Central banks’ intervention to ease lending crisis

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by Lin Freestone

In an unprecedented move, up to £54bn ($110bn) in loans will be made available to world money markets by central banks including the Bank of England and the US Federal Reserve.

The Federal Reserve and the Bank of England will join the European Central Bank and central banks from Canada and Switzerland to offer the cash loans, to be made available in auctions.

Commercial banks in rich nations have sustained huge losses on investments that have gone sour in recent months. This has made them reluctant to lend any more money, especially to each other.

By acting together to inject extra funds into the system in the form of loans, the central banks hope to stop a banking and mortgage crisis turning into a recession.