Tuesday, 18 December 2007
The US Federal Reserve has made $20bn available to major banks in an attempt to ease concerns about a global credit crunch.
Monday's auction is the first step in a plan agreed among five central banks, including the Bank of England and the European Central Bank.
As well as the Bank of England and Fed, the European Central Bank and the national banks of Canada and Switzerland are also involved. The central banks hope that the auction will make retail banks and investment houses happier to lend to each other.
The banks lent heavily to individuals taking out mortgages which they now may not be able to repay.
A subsequent surge in mortgage defaults and bad debts has forced many banks to cut the value of their investments, costing them billions of dollars.
As a result, the banks fear that they might need any spare cash they have to cover their losses.
$20bn from Fed to ease credit crisis
Monday's auction is the first step in a plan agreed among five central banks, including the Bank of England and the European Central Bank.
As well as the Bank of England and Fed, the European Central Bank and the national banks of Canada and Switzerland are also involved. The central banks hope that the auction will make retail banks and investment houses happier to lend to each other.
The banks lent heavily to individuals taking out mortgages which they now may not be able to repay.
A subsequent surge in mortgage defaults and bad debts has forced many banks to cut the value of their investments, costing them billions of dollars.
As a result, the banks fear that they might need any spare cash they have to cover their losses.
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