UK authorities look to shore up banking system
On a day which was probably lost in the headlines of the US debate about the $700 billion bailout it has been confirmed that the UK authorities have introduced three new elements to the financial markets in an effort to steady the ship. The new elements include :-
Increase of savings protection - as was widely flagged over the last few days it has been confirmed that savers will see the first £50,000 of their deposits with any one institution covered by the central compensation fund. This is an increase from the current level of £35,000 and will come into play next week.
Loosening of collateral requirements for Bank of England loans - it has been confirmed that rather than just taking the highest asset backing from financial institutions, the Bank of England is prepared to lend money to banks against lower level asset backing. This will greatly increase the liquidity in the money markets from an early stage.
Orderly gilt markets - as we seem to see in the event of a crisis there has been a flight to quality which has seen government backed gilts in high demand. The UK Debt Management Office will be introducing new systems and procedures to ensure there is no 'squeeze' in prices.
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