So what can the banks use as collateral for BoE funding?
The Bank of England (BoE) recently loosened its rather rigid criteria with regards to the levels and types of asset backing it would accept in exchange for forwarding liquidity to UK banks. However, few could have been primed for the type and quality of the loans which it will now accept!
Some of the more weird and wonderful top of the range assets include :-
US student loans - yes, the Bank of England is prepared to lend money to UK banks with assets which are backed by US students. However, do not forget that there is no reason to believe that some of the worse off students will not default on their loans because there is little downside for them
Car loans - in the current market we have seen a number of eyebrows raised at the suggestion that car loans will be used as collateral. Never mind the state of the UK car market and the ever falling chances of selling your car at a decent price, what about the increased cost of motoring and potential job losses for many in the UK?
Equipment leases - often connected to companies, equipment leases can be substantial in size and often agreed on a long term basis. What happens if a company goes under? Who will pay the price when the lease agreement is in default?
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