A Bank of England emergency offer of £5 billion of three-day loans was nearly five times oversubscribed today as financial institutions scrambled for cash in the face of a global credit crunch.
Aimed at restoring confidence to panicky markets in the wake of the weekend sale of US investment bank Bear Stearns, the loan offer was only the second such 'exceptional' operation since the crisis began last summer.
The BoE said it wanted to bring overnight interest rates down. Banks were so fearful of each others' solvency that they were charging more than 25 basis points above the main central bank lending rate for loans of even just one day.
The last time the BoE took such a step was in September just after the run on Northern Rock bank, Britain's fifth-biggest mortgage lender, which was later nationalised.
