British banks may find it difficult to get hold of cash once the Bank of England closes its liquidity initiative in October, the Times has reported.
Currently, the Bank operates a Special Liquidity Scheme (SLS). Once this is removed – and if rumours are correct the European Central Bank is about to tighten its lending – the banks could be in trouble, according to the paper.
In its most recent minutes the Bank’s Monetary Policy Committee noted “many banks were planning to reduce lending growth or dispose of non-core assets, which could reduce UK output growth”.
UBS bank analyst Alastair Ryan said take-up from the SLS “could be £200bn or more”, the Telegraph has reported.
The scheme, which allows lenders to swap mortgage assets for more liquid Treasury bills has released money so the banks can lend to customers.
Commercial property prices have continued to fall in the difficult financial climate, despite the increasing interest from overseas investors looking for bargains.