Bank of England to prop up UK banks

The Bank of England has announced it is to inject £10bn into the financial markets in an effort to bring down the London Interbank Offered Rate (Libor). It’s a U-turn for the bank which had just a week earlier said it would not be doing such a thing.

The three-month Libor rate recently rose above the Bank of England’s base rate of 5.75% and its punitive emergency lending rate of 6.75%, curtailing banks’ abilities to lend to each other.

The move by the UK’s central bank followed a £1.6bn emergency loan to British lender Northern Rock, which led to retail depositors withdrawing £2bn from savings with it.