Banks could help out building societies

The Bank of England’ s Special Liquidity Scheme which allows banks to swap temporarily their mortgage-backed and other securities for UK Treasury Bills, does not appear to be very helpful to the majority of building societies but apparently the big players may come to their rescue.

The problem is that all but three or four societies don’t securitise and therefore don’t have the necessary legal framework or expertise in place to take advantage of the scheme which is estimated to be worth £50bn.
However there appears to be an ‘unoffical requirement’ for the bigger players to act as wholesalers on behalf these societies so that they too can take advantage of the money on offer.
According to Adrian Coles, director general of the Building Societies Association a number of the large banks, as well as building societies, may well offer to on-lend funds – both emerging from the SLS and more generally over the next few weeks – and a number of societies may choose to take up these offers.