Mervyn King made the pledge to MPs at a Treasury Select Committee meeting on 26 March as he discussed the central bank’s inflation report.
He said: “We will provide the liquidity assistance that the financial system needs to restore confidence. Such lending can be only a temporary measure but it can provide a useful bridge to a longer-term solution.”
The BoE extended the range of eligible collateral on its three-month loans in December, January and March to include mort- gage-backed securities.
King confirmed that January’s auction will be rolled over on 15 April, with its size to be decided in light of market conditions prevailing at the time.
King added: “It is unrealistic to assume that markets for many asset-backed securities are likely to reopen speedily or return to their previous levels of activity when they do.”
He warned that the financial crisis had moved into a new phase and said that the heart of the problem was an overhang of assets in which markets had closed on banks’ balance sheets .
He added: “These assets can’t be sold or used to get funding. This creates uncertainty about banks’ financial positions.”