On September 18 2008, the Bank of England announced that it
would extend the Special Liquidity Scheme (SLS) for an
additional three months, to January 30 2009. The Bank stated
that the extension was designed to provide "additional time for
banks to plan their access to the scheme in an orderly
fashion". The Bank also stressed that the SLS rules will not
change: the nature of qualifying assets, the interest rates
offered by the Bank and the haircuts applied to SLS assets
remain the same.
The existing SLS was due to end on October 20 2008, but
pressure from many quarters, including the Council of Mortgage
Lenders, has led the Bank to perform a U-turn in its policy on
the provision of liquidity to UK financial institutions since
the onset of the credit crisis in August 2007. It is arguable
that this is a fair assessment, although only a week...