As reported on our blog earlier this week, the Governor of the Bank of England, Mervyn King, confirmed that the existing special liquidity scheme would end as planned on 21 October and be replaced by another scheme. However, in a statement on Wednesday 17 September, the Bank of England said the “window” for the banks to come to the Bank of England to swap unmarketable mortgage-backed securities for gilts under the current scheme would be extended to 30 January  2009, because of “the current disorderly market conditions” and “to provide additional time for banks to plan their access to the scheme in an orderly fashion”. The features of the special liquidity scheme and the terms offered remain unchanged. The Bank still intends to publish the consultation paper on the proposed permanent short term liquidity facility shortly.

Details of the special liquidity scheme can be found here.