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This is a spare 'blog in case my main 'blog at markwadsworth.blogspot.com isn't working
From page 89 of the Markets & Operations chapter of The Bank of England’s Quarterly Bulletin Q2 2011:
The Special Liquidity Scheme (SLS) was introduced in April 2008 to improve the liquidity position of the banking system by allowing banks and building societies to swap their high-quality mortgage-backed and other securities for UK Treasury bills for up to three years. The Scheme was designed to finance part of the overhang of illiquid assets on banks’ balance sheets by exchanging them temporarily for more easily tradable assets.
When the drawdown period for the SLS closed at the end of January 2009, £185 billion of UK Treasury bills had been lent under the SLS. In order to prevent a refinancing ‘cliff’, the Bank has held bilateral discussions with all users of the Scheme to ensure that there are plans in place to reduce their use of the Scheme in a smooth fashion… By end-May 2011, £148 billion had been repaid, compared with £94 billion at end-February 2011.
As I explained in October 2008 (I suppose I ought to update those workings), UK banks are raking in more than £100 bn a year in interest and mortgage repayments, they’re paying out a smidge in deposit interest and lending precious little (which is good news for house prices). So they can use the rest to repay these soft loans from the government.