Britain does not face subprime crisis, says IMF

FRANKFURT (Reuters) - Britain does not face a U.S.-style subprime mortgage crisis but the Bank of England's latest move to help out commercial banks can only be one element in easing credit market tensions, a senior International Monetary Fund official said on Monday.

Michael Deppler, director of the IMF's European department, said after the Bank of England announced about 50 billion pounds of assistance to British banks that the main solution to the credit crisis lay in banks being more open about their losses and recapitalizing.

"The UK has more the symptoms of the U.S. than have some of the continental countries. But in our view it's wrong to simply equate the UK markets to with U.S. markets in terms of subprime and the nature of risks to mortgages," he told reporters in Frankfurt.

Mortgage lending standards had been tighter and the level of home repossessions was much lower than in the United States, he stressed. "You're in a different world."

Nonetheless, worries about British banks' mortgage-backed assets have played a major part in driving LIBOR interbank lending rates way above the Bank of England rate path which they usually track.

In a bid to relieve these tensions, the Bank of England announced earlier on Monday that it planned to let British banks swap about 50 billion pounds ($99.4 billion) of riskier mortgage debt for more liquid government bonds.

The BoE said the plan was initially likely to involve about 50 billion pounds but BoE Governor Mervyn King said that was based on discussions with major banks and did not include all 119 institutions eligible and so the figure could go higher.

Deppler did not want to comment on the details of the plan, but said that in general, central bank efforts could only tackle the symptoms, not the cause, of credit market ills.

"We are cautious in those regards but it is very much a question of the specifics (of the BoE plan)," he said.

Banks needed to be more transparent to help rebuild confidence in financial markets, he said.

"It's pretty important that banks address these issues in a specific way," he said.

"Strengthening the position of the banks is ultimately the most important action and these other actions are basically intended to help them. They are only supports."

(Reporting by David Milliken, editing by Mike Peacock)