BoE to unveil money market reforms next week

LONDON, Oct 8 (Reuters) - The Bank of England will next week announce proposals aimed at making it easier for banks to borrow cash in emergencies, the BoE said on Wednesday, replacing a scheme that banks had been afraid to use because it carried too much stigma.

The BoE had been due to announce plans for an overhaul of its money market operations in September but delayed this due to the financial crisis. It said on Wednesday the plans would include a discount window facility.

“Next week, the Bank will bring forward its plans for a permanent regime underpinning banking system liquidity, including a discount window facility (previously scheduled for September but delayed in the light of financial conditions),” the BoE said in a statement.

The move was announced as part of a multi-billion pound government package to bail out British banks hit by the global financial crisis.

Its previous scheme, the Standing Lending Facility, has not been used for more than a year as banks have feared negative publicity even though the facility was designed to be anonymous. BoE Governor Mervyn King had said last month that the aim of the new facility would be to provide “short-term liquidity insurance” to financial institutions hit by unexpected shocks. The U.S. Federal Reserve has allowed banks to take out longer-term loans at its discount lending rate.