OPENING UP MORTGAGE MARKET
Monday's BoE move is aimed at freeing up bank balance sheets so companies can lend more to consumers who face declining house values, fewer mortgage options, and soaring oil and food prices.
"The Bank will be making money available to the British banking system ... the idea behind it is it will open up the market and it will begin the process of opening up the mortgage market, " Darling said on Sunday.
The BoE is expected to announce the plan at 9 a.m., with Darling set to make a statement in parliament in the afternoon.
The Treasury and Bank of England have declined to comment on details of the plan but a source familiar with the package said it involved swapping 50 billion pounds of gilt-edged government bonds for mortgage-backed securities.
In the United States, the Federal Reserve last month took similar action with a $200 billion (100 billion pound) programme to boost liquidity in financial markets.
The British scheme is intended to run for just over a year and will involve valuing the less liquid mortgage securities the BoE takes on to its books at a discount, the source said.
In return, the government is expecting banks to take more action to shore up their own balance sheets.
"...if you look at what's been happening in the last few days, the pressure on banks to declare the extent of any losses they've made ... and how they are going to deal with it and how they are going to raise money from their shareholders - I think you'll see much, much more of that," Darling said.
Royal Bank of Scotland, Britain's second largest bank, is expected to announce a share issue this week in a move which analysts believe could raise over $20 billion and others in the sector are expected to follow.
