Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), claimed that the ECB offered better terms to the Bank of England and, more importantly, can keep the loan secret.
Williams believed that with the market nervous to any ‘sign of weakness’, being singled out for borrowing from the Bank of England could put a lender in an even worse position than before the funding was sought.
Speaking as part of next week’s ‘French Connection’, to be published in full in next week’s MI, Williams said: “The Bank doesn’t offer the same terms and the same protection as the ECB so it’s not known if you are borrowing from the ECB, but it is if you borrow from the Bank. This makes a huge difference because of the nervousness of the market. If you are seen to be borrowing from the Bank, it is seen as a sign of weakness. The market then trades against you and this further damages your position.”
Williams insisted that there was a general view among IMLA members that the Bank of England, the Financial Services Authority and the government had underperformed during the credit crunch and that the Bank should be matching the ECB to avoid other lenders being grouped with Northern Rock, which has now become synonymous with the credit crunch.
Sue Anderson, head of external affairs at the Council of Mortgage Lenders, said it completely endorsed Williams’ views. She explained:
“The point is that the Bank has attempted to offer repo facilities but it has done so at a penal rate and in public. The ECB is doing this in private, so why wouldn’t lenders fully explore this route if they could avoid the penalties and the potentially reputation-damaging stigma going to the Bank of England would bring.”
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