The Bank of England made the following statement this morning:
In light of the continuing exceptional stresses in financial markets, the Bank of England is today announcing the introduction of a new contingency liquidity facility, the Extended Collateral Term Repo (ECTR) Facility.
This Facility is designed to mitigate risks to financial stability arising from a market-wide shortage of short-term sterling liquidity. There is currently no shortage of short-term sterling liquidity in the market. But should that position change, the new Facility gives the Bank additional flexibility to offer sterling liquidity in an auction format against the widest range of collateral.
Obviously this follows on from the coordinated action last week, but it underlines that the liquidity crunch that nearly took place carries risks for all non-US$ holders.
The rumour that suggests that we came within a few hours of the total collapse of the short term funding market can only be reinforced by today's statement.
Very Scary Indeed.