Britain's central bank, the Bank of England, has announced a plan aimed at preventing the unfolding international credit crisis from causing more damage to the British economy. Under the deal, lending institutions will be able to swap currently held mortgage debt in exchange for secure government bonds. For VOA, Tom Rivers reports from London the lending boost could total about $100 billion, but could go even higher.

The infusion of money is designed to boost confidence in Britain's financial markets.

Durng the past months, major British banks have been less willing to lend to each other and that has meant less money has been available in the mortgage sector, which in turn has resulted in an overall consumer credit crunch.

Under a new plan, the Bank of England will free up at least $100 billion to the lending institutions. The idea is to inject some liquidity back into the financial system and ease constrictions.

British Treasury Secretary Alistair Darling outlined the plan in parliament.

"The banks and building societies and other institutions that are eligible for the bank standing facility will be able to enter into agreements with the Bank of England, under which they exchange high quality asset backed securities for treasury bills," he said. "They can then hold these bills or trade them in the markets. Each exchange agreement will be for a maximum of a year, but can be renewed at the bank's discretion so that the exchange can ultimately be up for three years."

George Buckley, from Deutsche Bank in London, explains how it will work.

"What they are doing is using those government securities as collateral and they are going into the market and saying, please lend to us at a better rate than we could have got before, just simply because we have got better collateral than we did have before," he said.

It will take some time before the effects of the plan are actually seen, but Sue Anderson from the British Council of Mortgage Lenders says it should help to loosen up those currently tight credit markets.

"In theory, yes, this should have a beneficial impact and head us back towards a more normal market," she said.

Treasury Secretary Darling predicts the Bank of England move will help resolve problems in the wholesale financial markets, which over time will also trickle down to the retail level that is now seeing a downturn in activity as well.

Darling says the British financial system remains fundamentally strong, but the market is one that is not immune from the international downturn. He also urged banks to be more transparent and to fully disclose the extent of bad debt so that prudent action can be taken earlier to remove the uncertainty seen recently on the global markets.