(16 September 2008 – Global) A group of ten large American and European banks have announced a US$70 billion loan program to help ease credit shortage problems.The group of global banks and securities firms announced a US$70 billion (A$86 billion) loan program that financial companies can use to help ease a credit shortage that threatens financial markets.
The 10 banks, including Bank of American and Merrill Lynch, the investment bank that BOA will take over, said they were committing $US7 billion each for the pool.
The pool of funds intends to signal to the market that banks, brokerages and other financial companies could use the fund to take care of borrowing needs.
The banks said the program would be available to participating banks. Each of the participating banks could use the pool to get a cash infusion of up to a maximum of one-third of the total size of the pool.
The banks also said that as other banks are permitted to join the group, the size of the loan program might increase.
All participating banks intend to use this facility, beginning this week.
The banks and securities firms signed up to this agreement are Bank of America, Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley and UBS.
The banks made the announcement to try to head off market disruption after the failure of investment bank Lehman Brothers.