Resources for Basel II Capital Accord (Basel II)

Cutting through the normal banking rules

www.telegraph.co.uk

Three-month interbank rates - the benchmark City borrowing rate - had been trading at a massive premium to the official Bank base rate since August, as banks refused to lend to each other, stockpiling cash themselves. The situation was hardly better on the other side of the Atlantic or the Channel, and despite a series of interest rate cuts from the Federal Reserve and an unexpectedly early reduction by the Bank itself, the situation was getting worse in the run-up to Christmas.

With fears growing about the scale of the financial impact on the world's biggest lenders from the US housing slowdown and the related derivatives whose values had plunged to almost zero, no one wanted to lend to each other - particularly not before the Christmas/New Year period when markets freeze even in good times.

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