The Bank of England, aiming to deal with the crippling impact of the US subprime mortgage crisis, on Monday announced a £50 billion (US$100 billion €63 billion) plan to allow banks to swap mortgage-backed securities for Treasury bills.

The bank's aim is to unblock the interbank lending market and restore normal lending practices to banks and home buyers hampered by the subprime credit crisis.

The asset swaps are for one year, but renewable for up to three years - and only for assets which existed at the end of last year, the central bank said. The risk of losses on the swapped assets remains with the commercial banks, not the taxpayers, the Bank of England said.

Improving liquidity position

"The Bank of England's special liquidity scheme is designed to improve the liquidity position of the banking system and raise confidence in financial markets while ensuring that the risk of losses on the loans they have made remains with the banks," said central bank Governor Mervyn King.

The Bank of England is offering the swaps starting Monday and continuing for six months.

Banks will be able to swap a range of high-quality assets, including AAA-rated securities backed by UK and European residential mortgages for Treasury bills.

Even though the assets have value, banks can't use them to raise money because such securities are tainted by the crisis over lower-quality securities backed by mortgages to people with weak credit.

The swap gives the banks assets they can use to operate, in hopes they will then resume lending more - and support the housing market and the overall British economy.

Britain's biggest casualty of the credit crunch was mortgage lender Northern Rock, which had to turn to the Bank of England for emergency funding and eventually wound up in public ownership.