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London: The Bank of England's mortgage rescue plan has no upper limit on the amount banks can swap for government debt and it would depend on what they needed to meet their operational needs, BoE governor King said on Monday.
King said no demands had been made on banks wishing to partake in the scheme, which the central bank has said could initially involve around £50 billion ($100 billion) in rolling one-year Treasury bills.
"There is no arbitrary limit on it - it may well go higher," King told reporters at a briefing after the BoE announced its scheme.
King said the £50 billion figure had been based on discussions with major banks and did not include all 119 institutions eligible.
The plan was designed to help the economy and not bail out banks, King said, adding he did not want mortgage lending to return to its previous elevated levels.
"The purpose is to protect the rest of the economy from the banks," King said. "Banks themselves are going through a difficult and painful adjustment ... This cannot be avoided."
"If you need it, it is here. But there is a price to pay for it."
Banks wishing to take part in the scheme will be required to pay a fee, based on interbank lending rates, and assets would be swapped at a discount - or haircut, the BoE said.
"This is fair way of charging. This is not a gift," King said, but added banks were not being forced to take any action in return.
Markets had speculated British authorities might require a "quid pro quo" response from banks, involving capital raising.
"The BoE has no powers or authority to instruct the banks to do anything," he said, but welcomed moves by some banks to raise new capital.
It is hoped the measures will bring down the rate at which banks lend money to each other, by reducing fears about the quality of the balance sheets of counterparties. That in turn, could lead to softer terms for consumers.
Banks have been raising their interest rates to consumers even as the BoE has been cutting official rates.
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