style="margin: 0px; text-align: justify">Bank of England (BOE) Governor Mervyn King said on Thursday that the UK central bank will activate a sterling liquidity facility to aid banks, and plans to have a form of credit easing operating to boost lending as the case for looser policy is growing.

The BOE will start holding auctions of sterling liquidity with a maturity of six months.

King said that the lending plan will provide banks with funds below current market rates.

“Exceptional circumstances create a case for a temporary bank funding scheme to bridge to calmer times,” King said.

The BOE Governor King also said that the UK central bank would not expand its quantitative easing (QE) program into private-sector assets.

"There are reasons for treating that idea with caution,” he said.

UK's Chancellor George Osborne said that the BOE will activate an emergency lending program and that the British Treasury would provide cheap funds to banks if they boost lending to households and companies.

“We are not powerless in the face of the eurozone debt storm,” Osborne said.

King said that the BOE's latest measures were prompted by a rapidly deteriorating UK economic outlook.

“Banks are at risk of future losses from a further downturn in the economy and exposures to the euro area,” King said.

“Not only have the euro-area problems escalated to the point where exit for Greece and other periphery countries is the subject of widespread speculation, but signs of a slowing in China, India, and other previously buoyant emerging economies, such as Brazil, are appearing daily,” he added.

Investors want global leaders to take action on reviving economic growth, Institute of International Finance Managing Director Charles Dallara said in a letter yesterday to leaders attending the G-20 summit.

He said that world markets will be looking expectantly for evidence of a globally coordinated policy response targeted to revive growth prospects.

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