British Banking System Works to Calm Lending Market Fears

London–British banking officials said Tuesday that a new plan to deal with credit market chaos and restore lending market confidence was in the works, the New York Times said.Bank of England governor Mervyn King noted that “the crisis is not yet over” and said that the Bank of England was creating a new method of offering financing to banks. The plan will be released later this year.In a separate announcement, the British Bankers’ Association said it will alter the way it calculates the London interbank offered rate, which is one of the most common benchmarks to establish the cost of debt. The libor is used to set interest rates for mortgages, corporate debt, student loans and other products.Banks have been hesitant about interbank lending because of concern they might need money, which has increased the Libor and made it more costly for banks to borrow from each other.The association said it would ask banks to validate any rate discrepancies, increase the number of banks it surveys to determine the Libor and boost the size of the Foreign Exchange and Money Markets Committee, an independent panel that monitors the Libor calculation process, to increase confidence in the Libor.