Britain’s biggest banks are to call on the Bank of England to take a more active role in trying to put an end to the liquidity shortage in spite of the Governor’s stern message yesterday.

Angela Knight, chief executive of the British Bankers’ Association, is meeting Bank officials today to ask them to take on “an enabling role”.

She pointed to the way the New York Federal Reserve orchestrated the private sector rescue of Long Term Capital Management in 1998 as an example of the kind of guiding hand that could help.

“If you’ve got a money market that’s stuck, the question is, is there some sort of enabling role the Bank could take on? This is quite a serious issue,” she said. “Is there a way the system can be unblocked? I’m going to convey to the Bank some of the views expressed by our members.”

Ms Knight, a former Conservative minister, declined to say what form the enabling role might take, adding she would not want to dictate to the Bank. Three-month Libor, the interest rate at which banks lend to one another over the short term, was now “extremely high”.

Responding to the Governor’s tough message, one banker said it was not surprising. “If I were the Governor, I’d be concerned about moral hazard and special pleading.

“But the pressure is going to get greater as the problem starts seeping into the real economy,” he added.

Banks have been hoarding cash and liquid securities and refusing to lend to one another in anticipation of having to refinance investment vehicles left stranded by the paralysed commercial paper market.

Times Recommends

• Lies and cover-up at MG Rover exposed by report
• High oil prices push manufacturing costs up
• Primark founder steps down as chief executive