Mark Carney
Govenor Mark Carney is lowering the standard of borrowing so banks can get easier access to credit to boost the British economyReuters

The Bank of England will make it easier for UK banks to borrow money in a bid to aid the economic recovery.

New lending schemes, which will be introduced on 11 February, come under the Indexed Long-Term Repo (ILTR) operation will allow lower-quality assets to be offered as collateral but will demand higher interest rates.

BoE governor Mark Carney said in October 2013 that he would boost the amount of credit available for banks in a major speech at the 125th anniversary of the Financial Times.

His predecessor, Mervyn King, was criticised for his reluctance to allow banks access to credit during the start of the financial crisis in 2007.

The crisis resulted in a credit crunch when banks ran out of access to liquidity and had to freeze their operations.

ILTRs were introduced as part of the BoE's efforts to boost growth in the economy.

ILTRs have allowed banks to sign on to them on a monthly basis to help them access credit and avoid funding difficulties.

From 11 February, banks that take part in the new ILTR operation will be able to access a type of funding that was only available for emergency operations in the past.

"The Bank's current ILTR operations will be replaced by new ILTR auctions that provide more liquidity at cheaper rates, longer maturities and against a wider range of collateral than previously available. An important innovation in the design of the ILTR auctions is that they are responsive to market conditions," said the BoE.

It expected initial borrowing to be limited as the banking sector was adequately supplied with credit, the BoE added.