Bank says will not extend special liquidity scheme

LONDON (Reuters) - The Bank of England said on Sunday it had no plans to extend an innovative six-month scheme designed to ease strains in the mortgage market.

The Bank unveiled its special liquidity scheme in April in an attempt to free up banks' balance sheets and boost confidence in the financial system. It gave lenders a six-month window in which to exchange hard-to-trade mortgage assets for government bills.

The window for participation in the scheme closes in the week of Oct 20.

The Sunday Times reported the central bank would allow an informal extension of the scheme specifically for building societies. It said societies structuring covered bonds in order to use the scheme would be given access even if their preparations slipped past the cut-off date.

The Bank of England denied such a move was afoot.

"There are no plans to extend the scheme, either formally or informally," a Bank spokesman told Reuters. "The scheme will close as planned during the week of October 20."

(Reporting by Christina Fincher)