LONDON (Reuters) - A ground-breaking plan by the Bank of England to lend banks about 50 billion pounds to help alleviate a credit crunch was "an innovative and unique policy response" and should help money markets, the banking industry lobby group said.

"The banks are participating in this arrangement and expect it to make a significant contribution to alleviating the pressures in the UK money markets," the British Bankers' Association said in a statement.

The BoE plan unveiled on Monday allows banks to swap mortgage-backed bonds, which have become hard to trade, for specially-issued Treasury bills. The BBA said banks would continue to work closely with the government, central bank and regulator to keep markets open.