INSTANT VIEW - Bank to launch discount window facility

LONDON (Reuters) - The Bank of England on Thursday outlined plans to launch a discount window and a new operational standing facility on Monday, in a major shake-up of its money market operations.

The Bank's objectives for the reforms are maintaining overnight interest rates in line with the main Bank Rate so there is very little volatility and to reduce the cost of disruption to liquidity and payment services.

Below are analysts' comments on the measures.

PHILIP SHAW, INVESTEC

"Our view is that both of the main changes should enhance the operation of UK money markets, in particular the operational standing facility has to be a vast improvement over the existing standing lending facility."

"The discount window facility should help short-term liquidity as well, even though it enables banks to borrow gilts rather than cash.

"These facilities are not designed to help money markets away from their current stresses. They are planned to be longer term facilities that are designed to assist the function of the money market under more normal conditions. By themselves, they are not going to play a huge part in destressing UK capital markets. They may be a modest help but that is effectively not their intention."

"In the short term we can only expect the measure to be of modest assistance in helping to unfreeze money markets. The package of measures we've seen overall in the past week and half may well help to deliver some sort of normality."

FRANCIS DIAMOND, JP MORGAN