BARCLAYS ADMITS BORROWING HUNDREDS OF MILLIONS AT BANK’S EMERGENCY RATE
September 1st, 2007More “technical difficulties” at one of the world’s top banks. Remember the recent Wells Fargo disaster…
Via: Guardian:
Barclays has been forced to borrow hundreds of millions of pounds from the Bank of England’s emergency lending facility for the second time in a fortnight, it was revealed last night.
In a hurried and emotive statement after London’s markets had closed, Barclays attempted to calm fears that it faces a cash crisis. Rumours had circulated all day that Barclays was forced to go to the Bank of England after the central bank said it had lent £1.6bn at its penal rate of 6.75%. It is thought that Barclays borrowed the entire amount.
Barclays said: “There are no liquidity issues in the UK markets. Barclays itself is flush with liquidity. In these challenging times the dramatisation of such situations is of no help to markets, their members or their customers.”
The high street bank, which also has a huge investment banking division, said it needed cash only because of a “technical breakdown” in the UK clearing system, through which all the major banks settle their books at the end of the day. Its shares fell 2.5p to 597.5p, raising questions over its £45bn bid to take over the Dutch bank ABN Amro. In its statement, Barclays said: “The Bank of England sterling standby facility is there to facilitate market operations in such circumstances. Had there not been a technical breakdown, this situation would not have occurred.”
The standby facility is usually used a couple of times a month but the size of the loan, and the fact that this is the second time within two weeks that Barclays has gone to the Bank of England, have raised eyebrows.
Barclays’ appeal for calm follows days of speculation about the bank’s exposure to losses in asset-backed security markets.
Research Credit: PW
