Barclays taps Bank of England for emergency loan for second time this month

Barclays PLC has tapped the Bank of England for an emergency loan for the second time this month, borrowing 1.6 billion pounds (US$3.2 billion; euro2.4 billion) after a failure in a trading system, according to a person familiar with the transaction.
The Bank of England, acting as the lender of last resort, said it extended the cash from its standing facility on Wednesday to an unnamed institution. A source, who was not permitted to speak on the record, said Barclays was the receiver.
Barclays declined to confirm it had used the facility, which uses a penalty interest rate of 1 percent above the benchmark interest rate of 5.75 percent, but issued a statement saying it was "flush with liquidity."
Barclays spokesman Alistair Smith, noting the use of the facility on Wednesday, said there was a widely reported breakdown in the banking clearance system on that day.
"The Bank of England sterling standby facility is there to facilitate market operations in such circumstances," he said. "Had there not been a technical breakdown, this situation would not have occurred."
The standing facility was last used on Aug. 20 when Barclays borrowed 314 million pounds (US$634 million; euro466 million) after a loan from HSBC Holdings PLC was delayed.
Use of the facility has come under the microscope in recent weeks as economists and analysts keep a close eye on liquidity levels following the subprime mortgage market collapse in the United States.
The crisis spread to Europe after banks have repackaged risky loans with more reliable ones and share prices tumbled on fears of a shrinking availability of credit.
However, Smith said that "there are no liquidity issues in the U.K. markets."
"In these challenging times the dramatization of such situations is of no help to markets, their members or their customers," he added.

Updated : 2021-01-28 22:38 GMT+08:00