August 31, 2007

Barclays borrows £1.6 billion

It turns out that the third largest bank in the UK; Barclays Plc has had to borrow almost £1.6 billion from the Bank of England. This follows a failure a system that was supposed to process trades. This is the second time in less than two weeks that Barclays has had to go to the Bank of the Last Resort. The last time was when a £314 million loan from the HSBC was delayed.

The Bank of England will lend these huge amounts to banks when there is an absolute need for the money, however they charge the highest interest rate possible, a massive 6.75%!

There does appear to be some confusion over the reasons for this. Barclays say that there was a system failure, which resulted in their trades not being settled. Whereas the company that operates the system CrestCo say that there was a disruption, but there were no settlement issues reported.

Source [Bloomberg]

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