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Bank bosses to meet governor King Bank bosses to meet governor King
(about 1 hour later)
The bosses of major UK banks will be meeting Bank of England Governor Mervyn King later.The bosses of major UK banks will be meeting Bank of England Governor Mervyn King later.
They are likely to tell Mr King that he needs to do more to reassure their creditors that the central bank will provide help if it is needed. They are likely to tell Mr King that he needs to do more to reassure markets that the central bank will provide extra financial help if it is needed.
It comes a day after the Financial Services Authority launched an inquiry into whether false rumours were spread in the City to undermine bank shares.It comes a day after the Financial Services Authority launched an inquiry into whether false rumours were spread in the City to undermine bank shares.
The Bank of England reassured investors that the rumours were untrue. Ahead of the meeting, the Bank raised the funds available to lenders.
The Bank said it was adding an extra £5bn to its normal weekly funds available to commercial banks, bringing the total on offer at its weekly Thursday cash auction to £11bn.
'Strong confidence''Strong confidence'
The banks are said to want Mr King to guarantee that if any UK lender suffered a cash shortage, it would provide whatever finance was needed.The banks are said to want Mr King to guarantee that if any UK lender suffered a cash shortage, it would provide whatever finance was needed.
There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling UK Financial Services Authority Read Robert Peston's blogThere has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling UK Financial Services Authority Read Robert Peston's blog
Angela Knight, chief executive of the British Bankers Association, told the BBC's Today programme that she was confident the Bank would take action.Angela Knight, chief executive of the British Bankers Association, told the BBC's Today programme that she was confident the Bank would take action.
"The Bank of England is very keen to ensure that we have good strong confidence in our market - after all we've got good strong banks," she said."The Bank of England is very keen to ensure that we have good strong confidence in our market - after all we've got good strong banks," she said.
"We're all facing as I say a particularly unusual situation in this credit crunch.""We're all facing as I say a particularly unusual situation in this credit crunch."
The Bank said ahead of the meeting that it was adding an extra £5bn to its normal weekly funds available to commercial banks, bringing the total on offer at its weekly Thursday cash auction to £11bn.
'No substance''No substance'
The banks' meeting with Mr King comes a day after the UK's financial watchdog, the Financial Services Authority (FSA), said it would "not tolerate" traders starting "false" rumours about firms to make cash from dealing in their shares.The banks' meeting with Mr King comes a day after the UK's financial watchdog, the Financial Services Authority (FSA), said it would "not tolerate" traders starting "false" rumours about firms to make cash from dealing in their shares.
WHAT IS SHORT-SELLING? Trader borrows shares, then sells themRepurchases shares later at a lower priceTrader returns shares to lenderMakes a profit on the differenceWHAT IS SHORT-SELLING? Trader borrows shares, then sells themRepurchases shares later at a lower priceTrader returns shares to lenderMakes a profit on the difference
HBOS, whose shares fell as much as 17% at one stage on Wednesday, denied rumours of funding difficulties.HBOS, whose shares fell as much as 17% at one stage on Wednesday, denied rumours of funding difficulties.
"There has been a series of rumours in the market today [Wednesday]," said a HBOS spokesman."There has been a series of rumours in the market today [Wednesday]," said a HBOS spokesman.
"A number of ill-founded and malicious rumours about the UK banking system in the markets."A number of ill-founded and malicious rumours about the UK banking system in the markets.
"These rumours have not a shred of substance whatsoever. They are lies.""These rumours have not a shred of substance whatsoever. They are lies."
'Just criminals''Just criminals'
HBOS said it supported the "decisive action" of the FSA to investigate the alleged market abuse.HBOS said it supported the "decisive action" of the FSA to investigate the alleged market abuse.
Those behind the rumours are no worse than ordinary criminals, they're just basically stealing money from the market Banking analyst Ralph SilvaThose behind the rumours are no worse than ordinary criminals, they're just basically stealing money from the market Banking analyst Ralph Silva
"There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling," the FSA said in a statement."There has been a series of completely unfounded rumours about UK financial institutions in the London market over the last few days, sometimes accompanied by short-selling," the FSA said in a statement.
In short-selling a trader borrows shares, sells them immediately and hopes to repurchase the shares in the future at a lower price.In short-selling a trader borrows shares, sells them immediately and hopes to repurchase the shares in the future at a lower price.
The trader can then return them to the lender and make a profit on the difference.The trader can then return them to the lender and make a profit on the difference.
Ralph Silva, a banking analyst at financial consultancy and research firm, Tower Group, told BBC Radio Five Live that those behind the false rumours "ought to be flogged".Ralph Silva, a banking analyst at financial consultancy and research firm, Tower Group, told BBC Radio Five Live that those behind the false rumours "ought to be flogged".
"They're no worse than ordinary criminals, they're just basically stealing money from the market," he said."They're no worse than ordinary criminals, they're just basically stealing money from the market," he said.
"They're putting out rumours, they're putting out lies, and they're taking advantage of the lies they put out, they're just criminals.""They're putting out rumours, they're putting out lies, and they're taking advantage of the lies they put out, they're just criminals."
The credit crunch started last summer following the revelation of multi-billion dollar bad debts in the US mortgage sector.The credit crunch started last summer following the revelation of multi-billion dollar bad debts in the US mortgage sector.
The knock-on impact has made banks around the world unwilling to lend to each other, making credit much harder to find and more expensive.The knock-on impact has made banks around the world unwilling to lend to each other, making credit much harder to find and more expensive.