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Barclays needs central bank loan Barclays needs central bank loan
(20 minutes later)
Barclays says that a "technical breakdown" in the UK's clearing system forced it to borrow £1.6bn from the Bank of England.Barclays says that a "technical breakdown" in the UK's clearing system forced it to borrow £1.6bn from the Bank of England.
It is the second time this month that the bank has tapped into the central bank's emergency credit line, sparking fears it is facing a cash crisis.It is the second time this month that the bank has tapped into the central bank's emergency credit line, sparking fears it is facing a cash crisis.
But the UK bank insisted it was "flush with liquidity".But the UK bank insisted it was "flush with liquidity".
At the end of every day, banks such as Barclays have to settle their trades through the market settlement system.At the end of every day, banks such as Barclays have to settle their trades through the market settlement system.
Credit scrutiny
Typically, if borrowings are greater than their reserves at the end of the trading session, banks can borrow money from other banks to make up the difference.Typically, if borrowings are greater than their reserves at the end of the trading session, banks can borrow money from other banks to make up the difference.
Penalty rate
But a malfunction in an electronic trading system on Thursday afternoon meant that Barclays discovered it had a shortfall too late to borrow from another high street bank.But a malfunction in an electronic trading system on Thursday afternoon meant that Barclays discovered it had a shortfall too late to borrow from another high street bank.
Unable to get help in the wholesale market, Barclays had to turn to the Bank of England for a loan at the penalty rate of 6.75%, which is 1% above its base rate. The dramatisation of such situations is of no help to markets, their members or their customers Barclays statement
Unable to get help in the wholesale market, Barclays had to turn to the Bank of England for a loan at a rate of 6.75%, which is 1% above its base rate.
High Street banks have gone to the Bank of England for such funding 14 times so far this year, but such transactions have come under greater scrutiny amid concerns about a lack of liquidity at some banks.High Street banks have gone to the Bank of England for such funding 14 times so far this year, but such transactions have come under greater scrutiny amid concerns about a lack of liquidity at some banks.
Barclays said, "Had there not been a technical breakdown, this situation would not have occurred." "Had there not been a technical breakdown, this situation would not have occurred," Barclays said in a statement.
"In these challenging times the dramatisation of such situations is of no help to markets, their members or their customers.""In these challenging times the dramatisation of such situations is of no help to markets, their members or their customers."
On 20 August, Barclays was forced to take out a £314m loan from the Bank of England after HSBC was unable to process a last-minute request for the money.On 20 August, Barclays was forced to take out a £314m loan from the Bank of England after HSBC was unable to process a last-minute request for the money.