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| Version 4 | Version 5 |
|---|---|
| Barclays needs central bank loan | Barclays needs central bank loan |
| (about 1 hour 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. |
| 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. |
| Barclays explained that it was forced to tap into the Bank of England's emergency credit line because a technical glitch meant it discovered the shortfall in its finances too late in the day to borrow from another high street bank. | Barclays explained that it was forced to tap into the Bank of England's emergency credit line because a technical glitch meant it discovered the shortfall in its finances too late in the day to borrow from another high street bank. |
| It added that the malfunction affected an electronic trading system on Wednesday afternoon. | It added that the malfunction affected an electronic trading system on Wednesday afternoon. |
| The Bank of England confirmed the loan was requested after the trading day had finished. | |
| 'Challenging times' | 'Challenging times' |
| "Had there not been a technical breakdown, this situation would not have occurred," Barclays said in a statement. | "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." |
| Barclays has been under increased scrutiny since Edward Cahill, the man in charge of structuring debt investments at the bank's investment arm Barclays Capital, unexpectedly resigned earlier this month. | Barclays has been under increased scrutiny since Edward Cahill, the man in charge of structuring debt investments at the bank's investment arm Barclays Capital, unexpectedly resigned earlier this month. |
| His sudden departure sparked panic that Barclays could be sitting on hefty losses as a result of the devaluation of these debt funds which are heavily tied to sub-prime US mortgages - well-known to be the key factor causing havoc in financial markets. | His sudden departure sparked panic that Barclays could be sitting on hefty losses as a result of the devaluation of these debt funds which are heavily tied to sub-prime US mortgages - well-known to be the key factor causing havoc in financial markets. |
| Others in that division are also believed to have left. | Others in that division are also believed to have left. |
| Yet, Barclays' shares rose almost 1% to 602.5p in morning trade, in a sign that the market is cautiously confident that its financial position is still strong. | Yet, Barclays' shares rose almost 1% to 602.5p in morning trade, in a sign that the market is cautiously confident that its financial position is still strong. |
| Greater scrutiny | Greater scrutiny |
| The Bank of England's loan rate to commercial banks is 6.75%, which is 1% above its base rate. | The Bank of England's loan rate to commercial banks is 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 and such a loan does not usually raise eyebrows. | High street banks have gone to the Bank of England for such funding 14 times so far this year and such a loan does not usually raise eyebrows. |
| But such transactions have come under greater scrutiny amid concerns about a lack of liquidity in some financial institutions. | But such transactions have come under greater scrutiny amid concerns about a lack of liquidity in some financial institutions. |
| 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. |