‘Technical breakdown’ forces Barclays to borrow £1.6bn
- Reduce text size Decrease text size
- Increase text size Increase text size
- Print article Print
- Jump to comments Comment
- Share this article Share
- Email article to a friend Email
Bank blames trading system malfunction for short-fall. City raises eyebrows....
UK high street bank Barclays has announced that a ‘technical breakdown’ forced it to borrow £1.6 billion from the Bank of England, raising concerns about the bank’s financial health.
It is common for high street banks to borrow money from one another when they have loaned more money than their reserves at the end of a trading session. Barclays bank this week announced that a malfunction in one of the City’s electronic trading platforms, CREST, meant that it did not know how much it had loaned out before it was too late to borrow from its competitors.
However, Euroclear – the company that owns and operates CREST – reports that no other institutions encountered any problems with the system. This has raised speculation that Barclays Bank has suffered not just technical but financial difficulties, prompting a momentary dip in the value of the pound.
John Anderson, of Rensburg Fund Management, told the Daily Telegraph newspaper: "When people tap into this facility, it can mean only one thing: liquidity [the ability to fulfill financial obligations] is gone."
The bank has firmly denied this. “Had there not been a technical breakdown, this situation would not have occurred,” the company said in a statement. “At the end of the day, there was excess liquidity in the money markets, where bank reserves were larger than bank borrowings. There are no liquidity issues in the UK markets. Barclays itself is flush with liquidity."
Barclays borrowed the money from the Bank of England at a rate of 6.75% - 1% higher than its base rate.
Further readingInformation Age feature - Financial services technology: A nexus of innovation?
Applied IT - HSBC trades from a clean slate
