If the currencies had been the same, no one would have believed Barclays. On Thursday, it emerged that the UK bank had been forced to borrow £1.6bn from the Bank of England’s emergency lending facility. On Friday, Barclays said it would lend $1.6bn to a structured credit vehicle that was no longer able to borrow in the commercial paper market. The explanation turned out to be a blend of coincidence and, arguably, incompetence, rather than a big lender in trouble. The episode has, however, damaged the Bank’s new money market system.
For the second time in a fortnight Barclays says a technical glitch – this time with the Crest settlement system – forced it to borrow from the facility. As proof that the market as a whole was not working, it points out that other, undisclosed, banks were forced to deposit cash in the Bank’s emergency facility on Wednesday. As proof that the market is now working, Barclays says it is again borrowing actively from other banks, at about the market overnight rate.
