Light sleepers will find things to fret about but Thursday’s trading statement from Barclays was reassuring. The shares had been heading south on rumours of writedowns, resignations and capital raisings in spite of management’s denials of any significant problems. In the end, Barclays announced a net writedown of just £1.3bn and gave an upbeat view of next year. That its stock price did not bounce, admittedly on a bad day for equities, highlights the bearishness in financial markets.

The UK’s third largest bank has benefited from the fact that half the mortgages underpinning its collateralised debt obligations and similar structures were originated before 2005. Even so, the rating agencies’ downgrades of CDOs in October caused prices to plummet by up to 40 per cent. This, combined with a more conservative outlook for 2008, moved Barclays to slash the value of loans underpinning much of its “super-senior” CDO exposure. For example, principal CDOs backed by residential mortgage-backed securities have been marked down to zero. Combined with hedging and other forms of protection, Barclays reckons it has now covered itself should the face value of subprime loans fall 65 per cent. Splatterings of subprime exposure have also been written down in Barclays’ US mortgage origination business, on its own trading book and within structured investment vehicles.