The Bank of England's emergency response to an extreme lack of cash in London's money markets yesterday fell well short of demand with commercial banks bidding for almost five times the amount of money that was made available.

Traders reported a huge shortage of sterling and dollar liquidity yesterday morning as banks hoarded cash and sent overnight borrowing costs jumping. The overnight Libor interbank borrowing was fixed at 5.59 per cent compared with 5.31 per cent on Friday, far above the Bank's official rate of 5.25 per cent.