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Bank of England Covers Barclays Shortfall: WSJ

CNBC.com
Wednesday, 22 Aug 2007 | 6:29 AM ET

The Bank of England lent Barclays 314 million pounds ($622 million) at its standing facility, which can be used to square accounts between banks, the Wall Street Journal reported on its online edition on Wednesday, citing sources familiar with the situation.

The BOE said on Tuesday it had used the facility, which allows banks to borrow unlimited amounts if they find themselves short of cash at the end of the day, for the first time since July 17 but refused to disclose the identity of the borrower.

The Wall Street Journal said Barclays, which was short of the amount in its BOE account, had tried to borrow it first from HSBC bank, but the transaction could not be completed before a 4:20 p.m. London time deadline.

A Barclays spokesman contacted by CNBC.com said the bank had no comment.

Banks are not allowed to have BOE accounts which are short overnight and they use loans from other banks or the central bank's standing facility to cover shortfalls.

The use of the standing facility, which carries an interest rate 1 percentage point higher than the BOE's official rate, goes unnoticed by the markets in normal conditions.

The Wall Street Journal said the facility had been used 15 times since it was introduced in May last year.

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