Barclays Shares Fall Amidst Ongoing Liquidity Scrutiny

by Stewart Douglas

Story link: Barclays Shares Fall Amidst Ongoing Liquidity Scrutiny

Barclays Bank was again today under scrutiny as share prices fell in market trade amidst rumours it had become the second UK bank subject to emergency Bank of England funding in the wake of the sub-prime lending crisis.

Barclays, which has been very much under scrutiny since failing to secure the backing of shareholders for its bid for Dutch bank ABN Amro, was today facing heavy losses on the FTSE even after media reports of an alleged emergency support package on Friday were quashed by company insiders.

Whilst the bank has yet to make any official statement as to its current financial health, analysts across the word are expecting that the bank is currently experiencing problems, particularly with its exposure to debt investments in its capital division over the last few months.

Whilst rumours of a liquidity shortage at the bank are rife, some market analysts have pointed to recent substantial investments by Barclays and its subsidiaries which would be uncharacteristic of a company suffering from financial problems, including a buy back of almost 6 million shares.

However it was thought that the bank had become embroiled in the sub-prime crisis that plagued Northern Rock and more specifically investment banks across the globe.  With rising defaults on mortgages within the risky sub-prime sector, investment houses that had increased their exposure to sub-prime linked assets were quick to find liquidity a problem to sustain their lending operations.

Whilst it is thought that the bank may be facing some kind of pressure on its finances, analysts have been quick to highlight recent trading activities, in conjunction with the conparatively smaller size of the Barclays Capital operation, as factors which would appear contrary to such a proposition.

Barclays today classed the sell-offs as market jitters, contesting that there were in fact no liquidity problems within either of their main operations involved in the situation.