BoE 'unaware' of UK bank woes

The Bank of England said it isn't aware of a problem at any UK bank, in a rare response yesterday to market speculation that HBOS or another big name faced trouble as the financial market crisis deepens.

"No meetings have taken place or been scheduled to discuss problems with any institution in the UK," a BoE spokesman said.

HBOS, Britain's biggest mortgage lender through its Halifax brand, also dismissed the speculation, saying it had an "exceptionally strong balance sheet" and continued to access wholesale funding.

Its shares slumped as much as 17 percent to a record low of 398 pence earlier on Wednesday, and by 1113 GMT were still down 10.5 percent at 430 pence.

Shares in rivals Alliance & Leicester and Bradford & Bingley also both fell over 5 percent as dealers cited talk that higher funding costs were heaping pressure on banks facing a UK economic slowdown and more potential losses on risky US assets.

The chatter reflects a jittery mood swirling around the UK banks, dealers and analysts said. A three-quarter-point cut in US interest rates late on Tuesday offered only brief respite for stocks.

The latest sell-off is also likely to prompt an investigation by the Financial Services Authority, according to a person familiar with the situation.

He said stocks are swinging wildly on false speculation, giving speculators the opportunity to profit from selling the shares "short" before buying them back later.

The BoE spokesman said rumors that the central bank's Governor Mervyn King or any other senior executive had cancelled a trip to the Far East due to a possible problem were "complete fantasy". King deferred a trip to England's West Midlands on Tuesday to monitor market developments after the bailout of US investment bank Bear Stearns, he said.

A crisis at Northern Rock six months ago was sparked by its failure to raise funds in wholesale markets following a credit crunch, and this week's fire sale of Bear Stearns has heightened concern there could be more casualties.

A spokesman for HBOS said: "We're a very diversified business with an exceptionally strong balance sheet."

As the biggest savings provider in the UK it has access to "a deep pool of retail deposits", he said, adding: "We continue to access wholesale markets whenever we feel it is appropriate to do so. We are one of the best names in the capital markets."

Agencies

(China Daily 03/20/2008 page16)