BORROWING costs among lenders soared past the 6 per cent mark for the first time since December yesterday as the crisis gripping money markets showed no signs of easing, writes Scott Reid.
The rate at which banks are prepared to lend to each other over three months hit 6 per cent on Wednesday before rising further yesterday.
The rocketing costs have seen banks scramble to borrow from the Bank of England, with yesterday's weekly mone
y auction almost three times oversubscribed.
Last week's auction was also in high demand, again nearly three times oversubscribed, despite the central bank doubling the weekly funding available to £10.93 billion just days after releasing £5bn in funding.
Major banking shares headed north yesterday after the Bank of England offered £13.62bn at its latest money auction, while the European Central Bank promised to pump in additional liquidity if needed as the quarter comes to an end.
HBOS advanced 3 per cent, Barclays added nearly 2 per cent and Royal Bank of Scotland climbed just under 1 per cent.
Central banks around the globe have been pumping money into the markets in a bid to ease the crunch.
The Bank of England met commercial banks late last week as the credit squeeze tightened, with the cut price sale and rescue of US investment bank Bear Stearns having prompted further fears over the sector.
Governor Mervyn King also on Wednesday pledged further assistance in an attempt to restore waning confidence.
Banks are continuing to rein in their lending as funding becomes more expensive.
The full article contains 266 words and appears in The Scotsman newspaper.
