Barclays seizes on offer of cheap money

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Barclays has revealed it accepted billions of pounds of cheap loans under a scheme to stave off another financial crisis.

It took 8.2bn euros (£6.7bn) of cheap cash from the European Central Bank (ECB) earlier this week, having shunned the offer when similar loans were last handed out in December.

The money will “provide funding stability” for its operations in Spain and Portugal, whose economies are suffering amid the eurozone crisis.

Barclays adds to the number of UK banks to come clean on how much cash they took, but many others refuse to comment on their central bank dealings.

Taxpayer-backed Lloyds accepted 13.6bn euros (£11.4bn) for the first time this week.

HSBC took about 350m euros (£292.7m) on top of the 5.2bn euros (£4.3bn) it received in December, which was mainly to fund its French operation.

Royal Bank of Scotland is also thought to have taken up the offer.

French and German lenders have been notably quiet. Italian banks took about 139bn euros at the offer, led by Intesa Sanpaolo, which received 24bn. The other main users were expected to be Spanish banks.

Earlier this week the ECB dished out a bigger than expected 529.5bn euros (£448.7bn) in three-year loans to 800 banks in addition to a similar amount loaned in December.

The scheme offers banks loans at an interest rate of just one per cent, which they can use to bolster their balance sheets.

Bank of England Governor Sir Mervyn King earlier this week said the scheme had helped avoid a run on banks, particularly in the southern part of the eurozone.

It is understood that many banks have been using the cheap funds to buy Government bonds, which has brought down debt-ridden nations’ borrowing costs, helping to ease the eurozone debt crisis.

Barclays said any profits it makes on investing the cheap cash will be ring-fenced and will not contribute to paying its bankers.

Its chief executive Bob Diamond previously said the scheme, known as the long term refinancing operation (LTRO), had helped restore market confidence.