BARCLAYS BANK LENDING

The need for Barclays bank to borrow £1.6bn overnight from the Bank of England has worried some customers.
It has more than 11 million customers with current accounts in the UK, with more than £84bn of their money on deposit.

BBC News looks at what customers can do if things go wrong at a bank.

Is Barclays bust?

Unless its senior management are hiding something both big and nasty, then it certainly is not insolvent.

Big UK banks have been fantastically profitable in the past decade, making money on a scale undreamt of before.

Last year Barclays' profits were a record £7.14bn, and it made another £4.2bn in the first six months of this year alone.

As a spokesman mentioned overnight, it is swimming in cash.

So what are people worried about?

One part of the bank called Barclays Capital has been involved in the business of buying and selling packages of loans called CLOs and CDOs.

It seems the bank has lost money doing this as a result of the recent liquidity crisis in the financial markets.

However, no-one outside the bank knows exactly how much has been lost.

Soothing noises have been made.

But until a clear explanation is given, professional investors will continue to worry.

What if it did go bust?

If the unthinkable happened and Barclays, or any other bank, went bust, then customers with current accounts could look to the Financial Services Compensation Scheme for help.

This is an independent body and is funded by levies on the rest of the financial services industry.

For customers with money on deposit, the compensation limits are £31,700 per person, made up of 100% of the first £2,000 and 90% of the next £33,000.

What about shares in Barclays?

These have gone down by nearly 20% in the past month or so, though that has just taken them back to where they were about a year go.

But unless you are a professional trader, worrying about very short-term trends in a volatile market amounts to barking up the wrong tree.

If you lose sleep over daily or weekly share price movements you should not have bought them in the first place.

It is the long-term that matters.

If the bank continues to make money hand over fist and can dispel worries over any hidden losses, investors should have little to worry about.


SOURCE: BBC