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British lenders turn to Bank of England for extra cash injection

Published 28/06/2016

Governor of the Bank of England Mark Carney moved to ease concerns following the Brexit vote
Governor of the Bank of England Mark Carney moved to ease concerns following the Brexit vote

Britain's lenders have tapped the Bank of England for another £3.1 billion in extra cash to help bolster their balance sheets following the Brexit vote.

Lenders have now taken more than £9 billion from the Bank so far this month after it launched three additional so-called funding auctions surrounding the referendum vote.

It is the first time the Bank has ever held more than one such auction in a month.

Bank governor Mark Carney pledged on Friday to pump at least £250 billion into money markets if needed to prevent a credit squeeze.

But the result of the latest funding auction shows little sign of stress in the banking sector and is less than the £3.3 billion taken by lenders at the start of the month.

Banks in the UK already have a combined £600 billion in liquidity on their balance sheets, helping shield the sector from a repeat of the credit crunch seen at the height of the financial crisis.

Bank shares surged higher on Tuesday after two days of punishing declines amid a wider stock market fight back after the Brexit vote.

Lloyds Banking Group rose more than 5%, while Barclays and Royal Bank of Scotland lifted 3%.

But the trio have seen shares crash by up to 30% in the previous two trading sessions.

Connor Campbell, financial analyst at Spreadex, said: "The UK's banking sector is looking a bit rosier after having the colour completely drain from its face at the start of the week."

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