Barclays taps ECB for 8.2 bln euros of cheap cash - Reuters UK

By Steve Slater

LONDON | Fri Mar 2, 2012 6:30pm GMT

LONDON (Reuters) - Barclays Plc (BARC.L) tapped the European Central Bank (ECB) for 8.2 billion euros ($10.8 billion) of cheap funding this week, marking a U-turn for the bank as it had previously been worried about the risk of political interference if it took funds.

Other British banks taking ECB funds included Royal Bank of Scotland (RBS) (RBS.L), which took about 5 billion euros from this week's offer and a similar amount at the first offer in December, a person familiar with the matter said.

That means Britain's top banks are likely to have taken 37 billion euros for their euro zone operations from the European Central Bank's two offers totaling just over 1 trillion euros of cheap cash, designed to restore investor confidence and ensure no banks collapse from a lack of liquidity.

Barclays did not take any funds at the previous offer in December and had indicated it had no plans to take any at all.

It said on Friday the money would be used to cover a mismatch between loans and deposits in Spain and Portugal, with 6.2 billion earmarked for Spain -- where lenders have been left exposed by a crash in the property market.

The move is seen as a more efficient way to fund local operations than by providing sterling-denominated funds from headquarters, especially if there are further problems in the euro zone or even a remote threat of a break-up of the bloc.

The bank said any funding benefit would be ring-fenced and would "not contribute to the remuneration of any personnel."

VERY POSITIVE

Some 800 banks took 530 billion euros from the ECB on Wednesday. But some banks have turned down the cash and say stronger lenders should show they are able to stand on their own.

Barclays CEO Bob Diamond said earlier this month the offer of cheap cash had been "very positive" in restoring market confidence.

But the bank has been wary of the risk of political meddling from taking any central bank help, given rising interference in the running of state-backed UK rivals RBS and Lloyds (LLOY.L).

Barclays shares closed up 2.2 percent at 256.75 pence, outpacing a slightly firmer Europe bank index .SX7P.

"Everyone it taking a more pragmatic view now," one analyst said. "There's no stigma attached and if you can get cash for 1 percent and you have Spanish mortgages then a rational person would take it."

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

French and German lenders have been notably quiet.

Italian banks took about 139 billion euros at the offer, led by Intesa Sanpaolo (ISP.MI), which received 24 billion. The other main users were expected to be Spanish banks.

Britain's Lloyds said it took 13.6 billion euros. HSBC (HSBA.L) took 5.2 billion euros in December, mainly to fund its French operation, and about 350 million on Wednesday.

RBS has not officially said how much it took, but its executives said last week the cheap, term funding was attractive to fund its euro zone operations, such as in Ireland.

($1 = 0.7573 euro)

(Editing by Mark Potter and David Holmes)