March 2, 2012 / 4:54 PM / 7 years ago

Barclays taps ECB for 8.2 billion euros of cheap cash

LONDON (Reuters) - Britain’s Barclays (BARC.L) tapped Europe’s central bank for 8.2 billion euros ($10.9 billion) of cheap funding this week, marking a U-turn for the bank as it had been worried about the risk of political interference from taking funds.

This means Britain’s top banks are likely to have taken over 35 billion euros for their euro zone operations from the European Central Bank’s two offers of cheap cash.

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 manage funding gaps in Spain and Portugal, with 6.2 billion of the funds earmarked for Spain.

That 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 “not contribute to the remuneration of any personnel.”

Some 800 banks took 530 billion euros of money from the ECB on Wednesday, with the offer aimed at ensuring no banks collapse from a lack of liquidity and restoring investor confidence.

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 help from the state, given rising interference in the running of state-backed rivals Royal Bank of Scotland (RBS.L) and Lloyds (LLOY.L).

By 1200 GMT Barclays shares were up 3 percent at 258.8 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.L, 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 commented on whether it used the facility, but is expected to have taken about 5 billion euros at each of the two tenders for its Irish or other euro zone subsidiaries.

($1 = 0.7501 euros)

Reporting by Steve Slater; Editing by Mark Potter and Hans-Juergen Peters

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