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Last Updated: Thursday, 15 March 2007, 17:20 GMT
Barclays plays down lending risk
New Century Financial office
Some analysts believe New Century is on the verge of collapse
Barclays has said it does not expect to be seriously affected by the woes of the US sub-prime lending market amid fears the fallout may spread to the UK.

The bank is in the spotlight after it emerged it had asked troubled US lender New Century Financial to repay $900m (464m) in mortgage loans immediately.

Rising bad debt provisions, triggered by defaults on US loans, led HSBC's top US executive to quit the firm recently.

Fears about US sub-prime exposure have hit UK bank stocks in recent days.

Exposure worries

Sub-prime lenders arrange mortgages for people with poor credit histories.

The possibility that growing customer defaults could derail the US housing market, and even push its economy closer to recession, have also knocked global stock markets.

We do not envisage any material losses due to exposure to the sector

But Barclays denied its involvement with New Century Financial, whose shares have been suspended amid concerns about its financial position, represented a serious commercial risk.

"All of our exposure to US sub-prime lending is fully collateralised pending securitisation," the firm said in a statement.

"We do not envisage any material losses due to exposure to the sector," it added.

Its comments came after New Century Financial revealed - in a statement to the US stock market regulator - that Barclays had issued a notice of default with regard to some of its loans to the firm.

New Century - the second biggest sub-prime mortgage lender in the US - has stopped making loans, with some analysts predicting the firm could soon be forced to seek bankruptcy protection.

HSBC's recent problems have raised fears that other British banks, most of whom have significant business interests in the US, could be affected by the sector's problems.

HSBC said last month that its exposure to bad debts - the bulk of them stemming from the US - totalled $10.5bn last year, 20% higher than previously estimated.

The firm's top US executive, Bobby Mehta, quit last month and the bank has pulled back from the sector.

Shares rebound

Analysts said there was little evidence so far that the crisis affecting the US sub-prime sector would spread to the UK.

"It is unlikely to be a major issue for UK banks but we need more information to be completely confident of that view," said Antony Broadbent, from Sanford Bernstein.

Bank stocks recovered on Thursday following heavy falls the previous day, with Barclays shares rising nearly 2%.

Wall St hit by home payment fears
13 Mar 07 |  Business
US probes sub-prime mortgage firm
13 Mar 07 |  Business
Q&A: Sub-prime lending
14 Mar 07 |  Business
New Century shares are suspended
12 Mar 07 |  Business
HSBC exec goes after US home woes
22 Feb 07 |  Business

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