Barclays Changes Tack On LTRO, Accesses EUR8.2B In Funding

Barclays PLC (BCS) tapped the European Central Bank for EUR8.2 billion in low interest loans, the U.K. lender said Friday, a move which underscores how the ECB's program to flood the market with cheap money is winning over even the most reluctant banks.

Barclays said that it accessed the Long Term Refinancing Operation, which offers three-year loans to banks at a rate of 1%, to bolster funding for its Spanish and Portuguese businesses as it restructures them. The bank tapped the fund via the Banco de Portugal and Banco de Espagna for its operations in those two countries, a move the bank said is more efficient than sending sterling denominated funds from its London headquarters.

Any funding benefit will be ring-fenced on Barclays' balance sheet and will not contribute to any bonus payouts, the bank added.

On Wednesday the European Central Bank handed out EUR529.5 billion in cheap, three-year loans to 800 lenders, as part of a wider effort the thaw funding difficulties on the continent as banks shy away from lending to each other. The loans were on top of the EUR489.2 billion of similar loans the ECB dispensed to 523 banks in late December.

While several U.K banks were more than happy to tap the cheap credit, executives at some institutions warned of the stigma attached to those who are seen accepting low interest rate handout. In particular, the banks cited the potential risks of political intervention.

Last month, Barclays Chief Executive Bob Diamond said that he thought that the program was "terrific" but confirmed that the bank had stayed away from the December LTRO. Privately, executives at the bank said that they feared accessing the credit could harm the bank's reputation further along the road and that unless the money was absolutely needed, it wasn't worth taking the risk.

Barclays' apparent U-turn comes after Lloyds Banking Group PLC (LYG) said Wednesday it had accessed EUR13.6 billion in funding from the ECB. HSBC Holdings PLC (HBC) tapped the fund for EUR350 million and Royal Bank of Scotland Group PLC (RBS) hasn't publicly stated whether it accessed the fund.