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March 16, 2007    

Little risk to UK banks from subprime crisis, say analysts

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by Elaine Frei

Little risk to UK banks from subprime crisis, say analysts

Despite worries that problems in the subprime mortgage sector in the United States could spread to the UK, Barclays Bank (LSE: BARC; NYSE: BCS; TYO: 8642) says that it will not be seriously affected by the current troubles. While it has asked New Century Financial, which has been delisted by the New York Stock Exchange, to pay back £464 million in mortgage loans right away, Barclays said that its association with the subprime lender did not pose a serious risk to the bank. New Century has stopped taking applications for loans, and many analysts expect it to declare bankruptcy soon.

Fears that UK banks could be pulled into the subprime mortgage mess have been fueled by recent revelations from HSBC (LSE: HSBA; NYSE: HBC; Euronext: HSBC; SEHK: 005) that it lost $10.5 billion in 2006 due to loan defaults, mostly from its Household Financial unit in the US. HSBC’s top executive executive in the US resigned due to the issue. Still, most analysts don’t believe that the US crisis will have a major impact in the UK.

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