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Banks deny selling Britain short

CLEARING banks yesterday rejected accusations that they had speculated heavily against sterling, and pointed to institutional funds and investment banks as much bigger players in the markets during the crisis.

Sir Nicholas Goodison, president of the British Bankers Association, said it was 'complete nonsense to say our own banks have sold Britain down the river'.

He hoped politicians would realise they had to manage economies better, 'having deregulated capital flows all over the world'.

Peter Wood, finance director of Barclays, said the maximum position - the amount of a bank's own money put at risk - allowed by the Bank of England was 'astoundingly small'.

Mr Wood, speaking on behalf of all the clearers, said a single deal carried out by a bank's foreign exchange traders on behalf of a customer could be bigger than the limit the bank itself was allowed at any one time.

In the week Britain left the exchange rate mechanism, pounds 2.75bn of sterling was sold to Barclays by non-bank organisations.

Of this, 75 per cent was from fund managers and investment banks and 25 per cent from other customers.

This gave an idea of where profits may have been made, Mr Wood said.

Barclays did several times as much trade with banks, but German and probably other banks were under the same constraints as the British clearers.

Profits came more from turnover than from position-taking.