Banking: So who needs £10bn?

Banks and building societies have given the Bank of England's £10bn loan, designed to inject extra cash into the UK money market, the cold shoulder.

The Bank held a telephone auction for the money on Wednesday morning but found there were no bidders. The extra cash comes in the form of a loan at 1 per cent above Bank base rate (currently 5.75 per cent).

It was made available so that banks and building societies, which were struggling to raise money through the money market, could fund new mortgages credit cards and loans more easily.

A Bank official explained away the failure of the auction by suggesting that loans were now available at a lower rate than the Bank was offering through the normal channels – in other words, the British money market.

In addition, the Bank defended its decision to hold the auction, calling it a "safety valve" in the light of the credit crunch and the recent crisis at Northern Rock.

Despite the lack of demand, the Bank confirmed that three more planned auctions would still go ahead, with the next one due this Wednesday.

The one after that is scheduled for 10 October and the final one for 17 October.