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Banks clamor for funds from the BOE - Bloomberg:

The Bank of England said financial institutions bid for 50 billion pounds ($99 billion) in its weekly auction, the most in three months, as a worsening shortage of credit increased the need for central bank funds.

The Bank of England offered 13.7 billion pounds in today's weekly auction, it said in a statement in London today. That made the operation more than three times oversubscribed. Bids were the most since Jan. 10.

Higher credit costs threaten to exacerbate the U.K.'s housing downturn and push the economy into a recession as mortgage lenders including HBOS Plc and Barclays Plc's Woolwich unit withdraw their best deals and raise interest rates. The Bank of England and the government are likely to announce a plan to shore up the credit market in the next two weeks.

``It shows the scale of the problem,'' said Nick Parsons, head of market strategy at NABCapital in London. ``There is not enough money being shifted around the system. You can understand why there is political pressure being bought about to solve problems in the markets.''

The gap between borrowing pounds for three months and the Bank of England's benchmark rate, currently at 5 percent, rose to 93 basis points on April 14 and stayed close to that level yesterday. That's the most since December.

Prime Minister Gordon Brown said yesterday he's looking for ways to inject funds into the mortgage market and is studying measures already taken in the U.S. British house prices dropped the most since 1992 in March, HBOS, the country's largest mortgage lender, said last week.

 As UK government intervention exacerbates money market rate costs:

Bloomberg - Money-market rates may rise after the British Bankers' Association threatened to ban members that deliberately understate their borrowing costs.

Participants have complained that banks may be submitting inaccurate information amid the global credit squeeze, Angela Knight, chief executive officer of the London-based association, said yesterday. The BBA will exclude banks that give misleading quotes and plans to speed up a review of the daily ``fixing'' process by which borrowing costs are determined, it said.

The threat ``will add to the upward drift we're already seeing'' in money-market rates, said Christoph Rieger, a fixed- income strategist in Frankfurt at Dresdner Kleinwort, the investment bank owned by the insurer Allianz SE.