THE banking giant HBOS made a strong recovery on the stock market yesterday, as the governor of the Bank of England tried to ease fears of market volatility and the impact of the credit crunch.
Edinburgh-based HBOS's share price rose 6 per cent, to end the day at 473.75p. It was the third best performer on the FTSE 100 Index.
On Wednesday, HBOS had been the subject of market rumours about its liquidity, and these are under investigation
by the Financial Standards Authority.
Its shares plunged 17 per cent at one point, to a record low of 398p, before recovering to finish the day on 446.25p, down 7.1 per cent.
Meanwhile, Mervyn King, the Bank of England governor, pledged to continue "close dialogue" with high street banks after he and his officials met representatives of the big five – HSBC, Royal Bank of Scotland, Barclays, Lloyds TSB and HBOS.
The banks had demanded action to calm the markets and wanted assurances that the Bank would provide extra financial help, should it be needed.
Earlier in the day, the Bank had agreed to add £5 billion to its normal weekly funds made available to commercial banks, taking the total on offer at its weekly cash auction to £11 billion.
Details of the talks were not disclosed.
After the meeting, however, a spokesman for the Bank said: "The Bank of England and the banks agreed to continue their close dialogue with the objective of restoring more orderly market conditions."
The spokesman said the meeting had been scheduled last week and was not in response to any specific event.
On Wednesday, the Bank was forced to take the unprecedented step of publicly denying that HBOS, Britain's biggest mortgage lender, had turned to it for emergency funding.
