HBOS is under scrutiny as it feels the full force of the credit crunch.
Shares in the bank have fallen 40 per cent and questions raised as to whether it can sustain its current lending.
Despite worries from the market, the group remained confident: “HBOS is strong bank. We have significant capital resources and the largest deposit base of any bank in the country,” the Evening Standard reported a company spokesperson said.
HBOS is Britain’s biggest mortgage lender and owns Halifax, which has more deposited cash than any other high street bank.
Banks are holding onto their cash after the collapse of Lehman Brothers. This has helped push the London Interbank Overnight rate from 3.1 per cent to 6.3 per cent, it has been reported.
Traders in their offices in London are watching developments closely, although it is thought unlikely HBOS will suffer the fate of Northern Rock.
“We believe that the market has assigned an unduly pessimistic assessment of HBOS’s funding position and therefore, as the position is clarified … the HBOS share price should recover,” James Eden, banks analyst at Exane BNP Paribas told the Guardian.