Barclays today denied a report that failed debt vehicles structured by its investment banking arm had left it with an exposure worth hundreds of millions of dollars.
Barclays Capital has embraced highly leveraged investment vehicles known as SIV-lites, which combine traditional structured investment vehicle (SIV) and collateralised debt obligation (CDO) technologies.
But SIV-lites have increasingly become a focus of investor concern amid recent debt market turmoil that has hit the value of assets underpinning the deals and has led to short-term funding for them drying up.
The Financial Timesreported today that Barclays has been left with "several hundred million dollars" of exposure to SIV-lites arranged by Barcap that have run into trouble as a result of credit market turbulence.
Worries this week have focused on an SIV-lite structured and marketed by Barcap for stricken German lender SachsenLB, which is being sold to rival LBBW.
But Barcap said today it provided no funding for the vehicle, Sachsen Funding 1.
A source said Sachsen Funding 1 includes a facility whereby Barclays can be tapped for cash if the vehicle runs into trouble but added that has not happened.
Barclays shares were trading down 2 per cent at 599 pence earlier this morning, compared to a 1 per cent drop in the European banking sector.