The European Central Bank said on Monday it had allotted €30bn ($42.04bn) in one-day liquidity to counter financial turmoil in the wake of the crisis in the US banking system, while the Bank of England said it would offer £5bn of extra reserves to help stabilise conditions in the sterling money markets.

The ECB said it had alloted the money at a marginal rate of 4.30 per cent and an average rate of 4.39 per cent. Altogether 51 banks bid €90.27bn. Earlier, using language similar to that previously used to signal possible intervention in financial markets, the Frankfurt-based institution said it "continues to closely monitor the conditions in the euro area money market".

Its statement added: "The ECB stands ready to contribute to orderly conditions in the euro money market."

Meanwhile, the Bank of England said it would offer extra reserves to help stabilise conditions in sterling money markets as it seeks to stem the fall-out from Lehman Brothers' slide into bankruptcy.

Many UK banks will be short of cash because they have lent Lehman money which is now tied up in the bankruptcy proceedings. The money is not necessarily lost, but the central bank may need to tide UK banks over until it becomes clearer how much they will ultimately recover

Continued at Financial Times