Those of you who checked the price of your banking shares on Friday would have been dismayed to find that the sector is yet again in the spotlight and under more pressure.  While the debacle of Northern Rock is bad enough, there are rumours that at least one other UK bank is in trouble, with Barclays Bank being the name mentioned by many.  So what is happening?

The problems of today can be traced back some time, to an age where new and exciting financial instruments were created and sold around the world to a whole host of banking giants.  In the good times these instruments often forge ahead in value, but when markets hit a rocky patch they can collapse with many unsure where the final buck will rest.  It is this uncertainty, and knock on effect from the credit crunch, which has opened up Barclays Capital to a number of rumours. 

Barclays Capital has been one of the main drivers behind the rise in stature and profitability at Barclays, although it is often hidden away from public viewing.  The division has built a great reputation for creating and investing into a number of modern day investment instruments, often creating massive profits and commission payments along the way.  However, alarm bells started ringing a few weeks ago when one of the company’s senior mangers went AWOL.

While Barclays have refuted allegations that they have approached the Bank of England about a rescue loan, the rumours will just not die.  This is not the first time that Barclays has been rumoured to be struggling, with the Bank apparently in talks with the Bank of England around about the time Northern Rock hit the buffers. 

It will be interesting to see what happens with Barclays Bank, as this has the potential to drag the sector lower and lower as investors look for the next casualty.  Credit crunch part two has certainly begun, but when it will end is anyone’s guess.