Aug. 21 (Bloomberg) -- The Bank of England lent money at its emergency interest rate for the first time in a month after the U.S. subprime mortgage crisis made commercial banks more reluctant to extend credit to each other.

The U.K. central bank said today it advanced 314 million pounds ($628 million) at 6.75 percent yesterday, the first time it has done so since July 17. A spokeswoman for the central bank, which offers funds at 1 percentage point more than the benchmark rate to institutions that need money outside of its weekly auctions, declined to identify the borrower.

The Wall Street Journal reported on its Web site today that Barclays Plc was the borrower. Barclays used the money to cover a shortfall in its account with the central bank, the Journal reported, citing unidentified people familiar with the matter.

The pound fell on concern the credit market crisis is spreading to Britain. The U.S. Federal Reserve and the European Central Bank have pumped extra money into markets since Aug. 9. to avert a breakdown in lending. The Bank of England, which revamped its money-market tools a year ago, so far hasn't cut any of its interest rates or auctioned any additional cash.

``The amount isn't huge, but it's impossible to say whether it's something more than what it appears,'' said George Buckley, chief U.K. economist at Deutsche Bank AG in London. ``It's consistent with normal management of reserves and liquidity.''

Lending Rates

The Bank of England's so-called standing facility was last tapped for 109 million pounds on July 17 and for 1.93 billion pounds on July 2, according to data on the central bank's Web site.

The overnight rate charged by banks for pounds fell to 5.94 percent from 6.07 percent after the Bank of England's statement, and the three-month sterling rate dropped to 6.62 percent from 6.65 percent. The central bank repeated a statement that its standing facilities are available every day. Its benchmark rate is currently at 5.75 percent.

The pound, which climbed to a 26-year high of $2.0654 on July 24, dropped as low as $1.9744 today.

Northern Rock Plc, Bradford & Bingley Plc and HBOS Plc were among banks that said they didn't ask the Bank of England for money. HSBC Holdings Plc, Deutsche Bank AG, Commerzbank AG and Lloyds TSB Group Plc declined to comment. Spokespeople for Barclays in London and New York also declined to comment. Barclays' shares fell 6.5 pence to 6.28 pounds.

Liquidity in London

The move ``marks an increased deterioration of the liquidity situation in London,'' said David Page, an economist at Investec Securities in London. While the Bank of England should have done more to provide banks with liquidity, it's difficult to say whether other banks will need to tap its facility again, he said.

Vince Cable, a Liberal Democrat member of Parliament who speaks on economic issues, said the Bank of England is right to take its time in evaluating the impact of the crisis and blamed commercial banks for making bad loans.

``The banks have been irresponsible,'' Cable said in an interview. ``So far they've got away with it. I expect the Bank of England to take a cool view of this rather than be panicked into big cuts in interest rates.''

Central banks have struggled so far to restore confidence. Traders have fled money market funds, considered among the safest instruments, on concern that they have invested in risky collateralized-debt obligations backed by subprime mortgage loans and banks are reluctant to lend each other money.

ECB Paring Back

In Germany, Landesbank Sachsen Girozentrale, a state-owned bank getting emergency funding, has about 3 billion euros ($4.1 billion) in investments linked to subprime mortgages, according to a person familiar with the matter. Yields on U.S. Treasury bills fell by the most since the stock market crash 1987 yesterday.

The ECB, the first central bank to react to the crisis, is nevertheless paring back the emergency funding it pumped into financial markets. With banks repaying 310 billion euros in funds tomorrow, the ECB today allotted 275 billion euros for seven days in its weekly refinancing operation.

``The ECB did a good job at the start of this crisis by injecting a massive amount of liquidity,'' said Paul Mortimer- Lee, head of market economics at BNP Paribas in London. ``What we really need is an injection of longer term funds. The central banks at this time are not really in control.''

Other banks to say they were not the recipients of Bank of England loans were Fortis Bank, Britannia Building Society, Yorkshire Building Society, Nationwide Building Society, Kaupthing Bank and Alliance & Leicester Plc.

Dresdner Bank AG, Landesbank Baden-Wurttemberg, Bayerische Landesbank, HVB Group, ING Groep NV, DZ Bank were among other banks to decline comment.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.

Last Updated: August 21, 2007 16:29 EDT