Barclays dragged in US sub-prime saga

Barclays faces being caught up in the US sub-prime lending troubles after it revealed that it has a $1bn credit line with one of the tarnished firms in the debacle.

The line is lent to New Century Financial, which has admitted that it is close to breaching its sub-prime loan covenant. Its shares dropped 63% after this announcment.

Morgan Stanley, Goldman Sachs and UBS also have credit lines with New Century.

It is unknown if Barclays is to sell some of the risk with the troubled firm.