Britain’s banks have asked for an extra £3.57 billion this month from the Bank of England to ease the cost of borrowing from each other. The Bank of England said yesterday that it would auction £23.54 billion after increasing the amount from £19.97 billion at the request of the banks.

Last month the banks under-estimated the amount of cash they needed and the London interbank borrowing rate (Libor) leapt above the base rate of 5.25 per cent as they struggled to borrow enough cash from each other.

The overnight Libor yesterday was 5.21 per cent as the market anticipated a cut in the base rate.

Britain’s banks must tell the Bank of England how much cash they need in each “maintenance period” — the time between rate decisions — to settle their bills with one another. The latest auction will take place between today and May 7.

While the Bank is expected to cut rates, the European Central Bank is more likely to hold its base rate at 4 per cent today. Geoff Kendrick, currency strategist at Westpac, said: “The UK has softened a lot more than Europe and I guess that’s why we’ll see the Bank of England cut rates tomorrow while the ECB will be hawkish.”

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