BOB DIAMOND, Barclays’ investment-banking boss, has scotched fears that Britain’s third-largest bank faces a black hole in its accounts from exposure to the turmoil in credit markets.

In an interview with The Sunday Times, he said: “There was an impression that we had hundreds of millions in unsecured exposure. So we said that the potential, conservative, loss could be £75m. We do not like having to say things like that, but there were enough questions to make it important for us to make that statement.”

Diamond rejected market speculation that Barclays might be forced into a profit warning. “The fears over the SIV-lites, Edward [Cahill’s] decision to resign and the borrowing from the Bank of England were taken so far out of context,” he said.

The comments came after a turbulent fortnight for Barclays. Investors have feared that the bank could face mounting losses from its involvement in exotic investment funds.

The bank has also looked gaffe-prone after it was forced to borrow £1.6 billion from the Bank of England’s emergency reserves on Wednesday – the second time in less than a week. Barclays blamed the move on a technical glitch. Shareholders were also unsettled by the sudden resignation of Cahill, head of the division responsible for creating four debt vehicles, known as SIV-lites, that have run into trouble in recent weeks.

Barclays’ share price has fallen by almost a fifth since mid-June, damaging its chances of taking over the Dutch bank ABN Amro. Barclays’ offer, made up of 63% in shares, is now worth €60.5 billion (£41 billion), about €10.5 billion less than the rival offer from the consortium led by Royal Bank of Scotland.

Barclays does operate in the sub-prime market, but Standard & Poor’s, the rating agency, argues that the bank’s exposure is limited. A senior Barclays executive said: “If it was bad we would have told the market. We are absolutely attentive to risk. We have stress-tested the hell out of this.”

Some Barclays shareholders have raised concerns that the bank could face legal action from customers who bought exotic debt products. Three years ago, Barclays Capital was sued by HSH Nordbank over $151m in losses the German bank suffered on a derivative investment. The case was later settled.

Last week, many of the world’s biggest investment banks scrambled to quash rumours about exposure to sub-prime problems. One banking analyst said: “The real concern is that nobody really knows where the sub-prime exposure is.” In 2006, $600 billion of sub-prime loans were originated in America. Yet one analyst said that only $100 billion has been accounted for among global banks, leaving $500 billion outstanding. If previous years’ loans are taken into account. the market could be as large as $2,000 billion.

Despite the current turbulence, Diamond predicts that the credit markets could recover by October or November, though problems in the American sub-prime mortgage market will “take far longer to work out”.

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