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Barclays has insisted that it is "flush with liquidity" after tapping into the Bank of England's emergency credit fund for the second time in a fortnight.

Rumours that Barclays had again been forced to turn to the Bank as a lender of last resort came after the central bank announced yesterday it had lent £1.6 billion under its emergency borrowing facility.

Under the facility, banks are charged interest at a penal rate of 6.75 per cent.

But in a statement issued after the markets closed, Barclays attempted to quash speculation that it had been compelled to use the stand-by facility as a result of a cash crisis.

While not commenting directly on the Bank of England loan, Britain's third-largest bank said the emergency facility would not have been tapped into had it not been for a technical breakdown that occurred in the UK's clearing system.

The UK's banks use the system to settle their books at the end of each day, usually borrowing money from other lenders if their borrowings are found to be greater than their reserves. However reports suggest that Barclays was forced to turn to the Bank of England yesterday after discovering it had a shortfall too late in the day to borrow from a high street rival.

"The Bank of England sterling standby facility is there to facilitate market operations in such circumstances. Had there not been a technical breakdown, this situation would not have occurred," Barclays said in a statement.

"In these challenging times the dramatisation of such situations is of no help to markets, their members or their customers," the bank added.

Loans made by the Bank of England under its emergency standby facility have come under greater scrutiny in the wake of the current turmoil on the world's financial markets.

Some analysts have speculated that the facility has been used as a result of the global credit squeeze. It is thought that banks around the world are now more reluctant to lend to one another due to losses they have made as a result of exposure to ongoing problems in the US sub-prime mortgage market.

It is thought that Barclays took out a previous £314 million loan under the emergency facility on August 20th, after reportedly having been unable to secure last-minute funds from rival HSBC.