UK bank lending rates hit nine year highs as banks sought funds to cover commitments for the start of next year amid a tightening credit squeeze. Financial Times, Daily Telegraph

Sterling one-month inter-bank rates spiked more than 60 basis points to their highest levels since the end of 1998. European one-month rates rose to levels not seen since May 2001. US rates were also abnormally high.

Senior bankers insist the problems are primarily linked to the end of the year. But others fear the increasing sense of paralysis in the money markets could have dangerous repercussions for the financial system.