Libor rising on wrangle over bailout

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Banks awaiting firm details of the plan refused to lend to each other sending the interbank cost of borrowing sterling, euros and the dollar in particular soaring.

Three-month dollar Libor, the rate charged by banks lending the greenback, jumped 0.29% to 3.76875%, well above the Federal Reserve rate of 2%.

"We have seen substantial evidence that banks are unwilling to make loans to each other," said Stephen Cecchetti, chief economist at the Bank for International Settlements.

"European banks don't want to borrow or lend to each other. The people who are left with extra would rather deposit it than lend it out, and the people who are short can't borrow."

The lending freeze underlined the crisis in the financial markets as the credit crunch refused to ease.