British banks count cost of Enron

BRITISH banks are counting the cost of the collapse of US energy giant Enron which on Sunday filed for bankruptcy protection with debts of more than $30bn. The Financial Services Authority is trying to calculate how much banks stand to lose as a result of their exposure to Enron, but losses are expected to run into millions of pounds. An FSA spokesman said: 'We are monitoring the situation. It is a bit like after 11 September when we talked to insurance companies.'

Enron's UK subsidiaries are believed to owe millions of pounds to banks including Barclays, Royal Bank of Scotland and Abbey National. Abbey has revealed it lent £115m to the group and is expecting to lose up to £95m.

National Australia Bank, which owns Yorkshire Bank and Clydesdale Bank in the UK, also revealed it had exposure to Enron totalling around £140m. Barclays's exposure is estimated at between £50m and £300m, while Royal Bank of Scotland's is between £140m and £600m. In all, Enron is believed to owe at least £15bn to banks worldwide.

The potential losses were totted up as Enron applied to a New York court for Chapter 11 bankruptcy, which will allow the energy trader to continue operating while its creditors try to sort out its finances.

Enron is also suing rival Dynegy for breach of contract after it pulled out of a proposed $9bn merger, a move which triggered Enron's collapse - the biggest in history. Dynegy's chairman branded Enron's lawsuit against his company 'frivolous and disingenuous'.

Meanwhile, there is growing anger among the 1,100 staff who were sacked from Enron's London headquarters on Friday. While London staff received no redundancy money or notice payment, there were reports of sacked Houston workers receiving six weeks' pay. There were also claims from disgruntled staff that any employees on business trips overseas would be forced to pay their own hotel bills and air fares home.

Jobs at Enron's other UK businesses not placed in receivership are expected to be safe providing bidders emerge. They include Wessex Water, the Teeside power plant and Enron Direct, a supplier of power to small businesses.

Enron's spectacular fall from grace was sparked six weeks ago when a discrepancy in its accounts prompted an investigation by US financial watchdogs and a slump in the firm's share price. Enron later admitted its profits between 1997 and 2001 were $600m lower than had been claimed.

While the loss of investor confidence threatened Enron, a takeover bid from Dynegy looked to have provided it with a lifeline until Dynegy pulled out of talks on Wednesday.

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