Fire spreads!

By Gavin Serkin and Gavin Finch Aug. 9 (Bloomberg) -- The British Bankers Association said the overnight lending rate that banks charge each other toborrow in dollars rose to 5.86 percent today from 5.35 percent. The so-called London interbank offered rate in dollars isthe highest since the start of 2001. The benchmark borrowing rate is rising on concern banksface growing losses on investments linked to U.S. mortgages. The European Central Bank said today it is ``closely monitoring thesituation and stands ready to act to assure orderly conditionsin the euro money market.'' ``Liquidity in the market has completely dried up asinvestors aren't recycling their money back because of subprimeconcerns,'' said Saher Bin Jung, a trader on the commercial paper desk at Commerzbank AG. ``Levels have shot up dramaticallysince yesterday as issuers are trying to entice investorsback.'' BNP Paribas SA, France's biggest bank, today halted withdrawals from three investment funds because it couldn't``fairly'' value their holdings on concern about subprimemortgage losses. The ECB in Frankfurt said in its statement today that``there are tensions in the euro money market notwithstandingthe normal supply of aggregate euro liquidity.'' Three-month dollar Libor increased to 5.5 percent from 5.38percent.--Editor: Barrett