Some analysts believe New Century is on the verge of collapse

The bank is in the spotlight after it emerged it had asked troubled US lender New Century Financial to repay $900m (�464m) in mortgage loans immediately.

Rising bad debt provisions, triggered by defaults on US loans, led HSBC's top US executive to quit the firm recently.

Fears about US sub-prime exposure have hit UK bank stocks in recent days.

Exposure worries

Sub-prime lenders arrange mortgages for people with poor credit histories.

The possibility that growing customer defaults could derail the US housing market, and even push its economy closer to recession, have also knocked global stock markets.

We do not envisage any material losses due to exposure to the sector Barclays Q&A: Sub-prime lending

But Barclays denied its involvement with New Century Financial, whose shares have been suspended amid concerns about its financial position, represented a serious commercial risk.

"All of our exposure to US sub-prime lending is fully collateralised pending securitisation," the firm said in a statement.

"We do not envisage any material losses due to exposure to the sector," it added.

Its comments came after New Century Financial revealed - in a statement to the US stock market regulator - that Barclays had issued a notice of default with regard to some of its loans to the firm.

New Century - the second biggest sub-prime mortgage lender in the US - has stopped making loans, with some analysts predicting the firm could soon be forced to seek bankruptcy protection.

HSBC's recent problems have raised fears that other British banks, most of whom have significant business interests in the US, could be affected by the sector's problems.

HSBC said last month that its exposure to bad debts - the bulk of them stemming from the US - totalled $10.5bn last year, 20% higher than previously estimated.

The firm's top US executive, Bobby Mehta, quit last month and the bank has pulled back from the sector.

Shares rebound

Analysts said there was little evidence so far that the crisis affecting the US sub-prime sector would spread to the UK.

"It is unlikely to be a major issue for UK banks but we need more information to be completely confident of that view," said Antony Broadbent, from Sanford Bernstein.

Bank stocks recovered on Thursday following heavy falls the previous day, with Barclays shares rising nearly 2%.