Expectations are mounting that Barclays plc (NYSE:BCS) won't take up government insurance against toxic losses, relying instead on the proceeds of the sale of its exchange-traded funds business iShares Ltd. to bolster its capital cushion to withstand future shocks.
Bloomberg News said that while Barclays' board, led by CEO John Varley, hasn't made a final decision, it probably won't participate in the asset protection scheme after the Financial Services Authority determined last week that the bank is adequately capitalized following rigorous tests. Lloyds Banking Group plc recently agreed to pay the government a 5% fee - in shares - for insurance on £260 billion ($372.3 billion) of assets, while Royal Bank of Scotland Group plc is paying 2% to cover £325 billion. In exchange for the guarantees, the banks also tied themselves to lending plans.
Barclays faces a Tuesday deadline for applying to the scheme. It is also in the final stages of an auction for iShares. A Hellman & Friedman LLC consortium including Apax Partners Worldwide LLP; Goldman Sachs Group Inc.; and Bain Capital LLC, reportedly with Colony Capital LLC, are involved in separate bids for the business. Credit Suisse Group noted last week that a potential £4 billion ($5.7 billion) capital gain from the iShares sale would push Barclays' core Tier 1 ratio to 7.4% from 6.7%. Barclays spokesman Alistair Smith declined to comment. - Laura Board
Also see:
Barclays selling iShares? That's like Apple selling iPhone
Continue reading below
