Barclays has confirmed that it is turning its back on the Government’s offer to buy shares in the UK’s leading banks, for the time being.
The group will instead attempt to raise £6.5 billion of new capital from private investors.
When Prime Minister Gordon Brown announced the original £500 billion bank rescue package last week, Barclays indicated that it would prefer not to risk its independence and the possibility of having to hand seats on its board to Treasury representatives.
However, Barclays did join its rivals in signing up to an agreement whereby the banks pledged to increase their Tier 1 ratios by a combined £25 billion. The required improvement in capital positions needs to be met by the end of 2008 and Barclays is hopeful that its existing investors will support a fundraising in the meantime.
The group also took a different direction to its rivals back in the summer, when HBOS, Royal Bank of Scotland (RBS) and Bradford & Bingley embarked on rights issues. At that time, Barclays bolstered its balance sheet by raising capital from foreign investors, notably Qatar Investment Authority and Sumitomo Mitsui Banking Corporation.
If successful in its current fundraising, Barclays will not be forced to constrain executive pay or bonuses.
Chancellor of the Exchequer Alistair Darling has already made it clear that Ministers will enforce restrictions in the case of RBS, which is likely to end up 60% state-owned.
Barclays is, however, cancelling its shareholder dividend.