Racy past catches up with Barclays

Barclays announced it will tap shareholders for funds to cover potential future losses.

Barclays has bowed to Britain's Prudential Regulation Authority (PRA) and agreed to raise more money to cover potential losses on loans and investments. That will reduce the odds of a state bail-out. The PRA insisted on a leverage ratio of 3%, meaning that the bank must hold £3 of capital to support £100 of assets.Barclays had a 2.2% leverage ratio at the end of June. That implies a hole of £12.8bn. To make up the difference the bank will tap shareholders for £5.8bn, issue £2bn of bonds, and shrink the number of assets on its balance sheet.

What the commentators said

Remember, however, added Ben Chu in The Independent, that a 3% leverage ratio still means that the bank's assets only need to slide in value by 3% to leave taxpayers potentially exposed again. No wonder many have suggested that leverage ratios should be 4% or higher. In America, watchdogs are considering a ratio of 6% for the biggest banks. There's still more work to be done by the "Threadneedle Street Taliban" to make banks safer.

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