Barclays' family silver up for sale

published 20 March 2009

Barclays "keeps pulling rabbits out of the hat" to avoid throwing in its lot with taxpayers, said David Prosser in The Independent. Last autumn it avoided direct state aid by securing capital from the Middle East. Now it plans to sell its exchange-traded fund division iShares, one of its fastest-growing businesses. Ditching the "family silver" to raise money is surely "a sign that it is more concerned about its capital position than it cares to admit", said Lex in the FT.

Barclays' core tier-one capital ratio, a measure of balance sheet strength, is around half that of its state-controlled rivals, said David Wighton in The Times. iShares may boost capital by £2bn rather than the £5bn mooted in some quarters. This is "hardly a game changer" for the balance sheet but might help Barclays in its negotiation over possible use of the government's asset protection scheme, which insures toxic assets. Barclays may be able to pay the premium for the scheme in cash rather than by issuing shares to the government, like Lloyds and RBS.

Another headache for Barclays

But Barclays isn't just worried about government interference in its business. According to a whistleblower, Barclays has been "particularly adept" at avoiding tax for itself and its clients and allegedly earns £1bn a year from this legal practice, said George Hay and Hugo Dixon on Breakingviews. Government support would hardly bode well for the future of this moneyspinner. Even without support it looks set to come under pressure. After all, as Simon Duke said in the Daily Mail, tax avoidance is especially insensitive when taxpayers are "footing the bill for a decade of City recklessness".