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October 15, 2010    

Barclays shares hit by bond issue speculation

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by Kay Murchie
Barclays shares hit by bond issue speculation

Banking giant Barclays is understood to be exploring a number of options that would boost its capital reserves, in order to meet new Basel III regulations.

The Basel III rules recently agreed banks need to look to capitalise around 7% and Barclays is rumoured to be issuing a special bond that would enable it boost its cash reserves without issuing new equity.

As at the end of June, Barclays had a core Tier 1 ratio of 10% but, according to analysts, this could drop to 8.7%.

However, the bond issue does not meet with Basel proposals but the Committee and the Financial Services Authority are understood to be discussing whether to adapt their proposals.

Meanwhile, the report comes just two days after Standard Chartered outlined plans to tap investors for £3.3 billion by selling fresh shares, in order to meet the tough new regulations - designed to prevent another financial crisis.

It is believed that other banks will follow suit and as a result banking shares were hit this morning. Barclays shares lost over 4%, while Royal Bank of Scotland and Lloyds Banking Group also fell.

Barclays declined to comment on the report but did say it has “a lot of work to do to adapt to the new Basel framework.”

In related news, Barclays’ chief executive, John Varley, will be departing next year and will be replaced by Bob Diamond, currently president of Barclays PLC and chief executive officer of the group’s Corporate and Investment Banking and Wealth Management units.

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