Barclays to face £17 billion capital deficit: analysts

20 Jan 2010

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Barclays, that shunned the UK government's bailout in favour of Middle East money to retain its independence, may face a capital deficit of £17 billion due to the new capital requirements set by the new Basel Committee of banking regulators early this month.

Analysts at Credit Suisse said today that Barclays may face a capital deficit of around £17 billion as its equity Tier 1 ratio, which is currently 9.6 per cent, would drop to 5 per cent under the new Bank for International Settlements proposals on capital requirements.

Credit Suisse said that in order to raise its equity Tier 1 ratio to 8 per cent immediately, Barclays would require £17 billion of equity and if it is to be increased to 10 per cent, as some of the UK lawmakers would like, Barclays would then need to raise £28 billion.

This would require the banker to freeze the recently reinstated dividends, sell assets and dispose the 50 per cent stock it holds in fund manager BlackRock.

According to the new capital requirement rules, Barclays has a three-year transition period till 2012 and need not raise capital immediately. But analysts doubt whether the bank will wait out till three years to achieve the required equity Tier 1 ratio.

Credit Suisse analysts said in a note that in theory, it is possible that the bank can manage the transition to the new Basel rules without having to resort to raising external capital but can raise funds through selling its stake in BlackRock or reining in dividend.

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