Comments on: One cheer for Barclays?

By: Stuart Fairney

Stuart Fairney — Sat, 01 Nov 2008 07:17:10 +0000

The ever erudite Cable is wrong in fact. He denounces Barclays for having taken government money (they haven’t) and then moans about it. Discounting some mindless Lib-Lab pact after the next election, I imagine we will have heard the last of him.

By: Michael St George

Michael St George — Fri, 31 Oct 2008 17:24:05 +0000

John

Your post actually raises two issues, one a question and the other an inference.

You rightly ask why the regulator didn’t insist on the necessary increase in capital last year when it could have been raised in the market.

I suspect the answer is that either, as we have seen in other instances, the FSA signally failed to appreciate Barclays’ deteriorating capital position and especially the impending effect of marking-to-market on some of the more exotic components of its balance sheet – or possibly that it did indeed do so, but was prevented from pursuing the demand for additional capital adequacy, which would inevitably have entered the public domain, for political reasons not unconnected with Brown, G’s bottled election. I hope you will continue to harry on this point.

What is interesting is the price that Barclays is now manifestly willing to pay (or more likely the risk premium that the providers are now demanding) in order not to have to source the additional capital from said Brown, G and thereby fall into statism’s suffocating embrace.

Apparently the additional capital is structured as reserve capital instruments in the form of mandatorily convertible notes bearing a coupon of no less than 14%, and even 10% after tax, and carrying also conversion rights into equity at a substantial discount to the market price prevailing on conversion. That is expensive capital by any standards – no wonder the shares have been marked down today.

By: mikestallard

mikestallard — Fri, 31 Oct 2008 16:32:36 +0000

I went to sleep, I confess, during the TV programme last night on the banking crisis, so I suppose I am now an expert!
I did, however, have a suspicion that the two Scottish banks which were rescued were of remarkable importance to this hugely Scottish government, whereas, of course, Barclays is rather more southern Britain than North British. Poor old Lloyds!
Northern Rock was from North Britain too.

By: Neil Craig

Neil Craig — Fri, 31 Oct 2008 16:01:07 +0000

The BBC radio reporting of this was also very much that Barclay’s were doing something underhand in getting money from the market when all good people rely on government. In fact this gives much reason to think that similar government investment is secure – which should make us all sleep easier.

By: Monoi

Monoi — Fri, 31 Oct 2008 15:18:41 +0000

My understanding is that although Barclays is getting more capital away from the governement, it is using the government guarantee for its bond emissions. So does RBS.

I have been told that this was the single biggest reason of the collapse of “non core” countries debt earlier this week, making it therefore more expensive for those countries to borrow…

Another example why governement intervention is bad.

By: Johnny Norfolk

Johnny Norfolk — Fri, 31 Oct 2008 14:47:07 +0000

Would anyone in their right mind want this Labour government involved in their company. If they cannot run a country how can they run a bank or anything. Well done Barclays.

By: Kit

Kit — Fri, 31 Oct 2008 14:38:53 +0000

The Cable guy and Prestowire both explain away Barclay’s refusal to take taxpayers money so that they can protect their bonuses!