Barclays' £6bn cash-raising efforts to begin on Friday 13th

Bank prepares for trading of new shares after being ordered to make itself less vulnerable to future financial shocks

Barclays has chosen the inauspicious date of Friday 13 September to fire the starting gun on a near £6bn cash-raising after the bank was ordered by the regulator to make itself less vulnerable to financial shocks.

Investors have been told they must be on the share register by next Friday to take up Barclays' offer of one new share at 185p for every four currently owned. The price is a 40% discount to the value of the shares before the money-raising was first announced.

Barclays, which was told by the Prudential Regulation Authority in July it must plug a £12.8bn hole in its balance sheet, said it would be issuing a prospectus for the rights issue in due course but gave no exact date.

The new shares are scheduled to start trading on 3 October after what would be the largest rights issue by a bank since 2009 when the country's lenders were engulfed in the worst of the recent financial crisis.

Barclays also plans to issue £2bn of bonds, shrink the size of the bank by £2.5bn and make up the rest of the capital shortfall by holding back earnings rather than paying them out to shareholders or as staff bonuses.

Antony Jenkins, who came as chief executive a year ago, said in July that the cash call was part of a "bold and balanced plan" to bolster the bank's leverage ratio – a measure of the riskiness of its lending – from 2.2% to 3% by June 2014.

Barclays avoided the need for a government bailout in the financial crisis, unlike competitors Lloyds and Royal Bank of Scotland, but still announced a net loss of more than £1bn for 2012.

Shares in Barclays rose 1.5% last night but there had earlier been nervousness about the rights issue when the man who would have been at the centre of it, finance director, Chris Lucas, announced plans to step down on 16 August. The 52-year-old was expected to leave next year but said he was departing early due to ill health.

Lucas is one of four current and former directors being investigated by City regulators over a previous controversial cash raising from Qatar that made it possible for the bank to avoid a government bailout. He is being replaced by Tushar Morzaria, who is based in New York, and was expecting a long handover period with Lucas.

It is the latest personnel change at the top of the bank since Jenkins was promoted to take over from Bob Diamond, who quit following a £290m fine on Barclays for rigging Libor inter-bank lending rates.

The former chairman, Marcus Agius, and chief operating officer, Jerry del Missier, also left a year ago.

Jenkins has been desperately trying to open a new chapter for the scandal-hit Barclays, which in the last six months of 2012 was the most complained about high street bank in Britain. He has introduced a range of strategies but some aspects of the bank's past are proving hard to shrug off. In July US regulators upheld a fine on Barclays and four of its traders of $453m (£300m) for allegedly manipulating electricity prices in California. The bank said it intended to "vigorously defend this matter" but one analyst warned that the decision by the Federal Energy Regulatory Commission could derail a deferred prosecution agreement signed with the US Department of Justice over the bank's involvement in Libor-rigging.

Article Source : http://www.guardian.co.uk

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Vince Cable has swallowed the bankers' line on capital

Business secretary used the phrase 'capital Taliban' to describe Bank of England officials, which was both unhelpful and wrong

Hark the words of Robert Jenkins, former external member of the Bank of England's financial policy committee, earlier this month: "I fear that the banks have bamboozled government into believing that society must choose between safety and growth, between safer banks and bank shareholder value, and between a safer financial framework and a competitive City of London. These are all false choices."

Bad news, Mr Jenkins, your fears are well founded. On the evidence ofVince Cable's extraordinary outburst to the FT, the government has indeed been well and truly bamboozled.

The business secretary used and endorsed the phrase "capital Taliban" to describe Bank of England officials. The term is bankers' favourite way to insult the Bank and, aside from bad taste, there are two reasons why a cabinet member should not use it.

First, the criticism of the Bank's Prudential Regulation Authority (PRA) is plain wrong: asking banks to hold more capital should not impede lending.

Second, ministers should keep their noses out of the day-to-day judgments of the independent regulator.

This row has broken out after the PRA demanded that lenders achieve leverage ratios of 3% – that is, that they should hold £3 of capital to support £100 of lending. By no stretch of the imagination can 3%, implying a 33 times levered balance sheet, be regarded as an onerous demand. The Vickers commission argued for 4%, meaning a leverage cap of 25 times, and the US is heading towards 5%.

Nor is a 3% leverage ratio for British banks hard to achieve in practice. All the main lenders apart from Nationwide and Barclays are there already. Nationwide – conceivably an institution with a "safe" book of mortgage assets – has been given until the end of 2015 to fall into line. The PRA's verdict on when Barclays must conform is awaited eagerly, making the timing of Cable's comments appalling.

The key point is that more capital and more lending go hand-in-hand, as Sir Mervyn King stressed time and again when he was governor. "Capital supports lending and provides resilience. And, without a resilient banking system, it will be difficult to sustain a recovery," King said in his last Mansion House speech.

Business secretary Vince CableCable seems to have swallowed the bankers' line that the regulator is making them assemble vast sums of capital that could otherwise be used to lend to small businesses. No, that is not how the system works: to repeat, weakly capitalised banks won't lend because they can't lend. And getting more capital into the system looks a sensible policy when the starting point is a banking industry that is still hugely over-leveraged by historical standards. As Jenkins says, we don't have to choose between safety and growth.

Of course, it suits the lenders to muddy the waters. Barclays would be unpopular with its shareholders if it had to whack them with a rights issue to find capital in a hurry. Nationwide has a particular reason to worry because it is a building society without access to shareholder capital. But the PRA's job is to manage financial stability. By speaking out, Cable makes it harder for the Bank to be seen to act independently.

What if Barclays is next week given a Nationwide-style waiver to meet the 3% ratio by the end of 2015? Would that be because the PRA is satisfied with the current financial strength of Barclays or because the regulators have been intimidated by Cable and the Treasury, which apparently shares the view that jihadists are running amok in Threadneedle Street?

Mark Carney, the new governor, should be spitting blood. He's got a tough job. He doesn't need politicians who make it harder. Cable, who in opposition was quick to spot the danger in running an under-capitalised banking system, should know better.

Article Source : http://www.guardian.co.uk

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