Jenkins on Barclays' need for £12.8bn

 

Barclays will raise £5.8bn through a new share issue, to shore up its finances

Barclays was widely regarded as one of the UK's strongest banks.

So it is remarkable that its regulator, the Bank of England's Prudential Regulation Authority, has ruled that it needs to fill a hole in its capital resources - the funds that it puts aside as a protection for depositors and creditors - of £12.8bn by the middle of next year.

It is the only one of the UK's biggest stock-market banks that has been set such a challenge.

Barclays is meeting it by asking its shareholders to provide almost £6bn of new equity, by selling bonds to raise a further £2bn and by shrinking its balance sheet - in essence the credit it provides - by up to £80bn (it is doing this largely by reducing investment banking activity in derivatives and financing of securities deals).

Barclays chief executive Anthony Jenkins, speaking to me on the Today programme, insisted that there would be no reduction in the supply of vital loans to small businesses and households.

Barclays also disclosed that it expects to incur a further £2bn of losses from paying compensation to people missold PPI insurance and small businesses missold so-called financial products called swaps.

You can listen to my full interview with Anthony Jenkins. I began by asking him if by requiring Barclays to fill a £12bn hole in its accounts, the Prudential Regulation Authority is actually saying that the bank had been somewhat reckless?

 
Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this
    +4

    Comment number 47.

    Why are bank's buildings the biggest in every major city?
    What's the source of their profits?
    What product are they really producing?

    Some answers below:

    a) All money is created out of nothing as interest-bearing debt when a loan is made.
    b) Banking sector has a colossal £130bn implicit subsidy underwritten by all of us.
    c) The above isn't enough - some are so greedy they manipulate the system.

  • rate this
    +1

    Comment number 46.

    Are they having to refund their middle east emergency supporters?

  • rate this
    -1

    Comment number 45.

    12.8bn?

    Is that anywhere near enough remembering the upcoming fine which could be 10% of turnover for taking part in rigging the 1tn CDS 'market'? Just to mention one storm on the horizon. That could be 100bn!

    WE really must insist that there is full MARK TO MARKET where ALL of the liabilities & losses are taken into account.

    Without MtoM - every few months most banks will need more capital!

  • rate this
    0

    Comment number 44.

    @43 treacle
    RP: 'Barclays is meeting it by asking its shareholders to provide almost £6bn'

    Remember Bradford & Bingley?

  • rate this
    +4

    Comment number 43.

    @41.NonLondonView
    Will the Rights Offer succeed?

    As it is fully underwritten, then yes.

    Who has got the money?

    Institutional investors. Barclays shares at 40% discount - good value if you take a long term view.

  • rate this
    +1

    Comment number 42.

    Add up all the cash each bank has had (private & public) from the bail out, share issues, funding for lending scheme, guarantees of bad debts by Govt. etc since the bankers' financial crisis kicked off in 2007...

    ...look at those total figures for each bank in relation to their annual turnover (as averaged out over the same period)...

    ...suddenly Co-Op is all but the best of the bunch.....

  • rate this
    -1

    Comment number 41.

    2 "Will the Rights Offer succeed? Or fail? Who has got the money?"

    Indeed. And those who do have the money, are they going to invest in a lame company so it can pay it's PPI and Libor fines?
    With assets of 1.5 trillion, it is hard to credit they can't shuffle 0.4% of that into the right slot to fill this gap without raising money.
    Suspect we are not being told the full story.

  • rate this
    -1

    Comment number 40.

    And how GO et al can even think of floating Lloyds when they don't pay a dividend.....

    Do they think investors are stupid....
    or more importantly do fund managers think the public are gullible?
    accountability... to whom?
    go to bank... go to where?
    how much has Barclays paid management consultants for the above 'key' words?

  • rate this
    -1

    Comment number 39.

    This will be the silliest investment in history.

    And that is why my pension fund managers will buy shedloads of it.

    Once more, they are wasting other people's money.

    There is not a thing that I can do about it!

  • rate this
    0

    Comment number 38.

    At least the right way to raise money rather than ever more out of customers. Let's hope this and other calls drain the system of cash somewhat and get interest rates up and thereby put us back on the right track not the same one that made the problem, low rates feeding bad lending and overpriced housing. Still got two thirds price to drop yet with proper rates and lending restrictions.

  • rate this
    -3

    Comment number 37.

    More money laundering. Selling £5.8bn of something you haven't got, is criminal. Wish i was a Banker or a Catholic Priest, seems you'll be totally above the law and immune from any prosecution.

  • rate this
    -2

    Comment number 36.

    The PRA has insisted that Barclays hits its leverage target by mid 2014, effectively meaning they have to do a capital call this year. Wonder if the PRA has also insisted that HSBC and SC delay any corporate actions until after mid 2015 to give the government a nice clear run up to the general election with its LLOY.L and RBS.L holdings?

  • rate this
    0

    Comment number 35.

    @29.Up2snuff

    Who is going to want to buy old derivatives, except - perhaps - at a massive discount?
    ---

    No need to sell. Just let the portfolio run down. A lot of them will mature in the coming year.

    As for securities funding, same thing applies. Just do less and let maturities do the rest.

  • rate this
    -1

    Comment number 34.

    @25 NLV
    You have a point, esp item 3 when taken in conjunction with news today of bonuses paid to Treasury officials.

    GO is going to regret both the 50% top income tax rate cut and not starting to deal with the insideous bonus culture back in 2010. He really should have had the latter well & truly nailed by now.

  • rate this
    -1

    Comment number 33.

    I think someone at the top finally got round to reading "The Bankers New Clothes" (see this link http://www.amazon.com/The-Bankers-New-Clothes-Banking/dp/0691156840 )

    That book makes it very clear why Barclays is doing what it is doing.

  • rate this
    0

    Comment number 32.

    Anyone wanna buy a Coco?

    gee Bob Diamond and Rich Ricci, maestros in escapology as well. as......

    shareholders, this is what happens when you criticise the remuneration committee's report.....they ask you for more money or dilute your shareholding

    When will Lloyds TSB and RBS be in a fit state to pay a dividend, the litmus test for health in the capitalist system........

  • rate this
    +3

    Comment number 31.

    Off topic, but I am surprised that the following headline from Ireland has not had even a mention. "The administrators of the former Quinn Insurance are suing the accountancy firm PriceWaterhouseCoopers for 1bn euros ." If this is proven it will surely have significant consequences on one of the big four not to mention firing a warning shot across the other auditors.

  • rate this
    -2

    Comment number 30.

    I suggest we all listen carefully to this morning's Today interview (Radio 4, around 8.10am on i-player) with Martin Wolf (Banking Commission) and Alpesh Patel (investment trader) discussing risks at Barclays.

    Then we should all be very, very afraid.

  • rate this
    0

    Comment number 29.

    @05 treacle
    That was what was said ...

    Who is going to want to buy old derivatives, except - perhaps - at a massive discount? What effect on stock markets will the effect of no securities acquisition finance have?

    We're back into a 'storm' position where one corrective action puts something else severely out of kilter.

    Could a restriction in cash available bump up Base Rate?

  • rate this
    -1

    Comment number 28.

    @19.A White

    As for Mr Boy comment 15 "nobody forcing Barclays" ok so why are they doing it then if there is no need to ?

    --

    So that they can tap the market before the Lloyds flotation soaks up the cash.

 

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