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
    -1

    Comment number 67.

    Barclays was widely regarded as the Cowboys of UK banking Robert as you well know. 2008 Qatar dodgy loan deal ring a bell? Pretend we don't need a bail out. shift £bns around to loan back to ourselves. Meanwhile LIBOR (set up by the BBA who spend more money bribing the Govt than anyone else - is this really a democracy?)) was being fiddled to make a quick £10bn and PPI ditto. Barclays = jail

  • rate this
    -1

    Comment number 66.

    Banks are still broken and are still too big to fail. See Leverage Ratio. If you had £100 and wanted to lend money how much do you think you could lend legally? If your loan went bad how much would the tax payer pick up? How much would you as a highly paid bank executive get paid to take high risks at the expense of the taxpayer?

    How much will our politicians do to stop this? Nothing.

  • rate this
    -1

    Comment number 65.

    Hmm, if I was a shareholder in Barclays I would be rather upset.

    How much in bonuses? How much in LIBOR/PPI repayments (the above bonuses were calculated on these fraudulent sales/market manipulation).

    Barclays surfed the banking wave, got £Bns bailout from the Mid East Oil Corp to pretend it wasn't bust and now is admitting it hasn't enough money to cover its loans by even moderate standards.

  • rate this
    0

    Comment number 64.

    @63 Barclays shares are down only 20% over the last five years (over which time you should have received dividends, of course). You have to go back six years to get a 50% fall (but there was this banking crisis you may have heard mention of). Then again, there's been a 100% increase since the start of 2009. Yes, it's a negative dividend - a well-deserved one, I would say.

  • rate this
    0

    Comment number 63.

    This amounts to a big negative dividend. If you are a shareholder, you expect to receive a fair annual return on your investment. However, seems that we are being required to put more money in. My Barclays shares have dropped in value by around 50% over the last 5 years and the associated dividend stream has dropped by around 70%. I don't even know what to think about it.

  • rate this
    +1

    Comment number 62.

    #50.DoE
    "This climate of micro-managing private businesses needs to end soon".

    Why should it, when banks aren't *real* businesses? They're an arm of the state, licensed to privatise gains whilst govts nationalise their losses (aka bailouts). They get an implicit taxpayer subsidy through being guaranteed by us against insolvency via the BoE/Treasury

    Ever heard of "Too big to fail" (or to jail)?

  • rate this
    0

    Comment number 61.

    #25.NLV
    "...The bonus pool is untouched..."

    Give that man a lollipop!

    Come hell or high water, come dividends or bailouts, the bonuses get paid to the execs and the traders - regardless. They're the one thing that's ring-fenced. They drive the whole perverted shenanigans.

    Bonuses corrupt, untouchable bonuses corrupt absolutely.

  • rate this
    0

    Comment number 60.

    .They could stop handing out dividends and bonuses for a few years. The retained profit would recapitalise their reserves. Although it is better to rely on the constant drip, drip, drip of banking bailouts. Other people's money being pumped into the banking system letting those who "never took a bail out" to milk their fellows for every last penny

  • rate this
    0

    Comment number 59.

    To be clear - is the cash call that Barlcays should have made 5 years ago? I have no idea how they managed to avoid doing it for so long - some pretty good PR'ing me thinks?

  • rate this
    -2

    Comment number 58.

    So they are going to make a rights issue and expect the very same share holders who were totally misled over the Qatar bail out, to now support them ?

    They have had a hand in all the "fixing" probes to date just why would anyone think that Barclays are a worthwhile investment ?

    3% ratio is just window dressing ,bust is bust.

  • rate this
    0

    Comment number 57.

    Wall Street is capitalizing on loose federal regulations to raise commodities markets; oil, wheat, cotton, coffee & more have brought billions in profits to investment banks like Barclays Goldman, JPMorgan Chase & Morgan Stanley, while forcing consumers to pay more every time they fill up on gas, turn a switch, pop a beer...
    Buy shares in any huge investment bank at cost of your soul.

  • rate this
    0

    Comment number 56.

    JP Morgan Chase - possibly $600 million in penalties/repayments for allegedly cheating customers in energy markets in California & Michigan. This just after Barclays bank paid out $470M for manipulating electricity rates. Commodity market scams - huge players dealing with each other with little outside oversight.
    Buy shares in any huge investment bank at cost of your soul.

  • rate this
    0

    Comment number 55.

    Agree with JfH, the accounts of the banks are still not worth the paper they're written on.
    It was all smoke and mirrors in the past - to show how profitable they were.
    It is still all smoke and mirrors - but as a show of responsibility.

    They are still trying to fill the hole that opened up in 2008. No one knows the size of the hole. They can keep pouring money in...

  • rate this
    0

    Comment number 54.

    50 "Will the BoE take the blame"

    NO. Just like the previous two heads they are just obeying the orders from HM TREASURY that appointed them.

    The REAL cretins are HM Treasury - but if any of the heads had both an ounce of economic skill and a any idea of personal integrity they should resign as (almost) anyone can see the terrible economic bubble/disaster that HM Treasury is creating.

  • rate this
    0

    Comment number 53.

    guess I am happier than last year...
    just as well as the markets have spoken this morning on the subject of Barclays and BP...down down down....
    the incompetence of the City of London in assisting the UK in increasing happiness value...
    except that a lot of speculators will be making money on the shares going down!!!.....
    we're all in this together but maybe not for the long term...

  • rate this
    +2

    Comment number 52.

    39.onebadmouse. You can protect your pension by actively managing your investments. If you passively accept what the pension industry invests in then you can avoid it. Pension companies are limited in what they can invest in, both through size and legislation, and this forces them to have to purchase these types of bonds.

  • rate this
    0

    Comment number 51.

    31.Chris London

    "Off topic, but I am surprised that the following headline from Ireland has not had even a mention"

    ===

    But that's what the media do. They create a hubbub of relative trivia beneath which to bury the real news.

    Yesterday the BBC hid the ending of free access to Industrial Tribunals under a load of froth about lads' mags covers and the Co-op.

  • rate this
    0

    Comment number 50.

    Barclays should not increase it's retail balance sheet at the expense of more profitable corporate and commercial banking.
    That is madness and the regulator is effectively forcing Barclays to become less profitable. This climate of micro-managing private businesses needs to end soon. Will the BoE take the blame for the next bust if it forces banks to lend lots of mortgages again?

  • rate this
    0

    Comment number 49.

    Banks are being forced to keep more capital and yet at the same time are told to lend more- anyone else see the problems in this? Banks are becoming harder and harder to lend from, the rates charged are going up, and all to meet a new capital ratio requirement.

  • rate this
    +7

    Comment number 48.

    45+

    FIRST we must get the banks to produce proper accounts.

    If they had been doing this then (almost) none of these extra capital requirements would exist!

    The idiotically lax reporting standards combined with huge overcomplexity (see special investment vehicles et al.) created this banking disaster.

    BLAME the (old )FSA / BoE and above all - the massively incompetent HM Treasury (in the UK)

 

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