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Barclays protects its bankers' pay

Robert Peston | 10:55 UK time, Friday, 31 October 2008

Barclays existing shareholders are not universally overjoyed at the deal it has struck with the Abu Dhabi and Qatar.

Barclays signApart from anything else, if Barclays had raised the capital from HM Treasury - from all of us as taxpayers - it would have sold the new shares at just above 189p per share (assuming that it could have had the capital on the same terms as Lloyds TSB).

Now that price of 189p is almost a quarter higher than the price which Qatar and Abu Dhabi is in effect paying for 1.8bn new Barclays shares (which they'll receive when the mandatorily convertible notes are converted into shares before June 30 next year).

For the avoidance of doubt, Qatar and Abu Dhabi are paying much less than what was on offer to Barclays from the Treasury, from taxpayers, just over a fortnight ago.

So the wealth of Barclays' existing shareholders has been eroded by the refusal of Barclays to take the money on offer from taxpayers.

And it's worth noting that the Treasury was not undermining the important pre-emption rights of existing shareholders in the way that the deal with Abu Dhabi and Qatar has done.

The Treasury was offering to underwrite the issue of new shares at 189p, but taxpayers would have had the ability to buy the lot at that price.

That's very different from what Barclays has announced today.

Its existing shareholders have only been given the right to buy a fraction of the new equity on offer.

Barclays' big investors (and only the big ones) can today purchase up to £1.5bn of the mandatorily convertible notes, which is the equivalent of buying new shares at 153.3p each. They have no ability to claw back the £2.8bn of these notes that have been sold to Qatar and Abu Dhabi at that low price.

And, as I said in my earlier note ("Why Barclays prefers Abu Dhabi to GB"), existing shareholders don't get even a crumb of the attractive warrants sold to Abu Dhabi and Qatar with the £3bn of reserve capital instruments (these warrants can be converted into 1.5bn new Barclays shares at any time in the next five years, at a conversion price of 197.8p).

What's more Barclays is paying a whacking coupon, loads of income, to Abu Dhabi and Qatar. They get 9.75% on the convertible notes, and 14% (oh so loverly, a time of falling interest rates) on the reserve capital instruments.

And the 14% coupon is tax deductible (and, before you ask, the coupon on the prefs being sold by HBOS, Lloyds TSB and RBS to the Treasury is not tax deductible).

That means we as British taxpayers are subsidising the payment to these oil-rich states to the tune of £120m per annum - which presumably won't please Alistair Darling at a time when tax revenues are too tight to mention.

Oh, and by the way, while Qatar and Abu Dhabi are receiving this fat income stream, Barclays' existing shareholders have been told they can't have a dividend for the second half of this year (bye bye to £2bn).

So, to re-state the bloomin' obvious, Barclays is paying an arm and a couple of legs for this money from Abu Dhabi and Qatar (with a little bit of a contribution from British taxpayers), when it could probably have paid just one arm and one leg for the money from the Treasury, from taxpayers.

Why has it been so desperate to avoid taking taxpayers' cash?

Well, it wants to avoid making itself vulnerable to being bossed around by the chancellor and prime minister - which it fears would have happened it had taken taxpayers' moolah.

But what's really at stake?

Is this about protecting its right and ability to pay many millions of pounds, even tens of millions, to its superstar bankers?

After all, Barclays - following its takeover of the US bits of bombed-out Lehman - is in some ways more investment bank, more Wall Street, than retail bank these days.

And, famously, Bob Diamond, the head of Barclays Capital - its investment banking arm - has received double figure millions in annual remuneration for some years now.

I've already been rung this morning by sore investors and bankers who allege that Barclays has tapped Abu Dhabi and Qatar because it doesn't want Gordon Brown and Darling putting a ceiling on what it can pay its top execs.

Barclays tells me that it is motivated by a desire to protect its commercial freedom, which is about more than how it rewards its stars, but also includes that cherished freedom.


Page 1 of 2

  • Comment number 1.

    This desire to keep the remuneration rolling in at all costs just about sums up the whole problem, doesn't it?

  • Comment number 2.

    That's Capitalism! We (small shareholders, tax payers, consumers) are getting the shaft, they (bosses) are getting the goldmine.

    We all - government, taxpayers, institutions, shareholders should all vote with our feet and boycott this evil brood.

    How about the government set up a retail only bank to handle the uncomplicated transactions that 95% of the populace needs?

  • Comment number 3.

    If Barclays took the Queen's (many) shillings, will there be more when they need the extra liquidity ?? Those Middle Easterners have loads more to spare and it's all in good hard cash !! That, I believe, is the driving factor in their thinking.

    It's not what they need now but what they may need in to coming turmoil in the financial sector !! Real money, not funny money that devalue even as you lay hands on them !!

  • Comment number 4.

    At last, as announced in George Osborne’s speech at the London School of Economics, we at last have some idea where Tory economic policy is going. They now claim to believe, as belatedly does much of the world, in a general philosophy of Keynesianism. At the same time they have dramatically reversed their position (one they held just a few days ago in the brief era of bi-partisanship) of borrowing to buy our way out of recession; now claiming that is ‘old-fashioned Keynesianism’.

    But their new approach is a strange form of Keynesianism; especially delivered at LSE whose academics would presumably have registered the anomalies. Osborne seems to be narrowly defining it just as the use of automatic stabilisers, which most modern societies would implement as part of normal social policy; and without a thought of Lord Keynes, even in a recession. It appears that Osborne then consigns all the rest of Keynesianism to ‘neo-Keynesianism’, which he seems to believe is a term of abuse.

    Instead the rest of his solutions seem to hark back to Thatcher economics; in terms of interest rate control (the last remnant of monetarism), tax relief for small businesses and the middle classes, together with limits on government spending (monitored by an independent body).

    Am I alone, however, in thinking that his lack of understanding of economics is demonstrated – in front of LSE academics - by his idea as to what trickle-down theory is? As an economist myself I always thought it was the discredited idea that the wealth of the rich trickled-down to the poor. In the specific context of a depression, though, Keynes noted that money given to the rich was saved where that given directly to the poor was spent, thus helping us all spend our way out of depression. Osborne rather strangely thinks ‘trickle-down’ refers to government spending (typically on large scale projects) designed to boost the earnings of the poorer sections of society; especially those working in the hard hit construction industries.

  • Comment number 5.

    Hard to see the benefit for anyone - except for the board's bonuses. Why is it better to be bound to middle eastern governments than the UK government? Plus - of course - they'll not a get a second chance to get UK support, when it all goes belly-up. Which it will.

  • Comment number 6.

    Given Gordon Browns ability to change rules whenever he feels like it I'm not surprised that Barclays have decided to keep clear of Government money. Freedom from Labour meddling may seem expensive now but given the level of national debt who knows what is round the corner.

  • Comment number 7.

    And if the deal goes bad, the government will bail out the bank with it's new Abu Dhabi shareholders. Taking the Piss!!

  • Comment number 8.

    Sorry bit this is disgraceful.

    I'm not generally one for laying into bankers to anything like the degree regularly seen on here and I'm passing no judgement on salaries and bonuses but this is bascially riding rough shod over existing investors.

    In some ways I'm pleased that the governments stake in banks is lower than it would otherwise have been but it's immoral (and I'm surprised not illegal) for Barclays management to actively seek out a lower offer for personal reasons to the detriment of it's shareholders.

  • Comment number 9.

    It is inevitable that commercial and investment banking activities will have to be separated once again in both London and New York.

    Barclays will have chose which one to be. Expect the commercial banking part to be sold off / nationalised and the investment bank part to be heavily regulated.

    In this process the weakness of the true state of their balance sheet will be revealed. The shareholders will take a beating.

    If one or the other fails they will not get bailed out.

  • Comment number 10.

    So - let Barclay customers vote with their feet if they don't like this.

  • Comment number 11.

    That is a great report, thank you !

    Plenty of food for thought in the chilling prospect of our major banks coming under control of foreign governments!

    Is Britain bankrupt ?

  • Comment number 12.

    The next bank to teeter. LET IT BURN.

  • Comment number 13.

    It also strikes me that the reputations of the Barclays CEO and Chairman had been staked on sourcing non UK government equity. At the time they turned their noses up at the Government offer surely they were thinking that they could get funding on more advantageous terms elsewhere?

    However, as events have unravelled, this is obviously not the result, therefore the Directors have agreed to take this money so that they can maintain both their jobs and bonuses. No wonder the share price has fallen heavily today

    How can non executives/corporate governance bodies allow this to transpire? Where are the checks and balances? As a Barclays shareholder I am appalled, that they allow such a blatant action of self interest to happen, particularly in light of how we got here in the first place

  • Comment number 14.

    Seems a high price to pay for freedom from the British Government bossing them around
    Do they know something we dont

  • Comment number 15.

    I agree with everything said here, and what of Barclay's individual, small shareholders who were promised participation in a future issue and are suddenly left watching the drama from the sidelines.

  • Comment number 16.

    Well done Pesto - you've finally caught on. See my comment '39' to your earlier mistaken post.

  • Comment number 17.

    I am astounded at the abuse of existing shareholders, particularly small shareholders.

    How can these greedy self-serving directors, who are tantamount to assisting theft from exisitng shareholders, get away with denying existing shareholders their pre-emptive rights?

    How can they offer shares at 152.5p to mainly middle eastern investors when the Government would have paid 189p and honoured per-emptive rights?

    As a small shareholder, despite holding my shares in a Barclays Shareholders nominee account which makes it more difficult to vote on these things, I will be most certainly voting against this deal.

    If the guardians of our pension funds can raise their lazy selves into action they also ought to make sure this deal is voted against.

    I thought the Government stealing a large part of our banks was bad enough, particularly having voted Labour (never again) and not believing the old sayings about Labour Governments - but to see directors effectively assisting the theft by Arab investors so that they can continue to pay themselves unfettered sums is truly amazing.

    The Government is also partly to blame in not regulating against such abuse of existing shareholders-but how can the pot call the kettle black?.

  • Comment number 18.

    Yes, maximum commercial flexibility all round ! (And why wouldn't they ?)

  • Comment number 19.

    Yes - RP has hit the nail on the head. Barclays management avoided government money precisely so that they could continue paying themselves huge bonuses. Shareholders' interests didn't even enter into it.

  • Comment number 20.

    Robert Peston is absolutely right. Barclays management simply want to perpetuate the bogus bonus culture at any cost. If they were serious about remaing independent they would not pay any bonuses for this year. The heavy dilution, servicing costs will severely restrict the scope for dividends, and management will ensure their huge rewards package comes first. Sell Barclays!

  • Comment number 21.

    As a small shareholder in Barclays I should be unhappy at this deal. The reason I am not is that I'm more happy that Barclays have managed to avoid the disgusting blackmail tactics of the Gov't during the negotiations of the re-capitalisation of the banks. The enforced increase in capital ratios at a time when exactly the opposite should be happening to allow the banks to loan more money was a very dirty trick to play at time of unprecedented liquidity freeze. I can see Gordon Brown's smugness as he thinks he has beed able to nationalise these bastions of capitalism with overwhelming public approval. I see through this charade and so have Barclays.
    The capital ratios should have been increased during the boom years to restrict the too rapid expansion of the money supply this is a failure of macro economic policy by the government, not now at a time of de-leveraging and rapid money supply contraction which only compounds the problem.
    In public Brown calls for 'the banks' to maintain lending at the same level as 2007, yet the bank that is fully nationalised and therefore 100% owned by the government has been the worst bank with respect to reducing it's willingness lend, more than any other bank!! Thousands of people with Northern Rock mortgages were told within weeks of it being nationalised to bugger off and get a mortgage somewhere else. They have also been the bank which has been the most aggressive on re-possesions which in turn both increases the crash in house prices and undermines confidence in wholesale money markets to invest in UK assets. How can Brown expect other banks to do this when his bank (and i'll bet this is how he really sees it) wouldn't lend a fiver against the collateral of Buckingham Palace!
    This is either incompetance on a mesmerising scale or perhaps a very clever political game of chess being played out. Is this the beginning of the next global war, Socialism versus Capatilism.

  • Comment number 22.

    At the beginning of all of this turmoil, the one bank many journalists would have wished to disappear would have been Barclays. Robert, I get the impression that you cannot bear the idea of Barclays coming out of this trauma as one of the few winners.

  • Comment number 23.

    I'm back on home soil.

    The good news is that everything looks normal.

    'One in five employers said they would take advantage of the rules which allow them to make workers aged over 65 redundant, without having to provide a business reason'.

    Come on Liz, sack the lot.

    No potato pun intended !!

    Telegram from Mum.

    Barclays bank owned by arabs - stop - Manchester owned by arabs - stop -
    Where will it stop - stop

    Stopped for lunch on M 40, hope to find English menu.

  • Comment number 24.


    I think you have omitted the following in your blog:

    Brown and Darling have been completely outflanked, outwitted and outthought by the Barclays group.

    When small fish leave the small pond to swim in the ocean, they have to be able to deal with the great white sharks or they have to face the consequences.

    Although Barclays is British, I have felt for some years that their outlook is more global. I would not be surprised in the near future if they cease to be quoted on the London Stock Exchange and move abroad. Whether others will follow....

  • Comment number 25.

    well with so many of our banks owned by overseas investors, banks or may be states its expected that barclays would broker there own deal due in a great part to there misstrust of the government here.
    there has to be something they have not released that makes there deal worth there while?
    thus we can only speculate upon what ever that is they themselves are smug in there ivory towers rubbing there hands with glee.

    are they right well time will tell and to be honest to many british banks have fallen under dodgy european bamks ownership recently and this governments handling of the situation has been half hearted at best, with too many clauses.

    at least if barclays fails now if this downturn gets worse they wont be taking british taxpayers money with them unlike several others.

  • Comment number 26.

    What's at stake?

    How about we arrest the lot of them - GB, AD, all of the execs of Barclays and anyone else we can think of - and charge them all with conspiracy to defraud the Crown.

    That'll sort the men from the boys. He who squeals first wins....

  • Comment number 27.

    So, is Barclays to be re-named "AL-BARCLAIS".

  • Comment number 28.

    Surely if it can be shown that the Barclays Board has taken on more expensive capital and thereby hurt its shareholders in order to protect their massive remuneration, then they have broken their fiduciary duty?

    If I were a large Barclays shareholder I'd be looking at legal options to try to prevent this deal...

  • Comment number 29.

    Does Barclays find the commercial shackles proposed by the Treasury for taxpayer funding too limiting, and in particular the pressure to lend for political reasons unappetising. As I understand it Barclays are the only high street bank to be already offering the EU finance facility for small businesses so they are ahead of the pack on that score. If Barclays find the taxpayers money has too many strings and goes elsewhere that is a good thing surely, one less headache. I can't see how one minute the banks are being moaned at for failing to find private funding and asking for taxpayer money, but when they go and get private funding they get moaned at for that. Can't have it both ways. It is up to the shareholders to control exec pay.

  • Comment number 30.

    I think Barclays are very wise to avoid any dealings with HMG. It is difficult to overstate the damage that can (will?) be done by incompetent meddling in Bank's affairs by the unqualified rank amateurs that run this country.

    I for one am very, very pleased that Barclay's and HSBC have avoided the tar-pit of part nationalisation. Over the coming years, I am quite certain that these two will vastly outperform the rest.

  • Comment number 31.

    The greed of the Barclays directors is truely breathtaking (let alone their lack of patriotism)......I for one certainly hope they are wiped out by the impending CDS tsunami.

  • Comment number 32.


    Do you honestly believe the nonsense you've just written? I mean the bit about UK taxpayers subsidising the Abu Dhabi and Qatari investment funds?

    To save you the trouble, I'll correct your factual inaccuracies. The interest expense of paying this money to AD and Qatari investors is tax deductible to Barclays. They get the tax benefit not the investors. Therefore the beneficiaries of this tax deductibility are actually existing ordinary shareholders of Barclays. Why? Let's say Ally D decides to rush legislation through Parliament to remove your "subsidy". That would have no impact on the AD and Qatari investors: they would receive the same interest income. However, Barclays would end up with lower costs allowed versus tax, therefore their tax bill would rise. That means lower after tax profit attributable to ordinary shareholders. Barclays would respond in one of two ways: increase the interest rate charged to borrowers (eg small businesses, mortgages) in order to earn the same after tax return, or simply withdraw from the business as it's unattractive.

    Incidentally, why not acknowledge that the tax-deductibility of interest expense is common to all forms of borrowing, across all borrowers? So, for instance, small businesses can deduct their interest expense. Are you saying that the government should scrap the allowability of interst expense generally, or do you just have something against foreigners? Or banks? Or banks that don't have HMG as a shareholder?

    Why don't you also point out that existing shareholders have a number of remedies if they're unhappy about the likes of Bob Diamond getting big remuneration packages? Isn't BD a main Board Director of Barclays? I'm pretty sure he is. So existing shareholders can vote down the Remuneration Report at the next AGM. They can also vote against Director reappointments at the AGM, in particular any of those due for re-election who are members of the Remuneration Committee. You might like to go for a bit of balance and point out how highly rated BD is by Barclays institutional investors. There hasn't been much objection to his earnings as he expanded BarCap at considerable benefit to the shareholders until recent events. Has BarCap fared better or worse than most other investment banks in the current crisis?

    Finally, why don't you point out that the reason why Barclays cancelled its ordinary dividend was to help repair its capital base. Oh, and acknowledge that the nationalised banks have lobbied to have the "no divis" condition of HMG's investment removed. Barclays shows no sign of changing their stance on the next dividend.

    You might also like to enlighten readers as to how these capital injections normally work, ie private sounding out of investors (current ones or not) to establish the level of interest, required terms, explanation of the business strategy etc. It has been obvious since the HMG bailout was announced that Barclays was desperate to avoid having to tap it. And, yes, the reason is to avoid limits on executive payments that could compromise its Lehman's acquisition.

    The deal Barclays got on that was (almost literally) a steal. They don't want to lose it and, clearly, the AD and Qatari Funds are willing to invest, but at a price. You might like to find out why others weren't willing (or able) to invest. For instance, you could ask your mates GB and Ally D if they'd have been OK with Barclays taking HMG money, going ahead with their Lehman's acquisition including the need to pay bonuses previously agreed prior to Lehman's insolvency. If they're not happy to sanction that, then why would it make any sense for Barclays' existing shareholders to see a significant holding by a shareholder fundamentally opposed to the management's declared strategy? And why, if Barclays can get funding at a price they think still allows them to earn a decent return, would it make sense for barclays to ditch their chosen strategy just to get HMG funding? HMG funding may well be cheaper, but if the marginal reduction of returns exceeds the marginal reduction in cost of capital, then it's not in Barclays' interests to ditch their investment banking ambition in return for lower capital costs via HMG.

    I normally like RP's blogs. They stimulate debate which is the idea. This one is rubbish, though. It's overly populist and factually wrong as a result.

  • Comment number 33.

    Surely it should be totally obvious to everyone by now that the banks are totally unable to control their own greed, regardless of the devastating effects it has on society, regardless of how bad things are getting.

    It's a near-inevitable side-effect of competing in our monetarist global economy, and I doubt any company is immune. Just look at Enron, or Halliburton, or Monsanto, or Nestle, or... well... any of them.

    Isn't it time now for money -- the most vital and fundamental building block of society -- to be a government function?

    OK, that means giving a lot more power over society back to the government, and perhaps that's risky -- but at least that power would be out of the hands of people who we KNOW will misuse it.

  • Comment number 34.

    So, they're selling shares to Middle East investors at 153.3 p instead of selling to HMG at 189p, and all that existing shareholders get out of it is a bank that is free to go on paying bonuses? Crazy, on the face of it.

    I doubt if it's this simple but, if it is, then aren't their rules to stop this sort of thing?

    Specifically, is a company allowed to issue this much new equity without offering equivalent terms to existing shareholders?

    Aren't they obliged to take the best offer (i.e. HMG's 189p)?

    Don't they have to hold an EGM to get shareholder consent for this sort of thing?

    I'd be grateful if someone could clarify this. It looks a lousy deal for existing shareholders on the face of it.

  • Comment number 35.

    So, let me get this straight. This is not a good deal for shareholders. However, it does mean that Barclays keeps the right to pay its senior executives eye-wateringly large bonuses, which would have been restricted if they'd taken government money.

    This decision, which apparently is not good for shareholders, but is definitely very good for senior executives, was taken by the senior executives, who are supposed to act on behalf of the shareholders.

    Am I missing something, or is this about as clear cut a case of conflict of interest as you are ever likely to see in corporate finance?

  • Comment number 36.

    Recommendation: - Due Diligence.

    If I was contemplating such an investment (i should be so lucky!) and getting such a large risk premium I would be very worried about why, particularly when they could have had funds at lower rates. I do not accept the bosses pay argument.

    To look at the books and records very closely indeed, would be my first reaction - questions that come immediately to mind include the nature of the assumptions in the marking-to-market of the assets and liabilities on the books.

    I guess this thought is shared in the market and that is why the price had dropped, when you might have expected it to rise.

  • Comment number 37.

    To anyone who still thinks this is a good idea take a look at Barclays share price movement since 09.00 this morning. The market knows a shareholder shafting when it smells one.

  • Comment number 38.

    Amid the discussion about the British banks there is little if any reference to the third largest - Standard Chartered - also noted for not having indulged in a diet of toxic derivatives and greed driven lending (and not at the door of Downing Street with the begging bowl). My recollection is that both Standard Chartered and Barclays have one of the Singapore investment companies, Temasek, as major (15%+) investors. What I wonder do they feel about seeing their investment eroded by their middle east counterparts, or have they with typical Singaporean discretion quietly made their own arrangements with Barclays without shouting about it?

  • Comment number 39.

    Of course it makes sense!
    The middle-eastern investors are not likely to ask Barclays to make populist decisions such as providing cheap mortgages, etc. Any normal investor would be better than the politically-motivated Treasury....
    When the crisis ends (and it will take some time, of that I have no doubt), Barclays will be stronger than its treasury-funded rivals because it is independent to make its own business decisions.

  • Comment number 40.

    This shows the true colours of the Barclays executive and unfortunatley probably all successful bankers. Their objective is to make as much money as they can with 'charity begins at home' the main priority. The ability to securely hold peoples savings and handle every day finances are an essential part of daily life as is water electricity etc. Making obscene profits from this is totally immoral. Only by closing these institues down and replacing them with a totally regulated non-competitve single 'National Bank for the UK' can a solution be found. If there's no competition there is no argument for big pay big bonuses and shameful policies.

  • Comment number 41.

    Pheeewee Robert. Have these greedy 'bleep' learnt nothing. It looks sooooo bad for them. It just shows you how these bankers feel no shame at all. They're even willing to do the dirty on their own shareholders. What a scandal. What a bunch. Surely they're expected to act in the interest of their shareholders? Or is that an old fashioned concept these days?

  • Comment number 42.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 43.

    Never liked Barclays - they are ruthless greedy, bully cowboys. Now they are doing their turn on the Arab states and at others expense.

  • Comment number 44.

    "Why has it [Barclays] been so desperate to avoid taking taxpayers' cash?

    Well, it wants to avoid making itself vulnerable to being bossed around by the chancellor and prime minister - which it fears would have happened it had taken taxpayers' moolah.

    But what's really at stake?"

    Which you then spend 4 paragraphs condensing into an assertion that executive remuneration is the only possible reason for Barclays' reluctance to accept Treasury funding.

    Does it ever cross your mind that some of your truth structure may actually be no more than expedient assumption? Maybe you have invested so much of yourself in Brown's right to determine the way through this that you are not prepared to accept that anyone who disputes this can possibly be acting rationally.

    Maybe it's you who is not acting rationally.

  • Comment number 45.

    RE: 21 That's exactly the action Barclays has been taking against it's customers at every turn since things went pear shaped so don't get too stroppy with the Govt.

    I think this shows the lengths Barclays will go to to avoid any imposed responsibility for fairness to its customers. Barclays likes to be a law unto itself and taking government cash would cause difficulties in achieving that end.

  • Comment number 46.

    In a perverse sense, this is ironically amusing. If you ever wanted a snapshot of what was wrong with the banking industry this has got to be it.

    Print it out and frame it. In ten or fifteeen years when it all collapses again you can look up at it hanging on the wall, shake your head and mutter to yourself "I told you so.".


  • Comment number 47.

    The reason this is happening and why more solvent banks will be targeted is set out below

    The Gulf has massive infrastructure projects under way designed to diversify its economic away from relying on oil export revenues. Many of these projects are public-private partnerships, but private investors are finding it difficult during the global credit crunch to access abundant and cheap funds.

    As a result the shareholders can be pretty sure their loaned funds will not be defaulted on which cannot be said for Britain or the USA

  • Comment number 48.

    As an ex-employee of Barclays i've avoided dealing with them at all possible times.

    It's a shame as Woolwich was a great firm with some great deals. Even though this brand still gives some great deals i can't bring myself to use them now they are part of the Barclays brand

  • Comment number 49.

    Also didn't Barclays recently acquire a part of Lehman's? They found the money for that easil enough

  • Comment number 50.

    "The UAE will employ all means to head off the global financial crisis, be it through bilateral cooperation with the country's friends and allies or through international financial institutions," Shaikh Abdullah told a joint press conference with his German counterpart Frank Walter Steinmeier in Abu Dhabi.

    courtesy Gulf news, yesterday

  • Comment number 51.

    It looks as though the senior management at Barclays are more concerned with preserving their massive pay packets than they are at protecting the rights of existing shareholders.

    I have long believed that shareholders exercise far too little influence over the boards of companies. This was a point made quite forcefully by the Hedge Fund manager Hugh Hendry in a recent episode of Dispatches on Channel 4. The plain fact is that although in theory a company like Barclays should be run in the best interests of its shareholders, in practice many of the decisions, particularly with regard to remuneration, appear to be motivated by the self-interest of the senior management. In effect, senior managers run these companies as if they own them.

    I’m not sure what the answer is. Somehow, the various shareholders - pension funds, investment managers and the like, need to get together to exercise a greater degree of control over the companies in which they have a stake.

  • Comment number 52.

    "The UAE will employ all means to head off the global financial crisis, be it through bilateral cooperation with the country's friends and allies or through international financial institutions," Shaikh Abdullah told a joint press conference with his German counterpart Frank Walter Steinmeier in Abu Dhabi.

    courtesy Gulf news, yesterday

  • Comment number 53.

    "The UAE will employ all means to head off the global financial crisis, be it through bilateral cooperation with the country's friends and allies or through international financial institutions," Shaikh Abdullah told a joint press conference with his German counterpart Frank Walter Steinmeier in Abu Dhabi.

    courtesy Gulf news, yesterday

  • Comment number 54.

    Well done Barclays.

    I'd pay almost any price to keep Gordon Brown and Alastair Darling from meddling in my business, or (worse still) the dead-hand of the 9 to 5 civil servant which may well follow the nationalisation of other banks.

    Government ownership of banks will be as disasterous for banking in the UK as it was for steel, coal and cars, but with even more serious consequnces for the wider economy

  • Comment number 55.

    The answer simply put is that Barclays' board had no desire to be nobbled by the Standard Chartered "rescue" plan.

  • Comment number 56.

    Ah - the blessed know everything Robert - with all of his years' experience of running a financial institution - not!

    Did it ever cross your mind that there could well be more to this transaction than the visible investment?

    The gulf states have a lot of disposable wealth, maybe they want someone to manage it for them - maybe a bank they have a stake in.

    Barclay's could well be playing a very canny long game - but then that is not such a good story is it - and probably not the story written for Robert by the Treasury

  • Comment number 57.


    Excellent post. I have only recently cottoned on to your posts, but you're obviously working in the industry and know what you're talking about.

    As regards the press, it has often amused me that if you have any inside knowledge of a story you will invariably see factual errors in even the most "respected" press reports.

  • Comment number 58.

    Wee-scamp, this is about shareholders not customers – who as RP demonstrates are being penalised by this move. I thought a board was under a legal obligation to act in the interests of all shareholders.

  • Comment number 59.

    As a taxpayer, Iam glad that Iam not picking up the bill this time

  • Comment number 60.

    To me, this blog/article sounded as though it was actually Alistair Darling having a whinge about not being able to get his claws into Barclays, rather than an unbiased article on the BBC.

    I'm not a big fan of Barclays - I would never bank there myself now after past experiences - but I'm glad at least one of the banks isn't held in thrall to the Treasury.

    Given Labour's handling of the economy, the thought that they could also have had significant influence over all the major banks is more frightening than the amount that bankers get paid.

    As for paying two arms and two legs for this deal, for their shareholders it will hopefully mean they get their four prosthetic limbs sooner than they would have received two if the Treasury had taken a stake in the company.

  • Comment number 61.

    Nice piece of analysis Robert.

    Which makes it plain that these bankers are continuing to do what they have done to such an excessive degree over the last few years..... run their banks in the interests of themselves (directors and senior executives) and not, as they should be doing, in the interests of their shareholders.

    You could say, though, that Barclays shareholders are a cowered, sensitive, delicate lot at the moment, who have little appetite for expressing strong views in all this, because they realise that their shares are only worth anything at all because of the government guarantees that have been handed out.

    One question - Barclays may have avoided calling on the government for share capital, but it is still using the two other elements of the government package, so what is the government getting/ do we as taxpayers get in return for this help?

  • Comment number 62.

    i'd like to know how the cost of capital compares after taking account of the tax deductibility.

    despite the comment from JayPee28bpr @ 31, i do still get the sense that, even after taking account of the deductibility and the impact on the lehman acquisition, this is a worse deal for existing shareholders than the bailout, if only for the simple reason that current shareholders are not being offered the right to participate on equal terms. (nb, i believe robert's 7th para was supposed to read "The Treasury was offering to underwrite the issue of new shares at 189p, but EXISTING SHAREHOLDERS would have had the ability to buy the lot at that price.")

    although robert does sometimes get his facts wrong, he clearly has been getting a lot of angry calls from barclays shareholders and i suspect that he has the "feel" of the story about right.

  • Comment number 63.

    #4 mercerdavids

    Great post! I think you are right about this 'trickle down' nonsense: it needs to trickle up (as it were) by stimulating economic activity at the bottom end of society.

    I don't know what Osbourne is going on about. He slates Broon and Darling for spending our way out of trouble; and then promotes the idea of tax cutting our way out of trouble! Eh?

    Do they really think freezing council tax and reducing employer contributions is going to do much?

    How long did it take the Tories to dream this one up? If they were in government the economy would have collapsed weeks ago while they figure out who to 'target' these tax cuts to.

  • Comment number 64.

    This makes perfect sense to me. Good for Barclays looking towards the long-term bigger picture and not at the very short term cost. I am a Barclays shareholder and I think this is very good news.

  • Comment number 65.

    i like everyone else am appalled with banks behaviour regarding bonuses e.t.c. i think not enough credit it is being given to the Barcalys board here surely there not stupid enough to take a worse deal just to keep there bonuses and freedom e.t.c. i think there is a much more worrying aspect here and that is her majestys goverment in a bit of a pickle. The Banks have no money, the goverment is up to its eyeballs in debt, Countrys are now running into trouble and the IMF are down to there last few billion. With everyone calling in loans and debts that simply can't be paid is the whole system coming down in a domino effect!!! i'm a little worried that barcalys know something we don't! i think it might now be time to stock up on some tinned foods

  • Comment number 66.

    BTW I thought banks were not allowed to be retail banks and investment banks anymore, or is that a US thing?

  • Comment number 67.

    Perhaps someone can explain how Barclays can afford to pay such high returns to their new Arab investors? Couldn't they have obtained funds at a cheaper price from say the British pension funds?

    Doesn't this deal mean increasing the interest rates Barclays charge to customers at a time when everyone expects the bank rate to fall in the next year? Or is it the case that interest rates are no longer related to the bank rate?

    One thing looks very clear. It is a lousy deal for small shareholders. The share price has tumbled today on the news.

    I hope that the refusal of Barclays to accept HM Treasury help means that, if Barclays runs into further trouble, HM Treasury will extract a much higher price for help than charged to the other banks that have accepted help.

    If I still had an account with Barclays, I would close my account on this news. I'm glad I'm now with the building society, Nationwide which is owned by the members.

  • Comment number 68.

    Unbelievably arrogant. The more I learn about the banking industry, the more I am physically repulsed by their behaviour.
    The whole process of this financial meltdown is akin to turning over a rotting corpse and finding the nest of leeches attached beneath, feasting on the foul dregs, not missing a drop.

    Are we so stupid that we trust the these parasites with the control of our money supply and the economic health of our nation?


  • Comment number 69.

    Isn't this a bit like telling Ocado they could get their groceries cheaper from Somerfield or Lidl?

  • Comment number 70.

    I have read some articles - but one criticising a private sector company for not taking taxpayers (our) cash is beyond belief.
    Is the Treasury so upset that a bank could raise the money elsewhere? And why is the BBC not quoting these concerns directly?
    And not forgetting Barclays' shareholders have their own rights which are enforceable in law.

  • Comment number 71.

    What this decision shows is that Barclays did not want the Government to get its hands on its books. The question, given the fact that this deal is a seemingly worse deal financially for the Bank and, more importantly its shareholders, is why?

    The answer I fear is two-fold.

    The first is the obvious, i.e. it did not want its business model effectively disbanded by nationalization - there is no such thing as part-nationalized, once government is in, 'freedom' to act independently is withdrawn no matter how little the stake.

    However, the second is more concerning, i.e. that the bank did not want to expose the true extent of its toxic debt, which given they have admitted that credit default swaps is a least £2.4t, it would have had to do under nationalization, and instead has fished around to find others more willing to keep the situation under wraps in return for a hefty return.

    The concern therefore is that their situation is thus even worse than they are prepared to admit.

    Anyone who believes that this crisis has bottomed out is, sadly, deluding themselves. We are only just beginning. I remain convinced that the system is beyond repair and all that is going on is a series of sticking-plaster solutions, which will unravel in due course.

    Brown the saviour of the economy? Think again!

  • Comment number 72.

    I think you got this one wrong. I think Barclays is looking ahead to where it can do business in the longer term. I think they also can see a real problem for UK banks raising money through normal channels in future. I also have some sympathy with your correspondents who talk about the Government pushing banks to lend to bad risks- although the paradox is that they lent enough to entities where they had no clue of the risk. I applaud what HMG have done but do not blame the banks if they can get out of this mess without HMG money. What I do not approve of is the idea that banks should lend to businesses because they are small rather than because they are a good risk.
    Where I think Barclays are a disgrace is in foregoing the dividend if they have made money and not accepting that they need to change the basis of remuneration of their senior people. But it is up to their depositors to make a judgement and take their money elsewhere if they object to it. Unfortunaely their shareholders have been shafted enough already and borrowers are hardly likely to take their business elsewhere in the current climate. Interestingly Barclays were the worse bank for shafting their customers in the 80s and 90s- so the nasty devils have not really changed their spots.

  • Comment number 73.

    It means they can attract the best talent now that there competitors are constrained by government. Barclays will not have to be prudent bankers! If they ever were.

  • Comment number 74.


    beyond the brief flicker of the candle of publicity and well-hidden from public gaze, ordinary peoples' lives are being wrecked by the recession - unless I'm dreaming and it's over already.

    Funny how the BBC is going to treat all this. 'Same as last time, 1990-92 and beyond'. Plus ca change. Not news anymore, even little bigmouth Jonathan Ross is bigger than the recession 'story'..

    So, in closing:

    People are going to suffer.
    There are going to be a lot of redundancies. A lot of people are going to go bankrupt.
    A lot of firms are going to go under.
    A lot houses will get repossessed.

    De facto.

    The end. Good afternoon, good evening and - Goodnight.

    Nice one BBC. Clinch those headlines. Lord knows, you'll need the ratings more than ever now.


  • Comment number 75.

    63. At 1:55pm on 31 Oct 2008, dceilar wrote:

    ''I don't know what Osbourne is going on about. He slates Broon and Darling for spending our way out of trouble; and then promotes the idea of tax cutting our way out of trouble! Eh?''

    May I explain, although I feel I will get short shrift.

    1.Taxes should be reduced to enable all to either buy or save. The choice is theres.

    2.Borrowing should remain as it is now - virtually impossible

    3. Profits of over a reasonable percentage(set at figure above interest rate that still makes it viable to invest), should be windfall taxed

    4. People earning over 50k pa should be taxed at at least double the current rate

    5. Home Loans should be fixed for the length of the mortgage and nobody should be able to borrow more than 3 X earnings

    The result would be people at the bottom would have the ability to purchase without credit or save.

    Companies would be paying into society, investors could still get a healthy return

    The economy would expand bottom up, social responsibility would come to the forefront of companies and communities

    The higher earners would contribute a fairer share of wealth toward community instead of sitting behind their wrought Iron fences patrolled by guard dogs

    When you ask the questions:

    Why should we pay bills to water, electricity and gas that produce the billions of profit for these companies shareholders with a small percentage going to towards regeneration?

    Is it not a statement of our society that our basic needs are used to make money instead of support life?

    If inflation is 5% and interest pays 6%, why are legal companies allowed to charge 30+% interest to the most vulnerable

    Why do we have to pay PAYE taxes and NI straight form our salaries when the richest people in society pay nothing?

    The system supports greed, encourages greed and kills dead social awareness.

  • Comment number 76.

    It seems to me that the board members are more interested in protecting their high salaries or perhaps protecting their current positions. Who was in the driving seat when these banks got into trouble. Also it seems that often the increases in salaries are paid for by the reduction in salaries of other workers. Quite often we hear announcements of employees being made redundant and then not long after senior posts are rewarded with increased bonus payments or increases in salaries. Personally I feel sad for our young people coming into the work place today as we have not educated them for the modern world. I was interested to learn that in Germany they still have the apprenticeship schemes and they recognise that people have different skill some are practical and others academic. Lets wake up UK and think about our future and rebuild again not import everything.

  • Comment number 77.

    So, short selling Barclays shares is illegal, but short-changeing Barclays shareholders is OK ?

  • Comment number 78.

    If Barclays can raise the required capital without Government support, that is understandable and even commendable. However, as you point out, the motives may not be honorable!

    Since Barclays has cut its dividend etc. to build capital, at the Shareholders' expense, the shareholder should reasonably be expecting the bank to overhaul its remuneration policies to reflect accountability and share the burden. So it remains to be seen whether or not management will accept any accountability/responsibility. History of Barclays would appear to justify some skepticism that this will happen. However the retail customer will continue to 'make sacrifices' through outrageous charges for very average services.

  • Comment number 79.

    Now it seems not only Lloyds HBOS will be a much stronger position as stated in my previouse posting, RBS is better positioned to recover much faster and come out eventually strong growth and better div for its share holders as the bailout terms will curb the excessive executive payment and unnecessary risk taking. After all the worries of treasury bailout plan, these three banks HBOS, LLoyds and RBS will be now in a bullet proof case to march on to be the next stable, profitable and reasonable high street banks of UK. The next thing will happen to Barclays is really unpredicatable.

  • Comment number 80.


    Glad you like the posts. I'm actually a consultant, which many will regard as the same degree of evil as a short seller I suspect! I've held senior positions in financial services businesses previously, though. These were mainly in fund management companies.

    For what it's worth, I've long held the view that financial services generally adds no value at all to society, and happily acknowledge that those of us in the industry, by contrast, are rewarded extremely well. So I don't approach blogs like RP's from any kind of apologetic perspective. I just think they should be factually accurate if people are to make informed contributions to the debate on how financial institutions should be regulated in future. And that's a very legitimate debate for everyone to be involved in.

    Criticism of bankers, governments and, to a lesser extent, regulators, is perfectly justified. However, there is a lack of knowledge of banking and fund management generally displayed in replies to these blogs. That's not a criticism of the commentators. As an industry, we've been poor at explaining the products we sell and what we seek to achieve for investors. "Hedge Funds" are a great example. Blogs over recent weeks would suggest that "Hedge Funds" and "Short Sellers" are one and the same thing. The assumption is that they are hugely risky. In fact, most Hedge Fund investors use them to reduce overall risk. Most Hedge Funds do not take short positions. In fact a large proportion of them don't even invest in equities.

    I hope we'll see a push to educate people a bit better on financial services. If we get this as a result of this crisis, then at least some good will have come out of it. It does require outfits like the Beeb to take part, and as part of this to put out accurate stories, though. Note I said accurate, I don't believe they need to be balanced. In this instance, I just think the reporting was plain inaccurate. We need to avoid that if everyone is to be enabled to make an informed contribution to the future of financial services.

  • Comment number 81.

    "73. At 2:50pm on 31 Oct 2008, Ralphbab wrote:

    It means they can attract the best talent now that there competitors are constrained by government."

    Is this a joke? All the "best talent" that brought our banks to the brink of bankruptcy? In any rational economy, these clowns would never work again. In this lunatic asylum economy, of course, the old boys' network will ensure that they all land on their feet, ready to do the whole thing all over again. Must be nice to be so "talented".

  • Comment number 82.

    It seems to me this deal only protecting the super bonus payment of the super bankers but very bad deal to the small shareholders comparing what the treasury offered. Now the Lloyds share price £2.02 is the proof that HBOS, Lloyds and RBS will be in a better position to progress, it's now better to switch to buy RBS share at 68pence that means one Barclays share at the current price can still buy 2.5 RBS shares.

  • Comment number 83.

    Did the Treasury offer funds to Barclays if needed?

    Or is Barclays a risky proposition and heavily geared, and taxpayers are better off out of there?

    Do Taxpayers want to invest in Barclays if this is the way they behave?

    Just seems there is perhaps a little more to this than meets the eye at present.

  • Comment number 84.

    I note HarpendenAL5 #64, who is a Barclays shareholder, considers this story to be very good news.

    The market thinks otherwise. The price as I write is 170p, down 35p on the day (a fall of over 17%).

    In contrast, LloydsTSB and HBOS shares prices rose today.

  • Comment number 85.

    Sorry to spoil the party, quick question.

    One big business scoop after another. A kind of financial-times-ice cream party.

    You RP are the not the business editor you is the BIG business editor.

    Is there a SMALL business editor on this BBC site?

    I only ask because whilst many must find these BIG BUSINESS blog topics absolutely rivetting there is a limit to how many of them I can read without throwing up.


  • Comment number 86.

    I am with #34 (Friendlycard)---don't Barclays Shareholder agreement or Mems. and Arts. have anything to say on rules and procedures for dilutive capital raising.

    The shareholders are supposedly the owners of the company and it seems very strange that managers can dream up a scheme and simply impose it on them.

    There is mention of large investors being offered buy-in and perhaps behind the scenes there have been soundings that enough large shareholders can be brought in by this offer---but I would still have thought it had to go to an EGM?

    Of course the total disregard of shareholders shown by HMG from Northern Rock to Bradford and Bingley... as well as HBOS , and even Lloyds TSB; seems to set a climate in which shareholders are seen as somehow totally disenfranchised in this war---- perhaps Barclays feel they can simply take cover in the smoke shrouding the battlefield?

  • Comment number 87.

    Maybe they don't want tax payer money because they don't trust brown.

    I don't trust him - do you?

    Can you just run through his 'golden rule' again - but include all his 'off balance sheet' borrowing (the type of practice he now claims to abhore when performed by the banks...).

    Actually it isn't quite true that I don't trust brown, I do trust him to mislead, lie, destroy and general jynx everything he comes in to contact with...

    Vinces line -- if abu-dabi can get 17% why the heck is brown only getting 12% from the other banks??!!

    More brown incompetence costing the tax payer money.

  • Comment number 88.

    86 e2toe4:

    Thanks; I'm sure there must be rules about dilution, about a requirement to take the best price offered, and about the right of shareholders to stop this in an EGM.

    More broadly, posters here seem to fall into two categories.

    One group think that Barclays is right not to take HMGs money, therreby avoiding HMG's meddling and ideological agenda.

    Others think Barclays is motivated simply by the desire to keep paying bonuses, and the shareholders can go hang.

    My guess would be that this is a bit of both. Barclays does want to keep paying bonuses (which seems, shall we say, a self-interested approach) but ALSO wants to avoid HMGs meddling.

    I can sympathise on the latter point; if I thought that I was going to have to run my own business on the lines of Brown's messianic, son-of the-Manse moralistic drivel, I'd shut it down first, or at least seek any alternative, so I can see what Barclays are thinking.

    The point that few have raised is future expectations. My guess would be that Barclays, like me, thinks this recession has a very long way to run yet - five years minimum, ten years most likely, fifteen years possibly.

    So they're looking at longer term relationships and future capital requirements, in which sense HMG (with its social rather than business agenda) would be a more uncomfortable bedfellow than the Middle East guys. This might be the explanation, methinks....

  • Comment number 89.

    post 51, virtualslavery hit the nail on the head.

    It would appear that the smaller shareholder, often a customer of the bank too, has been sacrificed at the expense of the larger shareholders, and we are powerless to do anything about it. Unless we form a partnership to protest.

    As a PR exercise this has been atrociously handled. It smacks of extreme arrogance. Alienating the little people, instead of rewarding their loyalty, makes no sense.

  • Comment number 90.

    Good story. The question this raises in my mind is:

    What are the board doing while execs take more expensive capital to protect their own "freedom", i.e. erode shareholder value?

    If boards in this country did what they are paid to do (look after shareholder interests) a little more often then we would all be a lot better off.

  • Comment number 91.

    I am not sure why Barclays are being pilloried for acting quickly, decisively and independently. They have beaten the government banks to their cash by some margin. Well played.

    I imagine this is the best deal they could do in the circumstances. I would be highly surprised if all Barclays' largest shareholders were not well in the know and asked a) if they were prepared to do something similar and b) if they approved of the terms that were likely to be on offer for those that were.

    It remains to be seen whether the Lehman deal was a good one, but I suspect it will prove to be so. Just ask yourselves whether they could do something similar whilst in hock to the government and I think you have the answer as to why they did it this way and did not take HMG's shillings. And why is this suddenly bad news? (Answer - it offends Robert's own personal sensitivities).

  • Comment number 92.

    #80 You cannot reason with "the people" when they are hell-bound to conduct witch hunts that puts the Salem Witch Trials to shame !!

    They think they know everything based on a few presumptions and no amount of inconvenient facts will alter their outlook !! Some of the media seems to want to play the role of The Witchfinder General, historically one of the worst mass murderers in England.

    Few are willing to look beyond the surface of the news and seek the real reasons behind any of it !!

    Such are the very lemming-like characteristics that sharp operators in the markets look for and bet against and make tons of money while the lemmings fall over the cliff !!

    One major investor in Barclays is Temasek (Singapore government Sovereign Wealth Fund). They didn't get so rich by being stupid !! If there has not been even squeak from them, then there has to be more to this than meets the eye and it might behoove us to look further before condemning this Barclays deal out-of-hand !!

    Then again, as the great P. T. Barnum said, "There's a sucker born every minute !!"

  • Comment number 93.

    Good on you Barclays for sticking it to the man! I am proud to bank with you today. (Limited time offer, certain conditions apply).

  • Comment number 94.

    One other thing that Mr. Peston did not seem to have taken into consideration in his article is that - while the Middle Easterners are paying for their deal in hard cash, HMG wants to pay for theirs in monopoly money. If Barclays is to do business internationally, monopoly money is of no use to them.

    Perhaps that is a factor that the Barclays' board took into consideration when they made their decision !! Hence the perceived "discount" in their share offering !! The perceived difference between real hard cash and monopoly money !!

    With the devaluation of the sterling an on-going thing, perhaps their final payment will be worth more in real terms !!

  • Comment number 95.

    Of course the main reason you want to maintain the right to pay high salaries is so you can head-hunt talent from other banks easily.

    Just like happened to any talent that showed its head at the FSA - it was pitifully easy to tempt that talent away, after they'd got a full understanding of the regulations and ways around them.

  • Comment number 96.

    From Al-Jazeera 14:09 GMT

    "Barclays' investor base has been transformed in the past two years, as it has raised funds from investors in China, Singapore and Japan as well as the Middle East, and the bank expects to benefit commercially from the links as well as getting cash.

    "There has been a significant shift in the availability of capital and economic power in the world over the last five years and we're ensuring we're aligned with those changes," John Varley, the chief executive of Barclays, said."

    This makes more commercial sense that merely preserving the bankers bonuses !! However, as George Orwell would have said - The Ministry of Truth is always right; even when it is wrong !!

    i.e. just prior to the lemmings jumping over the cliff, the smart operators will buy up what the lemmings want to sell and wait for the profits to roll in from Barclays' foreign transactions in the future !!

  • Comment number 97.

    Maybe with the Arabs having circa 30% of the shares they might decide to cut off a few fingers ,hands or even arms of the greedy bankers who get caught in the till.


    Alexander Curzon

  • Comment number 98.

    Another thought. Barclays' business is lending money for interest. The Islamic faith terms this 'usury', and condemns this practice absolutely. (Indeed, some Islamic commentators have said that the whole of the west's current banking crisis has been the direct result of contravening this rule. They seem to have a point).

    In this context, how on earth can Middlle East investors possibly take a big stake in Barclays?

  • Comment number 99.

    It appears that the board of Barclays has acted against shareholder's interests to protect their own position, which is illegal.

    Let's see what happens next.

  • Comment number 100.

    I thought it was a "principle" of the Stock Market that when any shares or quasi shares were issues then existing shareholders had pre-emptive or equal rights. This principle obviously only appplies in nice comfy "tick up" markets when there is enough pie for all involved (the City) to get their "just rewards". Now that does not happen they tear up the rule book.

    Why don't our vaunted pension funds have the cojones to stand up to this? That is the biq question.


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