In new efforts to comply with the Basel III banking regulations, UK banking giant Barclays is reportedly endeavouring to explore several different options that could increase the amount of capital it keeps in reserve.
The new business bank account regulation, which state that banks need to keep working capital equivalent to approximately 7 per cent of their net worth, were recently agreed upon by several EU member countries, and as a result rumours have been flying that Barclays will soon issue a specially created bond in order to boost its existing reserves without having to resort to new equity issuances.
As of this past June, the core ratio for the bank stood at 10 per cent, but analysts predict the possibility of that ratio dropping to 8.7 per cent, which would still be above the Basel III requirements.
The fixed-rate bond issue, however, is not in compliance with the Basel proposals, but despite this fact both the Financial Sevices Authority and the Committee are currently in discussions on whether their proposals will be adapted.
In the meantime, the new report comes hot on the heels of news that Standard Chartered will plan to tap their investors for appoximately £3.3 billion in a share sell-off in an effort to comply with the new, stringent regulations – that were specifically designed to safeguard against another financial meltdown.
Barclays did not take the opportunity to comment on the recently released report, but did state that the bank had a large amount of work ahead of it in order to adapt to the new framework set into place by Basel.
In a related news story, chief executive for the banking group John Varley will be parting ways with Barclays in 2011, and is set to be replaced by the current president of Barclays PLC, Bob Diamond. Mr Diamond is additionally the chief executive for Barclays’ Wealth Management and Corporate and Investment Banking units.