Banks refuse government cash

In a week which saw institutions such as Royal Bank of Scotland, HBOS and Lloyds TSB swapped preference shares for a combined £37billion, Barclays and HSBC chose to raise funds elsewhere.

While HSBC injected capital from within the company, Barclays is making a maverick move into the markets.

The Churchill Place resident announced plans to raise £6.5billion in capital, and has already agreed a £1billion injection with an existing shareholder.

Barclays admitted it might still take government money if its plan fails, possibly on “less favourable� terms.

But it hopes it will be able to out-manoeuvre its competitors in the market without the millstone of government restrictions – including snapping up disgruntled employees from rivals.

A Barclays spokeswoman said: “We believe we don’t need to go to the Government to raise money, but it has told us that the money will be available to us later if we do. It’s a no-brainer really.�

HSBC shifted £750million into its UK subsidiary last week. An HSBC spokesman said: “We were sufficiently well capitalised that we could provide the money from internal resources without going to the market.

“We were already ahead of a lot of the other banks, and we made a strongly capitalised bank even stronger.�

The worldwide bail-out total cleared £2trillion this week after the US treasury announced plans to pump $250billion (£143billion) into its banks.

Wharf tenants Bank of America, Citigroup, Wells Fargo, Bank of New York Mellon, State Street, Morgan Stanley and mooted newcomers JP Morgan Chase are among those signed up to the plan.

Prime minister Gordon Brown has announced that banks which sign up to the UK deal will face tight restrictions, including a guarantee that loans for home buyers are maintained.

But former Citigroup banker Peter Hahn feels the Government needs to clarify what role it will take as a shareholder.

The Cass Business School fellow said: “There’s still a large degree of uncertainty about what the Government wants for its investment.

“Barclays and HSBC can say their objectives are to benefit shareholders, and that there’s no political element to their decisions.�

But they may face greater control. Analysts predict banks will face greater regulation in future. Mr Hahn said: “Banking is changing and the giant institutions are going to be more regulated and bureaucratic.

“Before this, people used to say that banks were too big to fail. Now they’re too big to rescue.

“This move by the Government has stabilised the banking system, but the reality is that we’re sliding into recession.�

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