Barclays, in a move to address possible concerns, is formulating a plan to seek shareholder approval to sell bonds that are convertible to shares should the bank hit troubled waters. The bonds would assist the bank to remain afloat because of the tighter regulatory control imposed post 2008. One of the guidelines is to retain more capital in order to protect taxpayers.
This would be known as contingent capital bonds or some other hybrid capital and can amount up to GBP 7 billion termed as 'CoCos'. This allows banks to strengthen their balance sheets should their bottom line weaken substantially.
Barclays had previously raised US$3 billion in a similar bond sale last November and would ask for the same plan at its April 25 shareholder meeting. The shareholder approval is needed because current shareholding ratios may be diluted if the bonds are convertible to shares when core capital ratios fall below a certain level.
Join the Conversation