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Barclays keeps apologizing for saving the bank

In the summer of 2008, following failed offerings from HBOS and RBS, the UK Treasury commissioned a Rights Issue Review Group consisting of bankers, investors and regulators, to examine the equity-capital-raising process in the UK and recommend ways to make it more efficient and orderly. John Varley, chief executive of Barclays, agreed to be one of its members. The irony would become apparent soon.

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Varley was almost immediately embroiled in an almighty row when his own bank turned to Middle Eastern investors to shore up its capital.

In the middle of October 2008, with the world financial system crumbling, the UK bank regulator, the Financial Services Authority, told all British banks that they must raise new capital. It gave them until June 2009 to do so. No one was fooled by this. The banks didn’t have months. They had a couple of weeks, maybe just days. If they couldn’t raise it, the UK government would inject it.

Barclays did not give existing investors the choice of whether or not to subscribe for new shares. It turned instead to Qatar Holding LLC and entities representing the beneficial interests of Sheikh Mansour Bin Zayed Al Nahyan. These provided £7 billion ($11 billion) in return for reserve capital instruments and mandatory convertible notes with high coupons and abundant protections.

It was the deal that saved Barclays as an independent entity. Yet the bank’s management has been apologizing for it ever since.

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