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Barclays Bank said with some price in the middle of the month that it would not be seeking state help and that it would gain its capital "from the private sector". Barclays boss John Varley said on October 13 that "what we wanted was to protect our right to self-determination".
Clearly Barclays definition of "state help" is somewhat narrow, in that it would appear to prefer help from the Qatar Investment Authority, the Libyan Investment Authority, and two Russian banking groups that are, at the very least, "friendly" with the Russian government.
Presumably Barclays assumes that this will give it a better deal than would obtaining funds from the UK taxpayer. Annd, in fact, Barclays is probably right. Alistair Darling is so scared of appearing to cost the taxpayer money that the bailed out banks are (a) not getting that good a deal and (b) having to suffer the potential installation of bureaucrats who might not have got the banks into the problem that they are in in the first place, but who are not the right people to get the banks out of the mess that they are now in.
Does Barclays assume that the QIA and LIA will be "hands-off"? Probably. But what if they aren't? Barclays can hardly expect a sympathetic ear from the UK government, which will, in a way, be the owner of Barclays' rivals.
The banking system has suddenly become a very odd place. It's as if the Post Office became the largest financial institution in the country overnight. Normal profit and loss rules no longer apply. Instead you have local authority type rules. And the implications for the system as a whole don't strike me as very rosy as a result. Already Gordon Brown is saying "lend to small businesses or else". How long before the criteria for lending become more one of political desirability than common sense? Lower rates to economically deprived areas? That would mean that the places that actually make money would have to go elsewhere for funds, and THAT would give foreign banks a way in to the UK private sector.
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Clearly Barclays definition of "state help" is somewhat narrow, in that it would appear to prefer help from the Qatar Investment Authority, the Libyan Investment Authority, and two Russian banking groups that are, at the very least, "friendly" with the Russian government.
Presumably Barclays assumes that this will give it a better deal than would obtaining funds from the UK taxpayer. Annd, in fact, Barclays is probably right. Alistair Darling is so scared of appearing to cost the taxpayer money that the bailed out banks are (a) not getting that good a deal and (b) having to suffer the potential installation of bureaucrats who might not have got the banks into the problem that they are in in the first place, but who are not the right people to get the banks out of the mess that they are now in.
Does Barclays assume that the QIA and LIA will be "hands-off"? Probably. But what if they aren't? Barclays can hardly expect a sympathetic ear from the UK government, which will, in a way, be the owner of Barclays' rivals.
The banking system has suddenly become a very odd place. It's as if the Post Office became the largest financial institution in the country overnight. Normal profit and loss rules no longer apply. Instead you have local authority type rules. And the implications for the system as a whole don't strike me as very rosy as a result. Already Gordon Brown is saying "lend to small businesses or else". How long before the criteria for lending become more one of political desirability than common sense? Lower rates to economically deprived areas? That would mean that the places that actually make money would have to go elsewhere for funds, and THAT would give foreign banks a way in to the UK private sector.
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