Barclays Bank passes 'stress test'

By RUPERT STEINER FOR THE DAILY MAIL
Updated:

Barclays has passed a key financial health check ahead of Tuesday's decision on whether to join the government's toxic asset insurance scheme.

The Financial Services Authority conducted an 'extreme stress test' on the bank's loan book.

It probed whether Barclays could withstand a series of doomsday scenarios including a 50 per cent fall in house prices.

The shares jumped almost 24.6p, or nearly 18 per cent, to 164.8p after the City watchdog gave it the all clear.

The bank said: 'Barclays confirms that the UK Financial Services Authority has applied a detailed stress test to the balance sheet and profit and loss account of the Barclays Group.

Barclays

All clear: FSA has given Barclays a clean bill of health

'The purpose of the stress test has been to determine resilience to stressed credit risk, market risk and economic conditions.'

It said the strength of its finances were in line with FSA guidelines.

This means it will not be forced to tap the market for fresh capital to shore up its battered finances.

However analysts are fearful the test did not go far enough and Barclays may need a further £8billion in rescue funds most likely through a rights issue.

Barclays has so far managed to avoid following the route of Lloyds and Royal Bank of Scotland to part nationalisation.

It is not clear whether the clean bill of health from the FSA was dependent on the successful sale of its US exchangetraded fund manager iShares. A decision on the expected £4billion sale is expected on Monday.

One analyst said: 'I wouldn't be surprised it the stress test relied on the disposal but the details have not been revealed.

'The criteria for the stress test has also not been made public so we still have the same concerns over the strength of its balance sheet.'

Barclays is in talks with at least three would-be buyers of iShares, thought to be Goldman Sachs, Bain and Hellman & Friedman.

The bank will also decide on Tuesday whether to join the government's insurance scheme which ring fences its bad assets.

Most analysts believe Barclays wants to participate, but wants to do this without giving the authorities any say in the way it

• Yesterday American bank bosses met with President Obama to discuss recovery of the financial sector.

Citi's Vikram Pandit, Morgan Stanley's Jamie Dimon and Goldman's Lloyd Blankfein all attended.

The gathering at the White House is rare because it involves a meeting with the bankers en masse.

Past Presidents have tended to hold audiences with Wall Street executives on a one-to-one basis.


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