March 30 (Bloomberg) -- Barclays Plc won’t seek government asset guarantees after regulators said the U.K.’s third-biggest bank doesn’t need capital and as the lender plans to sell its iShares unit, said a person familiar with the situation.

London-based Barclays will inform the Treasury of its decision by tomorrow’s deadline, said the person, who declined to be identified because the discussions are confidential. The bank’s board hasn’t made a final decision, the person said.

Barclays would be “right to reject the insurance program because it’s expensive,” said Simon Maughan, an analyst at MF Global Securities Ltd. in London. Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc are paying a “high price” to take part in the plan, he added.

The Financial Services Authority has reviewed Barclays’s assets and found that it has sufficient resources even if the global financial crisis worsens, the bank said March 27. Barclays is also in talks to sell iShares, a manager of exchange-traded funds that has 226 billion pounds ($320 billion) under management, to bolster financial strength. RBS and Lloyds slipped into government control after taking taxpayer funds.

Barclays spokesman Alistair Smith declined to comment. When asked whether Barclays would participate in the asset insurance program, a Treasury spokesman said only that the agency will consider applications from eligible institutions until March 31.

Barclays declined 7 percent to 161.6 pence as of 12:01 p.m. in London trading, valuing the bank at 13.5 billion pounds. Barclays is still up 5.4 percent this year, making it the only U.K. lender to gain in the period.

Insurance Fees

Lloyds paid 15.6 billion pounds for government guarantees on 260 billion pounds of risky investments, or 5.2 percent of the assets. RBS paid 6.5 billion pounds, or 2 percent, to protect 325 billion pounds of assets. Both banks used preference shares paying 7 percent interest to cover the fee.

That will allow the government to increase its stakes in the two banks to as much as 75 percent.

Barclays has resisted giving a stake to the government, turning to a group of Middle Eastern investors for more than 5 billion pounds rather than accept a bailout.

Still, the bank’s Tier 1 capital ratio, a measure of financial strength, is 6.7 percent, lagging behind Lloyds and RBS. Lloyds estimates its core capital ratio will jump to 14.5 percent as a result of the asset-protection program, and RBS says its ratio will rise to 12.4 percent.

Need for Capital

Barclays may need as much as 20 billion pounds of funding and have to seek government aid within 12 months, even though the bank will avoid participating in the U.K. insurance program, analysts at Societe Generale led by Asheefa Sarangi in London wrote in a note to investors today. The U.K. eventually could end up with a stake of as much as 67 percent in Barclays, because of its “relatively weak” capital and “excess leverage,” wrote the analysts, who cut their rating on the stock to “sell” from “hold.”

Barclays is seeking as much as $7 billion for iShares, part of San Francisco-based Barclays Global Investors. IShares is the world’s largest manager of exchange-traded mutual funds, whose shares can be bought and sold like stocks.

The leading bidders are a joint effort by Colony Capital LLC and Bain Capital LLC, two U.S. private equity firms; New York-based Goldman Sachs Group Inc.; and a group of leveraged buyout firms that includes Hellman & Friedman LLC of San Francisco and London-based Apax Partners Worldwide LLP, according to people familiar with the discussions.

“They wouldn’t have even been thinking about selling it a year ago,” said Dave Bradbury, who helps manage $6 billion at Canada Life Ltd. in London. “Anything to avoid the government shilling.”

To contact the reporter on this story: Jon Menon in London at jmenon1@bloomberg.net

Last Updated: March 30, 2009 07:12 EDT