March 27 (Bloomberg) -- Barclays Plc may not need to raise additional capital after Britain’s third-largest bank passed tests conducted by the U.K.’s financial regulator. The bank’s shares rose 24 percent in London trading.

The Financial Services Authority examined Barclays’s loans and found the bank will continue to meet the regulator’s capital requirements under various credit risk, market risk and economic scenarios, London-based Barclays said today in a statement.

The review was conducted as Barclays considers joining the U.K. government’s program to guarantee risky assets. The FSA and government want assurances that if Barclays doesn’t use the insurance, it won’t need emergency help in the future, the Financial Times reported earlier today. Barclays is in talks to sell its iShares unit and may exchange bonds to boost capital.

“People are taking the view that, of the domestic banks, they are the best risk-return investment,” said Julian Chillingworth, chief investment officer at Rathbone Brothers Plc in London, who helps manage $21 billion, including Barclays stock. “There may be a lot of new money going into them” from investors.

Barclays rose 33.7 pence, or 24 percent, to 173.8 pence, its biggest gain since Jan. 26. The stock is up 13 percent this year, the only U.K. bank to advance in the period.

Lloyds Banking Group Plc and Royal Bank of Scotland Group Plc bolstered their financial strength at the cost of giving up stakes to the government as they put 585 billion pounds ($845 billion) of investments into the asset protection program.

iShares Sale

London-based Lloyds has said its core Tier 1 capital ratio will rise to 14.5 percent as a result of the asset insurance, and RBS estimated its ratio would jump to 12.4 percent. By comparison, Barclays’s ratio was 6.7 percent at the end 2008.

The government has set a deadline of March 31 to apply for the insurance plan.

Barclays asked bidders to submit offers for the iShares exchange-traded funds business by today. IShares is the biggest manager of mutual funds that trade on stock exchanges.

The bidders for iShares are led 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.

Barclays is seeking as much as $7 billion for the unit, and may announce an agreement by March 31, one of the people said.

Bond Exchanges

This week, other U.K. banks have moved to bolster capital through bond exchanges.

“Barclays actively manages its balance sheet and is always alert to what is happening in the market,” the company said in a statement when asked whether it would consider a bond exchange. “All institutions are in a position to restructure their liabilities.”

RBS yesterday offered to exchange or buy back $23 billion of bonds, and Lloyds offered on March 25 to exchange more than 7.5 billion pounds ($10.7 billion) of bonds into senior unsecured debt to bolster their financial strength.

Barclays has about 34 billion pounds of non-equity capital, Jonathan Pierce, an analyst at Credit Suisse Group AG in London, wrote in a note to investors. An offer to swap 5 billion pounds at 50 pence in the pound would add 0.6 percent to core Tier 1 capital, he said.

Holders of the debt may want to swap because the mark-to- market prices of the bonds are lower than the swap price being offered, Sandy Chen, a London-based analyst with Panmure Gordon & Co., wrote in a note to investors.

“These debt swaps are definitely a positive move for the banks,” said Chen, who has a “sell” rating on Barclays.

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

Last Updated: March 27, 2009 13:40 EDT