Barclays to Buy Back $3.9 Billion of Debt to Bolster Capital

Barclays Plc (BARC), the U.K.’s second- largest bank by assets, offered to buy back as much as 2.5 billion pounds ($3.9 billion) of securities to improve the quality of the capital it holds.

The lender will offer to buy back the Tier 1 securities for a discount of as much as 30 percent to face value, London-based Barclays said in a statement today.

Barclays is buying back the debt because it will count less towards the highest form of capital when the latest round of rules set by the Basel Committee on Banking Supervision take effect in 2013. Regulators are pressing banks to boost capital, or their ability to absorb losses, to shield taxpayers from the costs of future bailouts. Lloyds Banking Group Plc (LLOY) and BNP Paribas SA have announced similar deals in the past three weeks.

The “offers will enable the issuer to enhance further the quality of its capital structure through the reduction of non- Basel III compliant Tier 1 capital and subsequent generation of additional core Tier 1 capital,” Barclays said in the statement.

Bank of England Governor Mervyn King urged last week lenders to step up efforts to bolster their defenses against the euro area’s debt turmoil, which now looks like a “systemic crisis.”

Lloyds, Britain’s biggest mortgage lender, last week offered to exchange as much as $7.7 billion of capital notes for new bonds to boost capital. The British banks follow lenders including BNP Paribas SA, France’s largest bank, and Spain’s Banco Santander SA (SAN) in exchanging capital securities for debt.

The pool of debt investors can sell back to the bank includes core Tier-1 notes and reserve capital instruments in both U.S. dollars and British pounds.

To contact the reporter on this story: Gavin Finch in London at gfinch@bloomberg.net

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net

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