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Barclays Bank turns down UK government insurance scheme

As expected, after a green light from the Financial Services Authority, Barclays Bank has today refused to join the UK government's toxic asset insurance scheme. Citing the massive charges levied against banks in the scheme, Barclays is more than prepared to go it alone after receiving a clean bill of health from the FSA.

While there is no doubt that Barclays Bank, much like the vast majority of UK banks, does have substantial debt which could turn toxic in the short to medium term it would appear the bank has significant financial backing for the next five years. Stress tests carried out by the FSA suggest that the company could easily cope with a serious downturn in business from current levels, which may well surprise many. Shares in Barclays Bank had effectively been in freefall prior to the announcement from the FSA regarding the improved financial backing situation.

While it would be easy to read too much into the situation at Barclays Bank, with some people suggesting the worst is over, as we have seen over the last few months the situation in the UK banking sector can change very quickly. Even though Barclays Bank is on the verge of selling its iShare business, there is no guarantee it will not need additional finance from the government in the future.

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