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Does Barclays bank face a £17 billion funding shortfall?

Analysts in the City are becoming more and more concerned about the financial strength of Barclays bank with new capital regulations set to be introduced for global financial institutions. While last year JP Morgan suggested the bank would have deficit of around £12.8 billion, Credit Suisse has today issued a suggestion that Barclays bank could be in the market for a £17 billion injection of funds if the tier-one ratio is increased to 8% as expected.

The situation could potentially be even more difficult to manage if, as some regulators are pushing for, the tier one ratio is actually increased to 10% in the short term. However, while there are concerns that Barclays bank may well have to arrange an additional fundraising it is worth remembering that there is a three-year time span for transition to the new financial adequacy rules. So in theory Barclay's bank could easily manage this three-year transition without having to go cap in hand to shareholders or other external investors.

The problem with the introduction of these new capital regulations is the fact they can give a potentially damaging impression to those who read the headlines rather than research the actual details. In a worst-case scenario it is likely that Barclays bank could easily handle a transition to the new rules over the allowed three-year period.

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