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Abu Dhabi investors reduce exposure to Barclays bank

In a complicated financial transaction Abu Dhabi investors have reduced their stake in Barclays Bank after exercising various warrants available and then entering into a very complex hedging operation with Nomura. Effectively the Abu Dhabi investors have reduced their downside to Barclays Bank while still maintaining some upside with regards to their significant investment only a couple of years ago.

This affective hedging has come at a very difficult time for the UK banking industry and the UK economy with signs of a slowdown and a potential credit crunch part two for the UK financial arena. The UK government and the Bank of England are set to remove various finance facilities which were introduced in the midst of the economic crisis which will effectively lead UK banks to the money markets to raise funds to repay these loans. This leaves UK banks at the beck and call of market forces and there are concerns about the rates which may materialise.

It will be interesting to see how the banking sector performs over the next few months as this will be potentially indicative of the future for the UK economy. Base costs are set to rise for UK banks, bonuses are under pressure and the community is yet again becoming the "devil incarnate" in the eyes of the public.

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