Barclays is in an advanced stage of planning the carve-out of its UK retail business should the Government accept the likely recommendation of the Independent Commission on Banking (ICB) to order the ring-fencing of British depositors' money.
Senior sources at the bank said it could "push the button" on the ring-fencing of its UK retail arm as soon as the report is published and had already conducted extensive preparations to ready the business for separation.
A team of 30 Barclays staff have spent months drawing up new employment contracts for retail branch staff as well as assessing the leases on all the bank's UK branches to begin the legal work necessary to transfer them to a new operating company.
The advanced state of the preparations highlights the broad acceptance amongst Britain's largest banks of the likelihood the Government will force them to hive off their retail businesses into separate units that could be taken over by the authorities in the event they were to get into trouble in a future crisis.
Crucial to the Barclays proposals, which the ICB has been presented with, is an internal payment platform which would be funded with 90 days of cash by two broad operating subsidiaries.
The envisaged corporate structure would involve a group holding company that would raise capital. This would give Barclays the flexibility it believes it requires to then allocate capital between a retail company and a second subsidiary currently broadly titled "other" by management. It has yet to be decided which assets would count as retail.
Both main subsidiaries would buy payment services from the internal payment platform to support their various activities. By carving out a separate internal payment platform with resources to keep operating for at least 90 days, management hope the bank could ensure an orderly wind down of troubled operations. It would be a crucial part of Barclays' resolution plan which regulators will require every bank to put in place.
So-called "living wills" have been at the centre of attempts by the regulators to create a safer financial system in which no bank is too big too fail and every major UK lender is in discussions with the Financial Services Authority (FSA) to agree a contingency plan should they get into trouble.
Giving evidence to the Treasury Select Committee last week, Bob Diamond, Barclays chief executive, told MPs that the bank would be a "test case" for showing how a lender could be wound up in future.
Mr Diamond said the bank had "the technology" to allow it to fail safely if there was what he described as an "accident" that meant the lender had to be closed down.
Regulators are also keen for banks to issue more debt that enables bondholders to share the cost of a bailout. Contingent convertible bonds, or CoCos, are expected to become a major part of bank capital in future.
Barclays could receive FSA approval to issue its own CoCo within the next month and is keen to issue a trial bond of about £250m to assess investor appetite. The bank has already held discussions with institutions interested in buying a CoCo and has reached an agreement in principal with several major investors to buy the bond.
So far, Lloyds Banking Group is the only UK bank to have issued a CoCo, but its bond was a replacement for existing subordinated debt and was not thought to be a good test of appetite.
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