Barclays Bank (
) - the second largest bank in the United Kingdom by assets -
announced Monday that it will dispose of its entire
in BlackRock (
), the world's largest
manager. The bank currently holds almost 20 percent of BlackRock's
ownership stake, comprising both
and Series B convertible
BlackRock agreed to buy up to $1 billion of the $6.1 billion (£3.8
billion) of the shares the bank holds.
New rules created by the Basel Committee on
Supervision prompted the sale, with the main issue coming from a
regulation that requires Barclays to offset any declines in its
ownership stake with additional
. The bank wrote down the value of its
to $5.3 billion (£3.4 billion) in September 2011, and took the
remaining gains between then and now into
"It's a less attractive asset under the Basel III rules," Ian
Gordon, an analyst at London-based Investec, told
. "Barclays can remove it from that debate."
Barclays made its initial investment in December 2009, when
BlackRock stood close to the peak of its valuation at $217 per
. That deal saw the bank exchange its Barclays Global Investors
unit for a $15.2 billion deal that included almost 20 percent of
BlackRock and $6.6 billion in cash.
The news comes at a complex time for bankers and investors.
JPMorgan Chase's (
unit was recently rocked by the
that one of its major hedging trades blew up and cost the
bank $2 billion, prompting the immediate resignation of chief
investment officer Ina Drew and series of difficult questions for
chief executive officer Jamie Dimon.
reported last week that the relevant unit at JPMorgan - the
chief investment office -holds over $100 billion in risky
asset-backed securities and structured products, to the point that
they massively dominate that
in these securities. An anonymous trader from a competing
institution told the FT that "I can't see how they could unwind
these positions because no one can replace them in terms of size.
It's a bit of the same problem they face with the derivatives
trade. They pretty much are the market."
Barclays losses in its BlackRock holding won't imperil the bank's
overall stability, but the rule change which prompted the sale
represents part of a larger push to force retail banks out of the
business. Yet it seems that regulatory efforts to curb the constant
blending of traditional banking and market speculation will
continue to run up against the ceaseless creativity of the
financial industry, especially in a world where porous regulations
and liquid capital can flow across international boundaries to seek
out the highest rates of
The biggest worry for investors should not be the size of JPMorgan
or Barclays' losses - it should be which banks still sit on
undiscovered crises of capital losses.