As part of its effort to avoid taking the King’s shilling and being part-nationalised by the UK government, Barclays bank has announced it is raising money by selling stakes in itself to governments and royals from abroad.

Not exactly a private solution. Indeed, even if Barclays is not owned in some part by the UK government, it will still be guaranteed by it – and that matters.

Last month, the UK government asked banks to fortify themselves against further financial shocks by increasing their capital cushions, in return for which it would offer new guarantees on inter-bank lending.

To help the banks to raise new capital, the Treasury offered to buy preference shares, albeit only on onerous terms; some hoped that the banks would seek alternatives. This is what Barclays has done.

The current management proposal is for Barclays to receive a £7.3bn injection. Of this, £2bn will come from the Qatari sovereign wealth fund, with the rest coming from royals in Abu Dhabi and Qatar. It is striking that these investors are charging more than the UK government’s punitive rate.

Given that sovereign wealth funds’ earlier investment in financial institutions have resulted in heavy paper losses, it is hardly surprising that the Gulf royals have driven a hard bargain.

Ultimately, it is for shareholders to decide whether to back this deal. There can be no doubt Barclays is paying a heavy price for a measure of independence.

Critics complain that the deal will be better for the bank’s management – who will save their bonuses – than for shareholders. Shares in Barclays have fallen by a quarter since the deal was first announced.

But Barclays will be better placed to stave off pressure to maintain lending levels to small businesses or homeowners, or to pull out of emerging markets.

The bank, however, is still not entirely independent. One of the great fictions of recent years was that large banks could be allowed to fail and had no state guarantees. But governments were implicitly underwriting the financial system all along. They still are.

Regardless of who owns the shares, the UK Treasury must make sure that its large banks are stable – and it has a duty to intervene if they are not.

The Gulf deal has reduced risk for the UK government; in the event of problems, new shareholders will lose out before the exchequer. But Barclays is much too big to fail, and the government would be forced into a rescue if the bank were seriously to stumble.

The government may not be in the boardroom but it must keep a watchful eye.

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