LONDON, March 12 (Reuters) - Britain did not block Barclays (BARC.L) from buying Lehman Brothers 18 months ago, but it would have been reluctant to approve a deal without shareholder approval, if asked.
Details released by Britain’s financial regulator showed Barclays never proposed a deal nor asked for a waiver of shareholders’ right to approve the deal. Concerns about capital, liquidity and a guarantee requirement put paid to the deal.
Former U.S. Treasury Secretary Henry Paulson said in a memoir that Britain “screwed” the United States after a potential rescue of the U.S. investment bank by Barclays fell apart.
New York’s Fed bank had asked Barclays to guarantee Lehman’s financial obligations in the period up to the closing of a deal. That could have required a possibly unlimited guarantee for an undefined period of time, the FSA said.
Financial Services Authority Chief Executive Hector Sants and Barclays CEO John Varley “agreed that neither the Barclays board nor the FSA could approve any transaction structure that required Barclays to provide the guarantee asked for”, the document said.
Under UK Listing Rules, Barclays would also have needed shareholder approval for the deal, but that would have been impossible during the frantic Lehman rescue talks.
The regulator said it had “no objection in principle” to a deal but allowing a waiver of shareholder rights would have been unprecedented, and “it was not currently minded to consider waiving the requirements, even if asked to do so by Barclays, which was not the case”.
“Granting a waiver would have involved a serious interference with shareholder expectations,” the FSA said.
“The British screwed us,” Paulson said in his memoir, recalling when the deal fell apart.
Barclays ended up buying the U.S. operations of Lehman after the U.S. bank went into bankruptcy. (Reporting by Steve Slater, editing by Will Waterman)