Britain's financial regulator has concluded a stress test on Barclays Plc and is satisfied the bank does not need any fresh capital, a person familiar with the matter said on Friday.
Barclays shares soared over 10 percent as fears receded that it will need fresh funds or need to hand the government a stake.
The Financial Services Authority (FSA) has subjected British banks to a stress test more severe than the recession of the early 1980s, lasting for several years, and was satisfied Barclays does not need new funds to withstand rising bad debts, the source said.
Barclays and the FSA declined to comment.
By 0945 GMT Barclays shares were up 7.8 percent at 151 pence, after hitting 157p. Its shares have more than doubled in the past three weeks, valuing the bank at over 12 billion pounds ($17.34 billion).
Other UK banks were also helped and shares in Lloyds Banking Group rallied 9 percent, Royal Bank of Scotland rose 2.6 percent and HSBC firmed 2.4 percent.
Barclays needs to decide by Tuesday whether to join a UK government-backed scheme to insure some of its assets against future losses. It has maintained it has sufficient capital to withstand a deepening recession and will decide whether to join the scheme on economic merits.
The bank is also expected to conclude the sale of iShares, part of its asset management business, early next week.
Goldman Sachs is a potential bidder, as are Bain Capital and a consortium of Hellman & Friedman and Apax Partners, people familiar with the matter have said.
Analysts had estimated iShares was likely to be worth about 3 billion pounds, but bidders could be willing to bid over 4 billion pounds, according to recent media reports.
Barclays' core tier 1 ratio of 6.7 percent at the end of 2008 is well below RBS and Lloyds after they joined the UK asset insurance plan, but Barclays is expected to remain profitable whereas its rivals are predicted to make further losses.
"This (report that no new capital is needed) is likely to be seen as further evidence that the risk management at Barclays has been superior thus far in the recession," analysts at Cazenove said in a note.
Barclays is also expected to consider joining other banks in offering to exchange low-ranked bonds for higher quality debt to boost balance sheet quality.
The bank has about 20 billion pounds of Tier 2 debt instruments, and could offer to buy that back or exchange it for core Tier 1 bonds, which regulators and investors are focusing on. RBS and Lloyds have launched such offers in recent days.
A spokesman said Barclays actively manages its balance sheet and "is always alert to what's happening in the market".
