That Barclays is contemplating rescuing Lehman Brothers takes the breath away. The British bank remains weak, even after tapping shareholders for £4.5 billion this summer. There are still worries among some shareholders that it is taking an overoptimistic view of some of its own assets. Only a month ago it insisted that organic growth, not big acquisitions, was the way ahead.

That it should seriously consider throwing in its lot with an even weaker merger partner is surprising, especially when market confidence is as fragile as it was in March, when Bear Stearns collapsed. Even if the price were buttons, Barclays would probably still have to issue fresh equity to strengthen its capital ratios and to pay Lehman shareholders. There are some gems in Lehman, such as the equity capital markets division and the fund management offshoot. A deal could boost Barclays’ standing in investment banking in general and on Wall Street in particular.

But there would be big risks in buying the investment banking business even if shorn of its huge holdings of toxic, illiquid assets. And it seems unlikely that Barclays, which has a highly successful fund management unit, would want to add Lehman’s business, worth an estimated $10 billion.

In less doubt would be the reaction of UK regulators. Does the FSA really have the stomach to become lead regulator for a British-owned Lehman? Does the Bank of England, which regards banks as undercapitalised, want Lehman-inspired jitters crossing the Atlantic? The message from bruised shareholders to John Varley, the chief executive, is likely to be, by all means indulge in window-shopping, but please don’t enter the store.

patrick.hosking@thetimes.co.uk

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