By Mark Kleinman, City Editor
A cross-Channel tussle has broken out over the future of Visa Europe, the payments system, as its British member banks push for a deal that could generate cash proceeds of more than £7bn.
I have learnt that some of the UK's biggest lenders, including Barclays, are angling for Visa Europe to exercise an option that would force California-based Visa Inc to buy the company, as they seek ways to bolster their capital reserves. Their calls are, however, understood to have met strong resistance from a number of French and other European banks which are keen to retain a stake in one of the continent's most important payment networks.
The dispute between some of Visa Europe's most significant members is important because under the agreement governing its ownership, 80% of Visa Europe's main board members are required to support a deal for it to be ratified.
Sky News understands that investment bankers at Credit Suisse have been brought in to advise the board of Visa Europe on the discussions about a sale.
The situation has been given added impetus by British banks' need to boost their cash reserves. Visa Europe's status as a member-owned organisation means that banks' economic interest in it do not currently count towards the capital ratios by which regulators determine their financial strength.
Barclays is understood to own a shareholding in Visa Europe equivalent to just under 10%. At the top end of a $3bn (£1.96bn)-$12bn (£7.86bn) valuation range for Visa Europe suggested by City analysts, Barclays' stake could be worth as much as $1bn (£655m). In cash terms, that could provide a useful enhancement to Barclays' core tier one capital ratio, insiders said.
Britain's major banks are in talks with the Prudential Regulation Authority, the new regulatory body charged with maintaining the health of the financial system, about strengthening their capital bases. The discussions follow a report by the Financial Policy Committee (FPC) last month which suggested that UK lenders need to raise £25bn by the end of the year.
Roughly 3,700 banks either process payments of customers using Visa cards or issue cards under the Visa name. The size of each of these 3,700 members' economic stakes in Visa Europe, which are each represented by a single share, is determined by the volume of business that they conduct through the payments network.
People close to the situation said that among British lenders, Barclays and Lloyds Banking Group had historically conducted the largest amount of business through Visa, while HSBC had had far closer ties to Mastercard, Visa's principal rival.
Of the other major UK banks, Lloyds' stake in Visa Europe is understood to be as high as five per cent, while Royal Bank of Scotland and HSBC are thought to have much smaller stakes.
The exact sum that Visa Inc would have to pay to acquire Visa Europe would be determined by a pre-arranged formula. Last month, the Wall Street Journal reported that some Visa Europe members wanted to establish their own payments system that would compete against Visa and Mastercard.
A Visa Europe board meeting is understood to have been scheduled for this month to debate the possible sale, although it is unclear whether that has already taken place.
Visa Inc was itself previously a bank-owned association before it became a publicly-listed company through an initial public offering in 2008. Visa had been set up as five distinct operating units focused on different regions. All of those were combined to form Visa Inc except for Visa Europe, which opted to remain a separate bank-run co-operative.
Spokesmen for Barclays, Lloyds and Visa Europe all declined to comment.
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