Barclays was warned yesterday that its balance sheet would be subject to forensic Treasury examination if it decided to dump toxic assets on the taxpayer, amid signs that the bank could face a higher-than-expected bill for using the government’s asset insurance scheme.

Barclays executives are studying the terms of the Lloyds deal to insure £260bn of assets as they decide whether to formally apply to join the scheme before a 31 March deadline.

The signs so far are that if Barclays decided to take part, it would present a relatively small portfolio of assets to be covered and would hope to pay its insurance fee to the taxpayer in cash rather than issuing shares to the government.

But chancellor Alistair Darling’s team point out that the Treasury would not just look at the assets offered for insurance, but would examine the full balance sheet.

Financial Times