BarCap is making redundancies. Reuters cites a ‘spokesperson’ who says they’ve begun a pre-cull consultation process. Bloomberg says the cuts will involve ‘hundreds’ of people. Interestingly, Bloomberg also says that the cuts will, ‘follow a review how much capital each unit of the business uses.’

Banking analysts suggest that BarCap is rightsizing its business in preparation for coming capital rules. “They’ve got an ROE problem under Basel III,” says Mark Phin at KBW.

“Historically, Barclays used an economic capital model which allocated relatively little capital to assets in BarCap,” says Simon Maughan, an analyst at MF Global. “They are now moving to a risk-related asset model which will make BarCap relatively less profitable.”

Earlier this month, a report from UBS highlighted the fact that BarCap would never have made an economic profit had it been obliged to allocate capital in line with Basel III requirements. Under Basel III, UBS analysts also pointed out that BarCap’s risk assets will need to increase by 50%.

Analysts say BarCap wants to achieve a 15-20% ROE from its businesses. Once Basel III rules are implemented, this will prove most difficult to achieve in capital intensive areas of FICC.

“Anything to do with counterparty risk, particularly in relation to fixed income derivatives, will be looked at more closely,” says Maughan.

Capital intensive areas like correlation trading and securitization will be particularly squeezed.

BarCap FICC bankers therefore have reason to fear the coming review, while those in relatively less capital intensive equities and IBD businesses have substantially less cause for paranoia.

As FICC is trimmed, the ex-Lehman staff who dominate BarCap’s equities and IBD businesses will gain influence at the bank.

BarCap’s former Lehmanites have another reason to celebrate today: it’s emerged that the bonus-reduction pact which BarCap is entering into in the UK won’t extend overseas. Given that the FICC business is heavily based in the UK, BarCap’s FICC bankers could also find themselves disproportionately squeezed at bonus time. The BarCap FICC people who left in June are suddenly looking rather prescient.