Barclaycard hopes to turn customers' debt into cash

Barclaycard, the country's biggest credit card company, is considering a move to package up the debts of its 10m card holders and sell them on to institutional investors.

The decision on whether to sell on the debts, through the process known in the City as securitisation, is expected to be taken later this month after Barclaycard has canvassed the opinions of potential investors.

If Barclaycard, part of the Barclays banking group, goes for securitisation it will be the first such issue for four years and the first time a domestic British institution has participated in a practice well established in the US credit card market.

It is understood that Barclays, through its Barclays Capital investment banking unit, is talking with investors about securitising €1bn (£650m) of credit card debt.

It is unclear how this figure compares with the institution's overall amount of debt on its credit cards.

The bank is considering the move as part of a move to reallocate its risky assets on its balance sheet.

A leading analyst said that it was an indication of the increasingly competitive nature of credit card issuers in Britain, where the market has been assaulted in recent years by big US rivals.

While Barclays has not hitherto securitised its credit card debt, it has sold on the mortgages of its customers, as have other mortgage lenders.

Northern Rock securitised part of its mortgage book later this year while Abbey National will announce another £1bn securitisation of its mortgages today. It has completed two other deals worth a total of £1.25bn.

Abbey, which earlier this year securitised mortgage assets through a special vehicle known as Holmes after the fictional detective who shared its Baker Street address, uses the securitisation to manage its balance sheet more efficiently.