Barclays sells iShares to CVC for $4.2bn

Bob Diamond, Barclays' president, is set to pocket a $6.9m cash windfall after the banking group on Thursday agreed to sell its iShares subsidiary to CVC Capital, the private equity group, for $4.2bn (£2.8bn, €3.2bn).

The long-awaited sale of the fast-growing fund management business will boost Barclays' capital reserves as the bank seeks to strengthen its balance sheet to help it weather further losses that arise from the global economic downturn.

Mr Diamond, who oversees Barclays Global Investors, the bank's fund management division, is one of the beneficiaries of a compensation scheme that has given BGI employees shares and options over up to 10.3 per cent of the division's equity. Following the sale, BGI is expected to distribute the cash to shareholders in the form of a dividend.

The news is likely to be controversial because Barclays executives – including Mr Diamond – waived their rights to any bonuses in 2008 after the bank was last autumn forced to raise £7bn in capital from investors in the Middle East.

Barclays stressed that Mr Diamond was not involved in the negotiations over the iShares sale.