Barclays' £7bn raiser is under pressure

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The bank turned to the Middle Eastern investors in Qatar and Abu Dhabi to raise the new capital it needs to strengthen its balance sheet in the wake of the credit crunch. The deal would leave the bank almost one-third owned by Middle Eastern investors.

Now Legal & General and Aviva are reported to be leading a campaign to try to force Barclays chief executive John Varley to improve the terms of the deal by creating less dilution for existing shareholders and reducing the commissions being paid for the new funds.

Although L&G and Aviva would not comment, one investor said: "The deal was sprung upon us. It is extremely expensive and dilutive."

Barclays is due to pay a total of £300 million in fees for the fundraising.

Part of the deal includes issuing £3 billion of reserve capital instruments which will pay interest at 14% through until 2019. By contrast Lloyds, HBOS and Royal bank of Scotland, who are taking money from the British Government, will pay 12% on their preference shares.

Existing shareholders have openly been offered the right to take up to £1.5 billion of the new funds being raised.

Matters are likely to come to a head before Barclays puts the deal to shareholders at a special meeting on 24 November.

The Association of British Insurers, which represents major institutional investors like L&G and Arriva, is due to meet senior Barclays management, led by chairman Marcus Agius, this Friday.