Barclays was today finalising details of the £3 billion sale of its exchange traded funds business iShares to British private-equity group CVC Partners.

The deal will trigger a multi-million payout to Bob Diamond, Barclays president and chief executive of iShares' immediate parent Barclays Global Investors. Diamond and some 200 other executives own 4.5% of BGI.

Barclays will retain a 20% stake in iShares and has also decided not to include the stock lending business in the sale. It is also set to finance a huge chunk of the deal itself putting up as much as 70% of the sale price as a loan to CVC.

Final details of the deal were being thrashed out overnight. IShares is based in San Francisco and it has proved more complicated to sort out how to split the business away from BGI than originally thought.

The sale will boost Barclays' balance sheet and help chief executive John Varley to reinforce his decision not to go to the UK Government for financial help unlike rivals Royal Bank of Scotland and Lloyds. Instead, Varley raised £5 billion from Middle East investors. Barclays shares have doubled in price in the last three weeks after it was given a clean bill of health by the Financial Services Authority.

“This will help solve some of the short-term problems by improving capital ratios,” said Simon Willis of NCB Stockbrokers. “But the questions over capital adequacy will remain and Barclays may need to raise further capital later in the year if bad debts spiral.”

IShares is the world's largest producer of exchange trade funds which are used mainly by institutional investors to mimic movements in particular markets or sectors.