Barclays is examining a capital instrument dubbed a "step down, step up" bond that would allow the UK bank to meet increased capital requirements without issuing equity, a source said. If Barclays' core Tier 1 capital ratio dropped to less than 7%, bondholders would be forced to suffer a haircut of as much as 30%. British banks are considering a range of options as they face the prospect of having to raise capital.

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