Daily announcements of government bailouts have made their way across the Atlantic and into the U.K. The U.K. government's $86 billion rescue plan is dividing its financial sector into banks that receive government assistance and those that choose to go it alone.

While the Royal Bank of Scotland (NYSE:RBS), Lloyds TSB Group (NYSE:LYG), and Halifax Bank of Scotland are planning to exchange ownership stakes for billions in government sponsored assistance; two of Britain's other major banks, Barclays (NYSE:BCS) and HSBC (NYSE:HBC), are choosing to make their own way. The following reviews whether or not investors should follow the self-sustaining British banks avoiding the government payroll.

Barclays' Search for Capital
Barclays, best know for its lineup of ETFs and its commercials with bankers expressing brief, uncharacteristic moments of euphoria, is considering raising capital from foreign entities in Asia or the Middle East rather than pursing government assistance. Barclays' move suggests its acknowledgement of the danger of ceding ownership stakes to a higher power in the form of the U.K. government and possibly coming under more stringent regulations following the acceptance of the bailout funds. If Barclay can win favorable terms with its capital providers, it will be a bank investors should follow.

Barclays Hold On Dividends
Barclays is planning to put a hold on paying dividends until the second half of 2009 to keep capital levels of the bank intact. Investors should note that in September Barclays took advantage of struggling U.S. investment banks by planning to acquire essentially all of Lehman Brothers' North American business operations. Barclays stock is down 60% over the last 52 weeks. (Dividend seekers might want to read Is Your Dividend At Risk?)

HSBC Keeping It In The Family
HSBC bank recently received $1.29 billion from HSBC Holdings PLC, its international parent. HSBC reports that its tier 1 capital ratio is 8.8% suggesting that the company has enough reserves and equity in relation to debt to sustain itself. The tier 1 capital ratio is tool used to determine a bank's financial strength. HSBC's strength was also displayed by its ability to provide liquidity to other banks by lending $7 billion in three-month and six-month money to other banks earlier this month. HSBC is down only 9.93% since the beginning of the year, making it a safe haven for investors in financial services. (To get started on your own analysis, read Analyzing A Bank's Financial Statements.)

Final Thoughts
Barclays and HSBC are approaching their capital requirement from different angles, but both are also giving themselves the freedom to engage in banking activities without government restraints that could hamper their ability to grow. While a lack of banking regulation is surely part of the blame for the financial system bailouts, the banks that have managed to avoid government hand outs may be among the strongest options for investors to consider.

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