BRITISH bank Barclays Plc is close to issuing a 3-year note to raise at least 1 billion pounds (US$1.7 billion), adding to signs that government rescue plans are thawing funding markets.

Britain's second-biggest bank may also moderate the pace of its retail banking expansion in India, Pakistan and Russia and shrink the asset book of the American Lehman Brothers business it bought last month amid tighter capital requirements.

Analysts at Cazenove said in a note yesterday that Barclays will become more selective on investments and assets as banks are urged to preserve and raise capital.

Cazenove hosted a lunch with Barclays' Finance Director Chris Lucas and investors on Monday, and a spokesman for the bank confirmed that the details in the note were accurate.

Cazenove said Barclays was close to issuing the bond under the British government's guarantee.

"Though early days, there are the first signs that sentiment in the debt market is improving, consistent with the falls in Libor rates from their highs," said analysts at Cazenove, which is broker to the British bank.

Barclays' ability to issue unsecured funding with a term of more than a week has also improved and after falling to 1 to 2 billion pounds on some days, is now up to as much as 10 billion pounds daily, Cazenove said.

At that level of issuance, Barclays can broadly maintain its funding maturity profile, it added.

The interbank cost of borrowing dollars fell sharply on Monday as banks grew more confident of lending rather than hoarding cash, raising optimism a global money market freeze is reacting to action by central banks to improve liquidity.

London interbank offered rates (Libor) for three month dollars fell by almost half a percentage point.