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* UK banks must separate retail, investment bankingoperations
* New Barclays unit will support both sides afterring-fencing
* Could operate smoothly even if one operation got intotrouble
* Staff unclear who they will work for, fear job cuts -sources
* Overhaul to soak up much of 1 bln pound cost ofring-fencing
By Lawrence White
LONDON, Feb 5 (Reuters) - Barclays Plc is about tooverhaul its back office operations under a restructuring tohelp it comply with new post-crisis rules forcing British banksto ring-fence their retail operations from their riskierbusiness.
It has formed a new company that will operate as astandalone unit providing support services to both of its twomain operations when they are formally separated - retail andinvestment banking, the bank said.
The ring-fencing rules seek to avoid a repeat of the 2008crisis, when banks' bad bets threatened depositors' cash. WhileBarclays was not among those that needed a UK taxpayer-fundedbailout, the new rules apply to all lenders in Britain that haveretail and commercial or investment banking activities.
At Barclays, the aim is that critical support functionscould continue to operate smoothly if either of its two mainbusinesses were to run into trouble, while also keeping costsdown by not having several separate back-office units, sourcesinvolved in the project said.
The overhaul - including the creation of the new companyknown internally as ServCo - will affect most of the more than10,000 people who work in Barclays back offices operations in 17countries around the world.
It will group together the bank's huge operations in Indiaand South Africa that provide technology support and datamanagement, along with functions such as compliance withregulatory requirements, corporate relations, legal affairs andhuman resources.
While for some staff this will simply involve a change inthe name of the legal entity they work for, the sources said itwas also likely to lead to some job losses.
Barclays declined to comment on the possible staff cuts orthe cost of the restructuring.
However, sources with direct knowledge of the project saidit would soak up much of the 1 billion pounds ($1.25 billion)that Barclays has said it will cost to comply with thering-fencing rules.
UPHEAVAL
The structural change shows the upheaval that British banksface to meet the rules that come into force in 2019.
Other British lenders are working on similar models. HSBCtransferred 18,000 employees to a UK-based service company in2015, according to a company filing, as part of a move toinsulate its back-office functions to comply with the newregulations.
HSBC plans to base its ring-fenced British retail andcommercial banking business in Birmingham, shifting about 1,000staff to the central English city from London. Barclays,however, will keep both main operations headquartered at itsbuilding in the capital's Canary Wharf district.
Paul Compton, Barclays' chief operating officer, isoverseeing the creation of the new company, which will formallybe called Barclays Services Ltd.
"From the outset, we've been keen to use the incomingringfencing regulations to enhance the banking experience forour customers and clients, and the establishment of the servicecompany is a great example of how we can put this intopractice," Compton told Reuters in an email. He declined tocomment on how many people will work in the new unit.
Some back office workers are confused about which entitythey will end up working for and concerned about losing theirjobs, two of the sources said. ServCo's management structurewill be formalised by April with a view to it beginningoperations by September, they added.
Compton joined the bank in May 2016, one of manyhigh-profile former JPMorgan bankers recruited byBarclays Chief Executive Jes Staley, who himself ran the U.S.lender's investment banking division until 2013.($1 = 0.7988 pounds) (editing by David Stamp)
