Another FSA probe at Barclays

Barclays sign

Barclays is being investigated by the Financial Services Authority over whether it disclosed in a comprehensive and timely fashion all the fees it paid to advisors when raising more than £5bn of emergency capital from middle eastern investors at the end of 2008.

The FSA's probe also relates to a debt sale by Barclays the following year.

In today's interim results from Barclays, it disclosed that four current and former staff, including the finance director Chris Lucas, are being investigated by the City watchdog over whether they told shareholders enough about fees payable on unspecified commercial deals.

I have learned that these deals include the funds raised from investors in Qatar and Abu Dhabi at the end of 2008, which allowed Barclays to avoid being semi-nationalised along with Royal Bank of Scotland and Lloyds.

My sources at Barclays insist there was no deliberate intent to hide fees or mislead other investors about what was paid to advisors on these transactions. They say that if there was a breach of the FSA's rules, it was an oversight.

The FSA's investigation is relatively new, and there is some bemusement at the bank about why it did not take place earlier.

The money raised from Qatar and Abu Dhabi was controversial, because some of Barclays' other investors felt that the middle-eastern investors were offered terms for their investments that were too generous.

The other uncomfortable disclosure in Barclays' results is that it is taking a charge of £450m to cover the costs of providing redress to small businesses that were sold inappropriate financial products called swaps. This is a bigger sum than some had expected (and see this previous post).

All that said, the big message of the results for the first six months of the year is that - although Barclays is in the uncomfortable position of looking for a new chief executive and chairman, because of the damage to its reputation caused by the LIBOR scandal - its profits are holding up better than some rivals around the world.

Stripping out the increase in what it would cost Barclays to buy back its own debt, which arguably eccentric accounting rules force all banks to incur, profits before tax rose 13% to £4.2bn - which remains significantly below Barclays' targets but is moving in the right direction.

What is particularly striking is the resilient performance of the investment bank. This has prompted the outgoing chairman Marcus Agius to make comments implying the board has no intention of breaking the bank up, which is what some critics would like.

Barclays' balance sheet has become stronger in most respects: it is holding more cash; lending is moving near to balance with dependable deposits; but there has been a tiny reduction in the ratio of loss-absorbing equity capital to loans and investments.

As for Barclays' vulnerability to the crisis in the eurozone, its exposure to the debt of the financially-stretched governments of Spain, Italy, Portugal, Ireland, Greece and Cyprus fell by more than a fifth in the first half of the year to £5.6bn. Barclays holds £2.2bn of Spanish government debt, and £2.6bn of Italian government bonds.

That said, Barclays has made £49.6bn of retail and corporate loans in Spain, Italy and Portugal - so there could be an increase in its bad debt charge if the weakening of these economies intensifies.

In this latest period, Barclays' loss on debts and investments going bad across all its global operations was steady, at £1.8bn.

Like Lloyds' results yesterday, Barclays figures point to a British economy that is stagnating rather than shrinking violently.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 202.

    Sage Against The Machine @198
    "democratic power"
    Will reign when all "represent" all
    As equal stakeholders, free from conflict of interest

    The dividend from 'peace, freedom, imagination, co-operation' will far exceed any to be found in 'gated community' or 'tax-haven

    Ways will be found to match circulating money to available goods, never fear!

    Imagine, ALL the talents, 'on-side'!

  • rate this

    Comment number 201.

    @198.Sage Against The Machine
    "A small amount of interest compensates the lender for the risk and the debtor wants to pay up quicker."

    So assuming the democratic money supply is sufficient to adequately facilitate trade, what would then be an "acceptable" interest rate? 3%? 5%? Would it have to be risk-dependent? And if so, how can you guarantee that risks aren't repackaged as CDSs?

  • Comment number 200.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 199.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 198.

    195: Stuart Wilson wrote: What about a global ban on usury?

    If you mean no interest on loans at all, this would stagnate and collapse the economy. A small amount of interest compensates the lender for the risk and the debtor wants to pay up quicker. The problem is interest being charged on 97.4% of our money supply which has arisen through loans. Return money creation to democratic power.

  • rate this

    Comment number 197.

    Zap Pow

    Higher interest rates wouldn't help banks at the moment. With higher rates (under austerity) more people would be in a position of default, leading to lower house prices, with those prices being the banks assets (making them more insolvent).

    It would screw everyone else as well though yes.

    Stuart Wilson

    We wish!

  • Comment number 196.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 195.

    @194.Zap Pow
    "John from Hendon is misguided with repeated high interest rates mantra"

    What about a global ban on usury?

  • Comment number 194.

    All this user's posts have been removed.Why?

  • Comment number 193.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 192.

    "as everyone will be having a go at RBS next! (or will they?)."

    I think HSBC will be next.

  • rate this

    Comment number 191.

    Re Stew Wilson 'Battle of Balaclava' (?)

    Most young people in this country don't even know about the sacrifices of WW1 - never mind Balaclava. What a silly thing to say! Why not
    Bannockburn- as everyone will be having a go at RBS next! (or will they?).

  • rate this

    Comment number 190.

    Folk who try to seem extra clever by using fancy words (?)

    Fear and greed- the two basics of the human race 'old chap'!

    Bob Diamond didn't take any money of no one- he earned it by being top of his game! BUT HIS FACE DIDN'T FIT - don't believe everythi g the media and politicians say-they've played the misinformation game for years.

    Bob Diamond was the 'fall' guy-trial by media/ public opinion

  • rate this

    Comment number 189.

    155. John Hendon - anyone who thinks that a debt problem can be solved with yet more debt-based money is either an idiot or an economist. Your idea of putting up interest rates above 5% right now under the current debt-money system would create a complete train wreck of an economy. Why do you think the BoE put the rate where it is? Yours is the most rampant display of monumental buffoonery ever.

  • rate this

    Comment number 188.

    172. Harley
    1 HOUR AGO
    Blah- blah-blah! Same old blah!

    It's the energy companies that are ripping everyone off!

    The common excuse of every naughty schoolboy caught in the act. "It wisnae me! It was him an a'!" Yes the energy companies are ripping us off - that doesn't exculpate the banks that are doing the same

  • rate this

    Comment number 187.

    @186 Frankly, the sooner we're rid of everyone who thinks they're worth multi-million pound salaries for running companies that are successful due to the hard slog of often underpaid workers, while imagining they can slough off responsibility for cock-ups with an "I wasn't aware..." the better for everyone. I just hope Diamond is the first of many

  • rate this

    Comment number 186.

    Don't kid yourselves that getting rid of people like Bob Diamond is a good thing- these politicians sing a different song every time a different band wagon comes along!

    This mess started in the USA and they will take our banking business away from London! The EU want a bigger slice of the cake too! Merve 'the swerve' King is too big for his boots getting rid of Bob Diamond!

  • rate this

    Comment number 185.

    Bob Diamond wasn't liked by those in power over here- but he was a good bloke and on our side! I suspect he suffered after the way the US
    Treated our Brit BP Chairman.. Let's face it - the USA want only what's best for their companies - so let's stop putting down British firms!

  • rate this

    Comment number 184.

    @14 Minutes ago
    I wish all you lot would quit bitching and moaning!

    Bob Diamond for Prime Minister!!!

    Don't see why not to be perfectly honest. Swapping out one criminal for another won't actually change much but, at least Bob has been caught with his hands in the till. Cameron has to wait a while longer before we uncover his aiding and abetting. The countdown has begun !

  • rate this

    Comment number 183.

    "Bob Diamond is a top 1rate banker, who is better off out it here.
    Trial by media, politicians, and moaners!"

    The banker apologists' mount their counterattack? This is going to end up worse than the Battle of Balaclava.


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