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Mon 12 Feb 2018 04:33 PM

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Barclays bank unit charged by UK fraud office over 2008 Qatar loan deal

Accusation of 'unlawful financial assistance' against Barclays Bank relates to a $3bn loan Barclays secured for Qatar

Barclays bank unit charged by UK fraud office over 2008 Qatar loan deal

Barclays Plc’s operating unit faces a new criminal charge in relation to the lender’s controversial 12 billion-pound ($16.6 billion) fundraising at the height of the financial crisis a decade ago.

The accusation of "unlawful financial assistance" against Barclays Bank relates to a $3 billion loan Barclays secured for Qatar in November 2008, the lender said in a statement Monday. The Serious Fraud Office had already filed conspiracy to commit fraud and unlawful financial assistance charges against the holding company and four former executives, including ex-Chief Executive Officer John Varley, in June and a trial is scheduled for early 2019.

Any charges sustained against the operating unit could hurt the lender’s ability to do business globally. Regulatory approvals and banking licenses are usually tied to banks’ operating units.

Both the main company and Barclays Bank intend to contest the charges, according to the statement. “Barclays does not expect there to be an impact on its ability to serve its customers and clients as a consequence of the charge having been brought,” it said.

Barclays’ shares erased an earlier 1.8 percent climb to trade 0.2 percent higher at 10:33 a.m. in London. The stock dropped 9 percent last year -- the most of any large European lender -- after three-consecutive quarters of disappointing trading revenue cast doubt on managers’ ability to revive earnings at the investment bank.

The new charge adds to years of negative publicity for Britain’s most storied bank. It has paid well over a billion pounds in fines to settle charges that it manipulated foreign-exchange markets and rigged the Libor interest-rate setting mechanism. The Financial Conduct Authority is currently investigating current CEO Jes Staley’s attempt to discover the identity of a whistleblower.

“It is negative that the group hasn’t been able to settle a number of outstanding litigation issues" that remain "an unhelpful distraction to management," Richard Smith and Edward Firth, analysts at Keefe, Bruyette & Woods said in a report after the charges were disclosed. They rate the stock underperform.

The SFO case relates 322 million pounds in fees Barclays paid to the Qatar Investment Authority and a $3 billion loan facility it made available to the nation as part of side deals related to the 2088 fundraising. The deal allowed Barclays to avoid a state bailout when the industry crashed.

The SFO opened an investigation into the Qatar deal in 2012. About a dozen senior executives were interviewed across the five-year-probe, including another former CEO Bob Diamond.

The deal involved Qatar Holding LLC, a subsidiary of the country’s QIA sovereign wealth fund, and Challenger Universal Ltd., an investment vehicle of Qatar’s then prime minister.

The fundraising is also being reviewed by the Financial Conduct Authority, which re-opened its probe earlier last year after additional documents came to light. The regulator had previously fined the bank 50 million pounds in relation to how it disclosed the fees to the Qataris. The bank said previously it is challenging the fine, which has been stayed until after the criminal proceedings are resolved.

The charges also come as the SFO faces a transition with the departure of Director David Green in April without a successor having been selected.

“Under David Green’s tenure as director, the SFO has been busy taking on a number of high-profile investigations, and the decision to charge Barclays Bank now may be an indication of an intention to grapple with charging decisions in those matters ahead of his departure in a couple of months,” Ross Dixon, a lawyer with Hickman & Rose in London, said by email.

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