Barclays Braced For Fine Over Qatar Deals

By Mark Kleinman, City Editor

Barclays is braced for another major financial penalty over the deals that enabled it to escape British taxpayers' clutches by raising billions of pounds from private investors five years ago.

Sky News has learnt that the bank is negotiating a settlement with the Financial Conduct Authority (FCA) that could involve it paying tens of millions of pounds, according to people close to the talks.

A final agreement with the City watchdog, which could involve a fine of about £50m, is still being thrashed out and the size and nature of the penalties facing Barclays could still vary, they said.

Barclays had been trying to get the enforcement action resolved ahead of the publication of a preliminary prospectus for its £5.8bn rights issue, which could take place as soon as Monday afternoon.

The prospectus is expected to acknowledge that the settlement discussions with the FCA are taking place but a final deal is unlikely to be ready for inclusion in the document, according to a source close to the bank who said that talk of the details of a fine was "premature".

One person close to Barclays said the prospectus was expected to say that a settlement of around £50m had been proposed by the regulator. It would also spell out the list of market listing rules that the bank is alleged to have breached, they added.

Investment banks which have agreed to underwrite the rights issue are said to have been keen for a "clear sight" of Barclays' exposure to a new financial penalty.

Barclays raised almost £12bn in 2008 to avoid needing taxpayer help

The negotiations with the FCA centre on whether Barclays should have disclosed more details to the stock market about the £11.8bn capital-raisings which allowed the bank to escape the state's clutches by raising capital from Qatari and other sovereign investors.

Assuming the discussions do result in a financial penalty, it would add to the mounting cost of Barclays' transgressions in recent years, which have included a £291m fine for its role in the manipulation of the interbank borrowing rate Libor.

The bank has also set aside billions of pounds to compensate customers who were mis-sold payment protection insurance and interest rate swaps, and been hit with a contested fine for rigging US energy markets.

The Serious Fraud Office and authorities in the US are also examining the Qatari capital-raising issue, and the progress of their investigations remains unclear.

In its half-year results statement during the summer, Barclays referred to the probes without providing further details.

"The FCA and the Serious Fraud Office are both investigating certain commercial agreements between Barclays and Qatari interests and whether these may have related to Barclays' capital-raisings in June and November 2008.

"The FCA investigation involves four current and former senior employees, including Chris Lucas, [former] group finance director, as well as Barclays.

"The FCA enforcement investigation began in July 2012 and the SFO commenced its investigation in August 2012.

"The FCA provided its preliminary findings against Barclays on 27 June 2013 in respect of some of these commercial agreements. Barclays has responded on 25 July 2013 contesting the FCA's preliminary findings.

"Barclays expects further developments in the near term."

John Varley, the bank's former chief executive, is also among those under investigation.

Barclays is seeking to raise almost £8bn from investors through a combination of new shares and bonds, following pressure from the Bank of England's regulatory arm to strengthen its balance sheet.

Among the investment bankers helping Barclays to raise the money is James Leigh-Pemberton of Credit Suisse, who was on Monday confirmed as the new head of UK Financial Investments, the body which manages taxpayers' stakes in Britain's bailed-out banks.

Barclays and the FCA declined to comment.

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