By Andrew Saunders Friday, 01 February 2013

Qatar loan allegations heap more woe on Barclays

The SFO and the FSA are reportedly investigating claims that Barclays made undisclosed loans to Qatar as part of the bank's £6.1bn 2008 bail out by the Emirate.

Some of you will recall that the bank’s emergency fundraising at the height of the financial crisis is already under investigation with regard to the size of the fees paid during it. But now it is alleged that Barclay’s may have made loans to subsidiaries of the Qatari Investment Authority ahead of the bail out, effectively underwriting the purchase of its own shares. And furthermore that it did not disclose the loans to the relevant authorities.

This of course is absolutely not the way that things are supposed to be done. Former CitiGroup banker Peter Hahn, now a corporate finance expert at Cass Business School, told the Financial Times: ‘The concept of lending money to any investor to purchase your own shares raises a series of immediate questions about disclosure and other regulatory issues.’

After Libor, PPI and all the rest of it, Barclays (relatively) new boss Antony Jenkins could be forgiven for wondering where it will all end. This morning Jenkins announced that he is declining his bonus for 2012. Except that, as a senior exec in the retail side at the time of the Qatari rescue, he presumably had some inkling of what (if anything) was going on. Although the key players in the deal, including Bob Diamond and Marcus Agius, have now left the bank.  

It certainly doesn’t make Jenkins’ efforts to persuade the world that Barclays has turned over a new leaf any easier. Only last week a crop of large glass signs appeared in its Canary Wharf HQ emblazoned with the 5 words at the core of his new ethical mantra - Respect, Integrity, Service, Excellence and Stewardship.  Oh well. The only saving grace from this point of view being that 2008 was firmly back in the murky old regime rather than being part of the shiny, transparent new one.  

Whether the allegation prove to be true or not, the story adds yet more detail to the picture of an organisation that so determined to avoid a state funded rescue that it was prepared to go to pretty much any lengths to secure alternative funding. It certainly had no qualms about offering the QIA and its various subsidiaries much more attractive terms on the deal than were available to existing long-suffering shareholders.  

Some industry watchers have suggested that the key motivation for this desperation to avoid government cash was the desire of bosses at the time to preserve Barclays’ famously Croesan remuneration and bonus culture for a bit longer. In which case they largely achieved their aim, albeit at huge reputational cost.  

Whatever the reasoning, the deal is certainly coming back to haunt the new management - although would you really want to bet that either Barclays staff or shareholders would have been better off if it had gone down the state bailout route instead?

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