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Abu Dhabi, UAEMonday 25 June 2018

UK fraud prosecutor charges Barclays over $3 billion Qatar loan

The bank has been charged with unlawful financial assistance over a loan during the height of the global financial crisis

A Barclays bank building at Canary Wharf in London. REUTERS/Stefan Wermuth /File Photo
A Barclays bank building at Canary Wharf in London. REUTERS/Stefan Wermuth /File Photo

The UK’s Serious Fraud Office has charged Barclays bank over a $3 billion loan given to Qatar as part of an emergency fundraising plan at the height of the global financial crisis.

The bank has been accused of “unlawful financial assistance” following the loan to Qatar Holding that was used to buy shares in the bank in 2008. Public companies are normally banned from lending money to buy their own shares.

The latest charge follows action taken by the SFO against the bank’s holding company and four executives in June last year related to the same deal. They were also charged with conspiracy to commit fraud.

The SFO said then that it had not decided over bringing charges against the banking unit. The bank had been in talks with the SFO over a potential deal to avoid the new charges, Bloomberg reported last month.

The fresh charges has potential serious consequences for Barclays as the unit, rather than the holding company, as the licenced operator and could face sanctions from regulators if found guilty.

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The fundraising deal allowed the banking group – the world’s 15th largest by assets – to avoid the fate of Lloyds Banking Group and the Royal Bank of Scotland which were both bailed out by the government and were part-nationalised.

Barclays raised some $16.6bn from a range of investors to stave off the threat but the Qatari part of the deal, through a loan to its Ministry of Economy and Finance, has long been mired in controversy.

After a five-year investigation into the events surrounding the cash call, the action by the SFO last summer marked the first criminal charges to be brought in the UK against a bank and its former executives for activities during the financial crisis.

Those charged last year include John Varley, the former chief executive, and Roger Jenkins, the former head of investment banking in Mena for Barclays Capital. A trial is due in early 2019.

The SFO said on Monday that a date for the first court appearance in relation to the new charge against Barclays bank will be "set in due course".

Both Barclays and its bank unit said they will defend themselves against the charges. “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,” the company said in a statement.

The charges are the latest blow to the bank’s reputation which is currently under regulatory investigation over attempts by Barclays chief executive Jes Staley to try to discover the identity of a whistleblower. The episode prompted lawmakers to call for greater protection for people coming forward to allege corporate wrongdoing.

The bank was also given the largest ever fine in the history of the Financial Conduct Authority, the banking regulator, over its manipulation of foreign exchange markets. Barclays allowed a culture to develop which puts its interests ahead of clients and “undermined the reputation and integrity of the UK financial system,” the FCA said in its 2015 ruling.