Barclays Battles Watchdog Over £50m Deal Fine

By Mark Kleinman, City Editor

Barclays has confirmed that it is facing a £50m fine from the City watchdog over the £11.8bn capital-raisings that allowed it to remain out of Government ownership five years ago.

The bank confirmed a Sky News report that it had been told by the Financial Conduct Authority (FCA) that it was seeking the penalty over the disclosures it made to the stock market in 2008.

In the prospectus accompanying its £5.8bn rights issue, which was published on Monday afternoon, Barclays said it was continuing to contest the FCA verdict, which threatens to heap fresh shame on the embattled bank.

The regulator filed warning notices against Barclays late last week in which it accused the lender of failing to disclose £322m in advisory fees payable to Qatari interests which had agreed to take a multibillion pound stake in Barclays, according to the prospectus.

"While the Warning Notices consider that Barclays and Barclays Bank believed at the time that there should be at least some unspecified and undetermined value to be derived from the agreements, they state that the primary purpose of the agreements was not to obtain advisory services but to make additional payments, which would not be disclosed, for the Qatari participation in the capital raisings," Barclays said.

"The Warning Notices conclude that Barclays and Barclays Bank were in breach of certain disclosure-related Listing Rules and Barclays was also in breach of Listing Principle 3 (the requirement to act with integrity towards holders and potential holders of the Company's shares). In this regard, the FCA considers that Barclays and Barclays Bank acted recklessly. The financial penalty in the Warning Notices against the Group is £50m. However, Barclays and Barclays Bank continue to contest the findings."

Antony Jenkins is trying to repair the bank's image

Although the alleged breaches of market rules took place well before he took over the helm of Barclays, the findings put renewed pressure on Antony Jenkins, the bank's chief executive, who has embarked on a public crusade to overhaul its culture and standards.

Assuming the discussions with the FCA do result in Barclays paying a financial penalty, it would add to the mounting cost of the bank's recent transgressions, 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.

Other authorities in the UK and the US are also examining the Qatari capital-raising issue, and Barclays said on Monday that their investigations continued.

"The Serious Fraud Office is investigating the same agreements. Its investigation is at an earlier stage and the Group has received and continues to respond to requests for further information," the bank said.

"The DOJ and the SEC are undertaking an investigation into whether the Group's relationships with third parties who assist Barclays to win or retain business are compliant with the United States Foreign Corrupt Practices Act. They are also investigating the agreements referred to above including the two advisory services agreements.

"The US Federal Reserve has requested to be kept informed of these matters. It is not possible to estimate the full impact on the Group if the final conclusion of these matters is adverse," the bank added, implying that it could face far heftier financial penalties than the £50m proposed by the FCA.

The rights issue documentation was published as part of Barclays' efforts 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.

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