UK fraud office charges Barclays over $3bn Qatar loan

Britain’s Serious Fraud Office has charged Barclays’ operating subsidiary with giving Qatari investors an illegal loan which was then used to prop up its shares during the banking crisis, deepening the lender’s legal difficulties.

Barclays denies the SFO’s allegation that the $3bn loan it made to Qatar in November 2008 was connected with a Qatari investment in the British bank which ultimately helped it avoid a British government rescue, unlike its rivals Lloyds and Royal Bank of Scotland.

Qatar, which is a major investor in Britain with real estate and other assets, has not been accused of wrongdoing itself, but public companies in Britain are normally prohibited from lending money for the purchase of their own shares, known as “financial assistance”.

The SFO had levelled the same charge against the bank’s holding company last June, but it is the operating unit Barclays Bank PLC that is licensed for banking operations, meaning any conviction could also prompt sanctions from regulators.

Read: Barclays and four of its former bosses charged over 2008 Qatar fundraising

“The charges relate to financial assistance Barclays Bank Plc gave to Qatar Holding LLC between 1 October and 30 November 2008, which was in the form of a $3bn loan for the purpose of directly or indirectly acquiring shares in Barclays Plc,” the SFO said in a statement on Monday.

Barclays said in a statement that Barclays PLC and its operating arm intend to defend the respective charges against them, and it did not expect “an impact on its ability to serve its customers and clients as a consequence of the charge”.

The SFO declined to comment on the timing of the charges, but authorities can only file charges if the evidence is sufficient for a “realistic prospect of conviction” and if such a prosecution is in the public interest.

“(This move) signals a belief on the part of the SFO that they can evidence an unlawful intention in the actions of the officers of the bank when they entered into the loan arrangements,” Michael Potts, a partner at law firm Byrne and Partners, said.

“The defences to this offence are quite narrow and the SFO may believe that the bank will struggle to identify and prove a good faith purpose,” he said.

The SFO, which opened its inquiry into Barclays in 2012, said a date had not yet been set for the first court appearance.

Two former top executives also face a charge of unlawful financial assistance.

The trial of Barclays PLC and four former top executives on a separate charge of conspiracy to commit fraud by false representation when they negotiated a capital injection for the bank from Qatar, is due to start next January. That separate charge has not been made against the operating arm.

Barclays faces other legal issues ahead, with regulators weighing up how to respond to attempts by Barclays CEO Jes Staley to unmask a whistleblower.

Analysts at Keefe, Bruyette & Woods said that while it was unhelpful for Barclays that the SFO has added charges, it should not change the dynamics of the case materially.

“However, it is negative that the group hasn’t been able to settle a number of outstanding litigation issues, with outstanding litigation representing an unhelpful distraction to the management of the core franchise,” the financial services firm said in a note to clients.

Barclays shares were up 0.3 per cent to 193.4 pence by 4:09pm GMT, helped by a broader market rebound and UBS raising its price target for the stock to 225 pence from 220 pence.

Read: Barclays and four of its former bosses charged over 2008 Qatar fundraising