UK authorities are probing an allegation that Barclays loaned Qatar money to invest in the bank as part of its cash call at the height of the financial crisis in 2008, which enabled the bank to avoid a UK government bailout.
While the terms of Barclays' emergency fundraising have been under the scrutiny of the Financial Services Authority and the Serious Fraud Office since the summer – with a particular focus on fees paid for the deal – allegations over a loan to the Qataris is a new thread of the investigation. Two sources familiar with the situation have independently told the Financial Times of the investigation into the alleged loan.
If confirmed, such an arrangement could contravene market regulations if it was not properly disclosed at the time, legal and industry experts warned. "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," said Peter Hahn, a former banker at Citi now at Cass Business School.
The revelation is yet another blow for attempts by Antony Jenkins, Barclays' chief executive, to clean up the bank's image that has been tarnished by high-profile scandals ranging from Libor manipulation to the mis-selling of payment protection insurance.
Chris Lucas, Barclays' chief financial officer, is among four former and current executives investigated in connection with the capital raising.
The probe underscores broader inquiries by authorities worldwide on the terms of deals struck at the height of the financial crisis – often with Middle Eastern and Asian investors – as western banks battled to stay out of government control.
Dexia, the Franco-Belgian lender, came under scrutiny in 2011 when it emerged it had loaned two of its biggest institutional shareholders money to buy its shares in 2008.
The Icelandic prosecutor investigating the collapse of Kaupthing has examined a loan the bank allegedly made secretly to a Qatari royal, Sheikh Mohammed bin Khalifa al-Thani, in 2008 to fund the purchase of Kaupthing's shares. Four Icelandic individuals have been charged in the case.
Barclays turned to Qatar Holding, a subsidiary of the Qatar Investment Authority, and Challenger – an investment vehicle of Sheikh Hamad bin Jassim bin Jabr al-Thani, the prime minister of Qatar and his family – twice in 2008 for a total of 6.1 billion pounds. The sheikh – often referred to as HBJ – is also the chairman of Qatar Holding.
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Neither HBJ nor Qatar Holding is accused of wrongdoing and their lawyer at Stephenson Harwood and their spokesman declined to comment.
The SFO, FSA also declined to comment. The bank said the authorities' investigations were ongoing. It neither denied nor confirmed the revelation.
The bank's first cash call, in June 2008, saw Qatar Holding, Challenger and other sovereign wealth funds including Temasek of Singapore invest a total of 4.5 billion pounds in the bank. The second capital raising involved Qatar Holding and Challenger investing with Abu Dhabi a total of 7.3 billion pounds in the bank. The identity of any borrowers and size of the alleged loan are unclear.
As part of the June cash call's terms, the bank said it had entered into an arrangement whereby the QIA would advise Barclays in the Middle East. Then in October, the bank said that Qatar Holding would receive 66 million pounds for "having arranged certain of the subscriptions in the capital raising".
The bank revealed the FSA's probe in its interim results in July, adding that Mr Lucas was being investigated with three other former and current employees. The others were John Varley, the bank's former CEO, Richard Boath, its current co-head of global finance in Europe, the Middle East and Africa, and Roger Jenkins, the former head of Barclays' tax advisory business.