(The authors are Reuters Breakingviews columnists. The opinions
expressed are their own)
By Una Galani and George Hay
DUBAI/LONDON, Aug 2 (Reuters Breakingviews) - Barclays’
(BARC.L) Qatari baggage is getting heavier. A costly capital
injection by Gulf funds spared the UK bank from a state bailout
in 2008. But if a probe by the UK’s Financial Services Authority
into the disclosure of fees discredits one of the few remaining
members of Barclays’ top executive team, the bank’s decision to
seek salvation in the Middle East will look even more like a
The fallout from the interest rate-rigging scandal has
already cost Barclays its chairman, chief executive, and chief
operating officer. Now finance director Chris Lucas, along with
former executive Roger Jenkins, are at the centre of the probe,
which relates to the bank's capital raisings in June and October
The central question surrounds fees that Barclays may have
paid Qatar’s sovereign fund in return for advising the bank’s
Middle East business. The mandate was first disclosed when
Barclays raised 4.5 billion pounds from investors including
Qatar in June 2008. At the time, however, there was no
suggestion that Barclays was paying for these services.
Compare that with October 2008, when Barclays announced
plans to raise a further 7.3 billion pounds, mostly from Gulf
investors - an exercise that cost it a chunky 300 million pounds
in fees. On that occasion, Barclays said it had paid Qatar
Holding 66 million pounds for “having arranged certain of the
subscriptions” in the fundraising. Barclays says it believes it
met its disclosure obligations. But if the FSA disagrees, Lucas
will be in a difficult position.
Barclays shareholders never liked the Gulf deal, which they
saw as expensive and riding roughshod over their pre-emption
rights. The advisory tie up with Qatar also doesn't appear to
have given the bank’s Middle East business much of a boost.
Barclays has consistently argued that it had few alternative
sources of capital at the height of the crisis, and that Gulf
funds were preferable to the UK state capital that was forced on
both Royal Bank of Scotland (RBS.L) and Lloyds Banking Group
(LLOY.L). Constant government meddling suggested that Barclays
had made the right choice. But following the latest scandal,
some investors may be wondering if the bank would have been
better off accepting a bailout.
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- Barclays said on July 27 that it is at the centre of a
probe by the UK Financial Services Authority over its disclosure
in relation to “fees payable under certain commercial agreements
and whether these may have related to the bank’s capital
raisings in June and November 2008”.
- The British bank, which said that it considers it has met
its disclosure obligations, added that the investigation
involves four current and former senior employees, including
Chris Lucas, group finance director. Former Barclays executive
Roger Jenkins is also under investigation, according to a person
familiar with the matter.
- The British bank said on June 25, 2008 that it had
“entered into an agreement for the provision of advisory
services by Qatar Investment Authority to Barclays in the Middle
East and agreed to explore opportunities for a co-operative
business relationship with SMBC [Japan's Sumitomo Corporation]”.
- The disclosure was made as part of the bank’s announcement
that it had raised 4.5 billion pounds from investors including
the Qatar Investment Authority (QIA) and Challenger, a vehicle
beneficially owned by Qatar’s prime minister.
- On Oct 31, 2008, Barclays announced plans to raise a
further 7.3 billion pounds from investors led by Qatar Holding,
Challenger, and Abu Dhabi’s Sheikh Mansour. The bank said the
fees relating to the transaction amounted to 300 million pounds.
- As part of the fees, Barclays said that Qatar Holding
would be paid 66 million pounds “for having arranged certain of
the subscriptions in the capital raising” without providing
- Announcement, July 27: tinyurl.com/bttggdv
- Capital raising June 25, 2008: tinyurl.com/c2kanpl
- Capital raising Oct. 31, 2008: tinyurl.com/crcov25
Reasons to be fearful [ID:nL4E8IR1YT]
- For previous columns by the authors, Reuters customers can
click on [GALANI/]or [HAY/]
(Editing by Peter Thal Larsen and David Evans)
Keywords: BREAKINGVIEWS BARCLAYS/QATAR
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