19th Oct 2026 08:46
(Alliance News) - The Bank of England is examining whether traders at Barclays PLC misrepresented illiquid private credit loans to understate their risk after concerns were raised by an insider, the Financial Times reported on Monday.
The BoE's Prudential Regulation Authority received a complaint earlier this year about how the London-based bank was recording derivatives used to finance private credit loans, the FT said, citing people familiar with the matter. The complaint alleged that the way the bank handled the deals was in breach of PRA rules, FT sources said.
Shares in Barclays, which reports third-quarter results on Thursday, were down 2.3% at 422.90 pence each in London on Monday morning.
The FT said the complaint centred on Barclays' allocation of total return swaps referencing illiquid private credit loans to its trading book. Total return swaps are derivatives that can allow the bank to finance loans for private credit funds while passing the economic performance to the client in exchange for a fee.
Banks place assets either in their banking book or trading book, a decision that helps determine how much capital they must set aside to cover potential losses.
PRA rules restrict banks from assigning derivatives backed by illiquid collateral to their trading book, unless they can supply enough evidence to justify the treatment.
In a letter to finance directors last year, the PRA expressly warned banks against seeking to game the capital rules by repackaging illiquid assets as tradeable ones.
By Jeremy Cutler, Alliance News reporter
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