Barclays faces £50m bailout fine
Barclays has revealed it is facing a £50 million fine over claims it acted "recklessly" in its multibillion-pound bailouts from Qatar in 2008.
The Financial Conduct Authority (FCA) accused it of agreeing £322 million of secret payments to Middle Eastern investors to secure their support for cash calls totalling more than £5 billion at the height of the financial crisis.
Barclays, which contests the FCA's findings, said the fees relate to advisory services over five years.
It is also being probed by the Serious Fraud Office and regulators in the US, and admitted it does not know how much the final cost will be.
Barclays was warned about the potential fine on Friday and told shareholders today in a prospectus document for a rights issue that will tap investors for another £5.8 billion to plug a £12.8 billion hole in its finances.
The FCA ruling follows its £290 million penalty last year for rigging the Libor interbank lending rate.
Barclays said the FCA's warning notices state that the main 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 is alleged to have broken listing rules which impel it to disclose information and "act with integrity" to shareholders.
The bank turned to Qatari investors in 2008, helping it avoid the same fate as Royal Bank of Scotland and Lloyds, which were bailed out by the taxpayer.
It entered "advisory services agreements" with the Qataris in June and October 2008, but the fees were not disclosed at the time.
The bank revealed the latest blow as it warned it remains "cautious" about the trading climate.
Barclays said its investment bank had a tough summer, with income in July and August down "significantly" on a year earlier. Income across the group was about £500 million lower during July and August, it added.
In the eight months to the end of August adjusted income across the group was down 5% on a year earlier.
Barclays also warned it may not be able to meet the Prudential Regulation Authority's (PRA) demand that it strengthen its balance sheet by next summer.
The watchdog has ordered it to bolster its leverage ratio - a key measure of financial strength - to 3% by the end of June 2014.
But Barclays warned it may be unable to meet these demands - aimed to prevent future taxpayer bank bailouts - if various fundraising plans are derailed or regulators move the goalposts.
And the lender warned multi-billion pound provisions to compensate customers mis-sold products could rise further.
It has set aside about £4 billion for mis-sold payment protection insurance and £1.5 billion for complex interest rate swaps sold to "non-sophisticated" small businesses such as bed and breakfasts. But Barclays said the eventual costs of the scandals could "materially differ".
Barclays is offering investors one new share for every four they own, at a price of 185p per share, meaning a 40% discount to its share price before the rights issue was announced.
As well as the rights issue, Barclays is also issuing £2 billion of bonds that are turned into shares or wiped out if the bank gets into trouble.
It will also shrink its balance sheet by between £65 billion and £80 billion, while earnings will be retained to make up the balance of the capital gap.