News broke yesterday that Barclays Bank is to be charged with criminal offences. I stress, not the directors or some names individual, but the Bank itself.
The charge does, admittedly, relate to events in the past. It is alleged that in 2008 the Bank lent £3 billion ( I stress, billion) to Qatar so that Qatar could use those funds to buy shares in Barclays that then ensured Barclays would not need to be nationalised, unlike Lloyd's and RBS.
There was just one problem with this arrangement. It was illegal. Banks may not explicitly lend to assist others to buy shares in themselves.
Barclays, of course, knew this.
It took a long time for details of the story to leak out. But it has. And now charges are being brought, although no one knows what the consequence may be. Despite their many failings the U.K. has not tried to prosecute many banks.
There are issues to consider here though. What is alleged is a systemic failing.
If true it was deliberately abusive.
Some who may have made the decision to undertake this potentially illegal act may have gained as a result. If so that would be fraud.
There was a cover up: it took a long time to find out what happened, which is now not really in dispute; only culpability is.
And the result was abusive: Barclays gained from this.
But is there outrage? I have not heard it.
Has there been a call for banks to take the moral high ground, issued by ministers? No.
Has Barclays been threatened with the loss of all its public contracts? No.
Have the press been all over this deliberate act of abuse? No.
The FT says in an editorial on Oxfam this morning that:
[T]here is undoubtedly a need for much tougher procedures to tackle systemic abuse. There is also a strong case for an overhaul in the way charities are regulated. A succession of scandals has eroded public trust. Organisations like Oxfam are not sanctified by a noble cause. They should be held, like companies increasingly are, to much greater account.
What, like Barclays has been?
Or like all the other banks were for mis-selling?
And HSBC was when it aided criminal tax evasion?
I smell the whiff of considerable hypocrisy.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
So your position is that Barclays’ wrong-doing is notable, but Oxfam’s is not?
Also – and this is just a polite suggestion – you might like to google the term “sub judice”.
I have
I used the term alleged
And you fail to note a difference
Oxfam took action on the staff who committed wrong doing
Barclays is alleged to have done the wrong doing
Can’t you spot the difference?
Banking fraud is always let off the hook ( other than a rare fall guy). I suspect that this is partly to do with the fact that it is difficult for the general public to get their heads around what is actually going on as it all sounds so intangible-that combined with corruption fatigue and shoulder shrugging. Government is so interlocked with finance capitalism :
‘One in 10 new MPs has previously worked in financial services, ranging from investment banking and accounting to fund management, according to a report by the Madano Partnership.
With British banks facing a radical shake-up, no less than three former directors of Barclays Bank will be sitting in Westminster.
They include new Tory MPs Stephen Barclay, who is head of anti-money laundering and sanctions at Barclays Bank; Andrea Leadsom who was financial institutions director at the bank before joining Invesco Perpetual; and Jessie Norman, the new Conservative member for Hereford, who was a director of Barclays until 1997.’ ( Torygraph from 2010).
Government is riddled with this sort of thing with Rees-Mogg (also a 2010 intake) part of this underground Government of finance and money managers. They are simply not going to renege on their ‘friends.
A question on the accounting side of this:
When a bank creates a loan it simultaneously creates an asset AND a liability. But this doesn’t create equity as the two net out to zero (other than stream of interest). So the alleged purchase of the shares by this means would be to increase EQUITY ( capital?). Have I got that right?
Barclays lent money to Qatar
Qatar paid it back as equity
The cash cancelled out
The favourable terms on the equity covered the apparent cost of the loan
By creating money to purchase its own shares surely the bank abused the licence granted to it by society . Was this even “lending”? Clearly the bank was under the same liquidity pressure as its rivals and no longer had the capital resource necessary to create funds in this way.
The rabid right wing press is savaging Oxfam, a sickening sight. The bias of our media is such that it cannot report on a serious issue. All reasonable people will recognise that there have been failings in the charity, the Charity Commission and the Department for International Development but these issues cannot be sensibly addressed by the likes of the Mail and the Sun.
The headline in the Mail today, and since 2008, could have been “ABUSE RIFE IN HIGH STREET BANKS : MONEY LAUNDERED, LIBOR RATES FIXED, INSURANCE MIS-SOLD, TAX AVOIDANCE FACILITATED, ASSETS MISAPPRROPRIATED”.
I think Simon neatly sums up why there will be no such backlash.
All I would add is that we have to realise that the fraud that has been alleged is increasingly actually just a normal day at the office for far too much of the financial sector these days.
I live in hope and say to Barclays and their ilk ‘Enjoy it whilst you can – the pitchforks are coming’.
As I see it a loan account is created and debited a borrowers account is credited. Repayments over time cancel out the balances. Net equity is not affected at any point apart from the addition of interset to any profit on the year.
Shares would increase the equity and inject ” new” money into the cash flow.
Your point is ?
Pace concerns about whether the case is “sub judice” and potential contempt of court, frankly this stinks.
Any fool knows that financial assistance was one of the few points that one could always raise with a corporate lawyer if you wanted to make them sweat, at least for a short time, at least until the prohibition was abolished for private companies a few years ago. The prohibition was explicitly retained for public companies.
(The two other points that are still good for discussion in almost any corporate transaction are, first, whether there might be a distribution – and if so whether there are sufficient distributable reserves, for example on Aveling Barford grounds – and, second, whether there might be an issue with directors’ duties.)
It seems that Linklaters declined to act for Barclays in this matter when the bank did not want to take their advice that there was an issue with financial assistance. That was a huge red flag.
See for example https://www.lawgazette.co.uk/law/linklaters-quit-as-barclays-adviser-over-unlawful-loan-fears/5062497.article
or
https://www.thelawyer.com/quinn-simmons-battle-1-2bn-barclays-dispute/
Both of these in connection with an adviser seeking their fees in relation to this… and that is an aspect worth examining too.
The FT put the boot in on Barclays in the Lex column, the Times reported it accurately as did the Telegraph..so no neoliberal cover up there..the fact that Barclays are contesting the charges makes it difficult for any Minister to publicly condemn them?
From a previous poster – the pitchforks are coming? The problem is the financial sector employs so many people (beyond hedge fund managers etc) in support functions, IT, servicing, HR etc etc & London in particular depends upon it. Imagine London cafes and restaurants or retail in general without a vibrant finance sector ? I am not sure your revolutionary outlook is shared amongst the masses (certainly not in London anyway).
Of course there was a cover up
Barclays reported it incorrectly in the first place
For heaven’s sake, tty exercising a little brain power
Jim,
So they employ people – so what? If the wealth captured by those financial sector rentseekers was retained by other parts of the economy then more money would be spent in those other sectors. The service jobs would appear elsewhere. Not all of them in London, mind you but that’s not a bad thing either.
BTW the “pitchforks” reference is from this famous article:
https://www.politico.com/magazine/story/2014/06/the-pitchforks-are-coming-for-us-plutocrats-108014
Do catch up.
In 2009 Obama told the Bankers that only his administration stood between them and the pitchforks. Seems he meant it and would protect them from over-zealous citizens. It was, and is, always thus.
Thanks, G.H.
I didn’t know about that one.
“Barclays Bank is to be charged with criminal offences. I stress, not the directors or some names individual, but the Bank itself”
How shall we fit it into a jail cell?
I am sure that many volunteers would gladly assist that process if required.
‘How shall we fit it into a jail cell?’
These techniques might be helpful: /www.youtube.com/watch?v=E7kor5nHtZQ
Yes, they might. I’ll get us some uniforms just like those ones.
Am I right to understsnd that Barclays ( Bank, plc, whatever) loaned three billion from its own (at the time dwindling) coffers in order to borrow back not only that three billion but a much larger sum ( 11 billion has been bandied) ? . Otherwise what would be the point of being rescued with ones own money ?
It did not borrow back
Qatar injected share capital
I meant no cover up from the neo liberal press!..you would be hard pressed to find any organisation profit making or non profit making who wouldn’t try to keep wrong doings out of the public domain..it is human nature.
Some other significant absences of outrage in evidence today: former Labour MP Simon Dancczuk will not face criminal charges after an investigation into his expenses. Compare and contrast: “Ipsa’s compliance officer, Peter Davis, said: “The evidence points overwhelmingly to the conclusion that the MP obtained an increase to his accommodation expenditure budget by claiming dependant uplifts for his two oldest children for a period of over three years, when at no point were either of the children routinely resident. The compliance officer must also conclude that this was done knowing that there was no reasonable prospect of the children staying at the accommodation.” Yet somehow, that was deemed not to meet the evidential test for prosecution by the CPS. Hmm…
Closer to home, at least as far as corporate malfeasance is concerned, The Chief Executive of the Jewish Leadership Council, Jeremy Newmark, was accused of inappropriate spending and expenses claims. The police were not informed, and the Charity Commission said that it had not been told of the allegations. The response of the board: individual trustees ensured that the JLC’s accounts were made good, Newmark was allowed to resign on the grounds of ill-health, and no further action was considered to be warranted. Newmark is, of course, a key player in the ‘left-wing anti-semitism’ campaign, so either a good guy or at least a useful idiot to the esatblishment.
In terms of the offence, financial assistance is a complicated offence not well understood – the legislation does not even give a precise definition of assistance (its circular), only examples. So not so surprising it hasn’t captured people’s attention.
Worth noting that it is a company law point, not strictly a regulatory obligation, although it does indirectly fall within regulatory requirements not to breach law and carry out affairs in a proper way.
Not sure there is a particular cover up at this point. The facts supporting the charges are on the record and were published when the individual directors were charged. Interesting the delay between the two procedures but not conclusive as to the reason or correct to say it has been hidden until now – the current step is in effect a rewriting of an exiting writ or indictment to apply to another party.
I note you’ve sought to compare to Oxfam but I don’t think it is applicable.
In terms of illegality there was a legal opinion given by Linklaters which opined on the conduct in question. I believe the focus for proceeding against the directors first was in respect of the decision to disregard or act callously notwithstanding the legal opinion.
Also if you are suggesting the conduct is systematic do you mean you are aware of other instances when the bank’s management lent funds to an entity which then purchased its shares? I’m sure the SFO would love to have details…
You reveal much more of yourself than you imagine
It’s not appealing
Would add that in part also the offence is not well known and misunderstood because its application is limited only to asistance given to public companies, as compared to many years previously when no company could grant such assistance…
So why did Barclays buy Lehman Brothers corpse for $1.75 billions in 2008 supposedly using Qatar funding to take on $72 billions of assets and $68 billions of trading liabilities plus the New York HQ….
https://www.theguardian.com/business/2008/sep/17/barclay.lehmanbrothers1
Foolishness?
Just musing. Very interested to read a comment on the number of former Barclays directors who are now tory M.P.s. Rather telling.