Key Takeaways
- • Sona Asset Management, Diameter Capital Partners and Arini Capital Management are among the users of Barclays' total return swap (TRS) trades that are currently under regulatory scrutiny, according to 9fin sources.
- • Arini Capital Management says its exposure is "extremely negligible," with total mark-to-market exposure of just $1.4m.
- • The scrutiny centres on whether Barclays booked the swaps in its trading book or banking book, a classification that determines capital requirements for illiquid private credit exposures.
- • An insider complaint to the UK Prudential Regulation Authority (PRA) raised concerns that the underlying private credit loans were not liquid enough for the treatment Barclays had applied, a concern first reported by the FT on 19 October.
- • Barclays maintains that its use and booking of TRS are consistent with regulations.
Summary
Sona Asset Management, Diameter Capital Partners and Arini Capital Management are among the clients using Barclays' total return swap trades that are now under regulatory scrutiny, according to 9fin sources. TRS structures allow funds to take leveraged exposure to private credit loans without holding them directly.
The scrutiny stems from an insider complaint to the UK Prudential Regulation Authority. The complaint argued that the underlying private credit exposures were not liquid enough for the way Barclays had been classifying the swaps. 9fin, confirming an earlier report by the Financial Times on 19 October, said the issue turns on which book Barclays held the positions in. The trading book is intended for liquid, tradable assets and typically carries lower capital requirements. The banking book is where hard-to-sell loans such as private credit usually sit, and these can attract substantially higher capital charges.
Arini Capital Management's exposure is small. A source close to the firm described it as "extremely negligible," with total mark-to-market exposure of $1.4m.
Barclays initially told 9fin that its use and booking of TRS were consistent with regulations. On the bank's Q3 2026 results call on 22 October, finance director Anna Cross said Barclays takes "a prudent approach to both current and" future exposures. The article's excerpt of her remarks is truncated, so the full statement is not available.
The scrutiny stems from an insider complaint to the UK Prudential Regulation Authority. The complaint argued that the underlying private credit exposures were not liquid enough for the way Barclays had been classifying the swaps. 9fin, confirming an earlier report by the Financial Times on 19 October, said the issue turns on which book Barclays held the positions in. The trading book is intended for liquid, tradable assets and typically carries lower capital requirements. The banking book is where hard-to-sell loans such as private credit usually sit, and these can attract substantially higher capital charges.
Arini Capital Management's exposure is small. A source close to the firm described it as "extremely negligible," with total mark-to-market exposure of $1.4m.
Barclays initially told 9fin that its use and booking of TRS were consistent with regulations. On the bank's Q3 2026 results call on 22 October, finance director Anna Cross said Barclays takes "a prudent approach to both current and" future exposures. The article's excerpt of her remarks is truncated, so the full statement is not available.
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