Key Takeaways
- • The Bank of England is examining whether Barclays traders misrepresented illiquid private credit loans to understate their risk, after an insider raised concerns, the Financial Times reported on Monday, October 19, 2026.
- • The Prudential Regulation Authority received a complaint earlier this year about how Barclays recorded total return swaps referencing illiquid private credit loans, allocating them to its trading book.
- • The complaint alleges the treatment breached PRA rules that restrict banks from assigning derivatives backed by illiquid collateral to the trading book unless they can supply sufficient justifying evidence.
- • The regulatory concern is that trading-book classification could understate exposure and reduce capital required against potential losses; the FT did not disclose the size of the position.
- • Barclays shares fell 2.6% to 421.4 pence by 0750 GMT, while the FTSE 100 declined 0.9%.
Summary
The Bank of England is examining whether Barclays traders misrepresented illiquid private credit loans to understate their risk, according to the Financial Times, which cited people familiar with the matter. The probe follows concerns raised by an insider at the British bank. The Bank of England declined to comment on the report.
The FT reported that the Prudential Regulation Authority (PRA) received a complaint earlier this year concerning how Barclays recorded derivatives used to finance private credit loans. The complaint centred on Barclays' allocation of total return swaps referencing illiquid private credit loans to its trading book. The FT did not disclose the amount of exposure involved.
The complaint also alleged that the handling of these transactions breached PRA rules, which restrict banks from assigning derivatives backed by illiquid collateral to the trading book unless they can provide sufficient evidence to justify that treatment. The regulatory concern is that classifying derivatives linked to illiquid loans as trading positions could understate the underlying risk and reduce the capital banks must hold against potential losses. The FT said Barclays traders argued the exposure should be treated as a traded position because it was hedged through a matching swap with another counterparty.
Barclays said in an emailed statement to Reuters that it "takes seriously its regulatory obligations in markets where it operates," and declined to comment further on its interactions with the regulator. On Monday, Barclays shares were down 2.6% at 421.4 pence at 0750 GMT, while the FTSE 100 index fell 0.9%.
The FT reported that the Prudential Regulation Authority (PRA) received a complaint earlier this year concerning how Barclays recorded derivatives used to finance private credit loans. The complaint centred on Barclays' allocation of total return swaps referencing illiquid private credit loans to its trading book. The FT did not disclose the amount of exposure involved.
The complaint also alleged that the handling of these transactions breached PRA rules, which restrict banks from assigning derivatives backed by illiquid collateral to the trading book unless they can provide sufficient evidence to justify that treatment. The regulatory concern is that classifying derivatives linked to illiquid loans as trading positions could understate the underlying risk and reduce the capital banks must hold against potential losses. The FT said Barclays traders argued the exposure should be treated as a traded position because it was hedged through a matching swap with another counterparty.
Barclays said in an emailed statement to Reuters that it "takes seriously its regulatory obligations in markets where it operates," and declined to comment further on its interactions with the regulator. On Monday, Barclays shares were down 2.6% at 421.4 pence at 0750 GMT, while the FTSE 100 index fell 0.9%.
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