Key Takeaways
- • The Bank of England is examining whether Barclays traders misrepresented illiquid private credit loans to understate their risk, according to the Financial Times, which reported the probe on Monday, October 19, 2026.
- • The probe was triggered by a complaint, made earlier this year to the Prudential Regulation Authority by an insider, about how Barclays recorded total return swaps referencing illiquid private credit loans.
- • The complaint alleges Barclays allocated these derivatives to its trading book, which the PRA rules restrict for derivatives backed by illiquid collateral unless the bank can provide sufficient justification.
- • Barclays shares fell 2.6% to 421.4 pence at 0750 GMT, while the FTSE 100 declined 0.9%.
- • Barclays says it takes its regulatory obligations seriously; traders argue the exposure is hedged through a matching swap with another counterparty and should be treated as a traded position.
Summary
The Bank of England is examining whether Barclays traders misrepresented illiquid private credit loans in a way that understated their risk, the Financial Times reported on Monday, October 19, 2026, citing people familiar with the matter. The Bank of England declined to comment on the report.
The FT report said the Prudential Regulation Authority received a complaint earlier this year concerning how Barclays recorded derivatives used to finance private credit loans. The complaint centred on the bank's allocation of total return swaps referencing illiquid private credit loans to its trading book. The FT did not disclose the amount 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 their trading book unless they can supply sufficient evidence to justify that treatment. The regulatory concern, as described by the FT, is that classifying derivatives linked to illiquid loans as easier-to-trade investments could understate the risk of the underlying exposure and reduce the capital required to be set aside against potential losses.
Barclays traders have argued that the exposure should be treated as a traded position because it is hedged through a matching swap with another counterparty, despite being linked to illiquid private credit loans, according to the FT. In an emailed statement to Reuters, Barclays said it "takes seriously its regulatory obligations in markets where it operates" and declined to comment further on its interactions with the regulator.
Barclays shares were down 2.6% at 421.4 pence at 0750 GMT on Monday, while the FTSE 100 index was 0.9% lower. The report is based on unnamed sources and no regulatory finding has been announced.
The FT report said the Prudential Regulation Authority received a complaint earlier this year concerning how Barclays recorded derivatives used to finance private credit loans. The complaint centred on the bank's allocation of total return swaps referencing illiquid private credit loans to its trading book. The FT did not disclose the amount 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 their trading book unless they can supply sufficient evidence to justify that treatment. The regulatory concern, as described by the FT, is that classifying derivatives linked to illiquid loans as easier-to-trade investments could understate the risk of the underlying exposure and reduce the capital required to be set aside against potential losses.
Barclays traders have argued that the exposure should be treated as a traded position because it is hedged through a matching swap with another counterparty, despite being linked to illiquid private credit loans, according to the FT. In an emailed statement to Reuters, Barclays said it "takes seriously its regulatory obligations in markets where it operates" and declined to comment further on its interactions with the regulator.
Barclays shares were down 2.6% at 421.4 pence at 0750 GMT on Monday, while the FTSE 100 index was 0.9% lower. The report is based on unnamed sources and no regulatory finding has been announced.
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