Barclays ducks Qatar questions, takes further mis-selling hit
By Steve Slater and Matt Scuffham | February 5, 2013 11:28 PM EST
Barclays bosses ducked questions on Tuesday over funding for its rescue by Qatar four years ago, as another big charge for mis-selling showed how past problems continue to dog the British bank.
UK authorities have been investigating the bank's fundraising from Qatar at the height of the 2008 financial crisis since July. The Financial Times reported last week that they were looking into whether Barclays had lent Qatar money to buy shares in the bank itself.
Asked by UK lawmakers if there was anything linked to the Qatar fundraising that could cause embarrassment in the future, Barclays Chairman David Walker told a parliamentary inquiry that he could not comment due to the investigation.
Earlier, the bank said it had set aside a further 1 billion pounds ($1.6 billion), including an extra 600 million to compensate customers for payment protection insurance. PPI mis-selling alone has now cost UK banks over 12 billion and could end up more than double that, industry sources estimate.
Unlike RBS and Lloyds, which had to take government bailouts during the crisis, Barclays avoided a rescue funded by British taxpayers after Qatar bought its stake.
However, the wider banking industry has come under fire for a series of scandals including the mis-selling of financial products to clients who did not need or could not use them, and over the rigging of a major interest rate. This, along with public anger at big bonus payments, has put the spotlight on the culture of bankers before, during and since the crisis.
Walker and new Chief Executive Antony Jenkins said they were confident they can improve the Barclays culture by reforming pay structures and putting greater focus on ethics.
"We have learned lessons during this phase and I do seriously believe we'll be different," Walker told the parliamentary inquiry into standards in banking.
Jenkins said bonus awards for last year would be cut due to the past problems. "We have adjusted our pools substantially this year to reflect the events of 2012," he said.
However, lawmakers were skeptical. "It doesn't seem to matter what the scandal is, Barclays seems to have a finger in each pie, quite a big one," said Andrew Tyrie, the inquiry's chairman.
The UK banking inquiry was launched after Barclays was fined $450 million last June for rigging Libor interest rates, but the PPI scandal has shown its problems have also been in retail banking, the area that Jenkins used to run.
Tuesday's announcement marked Barclays' fourth provision for PPI, dating back to May 2011 when the industry lost a court case on mis-selling. It has now set aside 2.6 billion pounds to settle claims for over PPI - loan insurance to protect borrowers who miss repayments due to illness or redundancy, but which was often sold to people who were not eligible to claim.
Barclays also set aside 400 million pounds more to cover claims for mis-selling interest rate hedging products (IRHP), almost doubling its provision to 850 million and firing a warning shot that other banks face big bills too.
Britain's financial regulator said last week that a pilot study showed banks had mis-sold complex interest-rate hedging products to small businesses which did not need them or did not understand the risks involved, opening the door for billions of pounds in payouts.
"This (Barclays' provision) is by far the highest among UK banks and suggests further provisions by RBS, Lloyds and HSBC," said Shailesh Raikundlia, analyst at Espirito Santo.
Barclays said it had paid out only 36 million pounds on IRHP by the end of last year. It had about 5,000 IRHP policies.
By 1212 GMT Barclays shares were up 1.6 percent at 296 pence, in line with the European bank index.
Jenkins, who took over as CEO in August when his predecessor Bob Diamond was ousted over the Libor fine, is attempting to revive Barclays after the string of scandals and has promised to improve culture and standards across the bank.
But he said last week he would not take a bonus for 2012, saying he should "bear an appropriate degree of accountability" for the difficult year the bank endured.
He has warned that his turnaround plan, to be unveiled on February 12, could take 5-10 years to fulfill.
PPI has developed into the biggest ever mis-selling scandal for UK banks, who are trying to set a time limit for when customers can claim to draw a line under the payouts.
Barclays said it had paid out 1.6 billion in compensation by the end of December, or 62 percent of its provision.
Last month, the head of Britain's Financial Ombudsman Service said banks only had themselves to blame for the spiraling costs of the scandal, which she said could have been contained if they had addressed the issue earlier.
The ombudsman service, which steps in when banks and their customers cannot reach an agreement on compensation, said it was receiving up to 10,000 complaints each week about PPI and has hired 1,000 new staff to cope with the caseload.
(Additional reporting by Kate Holton and Sinead Cruise; Editing by Mark Potter and David Stamp)