Barclays shares to be hit by probe

Aug 30 2012

Barclays' shares are expected to tumble when the stock market opens after the Serious Fraud Office (SFO) launched an investigation into payments made between the bank and Middle East investors.

The inquiry, which comes after a similar investigation by the Financial Services Authority (FSA) was revealed last month, is a fresh blow to Barclays, which is still reeling following the Libor rate-rigging scandal.

The bank raised billions of pounds from Middle East investors at the height of the financial crisis in 2008, which effectively allowed it to avoid following in the footsteps of Lloyds and Royal Bank of Scotland by taking a state bailout.

The SFO is looking in particular at payments between the bank and Qatar Holding - part of sovereign wealth fund Qatar Investment Authority - which is understood to have made a £2 billion investment. Whereas the FSA's investigation was centred on four present and past senior staff, including finance director Chris Lucas, the SFO's probe is currently not thought to be focusing on any individuals.

Barclays raised more than £10 billion in emergency funding in two fundraisings in 2008. The bulk of this came from the Middle East, including a £3.5 billion investment from Manchester City owner Sheikh Mansour Bin Zayed Al Nahyan - a member of Abu Dhabi's royal family - which is not part of the investigation.

The SFO's move will increase pressure on Barclays after it already opened a criminal investigation into the Libor rate-rigging scandal.

Barclays has endured one of the most turbulent periods in its history after it was fined £290 million by UK and US regulators for manipulating Libor, an interbank lending rate which affects mortgages and loans.

It is the only bank to have admitted attempting to rig Libor, though several others are also the subject of international investigations.

The affair led to the departure of chief executive Bob Diamond, chairman Marcus Agius and chief operating officer Jerry del Missier. It also triggered a fierce debate in Westminster over banking ethics and has spawned several closely-watched hearings before the Treasury Select Committee.

Since then, Barclays has been caught up in a separate investigation, as it faces a potential £450 million bill for mis-selling complex financial products to unwitting small businesses.