Barclays expects to suffer a £450 million loss over the mishandling of US securities in 2019, with the discovery of the error delaying a £1 billion share buyback programme.
The bank revealed yesterday that it had offered and sold nearly twice as many structured notes and exchange-traded notes as it was registered to sell in the United States and that they would have to be repurchased at the price at which they were sold.
Barclays issues such products to meet “actual and anticipated client demand” for such securities. It said that they had been oversupplied to the market for about a year, giving certain customers the right to cancel contracts.
The bank has yet to publish details of this “rescission offer”, but it expects to lose £450 million on the issue, based on present market prices and the estimated pool of eligible customers. It said that regulatory authorities were conducting inquiries and were “making requests for information” over the error.
Barclays said that the £450 million figure — which does not include tax — was a “best estimate” of losses that would arise from the issue, but that it was also assessing the impact of these matters on previous period financial statements.
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The bank faces questions over why the issue has only just come to light.
An independent review has been set up to establish “among other things the control environment related to such issuances”.
The matter is a challenge for CS Venkatakrishnan, 56, who took over as chief executive of Barclays last November after Jes Staley, 65, abruptly stepped down amid the fallout from the Jeffrey Epstein scandal. Venkatakrishnan was group chief risk officer when the error occurred.
A buyback programme announced last month will be pushed back to the second quarter, after first-quarter results that are due on April 28.
Barclays overshot its $20.8 billion limit on the complex securities — which the US Securities and Exchange Commission agrees in advance with financial institutions — by $15.2 billion.
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The problem relates to two exchange-traded notes, VXX and OIL, linked to market volatility and crude oil prices, respectively. The bank suspended sales and issuance of the notes this month when it discovered the issue.
The FTSE 100 lender indicated that it had reported itself to the SEC.
Shore Capital said that Barclays appeared to be “tripping over its shoelaces” and warned that the error could reduce future capital distributions to shareholders and could “yet result in further fines and penalties”. But they added that the overall financial impact should be “manageable”. Barclays’ shares fell 6¾p, or 4.1 per cent, to 160½p.
