Bank of England Probes Barclays' Private Credit Accounting

The Bank of England's Prudential Regulation Authority (PRA) made public on October 19, 2026, an investigation into Barclays PLC concerning the bank's handling of private credit loans, which caused Barclays' shares to drop by approximately 2% to 3.5%[1][2][3][9].

This inquiry could require Barclays to reclassify assets or hold additional capital, impacting its financial stability metrics like risk-weighted assets and its core equity tier 1 (CET1) ratio[2]. The action also signals increased regulatory scrutiny across the $2 trillion private credit market, affecting financial institutions globally[2][3][5][6].

What the records show

The PRA's review focuses on allegations that Barclays misclassified financial contracts called total return swaps (TRS) connected to illiquid private credit loans[1][2][3]. An internal complaint from a Barclays insider alleges that these derivatives were incorrectly placed in the bank's "trading book" instead of the "banking book"[1][2][3]. Booking these positions in the trading book can potentially lower a bank's capital requirements by treating the exposure as actively tradable, allowing hedges and offsetting positions to reduce measured risk[2]. The banking book is meant for longer-term, harder-to-exit credit risks[2].

The complaint states that Barclays' arrangement for these swaps did not meet the PRA's criteria for trading-book treatment[2]. PRA rules restrict banks from assigning derivatives backed by illiquid collateral to their trading book unless sufficient evidence supports that classification[3]. The PRA had previously warned banks against trying to circumvent capital rules by repackaging illiquid assets as tradable instruments[3][6].

Timeline

The Prudential Regulation Authority received the initial complaint earlier in 2026[1][2][3]. The PRA began its review of the matter following the complaint[1]. The investigation became publicly known on Monday, October 19, 2026[1][2][3]. Barclays is scheduled to report its third-quarter results on Thursday, October 22, 2026[3][9].

What changed and for whom

News of the investigation led to an immediate drop in Barclays' stock value. Shares fell 2.6% to 421.4 pence by 0750 GMT on Monday[2]. Other reports noted declines of 2.3% and 2.0% on the same day[3][9]. If the PRA concludes that the positions were improperly classified, Barclays could be forced to reclassify them or hold additional capital through supervisory add-ons[2]. Either outcome would increase the bank's risk-weighted assets and reduce its CET1 ratio cushion[2]. A smaller capital cushion can limit the bank's use of its balance sheet in its investment banking operations and affect shareholder payouts[2]. The investigation also reflects increasing regulatory attention on the rapidly expanding private credit market, which has grown to more than $2 trillion in assets under management[5][6]. Regulators are examining this market due to concerns about opaque valuations, interconnectedness, and potential liquidity risks[4][7].

What the subject has said publicly

Barclays has stated it "takes seriously its regulatory obligations"[2][6]. However, the bank declined to comment on its specific interactions with regulators[2][6].

What we could not confirm

We could not confirm the specific identity of the internal complainant who raised the initial concerns with the PRA. We also could not confirm the exact timeline or potential outcomes of the PRA's investigation, including whether specific penalties or reclassifications will be mandated for Barclays. The broader impact on other financial institutions with similar private credit exposures remains unconfirmed.