The Bank of England's Prudential Regulation Authority (PRA) is investigating Barclays over allegations that the bank misrepresented the risk of derivatives linked to private credit loans. An insider complaint, lodged earlier in 2026, claims Barclays assigned total return swaps, which reference illiquid private credit loans, to its trading book. This practice is a concern because the trading book is designated for easily sellable assets, while harder-to-sell loans requiring higher capital are typically placed in the banking book.

Misallocating illiquid assets to the trading book could decrease capital requirements for Barclays and potentially increase the bank's profitability. PRA rules explicitly forbid banks from assigning derivatives backed by illiquid collateral to their trading book without adequate justification. The PRA has previously issued warnings against manipulating capital rules by reclassifying illiquid assets. Barclays has accumulated billions of dollars in private credit loan exposure through these derivatives.

What the Records Show

The PRA received a complaint earlier in 2026 alleging Barclays' handling of derivatives used to finance private credit loans breached the regulator's rules. The complaint focused on the bank's allocation of total return swaps, which refer to illiquid private credit loans, to its trading book. These swaps are derivatives that enable a bank to finance loans for private credit funds, passing economic performance to clients in exchange for a fee. Banks typically categorize assets into either their banking book or trading book, a decision that influences the amount of capital they must set aside to cover potential losses. The banking book holds less liquid loans that demand more capital, while the trading book is meant for easily tradable assets.

Timeline

Earlier in 2026, an insider complaint was lodged with the Bank of England's Prudential Regulation Authority regarding Barclays' practices with private credit derivatives. In February 2026, reports indicated Barclays had a £600 million exposure to the collapsed UK mortgage lender Market Financial Solutions Ltd (MFS). Separately, in October 2025, Barclays CEO CS Venkatakrishnan stated the bank maintained appropriate controls for its £20 billion private credit exposure and ran a "very risk-controlled shop". More recently, in October 2026, the Rosen Law Firm launched an investigation into potential securities claims against Barclays. Also in October 2026, several former Barclays traders had their convictions for historical LIBOR and EURIBOR rate-rigging scandals overturned by a London court.

What Changed and for Whom

The PRA's investigation signals increased scrutiny over Barclays' private credit exposure and its classification of financial instruments. If the allegations prove true, Barclays could face regulatory action for breaching capital rules, potentially impacting its profitability and reputation. The simultaneous investigation by the Rosen Law Firm for shareholders and the overturned convictions of former traders highlight a period of multiple legal and regulatory challenges for the bank. These developments could affect investor confidence and necessitate changes in Barclays' risk management practices.

What the Subject Has Said Publicly

In October 2025, CS Venkatakrishnan, Barclays' CEO, publicly stated that the bank possessed the necessary controls for its £20 billion exposure to private credit. He also affirmed that Barclays operated a "very risk-controlled shop". These statements, made before the current insider complaint, were general remarks about the bank's management of private credit.

What we could not confirm

We could not confirm the exact dates in October 2025 when CS Venkatakrishnan made his statements regarding private credit exposure. We could not confirm the precise date earlier in 2026 when the insider complaint was lodged with the PRA.