The Bank of England is examining Barclays over its handling of loans tied to the private credit sector, following allegations that the bank misclassified financial contracts to inflate its financial performance, according to reporting by The Guardian — World.
The regulatory scrutiny is being led by the Bank of England's Prudential Regulation Authority (PRA). The supervisory body initiated its inquiry earlier this year after an insider at Barclays raised concerns regarding the institution's accounting practices for transactions linked to private credit markets.
Whistleblower Prompts Regulatory Scrutiny
The inquiry began after internal warnings surfaced regarding the manner in which specific loans and associated agreements were recorded on the lender's books. Citing reporting from the Financial Times, the dispatch noted that the PRA stepped in specifically after the whistleblower brought the accounting irregularities to light.
The review centers on the rapidly expanding private credit sector, an area of alternative finance that has faced increasing scrutiny from global regulators over asset valuations, risk assessment, and underwriting standards.
Scrutiny Over Derivative Accounting
At the core of the regulatory review are concerns that complex financial contracts known as derivatives were logged incorrectly within Barclays' accounting systems. Investigators are assessing whether the misclassification of these derivative instruments had the effect of artificially boosting the bank's reported profits.
Neither the Prudential Regulation Authority nor Barclays has publicly detailed the scale of the transactions under review or the potential financial impact should regulators determine the contracts were improperly booked. The inquiry remains ongoing as officials review the bank's records and internal processes surrounding the credit deals.
