FSA cites tax and accounting in Barclays concern

CONCERN FROM THE FSA about Barclays’ approach to interpreting rules and regulations saw examples of tax and accounting issues cited to the bank’s chairman Marcus Agius.

With Agius questioned today by the Treasury Select Committee on claims that Barclays attempted to manipulate the inter-bank lending rate Libor, letters between Agius and the FSA were published as part of today’s evidence session.

A letter dated 10 April 2012 to Agius, from FSA chairman Lord Adair Turner, revealed the FSA’s concerns of the “cumulative impression created by a pattern of behaviour over the last few years” where it believed the bank “often” appeared to be using complex structures or arguments that were “at the aggressive end of interpretation of the relevant rules and regulations”.

The letter cites examples illustrating its concerns. Under “old news”, Lord Turner mentions the Protium structure the bank developed in 2009, in which the bank loaned former employees funds to buy Barclays’ toxic assets, as “perceived by many external commentators as a convoluted attempt to portray a favourable accounting result”.

Lord Turner also questioned the bank’s tax management, which saw the government introduce retrospective legislation after suggestions that the Exchequer could lose £500m.

“But as I know you recognise, and whatever the extent of advice which Barclays received in advance, the net impact has clearly been unfavourable to the degree of external trust in Barclays’ approach to issues such as tax, regulation and accounting issues,” concluded Turner in the letter.

Former Barclays chief executive Bob Diamond had called the release of details about Barclays’ tax schemes by the Treasury as “completely unwarranted”.