Apr 13, 2022
Barclays in BoE crosshairs over ‘gaming the rules’ with pension deals
Bank of England regulators have warned lenders about "Gaming the rules" with capital arbitrage transactions via their pension schemes, a move largely directed at Barclays, which has used such deals to boost its capital level. On Wednesday, the Prudential Regulation Authority released a strongly-worded statement criticising the use of "Deficit reduction transactions with their defined-benefit pension schemes that are structured to limit the regulatory capital impact". Should the PRA demand that the transactions be unwound, Barclays could take a £1.25bn hit to its core capital buffer years earlier than planned, according to analysts. The capital arbitrage transactions in question are two deals done in 2019 and 2020, totalling £1.25bn. The trustees of Barclays Bank UK Retirement Fund were asked to invest in gilt-backed notes issued by a subsidiary to fund the pension deficit, delaying the capital impact until between 2023 and 2025. Barclays clearly flagged the transactions and explained the rationale in earnings reports.
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