Bank of England Probes Barclays Over Private Credit Risk Claims

The Bank of England is examining whether traders at Barclays misrepresented illiquid private credit loans to understate their risk, the Financial Times reported on Monday, October 19, 2026, citing people familiar with the matter.

The bank's Prudential Regulation Authority received a complaint from an insider earlier this year about how Barclays recorded derivatives used to finance private credit loans, Reuters reported. The complaint alleged that the way the bank handled the deals breached PRA rules. Barclays shares fell around 2 percent in early trade in London, and were down 2.36 percent among the FTSE 100's biggest fallers in one morning market report.

The trades at the centre of it

The instruments are total return swaps. A bank uses them to finance loans for private credit funds and passes the loan's economic performance to a client in return for a fee. The question is where the position sits on the bank's books. A trading book position carries a lower capital charge than a banking book position, because trading assets are meant to be easy to sell.

The FT reported that Barclays traders argued that back to back swaps hedging their exposure made the positions tradable, even though the loans underneath them are illiquid and hard to price or sell quickly. The PRA has warned banks before against repackaging illiquid assets as tradable instruments to reduce the capital they must hold.

Barclays said it takes its regulatory obligations seriously but does not comment on interactions with regulators, according to the report. Barclays did not immediately respond to a Reuters request for comment, and the Bank of England could not be reached outside regular business hours.

Why it matters beyond one bank

Private credit is now a market of about 2 trillion dollars worldwide, and regulators in London and elsewhere have spent the year warning that its risks are hard to see. Loans sit with funds, banks finance the funds, and swaps move the returns around. When everyone is calm, the chain looks tidy. The capital rules exist for the day it is not.

No finding has been made against Barclays, and an examination is not a penalty. What investors will watch is the timing. Barclays reports third quarter results on October 22, and any question about its capital position will land in the middle of that update.

What happens next

The PRA can ask for documents, interview staff and, if it finds the rules were broken, require the bank to hold more capital against the positions or restate how they are recorded. Barclays could also face a fine in a later enforcement case, though that stage is a long way off and may never come. For now, the story is a regulator testing a simple line: a loan that cannot be sold does not become tradable because a swap sits on top of it.