US regulator prepared to end Barclays' Protium deal
The US regulator found Barclays' Protium deal "inappropriate", after the bank admitted a more pressing motivation behind its strategy
BARCLAYS’ CONTROVERSIAL Protium deal has come under fire from the US Securities and Exchange Commission, which said it was prepared to prohibit the package and could not agree that it was “appropriate”.
The deal saw the bank loan $12.6bn (£7.67bn) to a group of its own investment bankers who used the cash to set up Cayman Islands company Protium, which promptly bought $12.3bn of bad assets from Barclays.
It was billed as a way to mitigate the impact of volatile market values and “deliver more stable risk-adjusted returns”, The Daily Telegraph reports. However, upon closer questioning, the SEC was informed that its primary purpose was to occupy the team who had been managing the bank’s toxic assets in a bid to prevent a mass walk-out.
The bankers were at risk of leaving due to the bank’s move away from investment in sub-prime assets, effectively ending their long-term career prospects. Barclays finance director Chris Lucas told the SEC that the original goal of stabilising risk-adjusted returns was in fact just an “additional objective”.
Critics said the deal is proof that Barclays was held to ransom by its bankers and used creative accounting to turn toxic assets into a seemingly stable loan, thereby avoiding consolidating sub-prime financial packages on its balance sheet.
Barcalys declined to comment on the Protium deal.