Say what you will about Barclays’ structured notes—and among the things you can say are that they are great ways to lose money—you have to admit one thing: They sure are popular. Clients have snapped up some $36 billion of them since registering them with the Securities and Exchange Commission.
This certainly sounds great for Barclays. The only problem is it told the SEC it would only sell $20.8 billion of them.
“It looks like an operational or legal failure,” said Jerome Legras, managing partner at Axiom Alternative Investments, a fund that specializes in bank debt. “It’s hard to believe they would do such a stupid thing. This honestly is the first time I’ve heard of something like this.”
And that’s the kind of idiotic innovation one needs to leap to the top of the bungling bank league tables, with Barclays’ boner easily exceeding those of both Citigroup and Banco Santander in terms of both overall size and chunks taken from the bottom line.
Barclays PLC said it is buying back a slug of structured notes at a loss of about £450 million, or $591 million, after selling too many of them…. Barclays said it is conducting a review of the matter. Regulators, too, are “conducting inquiries and making requests for information,” the bank said. As a result, the bank will delay the start of its £1 billion share-buyback program to the second quarter.…
Barclays will have to buy the notes at the original purchase price. The estimated loss indicates that a substantial amount of the notes are currently trading below what investors paid for them. In fact, Barclays is more underwater on the notes than it appears: The bank’s calculation includes tax breaks associated with the loss.
Awkwardly, recently appointed Chief Executive C. S. Venkatakrishnan was in charge of risk management at the time the paperwork was filed.
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