David Prosser: Did Barclays' own executives see the bank coming?
Thursday 28 April 2011
Outlook Two years ago, when Royal Bank of Scotland contemplated a future in which it would be interminably dragged down by horrible losses on toxic sub-prime loans, it decided the humiliation and expense of asking the Government to insure it against such setbacks, via the asset-protection scheme, was the lesser of two evil alternatives. But this unsophisticated – and, worse, state-backed – solution was never going to be for Barclays. It came up with a much more cunning solution: lending a group of senior staff $12.6bn to take $12.3bn of potentially loss-making loans off the bank's hands.
On the face of it, Protium, as the former Barclays staff christened their new venture, has served its purpose, shielding the bank's balance sheet from the worst of its loans (and keeping the staff in question, who had been talking of setting out on their own, sweet). Still, the thing about being just a little too clever by half is that it tends to catch up with you. So it is proving at Barclays.
For one thing, under the latest rules agreed in Basel, Barclays was faced with setting a great deal more capital aside against the loan to Protium than the bank had ever envisaged. For another, those assets are turning out to be much less toxic than Barclays feared – as it turns out, at least so far, the bank would not have been forced to make huge write-downs after all.
The third problem with the Protium arrangement is that from the moment Barclays dreamt it up, cynics began sniping. After all, during the credit crisis, the world learnt a thing or two about the banks' off-balance-sheet assets. The last thing people wanted to see in this bright new era of transparency was a return to what looked like a similar arrangement.
The upshot is that less than two years into what was originally planned as a 10-year project, Barclays is calling time on the venture and taking its loans back.
At a cost, mind you – it will pay the managers of Protium $83m to liquidate the scheme so far ahead of schedule. It's not a bad little windfall to share at the end of just 18 months of work, particularly since the 80 or so staff at the firm have already had $40m worth of management fees from Barclays.
Times have changed, the bank says, and what worked two years ago is no longer so appropriate. Maybe, but Protium has always looked to be a rather too cosy arrangement for both the bank and its former staff – some of whom, presumably, played a role in saddling Barclays with the loans in the first place. This U-turn does nothing to change that view.
- 1 Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
- 2 Margaret Thatcher 'expressed fears of Asian rising' at Anglo-Irish summit in 1984
- 3 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 4 The Unluckiest People of the Year 2014 (and one very unlucky giraffe)
- 5 Magna Carta will be 800 years old next year – the perfect reminder of the rights and freedoms we must hold dear
Exclusive: Abusers using spyware apps to monitor partners reaches 'epidemic proportions'
UK weather: Warning for more snow and ice as freezing temperatures and gales hit Britain
Margaret Thatcher 'expressed fears of Asian rising' at Anglo-Irish summit in 1984
UK weather: Travel chaos continues as King's Cross train delays add to snow on roads
The Unluckiest People of the Year 2014 (and one very unlucky giraffe)
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Rozanne Duncan: Ukip expels councillor for 'jaw-dropping' comments made in BBC TV interview
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Immigrants make UK racist, says Ukip councillor Trevor Shonk
BBC director Danny Cohen: Rising UK antisemitism makes me feel more uncomfortable than ever
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...