REGULATORS could try to force Barclays to shift a raft of toxic assets back onto its balance sheet, the bank’s annual report revealed yesterday.
In a section regarding the special purpose vehicle (SPV) Protium, which Barclays created last year for accounting purposes, the bank said: “The ongoing review of Barclays ﬁnancial statements by regulators includes consideration of the non-consolidation of Protium.”
“Non-consolidation” would involve formally bringing the vehicle back onto the bank’s balance sheet, forcing it to once again mark the assets to market. Although this would not make a difference to its underlying profitability, stringent capital requirements brought in since Protium’s creation make Barclays keen to “exit” – most likely through a sale of the vehicle – before this happens.
Chief executive Bob Diamond said last month that Basel III?capital rules have made Protium uneconomical. Converting the vehicle from a loan back into on-balance sheet assets could require the bank to put aside a larger amount of capital against it than it had originally anticipated.
As a result, analysts think the bank is accelerating a sale of Protium to the vehicle’s current management by writing off chunks of the loan tied up in it. Last month, it wrote off £532m of the £7.5bn loan, and further impairments could follow. Such write-offs make Protium a more attractive prospect for a management buy-out.
The bank’s annual report also revealed that it paid £1.6bn in corporate tax globally last year. It paid £1.38bn in UK taxes, but would not say what proportion of that was in corporation tax.
Barclays and the FSA declined to comment yesterday.