Photo: Elliott Brown from Birmingham, United Kingdom / Wikimedia Commons, CC BY 2.0, cropped
Barclays Fell 3.5% on Reports the Bank of England Is Examining Its Private Credit Trades. Why Regulators Are Nervous About Private Credit
- Barclays shares fell 3.5% on Monday, October 19, to their lowest since mid-June, after a Financial Times report.
- The FT said the Bank of England's Prudential Regulation Authority is examining a complaint that traders recorded total return swaps referencing illiquid private credit loans in the trading book.
- Booking those positions in the trading book could understate risk and reduce the capital the bank must hold against losses.
- Barclays said it 'takes seriously its regulatory obligations' and does not comment on dealings with regulators. The BoE declined to comment.
- No finding of wrongdoing has been made, and the size of the positions has not been disclosed.
What happened
On Monday, October 19, the Financial Times reported that the Bank of England's Prudential Regulation Authority (PRA) is examining whether Barclays traders misrepresented the risk of positions linked to private credit loans.
Barclays shares fell 3.5%, to their lowest since mid-June. The FTSE 100 fell 0.8% that day, and European banks were the worst-performing sector, also hit by unrest in France.
What the report says
According to the FT, as relayed by Reuters:
- The PRA received a complaint earlier this year about how Barclays recorded total return swaps, derivatives that pass the returns of an asset from one party to another, referencing illiquid private credit loans.
- The complaint said these were allocated to the bank's trading book.
- PRA rules restrict putting derivatives backed by illiquid collateral in the trading book unless a bank can show enough evidence to justify it.
- Barclays traders reportedly argued that because they had hedged the exposure with a matching trade with another counterparty, it had become a traded position.
Why the book matters
| Trading book | Banking book | |
|---|---|---|
| Meant for | Assets the bank actively trades | Loans and assets it plans to hold |
| Valued at | Market prices | Mostly cost, with loss provisions |
| Capital treatment | Different market-risk rules | Credit-risk rules |
| Regulators' worry | Hard-to-sell assets parked here can look less risky than they are | — |
Classifying derivatives on illiquid loans as easier-to-trade positions could understate the underlying risk and reduce the capital Barclays must set aside for losses. That is the regulator's concern.
What we don't know
- No finding: there's no regulatory conclusion or formal charge.
- No size: the value of the positions hasn't been disclosed.
- Company response: Barclays said it "takes seriously its regulatory obligations" and does not comment on its interactions with regulators. The BoE declined to comment.
Why regulators are nervous about private credit
Private credit, lending by funds rather than banks or bond markets, has exploded over the past decade. Banks now lend to those funds and trade derivatives tied to their loans. Because private loans rarely trade, their true value is hard to check, especially when rates rise.
This month has added to the worry. AI data centre debt has come under strain (CoreWeave's bond yields jumped toward 15%), and banks are pulling back from new AI lending. Our explainer on private credit risks for retail investors covers how this market works.
What it means for investors
- For Barclays shareholders: Regulatory probes can lead to nothing, a fine, or higher capital requirements. Until there's clarity, expect the stock to trade at a discount.
- For bank stocks broadly: Investors will ask other banks about their private credit derivatives on upcoming earnings calls.
- For private credit funds: More scrutiny of banks could mean less bank financing for these funds, which could raise their borrowing costs.
What to watch next
- Barclays' Q3 results, due later this month, and any comment from management.
- Any PRA statement or industry-wide review of private credit exposures.
- Private credit fund redemptions, a sign of investor nerves.
Frequently asked questions
Why did Barclays shares fall on October 19, 2026?
The Financial Times reported that the Bank of England's Prudential Regulation Authority is examining a complaint about how Barclays traders recorded derivatives tied to illiquid private credit loans. Barclays fell 3.5% to its lowest level since mid-June. The bank and the BoE did not comment on the specifics.
What is Barclays accused of?
Barclays has not been accused of wrongdoing by the regulator. According to the FT, a complaint alleged that total return swaps referencing illiquid private credit loans were placed in the trading book rather than the banking book, which could understate their risk and lower the capital Barclays must hold. Traders reportedly argued the positions were hedged with another counterparty and therefore counted as traded.
What is the difference between a bank's trading book and banking book?
The trading book holds assets a bank intends to trade actively, valued at market prices. The banking book holds loans and assets it plans to keep. Capital rules differ between the two, and regulators limit putting hard-to-sell assets in the trading book unless the bank can justify it.
What is private credit?
Private credit is lending to companies by funds and other non-bank lenders rather than through public bond markets or traditional bank loans. It has grown into a market of well over $1 trillion. Banks increasingly lend to and trade with private credit funds, which is why regulators are watching their exposure.
Is my money at Barclays safe?
Nothing in the report suggests a threat to depositors. UK deposits are protected up to the Financial Services Compensation Scheme limit. The issue is about how certain trading positions were classified for capital purposes.
Primary sources
- Reuters via Investing.com — Bank of England probes Barclays over private credit loans, report (Oct. 19, 2026)
- Reuters via Euronext — BoE scrutinises Barclays over claim traders misrepresented private credit exposure, FT reports
- Sharecast — BoE said to be examining Barclays over private credit reporting
- Reuters via Investing.com — French stocks slide after violent protests (Oct. 19, 2026)
Data & disclaimer: This article is for educational purposes only and is not financial or investment advice. Figures reflect data available as of Oct 20, 2026, and conditions change — always confirm current pricing, rates and rules with the provider before you act. Written by Elizabeta Dimoska. See our editorial standards and disclosure.
Comments