Bank of England reviews Barclays over private credit loan handling

By Daniel Okafor

The Bank of England is reviewing how Barclays handled loans tied to the private credit sector, after concerns that financial contracts known as derivatives were incorrectly logged — a bookkeeping question that may have boosted the bank's reported profits.

The review sits with the Bank's regulatory arm, the Prudential Regulation Authority. It began earlier this year. The trigger was a tip from inside the bank itself: a Barclays insider raised the concerns, according to the Financial Times, which first reported the review.

The inquiry lands at an awkward moment for the industry. Private credit — lending by funds rather than banks — has grown into one of the most contested corners of finance. Regulators on both sides of the Atlantic have spent two years asking how exposed banks are to it. Now the question has narrowed to a single institution and a single bookkeeping question.

What is the review actually about?

The core issue is how derivatives were recorded. A derivative is a contract whose value depends on an underlying asset — a loan, a rate, a credit event. Banks use them to hedge lending positions, including positions linked to private credit borrowers.

How a derivative is logged matters. The accounting treatment determines when gains and losses appear in reported earnings. Log a contract one way and a gain lands in this quarter's profit. Log it another way and the same gain sits off the income statement until a later date.

The concern raised, per the FT report, is that derivatives connected to these loans were recorded incorrectly — and that the error worked in one direction: it potentially inflated Barclays' profits.

Who raised the alarm?

Not a regulator and not an outside auditor. A person inside Barclays flagged the issue. That detail shapes the story. Internal escalation to the point where the PRA opens a review suggests the concern survived the bank's own internal checks rather than dying in a compliance queue.

The PRA started its work earlier this year, the FT reported. Neither the pace of the review nor a deadline for its findings has been disclosed.

How serious could this become?

That depends on two things the source material does not yet answer: how large the mislogged positions are, and whether the PRA concludes the errors were isolated or systemic.

The spectrum of outcomes is wide. At the mild end, a review finds accounting errors, the bank restates or adjusts figures, and the matter closes. At the severe end, incorrect recording of derivatives that inflated profits would invite questions about the accuracy of past earnings reports — and about the controls that failed to catch them.

There is also the sector question. Barclays is not the only bank with private credit exposure. If the PRA's findings point to a broader pattern in how banks account for derivatives linked to private credit, the review could widen beyond one institution.

For now, no regulator has accused Barclays of wrongdoing. The bank has not, according to the reporting, publicly responded to the substance of the concerns. The review itself — initiated, resourced, and ongoing since earlier this year — is the hardest fact on the table, and its findings will determine whether a bookkeeping question becomes a profit question, or something larger.