* Makes 1 bln stg provision for PPI, interest rate swaps
* Signals rival UK banks need to set aside more cash
* Says cannot comment on Qatar fundraising investigation
* "We are shredding" some behaviours of the past -CEO
By Steve Slater and Matt Scuffham
LONDON, Feb 5 Barclays bosses ducked
questions on Tuesday over funding for its rescue by Qatar four
years ago, as another big charge for mis-selling showed how past
problems continue to dog the British bank.
UK authorities have been investigating the bank's
fundraising from Qatar at the height of the 2008 financial
crisis since July. The Financial Times reported last week that
they were looking into whether Barclays had lent Qatar money to
buy shares in the bank itself.
Asked if there was anything linked to the Qatar fundraising
that could cause embarrassment in the future, Barclays Chairman
David Walker told lawmakers that he could not comment due to the
Walker and his chief executive Antony Jenkins faced a
grilling during a sometimes tetchy 2-1/2 hour session before a
parliamentary inquiry into banking standards. Lawmakers accused
the bank of aiding "industrial scale tax avoidance" and said it
needed to shake up its board, including getting a new head of
its remuneration committee.
"It doesn't seem to matter what the scandal is, Barclays
seems to have a finger in each pie, quite a big one," said
Andrew Tyrie, the inquiry's chairman.
Barclays earlier set aside a further 1 billion pounds ($1.6
billion), including an extra 600 million to compensate customers
for payment protection insurance. PPI mis-selling alone has now
cost UK banks over 12 billion and could end up more than double
that, industry sources estimate.
Unlike Royal Bank of Scotland and Lloyds,
which had to take government bailouts during the crisis,
Barclays avoided a rescue funded by British taxpayers after
Qatar bought its stake.
However, the wider banking industry has come under fire for
a series of scandals including the mis-selling of financial
products to clients who did not need or could not use them, and
over the rigging of a major interest rate. This, along with
public anger at big bonus payments, has put the spotlight on the
culture of bankers before, during and since the crisis.
Walker and Jenkins said they were confident they can improve
the Barclays culture by reforming pay structures and putting
greater focus on ethics.
"We should shred some of those behaviours of the past, we
should shred situations where we were too short-term focused or
too aggressive. To the extent that those things were prevalent
in our culture, we are shredding that legacy," Jenkins said.
He said bonus awards for last year would be cut due to the
past problems, with the payment pools for business areas
"substantially" adjusted to reflect events.
Jenkins announced last week he would not take a bonus for
2012, saying he should "bear an appropriate degree of
accountability" for the difficult year the bank endured.
The UK banking inquiry was launched after Barclays was fined
$450 million last June for rigging Libor interest rates, and it
has also been hit by mis-selling in retail banking, the area
that Jenkins used to run.
Jenkins, who took over as CEO in August after his
predecessor Bob Diamond was ousted over the Libor fine, has
warned that his turnaround plan, to be unveiled on Feb. 12,
could take 5-10 years to fulfill.
Nigel Lawson, a former finance minister and member of the
inquiry, said the lawmakers had been told privately that the
bank's structured capital markets unit had been one of its most
profitable areas - posting annual profits in the "high hundreds
of millions" of pounds.
This unit, which sets up complex tax arrangements for
wealthy individuals and companies, has attracted criticism from
lawmakers. "This was industrial-scale tax avoidance," Lawson
said, noting that its business was not illegal but was
inconsistent with promises by the bank to be more ethical.
"We will be materially changing the way we run that
business," Jenkins said. Walker said the scale of the business
"is much smaller than suggested".
PPI has developed into the biggest mis-selling scandal for
British banks, and Jenkins said he supported setting a time
limit for customers to claim so that a line can be drawn under
Barclays' latest provision, its fourth since UK banks lost a
court case in May 2011, means it has set aside 2.6 billion
pounds to settle claims on the product, which was loan insurance
to protect borrowers who miss repayments due to illness or
redundancy, but which was often sold to people who were not
eligible to claim.
Barclays said it had paid out 1.6 billion in compensation by
the end of December, or 62 percent of its provision.
Last month, the head of Britain's Financial Ombudsman
Service said banks only had themselves to blame for the
spiraling costs of the scandal, which she said could have been
contained if they had addressed the issue earlier.
The bank also set aside 400 million pounds more to cover
claims for mis-selling interest rate hedging products (IRHP),
almost doubling its provision to 850 million and firing a
warning shot that other banks face big bills too.
Britain's financial regulator said last week that a pilot
study showed banks had mis-sold complex interest-rate hedging
products to small businesses which did not need them or did not
understand the risks involved, opening the door for billions of
pounds in payouts.
"This (Barclays' provision) is by far the highest among UK
banks and suggests further provisions by RBS, Lloyds and HSBC
," said Shailesh Raikundlia, analyst at Espirito Santo.
Barclays said it had paid out only 36 million pounds on IRHP
by the end of last year. It had about 5,000 IRHP products.
By 1420 GMT Barclays shares were up 0.8 percent, lagging a
1.5 percent rise by the European bank index.