Macaskill on markets: Curious Qatari tactics
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Macaskill on markets: Curious Qatari tactics

The UK’s Serious Fraud Office (SFO) charged Barclays and four former managers with fraud in June, alleging misconduct relating to two capital raising deals in 2008 and a loan to Qatar.


After an initial hearing planned for early July, the case is likely to provide more detail on how Barclays arranged investments from Qatar in June 2008 – three months before the global credit crisis – and in October 2008, when another capital infusion allowed the bank to avoid a bailout by the British state.

The SFO took almost five years to bring charges against Barclays, ex-CEO John Varley and former top managers Roger Jenkins, Tom Kalaris and Richard Boath. The long delay after the opening of the SFO investigation in August 2012 led to speculation that the case would be dropped. 


When charges were finally made on June 20, they were portrayed by some UK observers as a canny move by David Green, the head of the SFO, to take advantage of a UK government which was weakened by the recent loss of its parliamentary majority, to maintain the independence of the fraud agency.

The Conservative government included an intention to incorporate the SFO into a broader National Crime Agency in its election manifesto but it may now abandon that plan, partly because the case against Barclays has raised the profile of the specialist fraud investigator.

There was also some sympathy for the individuals charged along with Barclays, either because the allegations of false representation and unlawful financial assistance have not yet been detailed, or because arranging investments designed to avert a state bailout does not seem a nefarious goal by the low standards of modern banking.

But the decision to level charges should be welcomed, if only because it may bring some clarity to the tactics of Qatar and other sovereign wealth investors that have large holdings in banks.

Qatar invested just over £6 billion ($7.6 billion) in Barclays during 2008, first in equity in June, then in a more complex combination of mandatorily convertible notes, perpetual high-yielding securities and warrants in October. Barclays and its former managers are charged with false representation over both capital exercises, but side deals related to the October issuance are likely to dominate the case if it goes to trial. Charges over the second fundraising and of providing unlawful financial assistance were only made against Barclays itself, former CEO John Varley and Roger Jenkins, the structuring and Middle East expert whose deals created a variety of reputational challenges for the bank.


There were striking similarities between investments made by Qatar in Credit Suisse during 2008 and the Barclays fundraising. Both banks received investments twice that year from Qatar, and in both cases Barclays obtained funds after Credit Suisse. 

When both banks went to the Qatari capital-well in October 2008, both also made loans to the Qataris. Credit Suisse was allowed by Swiss regulators to lend money to Qatar in order to bring forward its own capital infusion, as supervisors agreed with a proposal that announcement of a deal at the same time as UBS was bailed out would contribute to market stability.

Like Barclays, Credit Suisse was able to stave off the indignity of a state bailout – and maintain control of its own executive compensation – by sourcing Middle Eastern funds, in turn presenting a contrast to its closest local rival bank. Barclays thought it had pulled off a coup by avoiding the bailout imposed on Lloyds and RBS, but it does not seem to have squared off its local supervisors as efficiently as Credit Suisse.

Barclays disclosed commissions and expenses of around £300 million paid mostly to Qatar and Sheikh Mansour of the United Arab Emirates, who joined the October fundraising (and became embroiled in a subsequent dispute over related fees for deal broker Amanda Staveley and others, as Euromoney has documented). 

Barclays also noted that its high-yielding reserve capital perpetual securities were expected to qualify as ‘innovative’ tier-1 capital as defined by its own regulators. Questions have been raised about total commissions paid for Barclays’ fundraising deals, however, especially why some payments were described as advisory services agreements and whether or not a $3 billion loan facility for Qatar was tied to its October 2008 capital infusion.

A trial could also bring some clarity to the investing tactics of Qatar and its web of advisers. The substantial stakes taken in Barclays and Credit Suisse before and during the credit crisis of 2008 were among multiple and continuing moves to build stakes in firms with a bias towards investment banking.


Qatar is reported to have recently applied for regulatory approval to increase its stake in Deutsche Bank above 10% to restore its position as the biggest shareholder in the firm, for example. The Chinese conglomerate HNA, which is seeing its own financing and leverage policies come under increasing scrutiny, overtook Qatar to become Deutsche Bank’s biggest shareholder this year. Qatar is also a core investor in a new investment bank that is planned by former Credit Suisse CEO Brady Dougan. 

Qatar seems to have developed a taste for complex financing arrangements along with its appetite for investments in banks with complicated business models.

Margin loans were reportedly used to finance some purchases of Deutsche Bank stock, including during its recent €8 billion capital issue, demonstrating that the attention generated by the 2008 deals with Barclays and Credit Suisse has not deterred Qatar from taking a complicated route to its stake building. 

There is nothing inherently wrong with complex financing, of course. But structuring arrangements can create fees that might give the appearance, at least, of conflicts of interest among advisers. A niche industry is developing in advising sovereign investors such as Qatar, as might be expected when apparently straightforward investments can be turned into a fee fountain with the addition of some creative financing.

The current political rift between Qatar and other Middle Eastern countries that are active sovereign investors, including Saudi Arabia and the United Arab Emirates, will add another layer of conflict to be managed when it comes to stake-building.

The political problems could pose some logistical challenges to financial advisers, such as limiting flight options when meetings are planned in multiple countries.

But complexity of any form is the financial adviser’s friend when it comes to the business of extracting value from sovereign wealth investments, and there will no doubt be plenty of further opportunities for creative financiers to turn Middle Eastern political division into a welcome source of profit.

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