Barclays bosses avoid questions over controversial Qatar investment at parliamentary inquiry

Tuesday 05 February 2013 19.23
Barclays says provision for PPI will now reach £2.6 billion sterling
Barclays says provision for PPI will now reach £2.6 billion sterling

Barclays bosses ducked questions at a UK parliamentary inquiry 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 by MPs if there was anything linked to the Qatar fundraising that could cause embarrassment in the future, Barclays Chairman David Walker told a parliamentary inquiry that he could not comment due to the investigation.

Barclays has stockpiled more cash to cover a growing compensation bill for mis-selling interest rate hedging products (IRHP) and payment protection insurance (PPI).

Following a review, Barclays said it would include a provision of £850m sterling for IRHP, up £400m, in full-year results due on February 12.

The provision for PPI will now reach £2.6 billion, an increase of £600m.

Several UK lenders face a collective bill of around £12 billion for mis-selling loan insurance designed to protect borrowers who missed repayments due to illness or redundancy.

Consumer groups that challenged banks over the way the policies were marketed and sold won a landmark court case in 2011, opening the floodgates to thousands of compensation claims over one of Britain's biggest ever consumer scandals.

Industry sources say they expect the final bill for banks to top £24 billion.

Barclays' announcement came hours before new chief executive Antony Jenkins and Chairman David Walker appear before UK lawmakers to testify to a banking inquiry into industry standards, which was launched after Barclays was fined $450m last June for rigging Libor interest rates.

Jenkins, who used to run retail banking, is likely to be grilled on why the bank - and the industry - has consistently underestimated the scale of redress for PPI claims.

Last month, the head of Britain's Financial Ombudsman Service, Natalie Ceeney, said banks only had themselves to blame for the spiralling costs of the scandal, which she said could have been contained if they had addressed the issue earlier.

The ombudsman service, which steps in when banks and their customers cannot reach an agreement on compensation, said it was receiving up to 10,000 complaints each week about PPI and has hired 1,000 new staff to cope with the caseload.