Barclays said it expects to take a £450 million ($588.8m) hit on mishandled structured product sales causing the British bank to delay its share buyback.
The lender said it issued $15.2 billion more structured and exchange-traded notes than it had registered for sale in the US over a period of about a year, heavily overshooting its $20.8bn limit.
The securities must now be bought back at their original purchase price, the bank said. The trading error was under investigation, it said.
Barclays Bank, the subsidiary that holds the lender’s corporate and investment bank, found that “securities offered and sold under its US shelf registration statement during a period of approximately one year exceeded the registered amount”, a statement by the lender said.
"Barclays has commissioned an independent review of the facts and circumstances relating to this matter including, among other things, the control environment related to such issuances," it said.
"Separately, regulatory authorities are conducting inquiries and making requests for information."
The mishandled products were two exchange-traded notes linked to crude oil and market volatility, sources said, with the bank suspending sales and issuance of the notes this month.
The firm issued about $36bn of investment products after registering with US regulators in August 2019 to sell up to $20.8bn, the bank’s statement said, with the trading error now requiring Barclays to repurchase the affected securities — a so-called rescission offer — at their original price.
The bank said its "best estimate at this time" was that the loss would amount to £450m, cutting its core capital ratio down to the middle of its 13-14 per cent target range, with the loss estimate not including tax.
As a result the bank said it would delay a planned £1bn share buyback, first unveiled on February 23 as part of its full-year 2021 results, until the second quarter of this year, while the independent review was carried out.
Barclays' wider investment bank had previously proved a stellar performer for the group over recent years, helping it post a record annual profit for 2021.
Analysts at Shore Capital said in a note that the bank appeared to be "tripping over its shoelaces", while other analysts called the mistake “basic”, “bizarre” and “embarrassing”.
Major banks typically file for blanket registrations that allow them to regularly issue notes that give clients a chance to bet on everything from market volatility to the performance of shares.
Market observers also said they could not recall a bank’s issuance exceeding the amount it registered, let alone blowing billions past its limit.
Chief executive C S Venkatakrishnan, who took charge of the lender in November, was the group’s chief risk officer at the time the registration document was filed.
“This kind of seemingly basic error may shake confidence in the investment bank going forward,” said Fahed Kunwar, an analyst at Redburn.
“With a new management team in place, there are already questions on the ability of the investment bank to continue to its strong performance.”
Shares in Barclays were down 2.8 per cent at 11.37am London time on Monday.
