Monday, 01 July 2024 13:55

Structured Notes Cost Barclays

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Across the pond, Barclays' shares dropped 3.7% on Monday after the bank revealed it would incur an earnings loss due to issuing an excess of structured notes. The bank forecasts a £450 million ($590 million) charge and a nearly 30 basis point reduction in its core tier 1 capital ratio, of which many investors watch. 


Consequently, the bank will postpone its £1 billion share buyback announced on February 23rd. Structured notes, which are customized debt products, require stringent regulatory and risk management oversight, and are often used as a specific fixed income solution.


 Although Barclays aimed to cap its issuance at $5 billion in 2019, it registered $20.8 billion instead. The bank has not clarified how this error occurred or why it took nearly three years to detect.

Finsum: This over extension reveals the complexity of implementation of structured notes but they still serve a valuable purpose. 

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