Sona Asset Management, Diameter Capital Partners, and Arini Capital Management are among users of Barclays’ total return swap trades currently under regulatory scrutiny, according to 9fin sources.
A source close to Arini said the firm’s exposure was “extremely negligible”, though, with the fund’s total mark-to-market exposure currently at just $1.4m.
These types of TRS trades are a way for funds to leverage private credit loans. An insider complaint to the UK’s Prudential Regulation Authority raised the concern that the underlying private credit exposures were not liquid enough for the way Barclays had been classifying the swaps, 9fin reported confirming an FT first report on 19 October.
The tension rests on which book Barclays held these swaps in: the trading book, which is meant for more liquid, tradable assets that typically require lower capital reserves, or the banking book, where hard-to-sell loans like private credit — which can carry substantially higher capital requirements — usually sit.
Barclays originally told 9finthat its use and booking of TRS was consistent with regulations. The group’s finance director Anna Cross said on Barclay’s Q3 26 results call on 22 October that the bank takes “a prudent approach to both current and...
