• A Barclays executive said that a complex deal with Qatar designed to rescue the bank during the 2008 financial crisis was "a nightmare," in conversations repeated at trial in London. 
• When former bank executives realised that Qatari investors could end up with a higher shareholding than previously expected, plus seats on the board, one banker said: "we're fucked." 
• Executives were also worried about the possibility of Barclays being taken over by the government because that would have put their large compensation packages at risk.
• The defendants, including the bank's former CEO John Varley and coworkers Roger Jenkins, Thomas Kalaris, and Richard Boath, all pleaded not guilty to charges of misleading investors in the fundraising.

Barclays executives became anxious in the summer of the financial crisis of 2008 as they struggled to put together a capital-raising deal with Qatari investors that would rescue the bank, a prosecutor told a London court today.

The bank's senior managers were trying to raise new investor funding in order to prevent Barclays from being taken over by the government or — in a worst-case scenario — succumbing to the liquidity crisis that bankrupted several US and European banks. At the time, Lehman Brothers was just weeks from insolvency.

So the Barclays execs approached a group of Qatari sovereign wealth investors, offering them equity in the bank in return for a large injection of cash, prosecutor Ed Brown told the court.

The executives, particularly the former head of Barclays' European financial-institutions group Richard Boath, were wary of how the capital-raising activity would impact their overall holding in the bank.

In one scenario of the deal, the possibility that the Qataris could own up to 10% of the British lender would be a "nightmare," prosecutors allege Boath said. They feared that the new investors, including Sheikh Hamad, the former Prime Minister of Qatar, could end up with a number of board seats as a result, the court heard. Boath suggested that if that came to pass, "we're fucked," prosecutors allege he told his colleagues:

“We’re fucked, we’re fucked,” Boath told the former executive chairman of investment management for MENA at Barclays Capital, Roger Jenkins, in a phonecall on July 16, prosecutors said. “It’s a fucking nightmare. Is he going to settle?”

“Yeah, he’ll settle,” Roger Jenkins said, referring to the amount the Qataris would pay.

“Has he got the cash?” Boath said.

“We’re just working that through now,” Jenkins said.

The testimony came in week two of the case, in which the UK's Serious Fraud Office alleges that then-CEO John Varley and the three other defendants, Boath and his colleagues Thomas Kalaris and Jenkins, misled investors in fundraisings during the financial crisis by paying Qatari companies £322 million ($423 million) — a 3.25% commission — in secret fees that were not properly disclosed.

The defendants pleaded not guilty to all charges.

The court also heard that Qatar Holding sent four invoices to Barclays for advisory services fees shortly after the signing of the documentation. The prosecution alleges that the short timeframe demonstrates that the advisory service agreements were not genuine agreements.

Subsequently, the Qataris ended up with a large shareholding in Barclays. A "clawback" arrangement gave other shareholders the option to purchase chunks of the Qataris' stake. But because few of those shares were bought, the £322 million commission fee represented a smaller percentage return on the Qataris' investment than expected.

"You’ll end up paying VAT on top, which would be awful"

In conversations during the same period between Boath and senior Barclays lawyer Julie Shepherd, the issue of paying value-added tax (VAT) on the service agreements to be signed with Qatar was raised. There was a wariness, according to the prosecution, that if the services to be provided under the terms of the agreement weren't clear then Barclays could be forced to pay VAT on top of the payment.

This possibility was described as "awful" by Shepherd during the call on July 16, 2008, because VAT at the time stood at 17.5%.

All of these conversations took place prior to the finalization of Barclays' capital raising which saw the bank collect £7 billion from Qatari investors in the form of Reserve Capital Instruments (RCIs) and Mandatorily Convertible Notes (MCNs).

The Qatar deal was allegedly intended to financially stabilise the bank. Executives were concerned at the prospect that they could find themselves without jobs if it became necessary for the British government to take over the bank, as it did with Northern Rock and Lloyds.

This was particularly clear because of the comparatively high levels of compensation enjoyed by the Barclays executives in question.

Jenkins said, “At 2 o'clock in the morning I was panicking that we were about to get nationalised and you guys must have been the same because the government would, wouldn’t look kindly on compensation over a million dollars,” Brown told the court. According to records read to the court by the prosecution, all four defendants were paid more than $1 million in both 2007 and 2008.

The trial at Southwark Crown Court is ongoing.

SEE ALSO: Barclays executives were 'rumbled' by Qataris during payment negotiations, jury hears on day 3 of trial in London

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• A Wall Street business that transforms unusual assets like Taco Bell franchises or cell-phone towers into investment-grade bonds is flourishing.
• The industry known as esoteric or non-traditional asset backed securitization has almost doubled in the past four years to $62 billion in issuance in 2018.
• Other esoteric deals involve cash flows from assets such as aircraft leases or rail cars, but bundling entire businesses like fitness centers or fast-food chains is among the fastest growing and most complex parts of the market.
• Issuers like this method of financing because it affords a higher rating and cheaper borrowing rates; investors get added security and more yield than similarly rated municipal or corporate bonds.
• But critics warn these investments carry added risks, including increased complexity, assets lacking historical data, and some deal structures that haven't been tested in bankruptcy court. 

One day last November, Barclays bankers and salespeople sitting on a second-story trading floor in the firm's Manhattan headquarters received an unexpected perk. A Taco Bell feast.

The spread included over 120 tacos, including many that were Nacho Cheese Doritos Locos, not to mention nachos, Cheesy Gordita Crunches and Cinnabon bites.

Why Taco Bell? It was the celebration of a Wall Street deal expected to become more commonplace this year. The transaction — $1.5 billion in bonds backed by royalty payments from thousands of Taco Bell franchises that Barclays helped sell — is known as a whole-business securitization.

It's one type of transaction in a growing part of the bond market known as esoteric or non-traditional asset-backed securities. Other esoteric deals involve cash flows from assets such as aircraft leases or rail cars, but bundling entire businesses like fitness centers or fast-food chains is among the fastest growing and most complex parts of the market. About $7 billion of whole business securitizations were done last year, according to figures compiled by Guggenheim Securities.

The broader esoteric ABS market almost doubled in the past four years to $62 billion in issuance in 2018, according to data provider Finsight. Right now that's enough to comprise around 20% of the total ABS market. One banker estimates it could account for as much as 50% of the total ABS market in the next few years. 

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"There are other emerging asset classes that could be eligible for securitization," said Benjamin Fernandez, a managing director at Barclays who runs the esoteric ABS group. "If issuers continue to get credit from their investor bases for adding structure and security, I think we could certainly continue to see more growth."

In ancient Greece, where the root meaning of "esoteric" first arose, it referred to belonging to an inner circle. For centuries, the term was used in philosophical thought as a catch-all category for beliefs held outside the accepted canon, including freemasonry, the occult, and magic, according to historian Wouter Hanegraaff. An early instance of esoteric being used for Wall Street investments was in 1979, when the New York Times quoted an investor who owned a hodgepodge of businesses like pinball arcades, a footwear product maker, and a refrigeration company. “We specialize in the esoteric,” he said.

These days on Wall Street, esoteric is defined almost more by what it's not — bonds backed by credit-card receivables, auto loans, mortgages, and student debt — than what it is. Among the many types of assets that underlie deals in this category are airplane leases, tech-enabled consumer loans, cell-phone payment plans, tax liens, and whole businesses.

The last category is most commonly made up of franchise food deals like Taco Bell due to franchisee fees seen as predictable revenue streams. Arby's was one of the earliest adopters and its sale of nearly $300 million in bonds backed by franchise royalty fees in 2000 launched the industry.

Dunkin Brands followed with a $1.7 billion issuance in 2006. Others include: Applebee's, Cinnabon, Church's Chicken, Domino's Pizza, Five Guys, Hardy's, Hooters, IHOP, Jimmy John's, Sonic, Wendy's, Wingstop. A notable exception is McDonald's, which is large enough to raise efficient, investment-grade financing at the corporate level.

The way the deals are structured should be known by anyone familiar with how mortgage bonds work. In this case, a company sells an asset, be it a fitness center, intellectual property, or a tug boat, to a shell company. The shell then issues debt to investors, using the cash to repay the corporate parent for the asset, and servicing debt with cash flows from the businesses it now owns. The assets are structured so that they're protected from a bankruptcy of the corporate parent, at least in theory.

For the banks that sell these deals, it's another way to scale the securitization machinery they pioneered in the 1970s. Within Barclays' securitized products origination group, for example, revenue from non-traditional ABS grew more than that of any other business in 2017 and 2018, according to a person familiar with the performance. 

While Guggenheim and Barclays typically lead the esoteric ABS league tables, Goldman Sachs and Deutsche Bank are also very active. 

For the issuers, it's a cheaper way to access the bond markets, sometimes by multiple percentage points and often with an investment grade rating that they can't get otherwise. And for the insurance companies and mutual funds that invest, the deals usually offer more yield than similarly rated corporate securities. 

Critics worry that in their haste to grab yield, investors may be overlooking some significant risks. Few transactions have historical data showing how the underlying asset has performed during multiple economic cycles. Not all the structures have been tested in bankruptcy court. And some varieties of whole business securitizations get pretty complicated.

"A legal structure diagram of the deal can sometimes span two pages," said one investor, who declines to invest in whole business deals and asked for anonymity to preserve relationships in the market. Making matters worse, some of the newer whole business deals involve most or all of a company's assets, raising questions about whether creditors of the parent could seize them in the event of a bankruptcy, the investor said.

"Will the bankruptcy court agree that these assets sit outside the parent?" asked one investor, adding that for some of the more complex securitizations, it's still an open question. 

Read more:‘Someone’s going to get hurt’: JPMorgan chief issues a stark warning on the market for risky loans

Paul Norris, a managing director at investment management firm Conning, argues that whole business deals lack the history and simplicity that he finds in aircraft leases and container deals, which bring decades of performance data and have structures that are easier to understand. Add in the fact that whole business deals are opportunistic for the issuer and the underwriters and Norris says he won't touch them. 

"All of it adds up to something that is extremely complicated, not all that liquid, and has not been proven," Norris said. 

Even the deals that Norris invests in require careful underwriting due to the idiosyncratic nature of different types and ages of airplanes or rail cars. 

Defenders of the whole business model point to almost two decades of history wrapping restaurant franchises into bonds, and suggest that many securitizations in the sector follow similar structures. One note: prior to the 2008 US financial crisis, the deals were backed by bond insurers and assigned AAA ratings. When the financial crisis hobbled those insurers, bankers began to sell the deals without insurance. Now many, including Taco Bell's, hold a BBB rating, one notch above junk. 

"This is a market that a number of us have been developing since before the financial crisis,” said Katrina Niehaus, who leads Goldman’s esoteric ABS business. “Historically, ABS, which takes more work up front and has more controls, was generally viewed as being a safer asset class. We didn’t see that in the last crisis, because mortgage ABS was at the epicenter, but the hope is that we revert to that historical logic."

Ron Joelson, the chief investment officer at Northwestern Mutual, is more optimistic about the broader esoterics market even though he hasn't done many whole-business deals either. In his view, yields are high enough to compensate investors for their added risk. And as predictions for a recession mount, it's also nice that the deals are secured, he said.  

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"There is something appealing about hard assets as we approach the latter part of the cycle," said Joelson, who said he plans to more than double his allocation to esoterics in the next couple of years to $3 billion. He oversees a $200 billion investment portfolio. "We generally have expertise to analyze those transactions although, because the historical track record isn’t that long, you have to do your homework."

Recent deals have tested the market's growth. Barclays had to postpone a deal last year for the parent of IHOP when investors grew wary of the credit, while Guggenheim's deal for $455 million in bonds backed by tug boats and barges later ran into trouble. The tug boat bonds, for a firm called Harley Marine, were downgraded after higher-than-expected operating expenses cut into investor returns and allegations of CEO fraud frightened investors. 

Despite those hiccups, investors don't yet seem to be souring on the broader esoterics space.

"What we're hearing from some investors is that there's a preference for structured finance over corporates or high yield," Barclays' Fernandez said. "They see it as a defensive play in a volatile market."

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• The UK's Serious Fraud Office alleges that former Barclays CEO John Varley and other executives misled investors in raising funds during the financial crisis.
• Barclays executives spent frantic hours negotiating with Qatari investors, which led to millions in hidden fees being funnelled to the investors via financial instruments, a London court heard on Tuesday.
• The need to get Qatari investors on board was urgent for the executives, who feared a government bailout which would have been a "constraint," SFO prosecutors said.
• One Barclays executive, Roger Jenkins, was got a £25 million bonus for his role in securing the Qatari funding, a draft agreement said. 
• The defendants, including the bank's former CEO John Varley and coworkers Jenkins, Thomas Kalaris, and Richard Boath, all pleaded not guilty to charges of misleading investors in the fundraising.

Barclays executives spent frantic hours negotiating with Qatari investors over the terms of funding for the crippled UK lender, amid fears that the Qataris would abandon the deal altogether, a London court heard Tuesday.

Serious Fraud Office (SFO) prosecutors claimed that the talks led to an agreement where millions in hidden fees were funnelled to Qatari investors via financial instruments called advisory services agreements, or ASAs.

The court also heard allegations that key executives, including then-CEO John Varley, knew about it. Court documents also showed that Barclays executive Roger Jenkins received a £25 million bonus for his role in securing funding.

Following the capital raising undertaken by Barclays in June 2008, a second arrangement was needed to meet new British government capital ratio requirements.

Barclays continued negotiations with Qatari investors that year. The court heard that those discussions centred on the fee the Qataris would be paid for their involvement amid fears that Qatar might be "walking" away from a deal, said Thomas Kalaris, then CEO of Barclays Wealth Management, on October 24, 2008, according to court documents.

The testimony came in week two of the case, in which the UK's SFO alleges that Varley and the three other defendants, Richard Boath and his colleagues Kalaris and Jenkins, misled investors in fundraisings during the financial crisis by paying Qatari companies £322 million ($423 million) — a 3.25% commission — in secret fees that were not properly disclosed. The defendants pleaded not guilty to all charges.

Millions as a "special award"

For his role in procuring the capital for Barclays, executive Jenkins — then executive chairman of investment management in the Middle East and North Africa — was set to receive a £25 million bonus as a "special award," according to a draft agreement from March 19, 2009.

In an email on November 24, 2008, Jenkins had emailed Barclays executive Rich Ricci about his proposed bonus, saying: "We need to make a special payment for this endeavor now...Did it four times this year to save our arses and jobs guys, you know the sell !"

Qatari investors got a big discount, prosecutors say

The second capital raising agreement with Qatar led to a £280 million payment, in the form of an advisory services agreement (ASA), which disguised the fact that Barclays had provided a major discount to Qatari investors on their investment, according to prosecutors.

"The ASA therefore again acted as a disguised mechanism for providing extra fees to the Qataris in a way which the two defendants knew and intended would not be disclosed," said SFO prosecutor, Edward Brown QC.

The prosecution also alleged that Jenkins, John Varley, the former CEO, knew the ASA was a commission fee for investing to meet the Qatari's desired "blended share price" of 130 pence per share.

Barclays worried a government bailout would be a "source of constraint"

The bank's senior managers were trying to raise new investor funding in order to prevent Barclays from being taken over by the government or — in a worst-case scenario — succumbing to the liquidity crisis that bankrupted several US and European banks. At the time, Lehman Brothers was just weeks from insolvency.

So the Barclays execs approached a group of Qatari sovereign wealth investors, offering them equity in the bank in return for a large injection of cash, prosecutor Brown told the court.

Barclays executives signed large capital raising agreements with the investors.

"The strategic investors would have a common commercial interest with Barclays, whereas the government would be a source of constraint," the court heard from the minutes of a Barclays board meeting on October 26, 2008.

Barclays also paid Qatar a £66 million introductory fee for bringing Abu Dhabi Investment Authority for consideration as a strategic investor, the court heard. 

The trial at Southwark Crown Court continues. 

SEE ALSO: "We're f---ed': Barclays insider worried his allegedly sketchy deal with Qatar would come at too high a price

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• The UK's Serious Fraud Office alleges that former Barclays CEO John Varley and other executives misled investors in raising funds during the financial crisis.
• Barclays executives worried in 2008 that if people found out about the bank's crisis-era payments to Qatari investors, they would think the deals were a "bung," a court heard Wednesday.
• The defendants, including the bank's former CEO John Varley and coworkers Roger Jenkins, Thomas Kalaris, and Richard Boath, all pleaded not guilty to charges of misleading investors in the fundraising.

Barclays executives worried in 2008 that if people found out about the bank's crisis-era payments to Qatari investors, they would think the deals were corrupt, a London court heard Wednesday.

Richard Boath, former head of Barclays' European financial institutions group, was alleged to have lost sleep at the thought of journalists finding out about the £322 million paid to Qatari companies.

The millions in payments are at the heart of the trial in which the UK's Serious Fraud Office (SFO) alleges that former Barclays CEO John Varley and other executives misled investors in raising the funds.

The executives said in conversations heard by the court that they negotiated the deals to inject capital into the bank and prevent nationalization at the dawn of the financial crisis.

In week two of the case, the court heard testimony of Boath's description of the deals. The following exchange, published in court documents, is from a June 2008 phone call which took place between Boath and Barclays lawyer Judith Shepherd:

Boath: "My worry is every journalist just gets it and says this is you know."

Shepherd: "Yeah."

Boath: "Well I hate to use the phrase so I’m not going to use it."

Shepherd: "No, no, no, because we don't even think that phrase, it's just words that never come across our lips"

Boath: "It begins with a 'B.'"

During interviews with the SFO under caution in 2014 and 2016, Boath said the 'B' word was probably "bung." When asked, what his understanding of the meaning of the word "bung" was, Boath said it meant a corrupt payment.

The court heard that Boath told Shepherd that when he reread the Qatari agreement: "I sort to start to tremble. So, you know, I’d really like to go and do something about it, so I can sleep."

The SFO alleges that then CEO Varley and the three other defendants, Boath, Thomas Kalaris, and Roger Jenkins, misled investors in fundraisings during the financial crisis by paying Qatari companies £322 million ($423 million) — a 3.25% commission — in secret fees that were not properly disclosed. The defendants pleaded not guilty to all charges.

"Senior management of the bank was extremely anxious to avoid being nationalized"

Barclays executives were concerned about the possibility of a government bailout in the midst of the financial crisis after Northern Rock had been nationalized in 2007. The American banks Bear Stearns and Lehman Brothers were also set to collapse in 2008 which focused the executive's minds on arranging capital raising to protect the struggling lender.

In statements presented to the SFO in lieu of answering questions in interviews, Thomas Kalaris, then CEO of Barclays Wealth Management, said that a bailout: "Would mean a restructuring of the bank; the shares would plummet and many people in the bank including senior management were at risk of redundancy. The senior management of the bank was extremely anxious to avoid being nationalized."

The funding raised from Qatar to meet government imposed capital ratio requirements during this volatile period demonstrated that Barclays' "status as a private company was riding on the vagaries of the market," Kalaris said in the statement.

The trial at Southwark Crown Court is ongoing.

SEE ALSO: Barclays executive got a £25 million bonus during the financial crisis for his role in Qatari funding deal to 'save our arses'

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• The judge in a trial of former Barclays CEO John Varley and three of his colleagues over an allegedly fraudulent deal with Qatar told a jury that entities connected to Qatar might be just as dishonest as the Barclays bankers, if the prosecution’s case is correct.
• The UK Serious Fraud Office alleges that Varley and the other executives misled investors while raising funds from Qatar investors during the financial crisis.
• The defendants, including Varley's coworkers Roger Jenkins, Thomas Kalaris, and Richard Boath, all pleaded not guilty to charges of misleading investors in fundraising.

The judge in the historic Barclays trial in London told the jury that the deals at the very heart of the trial were a "sham" that might implicate both parties, not just those on Barclays' side of the deal.

Justice Robert Jay, referring to Barclays' agreements with Qatari investors at the dawn of the financial crisis in 2008, said if jurors were convinced that the deals were fake, then that might show the Qataris were part of the conspiracy.

"A sham agreement is one that does not mean what it says ... it requires two parties," Jay told the jurors. Entities connected to Qatar might be just as dishonest as Barclays bankers now on trial for fraud, if the prosecution’s case is correct, Jay said.

The Serious Fraud Office (SFO) alleges that former Barclays CEO John Varley and other executives — Richard Boath, Thomas Kalaris, and Roger Jenkins — misled investors during the financial crisis in raising funds via financial instruments called "Advisory Service Agreements" (ASAs). The SFO alleges that the deals paid Qatari companies £322 million ($423 million) — a 3.25% commission — in secret fees that were not properly disclosed.

The defendants pleaded not guilty to all charges.

It's a shift in focus to the other side of the Barclays deal. Ed Brown, prosecuting for the SFO, has previously told the court that “the Qataris are not on trial here.”

The jury has repeatedly heard testimony that the executives were desperate for a capital injection to avoid being taken over and nationalized by the government. Rival bank RBS received a government bailout that year.   

Referring to their own fundraising efforts, Stephen Jones a Barclays banker on a recording of a call dated May 7, 2008, that was played to the courtroom said: "It feels much better than the RBS deal, I have to say."

The trial is ongoing at Southwark Crown Court in London. 

Read more: See all our coverage of the Barclays Qatar trial here.

SEE ALSO: A senior Barclays executive was terrified that the bank's financial crisis-era Qatari deals looked corrupt

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• Banks and financial firms that make up about 6.5% of Britain's GDP have already taken precautionary measures to prep for Brexit, meaning a lot of damage is already done.
• Banking is just the tip of the iceberg with many other industries also making irrevocable decisions

The damage to the economy from Brexit is already afoot — so much so that the act of leaving the EU itself is, at this point, increasingly irrelevant.

Leaders of companies with UK operations haven't been taking any chances. The latest wound: Nissan this week cancelled plans to build its new sport utility vehicles at its northern English Sunderland plant. The original decision would have created 740 new jobs. 

The impact on the City of London could be especially damaging — financial services, heavily concentrated in the capital, account for 6.5% of Britain's GDP.

Read More:The closer the UK gets to Brexit the more the country regrets it, polls show

The winner so far has been other European banking hubs. A Frankfurt lobby group has claimed that between €750 billion to €800 billion ($911 billion) in financial assets and claims 10,000 jobs will move to the German city by the time Britain leaves the European Union on March 29.

These moves won't be undone, even if Brexit were somehow cancelled. 

"I don't believe Brexit can be a trigger for a financial crisis or a banking crisis," Sergio Ermotti, CEO of Swiss investment firm UBS, told Bloomberg back in September. "But it could undermine investments, and trigger maybe a slowdown in the economy. That's clear."  

Here's a roundup of the financial exodus so far: 

• US bank giants Goldman Sachs, JPMorgan, Morgan Stanley, and Citigroup have moved 250 billion euros ($283 billion) of balance-sheet assets to Frankfurt because of Brexit. 
• Bank of America is spending $400 million to move staff and operations in anticipation of Brexit, and is trying to persuade London staff to move to Paris. 
• Barclays last week won permission to shift assets worth £166 billion ($216 billion) to its Irish division. Barclays is set to become Ireland's biggest bank. 
• France's BNP Paribas, Credit Agricole, and Societe Generale have opted to transfer 500 staff out of London to Paris. 
• UBS has chosen German financial center Frankfurt for its new EU headquarters. 
• Swiss peer Credit Suisse is moving 250 jobs to Germany, Madrid, and Luxembourg among other EU 27 countries as well as $200 million from its market division to Germany. And in December Credit Suisse told its wealthiest clients to hurry and move their money out of the UK before Brexit.
• Germany's Deutsche Bank is also considering shifting large volumes of assets to Frankfurt as part of its Brexit plan.
• HSBC, Europe's biggest bank, has shifted ownership of many of its European subsidiaries from its London-based entity to its French unit.
• Australia's largest bank by assets, Commonwealth Bank of Australia, has set in motion plans to base around 50 staff in Amsterdam, and has applied for a banking licence in the country.
• Other Australian lenders Macquarie, Westpac, and ANZ are also in talks to move operations to Dublin and continental Europe. 
• Europe’s biggest repo trading venue, called BrokerTec, is being moved to Amsterdam from London, meaning a $240 billion a day repo business is leaving the UK. 
• More than 100 UK-based asset managers and funds have applied to the Irish central bank for authorization in Ireland.

The impact of these changes will see less tax revenue for the government, fewer jobs, and a dent in dealmaking, taking a shine off the City's luster.

And that's just financial services.

A British parliamentary report also recently announced that the UK had lost out on €5 billion ($5.7 billion) in infrastructure funding in the past year. 

Schaeffler, a car parts company, is closing two UK factories because of Brexit, leading to 570 fewer jobs. 

Among others: There's a "Brexit-busting" ferry that sidesteps UK trade routes, drug companies are stockpiling medicine, and investors in the once-vibrant UK tech scene are drying up. (A great Twitter thread by a self-described 48%-er in Cambridge lists a wide array of industry impact. You can read it here.)

SEE ALSO: The UK government admits Brexit will inevitably leave Britain poorer

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• Italy has led the way for sovereign bond issuance in 2019 with two syndicated deals which attracted massive investor attention. 
• Despite being close to a recession and having its growth forecasts cut Italy drew huge interest as the market rallies. 
• Other countries are now issuing sovereign debt despite previous expectations that the end of the European Central Bank's bond buying programme might dampen interest in some sovereign issuance. 

Italy sold two huge sovereign bonds at the start of 2019, defying expectations and kicking off a spate of fellow issuances to continue a rally in the fixed income market. 

Investors were expected to be cautious of the end of the European Central Bank's bond buying programme, which concluded at the end of December, but Italy received record demand for its latest issue Wednesday with €41 billion of orders for the €8 billion of 30-year debt on offer.

"The Italy dynamic is interesting because investors had found themselves underweight after last year’s sell-off and are now getting back in as the markets rally," said Marco Baldini, head of European and Japan bond syndicate at Barclays.

It's a boost to European countries which are looking to issue new debt with Italy taking advantage of a window of opportunity in light of the recent U-turn by the Federal Reserve on interest rates.  

Despite Italy's 2019 growth forecast being slashed to 0.2% — down from 1.2% — Thursday investors remain positive about the country's position even given it entered a technical recession in the final quarter of 2018. Italy also clashed with Brussels last year with a dispute over its government budget which took months to solve.

"This was helped by Italy reaching agreement with the EU on its budget and they're taking advantage of this positive momentum to issue," Baldini added.

"Even with revised growth forecasts pointing to a potential recession, it has not affected the demand this year for both of their blow-out 15 and 30 year deals.”

Italy's first 2019 issuance — a 15-year €10 billion deal — was its largest ever sale and it encouraged similar issues from Spain and Greece aiding yield hungry investors. 

SEE ALSO: Saudi Arabia lured in a whopping $27 billion in orders for the kingdom's first bond sale since the Khashoggi murder

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• There has been a push within Barclays over the past few months for its equity traders to learn the coding language Python.
• The goal is to empower traders to run post-trade analysis for their own clients, as opposed to asking Barclay's small team of quants, to do it.

It's time to go back to school for members of Barclays' equities trading desk.

The bank has been encouraging and enabling its traders to learn how to code in the programming language Python in recent months. Daniel Nehren, Barclays' head of statistical modeling and development for equities, told Business Insider the goal is to have traders develop and run their own post-trade analysis, as opposed to relying on Nehren's team of roughly 30 quants to do it for them. 

Doing so will free up Nehren's team to have more time to analyze post-trade reports and make adjustments to improve how the bank executes trades for clients. 

Read more:Barclays has the fastest growing stock trading team around — and it's posing a threat to some of the biggest players

It's a move that indicates a shift in how the bank services clients — gone are the days of on-size-fits-all. Clients of the British bank, which has one of the fastest growing stock trading teams in the industry, don't want to be overburdened with a 40-page document that covers more information than they need, Nehren said. Instead, they're interested in specific analysis geared exactly towards what they are looking for. 

The issue, however, is that Nehren's team only has so much time and resources. 

"You have to find a way to balance, essentially, that bespoke resource-intensive view with the reality of, we are not going to have 500 quants running post-trade analytics for everybody," Nehren said. 

Barclays is setting up traders with code, template examples and blogs and online training classes they can watch to teach themselves how to code. No formal classes are held, but Nehren said his team is happy to sit down with any of the traders to talk through issues they are having or to help them code.

One of Python's key benefits is its readability. Unlike other coding languages, Python can be more easily understood by those without a background in programming. Just because it is easily digestible doesn't mean it has sacrificed any power, though. Python can be used for machine learning and data analysis. 

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The language has become increasingly popular within the finance community. According to a recent GitHub report ranking the top technologies favored by its community, Python was the third most popular programming language. 

Nehren also said he believes traders will be able to offer suggestions for improvements to algos the bank is using as they gain better insight through their Python programs. 

"As we give them the depth of being able to look at what these algos do and how they behave, the innovation comes actually from this cross-pollination," Nehren said. "The depth of partnership that just this effort has brought between my team and the coverage team and sales team, I think that just could be a game changer on its own.

Barclays' equities business posted $614 million in 2018 third quarter revenue, an 33% increase from the year-ago period. It will report fourth quarter results later in February. 

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• One of Barclays' largest investors, US hedge fund Tiger Global, has sold its entire holding in the bank. 
• It is a major blow to the lender as it bids to turnaround its performance in its investment banking division. 
• Tiger Global had been a major backer of CEO Jes Staley, but the move points to a weaker sentiment in the lender. 

One of the largest shareholders in Barclays has cut its stake in the lender during a crucial period for the bank. 

Tiger Global, a hedge fund, had held a top 10 stake in Barclays but has since cut its entire holding, according to the Financial Times.

It's a major blow to Barclays CEO Jes Staley who had received backing for his plan to reinvigorate the lender's investment banking operations and focus on the UK retail sector from the fund. 

The multibillion dollar fund had been reducing its stake since last summer and has now entirely offloaded its shareholding during a tricky period for Barclays as it fights off a challenge from activist investor Edward Bramson.

Staley's plan for the lender was well received initially with Barclays' share price touching £2.17 ($2.80) last March but its share price stands at £1.59 as of 9.40 a.m in London — down 0.5%. 

Tiger spent more than $1 billion building up a roughly 2.5% stake in Barclays due to its sizeable presence on Wall Street. Part of the decision to build the stake was the belief that the bank would likely see a boost from rising US interest rates and the corporate tax cuts last year. 

Barclays recently transferred billions in assets to Dublin and has spent large sums preparing for Brexit. 

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• Former Barclays chairman Marcus Agius is giving evidence as part of a major trial relating to alleged fraudulent behaviour by bank executives during the 2008 financial crisis. 
• Agius, chairman between 2007 and 2012, feared that key executives could resign as the crisis deepened.
• The ex-chairman also detailed the "complex and complicated" process of raising capital in what was "an extremely uncertain, febrile period."
• The defendants, former CEO John Varley, Richard Boath, Tom Kalaris, and Roger Jenkins, have pleaded not guilty to all charges. 

The former chairman of Barclays feared resignations from key executives during a difficult period for the bank as it sought to raise capital during the financial crisis.

Marcus Agius, chairman of Barclays between 2007 and 2012, gave testimony in front of a packed court in London Tuesday. "Any one of them might have said, 'This wasn’t what I signed up for, how do I get out of here?,'"  the jury heard. 

The Serious Fraud Office (SFO) alleges that former Barclays CEO John Varley and other executives — Richard Boath, Thomas Kalaris, and Roger Jenkins — misled investors during the financial crisis in raising funds via financial instruments called "Advisory Service Agreements" (ASAs). The SFO alleges that the deals paid Qatari companies £322 million ($423 million) — a 3.25% commission — in secret fees during capital raisings that were not properly disclosed to other investors.

The defendants pleaded not guilty to all charges.

The court heard details of how Barclays executives endured an "unsettling, nervous time" during the financial crisis in 2008. "I’m clear that in June 2008 we at Barclays did not anticipate how much worse things were going to get,” Agius said. "I don’t think we thought it was going to go as badly as it ultimately did."

Agius added that Barclay's desire to raise capital quickly was borne of a view that the world was a "more risky place", particularly in light of the failures of British bank Northern Rock and American lender Bear Stearns earlier in 2008. 

He added: "It was an extremely uncertain febrile period."

"Too clever by half"

Barclays raised billions of pounds in capital from Qatari investors in two transactions in 2008 in what was a "fast-moving and stressful time." Agius said that at the time of the first capital raise his concern that the deal Barclays was doing could be seen as "too clever by half."

He cited the fact that executives were negotiating potential fundraising with China Development Bank, Sumitomo, and Temasek alongside Qatar Holdings. Agius added "raising money was a complex and complicated thing to do. It requires a great deal of dexterity and there are a number of moving parts."

As a result, Agius's role in managing the board became a more difficult. The former chairman noted that “managing the board at that time was more full-time than it would normally have been in quieter times.”

The allegations that some investors in the bank may have been paid higher commission rates than others would have been, in Agius' view, completely against "market practice." Agius added there was "widespread" knowledge that commissions and fees paid to all investors had to be equal and had to be disclosed within the investor prospectus — a "crucial" document for fundraising. 

The trial is ongoing at Southwark Crown Court in London.

Read more: See all our coverage of the Barclays Qatar trial here.

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• Former Barclays chairman Marcus Agius is giving evidence as part of a major trial relating to alleged fraudulent behaviour by bank executives during the 2008 financial crisis.
• Agius, chairman between 2007 and 2012, was not aware of a deal to pay Qatari investors a higher rate than others during capital raisings undertaken by Barclays during the financial crisis.
• The defendants, former CEO John Varley, and fellow executives Richard Boath, Tom Kalaris, and Roger Jenkins, have pleaded not guilty to all charges.

Former Barclays chairman Marcus Agius was unaware of the existence of a deal with Qatari investors at the heart of a historic fraud trial, a London court heard Wednesday.

The Serious Fraud Office (SFO) alleges that former Barclays CEO John Varley and other executives — Richard Boath, Thomas Kalaris, and Roger Jenkins — misled investors during the financial crisis in raising funds via financial instruments called "Advisory Service Agreements" (ASAs).

The SFO alleges that the deals paid Qatari companies £322 million ($423 million) — a 3.25% commission — in secret fees during capital raisings that were not properly disclosed to other investors. The defendants pleaded not guilty to all charges.

Read more: See all our coverage of the Barclays Qatar trial here.

When shown a copy of one so-called ASA, worth £280 million, Agius — who was Barclays' chairman between 2007 and 2012 — said he was unaware of its existence.

Asked by SFO prosecutor Ed Brown if he had seen it before, he responded: "Absolutely not, I saw the document for the first time some years after," Agius said. He then clarified: "Not only did I not see the document but I wasn’t aware of its existence."

The former chairman added that he did not see the document until 2012. Agius said he was also unaware of how the deals were negotiated or how the fees were arrived at.

Discussions around the £7.3 billion in financing raised by Barclays from Qatari investors in October 2008 centred on the "relatively high" fees the bank paid for the underwriting, Agius told the court.

Barclays paid 2% for the Reserve Capital Instruments (RCIs) and 4% for the Mandatorily Convertible Notes (MCNs), which caused some disquiet amongst Barclays shareholders at the time.

Agius added that the usual fees for such underwriting would usually amount to between 1.5 and 2%. However, he suggested the higher fees for the capital raising deals, previously described as "exotic instruments" by Agius, were acceptable given the "extraordinary nature of the financing," the court heard.

The trial at Southwark Crown Court continues and is expected to last six months.

SEE ALSO: Ex-Barclays chairman feared execs would resign during financial crisis: 'This wasn’t what I signed up for, how do I get out of here?'

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This story was delivered to Business Insider Intelligence "Payments Briefing" subscribers hours before appearing on Business Insider. To be the first to know, please click here.

 Barclays rolled out Pay by Bank, which is offered to merchants by Mastercard-owned Vocalink and enables online shoppers in the UK to pay for purchases using their mobile banking app as a direct debit, to Barclaycard merchants. And in 2020, Barclays will launch the Pay by Bank app, which will extend access to over 6 million mobile banking users.

Partnering with Barclays can expand Pay by Bank’s presence and volume considerably among both UK merchants and consumers. 

Expanding its partnership with Barclays can accelerate Pay by Bank, which has been slow to take off. Pay by Bank was initially launched in 2015 by Zapp, a unit of Vocalink, with the expectation of reaching 20 million customers by 2017. It initially signed on several big-name banks, but the service likely hasn’t reached that goal: Prior to this extended partnership, it was still only available through Barclays’ peer-to-peer (P2P) app Pingit.

Extending its partnership to Barclays' merchants and consumers can drive volume and complement Mastercard’s other recent initiatives to grow Pay by Bank’s acceptance in the UK, including its partnership with major processor Worldpay, which will begin offering the service this year, and its partnership with London-based payment solutions provider PPRO to promote the adoption of Pay by Bank.

And because tensions between merchants over credit and debit card interchange fees are at a high globally, merchants will likely want to offer a solution that allows them to bypass card rails and not pay interchange; meanwhile, Mastercard will still be able to see volume, despite being a card network. 

Pay by Bank's success can feed into Mastercard’s overall growth ambitions in the UK and allow it to effectively scale in the region. Mastercard has been working to grow its presence in the UK payments space, and its £700 million ($917 million) acquisition of Vocalink has been helping it carve out a place at the forefront.

Vocalink gave Mastercard access to direct debit payments, which are rising in popularity: Direct debit transactions grew 4.9% in 2016 and are expected to reach 4.6 billion transactions by 2026. Growing Pay by Bank can increase Mastercard's market share — in a market where Visa holds an overwhelming 97% share of debit cards in the UK — and differentiate as it continues to deploy the service through more partners.

Further, growing its UK volume can boost Mastercard's worldwide gross dollar volume (GDV), which grew 14% annually in Q4 2018 to reach $1.55 trillion, marking a slight deceleration from its worldwide gross dollar volume (GDV) growth in Q4 2017.  

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• Barclays is in the process of revamping its electronic stock trading business.
• The bank is hoping to handle client orders more efficiently with a smarter algorithm that was recently developed.
• The move is one piece of Barclays' update on its electronic equities business, in addition to improved order execution and data analytics. 

A new era of electronic stock trading has arrived. 

Equities have always been considered on the cutting edge of trading technology, as Wall Street firms have pushed to trade faster and smarter over rivals. Traders have grown increasingly comfortable with algorithmic trading — the use of a computer program with a set of instructions – over the years. 

The potential around using artificial intelligence and machine learning have only bolstered this trend. As a result, Daniel Nehren, Barclays' head of statistical modeling and development for equities, said the level of innovation that can be expected coming out of Wall Street's stock trading desks in the coming years will be unparalleled.

"The next five years are really going to be the golden age for electronic trading," Nehren said in an interview with Business Insider.

The British bank is tackling the opportunity head on. Barclays is currently in the process using a single algorithm, as opposed to several, to handle clients' stock orders more efficiently, Nehren said.

Read more:Barclays is pushing its equities traders to learn how to code in Python, and it shows where stock trading is heading

Historically, if a client wanted to change its strategy during the trading day it would need to use multiple algos, cancelling and resubmitting orders along the way. Barclays' new algo will be able to adapt on the fly to a new client request or a changing market environment. 

"Because now I have one algo, I don't actually have to cancel and replace anything. I just have to change a parameter in that algo," Nehren said. "So it gives me a level of flexibility on how I do it in an efficient way"

Nehren, who joined Barclays in January 2018 after stops at Goldman Sachs, Deutsche Bank, JPMorgan, and, most recently, Citadel, has helped the bank become one of the fastest growing stock trading teams in the industry. Barclays' equities business generated $2.7 billion in income in 2018, a 25% uptick from 2017. That's more than double the average increase across the industry, which saw a 10% rise in equities revenue over the same time period, according to Coalition's 2018 investment bank index.

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Efficiency in handling client orders isn't the only benefit. Condensing the number of algos the banks uses for stock trading down to one will allow it to innovate more. Instead of devoting resources to maintaining multiple algos, which can be costly, Nehren said the bank can put money towards improving the single algo. 

Barclays began using the algo for internal trading back in October, and brought on its first client at the end of 2018. The bank is now in the process of slowly rolling out the algorithm to the rest of its clients. 

"Most of the sophisticated clients don’t care what algorithm you use," Nehren said. "The actual right way to do it is to build just one algorithm that is highly parameterized. That means you can still replicate the behavior that the client would want if the client is more used to a certain type of trading approach, but then allows me to be more generic."

See more: Barclays has the fastest growing stock trading team around — and it's posing a threat to some of the biggest players

Barclays new super algo is one piece of the banks' next generation platform it is in the process of rolling out for its stock trading business.

Nehren said nearly all clients have been onboarded to a revamped smart order router, software that helps brokers optimize trade execution. A real-time data analytics platform that will send trading signals into the smart order router and algo is currently being developed and will be rolled out over the course of the year.

Barclays has also continued to build out its team with experts in the low-latency field. Eric Anderson, who previously served as the global head of equities and prime technology at Nomura, and Eugen Sarbu, who also came from Nomura, were both brought on over the past year to help the bank with the next generation platform. 

Nehren said while all three components — algo, smart order router, and real-time data analytics platform — are impressive on their own, the true benefit comes from maintaining them on single, interconnected platform. Doing so allows them to work together more seamlessly and complement each other. 

In an age where new technology develops rapidly, Nehren said the next generation platform has been built for the long term. Nehren took special care to design the platform so new tech can be easily implemented when it's ready.

"Let’s focus on the core and building real performance first and then we can add the customization features as we build them," Nehren said. "Trying to build pure functionality once you have everything is a lot harder to do."

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• A London court today heard statements by former Barclays CEO John Varley at a landmark trial related to the bank's capital fundraising during the global financial crisis of 2008. “I do not accept that I am responsible for any criminal offence,” he said.
• The former boss indicated that so-called "advisory services agreements" with Qatari investors were done as part of a wider strategic diversification by the bank against a backdrop of "unprecedented turmoil" in financial markets. 
• Prosecutors claim the deals were fraudulent because they were not disclosed to other investors who got worse terms. 
• Barclays senior staff believed the bank might collapse if they could not get the deals done.
• Varley said he was too busy with meetings and "did not involve myself in the day-to-day running" of the deals.
• The defendants, including Varley and fellow executives Richard Boath, Tom Kalaris, and Roger Jenkins, have pleaded not guilty to all charges.

Barclays’ former CEO John Varley attempted to distance himself from fraud allegations that have enveloped a clutch of former bank executives during the financial crisis, saying he was bogged down with board meetings and political networking.

The case stems from Barclays' struggle to bring in investment during the crisis. Senior executives believed the bank was at risk of collapse if they could not get the deals done.

In the second month of the landmark fraud trial that could potentially put the former CEO behind bars for a decade, the jury today heard Varley’s statement, which was presumably intended to exonerate him:

“I could not and did not involve myself in the day-to-day running of the Business Heads’ operations,” he said, according to the statement read at London’s Crown Court on Thursday. “At the height of the financial crisis my responsibilities included extensive political and regulatory engagement.”

“I, together with my fellow chief executives in the other banks, was heavily engaged in the wider circle of senior civil servants, regulators, and government ministers striving to steer the banking industry and consequently the UK economy through this turbulent period.”

The Serious Fraud Office (SFO) alleges that Varley and other executives — Richard Boath, Thomas Kalaris, and Roger Jenkins — misled investors during the financial crisis in raising funds via financial instruments called "advisory services agreements" (ASAs). The SFO alleges that the deals paid Qatari companies £322 million ($423 million) — a 3.25% commission — in fees during capital raisings that were not disclosed to other investors. 

The defendants have pleaded not guilty to all charges.

Varley typically attended 10 board meetings a year, “but during the crisis was three times that number,” he said. “I do not accept that I am responsible for any criminal offence.”

"Unprecedented turmoil"

"The capital raisings which Barclays carried out in June and October 2008 took place in a period of unprecedented turmoil in the world’s financial markets," the jury heard.

The former boss also said that the decision to undertake ASAs with Qatari investors was part of his strategy to diversify Barclays shareholding internationally in an attempt to garner more business overseas. Only 25% of the bank's income and profit came from outside the UK at that time, the court heard. 

The Qatari interest in Barclays "coincided with the growing international influence of Qatar as a major investor and active sovereign wealth fund," the jury heard. The proposition that the Qataris might become shareholders in Barclays was relevant to my ambitions to diversify the Barclays share register and to my wish to grow Barclays within the Gulf states," Varley added. 

In his statement, Roger Jenkins, then executive chairman of investment management in the Middle East and North Africa, added to this sentiment, stating that Barclays was “underperforming our competitors and against our expectations" in the Middle East. 

Jenkins received a £25 million bonus for his role in the fundraising given his close relationship with the Qatari investors. He left Barclays a year after the fundraising on medical advice. "Unfortunately, in early August I suffered a heart attack which limited my personal involvement in the period between then and the time of the negotiations on the October capital raising," the jury heard.

Read more: See all our coverage of the Barclays Qatar trial here.

"Entirely separate"

The jury heard continued evidence from Glenn Leighton on Thursday. Leighton, a former director at Barclays’ financial institutions group, was the first to be cross-examined by the defence. 

The jury was also read transcripts of Leighton’s interviews with both the FCA and SFO, which were part of investigations into the Qatar deal. Leighton was quoted as saying the “advisory services agreement was entirely separate to the best of my knowledge at the time,” according to statements read by William Boyce QC.

The defence also alleged that the signing of the ASAs were celebrated by the executives saying the deals were “something that caused the bank to blow its trumpet, and broadcast as loudly as it could … we want the whole world to know about it because it’s so good for us, so good for the bank.”

The jury also heard evidence from Gay Huey-Evans, the deputy chair of the UK’s accounting watchdog this week. Huey-Evans was given the task of developing closer relationships with sovereign wealth funds in 2008 during a sustained boom in oil prices.

In an interview read in court Huey Evans suggested that she was unaware of the ASAs or the services provided under them. She told the SFO that she was unaware of any services Qatar provided to the bank, beyond an introduction to Abu Dhabi royal Sheikh Mansour bin Zayed al-Nahyan, the owner of Manchester City football club, which Barclays paid £66 million for an introduction to. 

“I have not seen or heard of this advisory services agreement before being shown it in connection with this case," the jury heard. "I wish I had known; I would have pressed Roger Jenkins over what services Qatar was providing,” she told SFO investigators during a 2015 interview. 

SEE ALSO: Barclays' former chairman says he was completely in the dark over deal with Qataris during the financial crisis

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• Former Barclays executive Roger Jenkins said he wouldn't sacrifice himself to save the jobs of then-CEO John Varley and former president Bob Diamond if a side deal related to a £4 billion investment in the bank went wrong, a London trial heard today.
• The executives all believed that the deal would save Barclays from collapse at the height of the financial crisis in 2008. But Jenkins feared the deal might have legal consequences, the court heard.
• "Well fuck that, I’m not taking a hit to save John and Bob’s jobs. Fuck that," Jenkins allegedly said. 
• Jenkins, Varley, and fellow executives Richard Boath and Tom Kalaris have all pleaded not guilty to charges of fraud. Varley potentially faces 10 years in prison if convicted.

A senior Barclays executive claimed he wouldn't sacrifice himself to save the jobs of then CEO John Varley and former president Bob Diamond if capital-raising negotiations at the height of the financial crisis fell apart, a London jury heard today.

"Well fuck that, I’m not taking a hit to save John and Bob’s jobs. Fuck that," the court heard that Roger Jenkins said. The quote from the former executive chairman of investment management in the Middle East and North Africa came in written testimony to the Serious Fraud Office by former Barclays Capital executive Richard Boath, in 2o14.

The implication is that Jenkins was afraid the deal might be toxic enough to generate legal consequences that would land on his doorstep.

The executives believed, during the darkest part of the global financial crisis, that if they failed to persuade a set of Qatari investors to give them £4 billion then Barclays might collapse. Other banks — Lehman Brothers, Bear Stearns and Northern Rock — had gone to the wall at the time.

The SFO alleges that Varley and other executives — Boath, Thomas Kalaris, and Roger Jenkins — misled investors in the deal by using "advisory services agreements" (ASAs). The SFO alleges that the side-deals paid Qatari companies £322 million ($423 million) — a 3.25% commission — in fees during the capital raisings, which were fraudulently not disclosed to other investors.

The defendants have pleaded not guilty to all charges. Bob Diamond is not accused of any wrongdoing. 

Jenkins received a £25 million bonus for his role in the fundraising, given his close relationship with the Qatari investors. During a conversation between Jenkins and Boath in 2008, the two executives discussed the viability of paying Qatari investors additional fees, adding up to a larger sum than other investors received, the court heard. 

Boath said: "We can’t do a capital markets transaction where we give one set of fees to the market or to one set of investors, and ... have a different set of economics for another set of investors because if they found out they’ll go completely nuts. You can’t do that." 

The interview with the SFO indicates that there were numerous discussions about the way in which the Qataris could be paid, with Boath at one point getting frustrated by the prospect of an ASA being used. "Tell them to get stuffed. Let’s do something else," the jury heard.

Read more: See all our coverage of the Barclays Qatar trial here.

Previously, the court heard that Thomas Kalaris, formerly head of Barclays Wealth Management said, "None of us wants to go to jail here." He was referring to a draft of the agreement. Boath responded, "it ain't worth it and apparently the food sucks." Kalaris then added: "No the food sucks and the sex is worse."

In his interview with the SFO, Boath made it clear that there "wasn’t a genuine concern about going to jail at all," and that his conversation with Kalaris was simply "a joke." He also claimed that his anxiety about the ASA deal "disappeared" after he learned that senior bank executives had consulted external legal advice about the agreements and the services provided.

"How could senior people at the top of their profession at a global bank like Barclays have agreed to this without some verification of the services?" Boath said.

The trial at Southwark Crown court is ongoing.

SEE ALSO: 'I do not accept that I am responsible for any criminal offence' says former Barclays CEO in landmark trial

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• Tim Throsby, the head of Barclays' international division and investment bank, is leaving after a little more than two years.
• The bank on Wednesday outlined a broad swathe of management moves. The sudden departure is potentially explosive for a company already grappling with an activist-shareholder revolt.

Tim Throsby, the head of Barclays' international division and investment bank, is leaving the UK bank after a little more than two years.

A statement from the bank on Wednesday outlined a broad swathe of management moves. Throsby was brought in with great fanfare from JPMorgan, a bigger US rival, in 2017. The sudden departure is potentially explosive for a company already grappling with an activist-shareholder revolt.

Ashok Vaswani, who heads Barclays UK, "will take on a newly created role within the Group as Global Head of Consumer Banking & Payments, reporting to Group CEO, Jes Staley," the company said.

Vaswani will "oversee the execution of plans for the Group's consumer banking and cards & payments businesses in the UK and internationally," it said.

Throsby left "as a consequence of the changes announced" on Wednesday, according to the firm.

Staley said in the statement: "We are grateful to Tim for his stewardship of Barclays International and BBPLC, and for his service to the Group more broadly. We wish him well for the future."

When he joined Barclays, Throsby vowed a new era of "commercial zeal" to match that of big bulge-bracket rivals and lamented that Barclays employees had lost a "suitable focus on opportunities to deploy risk,"according to Bloomberg.

Last year, Throsby led an overhaul of the investment bank, slashing about 100 senior staff members.

Insiders at the bank told Business Insider the shakeups had become exhausting. Some said they worried about the future of the investment-banking unit. The insiders declined to be named discussing corporate policy.

A Barclays spokesman, Simon Hailes, told Business Insider that the worries were "ridiculous" and that the commitment to Throsby's commercial zeal was unchanged as evidenced by Staley's comments in the statement:

"Competing in the top tier of global corporate and investment banking, enabled by our size, and commitment across asset classes, is important for Barclays' future returns.

The company on Wednesday said the other management changes included:

• The corporate and investment bank "will be managed as three distinct, though connected, units — Global Banking; Global Markets; and the Corporate Bank — all reporting directly to" Staley.
• "Global Banking will comprise Barclays' Advisory, DCM, and ECM businesses. It will be led by Joe McGrath, the Global Head of Banking."
• "Stephen Dainton, currently Global Head of Equities, will act as interim Global Head of Markets, while Barclays conducts an internal and external search for a permanent appointee to this crucial role."
• "Alistair Currie will lead Barclays' Corporate Bank as Head of Corporate Banking."
• McGrath, Dainton, and Currie will report to Staley "and join the Group Executive Committee," effective April 1.

All the moves are subject to regulatory approval, the company said.

When the bank announced a new class of managing directors late last year, insiders said the cuts allowed room for promotions for hungry and ambitious juniors. In December, Barclays hired two senior executives, Sanjeev Mordani and Ravi Singh, to work under the chief investment officer of its international unit, Art Mbanefo.

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This is a preview of the Global Payments Landscape report from Business Insider Intelligence, Business Insider's premium research service. To learn more about Business Insider Intelligence, click here. Current subscribers can log in and read the report here.

Cash is still prevalent in many emerging markets, defined as regions with rapidly evolving economies and increasing digital access. These countries represent 85% of the global population, leaving considerable room for payments innovation and for firms to enter to grow their global market share.

Digital payments trends

While cash is the payment method of choice among consumers in these regions, shifting dynamics have opened up opportunities for digital payment adoption: A rise in smartphone penetration, increased internet access, and government fraud prevention efforts have all played a role in streamlining digital payments.

Global cashless payments trends

In the latest Global Payments Landscape Report from Business Insider Intelligence, we identify four emerging markets — India, China, Brazil, and Kenya — that represent a glimpse into what the future of banking and payments looks like in emerging markets. Each market is at the forefront of payments innovation in the developing world and represents a unique approach to the transition to the digital economy that can serve as a strategic example for other emerging markets looking to achieve the same goals.

Here are some key takeaways from the report:

• India, China, Brazil, and Kenya are emblematic of four different noncash development strategies payments firms can replicate based on their respective market conditions. These four regions represent unique and meaningful expansion opportunities for payments providers, but they also highlight strategies firms can apply in other regions with similar market conditions.
• China serves as a blueprint for developing markets to turn popular smartphone apps into payment tools.
• India highlights the ability to enact government initiatives to turn smartphone innovation into access to the formal economy.
• Brazil exemplifies a government successfully breaking up a long-standing duopoly to drive payments competition.
• Kenya showcases how firms can leverage utilities like telecom access to build out financial services' access to the mainstream.

In full, the report:

• Identifies four emerging markets that are at the forefront of payment innovation in the developing world: India, China, Brazil, and Kenya.
• Discusses each market's unique approach to the transition to the digital economy, which can serve as a strategic example for other emerging markets looking to achieve the same goals. 
• Outlines strategies firms can apply to be successful in other regions with similar market conditions.

The companies mentioned in this report are: Airtel, Amazon, American Express, Alibaba, Alipay, Ant Financial, Banco Bradesco, Banco de Brazil, Barclays Bank of Kenya, Berkshire Hathaway, BillDesk, Caixa Economica, Cellulant, Cielo, Didi Chuxing, Elo, Flipkart, Google, Grab, ICICI, JD Finance, Mastercard, M-Pesa, NuBank, PagSeguro, PayPal, Paytm, PayU India, PesaLink, PhonePe, Rede, RuPay, Safaricom, Stone, Tencent, UnionPay, Visa, Vodafone, Walmart, WeChat Pay, WhatsApp, Western Union. 

Want to Learn More?

The Global Payments Landscapefrom Business Insider Intelligence compiles various payments snapshots, together illustrating how digital payment methods are supplementing or replacing cash in each market.

Each snapshot provides an overview of the payments industry in a particular country, and details the evolution of its development. They also highlight notable payments companies in each region and discuss the opportunities and challenges that players are facing in their respective markets.

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SEE ALSO: The Payment Industry Ecosystem: The trend towards digital payments and key players moving markets

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• A management overhaul at Barclays involving the shock departure of Tim Throsby, its investment-bank chief, raised questions among insiders about Throsby's No. 2 exec, Art Mbanefo.
• An ad hoc town-hall meeting at Barclays took place on Wednesday to calm the staffers of one of the bank's most important units, called FiRM. But Mbanefo, who heads the unit, wasn't there — he was on holiday abroad, sources said.
• "Art lost half his empire," an insider said.

Barclays' shock management overhaul and the departure of Tim Throsby, its investment-banking chief, were such a bombshell to staff that management called a last-minute ad hoc town-hall meeting to soothe nerves of staffers in one of its most important units.

Along with Throsby's departure after only two years at Barclays, the bank's statement on Wednesday outlined a big shake-up in which CEO Jes Staley will take on a clutch of new direct reports and more control of various units of the bank.

Conspicuously absent, insiders said, was any mention of one of the bank's most important units, the Firmwide Resource Management group, or FiRM. Art Mbanefo, its star leader — and Throsby's deputy — was also not mentioned.

To say FiRM is a key division of the bank is an understatement. Since the unit's debut in 2017, FiRM had been front and center in Throsby's mission to invigorate risk-taking while kick-starting returns at the bank.

The Wall Street Journal has said that "Mbanefo's job is to squeeze capital out of the unit that can be redeployed to juice up returns."

Highlighting FiRM's vital role, it was also reportedly tasked with fighting off the activist investor Ed Bramson, who has been trying to force Barclays into spinning out its sales and trading business.

The surprise town hall, insiders say, was intended to soothe nervous and confused FiRM employees. The omission of Mbanefo from the announcement was worrying, one insider said.

Making things more confusing, Mbanefo wasn't even at the meeting — he was on holiday abroad, the insiders said.

The town hall instead was hosted by a managing director in the FiRM unit, David Simpson.

Financial News described two outside sources as saying Mbanefo might have learned of his boss' departure alongside the rest of the staff.

The absence of Mbanefo during the announcement spoke to the surprise nature of Throsby's departure. Insiders say that text messages bounced around trading floors well into Thursday, pondering what Throsby's and the other executives' moves mean for the investment-bank unit and for Barclays as a whole.

It also raises questions about Mbanefo's role at Barclays, along with what eFinancialCareers estimates are at least 80 managing directors hired under Throsby.

One big issue is whether the management overhaul will affect the bank's performance.

Barclays said it wanted to generate about a 10% return on equity this year. Bank of America said in a note on Thursday that "challenging" investment-banking conditions meant the bank would need to slash costs by 7% to achieve that, "which looks hard to do even if investment spend is delayed."

Mbanefo did not respond to a request for comment. A Barclays spokesman on Wednesday said that the bank was as committed as ever to the investment-banking unit and that any talk of the contrary was "ridiculous." The spokesman declined to comment for this article.

The bank announced in late August that Mbanefo would expand his role to oversee business managers and the office of the CEO. Insiders said that some of those duties would now go under Paul Compton, the chief operating officer.

"Art lost half his empire," an insider said.

SEE ALSO: Barclays delivers a bombshell as investment-banking head Tim Throsby steps down

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This is a preview of a five-part slide deck from Business Insider Intelligence. To learn more about Business Insider Intelligence, click here. 

The pace of change in financial services has never been faster. In only the first quarter of 2019, Apple Card sent a shock wave through the credit card space, FIS' $35 billion Wirecard acquisition set a record in the payments industry, and Fifth Third's acquisition of MB Financial minted a new top-five bank. 

Looking ahead, the mix of investor capital, sweeping global regulations, technological developments, and financial services globalization will promise to ignite more major developments before the year ends.  

The incumbent banking and payment providers presiding over this landscape will face a mounting challenge to keep up. Firms must stay ahead of technology demands, preserve their bottom lines, grow their customer bases, and stay on the right side of regulators. 

Meanwhile, fintech threats keep growing in scale and breadth, buoyed by disruptive business models, agility, an advantageous regulatory position, and low overhead. These companies are reaching ever further across the financial services value chain, from banking to insurance, wealth management, and payments. 

In THE FUTURE OF FINTECH 2019, Business Insider Intelligence's fintech research team analyzes the five most important megatrends reshaping financial services with detailed data, analysis, and and actionable insights for financial services providers. 

Here are some key takeaways from the 130+ slide deck:

• New geographical fintech centers, investor focus on late-stage mega-rounds, and the emergence of specialized fintech funds are driving a surge in funding.
• The global open banking movement, led by regulators in most countries and industry players in some, is reshaping financial services and winning strategies to take advantage of this shift are emerging.
• As fintechs and tech companies are broadening their payments and banking offerings beyond core services,  incumbent firms are forced to shore up their defenses.
• Increasing regulatory scrutiny is driving change in the financial services industry, making winners and losers of incumbents, entrants, and consumers. 
• Technologies like AI and blockchain are moving from hype to reality, creating threats and opportunities. 

In full, the deck:

• Analyzes the five largest megatrends shaping financial services
• Identifies the best-of-breed providers getting ahead of industry developments
• Outlines key strategies other firms can use to mirror their success

Interested in getting the full report? Here are two ways to access it:

1. Purchase & download the full report from our research store. >>Purchase & Download Now
2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >>Learn More Now

The choice is yours. But however you decide to acquire this report, you've given yourself a powerful advantage in your understanding of the fast-moving world of Fintech.

The companies mentioned in the report are: Apple, Alibaba, Amazon, Ant Financial, Bank of America, Barclays, BBVA, BNP Paribas, BPCE, Brex, Credit Suisse, Circle, Citi, Clover, Danske Bank, Facebook, Fidelity, Flipkart, Grab, Goldman Sachs, Google, HSBC, IBM, ING Lemonade, JPMorgan Chase, MarketInvoice, Monzo, MUFG, N26, Nubank, OnDeck, Paypal, Paytm, PensionBee, Plaid, Policybazaar, PNC, R3, RBS, Ribbit Capital Robinhood, TransferWise, Toss, Simudyne, SBI Holdings, Square, SoftBank, Starling, Viola Group, Wealthify, Wealthsimple, and Wells Fargo, among others

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• Steve Eisman, the hedge-fund manager known for betting against the US housing market ahead of the 2008 crash, is holding a short position in Barclays.
• Eisman, who was played by Steve Carell in the movie "The Big Short," is a portfolio manager at Neuberger Berman. The fund disclosed the positions in a filing.
• Neuberger Berman is shorting a swath of European, Canadian, and US banks including Wells Fargo.

Steve Eisman, the hedge-fund manager known for betting against the US housing market ahead of the 2008 crash, is betting on a share decline in Barclays.

Neuberger Berman on January 31 disclosed that its Absolute Return Multi-Manager Fund was holding a short position against Barclays worth $455,000, or about 219,000 shares. That fund is thought to hold some of Eisman's positions, the research firm Breakout Point said.

"Barclays is a new addition to the fund's short portfolio," Breakout Point said.

Eisman, a central figure in the book "The Big Short" who was played by Steve Carell in the 2015 film of the same title, has short positions in other UK banks including Lloyds and RBS. He has come out against the risks of Brexit, having previously suggested that uncertainty around Britain's exit from the European Union was fueling his shorts in the country's banks.

"I don't think anybody has any idea what the economic impact of Brexit will be," he has told the BBC, via MarketWatch. "I don't, you don't, and all the people who have prognosticated about it, they certainly don't."

The fund is ramping up its bank shorts from the time of the most recent filings, according to analysis from Breakout Point. Neuberger Berman is boosting its overall bank short position to about $5 million from about $3.3 million. About 30% of this amount is, each, in bets against UK and Canadian banks, while about 35% is in positions in four EU stocks, according to Breakout Point.

A rough time for Barclays

Eisman's short raises more questions about the bank's operations under CEO Jes Staley. The bank is being targeted by the activist investor Edward Bramson, whose Sherborne Investors last year announced a more than 5% stake in the bank, with the clearly stated aim of moving Barclays away from a new reliance on investment banking.

Barclays dropped a bombshell last Wednesday when it announced that the head of the investment-banking division, Tim Throsby, was leaving the firm amid a raft of other management moves. And in February, one of the bank's largest backers pulled its stake in the lender.

Canadian and Wells Fargo short

Eisman has recently taken up positions betting against Canadian banks on the expectation that the country's housing market is set to contract.

The filing says Neuberger Berman has short positions in Canadian Imperial Bank of Commerce, Laurentian Bank of Canada, Royal Bank of Canada, and National Bank of Canada.

The fund also reported a short position in the US bank Wells Fargo, with the bet valued at about $236,000. Wells Fargo on Thursday announced its CEO, Tim Sloan, would retire.

SEE ALSO: A star investor in 'The Big Short' is betting against Canadian banks

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