Another shadow banking hit – but otherwise, Barclays looks fine

Barclays boss CS Venkatakrishnan, having seen the bank hit in the space of six months by two high-profile blow-ups in the world of shadow banking, is pledging to take more care. “We are constraining lending to certain structured finance counterparties who operate more vulnerable business models and cannot convince us of the quality and independence of their financial controls,” he said.

There’s an obvious response to that vow of greater vigilance: what were you doing previously? Wouldn’t it have been a good idea in the first place not to lend to high-risk outfits with unconvincing financial controls – for example those with large mortgage exposures but small audit firms? There was, in other words, a sense in the chief executive’s comments of stable doors being shut rather too late.

But here’s the other point about Barclays’ twin embarrassments: they are significant, but not enormous in the grand scheme. The impairment charge in Tuesday’s first-quarter numbers for Market Financial Solutions (MFS), which collapsed in February amid allegations of fraud, was £228m. Last year’s event was a £110m hit from US sub-prime auto lender Tricolor, where claims of fraud were also to the fore.

Put those numbers in the context of the whole of Barclays and they are not game-changing. Pre-tax profits still rose 3% to £2.8bn in the first three months of 2026, which Venkatakrishnan called a “solid quarter”. Certainly, there was no reason to alter a £500m share buy-back, part of the medium-term plan to return oodles of cash to shareholders.

Being picky, one could point to the upwards trend in overall credit impairment charges in recent quarters – this period’s outcome, inflated by MFS, was £823m, up from £643m a year ago. But, again, the increase is miles away from being an explosion in bad debts. Banks take risks. Alleged frauds happen. One cannot say, on the basis of two screw-ups, that the current credit cycle is bound to end in tears.

Nor, of course, can one rush to the opposite extreme and sound the all-clear amid the general worries about shadow banking and private credit, two areas of the financial world that tend to blur into one another. Complex, opaque and leveraged lending is never going to be a source of relaxation, not least for central bankers who are plainly struggling to achieve visibility on the activities they don’t regulate. And life could obviously become hairy were private credit calamities to multiply and, worse still, somehow to merge into lending stresses created by the Middle East conflict.

But, viewed from the narrow lens of Barclays’ quarterly numbers, such frightening visions still feel a way off. “We do not currently see any credit weakness in the UK or in our US consumer business, nor in corporate lending,” said Venkatakrishnan. There is still time for the picture to deteriorate, especially if the oil price sticks around $110 a barrel for many more months. But, as long as there aren’t too many more MSF and Tricolor cockroaches in the kitchen, the starting position isn’t terrible.