A Fine Balance Between Transparency and Clarity

My title today is a quote by the CEO of Barclays Bank in describing the qualtity and quantity of information that they provide in their Annual Report.

Now to be fair the two words, transparency and clarity are not synonyms in each and every case of their use, but I wonder just what differentiation he intended to highlight by stating there was a need to achieve this fine balance between the two.

Perhaps he was referring to a potential lack of understanding on the part of the shareholders reading the Annual Report and so it was better to dumb things down such that they would be clear to even the most ignorant capitalist.

Or maybe he was focusing on the quants in the audience who want everything to be laid out in a transparent fashion that means give us all the numbers and considerations and we will draw our own conclusions.

Or perhaps he was just waffling and wishing to draw attention away from the recent decision to take a portfolio named Protium back on to its balance sheet.

Without going into great detail at the height of the financial crisis Barclays created a new company called C12 and put around $12.5 billion worth of toxic loans into it and then loaned the company the same $12.5 billion to finance the new vehicle called Protium. C12 and Protium were managed by the same Barclays personnel who were responsible for the portfolio in the first place.

Protium is also the name of a medicine to fight reflux so somehow aptly named in that the aim of the transaction was to ensure that these toxic assets didn't rear up and create heartburn of the highest degree for Barclays.

So far so good. A little creative accounting and Barclays doesn't have to hold capital against the positions and because it was then classified as a loan it didn't have to be marked to market daily creating volatility and frankly losses for Barclays.

So now they decide to bring it back onto their books. In so doing they first mark up the value of the portfolio by about $320 million although the indices relating to the assets in the portfolio fell over the period. They then pay the former Barclays bankers $83 million for the 18 months they managed the portfolio and for breaking the original contract-C12 was designed to run the portfolio down over a 10 year period.

Just to make things even more transparent Barclays has also agreed to buy out unidentified third-party investors in the fund for $270m. Or perhaps that bit falls under clarity.

The transparency and clarity provided by the transaction might not conform to Barclays original intentions for it would appear that they are shedding some light on their own subterfuge.

The Liberal Democrat Peer Lord Oakeshott certainly thinks so as he is requesting that Her Majesty's Revenue and Customs-the taxman-look into to this to ensure it wasn't just tax avoidance.

Finding that fine balance just got harder.