By Lawrence White and Iain Withers
LONDON(Reuters) - Barclays (LON:BARC) has published terms to buy back up to $17.6 billion of securities sold in breach of U.S. regulations, potentially offering investors a premium above face value, to resolve an error that has blighted its CEO's first year in office.
The lender said the so-called rescission offer will commence from Aug. 1 and will be open for a period of 30 U.S. business days.
The bank did not immediately disclose how much the exercise would cost in total, instead setting out what the expected terms of the deal might be.
The bank will compensate both current holders of the notes and past ones who since sold on the securities, it said, providing a list of the more than 3000 securities affected.
Barclays is expected to set aside close to 1 billion pounds ($1.2 billion) in litigation and conduct charges in the second quarter, mainly to cover costs arising from the error, according to a consensus forecast of analyst estimates published by the bank ahead of its earnings statement on Thursday.
Analysts expect the costs to be somewhat offset by a hedge placed by Barclays once it first identified the overissuance problem, with Credit Suisse (SIX:CSGN) banking analysts pencilling in a 720 million pound gain on this hedge in a note published earlier this month.
The lender said on March 28 it had oversold a range of complex structured and exchange-traded notes, overshooting by about 75% a $20.8 billion limit agreed with United States regulators.
Purchasers of the notes, considered "unregistered securities" under U.S. law, had the right to demand Barclays buy back the investments at the original price plus interest.
Barclays has previously set aside 540 million pounds in provisions towards expected costs of the repurchase offer.
Chief Executive C.S. Venkatakrishnan, who served as group chief risk officer during the period of the over-issuance when it began in February 2021, has also commissioned an external investigation to uncover the causes of the breach.
In an earlier statement on May 23, Barclays said its ultimate liability would depend on a combination of factors "including but not limited to" market conditions and the number of noteholders taking up that offer.
There is also little visibility on the size of fines U.S. and UK regulators may impose, or whether buyers of the cancelled notes bring civil claims against the bank in pursuit of additional compensation on top of the price paid for the securities, the bank has said.
Venkat, who took the top job in November, has described the matter as "particularly upsetting", given the time and money the bank had invested to tighten up risk controls since 2016.
($1 = 0.8280 pounds)