Barclays Bank shifted its personal loan and Barclaycard insurance operations to Dublin primarily to try to avoid disclosing the huge profits it was making on its business, claimed a report.
The Guardian said documents had shown that income from Barclays' payment protection insurance (PPI) business had made up approximately a quarter of Barclay's personal finance profits, and 10% of the bank's overall profits during recent years.
It said the business was moved to Dublin in 1998 with the creation of Barclays Insurance Dublin, a new division which the bank described internally as a “response to disclosure threat”.
The move reportedly reduced Barclay's tax bill by taking advantage of Dublin's special 10% rate for financial services companies. The Guardian claimed that Barclays had 70% profit margins on the sale of PPI policies.
The newspaper said the bank made £240m profit on a turnover of £350m from the Dublin-based business during the 2000 to 2001 financial year.
It estimated that two million Barclays customers had purchased PPI policies on Barclayloans, Barclaycard and Woolwich mortgages. It said approximately 15 million Britons had bought such insurance policies.
According to internal documents obtained by the newspaper, the bank knew it faced a public relations disaster if the scale of its profits made from these policies became public knowledge.
It claimed the bank sponsored a secret public relations operation, codenamed Protect, to rebut claims it was making excessive profits.
If challenged on the profits, officials were instructed to explain that profits from PPI policies were subject to underwriting cycles, with short-term profits needing to be offset against the cost of claims in bad times.
A spokeswoman for Barclays said the bank's PPI policies offered good value for money, said the report. It said she denied that the payment protection business had accounted for 10% of the bank's profit in the last financial year.
