Barclays in legal battle with MFS administrators over part of £160m holding
The administrators of collapsed mortgage lender MFS are taking legal action against Barclays after the bank allegedly refused to hand back millions of pounds sat in its accounts.
Alix Partners, which was appointed as joint administrators for Market Financial Solutions in February, filed a High Court claim against Barclays on 31 July to claw back funds that belonged to the failed lender.
The claimant is alleging that Barclays has not returned the cash owed to the administrators of MFS Ltd, which serves as the lender’s central operating entity, distinct from its network of separate funding silos.
City PM understands Barclays was holding in excess of £160m belonging to the operating unit and silos at the time of the administration.
The collapse of MFS sent shockwaves through the financial system after a £1.3bn shortfall hit major global banks and private credit funds. The firm was accused of “double pledging”, where it used the same property assets as collateral for multiple loans from different institutions at the same time.
Barclays cut back risky lending after MFS hit
Alix Partners is now seeking to claw back a fraction of the £160m as part of the legal battle. Barclays confirmed it will be defending the claim but declined to comment further.
One source close to Alix Partners said there was “nothing normal” about the frozen cash and warned it could start a precedent of “one by one people going to the courts”.
Barclays freed up £21m of cash to Grant Thornton following a claim in April. The professional services firm is a court-appointed administrator for Trident Funding, a funding silo tied to MFS.
The blue-chip bank held a dual role in the MFS ecosystem, where it acted as both a lender and provided primary transactional bank activities. It began freezing MFS accounts in November 2025 after spotting irregularities.
Barclays total exposure to MFS is estimated to be around £500m, making it the single largest creditor to the group.
The bank took a hit of £228m from the collapse, which pushed its total credit impairment charges to £823m for the first three months of the year. This was up from £634m in the same period last year.
The group’s chief executive CS Venkatakrishnan, known as Venkat, said the bank was “constraining lending to certain structured finance counterparties” as a result of the hit. It also followed a £110m loss over the collapse of US sub-prime auto lender Tricolor.