UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 20-F
(Mark One)
☐ | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
☑ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2016
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
OR
☐ | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
Commission file numbers | Barclays PLC | 1-09246 | ||||
Barclays Bank PLC | 1-10257 |
BARCLAYS PLC
BARCLAYS BANK PLC
(Exact Names of Registrants as Specified in their Charter[s])
ENGLAND
(Jurisdiction of Incorporation or Organization)
1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND
(Address of Principal Executive Offices)
MARIE SMITH, +44 (0)20 7116 2907, MARIE.SMITH@BARCLAYS.COM
1 CHURCHILL PLACE, LONDON E14 5HP, ENGLAND
*(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Barclays PLC
Title of Each Class | Name of Each Exchange On Which Registered | |
25p ordinary shares | New York Stock Exchange* |
Title of Each Class | Name of Each Exchange On Which Registered | |
American Depositary Shares, each |
New York Stock Exchange | |
4.375% Fixed Rate Subordinated Notes due |
New York Stock Exchange | |
2.75% Fixed Rate Senior Notes due 2019 |
New York Stock Exchange | |
2.00% Fixed Rate Senior Notes due 2018 |
New York Stock Exchange | |
3.65% Fixed Rate Senior Notes due 2025 |
New York Stock Exchange | |
2.875% Fixed Rate Senior Notes due 2020 |
New York Stock Exchange | |
5.25% Fixed Rate Senior Notes due 2045 |
New York Stock Exchange | |
3.25% Fixed Rate Senior Notes due 2021 |
New York Stock Exchange | |
4.375% Fixed Rate Senior Notes due 2026 |
New York Stock Exchange | |
5.20% Fixed Rate Subordinated Notes due 2026 |
New York Stock Exchange | |
3.20% Fixed Rate Senior Notes due 2021 |
New York Stock Exchange | |
Floating Rate Senior Notes due 2021 |
New York Stock Exchange | |
Floating Rate Senior Notes due 2023 |
New York Stock Exchange |
Title of Each Class | Name of Each Exchange On Which Registered | |
3.684% Fixed Rate Senior Notes due 2023 |
New York Stock Exchange | |
4.337% Fixed Rate Senior Notes due 2028 |
New York Stock Exchange | |
4.950% Fixed Rate Senior Notes due 2047 |
New York Stock Exchange |
* | Not for trading, but in connection with the registration of American Depositary Shares, pursuant to the requirements to the Securities and Exchange Commission. |
Barclays Bank PLC
Title of Each Class
|
Name of Each Exchange On Which Registered
| |
Callable Floating Rate Notes 2035 | New York Stock Exchange | |
Non-Cumulative Callable Dollar Preference Shares, Series 3 | New York Stock Exchange* | |
American Depositary Shares, Series 3, each representing one Non-Cumulative Callable Dollar Preference Share, Series 3 | New York Stock Exchange | |
Non-Cumulative Callable Dollar Preference Shares, Series 5 | New York Stock Exchange* | |
American Depositary Shares, Series 5, each representing one Non-Cumulative Callable Dollar Preference Share, Series 5 | New York Stock Exchange | |
5.140% Lower Tier 2 Notes due October 2020 | New York Stock Exchange | |
iPath® Bloomberg Commodity Index Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Agriculture Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Aluminum Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Cocoa Subindex Total ReturnSM ETN | NYSE Arca |
iPath® Bloomberg Coffee Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Copper Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Cotton Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Energy Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Grains Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Industrial Metals Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Lead Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Livestock Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Natural Gas Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Nickel Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Platinum Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Precious Metals Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Softs Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Sugar Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® Bloomberg Tin Subindex Total ReturnSM ETN | NYSE Arca | |
iPath® S&P GSCI® Total Return Index ETN | NYSE Arca | |
iPath® S&P GSCI® Crude Oil Total Return Index ETN | NYSE Arca | |
iPath® CBOE S&P 500 BuyWrite IndexSM ETN | NYSE Arca | |
iPath® MSCI India IndexSM ETN | NYSE Arca | |
iPath® EUR/USD Exchange Rate ETN | NYSE Arca | |
iPath® GBP/USD Exchange Rate ETN | NYSE Arca | |
iPath® JPY/USD Exchange Rate ETN | NYSE Arca | |
iPath® S&P 500 VIX Short-Term FuturesTM ETN | NYSE Arca |
iPath® S&P 500 VIX Mid-Term FuturesTM ETN | NYSE Arca | |
iPath® Inverse S&P 500 VIX Short-Term FuturesTM ETN | NYSE Arca | |
iPath® Long Extended Russell 1000® TR Index ETN | NYSE Arca | |
iPath® Long Extended Russell 2000® TR Index ETN | NYSE Arca | |
iPath® Long Enhanced MSCI EAFE® TR Index ETN | NYSE Arca | |
iPath® Long Enhanced MSCI Emerging Markets Index ETN | NYSE Arca | |
iPath® Short Enhanced MSCI Emerging Markets Index ETN | NYSE Arca | |
iPath® Long Extended S&P 500® TR Index ETN | NYSE Arca | |
iPath® Global Carbon ETN | NYSE Arca | |
iPath® Optimized Currency Carry ETN | NYSE Arca | |
iPath® US Treasury Steepener ETN | NASDAQ | |
iPath® US Treasury Flattener ETN | NASDAQ | |
iPath® US Treasury 2-year Bull ETN | NASDAQ | |
iPath® US Treasury 2-year Bear ETN | NASDAQ | |
iPath® US Treasury 10-year Bull ETN | NASDAQ | |
iPath® US Treasury 10-year Bear ETN | NASDAQ | |
iPath® US Treasury Long Bond Bull ETN | NASDAQ | |
iPath® US Treasury Long Bond Bear ETN | NASDAQ | |
iPath® Pure Beta Broad Commodity ETN | NYSE Arca | |
iPath® Pure Beta S&P GSCI®-Weighted ETN | NYSE Arca | |
iPath® Pure Beta Cocoa ETN | NYSE Arca | |
iPath® Pure Beta Coffee ETN | NYSE Arca | |
iPath® Pure Beta Cotton ETN | NYSE Arca |
iPath® Pure Beta Sugar ETN | NYSE Arca | |
iPath® Pure Beta Aluminum ETN | NYSE Arca | |
iPath® Pure Beta Copper ETN | NYSE Arca | |
iPath® Pure Beta Lead ETN | NYSE Arca | |
iPath® Pure Beta Nickel ETN | NYSE Arca | |
iPath® Pure Beta Crude Oil ETN | NYSE Arca | |
iPath® Seasonal Natural Gas ETN | NYSE Arca | |
iPath® Pure Beta Agriculture ETN | NYSE Arca | |
iPath® Pure Beta Grains ETN | NYSE Arca | |
iPath® Pure Beta Softs ETN | NYSE Arca | |
iPath® Pure Beta Industrial Metals ETN | NYSE Arca | |
iPath® Pure Beta Energy ETN | NYSE Arca | |
iPath® Pure Beta Livestock ETN | NYSE Arca | |
iPath® Pure Beta Precious Metals ETN | NYSE Arca | |
iPath® US Treasury 5-year Bull ETN | NASDAQ | |
iPath® US Treasury 5-year Bear ETN | NASDAQ | |
iPath® S&P 500 Dynamic VIX ETN | NYSE Arca | |
iPath® Inverse S&P 500 VIX Short-Term FuturesTM ETN (II) | NYSE Arca | |
iPath® GEMS IndexTM ETN | NYSE Arca | |
iPath® GEMS Asia 8 ETN | NYSE Arca | |
iPath® Asian and Gulf Currency Revaluation ETN | NYSE Arca | |
iPath® S&P MLP ETN | NYSE Arca | |
iPath® Series B S&P GSCI Crude Oil Total Return Index ETN | NYSE Arca | |
Barclays ETN+ S&P 500® VEQTOR ETN | NYSE Arca |
Barclays ETN+ Shiller CAPETM ETNs | NYSE Arca | |
Barclays ETN+ Select MLP ETN | NYSE Arca | |
Barclays ETN+ FI Enhanced Europe 50 ETN | NYSE Arca | |
Barclays ETN+ FI Enhanced Global High Yield ETN | NYSE Arca | |
Barclays ETN+ FI Enhanced Europe 50 ETN Series B | NYSE Arca | |
Barclays Women in Leadership ETN | NYSE Arca | |
Barclays Return on Disability ETN | NYSE Arca | |
Barclays Inverse US Treasury Composite ETN | NASDAQ |
* | Not for trading, but in connection with the registration of American Depositary Shares, pursuant to the requirements to the Securities and Exchange Commission. |
Securities registered or to be registered pursuant to Section 12(g) of the Act: None
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None
Indicate the number of outstanding shares of each of the issuers classes of capital or common stock as of the close of the period covered by the annual report.
Barclays PLC | 25p ordinary shares | 16,804,603,949 | ||||
Barclays Bank PLC | £1 ordinary shares | 2,342,558,515 | ||||
£1 preference shares | 1,000 | |||||
£100 preference shares | 20,930 | |||||
100 preference shares | 31,856 | |||||
$0.25 preference shares | 161,000,000 | |||||
$100 preference shares | 58,133 |
Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☑ No ☐
If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934.
Yes ☐ No ☑
NoteChecking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.
Yes ☑ No ☐
Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes ☐ No ☐
Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check one):
Barclays PLC
Large Accelerated Filer ☑ | Accelerated Filer ☐ | Non-Accelerated Filer ☐ |
Barclays Bank PLC
Large Accelerated Filer ☐ | Accelerated Filer ☐ | Non-Accelerated Filer ☑ |
*Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐
International Financial Reporting Standards as issued by the International Accounting Standards Board ☑
Other ☐
*If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:
Item 17 ☐
Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☑
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
Yes ☐ No ☐
SEC Form 20-F Cross reference information
Form 20-F item number | Page and caption references in this document* | |||||
1 | Identity of Directors, Senior Management and Advisers | Not applicable | ||||
2 | Offer Statistics and Expected Timetable | Not applicable | ||||
3 | Key Information | |||||
A. | Selected financial data | 193, 195, 321-322, 447-448 | ||||
B. | Capitalization and indebtedness | Not applicable | ||||
C. | Reason for the offer and use of proceeds | Not applicable | ||||
D. | Risk factors | 86-96 | ||||
4 | Information on the Company | |||||
A. | History and development of the company | 44-46, 188, 233 (note 6), 235 (note 9), 294-295 (note 36), 298-299 (note 38), 306-307 (note 44), 308-316 (note 46), 429, 465-467 | ||||
B. | Business overview | v (Market and other data), 182-189, 197-211, 227-230, 231 (note 2) | ||||
C. | Organizational structure | 188, 294-295 (note 36), 308-316 (note 46), 429 | ||||
D. | Property, plants and equipment | 223, 264 (note 21), 266-267 (note 23), 269 (note 25) | ||||
4A | Unresolved staff comments | Not applicable | ||||
5 | Operating and Financial Review and Prospects | |||||
A. | Operating results | vi-x, 107, 149-150, 182-189, 191-211, 231-316 | ||||
B. | Liquidity and capital resources | 104-107, 121-122, 140, 152, 154-159, 161-177, 182-189, 242-244 (note 15), 281-284 (note 30), 285 (note 31), 299-301 (note 39), 304 (note 43) | ||||
C. | Research and development, patents and licenses, etc. | 44 | ||||
D. | Trend information | | ||||
E. | Off-balance sheet arrangements | 272 (note 28), 295-298 (note 37), 299-301 (note 39) | ||||
F. | Tabular disclosure of contractual obligations | 406-407 | ||||
G. | Safe harbor | iv-v (Forward-looking statements) | ||||
6 | Directors, Senior Management and Employees | |||||
A. | Directors and senior management | 3-5, 332-336 | ||||
B. | Compensation | 51-85, 287-288 (note 34), 289-293 (note 35), 302-304 (note 41), 426, 446 (note r) | ||||
C. | Board practices | 6-50, 80-83 | ||||
D. | Employees | 47, 50 (Permanent employees by region), 199, 200, 203, 207, 208, 210 | ||||
E. | Share ownership | 51-85, 287-288 (note 34), 302-304 (note 41), 339-341 | ||||
7 | Major Shareholders and Related Party Transactions | |||||
A. | Major shareholders | 45, 331-332 | ||||
B. | Related party transactions | 210, 302-304 (note 41), 426, 446 (note r) | ||||
C. | Interests of experts and counsel | Not applicable |
Form 20-F item number | Page and caption references in this document* | |||||
8 | Financial Information | |||||
A. | Consolidated statements and other financial information | 193-195, 219-316, 428-446 | ||||
B. | Significant changes | Not applicable | ||||
9 | The Offer and Listing | |||||
A. | Offer and listing details | 321 | ||||
B. | Plan of distribution | Not applicable | ||||
C. | Markets | 321 | ||||
D. | Selling shareholders | Not applicable | ||||
E. | Dilution | Not applicable | ||||
F. | Expenses of the issue | Not applicable | ||||
10 | Additional Information | |||||
A. | Share capital | Not applicable | ||||
B. | Memorandum and Articles of Association | 43-46, 317-319 | ||||
C. | Material contracts | 67-68 | ||||
D. | Exchange controls | 326 | ||||
E. | Taxation | 323-325 | ||||
F. | Dividends and paying assets | Not applicable | ||||
G. | Statement by experts | Not applicable | ||||
H. | Documents on display | 326 | ||||
I. | Subsidiary information | 294-295 (note 36) 308-316 (note 46) | ||||
11 | Quantitative and Qualitative Disclosure about Market Risk | 103, 141-151, 304 (note 43), 373-379 | ||||
12 | Description of Securities Other than Equity Securities | |||||
A. | Debt Securities | Not applicable | ||||
B. | Warrants and Rights | Not applicable | ||||
C. | Other Securities | Not applicable | ||||
D. | American Depositary Shares | 321, 327-328 | ||||
13 | Defaults, Dividends Arrearages and Delinquencies | Not applicable | ||||
14 | Material Modifications to the Rights of Security Holders and Use of Proceeds | Not applicable | ||||
15 | Controls and Procedures | |||||
A. | Disclosure controls and procedures | 332 | ||||
B. | Managements annual report on internal control over financial reporting | 41 | ||||
C. | Attestation report of the registered public accounting firm | 218 | ||||
D. | Changes in internal control over financial reporting | 41 | ||||
16A | Audit Committee Financial Expert | 11 |
16B | Code of Ethics | 330 | ||||
16C | Principal Accountant Fees and Services | 17-19, 304 (note 42), 329 | ||||
16D | Exemptions from the Listing Standards for Audit Committees | Not applicable | ||||
16E | Purchases of Equity Securities by the Issuer and Affiliated Purchasers | 46, 284 (Share repurchase) | ||||
16F | Change in Registrants Certifying Accountant | Not applicable | ||||
16G | Corporate Governance | 330 | ||||
17 | Financial Statements | Not applicable (See Item 8) | ||||
18 | Financial Statements | Not applicable (See Item 8) | ||||
19 | Exhibits | Exhibit Index |
* | Captions have been included only in respect of pages with multiple sections on the same page in order to identify the relevant caption on that page covered by the corresponding Form 20-F item number. |
Building the bank
of the future
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Notes
The term Barclays or Group refers to Barclays PLC together with its subsidiaries. Unless otherwise stated, the income statement analysis compares the year ended 31 December 2016 to the corresponding 12 months of 2015 and balance sheet analysis as at 31 December 2016 with comparatives relating to 31 December 2015. The abbreviations £m and £bn represent millions and thousands of millions of Pounds Sterling respectively; the abbreviations $m and $bn represent millions and thousands of millions of US Dollars respectively; and the abbreviations m and bn represent millions and thousands of millions of Euros respectively.
Comparatives have been restated to reflect the implementation of the Group business reorganisation. These restatements were detailed in our Form 6-K filed with the SEC dated 15 April 2016.
The information in this announcement, which was approved by the Board of Directors on 22 February 2017, does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2015, which included certain information required for the Joint Annual Report on Form 20-F of Barclays PLC and Barclays Bank PLC to the SEC and which contained an unqualified audit report under Section 495 of the Companies Act 2006 (which did not make any statements under Section 498 of the Companies Act 2006) have been delivered to the Registrar of Companies in accordance with Section 441 of the Companies Act 2006.
Barclays is a frequent issuer in the debt capital markets and regularly meets with investors via formal road-shows and other ad hoc meetings. Consistent with its usual practice, Barclays expects that from time to time over the coming quarter it will meet with investors globally to discuss these results and other matters relating to the Group.
Certain non-IFRS measures
Barclays management believes that the non-International Financial Reporting Standards (non-IFRS) measures included in this document provide valuable information to readers of its financial statements because they enable the reader to identify a more consistent basis for comparing the business performance between financial periods, and provide more detail concerning the elements of performance which the managers of these businesses are most directly able to influence or are relevant for an assessment of the Group. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by Barclays management. However, any non-IFRS measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well.
There are a number of key judgement areas, for example impairment calculations, which are based on models and which are subject to ongoing adjustment and modifications. Reported numbers reflect best estimates and judgements at the given point in time.
Notable items as set out on page 197 are considered to be significant items impacting comparability of performance and have been called out for each of the business segments.
Relevant terms that are used in this document but are not defined under applicable regulatory guidance or International Financial Reporting Standards (IFRS) are explained in the Results glossary of non-IFRS performance measures on page 212 and the glossary of terms on pages 449 to 464.
i
Key non-IFRS measures included in this document, and the most directly comparable IFRS measures, are:
Attributable profit/(loss) excluding notable items represents profit after tax excluding notable items less profit attributable to non-controlling interests. The comparable IFRS measure is attributable profit. A reconciliation is presented on pages vi to vii;
Average tangible shareholders equity is calculated as the average equity adjusted to remove the effect of goodwill and intangible assets. The comparable IFRS measure is average equity. A reconciliation is provided on page ix;
Average allocated tangible equity represents the average tangible equity that is allocated to Barclays Core, and to the businesses. The comparable IFRS measure is average equity. A reconciliation is provided on page ix;
Average tangible equity is equivalent to average tangible shareholders equity;
Barclays Core results are considered to be non-IFRS because Barclays Core represents the sum of three Operating Segments, each of which is prepared in accordance with IFRS 8; Operating Segments: Barclays UK, Barclays International and Head Office. A reconciliation is provided on pages vi to viii;
Basic earnings per share excluding notable items represents attributable profit excluding all notable items (page 197) divided by the basic weighted average number of shares in issue. The comparable IFRS measure is basic earnings per share. A reconciliation is provided on page 215;
Core basic earnings per share excluding notable items represents basic earnings per share excluding notable items calculated for Barclays Core. Barclays Core represents the sum of three Operating Segments, each of which is prepared in accordance with IFRS 8, Operating Segments: Barclays UK, Barclays International and Head Office. The comparable IFRS measure is basic earnings per share. A reconciliation is provided on page 215;
Cost: income ratio excluding notable items represents the ratio between total operating expenses excluding notable items and total income excluding notable items. The comparable IFRS measure is cost: income ratio. A reconciliation is provided on pages vi to viii;
Core cost: income ratio excluding notable items represents cost: income ratio excluding notable items calculated for Barclays Core. Barclays Core represents the sum of three Operating Segments, each of which is prepared in accordance with IFRS 8, Operating Segments: Barclays UK, Barclays International and Head Office. The comparable IFRS measure is cost: income ratio. A reconciliation is provided on pages vi to viii;
Total income excluding notable items represents total income excluding the impact of own credit, gain on disposal of Barclays share of Visa Europe Limited, revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology and gain on US Lehman acquisition assets. The comparable IFRS measure is total income. A full list of notable items is shown on page 197. A reconciliation is provided on pages vi to viii;
Net operating income excluding notable items represents net operating income excluding the impact of own credit, gain on disposal of Barclays share of Visa Europe Limited, gain on US Lehman acquisition assets and revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology. The comparable IFRS measure is net operating income. A full list of notable items is shown on page 197. A reconciliation is provided on pages vi to viii;
ii
Total operating expenses excluding notable items represents total operating expenses excluding the impact of provisions for UK customer redress, provisions for ongoing investigations and litigation including Foreign Exchange, gain on valuation of a component of the defined retirement benefit liability, impairment of goodwill and other assets relating to businesses being disposed and losses on sale relating to the Spanish, Portuguese and Italian businesses. The comparable IFRS measure is total operating expenses. A full list of notable items is shown on page 197. A reconciliation is provided on pages vi to viii;
Profit after tax excluding notable items represents profit after tax excluding the post-tax impact of own credit, impairment of goodwill and other assets relating to businesses being disposed, provisions for UK customer redress, gain on US Lehman acquisition assets, provisions for ongoing investigations and litigation including Foreign Exchange, losses on sale relating to the Spanish, Portuguese and Italian businesses, revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology, gain on a valuation of a component of the defined retirement benefit liability, and gain on disposal of Barclays share of Visa Europe Limited. The comparable IFRS measure is profit after tax. A reconciliation is provided on pages vi to viii;
Profit before tax excluding notable items represents profit before tax excluding the impact of own credit, impairment of goodwill and other assets relating to businesses being disposed, provisions for UK customer redress, excluding gain on US Lehman acquisition assets, provisions for ongoing investigations and litigation including Foreign Exchange, losses on sale relating to the Spanish, Portuguese and Italian businesses, revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology, gain on a valuation of a component of the defined retirement benefit liability, and gain on disposal of Barclays share of Visa Europe Limited. The comparable IFRS measure is profit before tax. A reconciliation is provided on pages vi to viii;
Return on average allocated tangible equity represents the return on average tangible equity that is allocated to Barclays Core, and to the businesses. The comparable IFRS measure is return on equity. A reconciliation is provided on page ix;
Attributable profit/(loss) excluding notable items represents attributable profit excluding the post-tax impact of own credit, impairment of goodwill and other assets relating to businesses being disposed, provisions for UK customer redress, gain on US Lehman acquisition assets, provisions for ongoing investigations and litigation including Foreign Exchange, losses on sale relating to the Spanish, Portuguese and Italian businesses, revision of Education, Social Housing, and Local Authority (ESHLA) valuation methodology, gain on a valuation of a component of the defined retirement benefit liability, and gain on disposal of Barclays share of Visa Europe Limited. The comparable IFRS measure is attributable profit. A full list of notable items is shown on page 197. A reconciliation to IFRS is presented on pages vi to viii;
iii
Return on average tangible shareholders equity excluding notable items represents attributable profit excluding notable items, including an adjustment for the tax credit recorded in reserves in respect of other equity instruments, as a proportion of average shareholders equity excluding non-controlling interests and other equity instruments adjusted for the deduction of intangible assets and goodwill. The comparable IFRS measure is return on equity. A reconciliation is provided on page 214;
Return on average tangible shareholders equity is calculated as the return on equity adjusted to remove the effect of goodwill and intangible assets. The comparable IFRS measure is return on equity. A reconciliation is provided on page ix;
Tangible net asset value per share is calculated by dividing shareholders equity, excluding non-controlling interests and other equity instruments, less goodwill and intangible assets, by the number of issued ordinary shares. The components of the calculation have been included on page 215;
Total operating expenses, excluding conduct and litigation charges, and other notable items represents total operating expenses excluding the impact of impairment of goodwill and other assets relating to businesses being disposed, provisions for UK customer redress, provisions for ongoing investigations and litigation including Foreign Exchange, and gain on a valuation of a component of the defined retirement benefit liability. The comparable IFRS measure is total operating expenses. A reconciliation is provided on pages vi to viii;
Total operating expenses excluding conduct and litigation charges represents total operating expenses excluding the impact of provisions for UK customer redress, and provisions for ongoing investigations and litigation including Foreign Exchange. The comparable IFRS measure is total operating expenses. A reconciliation to IFRS is provided on pages vi to viii; and
Transitional CET1 ratio according to FSA October 2012. This measure is calculated by taking into account the statement of the Financial Services Authority, the predecessor of the Prudential Regulation Authority, on CRD IV transitional provisions in October 2012, assuming such provisions were applied as at 1 January 2014. This ratio is used as the relevant measure starting 1 January 2014 for purposes of determining whether the automatic write-down trigger (specified as a Transitional CET1 ratio according to FSA October 2012 of less than 7.00%) has occurred under the terms of the Contingent Capital Notes issued by Barclays Bank PLC on November 21, 2012 (CUSIP: 06740L8C2) and April 10, 2013 (CUSIP: 06739FHK0). Please refer to page 155 for a reconciliation of this measure to CRD IV CET1 ratio.
Forward-looking statements
This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to the Group. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results or other financial condition or performance measures could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as may, will, seek, continue, aim, anticipate, target, projected, expect, estimate, intend, plan, goal, believe, achieve or other words of similar meaning. Examples of forward-looking statements include, among others, statements or guidance regarding the Groups future financial position, income growth, assets, impairment charges, provisions, notable items, business strategy, structural reform, capital, leverage and other regulatory ratios, payment of dividends (including dividend pay-out ratios and expected payment strategies), projected levels of growth in the banking and financial markets, projected costs or savings, original and revised commitments and targets in connection with the strategic cost programme and the Group Strategy Update, rundown of assets and businesses within Barclays Non-Core, sell down of the Groups interest in Barclays Africa Group Limited, estimates of capital expenditures and plans and objectives for future operations, projected employee numbers and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. These may be affected by changes in legislation, the development of standards and interpretations under International Financial Reporting Standards, evolving practices with regard to the interpretation and application of accounting and regulatory standards, the outcome of current and future legal proceedings and regulatory investigations, future levels of conduct provisions, future levels of notable items, the policies and actions of governmental and regulatory authorities, geopolitical risks and the impact of competition. In addition, factors including (but not limited to) the following may have an effect: capital, leverage and other regulatory rules (including with regard to the future structure of the Group) applicable to past, current and future periods; UK, US, Africa, Eurozone and global macroeconomic and business conditions; the effects of continued volatility in credit markets; market related risks such as changes in interest rates and foreign exchange rates; effects of changes in valuation of credit market exposures; changes in valuation of issued securities; volatility in capital markets; changes in credit ratings of any entities within the Group or any securities issued by such entities; the potential for one or more countries exiting the Eurozone; the implications of the results of the 23 June 2016 referendum in the United Kingdom and the disruption that may result in the UK and globally from the withdrawal of the United Kingdom from the European Union; the implementation of the strategic cost programme; and the success of future acquisitions, disposals and other strategic transactions. A number of these influences and factors are beyond the Groups control. As a result, the Groups actual future results, dividend payments, and capital and leverage ratios may differ materially from the plans, goals, expectations and guidance set forth in the Groups forward-looking statements. Additional risks and factors which may impact the Groups future financial condition and performance are identified in our filings with the SEC which are available on the SECs website at www.sec.gov.
Any forward-looking statements made herein speak only as of the date they are made and it should not be assumed that they have been revised or updated in the light of new information or future events. Except as required by the Prudential Regulation Authority, the Financial Conduct Authority, the London Stock Exchange plc (the LSE) or applicable law, Barclays expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Barclays expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that Barclays has made or may make in documents it has published or may publish via the Regulatory News Service of the LSE and/or has filed or may file with the SEC.
iv
Subject to our obligations under the applicable laws and regulations of the UK and the US in relation to disclosure and ongoing information, we undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Market and other data
This document contains information, including statistical data, about certain Barclays markets and its competitive position. Except as otherwise indicated, this information is taken or derived from Datastream and other external sources. Barclays cannot guarantee the accuracy of information taken from external sources, or that, in respect of internal estimates, a third party using different methods would obtain the same estimates as Barclays.
Uses of Internet addresses
This document contains inactive textual addresses to internet websites operated by us and third parties. Reference to such websites is made for information purposes only, and information found at such websites is not incorporated by reference into this document.
References to Pillar 3 report
This document contains references throughout to Barclays annual risk report, the Pillar 3. Reference to the aforementioned report is made for information purposes only, and information found in this report is not incorporated by reference into this document.
v
Barclays Group results reconciliation for the year ended |
31.12.16 | |||||||||||||||||||||||
Barclays UK |
Barclays International |
Head Office |
Barclays Core |
Barclays Non-Core |
Barclays Group |
|||||||||||||||||||
£m | £m | £m | £m | £m | £m | |||||||||||||||||||
Total income |
7,517 | 14,995 | 103 | 22,615 | (1,164 | ) | 21,451 | |||||||||||||||||
Own credit |
- | - | (35 | ) | (35 | ) | - | (35 | ) | |||||||||||||||
Gain on disposal of Barclays share of Visa Europe Limited |
151 | 464 | - | 615 | - | 615 | ||||||||||||||||||
Total income excluding notable items |
7,366 | 14,531 | 138 | 22,035 | (1,164 | ) | 20,871 | |||||||||||||||||
Credit impairment charges and other provisions |
(896 | ) | (1,355 | ) | - | (2,251 | ) | (122 | ) | (2,373 | ) | |||||||||||||
Net operating income/(expenses) |
6,621 | 13,640 | 103 | 20,364 | (1,286 | ) | 19,078 | |||||||||||||||||
Notable items |
151 | 464 | (35 | ) | 580 | - | 580 | |||||||||||||||||
Net operating income/(expenses) excluding notable items |
6,470 | 13,176 | 138 | 19,784 | (1,286 | ) | 18,498 | |||||||||||||||||
Operating expenses |
(3,792 | ) | (9,129 | ) | (135 | ) | (13,056 | ) | (1,509 | ) | (14,565 | ) | ||||||||||||
UK bank levy |
(48 | ) | (284 | ) | (2 | ) | (334 | ) | (76 | ) | (410 | ) | ||||||||||||
Total operating expenses excluding litigation and conduct, and other notable items | (3,840 | ) | (9,413 | ) | (137 | ) | (13,390 | ) | (1,585 | ) | (14,975 | ) | ||||||||||||
Litigation and conduct |
(1,042 | ) | (48 | ) | (27 | ) | (1,117 | ) | (246 | ) | (1,363 | ) | ||||||||||||
Provisions for UK customer redress |
(1,000 | ) | - | - | (1,000 | ) | - | (1,000 | ) | |||||||||||||||
Litigation and conduct excluding notable items |
(42 | ) | (48 | ) | (27 | ) | (117 | ) | (246 | ) | (363 | ) | ||||||||||||
Total operating expenses |
(4,882 | ) | (9,461 | ) | (164 | ) | (14,507 | ) | (1,831 | ) | (16,338 | ) | ||||||||||||
Notable items |
(1,000 | ) | - | - | (1,000 | ) | - | (1,000 | ) | |||||||||||||||
Total operating expenses excluding notable items |
(3,882 | ) | (9,461 | ) | (164 | ) | (13,507 | ) | (1,831 | ) | (15,338 | ) | ||||||||||||
Cost: income ratio |
65% | 63% | n/a | 64% | n/a | 76% | ||||||||||||||||||
Cost: income ratio excluding notable items |
53% | 65% | n/a | 61% | n/a | 72% | ||||||||||||||||||
Other net (expenses)/income |
(1 | ) | 32 | 128 | 159 | 331 | 490 | |||||||||||||||||
Profit/(loss) before tax |
1,738 | 4,211 | 67 | 6,016 | (2,786 | ) | 3,230 | |||||||||||||||||
Notable items |
(849 | ) | 464 | (35 | ) | (420 | ) | - | (420 | ) | ||||||||||||||
Profit/(loss) before tax excluding notable items |
2,587 | 3,747 | 102 | 6,436 | (2,786 | ) | 3,650 | |||||||||||||||||
Attributable profit/(loss)1 |
828 | 2,412 | 110 | 3,350 | (1,916 | ) | 1,623 | |||||||||||||||||
Notable items |
(857 | ) | 451 | (25 | ) | (431 | ) | - | (431 | ) | ||||||||||||||
Attributable profit/(loss) excluding notable items1 |
1,685 | 1,961 | 135 | 3,781 | (1,916 | ) | 2,054 | |||||||||||||||||
Risk weighted assets (£bn) 1 |
67.5 | 212.7 | 53.3 | 333.5 | 32.1 | 365.6 |
1 | Attributable profit in respect of the Africa Banking discontinued operation is reported at the Group level only. Allocated tangible equity, RWAs and leverage exposure are reported in Head Office within Core. |
vi
Barclays Group results reconciliation for the year ended |
31.12.15 | |||||||||||||||||||||||
|
Barclays UK |
|
|
Barclays International |
|
|
Head Office |
|
|
Barclays Core |
|
|
Barclays Non-Core |
|
|
Barclays Group |
| |||||||
£m | £m | m | £m | £m | £m | |||||||||||||||||||
Total income |
7,343 | 13,747 | 338 | 21,428 | 612 | 22,040 | ||||||||||||||||||
Own credit |
- | - | 430 | 430 | - | 430 | ||||||||||||||||||
Gains on US Lehman acquisition assets |
- | 496 | - | 496 | - | 496 | ||||||||||||||||||
Total income excluding notable items |
7,343 | 13,251 | (92) | 20,502 | 612 | 21,114 | ||||||||||||||||||
Credit impairment charges and other provisions |
(706) | (922) | - | (1,628) | (134) | (1,762) | ||||||||||||||||||
Net operating income |
6,637 | 12,825 | 338 | 19,800 | 478 | 20,278 | ||||||||||||||||||
Notable items |
- | 496 | 430 | 926 | - | 926 | ||||||||||||||||||
Net operating income/(expenses) excluding notable items | 6,637 | 12,329 | (92) | 18,874 | 478 | 19,352 | ||||||||||||||||||
Operating expenses |
(3,464) | (8,029) | (272) | (11,765) | (1,958) | (13,723) | ||||||||||||||||||
Gain on valuation of a component of the defined retirement benefit liability | 296 | 133 | - | 429 | - | 429 | ||||||||||||||||||
Impairment of goodwill and other assets relating to businesses being disposed | (96) | (96) | ||||||||||||||||||||||
Losses on sale relating to the Spanish, Portuguese and Italian businesses | - | - | - | - | (3) | (3) | ||||||||||||||||||
Operating expenses excluding notable items |
(3,760) | (8,162) | (272) | (12,194) | (1,859) | (14,053) | ||||||||||||||||||
UK bank levy |
(77) | (253) | (8) | (338) | (88) | (426) | ||||||||||||||||||
Total operating expenses excluding litigation and conduct, and other notable items | (3,837) | (8,415) | (280) | (12,532) | (1,947) | (14,479) | ||||||||||||||||||
Litigation and conduct |
(2,511) | (1,310) | (66) | (3,887) | (500) | (4,387) | ||||||||||||||||||
Provisions for UK customer redress |
(2,431) | (218) | - | (2,649) | (123) | (2,772) | ||||||||||||||||||
Provisions for ongoing investigations and litigation including Foreign Exchange | - | (984) | (52) | (1,036) | (201) | (1,237) | ||||||||||||||||||
Litigation and conduct excluding notable items |
(80) | (108) | (14) | (202) | (176) | (378) | ||||||||||||||||||
Total operating expenses |
(6,052) | (9,592) | (346) | (15,990) | (2,546) | (18,536) | ||||||||||||||||||
Notable items |
(2,135) | (1,069) | (52) | (3,256) | (423) | (3,679) | ||||||||||||||||||
Total operating expenses excluding notable items |
(3,917) | (8,523) | (294) | (12,734) | (2,123) | (14,857) | ||||||||||||||||||
Cost: income ratio |
82% | 70% | n/a | 75% | n/a | 84% | ||||||||||||||||||
Cost: income ratio excluding notable items |
53% | 64% | n/a | 62% | n/a | 70% | ||||||||||||||||||
Other net income/(expenses) |
- | 45 | (106) | (61) | (535) | (596) | ||||||||||||||||||
Losses on sale relating to the Spanish, Portuguese and Italian businesses | - | - | (112) | (112) | (465) | (577) | ||||||||||||||||||
Other net income/(expenses) excluding notable items | - | 45 | 6 | 51 | (70) | (19) | ||||||||||||||||||
Profit/(loss) before tax |
585 | 3,278 | (114) | 3,749 | (2,603) | 1,146 | ||||||||||||||||||
Notable items |
(2,135 | ) | (573 | ) | 266 | (2,442 | ) | (888 | ) | (3,330 | ) | |||||||||||||
Profit/(loss) before tax excluding notable items |
2,720 | 3,851 | (380 | ) | 6,191 | (1,715 | ) | 4,476 | ||||||||||||||||
Attributable (loss)/profit1 |
(47 | ) | 1,758 | 11 | 1,722 | (2,418 | ) | (394 | ) | |||||||||||||||
Notable items |
(2,008 | ) | (562 | ) | (187 | ) | (2,383 | ) | (707 | ) | (3,090 | ) | ||||||||||||
Attributable profit/(loss) excluding notable items1 |
1,961 | 2,320 | (176 | ) | 4,105 | (1,711 | ) | 2,696 | ||||||||||||||||
Average allocated tangible equity (£bn) 1 |
9.3 | 24.9 | 2.6 | 36.8 | 10.9 | 47.7 | ||||||||||||||||||
Risk weighted assets (£bn) 1 |
69.5 | 194.8 | 39.7 | 304.1 | 54.3 | 358.4 |
1 | Attributable profit in respect of the Africa Banking discontinued operation is reported at the Group level only. Allocated tangible equity, RWAs and leverage exposure are reported in Head Office within Core. |
vii
Barclays Group results reconciliation
for the year ended |
31.12.14 | |||||||||||||||||||||||
Barclays UK |
Barclays International |
Head Office |
Barclays Core |
Barclays Non-Core |
Barclays Group |
|||||||||||||||||||
£m | £m | m | £m | £m | £m | |||||||||||||||||||
Total income |
7,436 | 12,908 | 276 | 20,620 | 1,143 | 21,763 | ||||||||||||||||||
Own credit |
- | - | 34 | 34 | - | 34 | ||||||||||||||||||
Revision of ESHLA valuation methodology |
- | - | - | - | (935 | ) | (935 | ) | ||||||||||||||||
Gains on US Lehman acquisition assets |
- | 461 | - | 461 | - | 461 | ||||||||||||||||||
Total income excluding notable items |
7,436 | 12,447 | 242 | 20,125 | 2,078 | 22,203 | ||||||||||||||||||
Credit impairment charges and other provisions |
(901 | ) | (679 | ) | - | (1,580 | ) | (241 | ) | (1,821 | ) | |||||||||||||
Net operating income |
6,535 | 12,229 | 276 | 19,040 | 902 | 19,942 | ||||||||||||||||||
Notable items |
- | 461 | 34 | 495 | (935 | ) | (440 | ) | ||||||||||||||||
Net operating income/(expenses) excluding notable items | 6,535 | 11,768 | 242 | 18,545 | 1,837 | 20,382 | ||||||||||||||||||
Operating expenses |
(4,108 | ) | (8,170 | ) | (70 | ) | (12,348 | ) | (2,611 | ) | (14,959 | ) | ||||||||||||
UK bank levy |
(59 | ) | (248 | ) | (9 | ) | (316 | ) | (102 | ) | (418 | ) | ||||||||||||
Total operating expenses excluding litigation and conduct, and other notable items |
(4,167 | ) | (8,418 | ) | (79 | ) | (12,664 | ) | (2,713 | ) | (15,377 | ) | ||||||||||||
Litigation and conduct |
(1,108 | ) | (1,333 | ) | (65 | ) | (2,506 | ) | (301 | ) | (2,807 | ) | ||||||||||||
Provisions for UK customer redress |
(1,067 | ) | 32 | - | (1,035 | ) | (75 | ) | (1,110 | ) | ||||||||||||||
Provisions for ongoing investigations and litigation including Foreign Exchange |
- | (1,250 | ) | - | (1,250 | ) | - | (1,250 | ) | |||||||||||||||
Litigation and conduct excluding notable items |
(41 | ) | (115 | ) | (65 | ) | (221 | ) | (226 | ) | (447 | ) | ||||||||||||
Total operating expenses |
(5,275 | ) | (9,751 | ) | (144 | ) | (15,170 | ) | (3,014 | ) | (18,184 | ) | ||||||||||||
Notable items |
(1,067 | ) | (1,218 | ) | - | (2,285 | ) | (75 | ) | (2,360 | ) | |||||||||||||
Total operating expenses excluding notable items |
(4,208 | ) | (8,533 | ) | (144 | ) | (12,885 | ) | (2,939 | ) | (15,824 | ) | ||||||||||||
Cost: income ratio |
71% | 76% | n/a | 74% | n/a | 84% | ||||||||||||||||||
Cost: income ratio excluding notable items |
57% | 69% | n/a | 64% | n/a | 71% | ||||||||||||||||||
Other net (expenses)/income |
- | 52 | 316 | 368 | (813 | ) | (445 | ) | ||||||||||||||||
Losses on sale relating to the Spanish, Portuguese and Italian businesses | - | - | 315 | 315 | (761 | ) | (446 | ) | ||||||||||||||||
Other net (expenses)/income excluding notable items |
- | 52 | 1 | 53 | (52 | ) | 1 | |||||||||||||||||
Profit/(loss) before tax |
1,260 | 2,530 | 448 | 4,238 | (2,925 | ) | 1,313 | |||||||||||||||||
Notable items |
(1,067 | ) | (757 | ) | 349 | (1,475 | ) | (1,771 | ) | (3,246 | ) | |||||||||||||
Profit/(loss) before tax excluding notable items |
2,327 | 3,287 | 99 | 5,713 | 1,154 | 4,559 | ||||||||||||||||||
Attributable profit/(loss)1 |
852 | 926 | 374 | 2,152 | (2,659 | ) | (174 | ) | ||||||||||||||||
Notable items |
(855 | ) | (808 | ) | 260 | (1,403 | ) | (1,550 | ) | (2,605 | ) | |||||||||||||
Attributable profit/(loss) excluding notable items1 |
1,707 | 1,734 | 114 | 3,555 | (1,109 | ) | 2,779 | |||||||||||||||||
Average allocated tangible equity (£bn) 1 |
9.1 | 25.0 | (2.7 | ) | 31.4 | 15.6 | 47.0 | |||||||||||||||||
Risk weighted assets (£bn) 1 |
69.3 | 201.7 | 41.8 | 312.8 | 89.1 | 401.9 |
1 | Attributable profit in respect of the Africa Banking discontinued operation is reported at the Group level only. Allocated tangible equity, RWAs and leverage exposure are reported in Head Office within Core. |
viii
2016 | 2015 | 2014 | ||||||||||
Average allocated equitya |
£bn | £bn | £bn | |||||||||
|
||||||||||||
Barclays UK |
13.4 | 13.7 | 13.1 | |||||||||
Corporate and Investment Bank |
23.2 | 23.1 | 23.1 | |||||||||
Consumer, Cards and Payments |
5.0 | 4.0 | 4.0 | |||||||||
|
||||||||||||
Barclays International |
28.2 | 27.1 | 27.1 | |||||||||
Head Officeb |
8.0 | 3.9 | (1.3 | ) | ||||||||
|
||||||||||||
Barclays Core |
49.6 | 44.7 | 38.9 | |||||||||
Barclays Non-Core |
7.8 | 11.2 | 16.0 | |||||||||
|
||||||||||||
Barclays Group |
57.4 | 55.9 | 54.9 | |||||||||
Effect of Goodwill and Intangibles |
£bn | £bn | £bn | |||||||||
|
||||||||||||
Barclays UK |
(4.5 | ) | (4.4 | ) | (3.9 | ) | ||||||
Corporate and Investment Bank |
(1.4 | ) | (1.2 | ) | (1.2 | ) | ||||||
Consumer, Cards and Payments |
(1.3 | ) | (1.0 | ) | (1.0 | ) | ||||||
|
||||||||||||
Barclays International |
(2.7 | ) | (2.2 | ) | (2.2 | ) | ||||||
Head Officeb |
(1.4 | ) | (1.3 | ) | (1.4 | ) | ||||||
|
||||||||||||
Barclays Core |
(8.6 | ) | (7.9 | ) | (7.6 | ) | ||||||
Barclays Non-Core |
(0.1 | ) | (0.3 | ) | (0.3 | ) | ||||||
|
||||||||||||
Barclays Group |
(8.7 | ) | (8.2 | ) | (7.9 | ) | ||||||
Average allocated tangible equityc |
£bn | £bn | £bn | |||||||||
|
||||||||||||
Barclays UK |
8.9 | 9.3 | 9.1 | |||||||||
Corporate and Investment Bank |
21.9 | 21.9 | 22.0 | |||||||||
Consumer, Cards and Payments |
3.6 | 3.0 | 3.0 | |||||||||
|
||||||||||||
Barclays International |
25.5 | 24.9 | 25.0 | |||||||||
Head Officeb |
6.5 | 2.6 | (2.7 | ) | ||||||||
|
||||||||||||
Barclays Core |
41.0 | 36.8 | 31.4 | |||||||||
Barclays Non-Core |
7.8 | 10.9 | 15.6 | |||||||||
|
||||||||||||
Barclays Group |
48.7 | 47.7 | 47.0 |
Notes
a | This table shows the allocation of Group average equity across IFRS and non-IFRS segments |
b | Includes the African Banking discontinued operation |
c | This table shows average tangible equity for the Group and for the IFRS and non-IFRS reporting segments |
ix
2016 | 2015 | 2014 | ||||||||||
Profit/(loss) attributable to ordinary equity holders of the parent |
£m | £m | £m | |||||||||
|
||||||||||||
Barclays UK |
857 | (33 | ) | 869 | ||||||||
Corporate and Investment Bank |
1,342 | 1,180 | 421 | |||||||||
Consumer, Cards and Payments |
1,153 | 620 | 528 | |||||||||
|
||||||||||||
Barclays International |
2,495 | 1,800 | 949 | |||||||||
Head Office |
109 | 11 | 373 | |||||||||
|
||||||||||||
Barclays Core |
3,461 | 1,778 | 2,191 | |||||||||
Barclays Non-Core |
(1,899 | ) | (2,405 | ) | (2,645 | ) | ||||||
Africa Banking discontinued operation |
189 | 302 | 334 | |||||||||
|
||||||||||||
Barclays Group |
1,751 | (324 | ) | (120 | ) | |||||||
2016 | 2015 | 2014 | ||||||||||
Average allocated equitya |
£bn | £bn | £bn | |||||||||
|
||||||||||||
Barclays UK |
13.4 | 13.7 | 13.1 | |||||||||
Corporate and Investment Bank |
23.2 | 23.1 | 23.1 | |||||||||
Consumer, Cards and Payments |
5.0 | 4.0 | 4.0 | |||||||||
|
||||||||||||
Barclays International |
28.2 | 27.1 | 27.1 | |||||||||
Head Officeb |
8.0 | 3.9 | (1.3 | ) | ||||||||
|
||||||||||||
Barclays Core |
49.6 | 44.7 | 38.9 | |||||||||
Barclays Non-Core |
7.8 | 11.2 | 16.0 | |||||||||
|
||||||||||||
Barclays Group |
57.4 | 55.9 | 54.9 | |||||||||
2016 | 2015 | 2014 | ||||||||||
Return on average allocated equityc |
% | % | % | |||||||||
|
||||||||||||
Barclays UK |
6.4% | (0.2% | ) | 6.6% | ||||||||
Corporate and Investment Bank |
5.8% | 5.1% | 1.8% | |||||||||
Consumer, Cards and Payments |
23.1% | 15.3% | 13.2% | |||||||||
Barclays International |
8.8% | 6.6% | 3.5% | |||||||||
|
||||||||||||
Barclays Core |
7.0% | 4.0% | 5.6% | |||||||||
|
||||||||||||
Barclays Group |
3.0% | (0.6% | ) | (0.2% | ) |
Notes
a | This table shows the allocation of Group average equity across IFRS and non-IFRS reporting segments |
b | Includes the African Banking discontinued operation |
c | This table shows return on average equity for the Group and the return on average allocated equity for the IFRS and non-IFRS reporting segments |
x
Governance
Our corporate governance processes and the role they play in supporting the delivery of our strategy, including reports from the Chairman and each of the Board Committee Chairmen. |
Directors report |
Page | |||
UK Corporate Governance | § Index to disclosures |
2 | ||
Code | ||||
Who we are | § Board of Directors | 3 | ||
§ Group Executive Committee | 5 | |||
§ Board diversity
|
5
| |||
What we did in 2016 | § Chairmans introduction | 6 | ||
§ Board Audit Committee report | 10 | |||
§ Board Risk Committee report | 20 | |||
§ Board Reputation Committee report | 25 | |||
§ Board Nominations Committee report
|
29
| |||
How we comply
|
36
| |||
Other statutory information
|
51
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People
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47 | |||
Remuneration report |
43 |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 1 |
Governance: Directors report
UK Corporate Governance Code - index to disclosures
Page | ||||||||
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Leadership | Every company should be headed by an effective board which is collectively responsible for the long-term success of the company. | Board of Directors |
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3 to 4 39 |
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There should be a clear division of responsibilities at the head of the company between the running of the board and the executive responsibility for the running of the companys business. No one individual should have unfettered powers of decision. | Roles on the Board | 37 | ||||||
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The chairman is responsible for leadership of the board and ensuring its effectiveness on all aspects of its role. | Roles on the Board | 37 | ||||||
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As part of their role as members of a unitary board, non-executive directors should constructively challenge and help develop proposals on strategy. | Roles on the Board | 37 | ||||||
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Effectiveness | The board and its committees should have the appropriate balance of skills, experience, independence and knowledge of the company to enable them to discharge their respective duties and responsibilities effectively. | Board of Directors | 3 to 4 | |||||
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There should be a formal, rigorous and transparent procedure for the appointment of new directors to the board. | Appointment and re-election of Directors |
32 | ||||||
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All directors should be able to allocate sufficient time to the company to discharge their responsibilities effectively. | Attendance time commitment |
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38 39 |
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All directors should receive an induction on joining the board and should regularly update and refresh their skills and knowledge. | Induction, training and development |
39 | ||||||
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The board should be supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. | Information provided to the Board |
40 | ||||||
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The board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. | Review of Board and Board Committee effectiveness |
33 | ||||||
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All directors should be submitted for re-election at regular intervals, subject to continued satisfactory performance. | Roles on the Board |
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37 32 |
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Accountability | The board should present a fair, balanced and understandable assessment of the companys position and prospects. | Risk management going concern |
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97 to 114 32 |
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The board is responsible for determining the nature and extent of the principal risks it is willing to take in achieving its strategic objectives. The board should maintain sound risk management and internal control systems. | Risk management and internal control | 40 to 41 | ||||||
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The board should establish formal and transparent arrangements for considering how they should apply the corporate reporting, risk management and internal control principles, and for maintaining an appropriate relationship with the companys auditors. | Board Audit Committee report | 10 to 19 | ||||||
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Remuneration | Executive directors remuneration should be designed to promote the long-term success of the company. Performance-related elements should be transparent, stretching and rigorously applied. | Remuneration report | 51 to 85 | |||||
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There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his or her own remuneration. | Remuneration report | 51 to 85 | ||||||
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Relations with shareholders
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There should be a dialogue with shareholders based on the mutual understanding of objectives. The board as a whole has responsibility for ensuring that a satisfactory dialogue with shareholders takes place. | Stakeholder engagement | 41 to 42 | |||||
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The board should use general meetings to communicate with investors and to encourage their participation. | Stakeholder engagement | 41 to 42 | ||||||
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2 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Governance: Directors report
Who we are
Board of Directors
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 3 |
Governance: Directors report
Who we are
Board of Directors
Note
The composition of the board is shown as at 22 February 2017.
Committee membership key | ||
Aud | Board Audit Committee | |
Nom | Board Nominations Committee | |
Rem | Board Remuneration Committee | |
Rep | Board Reputation Committee | |
Ris | Board Risk Committee | |
* | Committee Chairman |
4 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Who we are
Group Executive Committee
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 5 |
Governance: Directors report
What we did in 2016
Chairmans introduction
6 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 7 |
Governance: Directors report
Board activity in 2016
Strategic Goal | Principal Risks | |||
Strategy formulation and monitoring
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§ Debated the potential impact of the EU Referendum and the contingency plans being developed. Following the result of the Referendum, discussed and assessed the implications for the UK, the banking sector and for Barclays, including a presentation from a third party on the political aspects and their potential implications |
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§ Regularly debated and monitored the progress of Barclays preparations for Structural Reform see the case study on page 9 for further details |
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§ Reflected on the position of Barclays Africa in the Barclays Group and its impact on Barclays capital position, deciding to sell-down Barclays holding to a position where Barclays Africa accounting and regulatory de-consolidation could be achieved |
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§ Assessed the progress of strategy execution in each of Barclays UK, Barclays Internationals investment bank and corporate business and the Cards business, via presentations from the heads of each business |
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§ Monitored the progress of the run-down of Barclays Non-Core via regular presentations from the heads of the Non-Core business |
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§ Discussed regular updates from the Group Chief Executive on the progress being made against the Groups execution priorities and received insights on stakeholder issues (including those arising from customers and clients, employees, regulators and governments) and cultural matters, including results from employee opinion surveys |
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§ Debated and provided input to management on the formulation of overall Group strategy, including |
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the impact of structural change and the creation of new subsidiary legal entities in the Group |
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the progress of the sell-down of Barclays Africa, including potential options, costs of separation, potential conduct risks and customer impacts |
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the impact of the EU Referendum result, taking into account an assessment of possible political scenarios and the potential impacts on each of Barclays businesses in terms of capital, operations, economics, regulation, clients and customers |
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a strategic approach to costs optimisation |
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constraints and risks to strategy execution, covering economic assumptions; expected regulatory requirements on capital and solvency ratios at Group and subsidiary legal entity level; anticipated changes to accounting rules; investor expectations; and potential impacts for clients and customers |
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potential growth opportunities, covering an assessment of the competitive landscape for Barclays UK, Barclays International and the Cards business; key trends and risks for each business in terms of economics, regulation, customers, employees and technology; near-term focus areas and potential transformational opportunities |
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Finance, including capital and liquidity
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§ Debated and approved the Groups Medium Term Plan for 2016-2018 and short-term plan for 2016, with a focus on producing increased returns in future |
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§ Regularly assessed financial performance of the Group and its main businesses via reports from the Group Finance Director |
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§ Reviewed and approved Barclays financial results prior to publication, including approving final and interim dividends |
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§ Discussed market and investor reaction to Barclays strategic and financial results announcements, with insights provided by the Head of Investor Relations |
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§ Provided input, guidance and advice to senior management on the high-level shape of Barclays 2017-2019 Medium Term Plan and subsequently approved the final plan |
8 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Strategic Goal | Principal Risks | |||
Governance and risk, including regulatory issues
|
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§ Debated and approved 2016 risk appetite for the Barclays Group |
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§ Regularly assessed Barclays overall risk profile and emerging risk themes, hearing directly from the Chief Risk Officer and the Chairman of the Board Risk Committee |
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§ Evaluated Barclays operational and technology capability, including specific updates on cyber-risk capability and the strategy for infrastructure services. Approved Barclays Internationals investment banks IT and Data Global Strategy |
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§ Approved the Groups 2016 Recovery Plan and US Resolution Plan |
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§ Held specific meetings with representatives of Barclays UK and US regulators to hear first-hand about regulatory expectations and their specific views on Barclays |
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§ Evaluated the status of Barclays risk and control environment and the plans in place to enhance the risk and control framework and approved a revised Enterprise Risk Management Framework (ERMF) |
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§ Considered regular updates from the Group General Counsel on the legal risks facing Barclays |
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§ Heard regularly from the chairmen of the Boards principal Board Committees on the matters discussed at Board Committee meetings |
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§ Received updates from the chairman of Barclays US IHC on matters discussed at its board meetings |
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§ Heard directly from representatives of the Banking Standards Board on its assessment of the culture in Barclays and the banking sector as a whole |
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Other, including compensation
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§ Reviewed Barclays Talent Management strategy and the process for succession planning for key executive positions, hearing directly from the Group HR Director and the Chairman of the Board Nominations Committee |
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§ Received and debated a presentation from the independent facilitator of the 2016 Board effectiveness review on the outcomes and potential areas of focus for improvement |
The above analysis reflects the ERMF that was in place during 2016.
Governance in Action Preparing for Structural Reform
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Law and regulation in the UK, and associated regulatory rules, require Barclays to separate its retail banking operations into a separate, independent legal entity (known as ring-fencing). Barclays has an internal Structural Reform Programme in place to implement these required changes in the UK. A new UK banking entity is being established as the ring-fenced bank (Barclays UK) and will serve retail and small business customers, as well as UK wealth and credit card customers. Barclays International will continue to serve corporate, institutional and investment banking clients and will also serve international wealth and credit card customers. A Group Service Company will be established to support the revised operating entity structure.
These structural changes will have a material impact on the way in which Barclays operates in future. Consequently, the progress of the Structural Reform Programme featured heavily on the Boards agenda during 2016, given the scale of change required and the potential material risks associated with transitioning to the new structure and with the new structure itself. The Board evaluated progress of the Structural Reform Programme at seven of the eight Board meetings held during 2016, including specifically evaluating the impact of structural change as part of the annual Group strategy Board meeting. Specific matters addressed by the Board included:
§ structural Reform design and implementation plans, including evaluating any identified risks and challenges; considering regulatory feedback on the plans and the status of actions arising from regulatory engagement; and agreeing the internal accountability framework
§ assessing the progress being made with establishing the new legal entity for Barclays UK, including any necessary regulatory licencing requirements and preparations for the ring-fence transfer scheme
§ monitoring the creation of the Group Service Company, including assessing its design, its board governance structure, its control and oversight framework and the execution milestones to be achieved
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§ debating the potential implications of Structural Reform on Barclays pension scheme, both in terms of the potential impact on Barclays and on pension scheme members
§ conducting an assessment of the overall conduct risk considerations associated with Structural Reform, focusing on the potential impacts for clients and customers
§ evaluating the work being conducted to address sort-code migration, covering technology planning and implementation and customer impact considerations.
Separately, during 2016, Barclays US businesses were organised under an Intermediate Holding Company (IHC) in order to meet US legal requirements. The IHC became operational from 1 July 2016. The Board was regularly updated on progress of implementation, any risks and challenges and how they were being managed.
Board Committees have supported the Board in overseeing the implementation of Structural Reform on matters that fall directly within their remit. For example, the Board Nominations Committee determined the proposed composition of the boards of the new operating entities and is in the process of identifying and evaluating proposed candidates for appointment to those boards. It also discussed and endorsed a set of Governance Guiding Principles, which will govern the relationship between the parent company and its new operating entities. The Board Risk Committee spends time at each meeting assessing the prospective capital and liquidity impacts of Structural Reform, while the Board Audit Committee has evaluated the potential accounting implications. More information can be found in the individual Board Committee reports on the pages that follow. |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 9 |
Governance: Directors report
What we did in 2016
Board Audit Committee report
Change has continued apace and it has been critical to focus on ensuring that the commitment to strengthening the control environment is maintained throughout this transformational period.
|
Dear Fellow Shareholders My report to you last year highlighted the significant degree of change that Barclays was facing, driven by its own strategic aims and by the demands of Structural Reform. Change has continued apace and it has been critical for the Committee to focus on ensuring the commitment to strengthening the control environment is maintained throughout this transformational period. Barclays has during 2016 put in place a significantly changed senior management team and my Committee colleagues and I are greatly encouraged by the renewed focus and vigour with which the control environment is being addressed and the sense of personal accountability that we are seeing. A significant development in the fourth quarter of 2016 was the creation of a chief controls office and the appointment of a Chief Controls Officer, which will drive forward the delivery of an enhanced programme designed to strengthen the control environment and remediate any known issues. Although the new controls office structure is in its infancy, I welcome the more strategic approach that is now being taken to embed accountability for a strong control environment into the first line of management. Such is the importance of this programme to Barclays that, for its initial phase, progress on the framework will be reported directly to the full Board. In assessing control issues for disclosure in the Annual Report, the Committee has continued to apply similar definitions to those used for assessing internal financial controls for the purposes of Sarbanes-Oxley. The conclusion we have reached is that there are no control issues that are considered to be a material weakness, which merit specific disclosure. Further details may be found in the Risk Management and Internal Control section on page 40.
Our busy agenda in 2016 continued to include our responsibilities for overseeing the performance and effectiveness of internal and external audit, the main independent assurance mechanisms that serve to protect shareholders interests. The Committee also continued to exercise its responsibilities for ensuring the integrity of Barclays published financial information by debating and challenging the judgements made by management and the assumptions and estimates on which they are based. The exercise of appropriate judgement in preparing the financial statements is critical in ensuring that Barclays reports to its shareholders in a fair, balanced and transparent way. The report that follows sets out details of the material matters considered by the Committee since my last report.
A significant change that the Committee has been overseeing is the transition to KPMG as Barclays statutory auditor, following the audit tender concluded in 2015. I met regularly with the PwC lead audit partner and his KPMG successor during 2016. KPMG has been shadowing the current auditor, PwC, during the 2016 year-end audit and the Committee is already seeing some value from the new perspective provided by KPMG on accounting estimates and policies. You can read more about auditor transition in the case study on page 19.
The introduction in March 2016 of the UKs Senior Managers Regime allocated to me specific prescribed responsibilities for safeguarding the independence of and overseeing the performance of the internal audit function, including the performance of the Chief Internal Auditor, in line with regulatory requirements. In practice, little has changed in the way in which I fulfil my responsibilities: I continue to hold regular meetings with the Chief Internal Auditor and members of her senior management team to ensure I am aware of current work programmes and any emerging issues and I also agree the Chief Internal Auditors objectives and the outcomes of her performance assessment. During 2016, the PRA undertook a review of Barclays Internal Audit (BIA) and made a number of recommendations to increase its effectiveness and the Committees monitoring thereof. An action plan has been developed to address these recommendations. The Committee also held a networking event with BIA during 2016, enabling Committee members to meet less formally with senior members of the BIA team.
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10 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 11 |
Governance: Directors report
What we did in 2016
Board Audit Committee report
Area of focus
|
Reporting issue
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Role of the Committee
|
Conclusion/action taken
| |||
Conduct provisions (see Note 27 to the financial statements). |
Barclays makes certain assumptions and estimates, analysis of which underpins provisions made for the costs of customer redress, such as for Payment Protection Insurance (PPI). | § Regularly analysed the judgements and estimates made with regard to Barclays provisioning for PPI claims, taking into account forecasts and assumptions made for PPI complaints and actual claims experience for Barclays and the industry as a whole.
§ Debated the potential impact on the future range of provisions arising from the FCAs proposed timebar on claims and the expected deadline of June 2019, discussing the levels of uncertainty in the projections.
§ Discussed the potential range of outcomes that might arise from the Plevin case (the 2014 UK Supreme Court ruling in Plevin v Paragon Personal Finance Ltd) and whether any increase in provisions was required.
§ Evaluated proposed additional provisions for PPI and whether the analysis performed by management was consistent with prior periods and reflected known trend data and whether Barclays approach was consistent with that taken by industry peers.
§ Assessed provisions for alternative PPI (card protection and payment break plan insurance) and the claims experience compared to the range of reasonable high and low end scenarios that had been determined.
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The Committee and management continue to monitor closely any changes in customer or claims management companies behaviour in light of the Plevin case and the proposed FCA timebar. Over the course of 2016, having assessed actual claims experience and the potential impact of the proposed timebar and the Plevin case, the Committee agreed to recognise additional provisions of £1000m in 2016, bringing Barclays total cumulative provisions against the cost of PPI redress and associated processing costs to £8.4bn, of which £2.0bn is remaining. |
12 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Area of focus | Reporting issue | Role of the Committee | Conclusion/action taken | |||
Legal, competition and regulatory provisions (see Notes 27-29 to the financial statements). |
Barclays is engaged in various legal, competition and regulatory matters. The extent of the impact on Barclays of these matters cannot always be predicted, but matters can give rise to provisioning for contingent and other liabilities depending on the relevant facts and circumstances. The level of provisioning is subject to management judgement on the basis of legal advice and is therefore an area of focus for the Committee. | § Evaluated advice on the status of current legal, competition and regulatory matters.
§ Assessed managements judgements and estimates of the levels of provisions to be taken and the adequacy of those provisions, based on available information and evidence.
§ Considered the adequacy of disclosure, recognising that any decision to set provisions involves significant judgement.
|
The Committee discussed provisions and utilisation. Having reviewed the information available to determine what was probable and could be reliably estimated, the Committee agreed that no additional provision should be made at the full year for ongoing investigations and litigation.
Further information may be found on pages 270 to 280. | |||
Valuations (see Notes 14-18 to the financial statements). |
Barclays exercises judgement in the valuation and disclosure of financial instruments, derivative assets and certain portfolios, particularly where quoted market prices are not available, including the Groups Education, Social Housing and Local Authority (ESHLA) portfolio. | § Evaluated reports from Barclays Valuations Committee, with particular focus on the restructuring of the ESHLA portfolio and its subsequent de-recognition; a valuation disparity with a third party in respect of a specific long-dated derivative portfolio; and an assessment of the impact of negative interest rates on the valuation of derivatives.
§ Considered proposals from the Valuations Committee to revise the valuations approach for the remaining ESHLA portfolio and to revise the approach to the marking of Own Credit.
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The Committee confirmed its agreement to the restructuring and de-recognition of the ESHLA portfolio and concluded that it was a de-recognition event. It noted the lack of progress made in resolving the third-party valuation disparity, which has been outstanding for some time, and satisfied itself on the basis of the information available to it that Barclays valuation methodology remains appropriate. It approved a revision to the model used for valuing the remaining ESHLA portfolio recommended by the Valuations Committee. | |||
Impairment (see Note 7 to the financial statements). |
Where appropriate, Barclays models potential impairment performance, allowing for certain assumptions and sensitivities, to agree allowances for credit impairment, including agreeing the timing of the recognition of any impairment and estimating the size, particularly where forbearance has been granted. | § Assessed impairment experience against forecast and whether impairment provisions were appropriate.
§ Evaluated the appropriateness and timing of the impairment taken in connection with Barclays exposures to the oil and gas sectors, including the impact of single name losses in the oil and commodities sectors.
§ Debated the adjustment in impairment taken in the Cards business for informal forbearance arrangements and the potential impact of changes in emergence modelling.
§ Considered a report from the Group Impairment Committee on the adequacy of loan impairment allowances as at 31 December 2016, including assessing internal and external trends, methodologies and key management judgements.
|
The Committee challenged the timing of the oil and gas impairment taken in the half-year results, although confirmed that the provision was adequate. It welcomed the proposal to create a new Group Impairment Committee and enhance the role of the Group Finance function in assessing impairment provisioning. It agreed a post-model adjustment of £250m for impairment in the UK and US Cards businesses during the third quarter of 2016 and obtained clarification on the impairment policy for the Cards business. At the full year, having debated the report from the Group Impairment Committee it confirmed the adequacy of the full year impairment charge of £2.4bn. | |||
Tax (see Note 10 to the financial statements). |
Barclays is subject to taxation in a number of jurisdictions globally and makes judgements with regard to provisioning for tax at risk and on the recognition and measurement of deferred tax assets. | § Evaluated the appropriateness of tax risk provisions to cover existing tax risk.
§ Debated the forecasts and assumptions supporting the recognition and valuation of deferred tax assets. |
The Committee confirmed the tax risk provisions for the full year and the treatment of deferred tax assets. |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 13 |
Governance: Directors report
What we did in 2016
Board Audit Committee report
Area of focus | Reporting issue | Role of the Committee | Conclusion/action taken | |||
Long-term viability |
The Directors are required to make a statement in the Annual Report as to the long-term viability of Barclays. The Committee provides advice to the Board on the form and content of the statement, including the underlying assumptions. | § Evaluated at year end a report from management setting out the view of Barclays long-term viability. This report was based on Barclays Medium Term Plan (MTP) and covered forecasts for capital, liquidity and leverage, including forecast performance against regulatory targets, outcomes of the stress test of the MTP and forecast capital and liquidity performance against stress hurdle rates, funding and liquidity forecasts and an assessment of global risk themes and the Groups risk profile.
§ Considered the viability statement in conjunction with Barclays risk statements and strategy/business model disclosures.
§ Addressed specific feedback from investors and other stakeholders on viability statements in general.
|
Taking into account the assessment by the Board Risk Committee of stress testing results and risk appetite, the Committee agreed to recommend the viability statement to the Board for approval. | |||
Fair, balanced and understandable reporting (including country-by-country reporting and Pillar 3 reporting). |
Barclays is required to ensure that its external reporting is fair, balanced and understandable. The Committee undertakes an assessment on behalf of the Board in order to provide the Board with assurance that it can make the statement required by the Code. |
§ Assessed, via discussion with and challenge of management, including the Group Chief Executive and Group Finance Director, whether disclosures in Barclays published financial statements were fair, balanced and understandable.
§ Evaluated reports from Barclays Disclosure Committee on its assessment of the content, accuracy and tone of the disclosures.
§ Established via reports from management that there were no indications of fraud relating to financial reporting matters.
§ Evaluated the outputs of Barclays internal control assessments and Sarbanes-Oxley s404 internal control process.
§ Assessed disclosure controls and procedures.
§ Confirmed that management had reported on and evidenced the basis on which representations to the external auditors were made. |
Having evaluated all of the available information and the assurances provided by management, the Committee concluded that the processes underlying the preparation of Barclays published financial statements, including the 2016 annual report and financial statements, were appropriate in ensuring that those statements were fair, balanced and understandable.
In assessing Barclays financial results statements over the course of 2016, the Committee specifically addressed and provided input to management on the disclosure and presentation of:
§ Barclays restated financial results, including the allocations to Barclays UK and Barclays International and the separation of the Cards business.
§ the sell-down of Barclays holding in Barclays Africa and its classification as held for sale.
§ guidance provided to the market on the costs of Structural Reform.
§ the Group Finance Directors presentations to analysts.
§ alternative performance measures in view of new guidance from the European Securities & Markets Association.
§ core performance and headcount.
§ operational risk capital and guidance on capital levels.
§ the level of segmental reporting.
The Committee recommended to the Board that the 2016 annual report and financial statements are fair, balanced and understandable.
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14 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Area of focus
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Matter addressed
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Role of the Committee
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Conclusion/action taken
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Internal control Read more about the Barclays internal control and risk management processes on pages 40 and 41 |
The effectiveness of the overall control environment, including the status of any material control issues and the progress of specific remediation plans. |
§ Evaluated and tracked the status of the most material control issues identified by management via regular reports from the Head of Operational Risk and latterly from the Chief Controls Officer.
§ Evaluated the status of specific material control issues and associated remediation plans, including in particular those relating to Security of Secret and Confidential Data; Infrastructure Access Management; Group Resilience; IT Security; Data Governance; Model Risk Management; and Unsupported Infrastructure and Applications, all of which remained open at the end of 2016.
§ Discussed lessons learned from specific control incidents and how these could be applied to Barclays business globally, via an enhanced lessons-learned process.
§ Debated any regulatory reports or other feedback received from regulators on Barclays overall control environment.
§ Assessed the status of the enhancements being made to Barclays risk and control self-assessment (RCSA) process to support disclosures in Barclays annual report.
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The Committee requested enhancements to reporting to make clear where operational risk was outside appetite and the actions being taken. The Committee welcomed the improvements made to the lessons-learned process and proposed that the new Group Controls Committee should play a role in setting standards for lessons-learned exercises and deciding when they should be conducted. The Committee endorsed the work being taken forward, under the leadership of the Chief Controls Officer, to address any feedback from regulators on Barclays control environment, noting that the Board would directly oversee the progress being made to address specific regulatory feedback. The Committee also challenged management to ensure that the RCSA process was sufficiently robust in light of some specific control issues that had emerged after certain RCSAs had been completed. | |||
The effectiveness of the management control approach and control environment in each individual business, including the status of any material control issues and the progress of specific remediation plans. |
§ Assessed individual reports from Barclays UK, Barclays International, the Cards business, Barclays Non Core operations, Barclays Internationals US investment banking operations and Barclays Africa, including questioning directly the heads of those businesses on their management control approach/culture and control environment, including any specific control issues, resilience issues, the status and progress of any remediation plans or workstreams and plans to enhance the control environment.
§ Tracked plans for implementing revised control governance structures in each business to align with changes in Barclays organisational structure.
§ Provided feedback on the 2016 control objectives for each member of the Group Executive Committee.
|
The Committee welcomed the decision by Barclaycard to redirect strategic investment towards enhancing its control environment and to restrict growth in new business while certain control issues, such as fraud levels in the US, were addressed. To make clear the levels of personal accountability expected, the Committee asked for the control objectives for each member of the Group Executive Committee for 2016 to be made more specific, with an emphasis on prioritising control issues. |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 15 |
Governance: Directors report
What we did in 2016
Board Audit Committee report
Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | |||
The effectiveness of the control environment in the Chief Operating Office (COO) and the status and remediation of any material control issues. | § Scrutinised on a regular basis the COO control environment, taking the opportunity to directly challenge and question functional leaders, including the Chief Operating Officer on the progress of remediation plans.
§ Debated the clarity of accountability and standards of consistency needed, given decentralisation of the business.
§ Addressed the issue of resilience and associated risk appetite, discussing in particular the impact of change on resilience initiatives.
§ Discussed the impact of the proposed sell-down of Barclays holding in Barclays Africa, including any ongoing support requirements on COO-related material control issues. |
The Committee emphasised the need for clear ownership and accountability between the business and COO for technology control issues, which has been addressed via the implementation of the new organisational management structure. In view of the volume of technology and change remediation required, the Committee tasked the Chief Operating Officer with enhancing the processes for self-identification and logging of risk and control issues. The Committee also asked the new Chief Information Officer to conduct a deep dive into Technology control issues, the outputs of which were evaluated by the Committee in the fourth quarter of 2016. The Committee welcomed the improved clarity of the plans to enhance the COO control environment and will receive further regular updates throughout 2017.
| ||||
The adequacy of the Groups arrangements to allow employees to raise concerns in confidence without fear of retaliation and the outcomes of any substantiated cases. | § Evaluated the results of benchmarking exercise to compare Barclays processes and case volumes to 40 peer companies.
§ Tracked the progress of the internal campaign to raise awareness among employees on raising concerns.
§ Monitored the trends in reported and substantiated whistleblowing cases, including any information on any instances of retaliation. |
The Committee concluded that Barclays processes were appropriate and in line with peers. It noted that the successful internal campaign had generated an increase in the number of whistleblowing reports, all of which were investigated. Volumes of cases remain proportionate to Barclays size and footprint. The Committee asked management to provide additional detail in its future reports where any whistleblowing investigation was outstanding for more than six months. In future, as Barclays Whistleblowing Champion, the Chairman of the Committee will make an annual report to the Board on whistleblowing matters.
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16 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Area of focus
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Matter addressed
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Role of the Committee
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Conclusion/action taken
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Internal audit |
The performance of BIA and delivery of the internal audit plan, including scope of work performed, the level of resources and the methodology and coverage of the internal audit plan. |
§ Scrutinised and agreed internal audit plans and deliverables for 2016, including agreeing the areas of focus, such as technology, data, change, execution risk, and the resources required.
§ Monitored delivery of the agreed audit plans, including assessing internal audit resources and attrition levels and any impacts on the plan.
§ Debated audit risk appetite and issue validation.
§ Tracked the levels of unsatisfactory audits, including discussing the time taken to issue audit reports and the reasons for any delays.
§ Discussed BIAs assessment of the management control approach and control environment in Barclays UK, Barclays International and the COO.
§ Debated with BIA the possibility of auditing culture.
§ Evaluated the outcomes from BIAs annual self-assessment.
§ Debated feedback received from the PRA on the performance of BIA and discussed the increased regulatory expectations of BIA and the impact on internal audit plans and resources.
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The Committee approved an increase in headcount to ensure appropriate audit coverage of technology and change and agreed an interim audit risk appetite level pending recruitment, subject to the delivery of mitigating actions assigned to the Chief Operating Officer. The Committee emphasised to management that it was not content with the number of unsatisfactory audits and considered setting a target for management. It also asked BIA to disclose in its reports the reasons for any delay in issuing audit reports, along with details of any audit work that was deferred or cancelled. In view of the additional expectations placed on BIA, the Committee requested details of internal audit vacancies, business areas and skills sets and encouraged the Chief Internal Auditor to consider internal transfers and other creative solutions to fill resourcing gaps. It agreed with BIA the action plan to address the recommendations arising from the PRA review of BIAs performance. The Committee confirmed that it was satisfied with the outcomes of the self-assessment of BIA performance, which evidenced that the function generally conforms to the standards set by the Institute of Internal Auditors. It further confirmed that it felt able to reply on the work of BIA in discharging its own responsibilities.
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External audit |
The work and performance of PwC, including the maintenance of audit quality during the period of transition to a new auditor. |
§ Met with key members of the PwC audit team to discuss the 2016 audit plan and agree areas of focus.
§ Assessed regular reports from PwC on the progress of the 2016 audit and any material issues identified, including debating with PwC whether any changes to the audit plan were needed following the UKs vote to leave the EU.
§ Discussed PwCs report on certain control areas and the control environment, including a specific report on controls over access to payment systems requested by the Committee.
§ Discussed the draft audit opinion ahead of 2016 year end.
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The Committee approved the audit plan and the main areas of focus.
Read more about the Committees role in assessing the performance, effectiveness and independence of the external auditor and the quality of the external audit below. |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 17 |
Governance: Directors report
What we did in 2016
Board Audit Committee report
18 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
During 2016, all engagements where expected fees met or exceeded the above thresholds were evaluated by either the Committee Chairman or the Committee as a whole who, before confirming any approval, assured themselves that there was justifiable reason for engaging the auditor and that its independence and objectivity would not be threatened. No requests to use PwC were declined in 2016 (2015: two), with one request to use KPMG declined (2015: n/a). On a quarterly basis, the Committee scrutinised details of individually approved and pre-approved services undertaken by PwC and KPMG in order to satisfy itself that they posed no risk to independence, either in isolation or on an aggregated basis. For the purposes of the Policy, the Committee has determined that any pre-approved service of a value of under £50,000 is to be regarded as clearly trivial in terms of its impact on Barclays financial statements and has required the Group Financial Controller to specifically review and confirm to the Committee that any pre-approved service with a value of £50,000 - £100,000 (or up to £25,000 for tax advisory services) may be regarded as clearly trivial. The Committee undertook a review of pre-approved services at its meeting in December 2016 and satisfied itself that such pre-approved services were clearly trivial in the context of their impact on the financial statements.
The fees paid to PwC for the year ended 31 December 2016 amounted to £49m (2015: £43m), of which £8m (2015: £9m) was payable in respect of non-audit services. Non-audit services represented 20.6% of the statutory audit fee (2015: 24.2%). A breakdown of the fees paid to the auditor for statutory audit and non-audit work can be found in Note 42 on page 304. Of the £8m of non-audit services provided by PwC during 2016, the significant categories of engagement, i.e. services where the fees amounted to more than £500,000, included:
§ audit-related services: additional work to facilitate the transition to KPMG as Barclays statutory auditor
§ transaction support: services provided in connection with the sell-down of Barclays holding in Barclays Africa, including acting as the reporting accountant on the circular issued to Barclays shareholders and providing comfort on associated documentation
§ quality assurance: performed on behalf of Barclays Africa over work conducted by Barclays in connection with the separation arrangements from Barclays.
The fees paid to KPMG for non-audit work during 2016 were £17.3m (2015: £38m). Significant categories of engagement approved in 2016 included:
§ Audit-related services: services provided in connection with minimum regulatory requirements for audits of benchmark interest rate submissions.
The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 As described in this report, Barclays is in compliance with the requirements of The Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014, which relates to the frequency and governance of tenders for the appointment of the external auditor and the setting of a policy on the provision of non-audit services. |
Governance in Action Statutory auditor transition
A significant activity for the Committee during 2016 has been overseeing the transition of Barclays statutory auditor from PwC to KPMG. Following the audit tender that concluded in mid-2015, KPMG will become Barclays statutory auditor with effect from the 2017 financial year onwards. The Committee has undertaken activity to manage the transition period to facilitate a smooth handover of responsibilities.
The Committee has overseen the steps required to enable KPMG to achieve independence by 1 July 2016. This included:
§ assigning a dedicated transition team to support operational activities, including progressing a global master services agreement and local jurisdictional agreements
§ agreeing with KPMG the overall plan to achieve independence and assessing regular reports from KPMG on the progress being made
§ monitoring the orderly termination of non-audit services being provided by KPMG to Barclays that would be prohibited when KPMG becomes statutory auditor
§ requiring KPMG to comply from 1 June 2016 with the provisions of the Groups policies relating to the statutory auditor, specifically, The Group Policy on the Provision of Services by the Group Statutory Auditor and the Group Policy on Employment of Employees or Workers from the Statutory Auditor, and requiring management to report to the Committee on any services or appointments undertaken in line with these policies
§ accepting a formal independence letter from KPMG. This included a list of ongoing non-audit services that are deemed permissible and which have been approved in accordance with Barclays policy and confirmation of KPMGs compliance with applicable ethics and independence rules.
Once independence was achieved, the Committee oversaw the handover plan and the transition to business as usual. This included:
§ inviting the lead audit partner of KPMG to attend Committee meetings as part of the process of shadowing PwCs 2016 audit
§ arranging for the lead audit partner of KPMG to attend meetings of the Board Reputation Committee and Board Risk Committee
§ receiving a briefing from KPMG on accounting developments, covering: Impairment and the impact of IFRS9 (Financial Instruments); Valuations; Negative interest rates; Structural Reform; IFRS15 (Revenue from contracts with customers) and IFRS16 (Leases)
§ discussing with KPMG accounting policy interpretations following KPMGs review of Barclays accounting policies
§ assessing regular reports from KPMG on the progress being made with key activities, including building the Barclays audit team and gaining an understanding of Barclays key processes, systems and controls
§ reviewing the report on KPMG issued by the FRCs Audit Quality Review team
§ scheduling a planning meeting between the Committee and KPMG for the second quarter of 2017 to discuss the audit strategy and provide input.
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Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 19 |
Governance: Directors report
What we did in 2016
Board Risk Committee report
The Committees focus during 2016 has been driven by a number of key challenges, including emerging economic and political risks, notably those associated with the EU Referendum and the subsequent vote by the UK to leave the EU .
Dear Fellow Shareholders
The Committees focus during 2016 has been driven by a number of key challenges. First, Barclays has been implementing its new strategy and executing its Structural Reform Programme, which has some particular implications in terms of capital and liquidity management across Barclays legal entities. Second, there was continued focus on any emerging risks arising in our key markets in the UK, US and South Africa as a consequence of any macroeconomic deterioration or disruption in financial market conditions. Finally, there were the challenges presented by emerging economic and political risks, notably those associated with the EU Referendum and the subsequent vote by the UK to leave the EU.
Considerations for risk appetite for 2016 and the Medium Term Plan (MTP) included credit cycle conditions; the impact of ongoing low commodity prices; a potential slowdown in China; and the likelihood of interest rate rises. Consequently, the recommendation of the risk function, which was endorsed by the Committee, was that a conservative approach to growth should be maintained, with a focus on core products and markets. We expected continued volatility in external conditions and aimed to ensure that the Group was conservatively positioned. Headwinds developed during 2016 with the potential to have a significant first-order impact on Barclays businesses, including heightened economic risk in the UK post the EU Referendum; increased geo-political risk following the US presidential election; and the IAS19 position of Barclays pension scheme, which is vulnerable to market volatility. Other emerging risks with the potential to impact Barclays include interest rate and credit spread movements; UK property price stress; potential transmission impacts of any slowdown in China; and ongoing volatility in oil prices, which remain low. All of these potential risks continue to be actively managed and the risk profile and actions taken are subject to regular oversight by the Committee. In these circumstances, we were pleased with the capital and leverage performance for 2016, although impairment performance was adverse to plan, primarily as a result of one-off effects reflecting managements review of impairment modelling in the UK and US Cards businesses.
In early 2016, Barclays appointed a new Chief Risk Officer, CS Venkatakrishnan, an appointment that was recommended to the Board by the Committee. The Committee oversaw the transition, specifically requesting information from the outgoing Chief Risk Officer on the transition plans and handover arrangements and seeking assurance from the new Chief Risk Officer that he had been provided with all of the information needed to enable him to fulfil his responsibilities. The Committee has welcomed the opportunity to work closely with the new Chief Risk Officer during 2016. We have also seen greater emphasis emerge over 2016 on the responsibilities of the first line of defence for |
managing risk in their businesses, with the chief executives of each business attending Committee meetings to present directly to the Committee, with the support of their chief risk officers, on the risk profile of their business and how risk is being managed.
My own responsibilities as Chairman of the Committee were re-emphasised during 2016, with the introduction in March 2016 of the UKs Senior Managers Regime. Under this regulatory regime, I have specific prescribed responsibilities for safeguarding the independence of and overseeing the performance of the risk function, including the performance of the Chief Risk Officer, in line with regulatory requirements. In addition to my regular meetings with the Chief Risk Officer and members of his senior management, I have led the Committee in encouraging the risk function to develop a way of assessing risk management capability, which we have also agreed will be subject to a periodic, external review. The risk function has also been encouraged to develop a way of measuring risk culture across the Group.
During 2016, I continued to liaise closely with the Chairman of the Board Audit Committee, particularly with regard to operational risk issues, where there is some degree of overlap between the remit of the two committees. I also attended a meeting of the risk committee of Barclays US IHC to gain a first-hand insight into the risk issues being addressed by management in that entity. I continued my practice of meeting regularly with other members of senior management and continued to engage with Barclays regulators in the UK and US.
Committee performance The Committees performance during 2016 was assessed as part of the independently facilitated annual Board effectiveness review. I am pleased to report that the conclusion of my Board colleagues was that the Committee is regarded as thorough and effective and that the Board has a high degree of confidence in the diligence and coverage of the Committee. The main area identified for improvement was to ensure that the co-operation and collaboration between the Committee and the Board Audit and Board Reputation Committees continues to capture all significant risk issues effectively. I will be working even more closely with my fellow Board Committee chairmen on this over the coming year. You can read more about the outcomes of the Board effectiveness review on pages 33 to 35.
Looking ahead 2017 will be a key year for Barclays in delivering its strategy, as it completes its restructuring and makes significant steps in implementing the new legal entity structure required under Structural Reform. I expect the Committee to focus on strategic risk, with an emphasis on promoting even greater linkages between strategy formulation and risk management, and ensuring that there is appropriate global oversight of risk across the new Group structure.
Tim Breedon Chairman, Board Risk Committee 22 February 2017 | |
20 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
The Committees work
The significant matters addressed by the Committee during 2016 are described below:
Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | |||
Risk appetite and stress testing, i.e. the level of risk the Group chooses to take in pursuit of its business objectives, including testing whether the Groups financial position and risk profile provide sufficient resilience to withstand the impact of severe economic stress. | The risk context to MTP, the financial parameters and constraints and mandate and scale limits for specific business risk exposures; the Groups internal stress testing exercises, including scenario selection and financial constraints, stress testing themes and the results and implications of stress tests, including those run by the Bank of England (BoE). | § Assessed the risk context for the 2016 MTP, including general economic and financial conditions and how these had been reflected in planning assumptions.
§ Debated the assumptions, parameters and results of the internal stress test of the risk appetite of the 2016 MTP.
§ Discussed and agreed mandate and scale limits for market and credit risk.
§ Approved the parameters for the European Banking Authority stress test.
§ Approved the parameters for BoE stress test scenario expansion.
§ Evaluated the BoE stress test results, including updates on stress testing governance and methodology and assessing potential contingency plan actions.
§ Debated regulatory and market reaction to the BoE stress test results.
§ Considered and approved internal stress test themes and the financial constraints and scenarios for stress testing risk appetite for the 2017 MTP.
§ Regularly monitored the progress of the US IHC in preparing for the Comprehensive Capital Analysis and Review (CCAR) stress test. |
The Committee recommended the proposed risk appetite for 2016 to the Board for approval, although asked management to develop a contingency plan with identified triggers and actions that could be implemented if the stress occurred. It also emphasised to management that mandate and scale limits should be set at appropriate levels, reflecting the desire to focus on conservative growth in core products and markets. The Committee approved credit and market risk limits and requested that additional limits were set for market risk in order to enhance monitoring and control. It also asked management to review limits and guidelines and develop a revised framework for single name risk management, which it subsequently considered and approved. The Committee approved the stress test results for submission to the BoE. After evaluating feedback from the BoE on the stress test, the Committee encouraged management to engage with the BoE on specific points where additional clarity on regulatory expectations was desirable. |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 21 |
Governance: Directors report
What we did in 2016
Board Risk Committee report
Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | |||
Capital and funding, i.e. having sufficient capital and financial resources to meet the Groups regulatory requirements and its obligations as they fall due, to maintain its credit rating, to support growth and strategic options. | The trajectory to achieving required regulatory and internal targets and capital and leverage ratios, including the potential impact of Structural Reform and legal entity requirements. | § Debated on a regular basis, capital performance against plan, tracking the capital trajectory, any challenges and opportunities and regulatory policy developments.
§ Assessed on a regular basis liquidity performance against both internal and regulatory requirements.
§ Regularly monitored capital and funding requirements on a legal entity basis, including evaluating proposed capital and liquidity processes for Barclays UK.
§ Debated with management proposed actions to be taken to restructure the Groups asset swaps and ESHLA portfolio in order to reduce the impact of market volatility on capital.
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The Committee supported the forecast capital and funding trajectory and the actions identified by management to manage the Groups capital position, including the actions taken to restructure asset swaps and the ESHLA portfolio. The Committee approved the proposed capital and liquidity processes for Barclays UK for submission to the regulator. | |||
Political and economic risk, i.e. the impact on the Groups risk profile of political and economic developments and macroeconomic conditions. | The potential impact on the Groups risk profile of political developments, such as the UKs EU Referendum and the US Presidential election, political and economic risk in South Africa, and weakening macroeconomic conditions, such as disruption and volatility in financial markets. | § Closely monitored the potential impact of the UKs EU Referendum on the Groups risk profile and risk management see the case study below for further details.
§ Requested an assessment of the potential impact of negative interest rates in the UK on Barclays and on UK banks generally, evaluating the potential impact on risk appetite, on customers and on Barclays models.
§ Continued to assess the economic and political situation in South Africa and the potential impact on the Groups risk profile, including assessing the potential risk of a sovereign credit rating downgrade and the action taken by management to position the business appropriately.
§ Continued to assess Chinese economic metrics and the potential for the global impact of any economic slowdown in China.
§ Discussed the impact of market volatility on Barclays pension scheme.
§ Monitored Barclays exposures to certain European banks in view of potential specific stresses for individual banks and general economic and political conditions in the Eurozone.
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The Committee identified interest rate risk as a potential area of emerging risk and asked management for an assessment of Barclays sensitivity to changes in interest rates and inflation, which was presented to the Committee in the fourth quarter. The Committee suggested that the Board was briefed on this subject and a briefing session is planned for 2017.
The Committee satisfied itself that the actions taken to position Barclays business in South Africa were appropriate in the context of the identified economic and political risk. It continues to keep the potential impact of a Chinese slowdown under active review and will be updated by management in early 2017 with an assessment of the risk horizon. Given the political and economic uncertainty in Italy that re-emerged in late 2016, the Committee asked management to renew its focus on reducing any redenomination risk arising from Barclays operations in Italy. | |||
Specific sector risk, i.e. the Groups risk profile in sectors showing signs of stress, such as the oil sector. | The Groups exposures to the oil and commodities sectors in light of the ongoing price weakness and volatility in these sectors during 2016. | § Continued to regularly assess the Groups exposures to the oil sector, including how the portfolio was performing and whether this was in line with expectations given the actions that had been taken to manage or restructure Barclays exposures.
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The Committee satisfied itself that the actions taken by management were appropriate. Given ongoing volatility in this sector it will continue to monitor the portfolio for any further signs of stress that may require additional action.
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22 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Area of focus
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Matter addressed
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Role of the Committee
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Conclusion/action taken
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Credit risk, i.e. the potential for financial loss if customers fail to fulfil their contractual obligations. |
Conditions in the UK housing market, particularly in London and the South East and the Groups risk appetite for and management of sectors such as the buy-to-let sector, given changes in taxation; levels of UK consumer indebtedness, particularly in the context of the risk of rising interest rates; and the performance of the Cards business, particularly the US Cards business, including levels of impairment. |
§ Continued to assess conditions in the UK property market for any signs of stress.
§ Evaluated how management was tracking and responding to rising levels of consumer indebtedness.
§ Scrutinised the performance of the Cards business, including reviewing performance against risk appetite, evaluating the drivers of impairment in the UK and US businesses and assessing actions being taken to ensure that the performance of certain business segments remained within agreed risk appetite.
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The Committee continued to encourage management to carry on with its conservative approach to UK mortgage lending, particularly in view of signs of slowdown the market post the EU Referendum. It also encouraged management to continue its close monitoring of overall levels of consumer indebtedness. The Committee challenged the credit performance of certain business segments in the US Cards business and encouraged management to complete the actions that had been identified to improve credit performance. It also emphasised to management the need to strengthen the linkages between business strategy and risk appetite.
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Operational risk, i.e. costs arising from human factors, inadequate processes and systems or external events. |
The Groups operational risk capital requirements and any material changes to the Groups operational risk profile and performance of specific operational risks against agreed risk appetite. |
§ Tracked operational risk key indicators via regular reports from the Head of Operational Risk.
§ Evaluated the potential impact of regulatory developments on operational risk capital requirements.
§ Debated specific areas of operational risk, including fraud; transaction operations; technology; payments; and cyber-risk, evaluating the extent of any losses, the overall threat landscape, risk trends and the controls in place, in order to assess the potential impact on operational risk capital requirements.
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The Committee focused its attention on the financial and capital impacts of operational risk, with specific attention on key risks that were outside appetite. It encouraged management to implement greater links between the control environment in each business and the operational risk capital allocated to that business. It also emphasised to management that there should be greater co-ordination between the key risks highlighted to the Committee and the operational risk control issues escalated to the Board Audit Committee, which is being addressed via the new chief controls office.
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Risk framework and governance |
The frameworks, policies and talent and tools in place to support effective risk management and oversight. |
§ Evaluated model risk and plans in place to enhance Barclays models and modelling capabilities.
§ Tracked the progress of significant risk management projects, including the plans in place to achieve compliance with BCBS239 risk data aggregation principles.
§ Debated any risk management matters raised by Barclays regulators and the actions being taken by management to respond.
§ Discussed and endorsed the revised Enterprise Risk Management Framework (ERMF) from the perspective of financial and operational risk.
§ Oversaw the transition and handover to a new Chief Risk Officer.
§ Encouraged management to find ways of assessing risk capability and risk management culture.
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The Committee will continue to track the delivery of plans to enhance modelling and will focus on this during 2017 as part of its oversight of the model risk principal risk. The Committee encouraged management to continue to improve risk data quality, including embedding accountability for risk data quality with the business chief risk officers. The Committee will continue to track managements response to any risk management matters raised by the Groups regulators.
The Committee was satisfied that the handover to the new Chief Risk Officer was appropriate. The Committee welcomed the development of a risk management capability scorecard and asked for risk management capability to be evaluated by an external third party on a periodic basis, with a view to starting in 2017. It also welcomed the proposal to measure risk culture and asked for this to be fed into the Board Reputation Committees overall assessment of Barclays culture.
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Remuneration |
The scope of any risk adjustments to be taken into account by the Board Remuneration Committee when making remuneration decisions for 2016. |
§ Debated the Risk functions view of 2016 performance, making a recommendation to the Board Remuneration Committee on the financial and operational risk factors to be taken into account in remuneration decisions for 2016.
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The Committee asked for capital and liquidity on a stressed basis to be taken into account when finalising the risk input to remuneration decisions. |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 23 |
Governance: Directors report
What we did in 2016
Board Risk Committee report
In addition, the Committee also covered the following matters in 2016:
§ assessed Barclays exposures to the leveraged finance market and general conditions in that market
§ was briefed by PwC on any risk matters associated with the 2015 year-end audit, specifically impairment; the valuation of the ESHLA portfolio; and a valuation disparity with a third party
§ evaluated the outcomes of the assessment of the Committees performance and any areas of Committee performance that needed to be enhanced
§ reviewed and updated its terms of reference, recommending them to the Board for approval
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Governance in Action contingency planning for the UKs EU Referendum
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A significant external risk event in 2016 was the UKs Referendum on its continued membership of the EU. The Board Risk Committee actively tracked this emerging risk throughout 2016, both before and after the vote.
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Pre-EU Referendum activity by the Committee included:
§ debating the UKs potential exit from the EU, including evaluating an assessment of the potential impacts on Barclays of a leave vote and discussing the key messages for policymakers and prudential authorities on the risks
§ evaluating Barclays potential exposures if there were to be a vote to leave the EU, including assessing the steps taken by management to mitigate any risk (such as reducing any currency mismatches) in order to position Barclays defensively to manage the impact of any volatility on market and funding risk
§ assessing the likelihood of any operational risk issues that might arise if there was a period of market volatility following a leave vote
§ conducting an overall review of the appropriateness of Barclays preparations for any market dislocation
§ reporting to the Board on the Committees deliberations.
In addition to the activities undertaken by the Committee, Board members, including certain non-executive Directors, participated in a Group crisis management planning exercise based on the UK voting to leave the EU. The exercise focused on Barclays response and communications planning in the event of a vote to leave; articulating some of the high level impact scenarios following a vote to leave; and determining the decisions and ensuing direction required from Barclays Crisis Leadership Team. |
Post-EU Referendum activity by the Committee included:
§ convening a special meeting to discuss and evaluate the effectiveness of Barclays preparations, concluding that the plans developed had been executed satisfactorily
§ assessing the performance of the actions taken to manage the impact of volatility on market and funding risk
§ evaluating a revised stressed outlook, based on revised economic assumptions, and its impact on Barclays risk profile, deliberating the effect of the revised outlook on forecast impairment and on capital and funding, market risk and credit risk
§ considering Barclays exposures to European banks in anticipation of potential market disruption in the Eurozone and the actions that had been taken to limit such exposures
§ discussing with management the actions that had been taken to reduce risk appetite and limits on exposures to residential property development, high loan-to-value mortgages and buy to-let lending and other actions that had been implemented to manage risk in higher risk retail segments and corporate portfolios
§ encouraging management to consider the strategic implications of the leave vote
§ emphasising to management the need to fully and openly engage on matters of mutual concern with the UK government and regulators given the new political and economic environment
§ continuing to track the potential impact of the leave vote and the actions being taken by management to deal with any emerging signs of stress in Barclays portfolios
§ reporting to the Board on the Committees deliberations.
The full Board also met in the aftermath of the vote result to be briefed on how Barclays had performed during the period of volatility immediately following the result, including discussing Barclays capital and liquidity position; market conditions; communications with employees and with customers and clients; contact with regulators and the UK government; the outlook for the UK economy; share price performance and potential strategic impacts.
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Read more about Barclays risk management on pages 342 to 403.
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24 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Governance: Directors report
What we did in 2016
Board Reputation Committee report
Achieving and sustaining a culture where all of our people demonstrate consistent behaviours and conduct underpinned by the Barclays values is key to delivering high performance for all our stakeholders and, therefore, to our long-term success.
Dear Fellow Shareholders One of the key areas of focus for the Committee during 2016 was encouraging management to develop a way of better understanding and measuring intangible areas such as behaviour and culture. Barclays has a strong and resonant purpose, Helping people achieve their ambitions in the right way, and a well understood set of values, Respect, Integrity, Service, Excellence and Stewardship. This culture is firmly endorsed from the top: achieving and sustaining a culture where all of our people demonstrate consistent behaviours and conduct, underpinned by Barclays values, is key to delivering high performance for all our stakeholders and, therefore, to our long-term success.
Our challenge has been how to co-ordinate the efforts to build culture across the Group and obtain assurance that progress is being made. Significant focus was given during 2016 to developing consistent measurement and reporting of culture and you can read about the Committees role in this important initiative in the case study on page 28. A similar approach has been taken to developing a set of indicators to allow us to measure progress across the Committees other areas of responsibility: conduct, complaints and citizenship.
During 2016, the Committee continued to track the exposure of Barclays, and the financial sector in general, to reputational risks. It also placed a renewed focus on the initiatives under way to build and manage Barclays reputation with its key stakeholders. We also continued to exercise oversight of the Barclays Compliance function, including approving its annual business plan, budget and resources.
Under the UKs Senior Manager Regime, which was introduced in March 2016, I have specific responsibilities with regard to safeguarding the independence and integrity of Barclays Compliance function and for overseeing its performance, including that of the Head of Compliance. To this end, I regularly meet with the Head of Compliance to receive briefings on the work of Compliance and provide support when necessary. I also meet regularly with other members of senior management, including those in the Corporate Relations, Citizenship and Reputation Risk teams.
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This is my first report as Chairman of the Board Reputation Committee and I wish to record my thanks to Sir Michael Rake, who I succeeded as Chairman on 1 January 2016, and to Wendy Lucas-Bull and Frits van Paasschen, who both stepped down from the Committee on their retirement from the Barclays Board during 2016. Mike Ashley and Mary Francis subsequently joined the Committee to ensure we have the right balance of skills and experience and appropriate cross-membership with other Board Committees.
The report on pages 26 to 28 sets out details of the material matters considered by the Committee during 2016.
Committee performance The Committees performance during 2016 was assessed as part of the independently facilitated annual Board effectiveness review. I can report that my fellow Board members considered that the Committee has made progress in defining its role and is performing well. The main area identified for improvement was around ensuring that Board members have greater awareness of the Committees mandate and core agenda. You can read more about the outcomes of the Board effectiveness review on pages 33 to 35.
Looking ahead Cultural transformation remains firmly on the Committees agenda and we will continue to track key indicators and measure the progress being made. This will be increasingly important as Barclays implements its Structural Reform Programme and begins to establish separate legal entities within the Group. My key objective in 2016 was to put the Committee at the centre of Barclays drive to be a leader in conduct, culture and reputation - matters at which we have not always excelled in the past. There is still lots to do, but I believe that the leadership and processes that we have now put in place give us a great foundation on which to build.
Sir Gerry Grimstone Chairman, Board Reputation Committee 22 February 2017 |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 25 |
Governance: Directors report
What we did in 2016
Board Reputation Committee report
The Committees work
The significant matters addressed by the Committee during 2016 are described below:
Area of focus | Matter addressed | Role of the Committee | Conclusion/action taken | |||
Conduct risk | The risk of detriment to customers, clients, market integrity, competition or Barclays from the inappropriate supply of financial services, including instances of wilful or negligent misconduct. | § Discussed updates from management on conduct risk and requested the development of a dashboard report of conduct indicators to be presented to each meeting.
§ Monitored on a regular basis performance against agreed conduct risk indicators.
§ Debated the indicators that had been developed to measure material conduct risks and issues, including providing feedback on indicators for policy breaches.
§ Discussed with BIA its view of the management of conduct risk across the Group, with particular emphasis on maintaining focus on conduct risk through periods of change.
§ Provided input, via the Committee Chairman, to the scope of BIAs review of the conduct risk programme.
§ Discussed directly with the senior management of Barclays International and Barclays UK their view of conduct and cultural issues in those businesses and the status of any initiatives in place to strengthen conduct and culture.
§ Confirmed with management that reviews had been undertaken to learn lessons from issues that had arisen at other banks and financial institutions, e.g. sales-based incentive schemes.
§ Tracked the levels of attestation by colleagues globally to The Barclays Way, the Groups code of conduct.
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The Committee requested further focus on product propositions and suitability and updates on product development and controls. In 2017, it will receive a quarterly report on new products. It provided input on the development of the dashboard, including requesting that it incorporates reports from BIA and draws on external data points where available. The Committee reiterated to management the importance of ensuring that the focus on conduct is maintained in those businesses or jurisdictions that Barclays is exiting or where it is reducing its presence. The Committee encouraged management to bring contingent workers into the scope of The Barclays Way training and arrangements are being made for all Committee members to complete the training themselves. | |||
The scope of any conduct risk adjustments to be taken into account by the Board Remuneration Committee when making remuneration decisions for 2016.
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§ Considered the proposed adjustments to be made to the incentive pool from a conduct risk perspective. |
The Committee endorsed the methodology used and the resulting adjustments proposed. |
26 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Area of focus |
Matter addressed | Role of the Committee | Conclusion/action taken | |||
Cultural change | The progress being made on embedding of cultural change. | § Debated reports on the progress being made to effect cultural change across Barclays globally, discussing the measures being taken to define the desired culture and how it would be measured.
§ Requested that a single report of cultural indicators was developed for reporting to each meeting and monitored on a regular basis performance against the agreed indicators.
§ Discussed the status of the actions arising from the Banking Standards Boards (BSB) 2015 assessment of Barclays, the progress of the 2016 assessment and the resulting 2016 assessment report, asking management for greater co-ordination between the BSBs work and internal employee surveys.
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Read more about the development of the culture measurement framework in the case study on page 28. | |||
Complaints | Ensuring fair outcomes for customers by monitoring volumes of complaints received and the standard and quality of complaints handling processes. | § Requested the development of a dashboard report of complaints indicators to be presented to each meeting.
§ Monitored on a regular basis performance against agreed complaints indicators.
§ Discussed the way in which complaints are handled and the focus on resolving complaints at first point of contact.
§ Debated imminent industry-wide changes in the way in which reportable complaints are recorded and the potential for reputation risk.
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The Committee encouraged management to develop a way of defining and reporting on complaints in the Barclays Internationals investment bank and a standard on complaint handling in that business will be issued in the first quarter of 2017. The Committee requested that additional information on the top root causes of complaints was included in future reports. | |||
Citizenship | The status of Barclays Citizenship Plan 2016-2018, the Shared Growth Ambition. | § Debated the targets to be set for the Shared Growth initiatives.
§ Agreed with the proposal to focus activity around the themes of access to employment, to financial and digital empowerment and to financing.
§ Assessed status updates on the progress of the Shared Growth Ambition.
§ Requested the development of a dashboard report of citizenship indicators to be presented to each meeting and monitored on a regular basis performance against agreed indicators.
§ Considered and recommended to the Board for approval Barclays statement under the UKs Modern Slavery Act, which can be found on Barclays website.
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The Committee provided feedback on how the Shared Growth Ambition was articulated and requested additional information on the focus areas and metrics and how progress would be measured and reported. Its feedback was incorporated into the plan, which was launched in June 2016. | |||
Reputation risk | Ensuring that Barclays anticipates, identifies and manages reputational issues that may impact it or the industry now or in the future. | § Monitored current reputation risk issues, including Barclays involvement in sensitive sectors such as defence or energy and fossil fuels.
§ Assessed emerging reputational issues, such as climate change and the relaxation of certain sanctions against Iran.
§ Evaluated the measures being taken to proactively build and manage Barclays reputation with stakeholders.
§ Assessed external opinion survey results, the trends in indicators and factors influencing the survey results, including the potential impact of the EU Referendum and government leadership changes in the UK and US.
§ Discussed the reputational risks associated with tax and how this was being managed across the Group, including the effectiveness of Barclays Tax Principles and Code of Conduct.
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The Committee provided feedback on the form and content of the reputation risk reports and how Barclays-specific and systemic risks might be monitored. It approved changes to Barclays Sanctions Policy with regard to sanctions with Iran. The Committee requested a regular report setting out a rolling 12-month view of Barclays communications campaigns. It also requested and received an update on Barclays crisis management plans. It requested and received further information on Barclays business in low tax jurisdictions. It asked for and receives regular reports from the Tax Management Oversight Committee on the transactions it has reviewed. |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 27 |
Governance: Directors report
What we did in 2016
Board Reputation Committee Report
The Committee also covered the following matters:
§ discussed the progress of plans to develop the Barclays brand
§ endorsed the 2017 priorities for Barclays Corporate Relations team
§ assessed the revised ERMF from a conduct and reputation risk perspective and recommended it to the Board for approval
§ approved the 2016 Compliance business plan and tracked progress, including updates on resourcing and attrition levels |
§ received a report on managements annual review of the effectiveness of compliance with the Volcker Rule (restrictions on proprietary trading and certain fund investments by banks operating in the US)
§ assessed and discussed a report on the Committees performance during 2015
§ approved revisions to its terms of reference and recommended them to the Board for approval.
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Read more about Barclays risk management on pages 342 to 403. | ||||||||||||||
Governance in Action measuring cultural progress
A primary area of focus for the Committee in 2016 was providing challenge and support to management in its delivery of cultural change. The Group Executive Committee confirmed conduct, culture and values as one of its execution priorities for 2016, with the aim of monitoring cultural change and bringing together different cultural indicators to form a coherent and consolidated view of culture across Barclays.
Senior representatives from Compliance, Risk, HR and BIA presented to the Committee in early 2016 on the progress of implementing cultural change and proposals for developing a set of key indicators, along with clear governance structures and accountability for monitoring and sustaining cultural progress. The Committee debated and endorsed the following objectives:
§ identify the desired culture end-state and how to measure progress towards achieving it
§ develop a cultural measurement tool that provides simple and consistent reporting relevant to all stakeholders
§ use the insights obtained to drive actions and further embed and sustain the desired values-based culture.
Ten cultural outcomes were identified, firmly linked to Barclays values:
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For each desired cultural outcome, a set of internal qualitative and quantitative indicators was identified, along with external perception indicators. The indicators proposed were drawn from existing indicators used in the Group, such as the results from Your View (the employee opinion survey), results from Barrett Values Surveys of Barclays Executive and Senior Leadership Group, external opinion survey results, BIA reports, performance reviews and indicators relating to risk management and compliance. Assessing these indicators will ensure that ongoing efforts are focused on priority issues and challenges that may impede cultural transformation.
In debating and endorsing the proposed cultural outcomes and indicators, the Committee provided feedback to management. It discussed in particular:
§ how to embed the desired culture across middle-management and whether a targeted action plan was needed for this population
§ how structuring incentives in the right way, based on personal accountability, could help drive the right culture and behaviours
§ whether a more holistic approach was needed to performance reviews, with even more focus on rewarding how things were done, rather than what was achieved
§ that indicators based around the how assessments from performance reviews might be incorporated as a measure of success
§ that existing indicators on audit issues and regulatory actions could be incorporated as a measure of success.
Feedback from the Committee was subsequently incorporated into the measurement tool. The Committee also requested the development of a culture dashboard, setting out quarterly performance against the agreed indicators. The first such report was made in September 2016, with a further report in December 2016, allowing the Committee to debate the results and trends and the areas identified for potential deep dive reviews or targeted action. During 2017, the Committee will continue to assess the quarterly indicators, the potential themes emerging and any specific challenges identified at a business and functional level. |
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Value
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Cultural outcomes
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Respect | Inclusion | Collaboration | ||||||||||
Integrity | Speaking up | Personal accountability | ||||||||||
Service | Customer/client centricity | Balanced short and long-term needs | ||||||||||
Excellence | Simplicity and efficiency | High performance | ||||||||||
Stewardship | Continuous improvement | Strong reputation | ||||||||||
28 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Governance: Directors report
What we did in 2016
Board Nominations Committee report
It is a key part of our role to be satisfied that there are proper processes in place for executive succession.
Dear Fellow Shareholders Following his appointment as Group Chief Executive at the end of 2015, Jes Staley has been building his Group Executive Committee. Board level consideration is required for appointments to the Group Executive Committee and throughout 2016 the Board Nominations Committee continued to embed its oversight of Group Executive Committee succession planning. The Committee was updated on Barclays talent and succession strategy and presented with role profiles and outputs from reviews of internal successors to Group Executive Committee roles. It is a key part of our role to be satisfied that there are proper processes in place for executive succession and at our regular meetings we discussed how potential successors are being provided with wider, relevant experience as part of their development.
Another ongoing area of focus for the Committee in 2016 was the composition of our subsidiary boards in light of the legal, regulatory and governance requirements of Structural Reform. A great deal of consideration has been given to ensuring the independence of the board and board committees of Barclays strategically significant subsidiaries, while allowing for collaboration between those boards and the Barclays Board. We have deliberated at length on the structure of the subsidiary boards and how they will report into and interact with our Group Board, which must continue to have appropriate oversight to ensure the effective operation of the Group and the protection of shareholder interests. During 2016, we finalised and recommended to the Board a set of Governance Guiding Principles, which document the high level expectations of the relationship that will exist between Barclays and its strategically significant subsidiaries.
The Committee regularly considered the balance of skills, experience and diversity needed on the Board during 2016. We refreshed the Board skills matrix to reflect the future strategy of the Group, identifying the attributes required to further strengthen and enhance the Boards effectiveness. We conducted searches for new non-executive Directors, approving the appointment of Mary Francis as non-executive Director: Mary brings both financial services experience and significant non-executive directorship experience to the Board. We also considered subsidiary board composition at each of our Committee meetings, with a particular focus on populating the strategically significant subsidiary boards as we continue to embed Structural Reform. It is fair to say that attracting candidates with the skills, experience and qualities we need remains a considerable task: serving on a bank board is not an undertaking that anyone considers lightly and our success in securing the right candidates has been necessarily limited by the challenges they perceive.
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When considering Board and Board Committee composition and succession plans diversity remains at the front of our minds. We continued to receive regular updates on diversity and inclusion during 2016 and were pleased to hear that the number of women in senior leadership positions had increased for the third successive year. As a Board we met our target of 25% female representation by 2015 and are progressing towards the target we set ourselves last year of 33% female representation by 2020. Diversity is not just about gender, however, and we are always mindful of diversity in all of its forms, even where we have not set specific targets.
Certain responsibilities for me as Chairman of the Committee have been prescribed by the Senior Managers Regime that was introduced in the UK in March 2016. Under that regime, I am responsible for ensuring that the Committee remains independent and that it performs effectively, fulfilling the responsibilities expected of it by our regulators in terms of overseeing decisions around the structure, size, composition, diversity and performance of the Board. The report that follows describes how these responsibilities have been fulfilled. I would like to take this opportunity to thank my fellow Committee members for their continued support during 2016.
Committee performance The performance of the Committee was assessed as part of the annual Board effectiveness review and I am pleased to report that is was assessed to be performing effectively. An area identified for improvement was around ensuring that there are more regular reports to the Board on the status of recruitment of new non-executive Directors, which I will address. The report on the Board effectiveness review contains more information and can be found on pages 33 to 35.
Looking ahead In 2017 we will continue to support the implementation of the new Group structure, ensuring that we have the right people in place to take Barclays forward. As appropriate, we will continue to make recommendations to the Board to ensure that we remain at the forefront of best practice corporate governance standards.
John McFarlane Chairman, Board Nominations Committee 22 February 2017 |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 29 |
Governance: Directors report
What we did in 2016
Board Nominations Committee report
The Committees work
The significant matters addressed by the Committee during 2016 are described below:
Area of focus |
Matter considered | Role of the Committee | Conclusion/action taken | |||
Board and Board Committee composition |
The membership of the Board and the current and future composition of the Board and its Committees. | § Debated a forward-looking plan of the expected skills and experience needed on the Board in the context of future strategic direction.
§ Evaluated the revised Board skills matrix and, in consideration of known and expected changes to the Board, conducted a search for non-executive Directors.
§ Reviewed the membership of Board Committees.
§ Considered and provided input to Board Committee Chairman succession plans. |
The Committee approved the revised skills matrix and agreed to conduct a search for new non-executive Directors in line with the requirements identified. It recommended the appointment of Mary Francis to the Board as non-executive Director and she subsequently joined the Board with effect from 1 October 2016. The Committee concluded that additional accounting and auditing experience was needed in order to provide further options for succession to the Board Audit Committee chairmanship over time and a search for potential candidates continues.
Please refer to page 32 for more details of the Boards approach to the recruitment of new Directors.
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30 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Area of focus | Matter considered | Role of the Committee | Conclusion/action taken | |||
Executive succession planning and talent management | Group Executive Committee composition and succession following the appointment of the new Group Chief Executive in 2015.
Oversight of Group Chief Executive succession and appointments to key positions. |
§ Discussed updates from the Group HR Director on Group Executive Committee succession plans, including assessing emergency cover and the existing talent pipeline.
§ Considered external assessments and benchmarking of internal talent.
§ Debated approval requirements for appointments to the Group Executive Committee and other key positions across the Group.
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The Committee requested a presentation of key outputs from the Group Executive Committee offsite meeting on talent. It also asked to receive reports of the executive assessments carried out by an external facilitator. The Committee agreed the approval requirements for key positions, and subsequently approved the appointment of Tim Throsby as President of Barclays International in accordance with those requirements.
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Governance implications of Structural Reform and strategically significant subsidiary board composition | The board and board committee composition of strategically significant subsidiaries, including board size, structure and proposed interactions.
The governance principles for the relationship between Barclays and its strategically significant subsidiaries. |
§ Finalised Governance Guiding Principles for the Group post-Structural Reform, which set out ultimate decision-making powers, while respecting the rights and responsibilities of the boards of the strategically significant subsidiaries.
§ Debated the required structure and composition of the strategically significant subsidiary boards and board committees in light of regulatory requirements and feedback.
§ Scrutinised the proposed board skills matrix for Barclays UK.
§ Considered candidates for the positions of chairman of Barclays UK and Barclays International.
§ Considered appointments to the Board of, and the associated fees for, the US IHC board.
§ Considered appointments to the Barclays Africa board.
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The Committee endorsed and recommended the Governance Guiding Principles to the Board for approval. It agreed the structure of the strategically significant subsidiary boards and commenced a search for non-executive directors, including for the position of chairman of Barclays UK, and agreed the process of the appointing of the chairman of Barclays International. The Committee approved the appointment of Directors to the US IHC board, including agreeing the fees to be paid to them. It also approved appointments to the Barclays Africa board. | |||
Board effectiveness | The progress made against the actions identified in the 2015 Board effectiveness review.
The 2016 effectiveness review of the Board and its Committees. |
§ Discussed and agreed the proposed actions to be taken in response to the findings of the 2015 review.
§ Reassessed the status of the actions throughout the year and tracked the progress of the action plan.
§ Confirmed the process to be followed for the 2016 review.
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The Committee recommended the proposed action plan and 2016 Board objectives to the Board for approval. The Committee agreed and recommended the process for the 2016 effectiveness review, which proceeded as recommended. | |||
Governance | Changes to the Boards corporate governance framework following the implementation of the Senior Managers Regime in March 2016. | § Reviewed updates to Corporate Governance in Barclays and the Charter of Expectations following the implementation of the Senior Managers Regime in order to integrate the requirements into the existing corporate governance framework, applying particular focus to the updated individual role profiles.
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Approved and recommended to the Board for approval the updated corporate governance documents and role profiles for key positions on the Board. |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 31 |
Governance: Directors report
What we did in 2016
Board Nominations Committee report
32 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F |
Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 33 |
Governance: Directors report
What we did in 2016
Board Nominations Committee report
Review of Board and Board Committee Effectiveness
Board priorities
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Leveraging Board experience in support of executives
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Greater awareness of Board Committee work
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2015 findings To ensure that the Board agenda is optimised, including time for blue-sky discussion of major risks. |
2015 findings To continue to ensure that all non-executive Directors have the opportunity to contribute to strategic debate. |
2015 findings To continue to raise awareness across all Board members of the significant issues considered by Board Committees and to continue to refine the remit and scope of the Board Reputation Committee.
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Actions taken in 2016 In early 2016 a set of Board objectives was agreed in order to track progress against the Boards priorities.
Board agendas were updated to allow more time for discussion of strategic options. This was also the focus for the 2016 Board Strategy Offsite. Board dinners were used for more free-ranging discussions, with suggested topics notified to the Directors in advance. No decisions were taken or required as part of these discussions, which were used to inform the broader debate at subsequent Board meetings. |
Actions taken in 2016 John McFarlane and Sir Gerry Grimstone took responsibility for ensuring that all non-executive Directors were involved in strategic decision making.
In the course of the year, it was decided that partnering non-executive Directors with members of the Group Executive Committee would not be taken forward. However, the experience of non-executive Directors has been leveraged as appropriate, e.g. the appointments of Steve Thieke and Diane Schueneman to the board of Barclays US IHC. Non-executive Directors continue to make a valuable contribution to the Board and its Committees. |
Actions taken in 2016 All Directors have access to Board Committee meeting papers and minutes, and have been reminded that they may attend Board Committee meetings whether or not they are members. Some Directors made use of this option during 2016. Board Committee Chairmen have continued to report to the Board on specific matters discussed at Board Committee meetings.
During 2016 Sir Gerry Grimstone, chairman of the Board Reputation Committee took action to define and focus its role and scope more clearly, including implementing new reporting initiatives such as the development of dashboard reports.
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2016 findings Create regular broad-based risk oversight sessions for the Board to allow Directors to look across the risk spectrum.
Schedule a debate on the role of the Board and non-executive Directors and link the conclusions to revised Board objectives to help focus the Boards agenda over the coming year. |
2016 findings The Board effectiveness review reported on positive and constructive relations between the new Board and the new management team. |
2016 findings Continue to optimise the information flow between Directors in the run-up to Structural Reform in 2018.
Consider agreeing common values for the Group and the banking subsidiary boards in the new structure.
For 2017 this finding will be renamed as Optimise communication and collaboration between directors, boards and committees.
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