Risk management

Credit risk management

~~Monitoring~~Analysis of total assets and credit risk exposures


				Analysis of total assets					Sub analysis
Assets	Loans and advances^a £m	Debt securities and other bills^b £m	Derivatives ^c £m	Reverse repurchase agreements ^d £m	Other £m	Assets subject to credit risk £m	Assets not subject to credit risk £m	Total assets £m	Credit market exposures^e £m
Cash and balances at central banks					30,019	30,019		30,019
Items in the course of collection from other banks					1,695	1,695		1,695
Treasury and other eligible bills		4,544				4,544		4,544
Debt securities		148,686				148,686		148,686	4,745
Equity securities^f							30,535	30,535
Traded loans	1,070					1,070		1,070
Commodities^g							802	802
Total Trading portfolio assets	1,070	153,230				154,300	31,337	185,637
Financial assets designated at fair value
Loans and advances	30,057				130	30,187		30,187	14,429
Debt securities		8,628				8,628		8,628
Equity securities^f							6,496	6,496
Other financial assets^h	1,469			7,283	479	9,231		9,231
Held on own account	31,526	8,628	–	7,283	609	48,046	6,496	54,542
Held in respect of linked liabilities under investment contractsⁱ							66,657	66,657
Derivative financial instruments			984,802			984,802		984,802	9,234
Loans and advances to banks	47,707					47,707		47,707
Loans and advances to customers	461,815					461,815		461,815	12,808
Debt securities		58,831				58,831		58,831	727
Equity securities^f							2,142	2,142
Treasury and other eligible bills		4,003				4,003		4,003
Available for sale financial instruments		62,834				62,834	2,142	64,976
Reverse repurchase agreements and cash collateral on securities borrowed				130,354		130,354		130,354
Other assets					3,096	3,096	3,206	6,302	109
Current tax assets							389	389
Investments in associates and joint ventures							341	341
Goodwill							7,625	7,625
Intangible assets							2,777	2,777
Property, plant and equipment							4,674	4,674
Deferred tax assets							2,668	2,668
Total on-balance sheet	542,118	224,692	984,802	137,637	35,419	1,924,668	128,312	2,052,980
Off-balance sheet:
Acceptances and endorsements						585
Guarantees and letters of credit pledged as collateral security and securities lending arrangements						53,942
Commitments						260,816			1,030
Total off-balance sheet						315,343
Total maximum exposure to credit risk						2,240,011

Notes

a	Further analysis of loans and advances is on pages 76 to 89

b	Further analysis of debt securities and other bills is on page 90

c	Further analysis of derivatives is on pages 91 to 92.

d	Reverse repurchase agreements comprise primarily short-term cash lending with assets pledged by counterparties securing the loan.

e	Further analysis of Barclays Capital credit market exposures is on pages 93 to 105.

f	Equity securities comprise primarily equity securities determined by available quoted prices in active markets.

g	Commodities primarily consists of physical inventory positions.

h	These instruments consist primarily of loans with embedded derivatives and reverse repurchase agreements designated at fair value.

i	Financial assets designated at fair value in respect of linked liabilities to customers under investment contracts have not been further analysed as the Group is not exposed to the risks inherent in these assets.

Barclays

Annual Report 2008

LOGO

Risk management

Credit risk management

Loans and advances

As the granting of credit is one of the Group’s major sources of income and its most significant risk, the Group dedicates considerable resources to gaining a clear and accurate understanding of credit risk across the business and ensuring that its balance sheet correctly reflects the value of the assets in accordance with applicable accounting principles. This process can be ~~broken down into~~summarised in the following broad stages:

–

Measuring exposures and concentrations

–

Monitoring weakness in exposures

–

Identifying potential problem loans and credit risk loans (collectively known as potential credit risk loans or PCRLs)

–

Raising allowances for impaired loans

–

Writing off assets when the whole or part of a debt is considered irrecoverable

~~Fig. 1: Loans and advances~~

   2007
£m    2006
£m
Retail businesses

Banks
   —      —
Customers
   164,062    139,350
Total retail businesses
   164,062    139,350
Wholesale businesses

Banks
   40,123    30,930
Customers
   185,105    146,281
Total wholesale businesses
   225,228    177,211
Loans and advances
   389,290    316,561

Measuring exposures and concentrations

Loans and advances to customers provide the principal source of credit risk to the Group although Barclays can also be exposed to other forms of credit risk

through loans to banks, loan commitments, contingent liabilities and debt ~~securities; see page 46)~~securities . The value of outstanding loans and advances balances, their risk profile, and potential concentrations within them can therefore have a considerable influence on the level of credit risk in the Group.

As at 31st December ~~2007, outstanding~~2008, total loans and advances to customers and banks net of impairment allowance were ~~valued~~£542,118m (2007: £410,789m), a rise of 32% on the previous year. Loans and advances at ~~£389bn (2006: £317bn), of which £349bn (2006: £286bn) was granted to personal or corporate customers (see figure 1)~~amortised cost were £509,522m (2007: £385,518m) and loans and advances at fair value were £32,596m (2007: £25,271m). Loans and advances were well distributed across the retail and wholesale portfolios.

Loans and advances were also well spread across industry ~~classifications (figure 2). Excluding Financial Services,~~classifications. Barclays largest sectoral ~~exposures are~~exposure is to home loans which, combined with other personal and business services sectors ,comprise 48% of total loans and ~~other services.~~advances (2007: 53%). These categories are generally comprised of small loans, have low volatility of credit risk outcomes, and are intrinsically highly diversified.

~~Balances~~ Growth in loans and advances to the financial services sector reflected an increased client base in the fund management business and increases in cash collateral. Loans and advances are ~~also~~further diversified across a number of geographical regions, (figure 3, based on location of customers). The majority of Barclays exposure is to the UK, which includes secured home loans exposure, followed by the United States, Africa and the rest of the European Union.

~~Fig. 4: Analysis of loans-to-value ratios of mortgages in the UK home loan portfolio at 31st December 2007 %~~

LOGO


Table 1: Loans and advances at amortised cost
As at 31st December 2008	Gross loans and advances £m	Impairment allowance £m	Loans and advances net of impairment £m	Credit risk Loans £m	CRLs % of gross loans and advances %	Impairment charge £m		Loan loss rates basis points
Wholesale – customers	266,750	2,784	263,966	8,144	3.1	2,540		95
Wholesale – banks	47,758	51	47,707	48	0.1	40		8
Total wholesale	314,508	2,835	311,673	8,192	2.6	2,580		82
Retail – customers	201,588	3,739	197,849	7,508	3.7	2,333		116
Total retail	201,588	3,739	197,849	7,508	3.7	2,333		116
Total	516,096	6,574	509,522	15,700	3.0	4,913		95

As at 31st December 2007
Wholesale – customers	187,086	1,309	185,777	5,157	2.8	1,190		64
Wholesale – banks	40,123	3	40,120	–	–	(13	)	(3	)
Total wholesale	227,209	1,312	225,897	5,157	2.3	1,177		52
Retail – customers	162,081	2,460	159,621	4,484	2.8	1,605		99
Total retail	162,081	2,460	159,621	4,484	2.8	1,605		99
Total	389,290	3,772	385,518	9,641	2.5	2,782		71

8076

Barclays

Annual Report ~~2007~~2008

Risk Management

Credit Risk Management

Loans and advances

based on location of customers. The majority of Barclays exposure is now outside the UK, reflecting higher rates of growth in the international portfolios as well as the effects of currency movements in 2008.

Barclays also actively monitors exposure and concentrations to sub-investment grade countries (see country risk policy, page 73). Details of the 15 largest sub-investment grade countries, by limit, are shown in figure 3.

Contractual maturity represents a further area of potential concentration. The analysis shown in figure 4 indicates that just over 40% of loans to customers have a maturity of more than five years; the majority of this segment comprises secured home loans.

Barclays risk is therefore spread across a large number of industries and customers and in the case of home loans, for example, well secured. These classifications have been prepared at the level of the borrowing entity. This means that a loan to the subsidiary of a major corporation is classified by the industry in which the subsidiary operates, even through the parent’s predominant sphere of activity may be in a different industry.

UK exposure to home loans accounts for just over 60 per cent of the Group’s total home loans exposure. The loan-to-value ratios (LTV) on the Group’s UK home loan portfolio are shown in figure 4. The valuations in the chart are those which applied at the last credit decision on each loan, i.e. when the customer last requested an increase in the limit or, if there has been no increase, at inception of the loan. Business flows (new business versus loans redeemed) have not materially changed the risk profile of the portfolio.

The impact of house price inflation will result in a reduction in LTV ratios within the mortgage book on a current valuation basis. On this basis, LTV on the residential mortgage book averaged 33% at the end of 2007 (2006: 34%). This ratio is a point-in-time analysis of the stock with LTV updated to current house prices by reference to an external price index and as a result may be influenced by external market conditions as well as changes in the stock of loans.

~~Barclays also actively monitors the risk profile of its~~Corporate and wholesale loans and advances

Gross loans and advances to wholesale customers and banks grew 38% to £314,508m (31st December 2007: £227,209m), largely due to Barclays Capital where loans and advances increased £72,514m (53%).

Credit Risk Loans (CRLs) rose 59% to £8,192m (31st December 2007: £5,157m). As a percentage of gross loans and advances, CRLs increased 13% to 2.6% (31st December 2007: 2.3%). CRL balances were higher in all businesses, reflecting the downturn in economic conditions, with some deterioration across default grades, higher levels of Early Warning List balances and a ~~view~~rise in impairment and loan loss rates in most wholesale portfolios. The largest rises were in Barclays Capital and GRCB – Western Europe.

Impairment charges on loans and advances rose 119% (£1,403m) to £2,580m (31st December 2007: £1,177m), primarily in Barclays Capital, although all other businesses were higher than the ~~early detection of any concentrations~~previous year. Impairment in ~~higher risk segments. Figure 5 depicts~~ Barclays ~~wholesale loan profile by existing risk grade (see page 67 for a description of~~Commercial Bank rose in both the rating system). The majority of Barclays exposure is to the higher quality names with just under 70% of exposure to customers with a DG of 10 or better. It is important to note that Barclays prices loans to risk. Thus, higher risk loans will usually have higher interest rates or fees or both. The profitability of a higher risk portfolio may, therefore, equal or exceed that of a lower-risk portfolio.

~~Barclays also actively monitors exposure~~Larger and ~~concentrations to sub-investment grade countries (see country risk policy, page 66). Details of the 15 largest sub-investment grade countries, by limit, are shown in figure 6.~~

Contractual maturity represents a further area of potential concentration. The analysis shown in figure 7 indicates that just over 40% of loans to customers have a maturity of more than five years; the majority of this segment comprises secured home loans.

LOGO


Table 2: Wholesale loans and advances to customers and banks
As at 31st December 2008	Gross loans and advances £m	Impairment allowance £m	Loans and advances net of impairment £m	Credit risk Loans £m	CRLs % of gross loans and advances %	Impairment charge £m	Loan loss rates basis points
Barclays Commercial Bank	68,904	504	68,400	1,181	1.70	414	60
Barclaycard	301	2	299	20	6.60	11	365
GRCB – Western Europe	15,432	232	15,200	578	3.70	125	81
GRCB – Emerging Markets	7,551	122	7,429	191	2.50	36	48
GRCB – Absa	8,648	140	8,508	304	3.50	19	22
Barclays Capital	208,596	1,796	206,800	5,743	2.80	1,936	93
Barclays Global Investors	834	–	834	–	–	–	–
Barclays Wealth	3,282	28	3,254	174	5.30	28	85
Head office	960	11	949	1	0.10	11	115
Total	314,508	2,835	311,673	8,192	2.60	2,580	82

As at 31st December 2007
Barclays Commercial Bank	65,535	483	65,052	956	1.50	292	45
Barclaycard	295	3	292	17	5.80	9	305
GRCB – Western Europe	10,927	63	10,864	93	0.90	19	17
GRCB – Emerging Markets	4,833	79	4,754	119	2.50	10	21
GRCB – Absa	5,321	112	5,209	97	1.80	11	21
Barclays Capital	136,082	514	135,568	3,791	2.80	833	61
Barclays Global Investors	211	–	211	–	–	–	–
Barclays Wealth	2,745	7	2,738	47	1.70	–	–
Head office	1,260	51	1,209	37	2.90	3	24
Total	227,209	1,312	225,897	5,157	2.30	1,177	52


		BarclaysAnnual Report 2008				77

LOGO

Medium Business divisions. Deterioration in the Spanish commercial and residential property markets led to higher impairment in GRCB –Western Europe, while in GRCB – Absa, wholesale credit impairment began to rise from a low base and credit indicators began to show deterioration. The loan loss rate on the wholesale and corporate portfolio rose to 82bp (2007: 52bp).

In the wholesale and corporate portfolios impairment allowances increased 116% to £2,835m (31st December 2007: £1,312m).

Barclays largest corporate loan portfolios continue to be in Barclays Capital and Barclays Commercial Bank. Barclays Capital’s corporate loan book grew 43% to £72,796m in 2008, driven by the decline in the value of Sterling relative to other currencies as well as drawdowns on existing loan facilities and the extension of new loans at current terms to financial and manufacturing institutions. Loans and advances at amortised cost grew 5% in Barclays Commercial Bank and was focused in lower-risk portfolios in Larger Business.

Portfolio growth rates were higher in the international businesses, where Global Retail and Commercial Banking’s wholesale portfolios in Western Europe, Emerging Markets and Absa grew by 40%, 56% and 63%, respectively.

Analysis of Barclays Capital wholesale loans and advances net of impairment allowances

Barclays Capital wholesale loans and advances increased 53% to £208,596m (2007: £136,082m). This was driven by a decline in the value of Sterling relative to other currencies, increased drawdowns on existing corporate lending facilities and the extension of new loans to corporate clients at current terms. Additionally, continuing market volatility resulted in increased cash collateral being placed with clients relating to OTC derivatives.

The corporate lending portfolio, including leveraged finance, increased 47% to £76,556m (2007: £52,258) primarily due to drawdowns on existing loan facilities and the extension of new loans at current terms to financial and manufacturing institutions.

Included within corporate lending and other wholesale lending portfolios are £7,674m of loans backed by retail mortgage collateral.

Barclays Capital loans and advances held at fair value

Barclays Capital loans and advances held at fair value were £19,630m (2007: £18,259m). These assets are primarily made up of US RMBS whole loans and commercial real estate loans, £14,429m of which is discussed within the credit market exposures.


Table 3: Analysis of wholesale loans and advances net of impairment allowances
	Corporate		Government		Settlement balance and cash collateral		Other wholesale		Total wholesale
Wholesale	2008 £m	2007 £m	2008 £m	2007 £m	2008 £m	2007 £m	2008 £m	2007 £m	2008 £m	20 07 £m
BCB	67,741	64,773	659	279	–	–	–	–	68,400	65,052
Barclaycard	299	292	–	–	–	–	–	–	299	292
GRCB – Western Europe	15,017	10,721	32	4	–	–	151	139	15,200	10,864
GRCB – Emerging Markets	5,283	3,276	1,709	1,193	–	–	437	285	7,429	4,754
GRCB – Absa	8,480	5,204	28	5	–	–	–	–	8,508	5,209
Barclays Capital	72,796	51,038	3,760	1,220	79,418	46,639	50,826	36,671	206,800	135,568
BGI	834	211	–	–	–	–	–	–	834	211
Barclays Wealth	3,254	2,738	–	–	–	–	–	–	3,254	2,738
Head office	949	1,209	–	–	–	–	–	–	949	1,209
Total	174,653	139,462	6,188	2,701	79,418	46,639	51,414	37,095	311,673	225,897


Table 4: Analysis of Barclays Capital’s loans and advances at amortised cost
As at 31st December 2008	Gross loans and advances £m	Impairment allowance £m	Loans and advances net of impairment £m	Credit risk Loans £m	CRLs % of gross loans and advances %	Impairment charge £m	Loan loss rates basis points
Loans and advances bank
Cash collateral and settlement balances	19,264	–	19,264	–	–	–	–
Interbank lending	24,086	51	24,035	48	0.2	40	17
Loans and advances to customers
Corporate lending	77,042	486	76,556	1,100	1.4	305	40
ABS CDO Super Senior	4,117	1,013	3,104	4,117	100.0	1,383	3,359
Other wholesale lending	23,933	246	23,687	478	2.0	208	87
Cash collateral and settlement balances	60,154	–	60,154	–	–	–	–
Total	208,596	1,796	206,800	5,743	2.8	1,936	93

Barclays

Annual Report 2008

Risk Management

Credit Risk Management

Loans and advances

Analysis of Barclays Commercial Bank loans and advances

The tables below analyse the industry split of Barclays Commercial Bank loans and advances after impairment allowance of £504m. The loan book consists of both loans and advances held at amortised cost and loans and advances held at fair value.

Loans and advances held at fair value were £12,966m as at 31st December 2008. Of these, £12,360m related to government, local authority and social housing. Fair value exceeds amortised cost by £3,018m. Fair value is calculated using a valuation model with reference

to observable market inputs and is matched by offsetting fair value movements on hedging instruments. The underlying nominal portfolio increased 47% in 2008.

Property balances within loans and advances at amortised cost and held at fair value totalled £16,351m, of which £8,795m related to social housing.

The weighted average of the drawn balance loss given default, for all of the above loans and advances, was 31%.

Table 5: Analysis of Barclays Commercial Bank loans and advances


Loans and advances to banks at amortised cost
		Total £m
Financial institutions and services		867
Total		867

Loans and advances to customers at amortised cost
		Total £m
Business and other services		16,611
Construction		3,974
Energy and water		1,112
Financial institutions and services		6,427
Finance Lease receivables		6,644
Manufacturing		8,378
Postal and communications		1,303
Property		8,985
Transport		2,014
Wholesale and retail distribution and leisure		11,426
Government		659
Total		67,533
Loans and advances held at fair value
		Total £m
Business and other services		535
Construction		39
Financial institutions and services		32
Property		7,366
Government		4,994
Total		12,966

Barclays

Annual Report ~~2007~~2008

LOGO

Barclays Commercial Bank financial sponsor leveraged finance

As at 31st December 2008, the exposure relating to financial sponsor related leveraged finance loans in Barclays Commercial Bank was £2,445m, of which £1,875m related to drawn amounts recorded in loans and advances.

Table 6: Barclays Commercial Bank financial sponsor leveraged finance


Leveraged finance exposure by region
As at 31st December 2008		£m
UK		2,111
Europe		323
Other		11
Total lending and commitments		2,445
Underwriting		28
Total exposure		2,473

The industry classification of the exposure was as follows:

Leveraged finance exposure by industry


As at 31st December 2008	Drawn £m	Undrawn £m	Total £m
Business and other services	1,083	288	1,371
Construction	12	5	17
Energy and water	43	17	60
Financial institutions and services	58	10	68
Manufacturing	307	130	437
Postal and communications	35	2	37
Property	26	5	31
Transport	14	43	57
Wholesale and retail distribution and leisure	297	70	367
Total exposure	1,875	570	2,445

Barclays

Annual Report 2008

Risk Management

Credit Risk Management

Loans and advances

Retail loans and advances

Gross Loans and Advances to retail customers grew 24% to £201,588m (31st December 2007: £162,081m). The principal drivers were GRCB – Western Europe, UK Retail Banking, and Barclaycard. The GRCB – Western Europe retail portfolio grew by £14,436m (59%) to £38,918m, largely driven by home loans in Spain and Italy, and the appreciation of the Euro against Sterling. The UK Retail Banking portfolio increased by £12,319m (15%) to £96,083m, primarily driven by UK home loans. The Barclaycard Retail portfolios grew by £8,866m (43%) to £29,390m, with growth across the US, UK and Barclaycard’s other European card portfolios.

Total home loans to retail customers grew by 27% to £135,077m, driven by the 58% rise in GRCB – Western Europe, reflecting currency movements and book growth. The UK home finance portfolios within UK Retail Banking grew 18% to £82,303m (31st December 2007: £69,805m).

Unsecured retail credit (credit card and unsecured loans) portfolios grew 43% to £38,856m (31st December 2007: £27,256m), principally as a result of growth in Barclaycard US and GRCB – Western Europe as well as the acquisition of Goldfish in the UK.

Table 7: Retail loans and advances net of impairment allowances


As at 31st December 2008	Gross loans and advances £m	Impairment allowance £m	Loans and advances net of impairment £m	Credit risk Loans £m	CRLs % of gross loans and advances %	Impairment charge £m	Loan loss rates basis points
UK Retail Banking	96,083	1,134	94,949	2,403	2.50	602	63
Barclaycard	29,390	1,677	27,713	2,566	8.70	1,086	370
GRCB – Western Europe	38,918	302	38,616	794	2.00	171	44
GRCB – Emerging Markets	4,083	191	3,892	179	4.40	130	318
GRCB – Absa	24,677	411	24,266	1,518	6.20	328	133
Barclays Wealth	8,437	24	8,413	48	0.60	16	19
Total	201,588	3,739	197,849	7,508	3.70	2,333	116

As at 31st December 2007
UK Retail Banking	83,764	1,005	82,759	2,063	2.50	559	67
Barclaycard	20,524	1,093	19,431	1,601	7.80	818	399
GRCB – Western Europe	24,482	81	24,401	250	1.00	57	23
GRCB – Emerging Markets	1,881	44	1,837	67	3.60	29	154
GRCB – Absa	24,994	235	24,759	499	2.00	135	54
Barclays Wealth	6,436	2	6,434	4	0.10	7	11
Total	162,081	2,460	159,621	4,484	2.80	1,605	99

Table 8: Analysis of retail loans and advances net of impairment allowances


	Home loans		Cards and unsecured loans		Other retail		Total retail
	2008 £m	2007 £m	2008 £m	2007 £m	2008 £m	2007 £m	2008 £m	2007 £m
UK Retail Banking	82,303	69,805	8,294	8,297	4,352	4,657	94,949	82,759
Barclaycard	–	–	23,224	14,930	4,489	4,501	27,713	19,431
GRCB – Western Europe	33,760	21,393	4,395	2,660	461	348	38,616	24,401
GRCB – Emerging Markets	603	285	2,900	1,369	389	183	3,892	1,837
GRCB – Absa	18,411	15,136	43	–	5,812	9,623	24,266	24,759
Barclays Wealth	–	–	–	–	8,413	6,434	8,413	6,434
Total	135,077	106,619	38,856	27,256	23,916	25,746	197,849	159,621

Barclays

Annual Report 2008

LOGO

Home Loans

The Group’s principal home loans portfolios continue to be in the UK Retail Banking Home Finance business (61% of the Group’s total), GRCB – Western Europe (25%) primarily Spain, and South Africa (14%). During the year, the Group managed the risk profile of these portfolios by strengthening underwriting criteria and reducing the maximum loan to value (LTV) ratios, with greater discrimination between purchases and remortgages and, within the UK buy to let (BTL) segment, between portfolio customers and single property investors.

Credit quality of the principal home loan portfolios reflected relatively low levels of high LTV lending. The LTVs on the Group’s principal home loan portfolios are shown in table 9. Using recent valuations, the LTV of the portfolios as at 31st December 2008 was 40% for UK Retail Banking’s mortgage business, 48% for the Spanish mortgage portfolio within GRCB – Western Europe and 41% for GRCB – Absa’s mortgage portfolio in South Africa. The average LTV for new mortgage business during 2008 at origination for these portfolios was 47% for the UK, 63% for Spain and 58% for South Africa. The percentage of balances with an LTV of over 85% based on current values was 10% for the UK, 5% for Spain and 25% for South Africa. In the UK, BTL mortgages comprised 6.8% the total stock.

Impairment charges rose across the home loan portfolios, reflecting the impact of lower house prices as well as some increase in arrears rates. Three-month arrears as at 31st December 2008 were 0.91% for UK

mortgages, 0.76% for Spain and 2.11% for South Africa. To support the Group’s risk profile, we increased collections staff across the businesses and improved operational practices to boost effectiveness.

Credit Cards and Unsecured Loans

The Group’s largest card and unsecured loan portfolios are in the UK (47% of Group total). The US accounts for 19%, where Barclaycard’s portfolio is largely Prime credit quality (FICO score of 660 or more). To address the impact of economic deterioration and the impact of weaker labour markets on the unsecured portfolios in 2008, the Group used a range of measures to improve new customer quality and control the risk profile of existing customers.

In the UK Cards portfolio, initial credit lines were made more conservative, followed by selective credit limit increases using more accurately assessed customer behaviour. The overall number of credit limit increases were reduced by strengthening qualification criteria and a proportion of higher-risk dormant accounts were closed. Arrears rates in the UK Cards portfolio fell slightly during the year, reflecting measures taken to improve customer quality in 2007 and 2008. Repayment Plan balances grew to support government initiatives to supply relief to customers experiencing financial difficulty. Payment rates in repayment plans remained relatively stable.

As a percentage of the portfolio, three-month arrears rates rose during 2008 to 1.87% for UK Loans and 2.15% for US Cards. The rate reduced to 1.28% for UK Cards.

Table 9: Home loans – distribution of balances by loan to value (mark to market)^a


	UK		Spain		South Africa
	2008 %	2007 %	2008 %	2007 %	2008 %	2007 %
<= 75%	78.2	90.1	86.7	92.2	60.5	68.6
> 75% and <= 80%	6.1	4.7	4.8	4.2	7.5	7.2
> 80% and <= 85%	5.5	2.5	3.7	1.6	7.2	7.1
> 85% and <= 90%	4.5	1.5	1.6	0.7	7.6	5.9
> 90% and <= 95%	2.5	0.9	1.3	0.6	6.7	6.1
> 95%	3.1	0.3	1.9	0.7	10.5	5.1
Portfolio loan-to-value (mark to market)	40	34	48	45	41	38
Average loan-to-value on new mortgages during the year	47	49	63	63	58	59


Table 10: Home loans three-month arrears^{a, b}
	As at 31.12.08 %	As at 30.06.08 %	As at 31.12.07 %
UK	0.91	0.70	0.63
Spain	0.76	0.46	0.24
South Africa	2.11	0.96	0.25


Table 11: Unsecured lending three-month arrears^c
	As at 31.12.08 %	As at 30.06.08 %	As at 31.12.07 %
UK Cards	1.28	1.36	1.36
UK Loans	1.87	1.40	1.35
US Cards	2.15	2.08	1.83

Note

a	Based on the following portfolios: UK: UKRB Residential Mortgage and Buy to Let portfolios; Spain: GRCB – Western Europe Spanish retail home finance portfolio; South Africa: GRCB – Absa retail home finance portfolio.

b	Defined as total 90 day + delinquent balances as a percentage of outstandings.

c	Defined as total 90 day + delinquent balances as a percentage of outstandings. Excludes legal and repayment plans. UK Cards based on Barclaycard Branded Cards, excluding Goldfish. UK Loans based on Barclayloan. US cards excludes Business Card and US Airways portfolios.

Barclays

Annual Report 2008

Risk ~~management~~Management

Credit ~~risk management~~Risk Management

Loans and advances

Monitoring weaknesses in exposures

Barclays actively manages its credit exposures. When weaknesses in exposures are detected – either in individual exposures or in groups of exposures – the Group takes action to mitigate the risks. Such actions may, for example, include: reducing the amounts outstanding (in discussion with the customers, clients or counterparties if appropriate); using credit derivatives securitising the assets; and, on occasion, selling them.

Corporate accounts that are deemed to contain heightened levels of risk are recorded on graded early warning or watch lists comprising three categories graded in line with the perceived severity of ~~increasing concern.~~the risk attached to the lending, and its probability of default. These are updated monthly and circulated to the relevant risk control points. Once listing has taken place, exposure is very carefully monitored and, where appropriate, exposure reductions are effected.

Should an account become impaired, it will normally, but not necessarily, have passed through all three categories, which reflect the need for ever-increasing caution and control.

Where an obligor’s financial health gives grounds for concern, it is immediately placed into the appropriate

category. All obligors, regardless of financial health, are subject to a full review of all facilities on, at least, an annual basis. More frequent interim reviews may be undertaken should circumstances dictate.

Warning list balances rose throughout the year as wholesale credit conditions deteriorated across the regions in which Barclays operates.

Within Local Business, accounts that are deemed to have a heightened level of risk, or that exhibit some unsatisfactory features which could affect viability in the short/medium term, are transferred to a separate ‘Caution’ stream. Accounts on the Caution stream are reviewed on at least a quarterly basis, at which time consideration is given to continuing with the agreed strategy, returning the customer to a lower risk refer stream, or instigating recovery/exit action.

Within the personal portfolios, which tend to comprise homogeneous assets, statistical techniques more readily allow potential weaknesses to be monitored on a portfolio basis. This applies in parts of UK Retail Banking, Barclays Wealth, ~~International Retail and Commercial Banking~~GRCB’s international retail portfolios and Barclaycard. The approach is consistent with the Group’s policy of raising a collective impairment allowance as soon as objective evidence of impairment is identified.

CRLs and PPLs balances by UK and non-UK

LOGO

Notes

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

b	From 1st January 2005, the application of IAS 39 required interest to be recognised on the remaining balance of an impaired financial asset (or group of financial assets) at the effective interest rate for that asset. As a result, interest is credited to the income statement

in relation to impaired loans; therefore these loans technically are not classified as ‘non-accrual’. In 2005, the Group replaced the ‘non-accrual’ category with one termed ‘impaired loans’. The SEC requires loans to be classified, where applicable, as non-accrual, accruing past due 90 days or more, ‘troubled debt restructurings’ and potential problem loans.

Barclays

Annual Report 2008

LOGO

Potential credit risk loans

IfIn line with disclosure requirements from the Securities Exchange Commission (SEC) in the US, if the credit quality of a loan on an early warning or watch list deteriorates to the highest category, consideration is given to including it within the Potential Problem Loan (PPL) list. PPLs are loans where payment of principal and interest is up to date but where serious doubt exists as to the ability of the borrowers to continue to comply with repayment terms in the near future.

Should further evidence of deterioration be observed, a loan may move to the Credit Risk Loan (CRL) ~~category.~~category as required by the SEC. Events that would trigger the transfer of a loan from the PPL to the CRL category could include a missed payment or a breach of covenant.

CRLs comprise three classes of loans:

–

‘Impaired loans’ comprise loans where individual identified impairment allowance has been raised and also include loans which are fully collateralised or where indebtedness has already been written down to the expected realisable value. The impaired loan category may include loans, which, while impaired, are still performing.

~~Notes~~

a–

~~In 2003, credit risk~~The category ‘accruing past due 90 days or more’ comprises loans ~~and potential problem~~that are 90 days or more past due as to principal or interest. An impairment allowance will be raised against these loans ~~were disclosed based on~~if the ~~location of~~expected cash flows discounted at the ~~booking office. In 2004-2007 they were disclosed by location of customers.~~effective interest rate are less than the carrying value.

b–	The category ‘impaired and restructured loans’ comprises loans not included above where, for economic or legal reasons related to the

debtor’s financial difficulties, a concession has been granted to the debtor that would not otherwise be considered. Where the concession results in the expected cash flows discounted at the effective interest rate being less than the loan’s carrying value, an impairment allowance will be raised.

In 2007, the term Credit Risk Loans replaced the term Non-Performing Loans (NPLs) as the collective term for the total of these three classes to recognise the fact that the impaired loan category may include loans which, while impaired, are still performing. This category includes drawn ABS CDO Super Senior positions.

Potential Credit Risk Loans (PCRLs) comprise PPLs and CRLs. Figures 5 and 6 show CRL and PPL balances by UK and non-UK. The amounts are shown before deduction of value of security held, impairment allowances (from 2005 onwards) and provisions or interest suspense (2004), all of which might reduce the impact of an eventual loss, should it occur. The significant increase to non-UK CRL and PPL balances, in 2007 and 2008, is principally due to the inclusion of US-located ABS CDO Super Senior positions and other credit market exposures.

Credit Risk Loans

In 2008, CRLs rose 63% to £15,700m (2007: £9,641m). Balances were higher in all businesses as credit conditions deteriorated across Barclays areas of operations and total loans and advances grew. The most notable increases were in Barclays Capital and the non-UK businesses in Global Retail and Commercial Banking.

CRLs and PPLs as a percentage of Loans and Advances

LOGO

Notes

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

cb	From 1st January 2005, the application of IAS 39 required interest to be recognised on the remaining balance of an impaired financial asset (or group of financial assets) at the effective interest rate for that asset. As a result, interest is credited to the income statement

in relation to impaired ~~loans,~~loans; therefore these loans technically are not classified as ‘non-accrual’. In 2005, the Group replaced the ‘non-accrual’ category with one termed ‘impaired loans’. The SEC requires loans to be classified, where applicable, as non-accrual, accruing past due 90 days or more, ‘troubled debt restructurings’ and potential problem loans.

8284

Barclays

Annual Report ~~2007~~2008

Risk management

Credit risk management

Loans and advances

–

The category ‘accruing past due 90 days or more’ comprises loans that are 90 days or more past due as to principal or interest where there is no expectation of ultimate write-off (whether in part or full) of the principal owed. Impairment allowance will be raised against these loans if the expected cash flows discounted at the effective interest rate is less than the carrying value.

–

The category ‘impaired and restructured loans’ comprises loans not included above where, for economic or legal reasons related to the debtor’s financial difficulties, a concession has been granted to the debtor that it would not otherwise be considered. Where the concession results in the expected cash flows discounted at the effective interest rate being less than the loan’s carrying value, an impairment allowance will be raised.

CRLs in retail secured mortgage products increased by £1,309m (89%) to £2,783m (2007: £1,474m). The ~~term Credit Risk Loans has replaced~~key driver was Absa Home Finance where balances increased significantly as a result of higher interest rates and increasing consumer indebtedness. Increases were also seen in UK Home Finance, reflecting weakening UK house prices and the ~~term Non-Performing Loans (NPLs)~~slowing economy, and in Spain, as economic conditions deteriorated.

CRLs in the ~~collective term~~unsecured and other retail portfolios increased by £1,715m (57%) to £4,725m (2007: £3,010m). The key drivers for ~~the total of these three classes since it recognises the fact that the impaired loan category may include loans,~~this increase were: Absa, which ~~while impaired, are still performing. This category includes drawn ABS CDO Super Senior positions.~~

~~Potential Credit Risk Loans (PCRLs) comprise potential problem loans (PPLs)~~was impacted by higher interest rates and credit risk loans (CRLs). Figures 8 and 9 show CRL and PPL balances by geography. The amounts are shown before deduction of value of security held, impairment allowances (from 2005 onwards) and provisions or interest suspense (2004

~~and earlier), all of which might reduce the impact of an eventual loss, should it occur. The significant increase to non-UK CRL and PPL balances is principally~~increasing consumer indebtedness, Barclaycard US, due to ~~the inclusion of US-located~~deteriorating credit conditions which resulted in rising delinquency rates, asset growth and exchange rate movements, and Spain, as economic conditions deteriorated and consumer indebtedness increased.

Corporate/Wholesale CRLs, excluding ABS CDO Super Senior positions, increased by £2,262m (125%) to £4,075m (2007: £1,813m). The key drivers were: Barclays Capital following a number of credit downgrades; increasing default probabilities; and ~~other~~Spain, primarily due to increases to the property-related names. Balances also increased in Barclays Commercial Bank and Absa Commercial and Banking Business as corporate credit ~~market exposures.~~conditions deteriorated, particularly in the last quarter of 2008.

~~Figures 12 and 13 show impairment allowances as a percentage of~~ CRLs ~~and PCRLs. Including the drawn~~on ABS CDO Super Senior positions ~~allowance coverage~~increased £773m (23%) to £4,117m (2007: £3,344m). The majority of this increase resulted from a migration of assets, totalling £801m, from potential problem loans (PPLs) to CRLs.

Potential Problem Loans

Balances within the Group’s potential problem loans (PPLs) category rose by £659m to £2,456m (31st December 2007: £1,797m). The principal movements were in the corporate and wholesale portfolios, where PPLs rose £1,463m to £1,959m (31st December 2007: £496m) as credit conditions deteriorated. This rise was offset by a fall in PPLs relating to ABS CDO positions, as those balances moved into the CRL category. Broadly flat PPLs from retail portfolios reflected methodology alignments affecting GRCB – Absa which transferred balances of just over £200m previously reported as PPLs to CRLs. This was offset by rises in UK Retail Banking, GRCB – Western Europe and GRCB – Emerging Markets.

Potential Credit Risk Loans

Combining CRLs and ~~PCRLs decreased~~PPLs, total potential credit risk loans (PCRL) balances in the corporate and wholesale portfolios increased by 161% in 2008 to ~~39.1%~~£6,034m (31st December ~~2006: 65.6%)~~2007: £2,309m) as a number of names migrated into the CRL and ~~33.0%~~PPL categories, reflecting higher default probabilities in the deteriorating global wholesale environment. PCRLs relating to ABS CDO positions remained stable at £4,117m (31st December ~~2006: 57.0%), respectively. These movements reflect~~2007: £4,145m).

Total retail PCRL balances increased 61% to £8,005m (31st December 2007: £4,984m) as delinquency rates rose across a number of secured and unsecured portfolios following a deterioration in credit conditions, particularly in the ~~fact that allowance coverage of~~UK, US, Spain and South Africa.

Group PCRL balances rose 59% to £18,156m (31st December 2007: £11,438m). Excluding ABS CDO Super Senior ~~credit risk loans was low relative~~positions, PCRLs increased 92% to ~~allowance coverage of other credit risk loans since substantial protection against loss is also provided by subordination~~£14,039m (31st December 2007: £7,293m).


Table 12: Potential credit risk loans and coverage ratios
	CRLs		PPLs		PCRLs
	31.12.08	31.12.07	31.12.08	31.12.07	31.12.08	31.12.07
Retail Secured	2,783	1,474	280	317	3,063	1,791
Retail Unsecured and other	4,725	3,010	217	183	4,942	3,193
Retail	7,508	4,484	497	500	8,005	4,984
Corporate/Wholesale (excl ABS)	4,075	1,813	1,959	496	6,034	2,309
Group (excl ABS)	11,583	6,297	2,456	996	14,039	7,293
ABS CDO Super Senior	4,117	3,344	–	801	4,117	4,145
Group	15,700	9,641	2,456	1,797	18,156	11,438

	Impairment allowance		CRL coverage		PCRL cove rage
	31.12.08	31.12.07	31.12.08	31.12.07	31.12.08	31.12.07
Retail Secured	561	320	20.2%	21.7%	18.3%	17.9%
Retail Unsecured and other	3,178	2,140	67.3%	71.1%	64.3%	67.0%
Retail	3,739	2,460	49.8%	54.9%	46.7%	49.4%
Corporate/Wholesale (excl ABS)	1,822	1,022	44.7%	56.4%	30.2%	44.3%
Group (excl ABS)	5,561	3,482	48.0%	55.3%	39.6%	47.7%
ABS CDO Super Senior	1,013	290	24.6%	8.7%	24.6%	7.0%
Group	6,574	3,772	41.9%	39.1%	36.2%	33.0%

Barclays

Annual Report 2008

LOGO

Impairment Allowances and ~~hedges. On~~Coverage Ratios

In 2008, impairment allowances increased 74% to £6,574m (31st December 2007: £3,772m). Excluding ABS CDO Super Senior ~~exposures,~~positions, allowances increased by 60% to £5,561m (31st December 2007: £3,482m). Allowances increased in all businesses as credit conditions deteriorated, but most notably in Barclays Capital and GRCB’s international portfolios.

Reflecting this 74% rise in impairment allowance compared with the ~~combination~~63% rise in total CRLs, the Group’s CRL coverage ratio rose to 41.9% (31st December 2007: 39.1%). Coverage ratios for PCRLs rose to 36.2% (31st December 2007: 33.0%).

The largest driver for these increases was the near four-fold increase in the impairment held against ABS CDO Super Senior positions as the LGD of ~~subordination, hedges and write-downs provided protection against loss levels to 72% on US sub-prime collateral as at 31st December 2007.~~these assets increased.

~~Figures 14 and 15 show allowance~~Allowance coverage ratios of CRLs and PCRLs excluding the drawn ABS CDO Super Senior positions decreased to ~~55.6%~~48.0% (31st December ~~2006: 65.6%~~2007: 55.3%) and ~~49.0%~~39.6% (31st December ~~2006: 57.0%~~2007: 47.7%), respectively. These movements in coverage ratios reflected:

–	An increase in CRLs and PCRLs in the well-secured home loan portfolios.

–	Higher CRLs and PCRLs in the corporate sector, where the recovery outlook is relatively high.

–	Increased early-cycle delinquent balances in the retail unsecured portfolios, as credit conditions worsened. These earlier-cycle balances, which tend to attract relatively lower impairment requirements, have increased as a proportion of the total delinquent balances.

The decrease in ~~these ratios reflected a change~~the PCRL coverage ratio, excluding the drawn ABS CDO Super Senior positions, was also driven by the overall increase in ~~the mix of CRLs and PCRLs. Unsecured retail exposures, where the recovery outlook is low, decreased~~PPLs as a proportion of ~~the~~ total ~~as the collections and underwriting processes were improved. Secured retail and wholesale and corporate exposures, where the recovery outlook is relatively high, increased as~~PCRLs. Since, by definition, PPLs attract lower

levels of impairment than CRLs, a higher proportion of ~~PCRLs.~~

~~Notes~~

a	~~In 2003, credit risk loans and potential problem loans were disclosed based on the location of the booking office. In 2004-2007 they were disclosed by location of customers.~~

b	~~Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.~~

~~Barclays~~

~~Annual Report 2007~~

~~Risk management~~PPLs in total PCRLs will tend to lower the overall coverage ratio.

~~Credit risk management~~

Allowances for impairment and other credit provisions

Barclays establishes, through charges against profit, impairment allowances and other credit provisions for the incurred loss inherent in the lending book.

Under IFRS, impairment allowances are recognised where there is objective evidence of impairment as a result of one or more loss events that have occurred after initial recognition, and where these events have had an impact on the estimated future cash flows of the financial asset or portfolio of financial assets. Impairment of loans and receivables is measured as the difference between the carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. If the carrying amount is less than the discounted cash flows, then no further allowance is necessary.

Impairment is measured individually for assets that are individually significant, and collectively where a portfolio comprises homogenous assets and where appropriate statistical techniques are available.

In terms of individual assessment, the trigger point for impairment is formal classification of an account as exhibiting serious financial problems and where any further deterioration is likely to lead to failure. Two key inputs to the cash flow calculation are the valuation of all security and collateral, ~~and~~as well as the timing of all asset realisations, after allowing for all attendant costs. This method applies in the corporate portfolios – Barclays Commercial Bank, Barclays Capital and certain areas within ~~International Retail and Commercial Banking~~GRCB’s international portfolios and Barclaycard.

For collective assessment, the trigger point for impairment is the missing of a contractual payment. The impairment calculation is based on a roll-rate approach, where the percentage of assets that move from the initial delinquency to default are derived from statistical probabilities based on experience. Recovery amounts and contractual interest rates are

LOGO

Notes

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

Barclays

Annual Report 2008

Risk Management

Credit Risk Management

Loans and advances

calculated using a weighted average for the relevant portfolio. This method applies to parts of ~~International Retail and Commercial Banking,~~GRCB’s international portfolios, Barclaycard and UK Retail Banking and is consistent with Barclays policy of raising an allowance as soon as impairment is identified.

Unidentified impairment allowances, albeit significantly lower in amount than those reported above, are also raised to cover losses which are judged to be incurred but not yet specifically identified in customer exposures at the balance sheet date, and which, therefore, have not been specifically reported.

The incurred but not yet reported calculation is based on the asset’s probability of moving from the performing portfolio to being specifically identified as impaired within the given emergence period and then on to

default within a specified period. This is calculated on the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate.

The emergence periods vary across businesses and are based on actual experience and are reviewed on an annual basis. This methodology ensures that the Group only captures the loss incurred at the balance sheet date.

These impairment allowances are reviewed and adjusted at least quarterly by an appropriate charge or release of the stock of impairment allowances based on statistical analysis and management judgement.

Where appropriate, the accuracy of this analysis is periodically assessed against actual losses.

As one of the controls of ensuring that adequate impairment allowances are held, movements in impairment allowances to individual names above £10m are presented to the ~~Group~~ Credit Committee for agreement.

~~The Group Credit Risk~~ Impairment ~~Committee (GCRIC),~~charges and other credit provisions in 2008

In 2008, total impairment charges increased 94% (£2,624m) to £5,419m (2007: £2,795m). This figure included impairment charges of £506m

(2007: £13m) on ~~a semi-annual basis, obtains assurance~~available for sale assets and reverse repurchase agreements.

Impairment charges on ~~behalf~~loans and advances and other credit provisions increased 77% (£2,131m) to £4,913m (2007: £2,782m) (see table 1 on page 76) reflecting charges of ~~the Group that all businesses are recognising impairment in their portfolios accurately~~£1,763m against ABS CDO Super Senior and ~~promptly in their recommendations~~other credit market exposures and ~~in accordance with policy, accounting standards and established governance.~~

~~GCRIC exercises the authority of the Barclays Risk Director, as delegated by the Chief Executive, and is chaired by Barclays Credit Risk Director.~~

~~GCRIC reviews the movements to~~increased impairment in the ~~businesses, including those already agreed at~~international portfolios within Global Retail and Commercial Banking. Total loans and advances grew 33% to £516,096m (31st December 2007: £389,290m). As a result, impairment charges on loans and advances and other credit provisions as a percentage of period end Group ~~Credit Committee, Potential Credit Risk Loans~~total loans and ~~Risk Tendency.~~advances increased to 0.95% (2007: 0.71%).

~~These committees are supported by~~In the retail portfolios, impairment charges on loans and advances and other credit provisions rose 45% (£728m) to £2,333m (2007: £1,605m) (see table 1 on page 76) principally as a ~~number~~consequence of ~~Group Policies including: Group Retail Impairment and Provisioning Policy; Group Wholesale Impairment and Provisioning Policy; and, Group Model Policy.~~

~~GCRIC makes twice-yearly recommendations to the Board Audit Committee on the adequacy of Group~~increased impairment ~~allowances. Impairment allowances are reviewed relative to the risk~~ in the ~~portfolio, business~~international portfolios, whilst total loans and advances increased 24% to £201,588m (31st December 2007: £162,081m). As a result, impairment charges as a percentage of period end total loans and advances increased to 1.16% (2007: 0.99%).

In the wholesale and corporate portfolios, impairment charges on loans and advances and other credit provisions rose by 119% (£1,403m) to £2,580m (2007: £1,177m) (see table 1 on page 76) whilst total loans and advances increased 38% to £314,508m (31st December 2007: £227,209m). As a result, impairment charges as a percentage of period end total loans and advances increased to 0.82% (2007: 0.52%).

Global Retail and Commercial Banking

Impairment charges in UK Retail Banking increased £43m to £602m (2007: £559m), reflecting growth in the book and deteriorating economic ~~trends,~~conditions. In UK Home Finance, whilst three month arrears increased from 0.63% to 0.91%, the quality of the book and conservative loan to value ratios meant that the impairment charges and amounts charged off remained low at £24m (2007: £3m release). Impairment charges in Consumer Lending increased 3% reflecting the current ~~policies~~economic environment and ~~methodologies and our position against peer banks.~~loan growth.

~~Fig. 16: Impairment charges for bad and doubtful debts~~ LOGO

   2007
£m    2006
£m    2005
£m
UK Banking
   849    887    671
Barclaycard
   838    1,067    753
International Retail and

Commercial Banking
   252    167    33
Barclays Capital
   846    42    111
Barclays Global Investors
   –      –      –
Barclays Wealth
   7    2    2
Head office functions and other operations
   3    (11)    1
Total impairment charges
   2,795    2,154    1,571

~~Fig. 17 Impairment/provisions charges over five years £~~

~~Notes~~Note

a	~~Does~~2004 does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.


Table 13: Impairment Charges and Other Credit Provisions
	Year Ended 31.12.08 £m	Year Ended 31.12.07 £m
UK Retail Banking	602	559
Barclays Commercial Bank	414	292
Barclaycard	1,097	827
GRCB – Western Europe	296	76
GRCB – Emerging Markets	166	39
GRCB – Absa	347	146
Barclays Capital	419	64
Barclays Wealth	44	7
Head office functions and other operations	11	3
Group Total	3,396	2,013
ABS CDO Sub-Prime and other credit
Market Provisions	1,763	782
Group Total (Including ABS CDO)	5,159	2,795
Other AFS Assets and Reverse Repos	260	–
Group Total
(Including ABS CDO and AFS/Reverse Repos)	5,419	2,795

84BarclaysAnnual Report 2008

~~Barclays~~

~~Annual Report 2007~~

LOGO

~~GCRIC~~The impairment charge in Barclays Commercial Bank increased £122m to £414m (2007: £292m), primarily reflecting higher impairment losses in Larger Business, particularly in the final quarter as the UK corporate credit environment deteriorated.

The impairment charge in Barclaycard increased £270m (33%) to £1,097m (2007: £827m), reflecting higher charges in Barclaycard International portfolios, particularly Barclaycard US which was driven by loan growth, rising delinquency due to deteriorating economic conditions and exchange rate movements; and £68m from the inclusion of Goldfish. These factors were partially offset by lower charges in UK Cards and secured consumer lending.

Impairment charges in GRCB – Western Europe increased £220m to £296m (2007: £76m) principally due to deteriorating economic trends and asset growth in Spain, where there were higher charges in the commercial portfolios as a consequence of the slowdown in the property and construction sectors. In addition higher household indebtedness and rising unemployment has ~~delegated~~driven up delinquency and charge-offs in the ~~detailed review~~personal sector.

Impairment charges in GRCB – Emerging Markets increased £127m to £166m (2007: £39m), reflecting: weakening credit conditions which adversely impacted delinquency trends in the majority of ~~loan~~the retail portfolios; asset growth, particularly in India; and increased wholesale impairment in Africa.

Impairment charges in GRCB – Absa increased £201m to £347m (2007: £146m) as a result of rising delinquency levels in the ~~businesses to the Retail~~retail portfolios, which have been impacted by rising interest and ~~Wholesale Credit Risk Management Committees.~~inflation rates and increasing consumer indebtedness.

~~In 2007, totalimpairment charges~~ ~~on loans~~Investment Banking and ~~advances and other credit provisions increased 30% (£641m) to £2,795m (2006: £2,154m) reflecting~~Investment Management

Barclays Capital impairment charges of ~~£782m~~£2,423m (2007: £846m) included a charge of £1,763m (2007: £782m) against ABS CDO Super Senior and other credit market positions.

~~Impairment~~ Further impairment charges ~~on loans~~of £241m were incurred in respect of available for sale assets and ~~advances~~reverse repurchase

agreements (2007: £nil). Other impairment charges increased £355m to £419m (2007: £64m) and primarily related to charges in the private equity and other ~~credit provisions as a percentage of Group total~~ loans ~~and advances rose to 0.71% (2006: 0.65%); total loans and advances grew by 23% to £389,290m (2006: £316,561m).~~

~~Retail~~ impairment charges on loans and advances fell 11% (£204m) to £1,605m (2006: £1,809m). Retail impairment charges as a percentage of period-end total loans and advances reduced to 0.98% (2006: 1.30%); total retail loans and advances rose by 18% to £164,062m (2006: £139,350m)

Barclaycard impairment charges improved £229m (21%) to £838m (2006: £1,067m) reflecting reduce flows into delinquency, lower levels of arrears and lower charge-offs in UK Cards. We made changes to our impairment methodologies to standardise our approach and in anticipation of Basel II. The net positive impact of these changes in methodology was offset by the increase in impairment charges in Barclaycard International and secured consumer lending.

Impairment charges in UK Retail Bank decreased by £76m (12%) to £559m (2006: £635m), reflecting lower charges in unsecured Consumer Lending and Local Business driven by improved collection processes, reduced flows into delinquency, lower trends of arrears and stable charge-offs. In UK Home Finance, asset quality remained strong and mortgage charges remained negligible. Mortgage delinquencies as a percentage of outstandings remained stable and amounts charged-off were low.

Impairment charges in International Retail and Commercial Banking –excluding Absa rose by £38m (93%) to £79m (2006: £41m) reflecting very strong balance sheet growth in 2006 and 2007 and the impact of lower releases in 2007.

Arrears in some of International Retail and Commercial Banking – Absa’s key retail portfolios deteriorated in 2007, driven by interest rate increases in 2006 and 2007 resulting in pressure on collections.

~~Wholesale and corporate~~ impairment charges on loans and advances increased £436m to £701m (2006: £265m). Wholesale and corporate impairment charges as a percentage of period-end total loans and advances increased to 0.31% (2006: 0.15%); total loans and advances grew by 27% to £225,228m (2006: £177,211m).

Barclays Capital impairment charges and other credit provisions of £846m included a charge of £782m against ABS CDO Super Senior and other credit market exposure and £58m relating to drawn leveraged finance positions.business.

The impairment charge in Barclays ~~Commercial Bank~~Wealth increased ~~by £38m (15%)~~£37m to ~~£290m (2006: £252m), primarily due~~£44m (2007: £7m) from a very low base. This increase reflected both the substantial increase in the loan book over the last three years and the impact of the current economic environment on client liquidity and collateral values.

The impairment charge in Head Office Functions and Other Operations increased £8m to ~~higher gross~~£11m (2007: £3m) mainly reflecting losses on Floating Rate Notes held for hedging purposes. An additional £19m (2007: £nil) of impairment charges ~~in Larger Business, partially offset by a lower charge in Medium Business due to a tightening of the lending criteria.~~were incurred on available for sale assets.

Writing-off of assets

After an advance has been identified as impaired and is subject to an impairment allowance, the stage may be reached whereby it is concluded that there is no realistic prospect of further recovery. Write-off will occur when, and to the extent that, the whole or part of a debt is considered irrecoverable.

The timing and extent of write-offs may involve some element of subjective judgement. Nevertheless, a write-off will often be prompted by a specific event, such as the inception of insolvency proceedings or other formal recovery action, which makes it possible to establish that some or the entire advance is beyond realistic prospect of recovery. In any event, the position of impaired loans is reviewed at least quarterly to ensure that irrecoverable advances are being written off in a prompt and orderly manner and in compliance with any local regulations.

Such assets are only written off once all the necessary procedures have been completed and the amount of the loss has been determined.

Subsequent recoveries of amounts previously written off are written back and hence decrease the amount of the reported loan impairment charge in the income statement.

Total write-offs of impaired financial assets ~~decreased~~increased by ~~£211m~~£956m to ~~£1,963m (2006: £2,174m)~~£2,919m (2007: £1,963m).

LOGO

Note

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

~~Barclays~~

~~Annual Report 2007~~

~~Risk management~~

~~Market risk management~~

Market risk is the risk that Barclays earnings or capital, or its ability to meet business objectives, will be adversely affected by changes in the level or volatility of market rates or prices such as interest rates, credit spreads, commodity prices, equity prices and foreign exchange rates. The main market risk arises from trading activities. Barclays is also exposed to interest rate risk in the banking book and the pension fund.

~~Barclays market risk objectives are to:~~

–

~~Understand and control market risk by robust measurement and the setting of position limits.~~

–

~~Facilitate business growth within a controlled and transparent risk management framework.~~

–

~~Ensure traded market risk resides primarily in Barclays Capital.~~

–

~~Minimise non-traded market risk.~~

~~Organisation and structure~~

The Board approves market risk appetite for trading and non-trading activities. The Market Risk Director is responsible for the market risk control framework and, under delegated authority from the Risk Director, sets a limit framework within the context of the approved market risk appetite. A daily market risk report summarises Barclays market risk exposures against agreed limits. This daily report is sent to the Risk Director, the Market Risk Director, the Finance Director and the appropriate Business Risk Directors.

The Head of each business, assisted by the business risk management team, is accountable for all market risks associated with its activities. Each business is responsible for the identification, measurement, management, control and reporting of market risk as outlined in the Barclays Market Risk Control Framework. Oversight and support is provided to the business by the Market Risk Director, assisted by the central market risk team. The Market Risk Committee reviews, approves, and makes recommendations concerning the market risk profile across Barclays including risk appetite, limits and utilisation. The Committee is held monthly and is chaired by the Market Risk Director. Attendees include the Risk Director, respective business risk managers and senior managers from the central market risk team.

In Barclays Capital, the Head of Market Risk is responsible for implementing the market risk control framework. Day to day responsibility for market risk lies with the senior management of Barclays Capital, supported by the Market Risk Management team that operates independently of the trading areas. Daily market risk reports are produced for the main Barclays Capital business areas covering the different risk categories including interest rate, credit spread, commodity, equity and foreign exchange. A more detailed trading market risk presentation is produced fortnightly and discussed at the Barclays Capital Traded Products Risk Review meeting. The attendees at this meeting include senior managers from Barclays Capital and the central market risk team.

Outside Barclays Capital, Global Retail and Commercial Banking is responsible for the non-structural interest rate risk in the banking book and Group Treasury is responsible for structural risk (interest rate and FX). The chart below right gives an overview of the business control structure.

~~Barclays~~

~~Annual Report 2007~~

~~Traded market risk~~

Barclays policy is to concentrate trading activities in Barclays Capital. This includes transactions where Barclays Capital acts as principal with clients or with the market. For maximum efficiency, Barclays manages client and market activities together. In Barclays Capital, trading risk occurs in both the trading book and the banking book as defined for regulatory purposes.

In anticipation of future customer demand, Barclays maintains access to market liquidity by quoting bid and offer prices with other market makers and carries an inventory of capital market and treasury instruments, including a broad range of cash, securities and derivatives. Derivatives entered into for trading purposes include swaps, forward rate agreements, futures, credit derivatives, options and combinations of these instruments. For a description of the nature of derivative instruments, see page 89.

~~Traded market risk measurement~~

~~The measurement techniques used to measure and control traded market risk include Daily Value at Risk and Stress Testing.~~

~~Daily Value at Risk (DVaR)~~ is an estimate of the potential loss which might arise from unfavourable market movements, if the current positions were to be held unchanged for one business day, measured to a confidence level of 98%. Daily losses exceeding the DVaR figure are likely to occur, on average, twice in every 100 business days.

~~DVaR uses the historical simulation method with a historic sample of two years. The credit spread calculation takes into account specific risks associated with different business names.~~

~~There are a number of considerations that should be taken into account when reviewing DVaR numbers. These are:~~

–

~~historical simulation assumes that the past is a good representation of the future which may not always be the case.~~

–

~~the assumed one day time horizon will not fully capture the market risk of positions that cannot be closed out or hedged within one day.~~

–

~~DVaR does not indicate the potential loss beyond the 98th percentile.~~

~~To complement DVaR, stress testing is performed and there is a large set of non-DVaR limits including foreign exchange concentration limits and interest rate delta limits.~~

~~DVaR is an important market risk measurement and control tool and consequently the model is regularly assessed. The main approach employed is the technique known asback-testing~~ ~~which counts the number of days when trading losses exceed the corresponding DVaR estimate.~~

On the basis of DVaR estimated to a 98% confidence level, on average there would be five days each year when trading losses would be expected to exceed DVaR and would therefore be reflected as back-testing exceptions. For Barclays Capital’s trading book, there were seven instances of a daily trading loss exceeding the corresponding 98% back-testing DVaR. These back-testing exceptions in 2007 reflected the increased volatility across a number of markets in which Barclays Capital operates. There were no instances of back-testing exceptions on a similar basis in 2006.

~~Stress testing~~ ~~provides an indication of the potential size of losses that could arise in extreme conditions. The three main types of stress test are:~~

–

~~risk factor: historical stress moves are applied to each of the risk categories which include interest rate, credit spread, commodity, equity and foreign exchange rate~~

–

~~emerging market contagion: historical stress moves combined with contagion factors are applied to the emerging markets portfolio~~

–

~~scenario: stress scenarios are applied to the trading book~~

Stress results are produced at least fortnightly and are included in the Traded Products Risk Review meeting information pack. If a potential stress loss exceeds the corresponding trigger limit, the positions captured by the stress test are reviewed and discussed by Barclays Capital market risk and the respective Barclays Capital Business Head(s). The minutes of the discussion, including the merits of the position and the appropriate course of action, are then sent to the Market Risk Director for review.

~~Barclays~~

~~Annual Report 2007~~

~~Risk management~~

~~Market risk management~~

~~Analysis of traded market risk exposures~~

~~The analysis of traded market risk exposures is given in Note 46.~~

~~Analysis of trading revenue~~

The histograms show the distribution of daily trading revenue for Barclays Capital in 2007 and 2006. Revenue includes net trading income, net interest income and net fees and commissions relating to primary trading. The average daily revenue in 2007 was £26.2m (2006: £22.0m) and there were 224 positive revenue days out of 253 (2006: 243 out of 252). The number of negative revenue days increased in 2007 largely as a result of volatile markets in the second half of the year. The number of large positive revenue days also increased but these were spread across the year.

~~Interest rate risk in the banking book~~

~~Interest rate risk arises from the provision of retail and wholesale (non-traded) banking products and services, as well as structural exposures within Barclays balance sheet.~~

The management approach of Barclays with respect to interest rate risk is to transfer the risk from the businesses either into local treasuries or to Group Treasury using an internal transfer price or interest rate swap. The methodology used to transfer this risk depends on whether the product contains yield curve risk, basis risk or customer optionality. Limits exist to ensure no material risk is retained within any business or product area.

Once each business’s risk has been transferred, the treasuries manage any residual yield curve and basis risks subject to modest risk limits and other controls. Market risk is also taken in overseas treasuries, within these limits, to support and facilitate customer activity.

~~Risk measurement~~

~~The techniques used to measure and control interest rate risk in the banking book include Annual Earnings at Risk, Daily Value at Risk and Stress Testing.~~

~~Annual Earnings at Risk (AEaR)~~ measures the sensitivity of net interest income (NII) over the next 12 months. It is calculated as the difference between the estimated income using the current yield curve and the lowest estimated income following a 50 basis points increase or decrease in interest rates.

~~Outside Barclays Capital, Barclays uses a simplified approach to calculateDVaR. It is used as a complementary tool to AEaR. Both AEaR and DVaR are supplemented by stress testing and a range of non-DVaR limits.~~

~~Stress testing~~ is carried out by the business centres and is reviewed by senior management and business-level asset and liability committees. The stress testing is tailored to the business and typically incorporates scenario analysis and historical stress movements applied to respective portfolios.

~~Analysis of interest rate risk in the banking book exposures~~

~~The analysis of interest rate risk in the banking book is given in Note 46.~~

~~Other market risks~~

Barclays maintains a number of defined benefit pension schemes for past and current employees. The ability of the Pension Fund to meet the projected pension payments is maintained through investments and regular Bank contributions.~~Pension risk~~ arises because: the estimated market value of the pension fund assets might decline; or their investment returns might reduce; or the estimated value of the pension liabilities might increase. In these circumstances, Barclays could be required or might choose to make extra contributions to the pension fund. Financial details of the pension fund are in Note 30.

~~Investment risk~~ is the risk of financial volatility arising from changes in the market value of investments, principally occurring in Barclays insurance companies. These investments may comprise various liquid instruments, such as cash, bonds and listed equities, to cover future insurance liability flows, and may therefore give rise to a mismatch between the revaluation of assets and liabilities. It is Barclays policy to hedge such exposures in line with a defined risk appetite.

~~Barclays policy is for foreign exchange trading risk to be concentrated and managed in Barclays Capital. Some transactionforeign exchange risk~~exposure arises within the local treasury operations in Global Retail and Commercial Banking to support and facilitate client activity. This is minimised in accordance with modest risk limits and was not material as at end 2007. Other non-Barclays Capital foreign exchange exposure is covered in Note 46.

~~Asset management structural market risk~~ arises where the fee and commission income earned by asset management products and businesses is affected by a change in market levels, primarily through the link between income and the value of assets under management. Where support agreements exist, the Group is exposed to the performance of the underlying asset. This exposure arises mainly within Barclays Global Investors, but also in Global Retail and Commercial Banking, and Barclays Wealth. It is Barclays policy that businesses monitor and report this risk against a defined risk appetite and regularly assess potential hedging strategies.

Barclays

Annual Report ~~2007~~2008

Risk management

Credit risk management

Loans and advances

Risk Tendency

In 2008, Risk Tendency increased 58% (£1,355m) to £3,710m (31st December 2007: £2,355m), compared with 32% growth in the Group’s loans and advances balances. This was reflective of the higher credit risk profile, weakening credit conditions across our main businesses, and changing mix, as a consequence of planned growth, in a number of businesses and portfolios. Risk Tendency in 2008 also increased as a result of the weakening of Sterling against a number of other foreign currencies, including the US Dollar and the Euro.

UK Retail Banking Risk Tendency increased £50m to £520m (31st December 2007: £470m). This reflected a higher risk profile in the unsecured and secured loans portfolios, weakening UK credit conditions, and asset growth, primarily in the Home Finance portfolio.

Risk Tendency in Barclays Commercial Bank increased £95m to £400m (31st December 2007: £305m). This reflected the deteriorating UK corporate credit environment and asset growth.

Barclaycard Risk Tendency increased £520m to £1,475m (31st December 2007: £955m) primarily reflecting the inclusion of new business acquisitions (£260m) as well as asset growth, exchange rate movements, and the economic conditions in the US. Risk Tendency in the UK Cards portfolio remained stable as improvements in portfolio quality were offset by deterioration in the UK economic environment.

Risk Tendency at GRCB – Western Europe increased £135m to £270m (31st December 2007: £135m) principally reflecting weakening credit conditions across Europe, particularly in Spain, asset growth and movements in the Euro/Sterling exchange rate.

Risk Tendency at GRCB – Emerging Markets increased £210m to £350m (31st December 2007: £140m) reflecting weakening credit conditions across the majority of regions, a change in the risk profile following a broadening of the product offering through new product launches and new market entry in India and UAE, and asset growth.

Risk Tendency at GRCB – Absa increased £65m to £255m (31st December 2007: £190m) reflecting weakening retail and, to a lesser extent, corporate credit conditions in South Africa and asset growth and movements in the Rand/Sterling exchange rate.

Risk Tendency in Barclays Capital increased £275m to £415m (31st December 2007: £140m) reflecting credit downgrades and asset growth. The drawn liquidity facilities on ABS CDO Super Senior positions are classified as credit risk loans and therefore no Risk Tendency is calculated on them.

Risk Tendency at Barclays Wealth increased £10m to £20m (31st December 2007: £10m) reflecting a weakening credit risk profile and asset growth.

LOGO

Notes

a	Excludes ABS CDO Super Senior positions as these are classified as credit risk loans and therefore no Risk Tendency is calculated on them.

b	Head office functions and other operations comprise discontinued businesses in transition.

Barclays

Annual Report 2008

Risk management

Credit risk management

Debt securities and other bills

The following table presents an analysis of the credit quality of debt and similar securities, other than loans held within the Group. Securities rated as investment grade amounted to 91.6% of the portfolio (2007: 88.0%).


As at 31.12.08	Treasury and other eligible bills £m	Debt securities £m	Total £m	%
AAA to BBB– (investment grade)	7,314	198,493	205,807	91.6
BB+ to B	1,233	15,309	16,542	7.4
B– or lower	–	2,343	2,343	1.0
Total	8,547	216,145	224,692	100.0
Of which issued by:
– governments and other public bodies	8,547	73,881	82,428	36.7
– US agency	–	34,180	34,180	15.3
– mortgage and asset-backed securities	–	34,844	34,844	15.5
– corporate and other issuers	–	55,244	55,244	24.6
– bank and building society certificates of deposit	–	17,996	17,996	7.9
Total	8,547	216,145	224,692	100.0
Of which classified as:
– trading portfolio assets	4,544	148,686	153,230	68.2
– financial instruments designated at fair value	–	8,628	8,628	3.8
– available-for-sale securities	4,003	58,831	62,834	28.0
Total	8,547	216,145	224,692	100.0

As at 31.12.07	Treasury and other eligible bills £m	Debt securities £m	Total £m	%
AAA to BBB– (investment grade)	4,114	189,794	193,908	88.0
BB+ to B	703	24,693	25,396	11.5
B– or lower	–	1,181	1,181	0.5
Total	4,817	215,668	220,485	100.0
Of which issued by:
– governments and other public bodies	4,817	63,798	68,615	31.1
– US agency	–	13,956	13,956	6.3
– mortgage and asset-backed securities	–	28,928	28,928	13.1
– corporate and other issuers	–	88,207	88,207	40.0
– bank and building society certificates of deposit	–	20,779	20,779	9.5
Total	4,817	215,668	220,485	100.0
Of which classified as:
– trading portfolio assets	2,094	152,778	154,872	70.2
– financial instruments designated at fair value	–	24,217	24,217	11.0
– available-for-sale securities	2,723	38,673	41,396	18.8
Total	4,817	215,668	220,485	100.0

Barclays

Annual Report 2008

Risk management

Credit risk management

Derivatives

~~Derivatives~~

The use of derivatives and their sale to customers as risk management products are an integral part of the Group’s trading activities. These instruments are also used to manage the Group’s own exposure to fluctuations in interest, exchange rates and commodity and equity prices as part of its asset and liability management activities.

Barclays Capital manages the trading derivatives book as part of the market risk book. This includes foreign exchange, interest rate, equity, commodity and credit derivatives. The policies regarding market risk management are outlined in the market risk management section on pages ~~86 to 88.~~

~~The policies for derivatives that are used to manage the Group’s own exposure to interest and exchange rate fluctuations are outlined in the asset and liability market risk section on page 223.~~106-110.

Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices defined in the contract. They include swaps, forward rate agreements, futures, options and combinations of these instruments and primarily affect the Group’s net interest income, net trading income, net fee and commission income and derivative assets and liabilities. Notional amounts of the contracts are not recorded on the balance sheet.

The Group participates both in exchange traded and over the counter derivatives markets.

Exchange traded derivatives

The Group buys and sells financial instruments that are traded or cleared on an exchange, including interest rate swaps, futures and options on futures. Holders of exchange traded instruments provide margin daily with cash or other security at the exchange, to which the holders look for ultimate settlement.

Over the counter traded derivatives

The Group also buys and sells financial instruments that are traded over the counter, rather than on a recognised exchange.

These instruments range from commoditised transactions in derivative markets, to trades where the specific terms are tailored to the requirements of the Group’s customers. In many cases, industry standard documentation is used, most commonly in the form of a master agreement, with individual transaction confirmations. The existence of a signed master agreement is intended to give the Group protection in situations where a counterparty is in default.

Foreign exchange derivatives

The Group’s principal exchange rate related contracts are forward foreign exchange contracts, currency swaps and currency options. Forward foreign exchange contracts are agreements to buy or sell a specified quantity of foreign currency, usually on a specified future date at an agreed rate. A currency swap generally involves the exchange, or notional exchange, of equivalent amounts of two currencies and a commitment to exchange interest periodically until the principal amounts are re-exchanged on a future date.

Currency options provide the buyer with the right, but not the obligation, either to purchase or sell a fixed amount of a currency at a specified exchange rate on or before a future date. As compensation for assuming the option risk, the option writer generally receives a premium at the start of the option period.

Interest rate derivatives

The Group’s principal interest rate related contracts are interest rate swaps, forward rate agreements, basis swaps, caps, floors and swaptions. Included in this product category are transactions that include combinations of these features.

An interest rate swap is an agreement between two parties to exchange fixed rate and floating rate interest by means of periodic payments based upon a notional principal amount and the interest rates defined in the contract. Certain agreements combine interest rate and foreign currency swap transactions, which may or may not include the exchange of principal amounts. A basis swap is a form of interest rate swap, in which both parties exchange interest payments based on floating rates, where the floating rates are based upon different underlying reference indices. In a forward rate agreement, two parties agree a future settlement of the difference between an agreed rate and a future interest rate, applied to a notional principal amount. The settlement, which generally occurs at the start of the contract period, is the discounted present value of the payment that would otherwise be made at the end of that period.

Credit derivatives

The Group’s principal credit derivative-related contracts include credit default swaps and total return swaps. A credit derivative is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection.

A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer upon a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.

A total return swap is an instrument whereby the seller of protection receives the full return of the asset, including both the income and change in the capital value of the asset. The buyer in return receives a predetermined amount.

Equity derivatives

The Group’s principal equity-related contracts are equity and stock index swaps and options (including warrants, which are equity options listed on an exchange). An equity swap is an agreement between two parties to exchange periodic payments, based upon a notional principal amount, with one side paying fixed or floating interest and the other side paying based on the actual return of the stock or stock index. An equity option provides the buyer with the right, but not the obligation, either to purchase or sell a specified stock, basket of stocks or stock index at a specified price or level on or before a specified date. The Group also enters into fund-linked derivatives, being swaps and options whose underlyings include mutual funds, hedge funds, indices and multi-asset portfolios.

Commodity derivatives

The Group’s principal commodity-related derivative contracts are swaps, options, forwards and futures. The main commodities transacted are base metals, precious metals, oil and oil-related products, power and natural gas.

Barclays

Annual Report ~~2007~~2008

8991

LOGO

The tables below set out the fair values of the derivative assets together with the value of those assets subject to enforceable counterparty netting arrangements for which the Group holds offsetting liabilities and eligible collateral.


Derivative assets – As at 31.12.08	Gross assets £m	Counterparty netting £m	Net exposure £m
Foreign exchange	107,730	91,572	16,158
Interest rate	615,321	558,985	56,336
Credit derivatives	184,072	155,599	28,473
Equity and stock index	28,684	20,110	8,574
Commodity derivatives	48,995	35,903	13,092
	984,802	862,169	122,633
Total collateral held			54,905
Net exposure less collateral			67,728

Derivative assets – As at 31.12.07	Gross assets £m	Counterparty netting £m	Net exposure £m
Foreign exchange	30,824	22,066	8,758
Interest rate	140,504	117,292	23,212
Credit derivatives	38,696	31,307	7,389
Equity and stock index	13,296	12,151	1,145
Commodity derivatives	24,768	15,969	8,799
	248,088	198,785	49,303
Total collateral held			16,700
Net exposure less collateral			32,603

Gross derivative assets of £985bn (2007: £248bn) cannot be netted down under IFRS. Derivative assets would be £917bn (2007: £215bn) lower than reported under IFRS if counterparty or collateral netting were allowed.

Exposure relating to derivatives, repurchase agreements, reverse repurchase agreements, stock borrowing and loan transactions is calculated using internal, FSA approved models. These are used as the basis to assess both regulatory capital and capital appetite and are managed on a daily basis. The methodology encompasses all relevant factors to enable the current value to be calculated and the future value to be estimated, for example: current market rates, market volatility and legal documentation (including collateral rights).

Barclays

Annual Report 2008

Risk management

Credit risk management

Barclays Capital credit market exposures

Barclays Capital’s credit market exposures primarily relate to US residential mortgages, commercial mortgages and leveraged finance businesses that have been significantly impacted by the continued deterioration in the global credit markets. The exposures include both significant positions subject to fair value movements in the profit and loss account and positions that are classified as loans and advances and available for sale. None of the exposure disclosed below has been reclassified to loans and advances under the amendments to IAS 39.

The exposures are set out by asset class in US Dollars and Sterling below:


		$m^a		£m^a
US Residential Mortgages	Notes	As at 31.12.08	As at 31.12.07	As at 31.12 .08	As at 31.12.07
ABS CDO Super Senior	A1	4,526	9,356	3,104	4,671
Other US sub- prime	A2	5,017	10,089	3,441	5,037
Alt-A	A3	6,252	9,847	4,288	4,916
US RMBS exposure wrapped by monoline insurers	A4	2,389	1,462	1,639	730

Commercial mortgages
Commercial real estate	B1	16,882	22,239	11,578	11,103
Commercial mortgage-backed securities	B1	1,072	2,596	735	1,296
CMBS exposure wrapped by monoline insurers	B2	2,703	395	1,854	197

Other Credit Market Exposures
Leveraged finance^b	C1	15,152	18,081	10,391	9,027
SIVs and SIV-Lites	C2	1,404	1,570	963	784
CDPCs	C3	218	39	150	19
CLO and other exposure wrapped by monoline insurers	C4	7,202	817	4,939	408

These exposures have been actively managed during the year in an exceptionally challenging market environment and have been reduced by net sales and paydowns of £6,311m, offset by the 37% appreciation of the US Dollar against Sterling. In January 2009, there was an additional sale of £3,056m of leveraged finance exposure which was repaid at par. Exposures at 31st December 2008 included £1,060m of securities from the acquisition of Lehman Brothers North American businesses. Exposures wrapped by monolines have increased during the course of 2008 as a result of declines in the fair value of the underlying assets.

Analysis of Barclays Capital credit market exposures by asset class


	ABS CDO Super Senior £m	Other US sub -prime £m	Alt-A £m	RMBS Wrapped by Monoline insurers £m	Commercial real estate loans £m	Commercial mortgage backed securities £m		CMBS wrapped by monoline insurers £m	Leveraged finance £m	SIVs and SIV-Lites £m	CDPCs £m	CLO and other exposure wrapped by monoline insurers £m	As at 31.12.08 £m
Debt securities		782	2,532			1,420				11			4,745
Trading portfolio assets		782	2,532			1,420				11			4,745
Loans and advances		1,565	778		11,555					531			14,429
Financial assets designated at fair value		1,565	778		11,555					531			14,429
Derivative financial instruments		643	398	1,639	23	(685	)	1,854		273	150	4,939	9,234
Loans and advances to customers	3,104	195							9,361	148			12,808
Debt securities		147	580										727
Available for sale financial instruments		147	580										727
Other assets		109											109
Exposure on balance sheet	3,104	3,441	4,288	1,639	11,578	735		1,854	9,361	963	150	4,939

Notes

a	As the majority of exposure is held in US Dollars the exposures above are shown in both US Dollars and Sterling .

b	Included within the total leveraged finance exposure of £10,391m is £1,030m of off-balance sheet commitments.

Barclays

Annual Report 2008

LOGO

There were gross losses of £8,053m (2007: £2,999m) in the year to 31st December 2008. These losses were partially offset by related income and hedges of £1,433m (2007: £706m), and gains of £1,663m (2007: £658m) from the general widening of credit spreads on issued notes measured at fair value through the profit and loss account.

The gross losses, which included £1,763m (2007: £782m) in impairment charges, comprised: £5,584m (2007: £2,811m) against US RMBS exposures; £1,488m (2007: £14m) against commercial mortgage exposures; and £981m (2007: £174m) against other credit market exposures.


	Fair Value Losses £m		Impairment Charge £m		Gross Losses £m
ABS CDO super senior	(78	)	(1,383	)	(1,461	)
Other US sub-prime	(1,560	)	(168	)	(1,728	)
Alt-A	(1,858	)	(125	)	(1,983	)
US RMBS wrapped by monoline insurers	(412	)	–		(412	)
Total US residential mortgages	(3,908	)	(1,676	)	(5,584	)

US	(671	)	–		(671	)
Europe	(350	)	–		(350	)
Total commercial real estate	(1,021	)	–		(1,021	)

Commercial mortgage-backed securities	(127	)	–		(127	)
CMBS wrapped by monoline insurers	(340	)	–		(340	)
Total commercial mortgages	(1,488	)	–		(1,488	)

SIVs and SIV-Lites	(143	)	(87	)	(230	)
CDPCs	(14	)	–		(14	)
CLO and other assets wrapped by monoline insurers	(737	)	–		(737	)
Total other credit market	(894	)	(87	)	(981	)

Total	(6,290	)	(1,763	)	(8,053	)

Barclays

Annual Report 2008

Risk management

Credit risk management

Barclays Capital credit market exposures

A. US Residential Mortgages

US residential mortgage exposures have reduced by 41% in US Dollar terms, and 19% in Sterling terms, since 31st December 2007.

A1. ABS CDO Super Senior

During the year ABS CDO Super Senior exposures reduced by £1,567m to £3,104m (31st December 2007: £4,671m). Net exposures are stated after write-downs and charges of £1,461m incurred in 2008 (2007: £1,816m) and hedges of £nil (31st December 2007: £1,347m). There were no hedges in place at 31st December 2008 as the corresponding liquidity facilities had been terminated. There were liquidations and paydowns of £2,318m in the year; weaker Sterling and a reduction in hedges increased exposure by £865m and £1,347m respectively.

The remaining ABS CDO Super Senior exposure at 31st December 2008 comprised five high grade liquidity facilities which were fully drawn and classified within loans and receivables, and no remaining mezzanine exposure. At 31st December 2007 there were 15 facilities of which nine were high grade and six mezzanine.

The impairment assessment of remaining super senior positions is based on cash flow methodology using standard market assumptions such as default curves and remittance data to calculate the net present value of the future losses for the collateral pool over time. As a result, future potential impairment charges depend on changes in these assumptions.

We have included all ABS CDO Super Senior exposure in the US residential mortgages section as nearly 90% of the underlying collateral relates to US RMBS. The impairment applied to the notional collateral is set out in the table below.


	As at 31.12.08				As at 31.12.07						As at 31.12.08	As at 31.12.07
	High Grade £m		Total £m		High Grade £m		Mezzanine £m		Total £m		Marks^a	Marks^a
2005 and earlier	1,226		1,226		1,458		1,152		2,610		90%	69%
2006	471		471		1,654		314		1,968		37%	47%
2007 and 2008	25		25		176		87		263		69%	53%
Sub-prime	1,722		1,722		3,288		1,553		4,841		75%	60%
2005 and earlier	891		891		714		102		816		77%	96%
2006	269		269		594		68		662		75%	90%
2007 and 2008	62		62		163		13		176		37%	80%
Alt-A	1,222		1,222		1,471		183		1,654		74%	92%
Prime	520		520		662		123		785		100%	100%
RMBS CDO	402		402		842		445		1,287		–	19%
Sub-prime second lien	127		127		158		–		158		–	32%
Total RMBS	3,993		3,993		6,421		2,304		8,725		68%	63%
CMBS	44		44		189		110		299		100%	96%
Non-RMBS CDO	453		453		429		80		509		56%	49%
CLOs	35		35		26		–		26		100%	100%
Other ABS	51		51		136		4		140		100%	100%
Total other ABS	583		583		780		194		974		66%	72%
Total notional collateral	4,576		4,576		7,201		2,498		9,699		68%	64%
Subordination	(459	)	(459	)	(1,001	)	(864	)	(1,865	)
Gross exposure pre impairment	4,117		4,117		6,200		1,634		7,834
Impairment allowances	(1,013	)	(1,013	)	(290	)	(432	)	(722	)
Trading losses gross of Hedges	–		–		(1,041	)	(53	)	(1,094	)
Hedges	–		–		(960	)	(387	)	(1,347	)
Net exposure	3,104		3,104		3,909		762		4,671
Collateral marks including liquidated structures											32%	62%

Note

a	Marks above reflect the gross exposure after the impairment and subordination and do not include the benefit of hedges. The change in marks since 31st December 2007 primarily results from the liquidation during 2008 of the most impaired structures.

Barclays

Annual Report 2008

LOGO

Consolidated collateral of £8.4bn relating to the ten CDOs that were liquidated in 2008 has been sold or are stated at fair value net of hedges within Other US sub-prime, Alt-A and CMBS exposures. The notional collateral remaining at 31st December 2008 is marked at approximately 12%. The collateral valuation for all ABS CDO Super Senior deals, including those liquidated and consolidated in 2008, is approximately 32% (31st December 2007: 62%).

The collateral for the outstanding ABS CDO Super Senior exposures primarily comprises residential mortgage backed securities (RMBS). At 31st December 2008 the residual exposure contains a higher proportion of collateral originated in 2005 and earlier than at 31st December 2007. There is minimal exposure to collateral originated in 2007 or later. The vintages of the sub-prime, Alt-A and US RMBS collateral are set out in the table below.


	As at 31.12.08	As at 31.12.07
Sub-prime Collateral by Vintage
2005 and earlier	71%	54%
2006	27%	41%
2007 and 2008	2%	5%
Alt-A Collateral by Vintage
2005 and earlier	73%	49%
2006	22%	40%
2007 and 2008	5%	11%
US RMBS Collateral by Vintage
2005 and earlier	72%	53%
2006	25%	40%
2007 and 2008	3%	7%

RMBS collateral for the ABS CDO Super Senior exposures is subject to public ratings. The ratings of sub-prime, Alt-A and total US RMBS CDO collateral are set out in the table below.


	31.12.08 High Grade	31.12.07 High Grade	31.12.07 Mezzanine	31.12.07 Total
Sub-prime US RMBS Ratings
AAA/AA	42%	43%	2%	30%
A/BBB	21%	51%	82%	60%
Non-investment Grade	37%	6%	16%	10%
Alt-A RMBS Ratings
AAA/AA	66%	89%	47%	85%
A/BBB	7%	8%	45%	12%
Non-investment Grade	27%	3%	8%	3%
Total US RMBS Ratings
AAA/AA	50%	63%	14%	50%
A/BBB	13%	31%	70%	41%
Non-investment Grade	37%	6%	16%	9%

Barclays

Annual Report 2008

Risk management

Credit risk management

Barclays Capital credit market exposures

A2. Other US Sub-Prime


	As at 31.12.08 £m	As at 31.12.07 £m		Marks at 31.12.08	Marks at 31.12.07
	As at 31.12.08 £m	As at 31.12.07 £m		Marks at 31.12.08	Marks at 31.12.07
Whole loans – performing	1,290	2,805		80%	100%
Whole loans – more than 60 days past due	275	372		48%	65%
Total whole loans	1,565	3,177		72%	94%
AAA securities	111	735		40%	92%
Other sub-prime securities	818	525		23%	61%
Total securities gross of hedges	929	1,260		25%	76%
Hedges	–	(369	)
Securities (net of hedges)	929	891
Residuals	–	233		–	24%
Other exposures with underlying sub-prime collateral:
– Derivatives	643	333		87%	100%
– Loans	195	346		70%	100%
– Real Estate	109	57		46%	68%
Total other direct and indirect exposure	1,876	1,860
Total	3,441	5,037

The majority of Other US sub-prime exposures are measured at fair value through profit and loss. US sub-prime securities held in conduits and a collateralised debt obligation (CDO) are categorised as available for sale and are recognised in equity.

Exposure declined from £5,037m to £3,441m driven by gross losses of £1,728m and net sales, paydowns and other movements of £1,649m. Weaker Sterling resulted in an increase in exposure of £1,086m. Exposures at 31st December 2008 included assets acquired from Lehman Brothers North American businesses of £83m in AAA securities and £124m in other US sub-prime securities.

At 31st December 2008, 82% of the whole loan exposure was performing. Whole loans included £1,422m (31st December 2007: £2,843m) acquired on or originated since the acquisition of EquiFirst in March 2007. Of this balance, £281m of new sub-prime loans were originated in 2008. At 31st December 2008, the average loan to value at origination of all the sub-prime whole loans was 79%. Loans guaranteed by Federal Housing Administration (FHA) are not included in the exposure above. An FHA loan is a mortgage loan fully insured by the US Federal Housing Administration and therefore not considered to be a credit sensitive product. EquiFirst has only originated FHA eligible loans since April 2008, and held £132m of these loans at 31st December 2008.

Securities included £37m held by consolidated conduits and £110m held in a CDO on which impairment charges of £16m and £53m respectively have been recorded.

Other exposures with underlying sub-prime collateral include counterparty derivative exposures to vehicles which hold sub-prime collateral. Derivatives of £643m (31st December 2007: £333m) relate to US Dollar denominated interest rate swaps. The increase in the balance principally relates to the decline in interest rates globally and the 37% depreciation of Sterling relative to the US Dollar, especially in the second half of 2008. The majority of all other exposures with underlying sub-prime collateral was the most senior obligation of the vehicle.

Barclays

Annual Report 2008

LOGO

A3. Alt-A


	As at 31.12.08 £m	As at 31.12.07 £m	Marks at 31.12.08	Marks at 31.12.07
AAA securities	1,847	3,553	43%	87%
Other Alt-A securities	1,265	208	9%	75%
Whole Loans	776	909	67%	97%
Residuals	2	25	6%	66%
Derivative exposure with underlying Alt-A collateral	398	221	100%	100%
Total	4,288	4,916

Alt-A securities, whole loans and residuals are measured at fair value through profit and loss. Alt-A securities held in conduits and a collateralised debt obligation (CDO) are categorised as available for sale and are recognised in equity.

Net exposure to the Alt-A market was £4,288m (31st December 2007: £4,916m), through a combination of whole loans, securities and residuals, including those held in consolidated conduits. There were gross losses of £1,983m in the year and net sales, paydowns and other movements of £181m. Weaker Sterling resulted in an increase in exposure of £1,190m. Exposures at 31st December 2008 included assets acquired from Lehman Brothers North American businesses of £300m in AAA securities and £324m in other Alt-A securities.

Securities included £491m held by consolidated conduits and £89m held in a CDO on which impairment charges of £65m and £58m respectively have been recorded.

At 31st December 2008, 75% of the Alt-A whole loan exposure was performing, and the average loan to value ratio at origination was 81%.

Other exposures with underlying Alt-A collateral include counterparty derivative exposures to vehicles which hold Alt-A collateral. Derivative exposures with underlying Alt-A collateral of £398m (31st December 2007: £221m) relate to US Dollar denominated interest rate swaps. The increase in the balance principally relates to the decline in interest rates globally and the 37% depreciation of Sterling relative to the US Dollar, especially in the second half of 2008. The majority of this exposure was the most senior obligation of the vehicle.

A4. US Residential Mortgage Backed Securities Exposure Wrapped by Monoline Insurers

The deterioration in the US residential mortgage market has resulted in exposure to monoline insurers and other financial guarantors that provide credit protection.

The table below shows RMBS assets where we held protection from monoline insurers at 31st December 2008. These are measured at fair value through profit and loss. Declines in fair value of the underlying assets are reflected in increases in the value of potential claims against monoline insurers. Such declines have resulted in net exposure to monoline insurers under these contracts increasing to £1,639m by 31st December 2008 (2007: £730m).

Claims would become due in the event of default of the underlying assets and losses would only be realised if both the underlying asset and monoline defaulted. At 31st December 2008 while 81% of the underlying assets were non-investment grade, 97% are wrapped by monolines with investment grade ratings.

There is some uncertainty whether all of the monoline insurers would be able to meet all liabilities if such claims were to arise: certain monoline insurers have been subject to downgrades in 2008. Consequently, a fair value loss of £412m has been recognised in the year. There have been no claims due under these contracts as none of the underlying assets were in default at 31st December 2008.

The fair value is determined by a credit valuation adjustment calculation which incorporates stressed cash flow shortfall projections, current market valuations, stressed Probability of Default (PDs) and a range of Loss Given Default (LGD) assumptions. The cash flow shortfall projections are stressed to ensure that we consider the potential for further market deterioration and resultant additional cash flow shortfall in underlying collateral. Monoline ratings are based on external ratings analysis and where appropriate significant internal analysis conducted by the independent Credit Risk function. In addition, we reflect the potential for further deterioration of monolines by using stressed PDs which results in all monolines having an implied sub-investment grade rating. LGDs range from 45% to 100% depending on the monoline.

Exposure by Credit Rating of Monoline Insurer


	As at 31.12.08
	Notional £m	Fair Value of Underlying Asset £m	Fair Value Exposure £m	Credit Valuation Adjustment £m		Net Exposure £m
AAA/AA	–	–	–	–		–
A/BBB	2,567	492	2,075	(473	)	1,602
Non-investment grade	74	8	66	(29	)	37
Total	2,641	500	2,141	(502	)	1,639

	As at 31.12.07
AAA/AA	2,807	2,036	771	(41	)	730

Barclays

Annual Report 2008

Risk management

Credit risk management

Barclays Capital credit market exposures

The notional value of the assets, split by the current rating of the monoline insurer, is shown below.


	Rating of Monoline Insurers – As at 31.12.08
	AAA/AA £m	A/BBB £m	Non- Investment Grade £m	Total £m
2005 and earlier	–	143	–	143
2006	–	1,240	–	1,240
2007 and 2008	–	510	–	510
High Grade	–	1,893	–	1,893
Mezzanine – 2005 and earlier	–	625	74	699
CDO²– 2005 and earlier	–	49	–	49
US RMBS	–	2,567	74	2,641
The notional value of the assets, split by the current rating of the underlying asset, is shown below.
	Rating of Underlying Asset – As at 31.12.08
	AAA/AA £m	A/BBB £m	Non- Investment Grade £m	Total £m
2005 and earlier	143	–	–	143
2006	–	–	1,240	1,240
2007 and 2008	–	–	510	510
High Grade	143	–	1,750	1,893
Mezzanine – 2005 and earlier	31	330	338	699
CDO²– 2005 and earlier	–	–	49	49
US RMBS	174	330	2,137	2,641

Barclays

Annual Report 2008

LOGO

B. Commercial Mortgages

Commercial mortgages reduced 18% in US Dollar terms. In Sterling terms these increased by 12%.

B1. Commercial Mortgages

Exposures in Barclays Capital’s commercial mortgages portfolio, all of which are measured at fair value, comprised commercial real estate loan exposure of £11,578m (31st December 2007: £11,103m) and commercial mortgage-backed securities (CMBS) of £735m (31st December 2007: £1,296m). During the year there were gross losses of £1,148m. Gross sales and paydowns of £1,034m in the UK and Continental Europe and £2,167m in the US were partially offset by additional drawdowns. Weaker Sterling increased exposure by £3,058m.

The commercial real estate loan exposure comprised 55% US, 41% UK and Europe and 4% Asia. 5% of the total relates to land or property under construction.

The US exposure included two large transactions which comprised 42% of the total US exposure and have paid down approximately £789m in the year. The remaining 58% of the US exposure comprised 76 transactions. The remaining weighted average number of years to initial maturity of the US portfolio is 1.4 years.

The UK and Europe portfolio is well diversified with 64 transactions in place as at 31st December 2008. In Europe protection is provided by loan covenants and periodic LTV retests, which cover 90% of the portfolio. 47% of the German exposure relates to one transaction secured on multifamily residential assets. Exposure to the Spanish market represents less than 1% of global exposure at 31st December 2008.


Commercial Real Estate Exposure by Region
	As at 31.12.08 £m	As at 31.12.07 £m	Marks at 31.12.08	Marks at 31.12.07
US	6,329	5,947	88%	99%
Germany	2,467	1,783	95%	100%
Sweden	265	250	96%	100%
France	270	289	94%	100%
Switzerland	176	127	97%	100%
Spain	106	89	92%	100%
Other Continental Europe	677	779	90%	100%
UK	831	1,422	89%	100%
Asia	457	417	97%	100%
Total	11,578	11,103


Commercial Real Estate Exposure Metrics
	WALTV^a	WAM^b	WALA^c
US	79.5%	1.4 yrs	1.6 yrs
Germany	79.4%	4.6 yrs	1.5 yrs
Other Europe	82.2%	4.5 yrs	1.7 yrs
UK	77.8%	5.8 yrs	1.8 yrs
Asia	93.3%	4.7 yrs	1.3 yrs


Commercial Real Estate Exposure by Industry
	As at 31.12.08
	US £m	Germany £m	Other Europe £m	UK £m	Asia £m	Total £m
Office	2,081	436	802	192	145	3,656
Residential	1,957	1,268	–	229	128	3,582
Retail	66	567	96	110	118	957
Hotels	1,145	–	441	29	18	1,633
Leisure	–	–	–	233	–	233
Land	232	–	–	–	–	232
Industrial	582	126	131	38	10	887
Mixed/Others	243	70	24	–	38	375
Hedges	23	–	–	–	–	23
Total	6,329	2,467	1,494	831	457	11,578

Notes

a	Weighted-average loan- to-value based on the most recent valuation.

b	Weighted-average number of years to initial maturity.

c	Weighted-average loan age.

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Risk management

Credit risk management

Barclays Capital credit market exposures

B1. Commercial Mortgages (continued)


Commercial Mortgage Backed Securities (net of hedges)
	As at 31.12.08 £m	As at 31.12.07 £m	Marks^a at 31.12.08	Marks^a at 31.12.07
AAA securities	588	1,008
Other securities	147	288
Total	735	1,296	21%	98%

Exposure is stated net of hedges traded in the liquid index swap market with market counterparties. The counterparty exposure is managed through a standard derivative collateralisation process and none of the hedge counterparties are monoline insurers.

Exposures at 31st December 2008 included assets acquired from Lehman Brothers North American businesses of £143m in AAA securities and £86m in other securities.

B2. CMBS Exposure Wrapped by Monoline Insurers

The deterioration in the commercial mortgage market has resulted in exposure to monoline insurers and other financial guarantors that provide credit protection.

The table below shows Commercial Mortgage Backed Security (CMBS) assets where we held protection from monoline insurers at 31st December 2008. These are measured at fair value through profit and loss. Declines in fair value of the underlying assets are reflected in increases in the value of potential claims against monoline insurers. Such declines have resulted in net exposure to monoline insurers under these contracts increasing to £1,854m by 31st December 2008 (31st December 2007: £197m).

Claims would become due in the event of default of the underlying assets and losses would only be realised if both the underlying asset and monoline defaulted. At 31st December 2008 all underlying assets were rated AAA/AA and 89% are wrapped by monolines with investment grade ratings.

There is some uncertainty whether all of the monoline insurers would be able to meet all liabilities if such claims were to arise: certain monoline insurers have been subject to downgrades in 2008. Consequently, a fair value loss of £340m has been recognised in the year. There have been no claims due under these contracts as none of the underlying assets were in default at 31st December 2008.


Exposure by credit rating of monoline insurer
	As at 31.12.08
	Notional £m	Fair value of underlying asset £m	Fair value exposure £m	Credit valuation adjustment £m		Net exposure £m
AAA/AA	69	27	42	(4	)	38
A/BBB	3,258	1,301	1,957	(320	)	1,637
Non-investment grade	425	181	244	(65	)	179
Total	3,752	1,509	2,243	(389	)	1,854

	As at 31.12.07
AAA/AA	3,614	3,408	206	(9	)	197

The notional value of the assets, split by the current rating of the monoline insurer, is shown below.


	Rating of monoline insurers – As at 31.12.08
	AAA/AA £m	A/BBB £m	Non- Investment Grade £m	Total £m
2005 and earlier	–	437	–	437
2006	69	544	–	613
2007 and 2008	–	2,277	425	2,702
CMBS	69	3,258	425	3,752

Note

a	Marks are based on gross collateral.

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The notional value of the assets split by the current rating of the underlying asset, is shown below. All CMBS assets were rated AAA/AA at 31st December 2008.


	Rating of Underlying Asset – As at 31.12.08
	AAA/AA £m	A/BBB £m	Non- Investment Grade £m	Total £m
2005 and earlier	437	–	–	437
2006	613	–	–	613
2007 and 2008	2,702	–	–	2,702
CMBS	3,752	–	–	3,752

C . Other credit market exposures

In the year ended 31st December 2008 these exposures increased by 17% in US Dollar terms, and 61% in Sterling terms.

C1. Leveraged Finance

Leveraged loans are classified within loans and advances and are stated at amortised cost less impairment. The overall credit performance of the assets remains satisfactory.

At 31st December 2008, the gross exposure relating to leveraged finance loans was £10,506m (31st December 2007: £9,217m). Barclays Capital expects to hold these leveraged finance positions until redemption. Material movements since 31st December 2007 reflect exchange rate changes rather than changes in loan positions.

The net exposure relating to leverage finance loans of £10,391m (31st December 2007: £9,027m) was reduced to £7,335m following a repayment of £3,056m at par in January 2009.


Leveraged Finance Exposure by Region
	As at 31.12.08 £m		As at 31.12.07 £m
UK	4,810		4,401
US	3,830		3,037
Europe	1,640		1,568
Asia	226		211
Total lending and commitments	10,506		9,217
Identified and unidentified impairment^a	(115	)	(190	)
Net lending and commitments	10,391		9,027


Leveraged finance exposure by industry
	As at 31.12.08			As at 31.12.07
	Drawn £m	Undrawn £m	Total £m	Drawn £m	Undrawn £m	Total £m
Insurance	2,546	31	2,577	2,456	78	2,534
Telecoms	2,998	211	3,209	2,259	240	2,499
Retail	904	128	1,032	828	132	960
Health care	659	144	803	577	141	718
Media	655	89	744	469	127	596
Services	568	131	699	388	134	522
Manufacturing	500	102	602	371	125	496
Chemicals	317	26	343	46	286	332
Other	329	168	497	233	327	560
Total	9,476	1,030	10,506	7,627	1,590	9,217

New leveraged finance commitments originated after 30th June 2007 comprised £573m (31st December 2007: £1,148m).

Note

a	The movement in impairment during the period is primarily due to the release of the provision on the post year end repayment, for which there was a binding commitment as at 31st December 2008.

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Credit risk management

Barclays Capital credit market exposures

C2. SIVs and SIV-Lites


SIVs/SIV-Lites
	As at 31.12.08 £m	As at 31.12.07 £m	Marks at 31.12.08	Marks at 31.12.07
Liquidity facilities	679	466	62%	100%
Bond inventory	11	52	7%	37%
Derivatives	273	266
Total	963	784

SIV exposure increased from £784m to £963m during the year. There were £230m of gross losses against SIVs and SIV lites in the year. Weaker Sterling resulted in an increase in exposure of £281m.

At 31st December 2008 liquidity facilities of £679m (31st December 2007: £466m) include £531m designated at fair value through profit and loss relating to a SIV-lite which had previously been hedged with Lehman Brothers. Following the Lehman Brothers bankruptcy this facility was reflected as a new exposure to the underlying assets. The remaining £148m represented drawn liquidity facilities in respect of SIV-lites and other structured investment vehicles classified as loans and advances stated at cost less impairment.

Bond inventory and derivatives are fair valued through profit and loss.

Movement in derivative exposure primarily related to CDS exposure due to general spread widening. At 31st December 2008 exposure was broadly in line with the prior year.

C3. CDPC exposure

Credit derivative product companies (‘CDPCs’) are specialist providers of credit protection principally on corporate exposures in the form of credit derivatives. The Group has purchased protection from CDPCs against a number of securities with a notional value of £1,772m. The fair value of the exposure to CDPCs at 31st December 2008 was £150m. A fair value loss of £14m has been recognised in the year.

Of the notional exposure, 45% related to AAA/AA rated counterparties, with the remainder rated A/BBB.


Exposure by credit rating of CDPC
	As at 31.12.08
	Notional £m	Gross exposure £m	Credit valuation adjustment £m		Net exposure £m
AAA/AA	796	77	(14	)	63
A/BBB	976	87	–		87
Total	1,772	164	(14	)	150

	As at 31.12.07
AAA/AA	1,262	19	–		19

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C4. CLO and other exposure wrapped by monoline insurers

The table below shows Collateralised Loan Obligations (CLOs) and other assets where we held protection from monoline insurers at 31st December 2008. The deterioration in markets for these assets has resulted in exposure to monoline insurers and other financial guarantors that provide credit protection. These are measured at fair value through profit and loss. Declines in fair value of the underlying assets are reflected in increases in the value of potential claims against monoline insurers. Such declines have resulted in net exposure to monoline insurers under these contracts increasing to £4,939m by 31st December 2008 (31st December 2007: £408m).

Claims would become due in the event of default of the underlying assets and losses would only be realised if both the underlying asset and monoline defaulted. At 31st December 2008 all of the underlying assets have investment grade ratings and 39% are wrapped by monolines rated AAA/AA. 87% of the underlying assets were CLOs, all of which were rated AAA/AA.

There is some uncertainty whether all of the monoline insurers would be able to meet all liabilities if such claims were to arise: certain monoline insurers have been subject to downgrades in 2008. Consequently, a fair value loss of £737m, has been recognised in the year. There have been no claims due under these contracts as none of the underlying assets were in default at 31st December 2008.

The fair value is determined by a credit valuation adjustment calculation which incorporates stressed cash flow shortfall projections, current market valuations, stressed Probability of Default (PDs) and a range of Loss Given Default (LGD) assumptions. The cash flow shortfall projections are stressed to ensure that we consider the potential for further market deterioration and resultant additional cash flow shortfall in underlying collateral. Monoline ratings are based on external ratings analysis and where appropriate significant internal analysis conducted by the independent Credit Risk function. In addition, we reflect the potential for further deterioration of monolines by using stressed PDs for non-AAA rated monolines, which results in all other monolines having an implied sub-investment grade rating. LGDs range from 45% to 100% depending on the monoline.


Exposure by credit rating of monoline in surer
		As at 31.12.08
	Notional £m	Fair value of underlying asset £m	Fair value exposure £m	Credit valuation adjustment £m		Net exposure £m
AAA/AA	8,281	5,854	2,427	(55	)	2,372
A/BBB	6,446	4,808	1,638	(204	)	1,434
Non-investment grade	6,148	4,441	1,707	(574	)	1,133
Total	20,875	15,103	5,772	(833	)	4,939

		As at 31.12.07
AAA/AA	15,152	14,735	417	(9	)	408

The notional value of the assets, split by the current rating of the monoline insurer, is shown below.
		Rating of monoline insurers – As at 31.12.08
		AAA/AA £m	A/BBB £m	Non- investment grade £m		Total £m
2005 and earlier		2,064	1,647	2,326		6,037
2006		1,803	2,173	1,918		5,894
2007 and 2008		3,324	1,369	1,602		6,295
CLOs		7,191	5,189	5,846		18,226
2005 and earlier		131	661	70		862
2006		145	158	232		535
2007 and 2008		814	438	–		1,252
Other		1,090	1,257	302		2,649
Total		8,281	6,446	6,148		20,875

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Risk Management

Credit risk management

Barclays Capital credit market exposures

The notional value of the assets split by the current rating of the underlying asset is shown below. All of the underlying assets had investment grade ratings as at 31st December 2008.


	Rating of Underlying Asset – As at 31.12. 08
	AAA/AA £m	A/BBB £m	Non- Investment Grade £m	Total £m
2005 and earlier	6,037	–	–	6,037
2006	5,894	–	–	5,894
2007 and 2008	6,295	–	–	6,295
CLOs	18,226	–	–	18,226
2005 and earlier	862	–	–	862
2006	535	–	–	535
2007 and 2008	785	467	–	1,252
Other	2,182	467	–	2,649
Total	20,408	467	–	20,875

Own credit

The carrying amount of issued notes that are designated under the IAS 39 fair value option is adjusted to reflect the effect of changes in own credit spreads. The resulting gain or loss is recognised in the income statement.

At 31st December 2008, the own credit adjustment arose from the fair valuation of £54.5bn of Barclays Capital structured notes (31st December 2007: £40.7bn). The widening of Barclays credit spreads in the year affected the fair value of these notes and as a result revaluation gains of £1,663m were recognised in trading income (2007: £658m).

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Risk management

Market risk management

Organisation and structure

Market risk is the risk that Barclays earnings or capital, or its ability to meet business objectives, will be adversely affected by changes in the level or volatility of market rates or prices such as interest rates, credit spreads, commodity prices, equity prices and foreign exchange rates. Market risk mainly arises from trading activities. Barclays is also exposed to market risk through non-traded interest rate risk and the pension fund.

Barclays market risk objectives are to:

– Understand and control market risk by robust measurement and the setting of position limits.

– Facilitate business growth within a controlled and transparent risk management framework.

– Ensure traded market risk resides primarily in Barclays Capital.

– Minimise non-traded market risk.

The Board approves market risk appetite for trading and non-trading activities. The Market Risk Director is responsible for the Market Risk Control Framework and, under delegated authority from the Group Risk Director, sets a limit framework within the context of the approved market risk appetite. A daily market risk report summarises Barclays market risk exposures against agreed limits. This daily report is sent to the Group Risk Director, the Market Risk Director, the Group Finance Director and the appropriate Business Risk Directors.

management, control and reporting of market risk as outlined in Barclays Market Risk Control Framework. Oversight and

support is provided to the business by the Market Risk Director, assisted by the central market risk team. The Market Risk Committee reviews, approves, and makes recommendations concerning the market risk profile across Barclays including risk appetite, limits and utilisation. The Committee meets monthly and is chaired by the Market Risk Director. Attendees include the Group Risk Director, respective business risk managers and senior managers from the central market risk team.

In Barclays Capital, the Head of Market Risk is responsible for implementing the market risk control framework. Day to day responsibility for market risk lies with the senior management of Barclays Capital, supported by the Market Risk Management team that operates independently of the trading areas. Daily market risk reports are produced for Barclays Capital as a whole as well as for the main business areas. The risks covered include interest rate, credit spread, commodity, equity and foreign exchange. A more detailed trading market risk presentation is produced fortnightly and discussed at the Barclays Capital Traded Positions Risk Review meeting. The attendees at this meeting include the Group Risk Director and senior managers from Barclays Capital and the central market risk team.

In Global Retail and Commercial Banking, each of the six main business areas (UK Retail Banking, Barclays Commercial Bank, Barclaycard, Western Europe, Emerging Markets and Absa) has its own market risk department. The head of each department is responsible for implementing the Market Risk Control Framework, with oversight provided by the central market risk team. A combination of daily and monthly risk reports are sent to the central market risk team. A risk summary is presented at Market Risk Committee and the respective Asset and Liability Committees.

Global Retail and Commercial Banking is responsible for non-structural non-trading interest rate risk and Group Treasury is responsible for structural risk (interest rate and foreign exchange). The chart below gives an overview of the business control structure.

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Annual Report 2008

Risk management

Market risk management

Traded market risk

Barclays policy is to concentrate trading activities in Barclays Capital. This includes transactions where Barclays Capital acts as principal with clients or with the market. For maximum efficiency, client and market activities are managed together. In Barclays Capital, trading risk occurs in both the trading book and the banking book, as defined for regulatory purposes.

Risk measurement and control

The measurement techniques used to measure and control traded market risk include Daily Value at Risk (DVaR), Expected Shortfall (ES), stress testing and scenario testing. Book limits such as foreign exchange and interest rate delta limits are also in place.

Daily Value at Risk is an estimate of the potential loss arising from unfavourable market movements, if the current positions were to be held unchanged for one business day. Barclays Capital uses the historical simulation method with a two year unweighted historical period.

In 2008, the confidence level was changed to 95% from 98% as an increasing incidence of significant market movements made the existing measure more volatile and less effective for risk management purposes. Switching to 95% made DVaR more stable and consequently improved management, transparency and control of the market risk profile.

The historical simulation calculation can be split into three parts:

– Calculate hypothetical daily profit or loss for each position over the most recent two years, using observed daily market moves.

– Sum hypothetical profit or losses for day one, giving one total profit or loss. This is repeated for all other days in the two year history.

– DVaR is the 95th percentile selected from the two years of daily hypothetical total profit or loss.

The DVaR model has been approved by the FSA to calculate regulatory capital for the trading book. The approval covers general market risk in interest rate, foreign exchange, commodities and equity products, and issuer specific risk for the majority of single name and portfolio traded credit products. Internally, as noted before, DVaR is calculated for both the trading and banking books.

When reviewing DVaR estimates, a number of considerations should be taken into account. These are:

– Historical simulation uses the recent past to generate possible future market moves but the past may not be a good indicator of the future

– The one day time horizon does not fully capture the market risk of positions that cannot be closed out or hedged within one day

– Intra-day risk is not captured

– DVaR does not indicate the potential loss beyond the 95th percentile.

DVaR is an important market risk measurement and control tool and consequently the model is regularly assessed. The main approach employed is the technique known asback-testing which counts the

The daily average, maximum and minimum values of DVaR, 95% and 98%, were calculated as below.


DVaR (95%)
	12 months to 31st December 2008				12 months to 31st December 2007
	Average £m		High £m	Low £m	Average £m		High £m	Low £m
Interest rate risk	28.9		47.8	15.1	15.3		26.5	10.0
Credit spread risk	31.1		71.7	15.4	17.3		28.0	10.8
Commodity risk	18.1		25.4	12.5	15.3		19.0	10.7
Equity risk	9.1		21.0	4.8	8.0		12.1	4.5
Foreign exchange risk	5.9		13.0	2.1	3.8		7.2	2.1
Diversification effect^a	(39.7	)	n/a	n/a	(27.2	)	n/a	n/a
Total DVaR	53.4		95.2	35.5	32.5		40.9	25.2


DVaR (98%)
	12 months to 31st December 2008				12 months to 31st December 2007
	Average £m		High £m	Low £m	Average £m		High £m	Low £m
Interest rate risk	45.0		80.9	21.0	20.0		33.3	12.6
Credit spread risk	54.0		143.4	30.1	24.9		43.3	14.6
Commodity risk	23.9		39.6	16.5	20.2		27.2	14.8
Equity risk	12.8		28.9	6.7	11.2		17.6	7.3
Foreign exchange risk	8.1		21.0	2.9	4.9		9.6	2.9
Diversification effect^a	(67.3	)	n/a	n/a	(39.2	)	n/a	n/a
Total DVaR	76.5		158.8	47.5	42.0		59.3	33.1

Note

The high (and low) DVaR figures reported for each category did not necessarily occur on the same day as the high (and low) DVaR reported as a whole. Consequently a diversification effect number for the high (and low) DVaR figures would not be meaningful and it is therefore omitted from the above table.

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number of days when a loss (as defined by the FSA in BIPRU 7.10) exceeds the corresponding DVaR estimate, measured at the 99% confidence level.

The FSA categorises a DVaR model as green, amber or red. A green model is consistent with a good working DVaR model and is achieved for models that have four or less back-testing exceptions in a 12-month period. For Barclays Capital’s trading book, green model status was maintained for 2008 and 2007.

To further improve the control framework, formal daily monitoring ofExpected Shortfall (ES) was started. This metric is the average of all the hypothetical losses beyond DVaR.

Stress testing provides an indication of the potential size of losses that could arise in extreme conditions. It helps to identify risk concentrations across business lines and assist senior management in capital planning decisions. A variety of different types of stress tests are performed in order to fulfil the objectives of stress testing. The global asset class stress tests have been designed to cover major asset classes including interest rate, credit spread, commodity, equity, foreign exchange rates and emerging markets.

Stress results are produced at least fortnightly. If a potential stress loss exceeds the corresponding trigger limit, the positions captured by the stress test are reviewed and discussed by Barclays Capital market risk management and the respective Barclays Capital business heads. The minutes of the discussion, including the merits of the position and the appropriate course of action, are then sent to the Market Risk Director for review.

Scenario tests are hypothetical events which could lead to extreme yet plausible stress type moves under which profitability is seriously challenged. The scenarios are devised by senior risk managers and economists and are reviewed quarterly. Examples include ‘Global pandemic’, ‘Problems with GBP sovereign issuances’ and ‘Liquidity crisis’. The scenarios are calculated at least fortnightly and the results are included in the Traded Positions Risk Review meeting information pack.

Analysis of traded market risk exposures

The tables and graph show the time series for total DVaR with commentary. Further analysis is given in Note 48.

Analysis of trading revenue

The histograms below show the distribution of daily trading revenue for Barclays Capital in 2008 and 2007. Revenue includes net trading income, net interest income, net fees and commissions relating to primary trading, and the effects of gains or losses on own credit. The average daily revenue in 2008 was £19.5m (2007: £26.2m) and there were 203 positive revenue days out of 254 (2007: 224 out of 253). The number of negative revenue days increased in 2008, largely a result of volatile markets especially in the fourth quarter. The number of positive revenue days greater than £45m also increased but these were spread across the year.

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Notes

a	Total DVaR remains broadly at the same level as recorded in Dec 07.

b	Total DVaR reduces due to reduction in interest rate positions.

c	Barclays acquires Lehman Brothers North American businesses during a period of extreme market volatility. The Lehman positions are subsequently reduced.

d	DVaR increases significantly due to extreme market volatility following the failure of several financial intuitions and a material deterioration in the global economic outlook. Barclays changes to 95% DVaR to improve management, transparency and control of the market risk profile.

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Risk management

Market risk management

Non-traded market risk

Barclays objective is to minimise non-traded market risks. This is achieved by transferring risk from the business to a local treasury or Group Treasury, which in turn hedges the net exposure with the external market. Limits exist to ensure no material risk is retained within any business or product area. The majority of exposures are within Global Retail and Commercial Banking.

Non-traded interest rate risk

Non-traded interest rate risk arises from the provision of retail and wholesale (non-traded) banking products and services.

The techniques used to measure and control non-traded interest rate risk include Annual Earnings at Risk, DVaR and Stress Testing. Book limits such as foreign exchange and interest position limits are also in place.

Annual Earnings at Risk (AEaR) measures the sensitivity of net interest income (NII) over the next 12 months. It is calculated on a monthly basis as the difference between the estimated income using the current yield curve and the lowest estimated income following a 100 basis points increase or decrease in interest rates.

To complement AEaR, the Group also uses a simplified version of theDVaR approach used by Barclays Capital.

Stress testing is also carried out by the business centres and is reviewed by senior management and business-level asset and liability committees. The stress testing is tailored to the business and typically incorporates scenario analysis and historical stress movements applied to respective portfolios.

The analysis of non-traded interest rate risk is given in Note 48.

Other market risks

Barclays maintains a number of defined benefit pension schemes for past and current employees. The ability of the Pension Fund to meet the projected pension payments is maintained through investments and regular Bank contributions.Pension risk arises because: the estimated market value of the pension fund assets might decline; or their investment returns might reduce; or the estimated value of the pension liabilities might increase. In these circumstances, Barclays could be required or might choose to make extra contributions to the pension fund. Financial details of the pension fund are in Note 30.

Investment risk is the risk of financial volatility arising from changes in the market value of investments, principally occurring in Barclays insurance companies and Barclays Global Investors. A change in the fair value of these investments may give rise to a liability which may have to be funded by the Group. It is Barclays policy to hedge such exposures in line with a defined risk appetite.

Barclays policy is for foreign exchange traded risk to be concentrated and managed in Barclays Capital. Some transactionalforeign exchange riskexposure arises within the local treasury operations in Global Retail and Commercial Banking to support and facilitate client activity. This is minimised in accordance with modest risk limits and was not material as at 31st December 2008. Other non-Barclays Capital foreign exchange exposure is covered in Note 48.

Asset management structural market risk arises where the fee and commission income earned by asset management products and businesses is affected by a change in market levels, primarily through the link between income and the value of assets under management.

It is Barclays policy that businesses monitor and report this risk against a defined risk appetite and regularly assess potential hedging strategies.

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Risk management

Market risk management

Disclosures about certain trading activities

including non-exchange traded commodity contracts

The Group provides a fully integrated service to clients for base metals, precious metals, oil, power, natural gas, coal, freight, emission credits, structured products and other related commodities. This service offering continues to expand, as market conditions allow, through the addition of new products and markets.

The Group offers both over the counter (OTC) and exchange traded derivatives, including swaps, options, forwards and futures and enters into physically settled contracts in base metals, power and ~~natural~~ gas, ~~with 2007 seeing the addition of~~ oil and related ~~products to this portfolio.~~products. Physical commodity positions are held at fair value and reported under the Trading Portfolio in Note ~~12.~~12 on page 215.

Fair value measurement

The fair values of physical and derivative positions are primarily determined through a combination of recognised market observable prices, exchange prices, and established inter-commodity relationships.

Further information on fair value measurement of financial instruments can be found in Note ~~49.~~50 on page 287.

Credit risk

Credit risk exposures are actively managed by the Group. Refer to Note 47 on page 264 for more information on the Group’s approach to credit risk management and the credit quality of derivative assets.

Fair value of the commodity derivative contracts

The tables below analyse the overall fair value of the OTC commodity derivative contracts by movement over time and maturity. As at

31st December ~~2007~~2008 the fair value of the commodity derivative contracts reflects a gross positive fair value of ~~£23,571m (2006: £17,501m)~~£44,881m (2007: £23,571m) and a gross negative value of ~~£22,759m (2006: £15,940m)~~£45,817m (2007: £22,759m).

~~Movement in fair value of commodity derivative positions~~

      2007
£m 2006
£m
Fair value of contracts outstanding
at the beginning of the period    1,561 527
Contracts realised or otherwise settled
during the period    (764 ) 379
Fair value of new contracts entered into
during the period    243 808
Other changes in fair values
   (228 ) (153 )
Fair value of contracts outstanding
at the end of the period    812 1,561

~~Maturity analysis of commodity derivative fair value~~


Movement in fair value of commodity derivative positions
	2008 £m		2007 £m
Fair value of contracts outstanding at the beginning of the period	812		1,561
Contracts realised or otherwise settled during the period	241		(764	)
Fair value of new contracts entered into during the period	(1,245	)	243
Other changes in fair values	(744	)	(228	)
Fair value of contracts outstanding at the end of the period	(936	)	812

      2007
£m 2006
£m
Not more than one year
   (279 ) 902
Over one year but not more than five years
   773 327
Over five years
   318 332
Total
   812 1,561


Maturity analysis of commodity derivative fair value
	2008 £m		2007 £m
Not more than one year	(2,022	)	(279	)
Over one year but not more than five years	999		773
Over five years	87		318
Total	(936	)	812

90110

Barclays

Annual Report ~~2007~~2008

Risk management

~~Risk~~Liquidity risk management

~~Liquidity management~~Organisation and structure

~~Liquidity management~~

Liquidity risk is the risk that the Group is unable to meet its obligations when they fall due as a result of customer deposits being withdrawn, cash requirements from contractual commitments, or other cash outflows, such as debt maturities. Such outflows would deplete available cash resources for client lending, trading activities and investments. In extreme circumstances lack of liquidity could result in reductions in balance sheet and sales of assets, or potentially an inability to ~~replace funds when they are withdrawn, with consequent failure to repay depositors and~~ fulfil ~~commitments to lend.~~lending commitments. The risk that it will be unable to do so is inherent in all banking operations and can be ~~impacted~~affected by a range of ~~institution specific~~institution-specific and market-wide events including, but not limited to, credit events, merger and acquisition activity, systemic shocks and natural disasters.

Barclays Treasury operates a centralised governance and control process that covers all of the Group’s liquidity risk management activities. Businesses assist Barclays Treasury in policy formation and limit setting by providing relevant and expert input for their local markets and customers.

Execution of the Group’s liquidity risk management strategy is carried out at country level within agreed policies, controls and limits, with the Country Treasurer providing reports directly to Barclays Treasury to evidence conformance with the agreed risk profile. Liquidity risk is a standing agenda item at Country and Cluster Asset and Liability Committees and on a consolidated basis is reported to the Group’s Treasury Committee.

The objective of the Group’s liquidity risk management strategy is to ensure that the funding profile of individual businesses and the Group as a whole is appropriate to underlying market conditions and the profile of our business in each given country. Liquidity risk limits and controls are flexed to achieve that profile and are based on regular qualitative and quantitative assessments of conditions and abilities under both normal and stressed conditions. Businesses are only allowed to have funding exposure to wholesale markets where they can demonstrate that their market is sufficiently deep and liquid and then only relative to the size and complexity of their business.

Liquidity limits reflect both local regulatory requirements as well as the behavioural characteristics of their balance sheets. Breaches of limits are reported to Treasury Committee together with details of the requirements to return to compliance.

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Risk management

Liquidity risk management ~~and measurement~~

Key elements

Liquidity management within the Group has several components.

Intraday liquidity

The need to monitor, manage and control intraday liquidity in real time is recognised by the Group as a ~~mission~~ critical process: any failure to meet specific intraday commitments would have significant ~~consequences.~~consequences, such as a visible market disruption.

The Group policy is that each operation must ensure that it has access to sufficient intraday liquidity to meet any obligations it may have to clearing and settlement systems. Major currency payment flows and payment system collateral are monitored and managed in real time to ensure that at all times there is sufficient collateral to make payments. In practice, the Group maintains a significant buffer of surplus intraday liquidity to ensure that payments are made on a timely basis. The Group actively engages in payment system development to help ensure that new payment systems are robust.

Day to day funding

Day to day funding is managed ~~by short term mismatch~~through limits ~~for the next day, week~~on wholesale borrowings, secured borrowings and ~~month which control expected cash flows to~~funding mismatches. These ensure that ~~requirements can be met.~~on any day and over any period there is a limited amount of refinancing required. These requirements include replenishment of funds as they mature or are borrowed by customers. The Retail and Commercial Bank together with Wealth maintain no reliance on wholesale funding. The Group maintains an active presence in global money markets through Barclays Capital and monitors and manages the wholesale money market capacity for the Group’s name to enable that to happen.

In addition to cash flow management, Treasury also monitors ~~unmatched medium-term~~term mismatches between assets and liabilities, as well as the level and type of undrawn lending commitments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees.

Liquid assets

The Group maintains a portfolio of highly marketable assets including UK, US and Euro-area government bonds that can be sold or funded on a secured basis as protection against any unforeseen interruption to cash flow. The Group accesses secured funding markets in these assets on a regular ~~basis to ensure market access.~~basis. The Group does not rely on committed funding lines for protection against unforeseen ~~interruption~~interruptions to cash flow.

Diversification of liquidity sources

Sources of liquidity are regularly reviewed to maintain a wide diversification by currency, geography, provider, product and term. In addition, to avoid reliance on a particular group of customers or market sectors, the distribution of sources and the maturity profile of deposits are also carefully managed. Important factors in assuring liquidity are ~~competitive rates~~strength of relationships and the maintenance of depositors’ confidence. Such confidence is based on a number of factors including the Group’s reputation and relationship with those clients, the strength of earnings and the Group’s financial position.

~~Barclays~~

~~Annual Report 2007~~

~~Risk management~~

~~Liquidity management~~

Structural liquidity

An important source of structural liquidity is provided by our core retail deposits in the UK, Europe and Africa, mainly current accounts and savings accounts. Although current accounts are repayable on demand and savings accounts at short notice, the Group’s broad base of customers – numerically and by depositor type – helps to protect against unexpected fluctuations. Such accounts form a stable funding base for the Group’s operations and liquidity needs.

The Group policy is to fund the balance sheet of the ~~retail~~Retail and ~~commercial bank~~Commercial Bank together with Wealth and Head office functions on a global basis with customer deposits and capital without recourse to the wholesale markets. This provides protection from the liquidity risk of wholesale market funding. The exception to this policy is Absa, which has a large portion of wholesale funding due to the structural nature of the South African financial sector.

~~Stress tests~~Scenario analysis and stress testing

Stress testing is undertaken to assess and plan for the impact of various scenarios which may put the Group’s liquidity at risk.

Treasury develops and monitors a range of stress tests on the Group’s projected cash flows. These stress scenarios include Barclays-specific scenarios such as an unexpected rating downgrade and operational problems, and external scenarios such as Emerging Market crises, payment system disruption and macro-economic shocks. The output informs both the liquidity mismatch limits and the Group’s contingency funding plan.

This is maintained by Treasury and is aligned with the Group and country business resumption plans to encompass decision-making authorities, internal and external communication and, in the event of a systems failure, the restoration of liquidity management and payment systems.

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Liquidity risk management

Key elements

The ability to raise funds is in part dependent on maintaining the Bank’s credit rating. The funding impact of a credit downgrade is ~~regularly estimated.~~closely tracked. Whilst the impact of a single downgrade may affect the price at which funding is available, the effect on liquidity is not considered material in Group terms.

For further details see contractual obligations and commercial commitments of the Group on page ~~46.~~19.

~~Recent~~Year end assessment of liquidity

Barclays maintained a strong liquidity profile in 2008, sufficient to absorb the impact of a stressed funding environment. The Group has access to a substantial pool of liquidity both in secured markets and from unsecured depositors including numerous foreign governments and central banks. In addition, our limited reliance on securitisations as a source of funding has meant that the uncertainty in securitisation markets has not impacted our liquidity risk profile.

Whilst funding markets were extremely difficult in the latter half of 2008, and particularly since September 2008, Barclays was able to increase available liquidity, extend the term of unsecured liabilities, and reduce reliance on unsecured funding. Barclays has participated in various government and central bank liquidity facilities, both to aid central banks implementation of monetary policy and support central bank initiatives, where participation has enabled the lengthening of the term of our refinancing. These facilities have improved access to term funding, and helped moderate money market ~~events~~rates.

For the Group, loans and advances to customers and banks are more than covered by the combination of customer deposits and longer term debt at 112% at 31st December 2008 (2007: 125%).

Global Retail and Commercial Banking

The ~~second half~~sum of ~~last year saw~~liabilities in Global Retail and Commercial Banking, Barclays Wealth and Head office functions exceeds assets in those businesses. As a ~~sustained period~~result they have no reliance on wholesale funding. The balance sheet is modelled to reflect behavioural experience in both assets and liabilities, and is managed to maintain a positive cash profile (table 1).

Throughout 2008 Global Retail and Commercial Banking continued to grow the amount of ~~severe stress~~deposits despite competitive pressures (table 2).

Barclays Capital

Barclays Capital manages liquidity to be self-funding through wholesale sources, managing access to liquidity to ensure that potential cash outflows in international financial markets characterised by increased volatility and impaired liquidity. Issuance of debt, particularly structured credit and mortgage related, fell sharply. The asset-backed commercial paper market was severely disrupted, resulting in the drawn down of committed liquidity lines from banks, while primary issuance of mortgage-backed securities and covered bonds stopped for a time. The repo markets including tri-party were also disrupted with the repo market for corporate debt closing for a time. Term money market funding became difficult to obtain and spreads over official rates widened.stressed environment are covered.

Funding reliability is maintained by accessing a wide variety of investors and geographies and by building and maintaining strong relationships with these providers of liquidity.

Unsecured funding

Additionally, unsecured funding is managed within specific term limits. The ~~Group maintained its strong~~term of unsecured liabilities has been extended, with average life improving by four months from eight months at the end of December 2007 to 12 months at the end of December 2008.

Our capital markets debt issuance includes issues of senior and subordinated debt in US registered offerings and medium term note programmes and European medium term note programs. Substantially all of our unsecured senior issuance is without covenants that trigger increased cost or accelerate maturity. Furthermore, between September and December 2008 we issued £11bn in government guaranteed debt, £9bn in maturities of one to three years and £2bn in under one-year maturities.

Secured funding

Barclays funds securities based on liquidity ~~profile throughout and saw some benefit from a flight to quality~~characteristics. Limits are in ~~financial markets. Nevertheless, Barclays, like its peers, was affected by the increased volatility and impaired~~place for each security asset class reflecting liquidity in ~~financial markets. During this period~~ the ~~Group’s balance sheet expanded due to:~~cash and financing markets for these assets. Approximately 80% of assets funded in repurchase and stock loan transactions are fundable within central bank facilities (excluding Bank of England Emergency facilities and the Federal Reserve Primary Dealer Credit Facility).

Liquidity risk to secured funding is also mitigated by:

–

~~The disruption of the Asset Backed Commercial Paper (ABCP) market led to liquidity facilities for third party conduits being drawn down.~~selecting reliable counterparties

–

~~Liquidity facilities were provided to three client SIV-lites which were restructured during~~maintaining term financing and by limiting the ~~period.~~amount of overnight funding

–

~~A number~~limiting overall secured funding usage

Readily available liquidity

Substantial resources are maintained to offset maturing deposits and debt. These readily available assets are sufficient to absorb stress level losses of liquidity from unsecured as well as contingent cash outflows, such as collateral requirements on ratings downgrades. The sources of liquidity and contingent liquidity are from a wide variety of sources, including deposits held with central banks and unencumbered securities.

In addition, the Group maintains significant pools of securitisable assets.

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Table 1: Expected Net Cash Inflows/(Outflows) on a Behavioural Basis
	Up to 1 yr £bn	1-3yrs £bn	3-5yrs £bn	Over 5 yrs £bn
As at 31.12.08	20	34	14	(95	)

Note

a	MBS includes only agency mortgages. ABS includes private label issuance of ~~loan syndications were delayed~~residential mortgage backed securities.


Table 2: Global Retail and Commercial Banking Deposit Balances
	As at 31.12.08 £bn	As at 30.06.08 £bn	As at 31.12.07 £bn	As at 30.06.07 £bn	As at 31.12.06 £bn
Total customer deposits	235	218	211	200	190

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Risk management

Capital risk management

Organisation and structure

Barclays operates a centralised capital management model, considering both regulatory and economic capital.

The Group’s capital management objectives are to:

–

Maintain sufficient capital resources to meet the minimum regulatory capital requirements set by the FSA and ~~remained~~the US Federal Reserve Bank’s requirements that a financial holding company be well capitalised.

–

Maintain sufficient capital resources to support the Group’s risk appetite and economic capital requirements.

–

Support the Group’s credit rating.

–

Ensure locally regulated subsidiaries can meet their minimum capital requirements.

–

Allocate capital to businesses to support the Group’s strategic objectives, including optimising returns on ~~our balance sheet.~~economic and regulatory capital.

Treasury Committee manages compliance with the Group’s capital management objectives. The Committee reviews actual and forecast capital demand and resources on a monthly basis. The processes in place for delivering the Group’s capital management objectives are:

–

Establishment of internal targets for capital demand and ratios

–

Managing capital ratio sensitivity to foreign exchange rate movements

–

Ensuring local entity regulatory capital adequacy

–

Allocating capital to the Group’s strategic medium-term plan

–

Economic capital management

In addition to the processes above, the Risk Oversight Committee and the Board Risk Committee annually review and set risk appetite (see page 65) and analyse the impacts of stress scenarios (see page 66) in order to understand and manage the Group’s projected capital adequacy.

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Risk management

Capital risk management

Key elements

Internal targets

To support its capital management objectives, the Group sets internal targets for its key capital ratios. Internal targets are reviewed regularly by Treasury Committee to take account of:

–

Changes in forecast demand for capital caused by accessing new business opportunities, including mergers and acquisitions

–

Flexibility in debt capital issuance and securitisation plans

–

The ~~demand for ABCP issued by Barclays-sponsored conduits weakened temporarily with the result that a small portion~~possible impact of ~~their funding was provided by Barclays.~~stress scenarios including:

~~These liquidity demands were~~

–

Changes in forecast demand for capital from unanticipated drawdown of committed facilities or as a result of deterioration in the credit quality of the Group’s assets

–

Changes in forecast profits and other capital resources

–

Changes to capital resources and forecast demand due to foreign exchange rate movements.

Managing capital ratio sensitivity to foreign exchange rate movements

The Group has capital resources (capturing investments in subsidiaries and branches, intangible assets, minority interests and debt capital) and risk weighted assets denominated in non-Sterling currencies. Changes in foreign exchange rates result in changes in the Sterling equivalent value of non-Sterling denominated capital resources and risk weighted assets. As a result, the Group’s regulatory capital ratios are sensitive to foreign exchange rate movements.

The Group’s hedge strategy is to minimise the volatility of all ~~successfully~~capital ratios whilst taking into account the impact on hedging of non-Sterling net investments, the cost of hedging, the availability of a suitable foreign exchange market and prevailing foreign exchange rates.

To minimise volatility in the equity ratio, the Group aims over time to maintain the ratio of foreign currency equity capital resources to RWAs the same as the Group’s equity ratio. To create equity capital resources denominated in non-Sterling currencies, the Group leaves some investments in core non-Sterling subsidiaries and branches unhedged. The resultant change in the Sterling value of the investments is captured in the currency translation reserve, resulting in an equity capital movement.

Depending on the value of non-Sterling net investments, it may not always be possible to maintain the ratio, leaving some capital ratio sensitivity to foreign exchange movements.

The proceeds from equity accounted foreign currency preference shares are also used in the equity ratio hedge. If a preference share is redeemed, the cumulative movement in the currency translation reserve will be offset by an equal and opposite movement in other reserves reflecting the revaluation of the preference shares to prevailing foreign exchange rates.

The exposure of the Tier 1 and total capital ratios to foreign exchange rate movements is managed ~~within overall funding~~by issuing, where possible, debt capital in non-Sterling currencies such that the ratio of Tier 1 and total capital resources to risk weighted assets is the same as the Group’s Tier 1 and total capital ratios. This is primarily achieved by the issuance of debt capital from Barclays Bank PLC in major currencies, but can also be achieved by subsidiaries issuing capital in local currencies.

Local entity regulatory capital adequacy

The Group manages its capital resources to ensure that those Group entities that are subject to local capital adequacy regulation in individual jurisdictions meet their minimum capital requirements. Local management manages compliance with entities minimum regulatory

capital requirements ~~despite occasional disruption~~by reporting to local Asset and Liability Committees with oversight by Treasury Committee, as required.

Injections of ~~access~~capital resources into Group entities are centrally controlled by Treasury Committee, under authorities delegated from the Group Executive Committee. The Group’s policy is for surplus capital held in Group entities to ~~some funding markets. Although term funding~~be repatriated to Barclays Bank PLC in ~~interbank markets substantially disappeared, liquidity remained good~~the form of dividends and/or capital repatriation, subject to local regulatory requirements, exchange controls and tax implications.

Other than as indicated above, the Group is not aware of any material impediments to the prompt transfer of capital resources or repayment of intra-group liabilities when due.

Allocating capital in the Group’s strategic medium-term plan

Capital adequacy and returns on regulatory and economic capital form a key part of the Group’s annual strategic medium-term planning process. Amongst other strategic objectives, the Group seeks to optimise returns on economic and regulatory capital through the planning process. To achieve this, executive management consider returns on risk weighted assets and economic capital when setting limits for ~~Barclays.~~business capital demand. Executive management will also review the forecast capital ratios to ensure internal targets continue to be met over the medium-term plan.

~~Barclays diversified portfolio~~Treasury Committee reviews the limits on capital demand on a monthly basis taking into account actual performance.

Economic capital management

Economic capital is an internal measure of ~~highly marketable securities enabled~~the minimum equity and preference capital required for the Group to ~~continue accessing~~maintain its credit rating based upon its risk profile.

Barclays assesses economic capital requirements by measuring the ~~repo market. Securitisation accounts~~Group risk profile using both internally and externally developed models. The Group assigns economic capital primarily within the following risks: Credit Risk, Market Risk, Operational Risk, Fixed Assets, Private Equity and Pension Risk. Group Risk owns the methodology and policy for ~~a modest proportion~~economic capital while the businesses are primarily responsible for the calculation.

The Group regularly enhances its economic capital methodology and benchmarks outputs to external reference points. The framework reflects default probabilities during average credit conditions, rather than those prevailing at the balance sheet date, thus removing some of the cyclicality from the economic capital calculation. Economic capital for wholesale credit risk includes counterparty credit risk arising as a result of credit risk on traded market exposures. The framework also adjusts economic capital to reflect time horizon, correlation of risks and risk concentrations.

Economic capital is allocated on a consistent basis across all of Barclays businesses and risk activities. A single cost of equity is applied to calculate the cost of risk. Economic capital allocations reflect varying levels of risk.

The total average economic capital required by the Group, as determined by risk assessment models and after considering the Group’s ~~funding so~~estimated portfolio effects, is compared with the ~~disruption~~average supply of capital resources to evaluate economic capital utilisation.

The Group’s economic capital calculations form the basis of its Internal Capital Adequacy Assessment Process (‘ICAAP’) submission to the ~~securitisation market has not significantly impacted the Group’s liquidity position.~~FSA under Pillar 2 of Basel II.

~~Assessment of liquidity~~Capital Allocation

~~Barclays liquidity position remains very strong both for its own paper~~In 2008, UK Retail Banking economic capital allocation increased £550m to £3,950m (2007: £3,400m), reflecting mortgage asset growth and paper issued by its sponsored conduits. We have benefited from significant inflows of deposits, increased credit lines from counterparties, increased client flows and continued full funding of our conduits.

~~The markets~~movements in 2008 have substantially improved with the passing of the year end, and a degree of normality has returned to the term interbank markets. However we expect there to continue to be dislocations through 2008, and we remain vigilant to ensure that our liquidity profile remains strong.

The FSA published a discussion paper in December 2007 setting out draft proposals for a new quantitative framework for regulating liquidity of banks in the UK in the light of the experiences of 2007. We welcome the FSA intention to update the liquidity regime.benchmark house price indices.

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Annual Report ~~2007~~2008

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Risk management

Capital risk management

Barclays Commercial Bank economic capital allocation increased £300m to £3,500m (2007: £3,200m), primarily as a consequence of asset growth with some mitigation from portfolio management activity.

Barclaycard economic capital allocation increased £650m to £2,700m (2007: £2,050m), driven by acquisitions, the redemption of securitisation deals and exposure growth, predominantly in the US.

GRCB – Western Europe economic capital allocation increased £650m to £1,900m (2007: £1,250m), primarily reflecting the weakening of Sterling and underlying lending growth.

GRCB – Emerging Markets economic capital allocation increased £650m to £1,100m (2007: £450m), reflecting broad-based retail and wholesale asset growth across the business, especially in India, UAE and the new markets of Russia and Pakistan.

GRCB – Absa economic capital allocation increased £200m to £1,100m (2007: £900m), reflecting balance sheet growth.

Barclays Capital economic capital allocation increased £3,050m to £8,250m (2007: £5,200m). This was driven by growth in the investment portfolio, deterioration in credit quality, exposure to drawn leveraged finance underwriting positions and an increase in market volatility.

Barclays Global Investors economic capital allocation increased £200m to £400m (2007: £200m). This was primarily driven by an increase in the support for selected cash funds and some increase in proprietary investments.

Barclays Wealth economic capital allocation in 2008 remained unchanged at £500m, despite strong growth on the balance sheet. This was due to the impact of greater geographical diversification and increased levels of collateralisation.


	2008 £m		2007 £m
The average supply of capital to support the economic capital framework^a
Shareholders’ equity excluding minority interests less goodwill^b	17,650		14,150
Retirement benefits liability	1,050		1,150
Cash flow hedging reserve	100		250
Available for sale reserve	400		(150	)
Gains on own credit	(1,250	)	(100	)
Preference shares	5,500		3,700
Available funds for economic capital excluding goodwill	23,450		19,000
Average historic goodwill and intangible assets^b	9,450		8,400
Available funds for economic capital including goodwill^c	32,900		27,400

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~~Operational risk management~~Notes

a	Averages for the period will not correspond to period-end balances disclosed in the balance sheet. Numbers are rounded to the nearest £50m for presentational purposes only.

b	Average goodwill relates to purchased goodwill and intangible assets from business acquisitions.

c	Available funds for economic capital as at 31st December 2008 stood at £40,150m (2007:£29,200m).

d	Average EC charts exclude the EC calculated for pension risk (average pension risk for 2008 is £650m compared with £500m in 2007).

e	Includes Transition Businesses and capital for central function risks.

f	Includes credit risk loans.

g	Includes investments in associates, private equity risk, insurance risk and residual value.

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Risk management

Operational risk management

Organisation and structure

Operational risk is the risk of direct or indirect losses resulting from human factors, external events, and inadequate or failed internal processes and systems.

Operational risks are inherent in ~~Barclays~~the Group’s operations and are typical of any large enterprise. Major sources of operational risk include: operational process reliability, IT security, outsourcing of operations, dependence on key suppliers, implementation of strategic change, integration of acquisitions, fraud, human error, customer service quality, regulatory compliance, recruitment, training and retention of staff, and social and environmental impacts.

Barclays is committed to the advanced measurement and management of operational risks. In particular, it has implemented improved management and measurement approaches for operational risk to strengthen control, improve customer service and minimise operating losses. Barclays was granted a Waiver to operate an Advanced Measurement Approach (AMA) under Basel II, which commenced in January 2008.

The Group’s operational risk management framework aims to:

–

Understand and report the operational risks being taken by the Group.

–

Capture and report operational errors made.

–

Understand and minimise the frequency and impact, on a cost benefit basis, of operational risk events.

Barclays works closely with peer banks to benchmark our internal ~~Operational Risk~~operational risk practices and to drive the development of advanced ~~Operational Risk~~operational risk techniques across the industry. It is not cost effective to attempt to eliminate all operational risks and in any event it would not be possible to do so. Events of small significance are expected to occur and are accepted as inevitable; events of material significance are rare and the Group seeks to reduce the risk from these in a framework consistent with its agreed Risk Appetite.

~~Organisation and structure~~

Barclays has a Group Operational Risk Framework, which is consistent with and part of the Group Internal Control and Assurance Framework. Minimum control requirements have been established for all key areas of identified risk by ‘Principal Risk’ owners (see page ~~85)~~65). The risk categories relevant to operational risks are Financial Crime, Financial Reporting, Taxation, Legal, Operations, People, Regulatory ~~Technology~~ and ~~Change.~~Technology. In addition the following risk categories are used for business risk: Brand Management, Corporate Responsibility, Strategic and ~~Strategic.~~

Change. Responsibility for implementing and overseeing these policies is positioned ~~throughout the organisation.~~with Group Principal Risk Owners. The prime responsibility for the management of operational risk and the compliance with control requirements rests with the business and functional units where the risk arises. ~~Frontline~~Front line risk managers are widely distributed throughout the Group in business units. They service and support these areas, assisting line managers in managing these risks.

Business Risk Directors in each business are responsible for overseeing the implementation of and compliance with Group policies. Governance and Control Committees in each business monitor control effectiveness. The Group Governance and Control Committee receives reports from the committees in the businesses and considers ~~Group-wide~~Group-significant control issues and their remediation.

In the ~~corporate centre,~~Group Centre, each Principal Risk is owned by a senior individual who liaises with Principal Risk owners within the businesses. In addition, the Operational Risk Director oversees the range of operational risks across the Group in accordance with the Group Operational Risk Framework.

Business units are required to report on both a regular and an ~~event- driven~~event-driven basis. The reports include a profile of the ~~key~~material risks to their business objectives, control issues of Group-level significance, and operational risk events. Specific reports are prepared on a regular basis for the ~~Group~~ Risk Oversight Committee, the Board Risk Committee and the Board Audit ~~Committee. In particular, the Group Operational Risk Profile and Group Operating Committee Report is provided quarterly to the Group Risk Oversight~~ Committee. The Internal Audit function provides further assurance for operational risk control across the organisation and reports to the Board and senior management.

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Risk management

Operational risk management

~~Operational risk measurement~~Measurement and capital modelling

Barclays applies a consistent approach to the identification and assessment of key risks and controls across all business units. Managers in the businesses use self-assessment techniques to identify risks, evaluate control effectiveness and monitor ~~capability.~~performance. Business management determines whether particular risks are effectively managed within business ~~risk appetite~~Risk Appetite and otherwise takes remedial action. The risk assessment process is consistent with the principles in the integrated framework published by the Committee of Sponsoring Organisations of the Treadway Commission (COSO).

A standard process is used Group-wide for the recognition, capture, assessment, analysis and reporting of risk events. This process is used to help identify where process and control requirements are needed to reduce the recurrence of risk events. Risk events are loaded onto a central database and reported monthly to the Group Operational Risk Executive Committee.

Barclays also uses a database of external public risk events and is a member of the Operational Risk Data Exchange (ORX), an association of international banks that share anonymised loss data information to assist in risk identification, assessment and modelling.

By combining internal data, including internal loss experience, risk and control assessments, key indicators and audit findings, with external loss data and expert management judgement, Barclays is able to generate Key Risk Scenarios (KRSs), which identify the most significant operational risks across the Group. The KRSs are validated at business unit and at Group level to ensure that they appropriately reflect the level of operational risk. ~~It is these that~~These are the main input to our capital model.

Operational risk capital is allocated, on a risk sensitive basis, to business units in the form of economic capital charges, providing an incentive to manage these risks within appetite levels.

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Risk management

Operational risk management

Operational ~~Risk Events~~risk events

A high proportion of Barclays operational risk events have a low financial cost associated with them and a very small proportion of operational risk events have a material impact. ~~Figure 1 shows that in 2007, 79%~~In 2008, 73% of reported operational loss events had a value of £50,000 or ~~less. Figure 2 shows that this~~less (2007: 79%) but accounted for 8% of ~~risk events by count only amounted to~~the overall impact (2007: 15% ~~of risk events by value.~~). In contrast, 2% of the operational risk events had a value of £1m or greater (2007: 2%) but accounted for ~~50%~~66% of the overall ~~loss. This was consistent with 2006 risk events and, from our analysis of external data, is in line with industry experience.~~impact (2007: 50%).

Analysis of Barclays operational risk events in ~~2007~~2008 by Basel II category, as shown in figure 3,1, highlights that the highest frequency of events occurred in External Fraud ~~(54%~~(46%) and Execution, Delivery and Process Management ~~(37%~~(42%). These two areas also accounted for the majority of losses by value (figure 4)2), with Execution, Delivery and Process Management accounting for ~~52%~~81% of total operational risk losses and External Fraud accounting for ~~24%~~10%. ~~This again was consistent~~Compared with ~~2006 internal risk~~2007 we have seen a reduction in External Fraud and an increase in Execution, Delivery and Process Management events, ~~and, from our analysis of external data, is in line with industry experience.~~driven mainly by market volatility.

Barclays has been granted a waiver by the UK FSA to apply an Advanced Measurement Approach (AMA) for Group-wide consolidated and solus regulatory capital reporting. Barclays has applied the AMA Group-wide. ~~The two areas~~Areas where roll-out of AMA is still continuing and where the Standardised approach is currently applied are ~~Banco Austral (Mozambique) and~~Barclays Bank Mozambique, National Bank of Commerce ~~Limited~~ (Tanzania), and the US Airways card portfolio purchased from Bank of America. Areas where roll-out of AMA is ongoing and where the ~~Standardised Approach~~Basic Indicator approach is ~~currently applied.~~applied are Banco Comercial Angolano, Woolworths Financial Services in South Africa, Barclays Bank PLC Pakistan, Barclays Investment and Loans India Limited, Barclays Bank LLC Russia and the Cash Equity, Municipal Bonds and M&A business acquired from Lehman Brothers. In certain joint ventures and associates, Barclays may not be able to apply the Advanced Operational Risk Framework.

Barclays does not currently ~~use insurance~~offset the expected loss or ~~expected losses to offset~~mitigating effect of insurances against its regulatory capital requirement. However, Barclays has applied to the FSA to offset expected loss.

~~Barclays~~

~~Annual Report 2007~~

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~~Risk management~~

~~Operational risk management~~

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Annual Report ~~2007~~2008

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Risk management

Financial crime risk management

Anti-money laundering and sanctions risk

Financial crime risk ~~management~~is a category of operational risk. It arises from the risk that the Group might fail to comply with financial crime legislation and industry laws on anti-money laundering or might suffer losses as a result of internal or external fraud, or might fail to ensure the security of personnel, physical premises and the Group’s assets.

Barclays adopts an integrated approach to financial crime risk management. In line with the five-step risk management model, Group Financial Crime Management (GFCM) has the responsibility to direct, assess, control, report and manage/challenge financial crime risks, which are structured into three strands: anti-money laundering (AML) and sanctions; fraud; and security.

Each business unit within Barclays develops its own capability to tackle financial crime, providing regular reporting on performance, incidents and the latest trends impacting business. This integrated model allows us to:

–

Develop a clear profile of financial crime risk across the ~~Group.~~Group

–

Share intelligence, adopt common standards and respond promptly to emerging ~~issues.~~issues

–

Drive forward law enforcement and other ~~Government initiatives.~~government initiatives

–

Benchmark ourselves against other financial institutions facing similar ~~challenges.~~challenges

Anti-money laundering and sanctions risk

The Group assesses the implications of all emerging legal and regulatory requirements that impact it and establishes and operates an AML Risk control framework and associated policies and ~~procedures~~minimum standards in respect of AML, terrorist financing, sanctions and ~~sanctions, updating these regularly.~~bribery and corruption.

ItThe Group operates an AML ~~assurance~~oversight programme to ensure a system of effective controls to comply with the overarching policies, providing technical guidance and support to each business unit. This is monitored via conformance testing both at the business units and the Group level. In 2008, Barclays Internal Audit completed a combined global audit of Know Your Customer, AML and Sanctions procedures.

GFCM collates and oversees the preparation of Group-wide management information on AML and sanctions. This information includes risk indicators, such as volumes of suspicious activity reports (SARs) and is supplemented by trend analysis, which highlights high-risk or emerging issues so that prompt action can be taken to address them.

Three committees (the AML Steering Committee, the Sanctions ~~Cross Cluster~~Cross-Cluster Operational Review Board ~~the AML Steering Committee~~ and the Policy Review Forum), review business performance, share intelligence, develop and agree controls, and discuss emerging themes and the implementation status of policies and procedures.

All businesses contribute towards the Group Money Laundering Reporting Officers Annual Report, which is provided to Group ~~Senior Executive Management~~senior executive management and is available to the FSA. Together with regular management information and conformance testing, this report updates senior management with evidence that the Group’s money laundering and terrorist financing risks are being appropriately, proportionally and effectively managed.

During ~~2007,~~2008, the Group augmented its ~~AML~~sanctions capability ~~implementing third EU money laundering directive, with its guiding principle~~by issuing a revised Sanctions Policy. This enhances certain areas of ~~a risk-based approach. For AML, this must be proportionate to the perceived risks and threats, including terrorist financing.~~

A new Group AML Policy, launched in December 2007 and encapsulating the risk-based approach, has further improved the Group’s customer due diligence procedures and standards, transaction monitoring and staff training and awareness.

The Group also implemented EU Regulation 1781/2006, which aims to ensure thorough and robust audit trails concerning electronic transfers. This assists the Group in monitoring its AML and terrorist financing and improves the information available to law enforcement authorities.control such as screening.

Barclays continues to upgrade its sanctions screening capabilities, in line with best international practice and changing regulatory ~~requirements. The Group~~requirements and has invested substantial resources to further enhance its monitoring capabilities in this area and will continue to do so.

Representatives of the Group attend industry fora such as the Wolfsberg Group, the British Bankers Association’s Money Laundering Policy Group (MLPG) and the Money Laundering Advisory Panel (MLAP), to ensure that Barclays is influential in discussing and interpreting new legislation.

In 2008, the Group ~~will review procedures~~continued to ~~ensure compliance with forthcoming legislation concerning~~follow developments in the Single European Payments Area (SEPA)~~. Should the US enact current draft legislation outlawing the use of the international~~, with a view to developing its payments ~~and clearing~~ systems ~~for perceived illegal US internet gaming transactions, further enhancements to payments activity monitoring will follow.~~accordingly.

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Risk management

Financial crime risk management

Fraud risk and security risk

Fraud risk

The Group establishes and operates a fraud risk ~~control~~ framework which measures overall fraud risk exposure and controls. Together with the Group-wide policies and reporting, this structure directs how fraud is managed.

~~The Group Financial Crime Management team (GFCM)~~GFCM is responsible for delivering the overall ~~fraud strategy and~~Group Fraud Strategy by providing oversight to Group and ~~Business Units~~business units in ~~order to manage~~the management of fraud risk.

The ~~strategy~~Group Fraud Strategy is designed to:

–

Contain existing risks through effective measurement, monitoring and robust anti-fraud systems, in line with the expansion of the bank

–

Identify emerging threats in order that effective fraud controls are embedded across the Group ~~and build up~~along with increased capability to manage ~~risk.~~risk

–

Identify and manage fraud incidents, ensuring regulatory and legal conformance, appropriate escalation and resolution of control issues ~~are addressed~~ to prevent further ~~loss.~~loss

–

~~Work proactively to highlight areas of concern in order that remediation can take place.~~Share fraud trends, intelligence and knowledge across the Group and between government bodies, law enforcement agencies, financial institutions and other key stakeholders

GFCM assesses ~~the~~ fraud risk ofacross existing and emerging products, ~~services, processes~~channels, and ~~jurisdictions~~jurisdictions. It has embedded a robust fraud reporting framework which tracks current exposure to ~~drive down fraud losses as turnover/growth increases. It also represents Barclays at trade, industry~~identify risk and ~~Government bodies providing a conduit to maximise the flow of information~~ensure adequate risk management capability and ~~intelligence. GFCM also provides technical expertise to~~controls.

The Group’s business ~~areas whether to drive through Group solutions or provide assistance with specific incidents and investigations.~~

~~Business Units, together with product holders and channels~~units identify their appetite for fraud loss which informs and determines the overall fraud plan. Objectives are ~~then~~ set around these ~~plans.~~plans and performance is monitored through reporting and oversight via appropriate Governance Committees at both business unit and Group level.

AtBarclays undertakes regular benchmarking performance reviews with relevant peer groups and maintains a ~~business level, fraud risk/loss committees track fraud (and in some cases operational) loss.~~ conduit to ensure a two-way exchange of information and intelligence at government, trade and industry levels.

The Barclays Group Fraud Risk profile is ~~exercised~~tracked regularly through the review and challenge of the net losses and key risk metrics; these are then viewed against the overall Fraud Risk Profile ~~(Fraud~~(at the Fraud Risk Oversight Committee).

~~Fraud~~Aggregated fraud data is reported monthly to senior ~~management both within~~management. The performance of the ~~Business Units and to Group who provide a global oversight of~~business in combating fraud ~~loss. Fraud~~losses is measured against plan ~~for both net and gross losses and~~ in line with the Principal Risk ~~Policy;~~Policy. Key Risk Indicators ~~(KRIs)~~ are embedded in order that overall exposure can be established.

As a result of this process, fraud ~~performance both at Business Unit and Group level~~ can be measured and appropriate action taken to minimise or track significant issues.

~~Externally there are ‘in country’ industry-wide forums to which Barclays contributes and in some cases can benchmark performance, controls and current and emerging issues.~~

Barclays overall reported fraud losses ~~fell~~increased in ~~2007,~~2008 in line with ~~most of~~industry trends. Whilst industry and proprietary initiatives (online and Chip/PIN) have continued to pay dividends and reduce exposure in some areas, fraud increased in other areas and in geographies that do not have Chip and PIN technology.

In 2008, the ~~reduction coming from~~Group implemented a new global fraud application system aimed at preventing first-party fraud.

Compromised customer details continue to be a significant ~~falls in internet banking fraud. As part of its efforts~~threat globally. GFCM continues to enhance security, Barclays offers all its personal customers complimentary internet security software to reduce phishing attacks. The Group has also rolled out two-factor authentication technology using the new PINsentry device to make online transactions more secure. Enhanced transaction profiling has further improved our ability to identify where customer accounts have been targeted by fraudsters and take preventative action to protect funds.

~~Following the loss of personal data, including bank details, by both~~

~~Government agencies and other third parties, data protection and security was a prominent theme in 2007. Barclays treats any incident of this nature with the utmost importance and has worked~~work closely with industry and ~~the Government to take steps~~other associated bodies to:

–

~~Reassure customers and provide points of contact for help and guidance.~~

–

Protect any customer ~~accounts,~~ whose details may ~~have been compromised.~~be compromised

–

Develop a standard approach for dealing with accounts that may be impacted by any data compromise or security ~~breaches.~~breach

–

Reassure customers and provide points of contact for help and guidance.

Security risk

~~Group Financial Crime Management (GFCM) also~~GFCM manages security risk. Its fundamental objective is to allow Barclays to operate in a safe and secure manner in all existing and potential future markets.

In pursuit of this objective, the ~~Security Risk~~security risk team gathers and shares current threat assessments across business areas, using intelligence from ~~Security~~security and ~~Government Agencies~~government agencies and ~~‘in country’~~in-country teams. It ensures that suitable policies and control systems are in place to protect Group business and ~~that plans to protect~~ high-risk ~~personnel are fit for purpose and in line with accepted best practice.~~personnel.

Barclays has developed and continues to improve a robust ~~people screening~~Group-wide people-screening process to protect the ~~bank~~Group from those people who want to harm the organisation, by either joining as staff members or becoming involved with its operations.

Security ~~Risk~~risk is regularly reported by the businesses and reviewed via the Security Risk Management Committee, whose objectives are to:

–

Consider the latest management information and security threat ~~assessments.~~assessments

–

Drive forward mitigating action to protect the Group from potential ~~threats.~~threats

–

Provide guidance to the design and effectiveness of the overall Barclays Security Risk ~~framework.~~framework

–

Ensure all ~~Security Risk~~security risk workstreams have been effectively integrated and ~~implemented.~~implemented

–

Monitor corporate security profiles against the agreed plan, tracking issues in order that remedial action can be ~~taken.~~taken

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Annual Report ~~2007~~2008

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Risk management

~~Statistical information~~

Statistical information

Statistical and other risk information

This section of the report contains supplementary information that is more detailed or contains longer histories than the data presented in the discussion. For commentary on this information, please refer to the preceding text (pages 7467 to ~~85)~~105).

~~Barclays applied International Financial Reporting Standards (IFRS) with effect from 1st January 2004, with the exception of IAS 32, IAS 39 and IFRS 4, which were applied from 1st January 2005.~~

Credit risk management


Table 1: Risk Tendency by business
	2008 £m	2007 £m
UK Retail Banking	520	470
Barclays Commercial Bank	400	305
Barclaycard	1,475	955
GRCB – Western Europe	270	135
GRCB – Emerging Markets	350	140
GRCB – Absa	255	190
Barclays Capital	415	140
Barclays Wealth	20	10
Head office functions and other operations^a	5	10
Risk Tendency by business	3,710	2,355


Table 2: Loans and advances
	2008 £m	2007 £m
Retail businesses
Customers	201,588	162,081
Total retail businesses	201,588	162,081
Wholesale businesses
Banks	47,758	40,123
Customers	266,750	187,086
Total wholesale businesses	314,508	227,209
Loans and advances	516,096	389,290

~~Table 1: Risk Tendency by business~~ ~~(page 78)~~Note

2007
£m

2006
£m

UK Banking
775      790
  UK Retail Banking
470      500
  Barclays Commercial Bank
305      290
Barclaycard
945      1,135
International Retail and Commercial Banking
475      220
  International Retail and Commercial Banking – excluding Absa
220      75
  International Retail and Commercial Banking – Absa
255      145
Barclays Capital
140      95
Barclays Wealth
10      10
Head office functions and other operations^a
10      10
Risk Tendency by business
2,355      2,260

Table 2: Loans and advances



2007
£m

2006
£m

Retail businesses

  Banks
–      –
  Customers
164,062      139,350

Total retail businesses
164,062      139,350
Wholesale businesses

  Banks
40,123      30,930
  Customers
185,105      146,281

Total wholesale businesses
225,228      177,211
Loans and advances
389,290      316,561

~~Note~~

a	Head office functions and other operations comprises discontinued business in transition.

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Risk management

Statistical information


Table 3: Maturity analysis of loans and advances to banks
At 31st December 2008	On demand £m	Not more than three months £m	Over three months but not more than six months £m	Over six months but not more than one year £m	Over one year but not more than three years £m	Over three years but not more than five years £m	Over five years but not more than ten years £m	Over ten years £m	Total £m
United Kingdom	127	6,474	193	163	232	–	–	343	7,532
Other European Union	1,210	10,458	54	415	407	50	5	1	12,600
United States	1,310	11,215	7	676	324	–	–	84	13,616
Africa	584	595	51	1	51	861	8	38	2,189
Rest of the World	1,652	6,957	201	666	884	943	39	479	11,821
	4,883	35,699	506	1,921	1,898	1,854	52	945	47,758


At 31st December 2007	On demand £m	Not more than three months £m	Over three months but not more than six months £m	Over six months but not more than one year £m	Over one year but not more than three years £m	Over three years but not more than five years £m	Over five years but not more than ten years £m	Over ten years £m	Total £m
United Kingdom	796	4,069	56	92	114	20	1	370	5,518
Other European Union	2,977	7,745	74	88	95	116	7	–	11,102
United States	321	5,736	95	1,255	343	98	5,498	97	13,443
Africa	283	1,260	131	114	196	439	158	–	2,581
Rest of the World	1,505	3,336	90	1,640	512	362	15	19	7,479
Loans and advances to banks	5,882	22,146	446	3,189	1,260	1,035	5,679	486	40,123


Table 4: Interest rate sensitivity of loans and advances
	2008			2007
At 31st December	Fixed rate £m	Variable rate £m	Total £m	Fixed rate £m	Variable rate £m	Total £m
Banks	12,101	35,657	47,758	16,447	23,676	40,123
Customers	98,404	369,934	468,338	77,861	271,306	349,167


Table 5: Loans and advances to customers by industry
At 31st December	2008 £m	2007 7£m	2006 £m	2005 £m	2004^a £m
Financial services	114,069	71,160	45,954	43,102	25,132
Agriculture, forestry and fishing	3,281	3,319	3,997	3,785	2,345
Manufacturing	26,374	16,974	15,451	13,779	9,044
Construction	8,239	5,423	4,056	5,020	3,278
Property	22,155	17,018	16,528	16,325	8,992
Government	5,301	2,036	2,426	1,718	–
Energy and water	14,101	8,632	6,810	6,891	3,709
Wholesale and retail, distribution and leisure	20,208	18,216	15,490	17,760	11,099
Transport	8,612	6,258	5,586	5,960	3,742
Postal and communication	7,268	5,404	2,180	1,313	834
Business and other services	37,373	30,363	26,999	22,529	23,223
Home loans^b	135,384	106,751	92,477	85,206	79,164
Other personal	53,087	46,423	37,535	39,866	29,293
Finance lease receivables	12,886	11,190	10,142	9,088	6,938
Loans and advances to customers excluding reverse repurchase agreements	468,338	349,167	285,631	272,342	206,793
Reverse repurchase agreements	n/a	n/a	n/a	n/a	58,304
Loans and advances to customers	468,338	349,167	285,631	272,342	265,097

Notes

~~Table 3: Maturity analysis of loans and advances to banks~~

~~Table 4: Interest rate sensitivity of loans and advances~~

   2007    2006
At 31st December
   Fixed
rate
£m
   Variable
rate
£m
   Total
£m
   Fixed
rate
£m
   Variable
rate
£m
   Total
£m
Banks    16,447    23,676    40,123    12,176    18,754    30,930
Customers    77,861    271,306    349,167    66,000    219,631    285,631

~~Table 5: Loans and advances to customers by industry~~

   IFRS    UK GAAP
At 31st December
2007
£m

2006
£m

2005
£m

2004^a
£m

2003
£m
Financial services
   71,160    45,954    43,102    25,132        9,872
Agriculture, forestry and fishing
   3,319    3,997    3,785    2,345        2,115
Manufacturing
   16,974    15,451    13,779    9,044        7,844
Construction
   5,423    4,056    5,020    3,278        2,534
Property
   17,018    16,528    16,325    8,992        6,728
Government
   2,036    2,426    1,718    –        –
Energy and water
   8,632    6,810    6,891    3,709        3,150
Wholesale and retail, distribution and leisure
   17,768    15,490    17,760    11,099        9,628
Transport
   6,258    5,586    5,960    3,742        3,654
Postal and communication
   5,404    2,180    1,313    834        698
Business and other services
   30,363    26,999    22,529    23,223        13,913
Home loans^b
   112,087    94,635    87,003    79,164        72,318
Other personal
   41,535    35,377    38,069    29,293        23,922
Overseas customers^c
   –    –    –    –        8,666
Finance lease receivables
   11,190    10,142    9,088    6,938        5,877
Loans and advances to customers excluding reverse repurchase agreements
   349,167    285,631    272,342    206,793        170,919
Reverse repurchase agreements
   n/a    n/a    n/a    58,304        n/a
Trading business
   n/a    n/a    n/a    n/a        58,961

Loans and advances to customers
   349,167    285,631    272,342    265,097        229,880

~~Notes~~

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

b	Excludes commercial property mortgages.

c	~~Overseas customers are now classified as part of other industry segments.~~

Barclays

Annual Report ~~2007~~2008

123

LOGO


Table 6: Loans and advances to customers in the UK
At 31st December	2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m
Financial services	26,091	21,131	14,011	11,958	8,774
Agriculture, forestry and fishing	2,245	2,220	2,307	2,409	1,963
Manufacturing	11,340	9,388	9,047	8,469	5,684
Construction	4,278	3,542	2,761	3,090	2,285
Property	12,091	10,203	10,010	10,547	7,912
Government	20	201	6	6	–
Energy and water	3,040	2,203	2,360	2,701	802
Wholesale and re tail distribution and leisure	14,421	13,800	12,951	12,747	9,356
Transport	3,467	3,185	2,745	2,797	1,822
Postal and communication	1,491	1,416	899	455	440
Business and other services	19,589	20,485	19,260	15,397	13,439
Home loans^b	82,544	69,874	62,621	57,382	61,348
Other personal	31,490	28,691	27,617	30,598	26,872
Finance lease receivables	3,911	4,008	3,923	5,203	5,551
Loans and advances to customers in the UK	216,018	190,347	170,518	163,759	146,248

~~Table 6:~~ Loans and advances ~~to customers~~included in the UK

   IFRS    UK GAAP
At 31st December    2007
£m    2006
£m    2005
£m    2004^a
£m        2003
£m

Financial services
   21,131    14,011    11,958    8,774        7,721
Agriculture, forestry and fishing
   2,220    2,307    2,409    1,963        1,766
Manufacturing
   9,388    9,047    8,469    5,684        5,967
Construction
   3,542    2,761    3,090    2,285        1,883
Property
   10,203    10,010    10,547    7,912        6,341
Government
   201    6    6    –        –
Energy and water
   2,203    2,360    2,701    802        1,286
Wholesale and retail distribution and leisure
   13,800    12,951    12,747    9,356        8,886
Transport
   3,185    2,745    2,797    1,822        2,579
Postal and communication
   1,416    899    455    440        476
Business and other services
   20,485    19,260    15,397    13,439        12,030
Home loans^b
   71,755    64,150    58,730    61,348        61,905
Other personal
   26,810    26,088    29,250    26,872        21,905
Overseas customers^c
   –    –    –    –        5,477
Finance lease receivables
   4,008    3,923    5,203    5,551        5,587

Loans and advances to customers in the UK
   190,347    170,518    163,759    146,248        143,809

~~The category ‘other personal’ now includes credit cards,~~above table for the years 2004 to 2007 have been reanalysed between wholesale and retail distribution and leisure, Home loans, and Other personal ~~loans, second liens and personal overdrafts.~~to reflect changes in classification of assets.

The industry classifications in Tables ~~5-9~~7-9 have been prepared at the level of the borrowing entity. This means that a loan to the subsidiary of a major corporation is classified by the industry in which the subsidiary operates, even though the parent’s predominant business may be in a different industry.

~~Table 7: Loans and advances to customers in other European Union countries~~


	IFRS				UK GAAP
Table 7: Loans and advances to customers in other European Union countries						Table 7: Loans and advances to customers in other European Union countries
At 31st December	2007 £m	2006 £m	2005 £m	2004^a £m	2003 £m		2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m
Financial services	7,585	5,629	3,982	2,419	1,205		14,218	7,585	5,629	3,982	2,419
Agriculture, forestry and fishing	141	786	155	280	147		216	141	786	155	280
Manufacturing	4,175	3,147	2,254	2,021	1,275		8,700	4,175	3,147	2,254	2,021
Construction	1,159	639	803	716	609		1,786	1,159	639	803	716
Property	2,510	2,162	3,299	344	346		4,814	2,510	2,162	3,299	344
Government	–	6	–	–	–		1,089	–	6	–	–
Energy and water	2,425	2,050	1,490	940	409		5,313	2,425	2,050	1,490	940
Wholesale and retail distribution and leisure	1,719	776	952	810	426		2,653	1,719	776	952	810
Transport	1,933	1,465	1,695	640	566		2,603	1,933	1,465	1,695	640
Postal and communication	662	580	432	111	40		962	662	580	432	111
Business and other services	3,801	2,343	3,594	3,795	1,251		5,490	3,801	2,343	3,594	3,795
Home loans^b	24,115	18,616	16,488	11,828	10,334		33,644	21,405	18,202	16,114	11,828
Other personal	3,905	3,672	1,909	1,369	1,769		7,247	6,615	4,086	2,283	1,369
Overseas customers^c	–	–	–	–	438
Finance lease receivables	2,403	1,559	1,870	937	212		3,328	2,403	1,559	1,870	937
Loans and advances to customers in other European Union countries	56,533	43,430	38,923	26,210	19,027		92,063	56,533	43,430	38,923	26,210

See note under Table 6.

Notes

a	~~Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005. The 2004 analysis excludes reverse repurchase agreements.~~

b	~~Excludes commercial property mortgages.~~

c	~~Overseas customers are now classified as part of other industry segments.~~

~~Barclays~~

~~Annual Report 2007~~

~~Risk management~~

~~Statistical information~~

~~Table 8: Loans and advances to customers in the United States~~

   IFRS    UK GAAP
At 31st December    2007
£m    2006
£m    2005
£m
2004^a
£m
   2003
£m

Financial services
   29,342    17,516    16,229    9,942        919
Agriculture, forestry and fishing
   2    2    1    –        1
Manufacturing
   818    519    937    388        341
Construction
   18    13    32    139        2
Property
   568    1,714    329    394        1
Government
   221    153    300    –        –
Energy and water
   1,279    1,078    1,261    891        1,358
Wholesale and retail distribution and leisure
   398    403    794    466        77
Transport
   137    128    148    186        468
Postal and communication
   2,446    36    236    63        153
Business and other services
   1,053    1,432    885    1,565        220
Home loans^b
   458    349    2    5,768        –
Other personal
   3,256    2,022    1,443    845        –
Finance lease receivables
   304    312    328    335        33

Loans and advances to customers in the United States
   40,300    25,677    22,925    20,982        3,573

~~See note under Table 6.~~

~~Table 9: Loans and advances to customers in Africa~~

   IFRS    UK GAAP
At 31st December    2007
£m    2006
£m    2005
£m    2004^a
£m        2003
£m

Financial services
   3,472    2,821    4,350    186        27
Agriculture, forestry and fishing
   956    889    1,193    102        201
Manufacturing
   1,351    1,747    1,501    313        261
Construction
   637    591    1,068    76        40
Property
   2,433    1,987    1,673    87        40
Government
   967    785    625    –        –
Energy and water
   356    156    193    184        97
Wholesale and retail distribution and leisure
   1,326    1,050    2,774    165        239
Transport
   116    354    394    137        41
Postal and communication
   231    241    27    52        29
Business and other services
   1,285    2,631    1,258    1,012        412
Home loans^b
   15,314    11,223    11,630    214        79
Other personal
   6,366    2,976    4,955    190        248
Finance lease receivables
   4,357    4,240    1,580    41        45

Loans and advances to customers in Africa
   39,167    31,691    33,221    2,759        1,759

~~See note under Table 6.~~

~~Table 10: Loans and advances to customers in the Rest of the World~~

   IFRS    UK GAAP
At 31st December    2007
£m    2006
£m    2005
£m    2004^a
£m        2003
£m
Loans and advances
   22,702    14,207    13,407    10,520        2,751
Finance lease receivables
   118    108    107    74        –
Loans and advances to customers in the Rest of the World
   22,820    14,315    13,514    10,594        2,751

~~Notes~~

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005. The 2004 analysis excludes reverse repurchase agreements.

b	Excludes commercial property mortgages.

~~100~~124

Barclays

Annual Report ~~2007~~2008

Risk management

Statistical information


Table 8: Loans and advances to customers in the United States
At 31st December	2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m
Financial services	56,006	29,342	17,516	16,229	9,942
Agriculture, forestry and fishing	–	2	2	1	–
Manufacturing	2,171	818	519	937	388
Construction	21	18	13	32	139
Property	549	568	1,714	329	394
Government	336	221	153	300	–
Energy and water	3,085	1,279	1,078	1,261	891
Wholesale and retail distribution and leisure	1,165	846	403	794	466
Transport	415	137	128	148	186
Postal and communication	3,343	2,446	36	236	63
Business and other services	2,279	1,053	1,432	885	1,565
Home loans^b	17	10	349	2	5,768
Other personal	7,702	3,256	2,022	1,443	845
Finance lease receivables	298	304	312	328	335
Loans and advances to customers in the United States	77,387	40,300	25,677	22,925	20,982

See note under Table 6.


Table 9: Loans and advances to customers in Africa
At 31st December	2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m
Financial services	1,956	3,472	2,821	4,350	186
Agriculture, forestry and fishing	817	956	889	1,193	102
Manufacturing	1,082	1,351	1,747	1,501	313
Construction	2,053	637	591	1,068	76
Property	3,485	2,433	1,987	1,673	87
Government	1,741	967	785	625	–
Energy and water	118	356	156	193	184
Wholesale and re tail distribution and leisure	1,012	1,326	1,050	2,774	165
Transport	739	116	354	394	137
Postal and communication	293	231	241	27	52
Business and other services	4,699	1,285	2,631	1,258	1,012
Home loans^b	19,018	15,393	11,223	11,630	214
Other personal	3,087	6,287	2,976	4,955	190
Finance lease receivables	5,130	4,357	4,240	1,580	41
Loans and advances to customers in Africa	45,230	39,167	31,691	33,221	2,759

See note under Table 6.


Table 10: Loans and advances to customers in the Rest of the World
At 31st December	2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m
Loans and advances	37,421	22,702	14,207	13,407	10,520
Finance lease receivables	219	118	108	107	74
Loans and advances to customers in the Rest of the World	37,640	22,820	14,315	13,514	10,594

Notes

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005. The 2004 analysis excludes reverse re purchase agreements.

~~Table 11: Maturity analysis of loans and advances to customers~~

b	Excludes commercial property mortgages.

Barclays

Annual Report 2008

125

LOGO

At 31st December 2007    On demand
£m    Not more
than three
months
£m    Over three
months
but not
more than
six months
£m    Over six
months but
not more than
one year £m
Over one
year but
not more
than three
years
£m
   Over three
years
but not
more than
five years
£m
Over five
years
but not
more than
ten years
£m
   Over
ten years
£m    Total
£m
United Kingdom

Corporate lending^a
   26,557    15,737    2,453    3,834    8,474    8,358    10,718    11,643    87,774
Other lending to customers in the
United Kingdom
   4,384    4,717    2,106    3,597    11,517    8,699    19,325    48,228    102,573
Total United Kingdom
   30,941    20,454    4,559    7,431    19,991    17,057    30,043    59,871    190,347
Other European Union
   4,016    7,665    2,229    3,284    5,842    4,883    8,842    19,772    56,533
United States
   3,053    20,205    3,430    5,938    1,904    2,498    2,658    614    40,300
Africa
   6,806    4,243    881    1,969    5,568    4,124    2,285    13,291    39,167
Rest of the World
   1,085    9,733    1,695    859    2,223    2,586    3,685    954    22,820
Loans and advances
to customers
   45,901    62,300    12,794    19,481    35,528    31,148    47,513    94,502    349,167

At 31st December 2006
On demand
£m
   Not more
than three
months
£m
Over three
months but
not more
than
six months
£m

Over six
months but not
more than one
year
£m

Over one
year but
not more
than three
years
£m

Over three
years
but not
more than
five years
£m

Over five
years
but not
more than
ten years
£m

Over
ten years
£m

Total
£m
United Kingdom

Corporate lending^a
   22,923    13,569    2,262    2,850    7,562    8,499    8,349    10,342    76,356
Other lending to
customers in the
United Kingdom
   3,784    4,427    2,110    3,586    11,937    7,459    16,358    44,501    94,162
Total United Kingdom
   26,707    17,996    4,372    6,436    19,499    15,958    24,707    54,843    170,518
Other European Union
   2,137    6,254    1,744    2,869    4,783    4,397    6,565    14,681    43,430
United States
   2,489    11,630    1,689    3,402    1,949    1,871    1,464    1,183    25,677
Africa
   2,575    2,471    1,272    2,177    5,212    4,177    3,555    10,252    31,691
Rest of the World
   86    6,377    1,015    1,020    1,116    1,465    1,800    1,436    14,315
Loans and advances to customers    33,994    44,728    10,092    15,904    32,559    27,868    38,091    82,395    285,631

~~Table 12: Loans and advances in currencies other than the local currency of the borrower for countries where this exceeds 1% of total Group assets~~


Table 11: Maturity analysis of loans and advances to customers
At 31st December 2008	On demand £m	Not more than three months £m	Over three months but not more than six months £m	Over six months but not more than one year £m	Over one year but not more than three years £m	Over three years but not more than five years £m	Over five years but not more than ten years £m	Over ten years £m	Total £m
United Kingdom
Corporate lending	24,790	14,715	1,574	3,259	10,585	12,372	10,495	15,876	93,666
Other lending to customers in the
United Kingdom	4,560	6,264	2,495	4,477	16,604	10,541	21,913	55,498	122,352
Total United Kingdom	29,350	20,979	4,069	7,736	27,189	22,913	32,408	71,374	216,018
Other European Union	5,254	17,618	2,707	5,681	11,808	10,272	10,138	28,585	92,063
United States	6,298	39,754	2,737	5,413	8,767	3,447	4,238	6,733	77,387
Africa	8,428	2,247	1,143	1,852	4,560	4,557	5,674	16,769	45,230
Rest of the World	3,832	8,150	2,167	1,545	9,267	4,008	5,666	3,005	37,640
Total	53,162	88,748	12,823	22,227	61,591	45,197	58,124	126,466	468,338

      As % of
assets    Total
£m    Banks
and other
financial
institutions
£m    Governments
and official
institutions
£m    Commercial
industrial
and other
private
sectors
£m
At 31st December 2007
United States
   2.1    26,249    7,151    6    19,092

At 31st December 2006

United States
   1.7    16,579    7,307    89    9,183

At 31st December 2005

United States
   2.6    24,274    15,693    –    8,581


At 31st December 2007	On demand £m	Not more than three months £m	Over three months but not more than six months £m	Over six months but not more than one year £m	Over one year but not more than three years £m	Over three years but not more than five years £m	Over five years but not more than ten years £m	Over ten years £m	Total £m
United Kingdom
Corporate lending	26,557	15,737	2,453	3,834	8,474	8,358	10,718	11,643	87,774
Other lending to customers in the
United Kingdom	4,384	4,717	2,106	3,597	11,517	8,699	19,325	48,228	102,573
Total United Kingdom	30,941	20,454	4,559	7,431	19,991	17,057	30,043	59,871	190,347
Other European Union	4,016	7,665	2,229	3,284	5,842	4,883	8,842	19,772	56,533
United States	3,053	20,205	3,430	5,938	1,904	2,498	2,658	614	40,300
Africa	6,806	4,243	881	1,969	5,568	4,124	2,285	13,291	39,167
Rest of the World	1,085	9,733	1,695	859	2,223	2,586	3,685	954	22,820
Loans and advances to customers	45,901	62,300	12,794	19,481	35,528	31,148	47,513	94,502	349,167


Table 12: Foreign outstandings in currencies other than the local currency of the borrower for countries where this exceeds 1% of total Group assets
	As % of assets	Total £m	Banks and other financial institutions £m	Governments and official institutions £m	Commercial industrial and other private sectors £m
At 31st December 2008
United States	3.1	63,614	16,724	2	46,888
Cayman Islands	1.2	23,765	271	–	23,494
At 31st December 2007
United States	2.1	26,249	7,151	6	19,092
At 31st December 2006
United States	1.7	16,579	7,307	89	9,183

At 31st December 2008, 2007 ~~2006~~ and ~~2005,~~2006, there were no countries where Barclays had cross-currency loans to borrowers between 0.75% and 1% of total Group assets.

~~Note~~

a	~~In the UK, finance lease receivables are included in ‘Other lending’, although some leases are to corporate customers.~~

126

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Annual Report ~~2007~~2008

~~101~~

Risk management

Statistical information


Table 13: Off-balance sheet and other credit exposures as at 31st December
	2008 £m	2007 £m	2006 £m
Off-balance sheet exposures
Contingent liabilities	66,310	45,774	39,419
Commitments	260,816	192,639	205,504
On-balance sheet exposures
Trading portfolio assets	185,637	193,691	177,867
Financial assets designated at fair value held on own account	54,542	56,629	31,799
Derivative financial instruments	984,802	248,088	138,353
Available for sale financial investments	64,976	43,072	51,703


Table 15: Credit risk loans summary
At 31st December	2008 £m	2007 £m	2006 £m	2005 £m	2004^b £m
Impaired loans^c	12,264	8,574	4,444	4,550	n/a
Non-accruing loans	n/a	n/a	n/a	n/a	2,115
Accruing loans where interest is being suspended with or without provisions	n/a	n/a	n/a	n/a	492
Other accruing loans against which provisions have been made	n/a	n/a	n/a	n/a	943
Subtotal	12,264	8,574	4,444	4,550	3,550
Accruing loans which are contractually overdue 90 days or more as to principal or interest	2,953	794	598	609	550
Impaired and restructured loans	483	273	46	51	15
Credit risk loans	15,700	9,641	5,088	5,210	4,115

Notes

~~Table 13: Off-balance sheet and other credit exposures as at 31st December~~

   2007
£m    2006
£m    2005
£m

Off-balance sheet exposures

Contingent liabilities
   45,774    39,419    47,143
Commitments
   192,639    205,504    203,785
On-balance sheet exposures

Trading portfolio assets
   193,691    177,867    155,723
Financial assets designated at fair value held on own account
   56,629    31,799    12,904
Derivative financial instruments
   248,088    138,353    136,823
Available for sale financial investments
   43,072    51,703    53,497

~~Table 14: Notional principal amounts of credit derivatives as at 31st December~~

   2007
£m    2006
£m    2005
£m
Credit derivatives held or issued for trading purposes^a
   2,472,249    1,224,548    609,381

Total
   2,472,249    1,224,548    609,381

~~Table 15: Credit risk loans summary~~

   IFRS    UK GAAP
At 31st December    2007
£m    2006
£m    2005
£m    2004^b
£m        2003
£m
Impaired loans^c
   8,574    4,444    4,550    n/a        n/a
Non-accruing loans
   n/a    n/a    n/a    2,115        2,261
Accruing loans where interest is being suspended with or without provisions
   n/a    n/a    n/a    492        629
Other accruing loans against which provisions have been made
   n/a    n/a    n/a    943        821
Subtotal
   8,574    4,444    4,550    3,550        3,711
Accruing loans which are contractually overdue 90 days or more as to principal or interest
   794    598    609    550        590
Impaired and restructured loans
   273    46    51    15        4

Credit risk loans
   9,641    5,088    5,210    4,115        4,305

~~Notes~~

a	Includes credit derivatives held as economic hedges which are not designated as hedges for accounting purposes.

b	2004 does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

c	Includes ~~£3,344m~~£4,117m (2007: £3,344m) of ABS CDO Super Senior exposures.

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Table 16: Credit risk loans
At 31st December	2008 £m	2007 £m	2006 £m	2005 £m	2004 ^a £m
Impaired loans:^b
United Kingdom	3,793	3,605	3,340	2,965	n/a
Other European Union	1,713	472	410	345	n/a
United States	4,397	3,703	129	230	n/a
Africa	1,996	757	535	831	n/a
Rest of the World	365	37	30	179	n/a
Total	12,264	8,574	4,444	4,550	n/a
Non-accrual loans:
United Kingdom	n/a	n/a	n/a	n/a	1,509
Other European Union	n/a	n/a	n/a	n/a	243
United States	n/a	n/a	n/a	n/a	258
Africa	n/a	n/a	n/a	n/a	74
Rest of the World	n/a	n/a	n/a	n/a	31
Total	n/a	n/a	n/a	n/a	2,115
Accruing loans where interest is being suspended with or without provisions:
United Kingdom	n/a	n/a	n/a	n/a	323
Other European Union	n/a	n/a	n/a	n/a	31
Africa	n/a	n/a	n/a	n/a	21
Rest of the World	n/a	n/a	n/a	n/a	117
Total	n/a	n/a	n/a	n/a	492
Other accruing loans against which provisions have been made:
United Kingdom	n/a	n/a	n/a	n/a	865
Other European Union	n/a	n/a	n/a	n/a	27
United States	n/a	n/a	n/a	n/a	26
Africa	n/a	n/a	n/a	n/a	21
Rest of the World	n/a	n/a	n/a	n/a	4
Total	n/a	n/a	n/a	n/a	943
Accruing loans which are contractually overdue 90 days or more as to principal or interest:
United Kingdom	1,656	676	516	539	513
Other European Union	562	79	58	53	34
United States	433	10	3	–	1
Africa	172	29	21	17	1
Rest of the World	130	–	–	–	1
Total	2,953	794	598	609	550
Impaired and restructured loans:
United Kingdom	367	179	–	5	2
Other European Union	29	14	10	7	–
United States	82	38	22	16	13
Africa	–	42	14	23	–
Rest of the World	5	–	–	–	–
Total	483	273	46	51	15
Total credit risk loans:
United Kingdom	5,816	4,460	3,856	3,509	3,212
Other European Union	2,304	565	478	405	335
United States	4,912	3,751	154	246	298
Africa	2,168	828	570	871	117
Rest of the World	500	37	30	179	153
Credit risk loans	15,700	9,641	5,088	5,210	4,115

~~Table 16: Credit risk loans~~Notes

   IFRS          UK GAAP
At 31st December    2007
£m    2006
£m    2005
£m
2004^a
£m
   2003
£m

Impaired loans:^b

United Kingdom
   3,605    3,340    2,965    n/a        n/a
Other European Union
   472    410    345    n/a        n/a
United States
   3,703    129    230    n/a        n/a
Africa
   757    535    831    n/a        n/a
Rest of the World
   37    30    179    n/a        n/a

Total
   8,574    4,444    4,550    n/a        n/a

Non-accrual loans:

United Kingdom
   n/a    n/a    n/a    1,509        1,572
Other European Union
   n/a    n/a    n/a    243        143
United States
   n/a    n/a    n/a    258        383
Africa
   n/a    n/a    n/a    74        86
Rest of the World
   n/a    n/a    n/a    31        77

Total
   n/a    n/a    n/a    2,115        2,261

Accruing loans where interest is being suspended with or without provisions:

United Kingdom
   n/a    n/a    n/a    323        559
Other European Union
   n/a    n/a    n/a    31        29
Africa
   n/a    n/a    n/a    21        37
Rest of the World
   n/a    n/a    n/a    117        4

Total
   n/a    n/a    n/a    492        629

Other accruing loans against which provisions have been made:

United Kingdom
   n/a    n/a    n/a    865        760
Other European Union
   n/a    n/a    n/a    27        35
United States
   n/a    n/a    n/a    26        –
Africa
   n/a    n/a    n/a    21        22
Rest of the World
   n/a    n/a    n/a    4        4

Total
   n/a    n/a    n/a    943        821

Accruing loans which are contractually overdue 90 days or more as to principal or interest:

United Kingdom
   676    516    539    513        566
Other European Union
   79    58    53    34        24
United States
   10    3    –    1        –
Africa
   29    21    17    1        –
Rest of the World
   –    –    –    1        –

Total
   794    598    609    550        590

Impaired and restructured loans:

United Kingdom
   179    –    5    2        4
Other European Union
   14    10    7    –        –
United States
   38    22    16    13        –
Africa
   42    14    23    –        –

Total
   273    46    51    15        4

Total credit risk loans:

United Kingdom
   4,460    3,856    3,509    3,212        3,461
Other European Union
   565    478    405    335        231
United States
   3,751    154    246    298        383
Africa
   828    570    871    117        145
Rest of the World
   37    30    179    153        85
Credit risk loans
   9,641    5,088    5,210    4,115        4,305

~~Notes~~

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

b	Includes ~~£3,344m~~£4,117m (2007: £3,344m) of ABS CDO Super Senior Exposures.

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Statistical information

~~Table 17: Potential problem loans~~


Table 17: Potential problem loans
At 31st December	2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m
United Kingdom	883	419	465	640	658
Other European Union	963	59	32	26	32
United States	431	964	21	12	27
Africa	140	355	240	248	67
Rest of the World	39	—	3	3	14
Potential problem loans^b	2,456	1,797	761	929	798

   IFRS    UK
GAAP
At 31st December    2007
£m    2006
£m    2005
£m    2004^a
£m
2003
£m

United Kingdom
   419    465    640    658        989
Other European Union
   59    32    26    32        23
United States
   964    21    12    27        259
Africa
   355    240    248    67        53
Rest of the World
   –    3    3    14        3
Potential problem loans^b    1,797    761    929    798         1,327

~~Table 18: Interest foregone on credit risk loans~~


Table 18: Interest foregone on credit risk loans
	2007 £m	2006 £m	2005 £m	2008 £m	2007 £m	2006 £m
Interest income that would have been recognised under the original contractual terms
Interest in come that would have been recognised under the original contractual terms
United Kingdom	340	357	304	244	340	357
Rest of the World	91	70	52	235	91	70
Total	431	427	356	479	431	427

Interest income of approximately £195m (2007: £48m, ~~(2006: £72m, 2005: £29m)~~2006: £72m) from such loans was included in profit, of which £72m (2007: £26m, ~~(2006: £49m, 2005: £20m)~~2006: £49m) related to domestic lending and the remainder related to foreign lending.

In addition, a further £159m (2007: £113m, ~~(2006: £98m, 2005: £76m)~~2006: £98m) was recognised arising from impaired loans. Following impairment, interest income is recognised using the original effective rate of interest which was used to discount the expected future cash flows for the purpose of measuring the impairment loss. £54m (2007: £93m, ~~(2006: £88m, 2005: £70m)~~2006: £88m) of this related to domestic impaired loans and the remainder related to foreign impaired loans.


Table 19: Analysis of impairment/provision charges
At 31st December	2008 £m	2007 £m	2006 £m		2005 £m		2004^a £m
Impairment charge/net specific provisions charge
United Kingdom	1,817	1,593	1,880		1,382		1,021
Other European Union	587	123	92		75		102
United States	1,519	374	12		76		57
Africa	454	214	143		37		27
Rest of the World	207	2	(53	)	4		103
Impairment on loans and advances	4,584	2,306	2,074		1,574		1,310
Impairment on available for sale assets	382	13	86		4		n/a
Impairment on reverse repurchase agreements	124	—	—		—		—
Impairment charge	5,090	2,319	2,160		1,578		1,310
Total net specific provisions charge	n/a	n/a	n/a		n/a		n/a
General provisions (release)/charge	n/a	n/a	n/a		n/a		(206	)
Other credit provisions charge/(release)	329	476	(6	)	(7	)	(11	)
Impairment/provision charges	5,419	2,795	2,154		1,571		1,093

~~Table 19: Analysis of impairment/provision charges~~Notes

   IFRS    UK
GAAP
At 31st December    2007
£m    2006
£m 2005
£m 2004^a
£m
2003
£m

Impairment charge/net specific provisions charge

United Kingdom
   1,593    1,880 1,382 1,021        1,132
Other European Union
   123    92 75 102        37
United States
   374    12 76 57        84
Africa
   214    143 37 27        21
Rest of the World
   2    (53 ) 4 103        46

Impairment on loans and advances
   2,306    2,074 1,574 n/a        n/a
Impairment on available for sale assets
   13    86 4 n/a        n/a

Impairment charge
   2,319    2,160 1,578 n/a        n/a

Total net specific provisions charge
   n/a    n/a n/a 1,310        1,320
General provisions (release)/charge
   n/a    n/a n/a (206)        27
Other credit provisions charge/(release)
   476    (6 ) (7 ) (11)        –

Impairment/provision charges
   2,795    2,154 1,571 1,093        1,347

~~Notes~~

a	Does not reflect the application of ~~IAS~~IA S 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

b	Includes ~~£951m~~£nil (2007: £951m) of ABS CDO Super Senior and SIV-lites exposures.

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~~Table 20: Impairment/provisions charges ratios (‘Loan loss ratios’)~~ LOGO

   IFRS          UK GAAP

2007
%

2006
%

2005
%
   2004 ^a
%
2003
%
Impairment/provisions charges as a percentage of average loans and advances for the year:

Specific provisions charge
   n/a    n/a    n/a    0.40        0.46
General provisions charge
   n/a    n/a    n/a    (0.07)        0.01
Impairment charge
   0.64    0.66    0.58    n/a        n/a
Total
   0.64    0.66    0.58    0.33        0.47
Amounts written off (net of recoveries)
   0.49    0.61    0.50    0.40        0.48
Table 21: Analysis of allowance for impairment/provision for bad and doubtful debts

   IFRS    UK GAAP
   2007
£m
   2006
£m
   2005
£m
   2004^a
£m        2003
£m
Impairment allowance/Specific provisions

United Kingdom
   2,526    2,477    2,266    1,683        1,856
Other European Union
   344    311    284    149        97
United States
   356    100    130    155        121
Africa
   514    417    647    70        79
Rest of the World
   32    30    123    90        80
Specific provision balances
   n/a    n/a    n/a    2,147        2,233
General provision balances
   n/a    n/a    n/a    564        795
Allowance for impairment provision balances
   3,772    3,335    3,450    2,711        3,028
Average loans and advances for the year
   357,853    313,614    271,421    328,134        285,963
Table 22: Allowance for impairment/provision balance ratios

   IFRS    UK GAAP
   2007
%
   2006
%
   2005
%
   2004 ^a
%        2003
%
Allowance for impairment/provision balance at end of year as a percentage of loans and advances at end ofyear:
Specific provision balances
   n/a    n/a    n/a    0.62        0.77
General provision balances
   n/a    n/a    n/a    0.16        0.27
Impairment balance
   0.97    1.05    1.14    n/a        n/a
Total
   0.97    1.05    1.14    0.78        1.04


Table 20: Impairment/provisions charges ratios (‘Loan loss ratios’)
	2008 %	2007 %	2006 %	2005 %	2004^a %
Impairment/provisions charges as a percentage of average loans and advances for the year:
Specific provisions charge	n/a	n/a	n/a	n/a	0.40
General provisions charge	n/a	n/a	n/a	n/a	(0.07	)
Impairment charge	1.01	0.64	0.66	0.58	n/a
Total	1.01	0.64	0.66	0.58	0.33
Amounts written off (net of recoveries)	0.61	0.49	0.61	0.50	0.40

~~Notes~~


Table 21: Analysis of allowance for impairment/provision for bad and doubtful debts
	2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m
Impairment allowance/Specific provisions
United Kingdom	2,947	2,526	2,477	2,266	1,683
Other European Union	963	344	311	284	149
United States	1,561	356	100	130	155
Africa	857	514	417	647	70
Rest of the World	246	32	30	123	90
Specific provision balances	n/a	n/a	n/a	n/a	2,147
General provision balances	n/a	n/a	n/a	n/a	564
Allowance for impairment provision balances	6,574	3,772	3,335	3,450	2,711
Average loans and advances for the year	453,413	357,853	313,614	271,421	328,134


Table 22: Allowance for impairment/provision balance ratios
	2008 %	2007 %	2006 %	2005 %	2004^a %
Allowance for impairment/provision balance at end of year as a percentage of loans and advances at end of year:
Specific provision balances	n/a	n/a	n/a	n/a	0.62
General provision balances	n/a	n/a	n/a	n/a	0.16
Impairment balance	1.27	0.97	1.05	1.14	n/a
Total	1.27	0.97	1.05	1.14	0.78

Note

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

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Statistical information


Table 23: Movements in allowance for impairment/provisions charge for bad and doubtful debts
	2008 £m		2007 £m		2006 £m		2005 £m		2004^a £m
Allowance for impairment/provision balance at beginning of year	3,772		3,335		3,450		2,637		2,946
Acquisitions and disposals	307		(73	)	(23	)	555		21
Unwind of discount	(135	)	(113	)	(98	)	(76	)	n/a
Exchange and other adjustments	791		53		(153	)	125		(33	)
Amounts written off	(2,919	)	(1,963	)	(2,174	)	(1,587	)	(1,582	)
Recoveries	174		227		259		222		255
Impairment/provision charged against profit^b	4,584		2,306		2,074		1,574		1,104
Allowance for impairment/provision balance at end of year	6,574		3,772		3,335		3,450		2,711


Table 24: Amounts written off
	2008 £m		2007 £m		2006 £m		2005 £m		2004^a £m
United Kingdom	(1,514	)	(1,530	)	(1,746	)	(1,302	)	(1,280	)
Other European Union	(162	)	(143	)	(74	)	(56	)	(63	)
United States	(1,044	)	(145	)	(46	)	(143	)	(50	)
Africa	(187	)	(145	)	(264	)	(81	)	(15	)
Rest of the World	(12	)	—		(44	)	(5	)	(174	)
Amounts written off	(2,919	)	(1,963	)	(2,174	)	(1,587	)	(1,582	)


Table 25: Recoveries
	2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m
United Kingdom	131	154	178	160	217
Other European Union	4	32	18	13	9
United States	1	7	22	15	14
Africa	36	34	33	16	4
Rest of the World	2	—	8	18	11
Recoveries	174	227	259	222	255

Notes

~~Table 23: Movements in allowance for impairment/provisions charge for bad and doubtful debts~~

   IFRS    UK GAAP
   2007
£m
2006
£m
2005
£m
2004 ^a
£m        2003
£m

Allowance for impairment/provision balance at beginning of year
   3,335 3,450 2,637 2,946        2,998
Acquisitions and disposals
   (73 ) (23 ) 555 21        62
Unwind of discount
   (113 ) (98 ) (76 ) n/a        n/a
Exchange and other adjustments
   53 (153 ) 125 (33)        (18 )
Amounts written off
   (1,963 ) (2,174 ) (1,587 ) (1,582)        (1,474 )
Recoveries
   227 259 222 255        113
Impairment/provision charged against profit^b
   2,306 2,074 1,574 1,104        1,347
Allowance for impairment/provision balance at end of year
   3,772 3,335 3,450 2,711        3,028
Table 24: Amounts written off

   IFRS    UK GAAP
   2007
£m
2006
£m
2005
£m
2004 ^a
£m        2003
£m

United Kingdom
   (1,530 ) (1,746 ) (1,302 ) (1,280)        (1,175 )
Other European Union
   (143 ) (74 ) (56 ) (63)        (54 )
United States
   (145 ) (46 ) (143 ) (50)        (215 )
Africa
   (145 ) (264 ) (81 ) (15)        (13 )
Rest of the World
   – (44 ) (5 ) (174)        (17 )
Amounts written off
   (1,963 ) (2,174 ) (1,587 ) (1,582)        (1,474 )

Table 25: Recoveries

   IFRS    UK GAAP
   2007
£m
2006
£m
2005
£m
2004 ^a
£m        2003
£m

United Kingdom
   154 178 160 217        95
Other European Union
   32 18 13 9        7
United States
   7 22 15 14        10
Africa
   34 33 16 4        1
Rest of the World
   – 8 18 11        –
Recoveries
   227 259 222 255        113

~~Notes~~

a	Does not reflect the application of ~~IAS~~IA S 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

b	Does not reflect the impairment of available for sale assets or other credit risk provisions.

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Table 26: Impairment allowances/provision charged against profit
	2008 £m		2007 £m		2006 £m		2005 £m		2004^a £m
New and in creased impairment allowance/specific provision charge:
United Kingdom	2,160		1,960		2,253		1,763		1,358
Other European Union	659		192		182		113		131
United States	1,529		431		60		105		85
Africa	526		268		209		109		47
Rest of the World	242		20		18		39		134
	5,116		2,871		2,722		2,129		1,755
Reversals of impairment allowance/specific provision charge:
United Kingdom	(212	)	(213	)	(195	)	(221	)	(120	)
Other European Union	(68	)	(37	)	(72	)	(25	)	(20	)
United States	(9	)	(50	)	(26	)	(14	)	(14	)
Africa	(36	)	(20	)	(33	)	(56	)	(16	)
Rest of the World	(33	)	(18	)	(63	)	(17	)	(20	)
	(358	)	(338	)	(389	)	(333	)	(190	)
Recoveries	(174	)	(227	)	(259	)	(222	)	(255	)
Net impairment allowance/specific provision charge^b	4,584		2,306		2,074		1,574		1,310
General provision (release)/charge	n/a		n/a		n/a		n/a		(206	)
Net charge to profit	4,584		2,306		2,074		1,574		1,104

~~Table 26: Impairment allowances/provision charged against profit~~


Table 27: Total impairment/specific provision charges for bad and doubtful debts by industry
	2008 £m	2007 £m	2006 £m		2005 £m		2004^a £m
United Kingdom:
Financial services	76	32	64		22		(1	)
Agriculture, forestry and fishing	4	–	5		9		–
Manufacturing	118	72	1		120		28
Construction	15	14	17		14		10
Property	80	36	15		18		(42	)
Energy and water	1	1	(7	)	1		3
Wholesale and retail distribution and leisure	59	118	88		39		66
Transport	3	3	19		(27	)	(19	)
Postal and communication	–	15	15		3		(1	)
Business and other services	234	81	133		45		64
Home loans	28	1	4		(7	)	17
Other personal	1,178	1,187	1,526		1,142		894
Finance lease receivables	21	33	–		3		2
	1,817	1,593	1,880		1,382		1,021
Overseas	2,767	713	194		192		289
Impairment/specific provision charges	4,584	2,306	2,074		1,574		1,310

   IFRS    UK GAAP
      2007
£m 2006
£m 2005
£m 2004 ^a
£m
2003
£m

New and increased impairment allowance/specific provision charge:

United Kingdom
   1,960 2,253 1,763 1,358        1,373
Other European Union
   192 182 113 131        57
United States
   431 60 105 85        118
Africa
   268 209 109 47        33
Rest of the World
   20 18 39 134        47
   2,871 2,722 2,129 1,755        1,628
Reversals of impairment allowance/specific provision charge:

United Kingdom
   (213 ) (195 ) (221 ) (120)        (146 )
Other European Union
   (37 ) (72 ) (25 ) (20)        (13 )
United States
   (50 ) (26 ) (14 ) (14)        (24 )
Africa
   (20 ) (33 ) (56 ) (16)        (10 )
Rest of the World
   (18 ) (63 ) (17 ) (20)        (2 )
   (338 ) (389 ) (333 ) (190)        (195 )
Recoveries
   (227 ) (259 ) (222 ) (255)        (113 )
Net impairment allowance/specific provision charge^b
   2,306 2,074 1,574 1,310        1,320
General provision (release)/charge
   n/a n/a n/a (206)        27
Net charge to profit
   2,306 2,074 1,574 1,104        1,347
Table 27: Total impairment/specific provision charges for bad and doubtful debts by industry

   IFRS    UK GAAP
      2007
£m 2006
£m 2005
£m 2004 ^a
£m
2003
£m

United Kingdom:

Financial services
   32 64 22 (1)        13
Agriculture, forestry and fishing
   – 5 9 –        (3 )
Manufacturing
   72 1 120 28        79
Construction
   14 17 14 10        (23 )
Property
   36 15 18 (42)        (3 )
Energy and water
   1 (7 ) 1 3        13
Wholesale and retail distribution and leisure
   118 88 39 66        38
Transport
   3 19 (27 ) (19)        100
Postal and communication
   15 15 3 (1)        1
Business and other services
   81 133 45 64        76
Home loans
   1 4 (7 ) 17        9
Other personal
   1,187 1,526 1,142 894        757
Overseas customers^c
   – – – –        66
Finance lease receivables
   33 – 3 2        9
   1,593 1,880 1,382 1,021        1,132
Overseas
   713 194 192 289        188
Impairment/specific provision charges^c
   2,306 2,074 1,574 1,310        1,320

The category ~~‘other~~‘Other personal’ now includes credit cards, personal loans, second liens and personal overdrafts.

The industry classifications in Tables 27, 28 and 29 have been prepared at the level of the borrowing entity. This means that a loan

to the subsidiary of a major corporation is classified by the industry in which the subsidiary operates, even though the parent’s predominant business may be in a different industry.

Notes

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

b	Does not reflect the impairment of available for sale assets , reverse repurchase agreements or other credit risk provisions.

~~Overseas customers are now classified as part of other industry segments.~~

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Statistical information


Table 28: Allowance for impairment/specific provision for bad and doubtful debts by industry
	2008		2007		2006		2005		2004^a
	£m	%	£m	%	£m	%	£m	%	£m	%
United Kingdom:
Financial services	81	1.2	103	2.7	67	2.0	26	0.8	7	0.3
Agriculture, forestry and fishing	1	0.0	5	0.1	17	0.5	12	0.3	4	0.2
Manufacturing	185	2.8	65	1.7	85	2.5	181	5.2	37	1.7
Construction	18	0.3	16	0.4	16	0.5	13	0.4	6	0.3
Property	114	1.7	54	1.4	26	0.8	24	0.7	26	1.2
Energy and water	1	0.0	1	–	–	–	18	0.5	23	1.0
Wholesale and retail distribution and leisure	43	0.7	102	2.7	81	2.4	99	2.9	70	3.3
Transport	–	0.0	11	0.3	24	0.7	32	0.9	55	2.6
Postal and communication	33	0.5	25	0.7	12	0.4	2	0.1	13	0.6
Business and other services	236	3.6	158	4.2	186	5.6	102	3.0	105	4.9
Home loans	46	0.7	15	0.4	10	0.3	50	1.4	58	2.7
Other personal	2,160	32.9	1,915	50.8	1,953	58.6	1,696	49.2	1,265	58.9
Finance lease receivables	29	0.4	56	1.5	–	–	11	0.3	14	0.7
	2,947	44.8	2,526	67.0	2,477	74.3	2,266	65.7	1,683	78.4
Overseas	3,627	55.2	1,246	33.0	858	25.7	1,184	34.3	464	21.6
Total	6,574	100.0	3,772	100.0	3,335	100.0	3,450	100.0	2,147	100.0

See note under Table 27.

~~Barclays~~

~~Annual Report 2007~~

~~107~~

~~Risk management~~

~~Statistical information~~

~~Table 28: Allowance for impairment/specific provision for bad and doubtful debts by industry~~

   IFRS    UK GAAP
   2007    2006    2005    2004^a    2003
   £m    %    £m    %    £m    %    £m    %        £m    %
United Kingdom:

Financial services
   103    2.7    67    2.0    26    0.8    7    0.3        12    0.5
Agriculture, forestry and fishing
   5    0.1    17    0.5    12    0.3    4    0.2        5    0.2
Manufacturing
   65    1.7    85    2.5    181    5.2    37    1.7        58    2.6
Construction
   16    0.4    16    0.5    13    0.4    6    0.3        7    0.3
Property
   54    1.4    26    0.8    24    0.7    26    1.2        3    0.1
Energy and water
   1    –    –    –    18    0.5    23    1.0        27    1.2
Wholesale and retail distribution and leisure
   102    2.7    81    2.4    99    2.9    70    3.3        52    2.3
Transport
   11    0.3    24    0.7    32    0.9    55    2.6        103    4.6
Postal and communication
   25    0.7    12    0.4    2    0.1    13    0.6        15    0.7
Business and other services
   158    4.2    186    5.6    102    3.0    105    4.9        121    5.4
Home loans
   15    0.4    10    0.3    50    1.4    58    2.7        55    2.5
Other personal^b
   1,915    50.8    1,953    58.6    1,696    49.2    1,265    58.9        1,359    60.9
Overseas customers^c
   –    –    –    –    –    –    –    –        24    1.1
Finance lease receivables
   56    1.5    –    –    11    0.3    14    0.7        15    0.7
   2,526    67.0    2,477    74.3    2,266    65.7    1,683    78.4        1,856    83.1
Overseas
   1,246    33.0    858    25.7    1,184    34.3    464    21.6        377    16.9
Total
   3,772    100.0    3,335    100.0    3,450    100.0    2,147    100.0        2,233    100.0

~~See note under Table 27.~~

Table 29: Analysis of amounts written off and recovered by industry


	Amounts written off for the year					Recoveries of amounts previously written off
	IFRS				UK GAAP	IFRS				UK GAAP	Amounts written off for the year					Recoveries of amounts previously written off
	2007 £m	2006 £m	2005 £m	2004^a £m	2003 £m	2007 £m	2006 £m	2005 £m	2004^a £m	2003 £m	2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m	2008 £m	2007 £m	2006 £m	2005 £m	2004^a £m
United Kingdom:
Financial services	6	13	2	7	14	1	–	1	3	12	88	6	13	2	7	4	1	–	1	3
Agriculture, forestry and fishing	5	8	3	2	–	2	1	–	1	1	6	5	8	3	2	–	2	1	–	1
Manufacturing	83	73	47	79	126	7	21	11	30	8	53	83	73	47	79	8	7	21	11	30
Construction	23	17	15	13	19	3	2	1	2	14	19	23	17	15	13	2	3	2	1	2
Property	16	23	4	2	5	10	6	1	69	1	27	16	23	4	2	2	10	6	1	69
Energy and water	–	1	22	9	15	–	2	–	2	–	1	–	1	22	9	–	–	2	–	2
Wholesale and retail distribution and leisure	109	120	85	55	45	12	14	25	7	5	137	109	120	85	55	7	12	14	25	7
Transport	13	11	29	44	5		1	10	15	1	10	13	11	29	44	1		1	10	15
Postal and communication	3	5	15	2	1	–	–	–	1	–	3	3	5	15	2	–	–	–	–	1
Business and other services	83	124	83	96	58	22	17	14	16	11	153	83	124	83	96	10	22	17	14	16
Home loans	1	–	2	19	11	1	7	4	5	3	4	1	–	2	19	1	1	7	4	5
Other personal	1,164	1,351	992	948	790	96	107	92	65	38	960	1,164	1,351	992	948	88	96	107	92	65
Overseas customers^b	–	–	–	–	82	–	–	–	–	–
Finance lease receivables	24	–	3	4	4	–	–	1	1	1	53	24	–	3	4	8	–	–	1	1
	1,530	1,746	1,302	1,280	1,175	154	178	160	217	95	1,514	1,530	1,746	1,302	1,280	131	154	178	160	217
Overseas	433	428	285	302	299	73	81	62	38	18	1,405	433	428	285	302	43	73	81	62	38
Total	1,963	2,174	1,587	1,582	1,474	227	259	222	255	113	2,919	1,963	2,174	1,587	1,582	174	227	259	222	255

See note under Table 27.

~~Notes~~Note

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

b	~~Overseas customers are now classified as part of other industry segments.~~

~~108~~

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Table 30: Total impairment allowance/(provision) coverage of credit risk loans
	2008 %	2007 %	2006 %	2005 %	2004^a %
United Kingdom	50.7	56.6	64.2	64.6	68.1
Other European Union	41.8	60.9	65.1	70.1	60.9
United States	31.8	9.5	64.9	52.8	57.0
Africa	39.5	62.1	73.2	74.3	68.4
Rest of the World	49.2	86.5	100.0	68.7	71.9
Total coverage of credit risk loans	41.9	39.1	65.6	66.2	66.9
Total coverage of credit risk loans excluding ABS CDO Super Senior exposure	48.0	55.3	65.6	66.2	66.9

~~Table 30: Total impairment allowance/(provision) coverage of credit risk loans~~

   IFRS UK GAAP
   2007    2006    2005    2004 ^a 2003
   %    %    %    % %
United Kingdom
   56.6    64.2    64.6    68.1 74.2
Other European Union
   60.9    65.1    70.1    60.9 71.4
United States
   9.5    64.9    52.8    57.0 39.2
Africa
   62.1    73.2    74.3    68.4 54.5
Rest of the World
   86.5    100.0    68.7    71.9 94.1
Total coverage of credit risk loans
   39.1    65.6    66.2    66.9 71.5
Total coverage of credit risk loans excluding ABS CDO Super Senior exposure
   55.6    65.6    66.2    66.9 71.5

~~Table 31: Total impairment allowance/(provision) coverage of potential credit risk lending (CRLs and PPLs)~~

   IFRS UK GAAP
   2007    2006    2005    2004 ^a 2003
   %    %    %    % %
United Kingdom
   51.8    57.3    54.6    56.5 57.7
Other European Union
   55.1    61.0    65.9    55.6 65.0
United States
   7.6    57.1    50.4    52.3 23.4
Africa
   43.4    51.5    57.8    43.5 39.9
Rest of the World
   86.5    91.0    67.6    65.9 90.9
Total coverage of potential credit risk lending
   33.0    57.0    56.2    56.0 54.6
Total coverage of potential credit risk lenders excluding ABS CDO
Super Senior exposure

49.0
   57.0    56.2
56.0

54.6


Table 31: Total impairment allowance/(provision) coverage of potential credit risk lending (CRLs and PPLs)
	2008 %	2007 %	2006 %	2005 %	2004^a %
United Kingdom	44.0	51.8	57.3	54.6	56.5
Other European Union	29.5	55.1	61.0	65.9	55.6
United States	29.2	7.6	57.1	50.4	52.3
Africa	37.1	43.4	51.5	57.8	43.5
Rest of the World	45.5	86.5	91.0	67.6	65.9
Total coverage of potential credit risk lending	36.2	33.0	57.0	56.2	56.0
Total coverage of potential credit risk lenders excluding ABS CDO Super Senior exposure	39.6	47.7	57.0	56.2	56.0

Allowance coverage of credit risk loans and potential credit risk loans excluding the drawn ABS CDO Super Senior exposure decreased to ~~55.6%~~48.0% (31st December ~~2006: 65.6%~~2007: 55.3%) and ~~49.0%~~39.6% (31st December ~~2006: 57.0%~~2007: 47.7%), respectively. The decrease in these ratios reflected a change in the mix of credit risk loans and potential credit risk loans: unsecured retail exposures, where the recovery outlook is relatively low, decreased as a proportion of the total as the collections and underwriting processes were improved. Secured retail and wholesale and corporate exposures, where the recovery outlook is relatively high, increased as a proportion of credit risk loans and potential credit risk loans.

Allowance coverage of ABS CDO Super Senior credit risk loans was low relative to allowance coverage of other credit risk loans since substantial protection against loss is also provided by subordination and hedges. On ABS CDO Super Senior exposures, the combination of subordination, hedging and writedowns provide protection against loss levels to 72% on US sub-prime collateral as at 31st December 2007.Note

~~Note~~

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

134

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~~109~~

Risk management

Supervision and regulation

~~Supervision and regulation~~

The Group’s operations, including its overseas offices, subsidiaries and associates, are subject to a significant body of rules and regulations ~~including~~that are a condition for authorisation to conduct banking and financial services business and constrain business operations. These include reserve and reporting requirements and conduct of business regulations. These requirements are imposed by the relevant central banks and regulatory ~~authorities.~~authorities that supervise the Group in the jurisdictions in which it operates. The requirements reflect global standards developed by, among others, the Basel Committee on Banking Supervision and the International Organisation of Securities Commissions. They also reflect requirements derived from EU directives.

In the UK, the FSA is the independent body responsible for the regulation of deposit taking, life insurance, home mortgages, general insurance and investment business. ~~The FSA was established by the Government and it exercises statutory powers under the Financial Services and Markets Act 2000.~~

Barclays Bank PLC is authorised by the FSA to carry on a range of regulated activities within the UK and is subject to consolidated ~~supervision.~~supervision by the FSA. In its role as supervisor, the FSA seeks to ensure the safety and soundness of financial institutions with the aim of strengthening, but not guaranteeing, the protection of customers. The FSA’s continuing supervision of financial institutions ~~authorised by it~~ is conducted through a variety of regulatory tools, including the collection of information from statistical and prudential returns, reports obtained from skilled persons, visits to firms and regular meetings with management to discuss issues such as performance, risk management and strategy.

The FSA adopts a risk-based approach to supervision. The starting point for supervision of all financial institutions is a systematic analysis of the risk profile for each authorised firm. The FSA has adopted a homogeneous risk, processes and resourcing model in its approach to its supervisory responsibilities (known as the ARROW model) and the results of the risk assessment are used by the FSA to develop a risk mitigation programme for a firm. The FSA also promulgates requirements that banks and other financial institutions are required to meet on matters such as capital adequacy, limits on large exposures to individual entities and groups of closely connected entities, liquidity and rules of business conduct. ~~Certain of these requirements derive from EU directives as described below.~~

Banks, insurance companies and other financial institutions in the UK are subject to a single financial services compensation scheme (the Financial Services Compensation Scheme) where an authorised firm is unable or is likely to be unable to meet claims made against it because of its financial circumstances. Different levels of compensation are available to eligible claimants depending upon whether the protected claim is in relation to a deposit, a contract of insurance or protected investment business and certain types of claims are subject to maximum levels of compensation. Most deposits made with branches of Barclays Bank PLC within the European Economic Area (EEA) which are denominated in Sterling or other EEA currencies (including the ~~euro)~~Euro) are covered by the Scheme. Most claims made in respect of ~~designated~~ investment business will also be protected claims if the business was carried on from the UK or from a branch of the bank or investment firm in another EEA member state. The arrangements for compensating depositors and for dealing with failed banks are currently subject to consultation by the UK Tripartite Authorities – HM Treasury, the FSA and the Bank of England. The Government has committed to presenting proposals for legislation to Parliament on these matters in the course of 2008.

Outside the UK, the Group has operations (and main regulators) located in continental Europe, in particular France, Germany, Spain, Switzerland, Portugal and Italy (local central banks and other regulatory authorities); Asia Pacific (various regulatory authorities including the Hong Kong Monetary Authority, the Financial Services Agency of Japan, the Australian Securities and Investments Commission , the Monetary Authority of Singapore, the China Banking Regulatory Commission and the Reserve Bank of India); Africa and the Middle East (various regulatory authorities including the South African Reserve Bank and the Financial Services Board and the regulatory authorities of the United Arab Emirates) and the United States of America ~~(the~~(including the Board of Governors of the Federal Reserve System (FRB), the Office of the Comptroller of the Currency (OCC) and the Securities and Exchange Commission).

In Europe, the UK regulatory agenda is considerably shaped and influenced by the directives emanating from the EU. ~~A number of EU directives have recently been implemented, for example the Capital Requirements Directive and the Markets in Financial Instruments Directive (‘MiFID’).~~ These form part of the European Single Market programme, an important feature of which is the framework for the regulation of authorised firms. This framework ~~which continues to evolve,~~ is designed to enable a credit institution or investment firm authorised in one EU member state to conduct banking or investment business through the establishment of branches or by the provision of services on a cross-border basis in

other member states without the need for local authorisation. Barclays operations in Europe are authorised and regulated by a combination of both home (the FSA) and host regulators.

Barclays operations in South Africa, including Absa Group Limited, are supervised and regulated by the South African Reserve Bank (SARB) and the Financial Services Board (FSB). SARB oversees the banking industry and follows a risk-based approach to supervision whilst the FSB oversees the non-banking financial services industry and focuses on enhancing consumer protection and regulating market conduct.

In the United States, Barclays PLC, Barclays Bank PLC, and ~~certain~~Barclays’ US banking subsidiaries ~~and branches of the Bank~~ are subject to a comprehensive regulatory structure involving numerous statutes, rules and regulations. Barclays ~~branch operations~~Bank PLC’s branches in New York and Florida are licensed by, and subject to regulation and examination by, their respective licensing authorities, the New York State Banking Department and the Florida Office of Financial Regulation. Barclays Bank PLC also operates a federal agency in California that is licensed by and subject to regulation and examination by the OCC. Barclays Global Investors, NA is a ~~federally-chartered~~federally chartered trust company subject to regulation and examination by the OCC. Barclays Bank Delaware is a Delaware-chartered commercial bank subject to regulation and examination by the Federal Deposit Insurance Corporation and the Delaware State Banking Commissioner. In addition, the FRB is the primary US federal regulator for the New York and Florida ~~branch operations~~branches and also exercises regulatory authority over Barclays other US operations. The regulation of Barclays and its US ~~branches and~~banking subsidiaries imposes restrictions on the activities of ~~those~~Barclays, including its US banking subsidiaries and Barclays Bank PLC’s US branches and ~~subsidiaries.~~agencies, as well as prudential restrictions, such as limits on extensions of credit by the Barclays Bank PLC’s US branches and agencies and the US banking subsidiaries to a single borrower and to Barclays subsidiaries and affiliates.

The licensing authority of each US branch has the authority, in certain circumstances, to take possession of the business and property of Barclays Bank PLC located in the state of the office it licenses. Such circumstances generally include violations of law, unsafe business practices and insolvency. As long as Barclays Bank PLC maintains one or more federal branches or agencies, the OCC also has the authority to take possession of the US operations of Barclays Bank PLC under similar circumstances, and this federal power may pre-empt the state insolvency regimes that would otherwise be applicable to Barclays Bank PLC’s state-licensed branches. As a result, if the OCC exercised its authority over the US agency of Barclays Bank PLC pursuant to federal law in the event of a Barclays Bank PLC insolvency, all of Barclays Bank PLC’s US assets would most likely be applied first to satisfy creditors of its US branches and agencies as a group, and then made available for application pursuant to any UK insolvency proceeding.

In addition to the direct regulation of Barclays US banking offices, Barclays US operations subject Barclays to regulation by the FRB under various laws, including the International Banking Act of 1978 and the Bank Holding Company Act of 1956 (BHC Act). Barclays PLC, Barclays Bank PLC and Barclays Group US Inc. are bank holding companies registered with the ~~FRB~~FRB. Each has elected to be treated as ~~well as~~a financial holding ~~companies~~company under the BHC Act. Financial holding companies may engage in a broader range of financial and related activities than are permitted to banking ~~organizations~~organisations that do not maintain financial holding company status, including underwriting and dealing in all types of securities. To maintain the financial holding company status of each of Barclays PLC, Barclays Bank PLC and Barclays Group US Inc., Barclays Bank PLC is required to meet or exceed certain capital ratios and to be deemed to be “well managed”. and Barclays Bank Delaware and Barclays Global Investors, NA must also meet certain capital requirements and be deemed to be “well managed” ~~and~~. Barclays Bank Delaware must also have at least a “satisfactory” rating under the Community Reinvestment Act of 1977.

Barclays is required to obtain the prior approval of the FRB before acquiring, directly or indirectly, the ownership or control of more than 5% of any class of voting securities of any US bank or bank holding company. Under current FRB policy, Barclays is required to act as a source of financial strength for Barclays Bank Delaware. This policy could, among other things, require Barclays to inject capital into any of its US banking subsidiaries if they become undercapitalised. A major focus of US governmental policy relating to financial institutions in recent years has been combating money laundering and terrorist financing and enforcing compliance with US economic sanctions. Regulations applicable to US operations of Barclays Bank PLC and its subsidiaries impose obligations to maintain appropriate policies, procedures and controls to detect, prevent and report money laundering and terrorist financing and to ensure compliance with US economic sanctions against designated foreign

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Annual Report 2008

135

LOGO

countries, nationals and others. Failure of a financial institution to maintain and implement adequate programmes to combat money laundering and terrorist financing or to ensure economic sanction compliance could have serious legal and reputational consequences for the institution. See Financial Statement Note 36 for further discussion of competition and regulatory matters.

Another recent focus of US governmental policy relating to the financial services sector generally has been on disclosure and sales practices relating to the sector’s subprime mortgage and other lending.

Barclays investment banking operations are subject to regulations that cover all aspects of the securities business, including:

–

~~Trade practices among broker-dealers~~

Sales Methods

–

~~Capital structure~~

Trade practices among broker-dealers

–

~~Record-keeping~~

Use and safekeeping of customers’ funds and securities

–

~~The financing of customers’ purchases~~

Capital structure

–

Record-keeping

–

The financing of customers’ purchases

–

Procedures for compliance with US securities law

–

The conduct of directors, officers and employees

Barclays Capital Inc. and the other subsidiaries that conduct these operations are regulated by a number of different government agencies and self-regulatory organizations, including the Securities and Exchange Commission and the Financial Institution Regulatory Authority (FINRA). Depending upon the specific nature of a broker-dealer’s business, it may also be regulated by some or ~~FINRA.~~all of the New York Stock Exchange (NYSE), the Municipal Securities Rulemaking Board, the US Department of the Treasury, the Commodities Futures Trading Commission and other exchanges of which it may be a member. In addition, the US states, provinces and territories have local securities commissions that regulate and monitor activities in the interest of investor protection. These regulators have available a variety of sanctions, including the authority to conduct administrative proceedings that can result in censure, fines, the issuance of cease-and-desist orders or the suspension or expulsion of the entity or its directors, officers or employees.

Barclays subsidiaries in the US are also subject to regulation by applicable federal and state regulators of their activities in the asset management, investment advisory, mutual fund and mortgage lending businesses.

Regulatory Developments

In the wake of the financial crisis there will be regulatory change that will have a substantial impact on all financial institutions, including the Group. The full extent of this impact is not yet clear. Programmes to reform the global regulatory framework were agreed first by G8 Finance Ministers in April 2008 and subsequently by G20 Heads of Government in November 2008. In the EU, Finance Ministers agreed a roadmap for regulatory reform in May 2008. There is a substantial degree of commonality to these programmes covering issues of capital and liquidity regulation, risk management and accounting standards. These programmes will be further developed and implemented in 2009.

In the UK, in response to the financial crisis, the Chairman of the FSA has been requested by the Chancellor of the Exchequer to undertake a review of banking regulation. The Chancellor has indicated that he will be presenting a White Paper on the supervision of banking in spring 2009 with the expectation that proposals for legislation will be presented to Parliament. He has also commissioned Sir David Walker to review the corporate governance of the UK banking industry. The results of this review are expected before the end of 2009. The FSA has re-examined its regulatory requirements and processes, substantially increasing regulatory capital requirements in October 2008. It has also been undertaking a Supervisory Enhancement Programme that will increase both the resources devoted to supervision and the intensity of supervision.

On 21st February 2009, the Banking Act 2009 came into force which provides a permanent regime to allow the FSA, the UK Treasury and the Bank of England (the ‘Tripartite Authorities’) to resolve failing banks in the UK. The Banking Act aims to balance the need to protect depositors and prevent systemic failure with the potentially adverse consequences that using powers to deal with those events could have on private law rights, and, as a consequence, wider markets and investor confidence.

These powers, which apply regardless of any contractual restrictions, include (a) power to issue share transfer orders pursuant to which there may be transferred to a commercial purchaser or Bank of England entity, all or some of the securities issued by a bank. The share transfer order can extend to a wide range of ‘securities’ including shares and bonds issued by a UK Bank (including Barclays Bank PLC) or its holding company (Barclays PLC) and warrants for such and (b) the power to transfer all or some of the property, rights and liabilities of the UK bank to a purchaser or Bank of England entity. In certain circumstances encumbrances and trusts can be over-reached. Power also exists to override any default provisions in transactions otherwise affected by these powers. Compensation may be payable in the context of both share transfer orders and property appropriation. In the case of share transfer orders any compensation will be paid to the person who held the security immediately before the transfer, who may not be the encumbrancer.

The Banking Act also vests power in the Bank of England to override, vary or impose contractual obligations between a UK bank or its holding company and its former group undertakings (as defined in the Banking Act), for reasonable consideration, in order to enable any transferee or successor bank of the UK bank to operate effectively. There is also power for the Treasury to amend the law (save for a provision made by or under the Banking Act) by order for the purpose of enabling it to use the special resolution regime powers effectively, potentially with retrospective effect. The Banking Act also gives the Bank of England statutory responsibility for financial stability in the UK and for the oversight of payment systems.

Amendments are being made to the EU framework of directives, including to the Capital Requirements Directive and to the Directive on Deposit Guarantee Schemes. Further amendments to EU regulatory requirements are likely as the EU develops its response to the financial crisis, including the structure of the regulatory system in Europe as proposed in the report of a high-level Commission group published on 25 February 2009.

In the United States, the FDIC has established a Temporary Liquidity Guarantee Program (TLGP) for eligible institutions including, among others, US bank holding companies and FDIC-insured depository institutions, unless they opted out. Under the TLGP, the FDIC will insure the entire amount of non-interest bearing transaction account deposits of eligible institutions until December 31, 2009 and certain senior unsecured debt of eligible institutions issued before June 30, 2009.Barclays Bank Delaware and Barclays Group US, Inc. are eligible to participate in the TLGP, and they have opted in. Barclays PLC and Barclays Bank PLC, as non-US banks or bank holding companies, are not eligible to participate in the TLGP. The US Department of the Treasury has invested approximately $250 billion in the capital of US depository institutions and depository institution holding companies through a Capital Purchase Program authorized under the US Emergency Economic Stabilization Act of 2008 and is expected to continue to make capital investments under the authority of this act. Barclays, as a non-US institution, is not eligible for capital investments by the US Treasury under existing programs.

In addition, in the United States, as elsewhere, recent market disruptions and economic conditions have led to numerous proposals for changes and significant increases in the regulation of the financial services industry. However, given the current environment and status of such proposals, it is difficult to determine the nature and form of any regulation that may arise in the United States from any such proposals.

136

Barclays

Annual Report 2008

LOGO

Governance

~~110~~Board and Executive Committee

~~Barclays~~

~~Annual Report 2007~~

								138

						~~Governance~~

						~~Board and Executive committee~~		~~112~~

						Directors’ report		~~114~~140

						Corporate governance report		~~117~~143

						Remuneration report		~~128~~157

						Accountability and audit		~~143~~173

~~Barclays~~

~~Annual Report 2007~~

~~111~~

Board and Executive Committee

~~1.Marcus~~1. Marcus Agius

Group Chairman (~~Age 61~~)(Age 62)

Marcus has an extensive background in banking, having worked at Lazard from 1972 to 2006. He also has experience of chairing large organisations, including BAA plc and Lazard in London. Marcus is Senior Independent Director of the British Broadcasting Corporation (BBC).

Term of officeMarcus joined the Board ~~on 1st~~in September 2006 as a non-executive Director and ~~succeeded Matthew Barrett as~~was appointed Group Chairman ~~from~~on 1st January 2007. Marcus iswas last re-elected by shareholders at the ~~senior non-executive~~AGM in 2007, following his appointment.

Independent On appointment

External appointments Senior Independent Director of the BBC ~~and was Chairman of Lazard in London and a Deputy Chairman of Lazard LLC until 31st December~~since 2006. ~~He was formerly Chairman of BAA PLC, a position he held from 2002 until December 2006. Marcus is~~ Trustee to the Board of the Royal Botanic Gardens, ~~Kew and~~Kew. Chairman of The Foundation and Friends of the Royal Botanic Gardens, Kew. ~~Marcus is~~Chairman of Lazard in London and Deputy Chairman of Lazard LLC until 2006. Chairman of BAA plc until 2006.

Committee membership Chairman of the Board Corporate Governance and Nominations Committee ~~and a member~~since January 2007. Member of the Board HR and Remuneration ~~Committee.~~Committee since January 2007.

~~2.David~~2. David Booth

Non-executive Director (~~Age 53~~)(Age 54)

David ~~joined the Board on 1st May 2007. He became a member of the Board Risk Committee on 1st January 2008. He~~ currently manages his own venture capital investments, having retired from the Management Committee of Morgan Stanley in 1997. David was employed by Morgan Stanley from 1982 to 1992, and again from 1995 to 1997. He held various positions there, including Head of Government Bond Trading, Head of Mortgage Trading, Sales and Finance and Head of Global Operations and Technology. ~~In 1992-93, he~~

Term of office David joined the Board in May 2007. David was ~~President and a~~last re-elected by shareholders at the AGM in 2008, following his appointment.

Independent Yes

External appointments Director of ~~Discount Corporation of New York. In 1994-95, he was a consultant to Morgan Stanley regarding the relocation of its New York City headquarters. David is also a~~East Ferry Investors, Inc., Trustee of the Brooklyn Botanic ~~Garden and~~Garden. Chair of ~~its~~the Brooklyn Botanic Garden Investment Committee. Various positions at Morgan Stanley & Co. until 1997. Discount Corporation of New York until 1993.

~~3.Sir~~Committee membership Member of the Board Risk Committee since January 2008.

3. Sir Richard Broadbent

Senior Independent Director (~~Age 54~~)(Age 55)

Sir Richard ~~joined~~has experience of both the ~~Board~~private and public sector having worked in ~~September 2003.~~high-level banking roles and the Civil Service. He was ~~appointed Senior Independent Director on 1st September 2004. Sir Richard is Chairman of Arriva PLC and was previously~~ the Executive Chairman of HM Customs and Excise from 2000 to ~~2003. He~~2003 and was formerly a member of the Group Executive Committee of Schroders PLC and a non-executive Director of the Securities Institute. Sir Richard is Chairman of Arriva PLC.

Term of office Sir Richard joined the Board in September 2003 and was appointed Senior Independent Director on 1st September 2004. Sir Richard was last re-elected by shareholders at the AGM in 2006.

Independent Yes

External appointments Chairman of Arriva PLC since 2004. Executive Chairman of HM Customs and Excise until 2003. Former Group Executive Committee member of Schroders PLC. Non-executive Director of the Securities Institute until 1995.

Committee membership Chairman of the Board Risk Committee ~~and~~since January 2006 (member since April 2004). Chairman of the Board HR and Remuneration ~~Committee. He is also a member~~Committee since January 2007 (member since April 2004). Member of the Board Corporate Governance and Nominations ~~Committee.~~Committee since September 2004.

~~4.Leigh~~4. Leigh Clifford, AO

Non-executive Director (~~Age 60~~)(Age 61)

Leigh ~~joined~~is Chairman of Qantas Airways Limited. He previously worked for the ~~Board on 1st October 2004. He joined~~ Rio Tinto ~~in 1970 and~~Group, where he was a Director of Rio Tinto PLC from 1994 and Rio Tinto Limited from 1995 and was Chief Executive of the Rio Tinto Group from 2000 until ~~May~~ 2007.

Term of office Leigh joined the Board in October 2004. Leigh was ~~appointed to~~last re-elected by shareholders at the AGM in 2007.

Independent Yes

External appointments Chairman of Qantas Airways Limited since November 2007. Member of the Bechtel Board of Counsellors insince May ~~2007 and as a non-executive~~2007. Senior Adviser to Kohlberg Kravis Roberts & Co since January 2009. Director of ~~Qantas Airways in September~~the Murdoch Children’s Research Institute. Board Member of the National Gallery of Victoria Foundation. Chief Executive of Rio Tinto until 2007. ~~He became Chairman~~Director of ~~Qantas in November 2007. He is a member~~Freeport-McMoran Copper & Gold Inc. until 2004.

Committee membership Member of the Board HR and Remuneration Committee ~~and a member~~since July 2005. Member of the Barclays Asia Pacific Advisory Committee.

~~5.Fulvio~~5. Fulvio Conti

Non-executive Director (~~Age 60~~)(Age 61)

Fulvio ~~joined the Board on 1st April 2006. Fulvio~~ is currently Chief Executive Officer and General Manager of Enel SpA, the Italian energy group, ~~a position~~where he ~~has held since May 2005. He became~~was previously Chief Financial Officer from 1999-2005. Fulvio has held a number of ~~Enel SpA in 1999. Fulvio was formerly~~high-level financial roles, including Chief Financial Officer and General Manager of Telecom Italia and ~~between 1996 and 1998 was~~ General Manager and Chief Financial Officer of

Ferrovie dello Stato, the Italian national railway. ~~From 1991 to 1993 he~~He was also head of the accounting, finance and control department of Montecatini and was ~~subsequently~~ in charge of finance at Montedison-Compart, overseeing the financial restructuring of the group. He has ~~been a non-executive~~held positions in finance and operations in various affiliates of Mobil Oil Corporation in Italy and Europe.

Term of office Fulvio joined the Board in April 2006. Fulvio was last re-elected by shareholders at the AGM in 2008.

Independent Yes

External appointments Chief Executive of Enel SpA since 2005. Director of AON Corporation since January 2008. ~~Fulvio is a member~~Chief Financial Officer and General Manager of Telecom Italia until 1999. General Manager and Chief Financial Officer of Ferrovie dello Stato until 1998.

Committee membership Member of the Board Audit ~~Committee.~~

~~6.Dr Daniël Cronjé~~Committee since September 2006.

~~Non-executive Director~~ (~~Age 61~~)

Daniël joined the Board on 1st September 2005 following the acquisition by Barclays of a majority stake in Absa, where he was Chairman. Daniël joined Absa in 1987 and was formerly Deputy Chief Executive and Group Chief Executive until 1997. He joined Volkskas in 1975 and held various positions in Volkskas Merchant Bank and Volkskas Group. Daniël retired as Chairman of Absa on 1st July 2007 and from the Absa Board on 31st July 2007. He is currently a Director of TSB Sugar RSA Limited and Sappi Limited. He is a member of the Board Risk Committee. Daniël does not intend to seek re-election at the 2008 Annual General Meeting and will therefore leave the Board at the conclusion of the Annual General Meeting in April 2008.

~~7.Professor~~6. Professor Dame Sandra Dawson

Non-executive Director (~~Age 61~~)(Age 62)

Sandra ~~joined the Board in March 2003. She~~ is ~~currently~~ KPMG Professor of Management Studies at the University of Cambridge and ~~has been~~ Master of Sidney Sussex College, Cambridge since1999. She is also a Trustee and Director of Oxfam, and is a member of the UK-India Round Table, the Advisory Board of UK India Business Council and Chair of the Executive Steering Committee of the Advanced Institute of Management. Until September 2006,Cambridge. Sandra was Director of the Judge Business School at Cambridge ~~a position~~until September 2006 and she ~~had held since 1995. Sandra~~ has held a range of non-executive posts in organisations including Rand Europe (UK), JP Morgan Fleming Claverhouse Investment Trust and Riverside Mental Health Trust. ~~She was also a member~~

Term of office Sandra joined the ~~Senior Salaries Review Board. She is a member~~Board in March 2003. Sandra will retire from the Board at the 2009 AGM in April.

Independent Yes

External appointments KPMG Professor of Management Studies, University of Cambridge since 1995. Master of Sidney Sussex College, Cambridge since 1999. Director and Trustee of Oxfam since 2006. Deputy Vice Chancellor, University of Cambridge since 2008. Chairman, Executive Steering Committee, ESRC Advanced Institute of Management. Director of Cambridge Econometrics until 2007. Director of Judge Business School, University of Cambridge until 2006. Director of Rand Europe (UK) until 2004. Director of JP Morgan Fleming Claverhouse Investment Trust until 2003.

Committee membership Member of the Board Audit ~~Committee.~~Committee since August 2003.

~~8.Sir~~7. Sir Andrew Likierman

Non-executive Director (~~Age 64~~)(Age 65)

Sir Andrew ~~joined~~is Chairman of the ~~Board on 1st September 2004. He was previously~~National Audit Office, having held a number of public roles in the financial services sector, including Managing Director, Financial Management, Reporting and Audit and Head of the Government Accountancy Service at HM ~~Treasury. He is Professor of Management Practice in Accounting at the London Business School~~Treasury and a non-executive Director of the Bank of England. Sir Andrew is also Dean of the London Business School where he was ~~formerly a non-executive Director~~previously Professor of Management Practice in Accounting. He has been at the London Business School from 1974-1976, 1979-1993 and since 2004.

Term of office Sir Andrew joined the Board in September 2004. Sir Andrew was last re-elected by shareholders at the AGM in 2007.

Independent Yes

External appointments Dean of the London Business School since January 2009. Chairman of ~~MORI Group Limited. He is also a non-executive~~the National Audit Office since December 2008. Director of the Institute for Government since September 2008. Chairman of Applied Intellectual Capital Inc. until 2008. Non-executive Director of the Bank of England until 2008. Non-executive Director and Vice-Chairman of the Tavistock and Portman NHS Trust until 2008. Non-executive Director and ~~non-executive~~ Chairman of ~~Applied Intellectual Capital PLC. Sir Andrew is a member~~the MORI Group until 2005. Managing Director, Financial Management, Reporting and Audit and Head of the Government Accountancy Service at HM Treasury until 2004.

Committee membership Member of the Board Audit ~~and~~Committee since September 2004. Member of the Board Risk ~~Committees.~~Committee since September 2004.

~~9.Sir~~8. Sir Michael Rake

Non-executive Director (~~Age 60~~)(Age 61)

Sir Michael ~~was appointed to the Board with effect from 1st January 2008. He also became a member of the Board Audit Committee. Sir Michael is a former Chairman of KPMG International and~~ is currently Chairman of BT Group ~~plc~~PLC and Chairman of the UK Commission for Employment and Skills. Sir Michael previously worked at KPMG from 1974-2007 where he worked for a number of years in Continental Europe and the Middle East. He ~~is also a~~was Senior Partner of the UK firm from 1998-2000 and Chairman of KPMG International from 2002-2007.

Term of office Sir Michael joined the Board in January 2008. Sir Michael was last re-elected by shareholders at the AGM in 2008, following his appointment.

IndependentYes

External appointments Chairman of BT Group PLC since 2007. Director of ~~The McGraw-Hill Companies and~~ the Financial Reporting ~~Council. Sir Michael was~~Council since 2007. Chairman of the UK Commission for Employment and Skills since 2007. Director of the McGraw-Hill Companies since 2007. Chairman of KPMG International until 2007. Chairman of Business in the Community from 2004 tountil 2007.

~~112~~138

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Annual Report ~~2007~~2008

LOGO

~~10.Sir~~Committee membership Member of the Board Audit Committee since January 2008. He will succeed Stephen Russell as Chairman of the Board Audit Committee in March 2009.

9. Sir Nigel Rudd, DL

Deputy Chairman

Non-executive Director~~(Age 61)~~ (Age 62)

Sir Nigel ~~joined the Board in February 1996 and was appointed Deputy Chairman on 1st September 2004. He~~ is non-executive Chairman of Pendragon PLC and BAA Limited. He is also Deputy Chairman of Invensys plc and a non-executive Director of BAE Systems PLC and Sappi Limited. He was formerly Chairman of Alliance Boots PLC.

Term of office Sir Nigel joined the Board in February 1996 and was appointed Deputy Chairman in September 2004. Sir Nigel will retire from the Board at the 2009 AGM in April.

Independent Yes

External appointments Chairman of Pendragon PLC ~~a position he held~~since 1989. Non-executve Director and Deputy Chairman of Invensys plc since January 2009. Chairman of Alliance Boots PLC until ~~June~~ 2007. ~~He is a member~~Director of Pilkington PLC until 2006. Director of Kidde PLC until 2003.

Committee membership Member of the Board Corporate Governance and Nominations Committee ~~and also chairs~~since October 2001. Chairman of the ~~Group’s~~Barclays Brand and Reputation Committee.

~~11.Stephen~~10. Stephen Russell

Non-executive Director~~(Age 62)~~ (Age 63)

Stephen ~~joined the Board in October 2000 on completion of the acquisition of Woolwich PLC. He~~ was Chief Executive of Boots Group PLC from 2000 until 2003, having worked for Boots since 1967. ~~Stephen~~He has held a number of non-executive positions and is currently a non-executive Director of Network Rail and Network Rail Infrastructure Limited. He is a trustee of St. John’s Ambulance and Tommy’s the Baby Charity, ~~and~~ is on the Council of Nottingham ~~University. He~~University and is Chairman of Business Control Solutions Group.

Term of office Stephen joined the Board in October 2000 on completion of the acquisition of Woolwich PLC. Stephen was last re-elected by shareholders at the AGM in 2007.

Independent Yes

External appointments Non-executive Director of Network Rail ~~as a non-executive Director in~~since September ~~2007 and became~~2007. Trustee of St John’s Ambulance since 2005. Chairman of Business Control Solutions Group ~~in October 2007. Stephen is~~since 2005. Trustee of Tommy’s the Baby Charity since 2003. Member of the Council of Nottingham University since 2003. Chief Executive of Boots Group PLC until 2003.

Committee membership Chairman of the Board Audit Committee ~~and is a member~~since April 2003 (member since October 2000). He will be succeeded by Sir Michael Rake as Chairman of the Board ~~Risk and~~Audit Committee in March 2009. Member of the Board Corporate Governance and Nominations ~~Committees.~~Committee since September 2004. Member of the Board Risk Committee since October 2001 (Chairman from September 2004-December 2005).

~~12.Sir~~11. Sir John Sunderland

Non-executive Director~~(Age 62)~~ (Age 63)

Sir John ~~joined the Board on 1st June 2005. He has been~~was Chairman of Cadbury Schweppes PLC ~~since May 2003. Sir John joined Cadbury Schweppes~~until July 2008 having worked at Cadbury’s in ~~1968 and was appointed~~various roles, including that of Chief Executive, ~~in September 1996.~~since 1968. He is Deputy President of the Chartered Management Institute, and Deputy President of the CBI, having retired as President on 31st December 2006. He is a former President of both ISBA (the Incorporated Society of British Advertisers) and the Food and Drink Federation. Sir John is a Director of the Financial Reporting Council, an Adviser to CVC Capital Partners, an Association Member of BUPA and a Governor of both Reading and Aston University Councils.

Term of office Sir John joined the Board in June 2005. Sir John was last re-elected by shareholders at the AGM in 2008.

Independent Yes

External appointments Deputy President of the Chartered Management Institute since 2008 (President 2007-2008). Director of the Financial Reporting Council since 2004. Adviser to CVC Capital Partners. Association Member of BUPA. Governor, Aston University Council. Governor, Reading University Council. Chairman of Cadbury Schweppes PLC until July 2008. Deputy President of the CBI to June 2008 (member since 2003 and President until December 2006). President of ISBA (the Incorporated Society of British Advertisers) until 2005. President of the Food and Drink Federation until 2005. Non-executive Director of the Rank Group PLC until 2006. Former Advisory Board Member of Trinsum ~~Group and an Association~~Group.

Committee membership Member of ~~BUPA. He is a member~~the Board Corporate Governance and Nominations Committee since September 2006. Member of the Board HR and Remuneration ~~and Board Corporate Governance and Nominations Committees.~~Committee since July 2005.

~~13.Patience~~12. Patience Wheatcroft

Non-executive Director~~(Age 56)~~ (Age 57)

Patience was ~~appointed to the Board on 1st January 2008. An~~an established financial journalist and national newspaper editor, ~~Patience is a former~~having worked as Editor of~~The~~ the Sunday Telegraph from 2006 to 2007 and ~~was~~ Business and City Editor ofThe Times~~between 1997 and 2006.~~ from 1997-2006. She is a non-executive Director of Shaftesbury PLC, a member of the UK/India Round Table and a member of the British Olympic Association Advisory Board. She is also a member of the Council of the Royal Albert Hall and Chair of the Forensic Audit Panel.

Term of office Patience joined the Board in January 2008. Patience was last re-elected by shareholders at the AGM in 2008 following her appointment.

~~14.John~~Independent Yes

External appointments Non-executive Director of Shaftesbury PLC since 2008. Member of the UK/India Round Table. Member of the British Olympic Association Advisory Board since 2007. Member of the Council of the Royal Albert Hall. Chair of the Forensic Audit Panel since 2008. Editor of the Sunday Telegraph until 2007. Business and City Editor of The Times until 2006.

Committee membership Member of the Barclays Brand and Reputation Committee.

13. John Varley

Group Chief Executive

Executive Director and Chairman of Executive Committee~~(Age 51)~~ (Age 52)

John was appointed as Group Chief Executive of Barclays on 1st September 2004, prior to which he had been Group Deputy Chief Executive from 1st January 2004. He joined Barclays in 1982 and has held various positions across the Group, including the position of Group Finance Director from 2000 until the end of 2003. ~~John joined the Executive Committee in September 1996 and was appointed to the Board in June 1998.~~ He was Chief Executive of Retail Financial Services from 1998 to 2000 and Chairman of the Asset Management Division from 1995 to 1998. John is a non-executive Director of AstraZeneca PLC. He is also Chairman of Business Action on Homelessness, President of the Employer’s Forum on Disability, Honorary President of the UK Drug Policy Commission and a member of the International Advisory Panel of the Monetary Authority of Singapore.

Term of office John ~~is also a non-executive~~joined the Executive Committee in September 1996 and was appointed to the Board in June 1998. John was last re-elected by shareholders at the AGM in 2007.

External appointments Non-executive Director of AstraZeneca ~~PLC.~~PLC since 2006. Non-executive Director of British Grolux Investments Limited since 1999. Chairman of Business Action on Homelessness since 2006. President of the Employer’s Forum on Disability since 2005. Honorary President of the UK Drug Policy Commission since 2007. Member of the International Advisory Panel of the Monetary Authority of Singapore since 2006.

~~15.Robert~~14. Robert E Diamond Jr

President, Barclays PLC and CEO, Investment Banking and Investment Management

Executive Director and member of Executive Committee~~(Age 56)~~ (Age 57)

Bob ~~was appointed President of Barclays and became an executive Director on 1st June 2005. He~~ is responsible for the Investment Banking and Investment Management business of the Barclays ~~Group.~~Group, comprising of Barclays Capital, Barclays Global Investors and Barclays Wealth. He ~~has been a member of the Executive Committee since September 1997. He joined Barclays in July 1996 from CSFB,~~previously worked for Morgan Stanley and CS First Boston, where he was Vice-Chairman and Head of Global Fixed Income and Foreign Exchange.

Term of office Bob iswas appointed President of Barclays PLC and became an executive Director in June 2005. He has been a member of the Barclays Executive Committee since September 1997. Bob was last re-elected by shareholders at the AGM in 2006, following his appointment.

External appointments Chairman of Old Vic Productions ~~PLC.~~PLC since September 2007.

~~16.Gary Hoffman~~

~~Group Vice-Chairman~~

~~Executive Director~~~~(Age 47)~~

Gary was appointed as Group Vice-Chairman in July 2006. He was formerly Chairman of UK Banking and of Barclaycard and prior to that was Chief Executive of Barclaycard. He joined the Board on 1st January 2004. As Group Vice-Chairman, Gary is accountable on the Board for a range of responsibilities including Corporate Sustainability, Public Policy, Equality and Diversity, leading the Group’s response to the FSA’s Treating Customers Fairly initiative, chairing the Group’s Governance and Control Committee and franchise health with customers, employees and communities. Gary joined the Group in 1982. Gary is also a non-executive Director of Trinity Mirror PLC.

~~17.Christopher~~15. Christopher Lucas

Group Finance Director

Executive Director and member of Executive Committee~~(Age 47)~~ (Age 48)

Chris has worked across financial services for most of his career, including three years in New York as Head of the US Banking Audit Practice of PricewaterhouseCoopers LLP. Chris joined ~~the Board on 1st April 2007. Chris came~~Barclays from PricewaterhouseCoopers LLP, where he was UK Head of Financial Services and Global Head of Banking and Capital Markets. He was Global Relationship Partner for Barclays for the ~~1999-2004~~1999–2004 financial years and subsequently held similar roles for other global financial services organisations.

Term of office Chris ~~has worked across financial services for most~~was appointed Group Finance Director and became a member of the Executive Committee in April 2007. Chris was last re-elected by shareholders at the AGM in 2007, following his ~~career, including three years in New York as~~appointment.

External appointments UK Head of ~~the US~~Financial Services and Global Head of Banking ~~Audit Practice~~and Capital Markets of PricewaterhouseCoopers ~~LLP.~~LLP until 2006.

~~18.Frederik~~16. Frederik (Frits) Seegers

Chief Executive, Global Retail and Commercial Banking

Executive Director and member of Executive Committee~~(Age 49)~~ (Age 50)

Frits ~~was appointed as Chief Executive of~~is responsible for the Global Retail and Commercial Banking ~~and became an executive Director on 10th July 2006. He is responsible for all~~business of the Barclays ~~retail and commercial banking operations globally, including~~Group, which includes UK Retail Banking, Barclays Commercial Bank, ~~International Retail~~Barclaycard, GRCB – Western Europe, GRCB – Emerging Markets and ~~Commercial Banking and Barclaycard. He is also a non-executive Director of Absa Group Limited.~~GRCB – Absa. Frits joined ~~the Board~~Barclays from Citigroup where he ~~previously~~ held a number of senior positions ~~latterly~~over the 17 years he worked there. Most recently, he was CEO Global Consumer Group with a remit covering all retail operations in Europe, the Middle East and Africa. He was also a member of the Citigroup Operating Committee and the Citigroup Management Committee.

He was CEO of Consumer Banking for Asia Pacific, covering 11 consumer markets, between 2001 and 2004. Under his leadership, this region was the fastest growing part of Citigroup. Frits was a non-executive Director of Absa Group Limited from 2006 until February 2009.

~~19.Paul Idzik~~

~~Chief Operating Officer~~

~~Member~~Term of ~~Executive Committee~~~~(Age 47)~~office

~~Paul~~ Frits joined the Board and the Executive Committee ~~and became~~in July 2006. Frits was last re-elected by shareholders at the AGM in 2007, following his appointment.

External appointments Chief ~~Operating Officer in November 2004. He is also Chairman of the Group Operating Committee. Paul was formerly Chief Operating~~Executive Officer of ~~Barclays Capital. He joined Barclays Capital in August 1999 following a career with Booz Allen & Hamilton, where he was a partner and senior member of the Financial Institutions Practice.~~Citigroup International PLC until 2006.

Barclays

Annual Report ~~2007~~2008

~~113~~

139

Directors’ report

~~Directors’ report~~

Profit Attributable

The profit attributable to equity shareholders of Barclays PLC for the year amounted to ~~£4,417m,~~£4,382m, compared with ~~£4,571m~~£4,417m in ~~2006.~~2007.

Dividends

As announced on 13th October 2008, in the light of the new capital ratios agreed with the Financial Services Authority (FSA) and in recognition of the need to maximise capital resources in the current economic climate, the Board concluded that it would not be appropriate to pay a final dividend for 2008. The ~~final~~Board intends to resume dividend payments in the second half of 2009, at which time it is intended to pay dividends quarterly. The interim dividend for the year ended 31st December ~~2007 of 22.5p per ordinary share of 25p each and 10p per staff share of £1 each have been agreed by the Directors. The final dividends will be paid on 25th April~~ 2008 ~~in respect of the ordinary shares registered at the close of business on 7th March 2008 and in respect of the staff shares so registered on 31st December 2007. With the interim dividends~~ of 11.5p per ordinary share ~~and of 10p per staff share that were~~was paid on 1st October ~~2007,~~2008 and the total distribution for ~~2007~~2008 is 11.5p (2007: 34.0p ~~(2006: 31.0p)~~ per ordinary ~~share and 20p (2006: 20p) per~~share). The staff ~~share.~~shares were re-purchased by the Company during the year. The dividends for the year ~~absorb~~have absorbed a total of ~~£2,253m (2006: £1,973m)~~£915m (2007: £2,253m).

~~Dividend Reinvestment Plan~~

Ordinary shareholders may have their dividends reinvested in Barclays PLC ordinary shares by participating in the Dividend Reinvestment Plan. The plan is available to all ordinary shareholders provided that they do not live in, and are not subject to the jurisdiction of, any country where their participation in the plan would require Barclays or The Plan Administrator to take action to comply with local government or regulatory procedures or any similar formalities. Any shareholder wishing to obtain details of the plan and a mandate form should contact The Plan Administrator to Barclays at Aspect House, Spencer Road, Lancing BN99 6DA. Those wishing to participate for the first time in the plan should send their completed mandate form to The Plan Administrator so as to be received by 4th April 2008 for it to be applicable to the payment of the final dividend on 25th April 2008. Existing participants should take no action unless they wish to alter their current mandate instructions, in which case they should contact The Plan Administrator.

Share Capital

~~During~~At the ~~year Barclays PLC purchased~~2008 Annual General Meeting, shareholders approved the creation of Sterling, Dollar, Euro and Yen preference shares (‘preference shares’) in order to provide the ~~market~~Group with more flexibility in managing its capital resources. As at 27th February 2009 (the latest practicable date for ~~cancellation 299,547,510 of its ordinary~~inclusion in this report) no preference shares ~~of 25p each, at a total cost of £1,802,173,355, in~~have been issued.

In order to minimise the dilutive effect on existing shareholders of the issuance of 336,805,556 ordinary shares in 2007, at the start of 2008 the Company purchased in the market for cancellation 36,150,000 of its ordinary shares of 25p each, at a total cost of ~~336,805,556 Barclays ordinary~~£171,923,243 (this was in addition to the 299,547,510 shares ~~to Temasek Holdings and China Development Bank. These transactions represent 4.5%~~purchased for cancellation in 2007). During 2008 the Company purchased all of its staff shares in issue, following approval for such purchase being given at the ~~issued share capital~~2008 Annual General Meeting, at ~~31st December 2007.~~a total cost of £1,023,054. As at 27th February ~~2008 (the latest practicable date for inclusion in this report),~~2009, the Company had an unexpired authority to repurchase shares up to a maximum of ~~645.1 million~~984,960,000 ordinary shares.

The issued ordinary share capital was increased by ~~65.5m~~1,772m ordinary shares during ~~the year~~2008. In addition to those issued as a result of the exercise of options under the Sharesave and Executive Share Option ~~Schemes.~~ Schemes during the year, the following share issues took place:

–

On 4th July 2008, the Company issued 168.9 million new ordinary shares in a firm placing to Sumitomo Mitsui Banking Corporation.

–

On 22nd July 2008, the Company issued 1,407.4 million new ordinary shares following a placing to Qatar Holding LLC, Challenger Universal Limited (a company representing the beneficial interests of His Excellency Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, the chairman of Qatar Holding LLC, and his family), China Development Bank, Temasek Holdings (Private) Limited and certain leading institutional shareholders and other investors, which shares were available for clawback in full by means of an open offer to existing shareholders. Valid applications under the open offer were received from qualifying shareholders in respect of approximately 267 million new ordinary shares in aggregate, representing 19.0% of the shares offered pursuant to the open offer. Accordingly, the remaining 1,140.3 million shares were allocated to the various investors with whom they had been conditionally placed.

–

On 18th September 2008, the Company issued 226 million new ordinary shares to certain institutional investors.

–

During the period 27th November 2008 to 31st December 2008, 33,000 ordinary shares were issued following conversion of Mandatorily Convertible Notes at the option of their holders.

At 31st December ~~2007~~2008 the issued ordinary share capital totalled ~~6,600,181,801~~8,371,830,617 shares. Ordinary shares represent ~~99.99%~~100% of the total issued share capital ~~and Staff shares represent the remaining 0.01%~~ as at 31st December ~~2007.~~2008.

The ~~Barclays PLC~~Company’s Memorandum and Articles of Association, a summary of which can be found in the Shareholder Information section on pages ~~269-270,~~305-309, contain the following details, which are incorporated into this report by reference:

–

The structure of the Company’s capital, including the rights and obligations attaching to each class of shares.

–

Restrictions on the transfer of securities in the Company, including limitations on the holding of securities and requirements to obtain approvals for a transfer of securities.

–

Restrictions on voting rights.

–

The powers of the Directors, including in relation to issuing or buying back shares in accordance with the Companies Act 1985. It will be proposed at the ~~2008~~2009 AGM that the Directors be granted new ~~authority~~authorities to allot and buy back shares under the Companies Act 1985.

–

Rules that the Company has about the appointment and removal of Directors or amendments to the Company’s Articles of Association.

Employee Benefit Trusts (‘EBTs’) operate in connection with certain of the Group’s Employee Share Plans (‘Plans’). The Trustees of the EBTs may exercise all rights attached to the shares in accordance with their fiduciary duties other than as specifically restricted in the relevant Plan governing documents. ~~Further information~~The trustees of the EBTs have informed the Bank that their normal policy is to abstain from voting in respect of the Barclays shares held in trust. The trustees of the Sharepurchase EBT may vote in respect of Barclays shares held in the Sharepurchase EBT, but only at the discretion of the participants. The trustees will not otherwise vote in respect of shares held in the Sharepurchase EBT.

Mandatorily Convertible Notes

On 27th November 2008, Barclays Bank PLC issued £4,050m of 9.75% Mandatorily Convertible Notes (MCNs) maturing on 30th September 2009 to Qatar Holding LLC, Challenger Universal Limited and entities representing the beneficial interests of HH Sheikh Mansour Bin Zayed Al Nahyan, a member of the Royal Family of Abu Dhabi and existing institutional shareholders and other institutional investors. If not converted at the holders’ option beforehand, these instruments mandatorily convert to ordinary shares of Barclays PLC on 30th June 2009. The conversion price is £1.53276 and, after taking into account MCNs that were converted on or before 31st December 2008, will result in the issue of 2,642 million new ordinary shares.

If there is a change of control of Barclays PLC following a takeover bid, Barclays PLC must (so far as legally possible) use all reasonable endeavours to cause the corporation which then controls Barclays PLC to execute a deed poll providing that the holders of the MCNs shall have the right (during the period ending on 30th June 2009) to convert the MCNs into, and to receive on a mandatory conversion, as the case may be, the class and amount of shares and other securities and property receivable upon such a takeover by the holders of the number of ordinary shares as would have been issued on conversion of the MCNs had such MCNs been converted immediately prior to the completion of such takeover.

The issue of new ordinary shares or certain other securities and rights of the Company, at any time during the period commencing on 27th November 2008 and ending on the ~~EBTs’ voting policy can~~date on which a holder exercises its optional conversion right or on the mandatory conversion date, at a price (the ‘Future Placing Price’) lower than the then current conversion price will (subject to exceptions for ordinary shares issued pursuant to employee share schemes, under the warrants or as a result of certain corporate events) result in a downward adjustment to the conversion price (subject to a minimum conversion price of the then par value per ordinary share (currently 25 pence)) so that it equals the Future Placing Price. The conversion price will also be ~~found~~subject to adjustment if the Company distributes an extraordinary dividend or if certain dilutive events occur, including bonus issues, rights issues or an adjustment to the nominal value or redenomination of the ordinary shares.

140

Barclays

Annual Report 2008

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Warrants

On 31st October 2008 Barclays PLC issued, in conjunction with a simultaneous issue of Reserve Capital Instruments issued by Barclays Bank PLC, warrants to subscribe for up to 1,516.9 million new ordinary shares at a price of £1.97775 to Qatar Holding LLC and HH Sheikh Mansour Bin Zayed Al Nahyan. The warrants may be exercised at any time up to close of business on ~~page 132.~~31st October 2013.

If there is a change of control of Barclays PLC following a takeover bid, Barclays PLC must (so far as legally possible) use all reasonable endeavours to cause the corporation which then controls Barclays PLC to execute a deed poll providing that the holders of the warrants shall have the right (during the period in which the warrants are exercisable) to exercise the warrants into the class and amount of shares and other securities and property receivable upon such a takeover by the holders of the number of ordinary shares as would have been issued on exercise of the warrants had such warrants been exercised immediately prior to the completion of such takeover.

The warrants contain provisions for the adjustment of the gross number of ordinary shares in the event of the occurence of certain dilutive events including, amongst others, extraordinary dividends, bonus issues, alterations to the nominal value of ordinary shares and rights issues.

Conversion of the outstanding MCNs and exercise of the Warrants in full would result in the issue of a further 4,159,167,571 new ordinary shares. The resultant shareholdings of Qatar Holding LLC and HH Sheikh Mansour Bin Zayed Al Nahyan, if the MCNs and Warrants they each hold were converted or exercised in full and taking into account existing holdings of Barclays shares, would represent approximately 12.8% and 16.5%, respectively, of the enlarged Barclays PLC issued ordinary share capital.

Substantial Shareholdings

Substantial shareholders do not have different voting rights from those of other shareholders. As at 27th February ~~2008,~~2009, the Company had been notified under Rule 5 of the Disclosure and Transparency Rules of the FSA of the following holdings of voting rights in its shares:


~~China Development Bank~~
~~(via its subsidiary Upper Chance Group Ltd)~~	~~3.02~~	%
~~Legal & General Group plc~~	~~4.02~~	%
~~Lloyds TSB Group Plc~~	~~5.01~~	%

~~Substantial shareholders do not have different voting rights from those~~No. of ~~other shareholders. As at 27th February 2008, the Company had been notified that Lloyds TSB Group Plc held voting rights over 329,648,746 of its~~ ordinary shares ~~amounting to 5.01% of the Company’s total voting rights, as shown above.~~



Qatar Holding LLC	522,755,622	6.4	%
Axa S.A.	460,195,183	5.5	%
Legal & General Group plc	330,460,896	4.1	%

Board Membership

The membership of the Boards of Directors of Barclays PLC and Barclays Bank PLC is identical and biographical details of the Board members are set out on pages ~~112~~138 and ~~113.~~139.

~~Chris Lucas joined the Board as Group Finance Director on 1st April 2007 and Naguib Kheraj left the Board on 31st March 2007.~~

~~David Booth joined the Board as a non-executive Director on 1st May 2007 and~~ Patience Wheatcroft and Sir Michael Rake were appointed as non-executive Directors with effect from 1st January 2008. Simon Fraser will join the Board as a non-executive Director with effect from 10th March 2009, subject to regulatory approvals. Dr Danie Cronjé left the Board on 24th April 2008 and Gary Hoffman left the Board on 31st August 2008.

Retirement and Re-election of Directors

~~In accordance with its Articles of Association, one-third (rounded down) of~~As announced on 18th November 2008, at the 2009 AGM all Directors ~~of Barclays PLC are required to retire by rotation at each Annual General Meeting (AGM), together with Directors appointed by the Board since the last AGM. The retiring Directors are eligible to~~will stand for ~~re-election. In addition,~~re-election, with the ~~UK Combined Code on Corporate Governance (the Code), recommends that every Director should seek re-election by shareholders at least every three years.~~

~~114~~

~~Barclays~~

~~Annual Report 2007~~

~~The Directors retiring by rotation at the 2008 AGM and offering themselves for re-election are Fulvio Conti, Gary Hoffman and Sir John Sunderland.~~exception of Sir Nigel Rudd ~~retires annually as recommended by the Code~~ and ~~is offering himself for re-election. In addition, David Booth, Sir Michael Rake and Patience Wheatcroft,~~Professor Dame Sandra Dawson, who ~~were appointed as Directors since the last AGM,~~ will ~~be offering themselves for re-election~~retire at the ~~2008 AGM. Danie Cronjé is retiring at~~conclusion of the 2009 AGM and isare not offering ~~himself~~themselves for re-election.

Directors’ Interests

Directors’ interests in the shares of the Group on 31st December ~~2007~~2008 are shown on ~~page 142.~~pages 164 and 166.

Directors’ Emoluments

Information on emoluments of Directors of Barclays PLC, in accordance with the Companies Act 1985 and the Listing Rules of the United Kingdom Listing Authority, is given in the Remuneration ~~report~~Report on pages ~~128~~157 to ~~142~~172 and in Note 4243 to the accounts.

Directors’ Indemnities

The Board believes that it is in the best interests of the Group to attract and retain the services of the most able and experienced Directors by offering competitive terms of engagement, including the granting of indemnities on terms consistent with the applicable statutory provisions. Qualifying third party indemnity provisions (as defined by section 234 of the Companies Act 2006) were accordingly in force during the course of the financial year ended 31st December ~~2007~~2008 for the benefit of the then Directors and, at the date of this report, are in force for the benefit of the Directors in relation to certain losses and liabilities which they may incur (or have incurred) in connection with their duties, powers or office.

Activities

Barclays PLC Group is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services. The Group operates through branches, offices and subsidiaries in the UK and overseas.

Community Involvement and Charitable Donations

Barclays has an extensive community programme covering many countries around the world. The Group provides funding and support to over ~~7,140~~7,000 charities and voluntary organisations, ranging from small, local charities, like Passage (UK), to international organisations like the Red Cross. We also have a very successful employee programme which in ~~2007~~2008 saw more than ~~43,700~~57,000 employees and pensioners worldwide taking part in Barclays-supported volunteering, giving and fundraising activities. Further information on our community involvement is given on pages 5853 and ~~60.~~54.

The total commitment for ~~2007~~2008 was ~~£52.4m (2006: £46.5m)~~£52.2m (2007: £52.4m). The Group committed ~~£38.9m~~£27.7m in support of the community in the UK ~~(2006: £39.6m)~~(2007: £38.9m) and ~~£13.5m~~£24.5m was committed in international support ~~(2006: £6.9m)~~(2007: £13.5m). The UK commitment includes ~~£30.4m~~£19.6m of charitable donations ~~(2006: £35.2m)~~(2007: £30.4m).

Political Donations

The Group did not give any money for political purposes in the UK nor did it make any donations to EU political organisations or incur any EU political expenditure during the year.

Absa Group Limited, in which the Group acquired a majority stake in 2005, made donations totalling ~~£170,142~~£186,589 in ~~2007 (2006: £212,729)~~2008 (2007: £170,142) in accordance with its policy of making political donations to the major South African political parties as part of their Democracy Support Programme. Donations are made to ~~support~~parties with more than three seats in the ~~development~~National Parliament as confirmed by the Independent Electoral Commission. Support for the deepening of democracy in South ~~Africa.~~Africa remains paramount for the new government. The Group made no other political donations in ~~2007.~~2008.

At the AGM in ~~2007,~~2008, shareholders gave a limited authority for Barclays ~~Bank~~ PLC and its subsidiaries to make political donations and incur political expenditure, within an agreed limit, as a precautionary measure in light of the wide definitions in ~~The Political Parties, Elections and Referendums~~the Companies Act ~~2000.~~2006. This was similar to an authority given by shareholders in ~~2006.~~2007. This authority, which has not been used, expires at the conclusion of the AGM held this year, or, if earlier, ~~26th July 2008.~~ 30th June 2009.

The Companies Act 2006 largely restates the provisions of The Political Parties, Elections and Referendums Act 2000. The risk of inadvertently breaching the Companies Act 2006 remains, and the Directors consider it prudent to seek a similar authority from shareholders. A resolution to authorise Barclays PLC and its subsidiaries

to make EU political donations and incur EU political expenditure up to a maximum aggregate sum of £125,000 is therefore being proposed at the Barclays PLC ~~2008~~2009 AGM.

Employee Involvement

Barclays is committed to ensuring that employees share in the success of the Group. ~~Staff~~Colleagues are encouraged to participate in share option and share purchase schemes and have a substantial sum invested in Barclays shares.

Employees are kept informed of matters of concern to them in a variety of ways, including the corporate news magazines, intranets, briefings and mobile phone SMS messaging. These communications help achieve a common awareness among employees of the financial and economic factors affecting the performance of Barclays.

Barclays is also committed to providing employees with opportunities to share their views and provide feedback on issues that are important to them. An annual Employee Opinion Survey is undertaken across Global Retail and Commercial Banking and Group Centre with results being reported to the Board and the Board HR and Remuneration Committee, all employees and to our European Works Council, Africa Forum, Unite (Amicus section), our recognised union in the ~~UK.~~UK and other recognised unions worldwide. Roadshows and employee forums also take place.

In addition, Barclays undertakes regular and formal ~~Group, business unit and project specific~~ consultations with ~~Unite (Amicus section).~~our recognised trade unions and works councils internationally.

Diversity and Inclusion

The diversity agenda at Barclays seeks to include customers, colleagues and suppliers. Our objective is to recruit and retain the best people, regardless of (but not limited to) race, religion, age, gender, sexual orientation or disability. We strive to ensure our workforce reflects the communities in which we operate and the international nature of the organisation. We recognise that diversity is a key part of responsible business strategy in support of our increasingly global business.

Barclays is committed to providing additional support to employees with disabilities and making it easier for them to inform us of their specific


		BarclaysAnnual Report 2008				141

Directors’ report

requirements, including the introduction of a dedicated intranet site and disability helpline. Through our Reasonable Adjustments Scheme, appropriate assistance can be given, including both physical workplace adjustments, and relevant training and access to trained mentors is also provided for disabled employees. A wide range of recruitment initiatives have been taken to increase the number of people with disabilities working in Barclays.

Health and Safety

Barclays is committed to ensuring the health, safety and welfare of our employees and to providing and maintaining safe working conditions. Barclays regards legislative compliance as a minimum and, where appropriate, we seek to implement higher standards. Barclays also recognises its responsibilities towards all persons on its premises, such as contractors, visitors and members of the public, and ensures, so far as is reasonably practicable, that they are not exposed to significant risks to their health and safety.

Barclays regularly reviews its Statement of Health and Safety Commitment, issued with the authority of the Board and which applies to all business areas in which Barclays has operational control. In this statement Barclays commits to:

·–

demonstrate personal leadership that is consistent with this commitment;

·–

provide the appropriate resources to fulfil this commitment;

·–

carry out risk assessments and take appropriate actions to mitigate the risks identified;

·–

consult with our employees on matters affecting their health and safety;

·–

ensure that appropriate information, instruction, training and supervision are provided;

·–

appoint competent persons to provide specialist advice; and

·–

review Barclays Health and Safety Group Process and the Statement of Commitment, at regular intervals.

~~Barclays~~

~~Annual Report 2007~~

~~115~~

~~Directors’ report~~

Barclays monitors its health and safety performance using a variety of measurements on a monthly basis and the Board HR and Remuneration Committee receives annual reports on health and safety performance from the Human ~~Resource~~Resources Director. As part of its Partnership Agreement with Unite (Amicus section), Barclays currently funds full time Health and Safety Representatives.

Creditors’ Payment Policy

Barclays values its suppliers and acknowledges the importance of paying invoices, especially those of small businesses, in a timely manner. It is the Group’s practice to agree terms with suppliers when entering into contracts. We negotiate with suppliers on an individual basis and meet our obligations accordingly. The Group does not follow any specific published code or standard on payment practice.

Paragraph 12(3) of Schedule 7 of the Companies Act 1985 requires disclosure of trade creditor payment days. Disclosure is required by the Company, rather than the Group. The Group’s principal trading subsidiary in the UK is Barclays Bank PLC, the accounts for which are prepared in accordance with International Financial Reporting Standards. The components for the trade creditor calculation are not easily identified. However, by identifying as closely as possible the components that would be required if Schedule 4 of the Companies Act 1985 applied, the trade creditor payment days for Barclays Bank PLC for ~~2007~~2008 were 2724 days ~~(2006: 28~~(2007: 27 days). This is an arithmetical calculation and does not necessarily reflect our practice, which is described above, nor the experience of any individual creditor.

Essential business contracts

There are no persons with whom the Group has contractual or other arrangements that are considered essential to the business of the Group.

Research and Development

In the ordinary course of business, Barclays develops new products and services in each of its business units.

Financial Instruments

The Group’s financial risk management objectives and policies, including the policy for hedging each major type of forecasted transaction for which hedge accounting is used, and the exposure to market risk, credit risk and liquidity risk are set out in pages 6167 to 92113 under the headings, ‘Barclays approach to risk management’, ‘Credit Risk Management’, ‘Market risk management’, ‘Liquidity Risk Management’ and ‘Derivatives’ and in Note 14 and Notes 4546 to 4849 to the accounts.

Events after the Balance Sheet Date

of the ~~Russian bank, Expobank, for a consideration~~Central Bank of ~~approximately $745m (£373m). The transaction is expected~~Indonesia. On 17th February 2009, Barclays announced that Barclays Capital will discontinue operations at its EquiFirst subsidiary due to ~~close in summer 2008 after~~ the ~~receipt~~market environment and strategic direction of appropriate regulatory approvals. Expobank focuses principally on Western Russia, with a substantial presence in Moscow and St Petersburg. Founded in 1994, it has grown rapidly and comprises a blend of retail and commercial banking, operating 32 branches and dealing with a range of corporate and wholesale clients. As at 31st December 2007, Expobank had net assets of $186m (£93m).the Group.

The Auditors

The Board Audit Committee reviews the appointment of the external auditors, as well as their relationship with the Group, including monitoring the Group’s use of the auditors for non-audit services and the balance of audit and non-audit fees paid to the auditors. More details on this can be found on pages ~~122~~198 and ~~123~~199 and Note 9 to the accounts. Having reviewed the independence and effectiveness of the external auditors, the Committee has recommended to the Board that the existing auditors, PricewaterhouseCoopers LLP, be reappointed. PricewaterhouseCoopers LLP have signified their willingness to continue in office and ordinary resolutions reappointing them as auditors and authorising the Directors to set their remuneration will be proposed at the ~~2008~~2009 AGM.

So far as each of the Directors are aware, there is no relevant audit information of which the Company’s auditors are unaware. Each of the Directors has taken all the steps that he or she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. For these purposes, ‘relevant audit information’ means information needed by the Company’s auditors in connection with preparing their report.

The Annual General Meeting ~~and~~

~~Class Meeting of Ordinary Shareholders~~

The Barclays PLC AGM will be held at The Queen Elizabeth II Conference Centre on Thursday ~~24th~~23rd April ~~2008.~~2009. The Notice of AGM is included in a separate document sent to shareholders with this report. A summary of the resolutions being proposed at the ~~2008~~2009 AGM is set out below:

Ordinary Resolutions

–

To receive the Directors’ and Auditors’ Reports and the audited accounts for the year ended 31st December ~~2007.~~2008.

–

To approve the Directors’ Remuneration Report for the year ended 31st December ~~2007.~~2008.

–

To re-elect the following Directors:

–

~~David Booth;~~

Simon Fraser

–

~~Sir Michael Rake;~~

Marcus Agius

–

~~Patience Wheatcroft;~~

David Booth

–

Sir Richard Broadbent

–

~~Fulvio Conti;~~

Richard Leigh Clifford

–

~~Gary Hoffman;~~

Fulvio Conti

–

~~Sir John Sunderland; and~~

Robert E Diamond Jr

–

Sir ~~Nigel Rudd.~~Andrew Likierman

–

Christopher Lucas

–

Sir Michael Rake

–

Stephen Russell

–

Frederik Seegers

–

Sir John Sunderland

–

John Varley

–

Patience Wheatcroft

–

To reappoint PricewaterhouseCoopers LLP as auditors of the Company.

–

To authorise the Directors to set the remuneration of the ~~Auditors.~~auditors.

–

To authorise Barclays PLC and its subsidiaries to make EU political donations and incur EU political expenditure.

–

To authorise an increase in the Company’s authorised share capital.

–

To renew the authority given to the Directors to allot securities.

Special Resolutions

–

To renew the authority given to the Directors to allot equity securities for cash other than on a pro-rata basis to shareholders and to sell treasury shares.

–

To renew the Company’s authority to purchase its own shares.

–

To ~~authorise the purchase of staff shares.~~permit General Meetings to continue to be called on 14 clear days’ notice.

–

~~To create preference shares.~~

–

~~To adopt new Articles of Association.~~

~~A Class Meeting of ordinary shareholders will be held at the conclusion of the AGM to consider an extraordinary resolution approving the creation of preference shares.~~

This is only a summary of the business to be transacted at the ~~meetings~~meeting and you should refer to the Notice of ~~Shareholder Meetings~~AGM for full details.

~~By order of the Board~~

By order of the Board

Lawrence Dickinson

Company Secretary

~~7th~~5th March ~~2008~~2009

~~116~~142

Barclays

Annual Report ~~2007~~2008

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~~Corporate governance~~

Corporate governance ~~report~~

Corporate governance report

Group Chairman’s Introduction

I am pleased to report to you on the activities of the Board and its Committees over the past 12 months, my first year as Group Chairman. It has been an eventful and busy year but we have continued to apply the high standards of corporate governance that we set both for ourselves as a Board and for our Company.

Since I last reported to you, there have been a number of changes to the Board. Chris Lucas succeeded Naguib Kheraj as Group Finance Director in April 2007 and we have significantly strengthened the independent non-executive presence on the Board with the appointments of David Booth, Sir Michael Rake and Patience Wheatcroft.

Weduring 2008. Our report ~~below on~~sets out how we have complied ~~in 2007~~ with the UK Combined Code on Corporate Governance (the Code)~~. We are committed to promoting good corporate governance. We seek~~ and also gives further details of the matters that the Board and its principal Committees have considered over the year.

The year proved to be extremely challenging for the financial services industry as increasing vulnerabilities exposed in the global financial system created a period of exceptional instability.

During October 2008, it became clear that an industry-wide solution to the risks of systemic failure in the UK financial services sector was needed. The outcome of discussions between the UK’s FSA and all UK banks was that we, along with many of our competitors, were required to raise additional equity and Tier 1 capital to take our capital ratios well beyond the levels we had previously agreed with our regulators (the ‘Capital Raising’).

On 31^st October 2008, Barclays announced the Capital Raising. In the extraordinary circumstances leading up to that announcement, the Board had choices to make – choices not available to all banks. These choices entailed exceptionally difficult judgements made in market circumstances where from one day to the next nothing could be taken for granted.

These choices included retaining independent control of the business in undertaking the recapitalisation required by the authorities; recapitalising the business in one market operation well in advance of the June 2009 deadline set by the authorities; and effecting a recapitalisation under which all shareholders were not afforded their pre-emption rights.

The Board did not take any of these decisions lightly: its governance processes were rigorous. It met frequently, debated the issues at length, heard differing views and arguments, sought external advice and consulted representative shareholder bodies. The decisions it made were reached in the interests of shareholders as the Board, in the circumstances at the ~~forefront~~time, perceived them to be. These included forming judgements about the earnings per share and return on capital consequences of ~~global best practice~~the Capital Raising for existing shareholders.

The Board believes that the decisions made have resulted in the Group being able to maintain its strategic momentum. The Directors deeply regret, however, that the Capital Raising denied Barclays then existing shareholders their full rights of pre-emption with respect to the ordinary shares issued. The Directors recognise that there is a high level of unhappiness on the part of some shareholders that the principle of pre-emption was breached, with consequent dilution of shareholdings and that, were it not to avoid the risk of destabilising the Company or the system, more of them may have voted against the enabling resolution at the General Meeting on 24th November 2008.

The Directors wish to place on record both their appreciation of the support received from shareholders in difficult circumstances in completing the Capital Raising and to ~~respond, in a timely fashion,~~re-affirm their fundamental commitment to ~~corporate governance developments. To gain a greater understanding~~the principle of pre-emption. The Board is clear that the ~~corporate governance framework within Barclays I encourage you~~extraordinary circumstances which they were required to ~~read ‘Corporate Governance in Barclays’, which is available from our website.~~deal with were so unusual as to be effectively unique.

Marcus Agius

Group Chairman

~~7th~~5th March ~~2008~~2009

Statements of Compliance

UK Combined Code on Corporate Governance

As Barclays is listed on the London Stock Exchange, we comply with the ~~UK Combined Code on Corporate Governance (the Code). The Code was revised in June 2006 and the revised Code applied to Barclays with effect from 1st January 2007.~~Code. For the year ended 31st December ~~2007,~~2008, we have complied with the relevant provisions set out in section 1 of the Code and applied the principles of the Code as described in this report.

NYSE Corporate Governance Rules

Barclays has American Depositary Receipts listed on the New York Stock Exchange (NYSE) and is ~~therefore~~also subject to the NYSE’s Corporate Governance rules (NYSE Rules). ~~As a non-US company listed on the NYSE, we~~We are exempt from most of the NYSE Rules, which domestic US companies must ~~follow. We~~follow, because we are a non-US company listed on the NYSE. However, we are required to provide an Annual Written Affirmation to the NYSE of our compliance with the applicable NYSE Rules and must also to disclose any significant ~~ways in which~~differences between our corporate governance practices ~~differ from~~and those followed by domestic US companies listed on the NYSE. As our main listing is on the London Stock Exchange, we follow the UK’s Combined Code. Key differences between the Code and NYSE Rules ~~and the Code~~ are set out later in this report.

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Barclays

Annual Report ~~2007~~2008

~~117~~

143

Corporate governance

Corporate governance report

Corporate ~~Governance Framework~~governance framework

The ~~overall~~Group operates within a comprehensive governance framework, ~~within~~ which ~~the Group operates~~ is set out ~~above.~~in the diagram below. Details of the Group’s risk management framework can be found on pages 6562 to ~~96.~~66.

The Board ~~manages~~is responsible for managing the Company on behalf of its shareholders and each Director must act in a way that he or she considers promotes the ~~shareholders. In order to run~~long-term success of the ~~business effectively,~~Company for the benefit of those shareholders as a whole. The Board also ensures that an appropriate balance between promoting long-term growth and delivering short-term objectives is achieved. The Board delegates responsibility for the day-to-day management of the Company to the Group Chief Executive, who is then responsible for ensuring that the business is operating effectively. The Group Chief Executive is supported by the Executive Committee, which he ~~chairs. The~~chairs, and the Executive Committee is supported by ~~various~~a number of management committees, including the Disclosure Committee. Details of the Disclosure Committee are set out on page ~~125. The rest of this~~154. This report ~~describes the way in which~~sets out how the Board and its Committees ~~operate~~work within the governance ~~framework.~~framework and corporate governance guidelines.

The ~~terms of reference for each of the principal~~ Board ~~Committees are available from the Corporate Governance section at:~~~~http://www.aboutbarclays.com~~

~~There are~~has eight scheduled Board meetings each year. ~~One of~~Strategy is reviewed regularly at these meetings and there is normally a day and a half ~~off-site~~offsite meeting to consider and approve the Group’s strategy for the ~~purposes~~next year. In addition to the scheduled Board meetings in 2008, 23 additional Board meetings were held during the year. The purpose of ~~considering~~these meetings was to discuss the difficult market conditions that existed during the year and ~~approving~~in particular the ~~Group’s strategy.~~three equity capital raising transactions that were undertaken: the £4.5bn Placing and Open Offer in July (the ‘Open Offer’), the £701m Placing in September (the ‘Placing’) and the issue of £4.05bn in Mandatorily Convertible Notes, £3bn in Reserve Capital Instruments by Barclays Bank PLC and warrants for new ordinary shares in November (the ‘Capital Raising’). There were 12 Board meetings held in October and November specifically to discuss the Capital Raising. There were also eight meetings of the Board Finance Committee, to which the Board delegated authority to approve certain aspects of the capital raising transactions and the acquisition of Lehman Brothers North American businesses. The Board Finance Committee comprises the Group Chairman, the Group Chief Executive and at least two independent non-executive Directors, typically the Deputy Chairman and Senior Independent Director.

These additional Board meetings, which were called at short notice, had attendance of 78% for the Open Offer (May-July 2008), 85% for the acquisition of the Lehman Brothers North American businesses (September 2008) and 90% for the Capital Raising (October-November 2008). Attendance at the Board Finance Committee was 100%. Those Directors who were unable to attend any meeting were briefed separately on the discussions at the meetings and their views were sought.

We arrange scheduled Board and Committee meetings at least a year in advance. All Directors are expected to attend each meeting and the attendance at scheduled Board meetings is set out on page 149. All Directors are provided with background papers and relevant information in advance of each meeting. If a Director is unable to attend a meeting because of exceptional circumstances, he or she will still receive the supporting papers and will usually discuss with the Chairman of the meeting any matters they wish to raise to ensure their views are given due consideration. The Group Chairman usually meets ~~privately~~ with the non-executive Directors, ~~before~~without the executive Directors or any senior management present, ahead of each scheduled Board meeting ~~in order~~ to brief them on the business of the ~~meeting and identify~~meeting. These meetings give the non-executive Directors an opportunity to advise the Chairman if they have any ~~shared areas of concern. In addition~~particular questions they wish to the scheduled Board meetings in 2007, there were a further 13 Board meetings held in relation to the proposed merger with ABN AMRO and ten meetings of a specially appointed Committee of the Board (the ‘Transaction Committee’), comprising theraise. The Group Chairman, Group Chief Executive ~~Deputy Chairman~~ and ~~Senior Independent Director, which was established~~Company Secretary are always available for the ~~purpose of overseeing~~Directors to discuss any issues relating to the ~~proposed merger with ABN AMRO and considering various aspects of the proposed transaction. Attendance at the additional~~ Board meetings ~~which were often called at short notice, was 88.1%. Attendance at~~or other matters. In 2008, all Directors contributed the ~~Transaction Committee was 100%.~~

~~Scheduled Board and Committee meetings are arranged well in advance~~appropriate amount of time needed to ~~ensure, as far as possible, that Directors can manage~~fulfil their time commitments. All Directors are provided with supporting papers and relevant information for each meeting and are expected to attend, unless there are exceptional circumstances that prevent them from doing so. Attendance at the scheduled Board meetings is set out on page 121.responsibilities. Reasons for non-attendance are generally prior business, personal commitments or ~~personal commitments. In the event that a Director is unable~~illness. Given market conditions in 2008, several meetings had to be rearranged at short notice and it was not always possible for all Directors to attend ~~a meeting, they will still receive~~on the papers for the meeting and will normally discuss any matters they wish to raise with the Chairman of the meeting to ensure their views are taken into account. In addition, all Directors are able to discuss any issues with the Group Chairman and Group Chief Executive at any time. In the case of Leigh Clifford, who was unable to attend two meetings of the Board HR and Remuneration Committee in 2007 because of other commitments, including his relocation to Australia following his retirement as Chief Executive of Rio Tinto, he received the papers for the meetings he was unable to attend and provided comments to the Committee Chairman ahead of both meetings. In 2007, all Directors contributed the time necessary to discharge their responsibilities to the Board.revised date.

The Group Chairman ~~works closely with~~and the Company Secretary work together to ~~ensure~~make sure that the information communicated to the Board is accurate, timely and ~~clear~~clear. This applies in advance of regular, scheduled Board meetings and in exceptional circumstances between those meetings. Timely communication of information ~~flows~~was particularly important this year, given the need for the Board to ~~the Board. Supporting papers for scheduled meetings are distributed the week before each meeting.~~respond to rapidly changing circumstances. Directors ~~may~~ also have secure access to electronic copies of meeting papers and other key documents ~~quickly and securely~~ via a dedicated Directors’ ~~Intranet. Examples include~~intranet, which includes past and current Board and Committee papers, reports, minutes, press coverage, analyst reports and material from ~~training~~briefing sessions. ~~All Directors have access to the~~The services of the Company Secretary and his team ~~and can~~are available to all Directors. Directors may also take independent professional advice on request, at the Company’s expense.

~~118~~

~~Barclays~~

~~Annual Report 2007~~

The Board

Role of the Board

~~Under~~Directors are required, by UK company law, ~~Directors must~~to act in a way they consider, in good faith, would ~~be most likely to~~ promote the success of Barclays for the benefit of the shareholders as a whole. In doing so, the Directors must have regard (amongst other matters) to:

–

the likely consequences of any decision in the ~~long-term;~~long term;

–

the interests of Barclays employees;

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144

Barclays

Annual Report 2008

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–

the need to foster Barclays business relationships with suppliers, customers and others;

–

the impact of Barclays operations on the community and the environment;

–

the desirability of Barclays maintaining a reputation for high standards of business conduct; and

–

the need to act fairly as between shareholders of Barclays.

The role and responsibilities of the Barclays Board are set out in ‘Corporate Governance in Barclays’, which ~~encompass the~~is available on our website atwww.aboutbarclays.com.

The duties of Directors, described above, ~~are set out in Corporate Governance in Barclays.~~form part of their role and responsibilities. The Board is responsible to shareholders for creating and delivering sustainable shareholder ~~value through~~value. In order to achieve this it must establish the ~~management of the Group’s businesses. It therefore determines the goals~~objectives and policies of the Group tothat will deliver ~~such~~ long-term ~~value, providing~~value. The Board sets the overall strategic direction and ensures it is delivered within aan appropriate framework of ~~rewards, incentives~~reward, incentive and ~~controls. The Board aims to ensure that management strikes an appropriate balance between promoting long-term growth and delivering short-term objectives.~~control.

~~The~~Another key responsibility of the Board is ~~also responsible for ensuring~~to ensure that management maintains a system of internal control that provides assurance of effective and efficient operations, internal financial controls and compliance with law and regulation. ~~In carrying out this responsibility, the~~The Board ~~has regard to what is appropriate for~~considers the Group’s business and reputation and ensures that the controls in place are appropriate to the materiality of ~~the~~ financial and other risks ~~inherent in the business~~ and the relative costs and benefits of implementing specific controls.

The Board has its powers set out in a formal schedule of matters reserved for the Board’s decision. A summary of the matters reserved for the Board is ~~also the decision-making body for all other~~set out opposite. These are matters ~~of such importance as to be of significance~~that are significant to the Group as a whole because of their strategic, financial or reputational implications or consequences. ~~There is a formal schedule~~The Schedule of ~~matters reserved for~~Matters Reserved to the ~~Board’s decision, which is summarised in the panel above right.~~Board was reviewed and updated during 2008 to ensure it remains appropriate.

~~The chart below left~~Figure 1 illustrates how the Board ~~allocated~~spent its time at ~~its eight~~the scheduled Board meetings during ~~2007. If the additional meetings relating to the proposed merger with ABN AMRO are taken into account, 49% of the Board’s time~~2008.

Activities in ~~2007 was spent on M&A. A typical Board~~2008

Typically, at each meeting, ~~receives reports from~~ the Group Chief Executive and Group Finance Director ~~and will also be presented with an update on~~report to the ~~execution of strategy in~~Board and one or two of the main businesses ~~and functions. It will~~or functions also ~~receive~~presents an update on the progress of implementing the strategy. The Board also receives reports from each of the principal Board Committees and may also receive ~~a report~~reports from the Company Secretary on any relevant corporate governance matters.

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~~Summary of matters reserved for~~
Summary of Matters Reserved to the Board

–
   Approval of the Group’s strategy, Medium-Term and Short-Term Plans and Risk Appetite
–   Monitoring delivery of the strategy and performance against plan
–   Changes relating to capital structure or status as a PLC
–   Approval of annual Capital Plan
–   Approval of interim and final financial statements, dividends and any significant change in accounting policies or ~~practices.~~practices

–
~~Approval~~   Authorisation of ~~strategy.~~Directors’ conflicts or possible conflicts of interest

–
~~Major acquisitions, mergers or disposals.~~   Appointment (or removal) of Company Secretary

–
~~Major capital investments and projects.~~   Any share dividend alternative

–
~~Board appointments and removals.~~
–
~~Role profiles of key positions on the Board.~~
–
~~Terms of reference and membership of Board Committees.~~
–
Remuneration of auditors and recommendations for appointment or removal of ~~auditors.~~auditors
–   Approval of all circulars, prospectuses and significant press releases
–   Principal regulatory filings with stock exchanges
–   Board appointments and removals
–   Role profiles of key positions on the Board
–   Terms of reference and membership of Board Committees
–   Major acquisitions, mergers or disposals
–   Major capital investments and projects
–   Approval of the framework for determining the policy and specific remuneration of executive Directors
–   Approval of Chairman and non-executive Director remuneration
–   Major changes in employee share schemes
–   Approval of Board and Board Committees performance evaluation process
–   Determination of independence of non-executive Directors
–   Approval of corporate governance framework
–   Approval of division of responsibilities between the Group Chairman and Group Chief Executive
–   Rules and procedures for dealing in Barclays securities

Barclays
Annual Report 2008
145
Corporate governance
Corporate governance report
The Board allocated its time at scheduled Board meetings during 2008 as follows:
–
received reports from the Group Chief Executive on strategic progress, matters considered by the Executive Committee and competitor activity;

–
~~Changes relating to~~received reports from the Group Finance Director on the financial position of the Group, which included capital ~~structure or status as a PLC.~~management and liquidity updates throughout 2008;

–
~~Approval~~received reports from each of ~~all circulars, prospectuses and significant press releases.~~the Board Committees;

–
~~Principal regulatory filings with stock exchanges.~~received reports from the Group Risk Director on risk management and from the Group General Counsel on legal risk;

–
~~Rules~~received reports from businesses or functions on progress against strategy, including Barclays Wealth, Barclays Capital, Barclaycard, Brand & Marketing, UK Retail Banking, Investment Banking and ~~procedures for dealing~~Investment Management in ~~Barclays securities.~~Asia Pacific and GRCB – Emerging Markets;

–
~~Any share dividend alternative.~~approved the full year and half-year results for the Group;

–
~~Major changes in employee share schemes.~~received a report on the effectiveness of the Board following the performance review;

–
~~Appointment (or removal)~~received reports on peer group comparisons of ~~company secretary.~~results following the release of preliminary and half-year results;
–
received reports on governance issues and updates on the changes in company law;
–
approved the revised fees recommended for non-executive Directors following a benchmarking comparison against our peer group;
–
received external presentations on shareholder sentiment, including institutional perceptions, Group Strategy, Global Retail and Commercial Banking, Investment Banking and Investment Management, performance, capital management and communications;
–
approved the strategy and Risk Appetite for the Group;
–
received reports on franchise health and the Employee Opinion Survey; and
–
received reports on the economic environment.
Adverse market conditions during 2008 led to the Board holding an additional 23 meetings during the year. These additional meetings discussed the impact of market conditions on performance, liquidity, the three capital raisings that were undertaken during the year and the acquisition of Lehman Brothers North American businesses. Ongoing and regular communication with the Board was vital during this period, a principle that had been established during the potential ABN AMRO acquisition in 2007. If the additional meetings relating to the capital raisings are taken into account, the Board spent 33% of its time on capital management.
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The capital raising that was announced on 31st October 2008 in response to the new higher capital targets which the FSA set for all UK Banks was the subject of considerable discussion. Seven Board meetings and three Board Finance Committee meetings were held during October to discuss the new requirements and Barclays response. The Board had to take some key decisions during this period, in particular:
��
whether or not to accept government money over the weekend of 11th/12th October 2008;
–
the decision to accelerate the timetable for raising required capital in the light of deteriorating market conditions;
–
the decision not to pursue a rights issue in the light of practical and market constraints; and
–
the decision to proceed with the Capital Raising as announced.
These decisions were only taken by the Board after rigorous discussion and having sought external advice. They were taken in the long-term interests of all shareholders.
Board structure and composition
The roles of the Group Chairman and Group Chief Executive are separate. In line with the recommendations of the Code, there is a strong independent element on the Board and at least half the Board are independent non-executive Directors. At the date of this report, the Board is comprised of the Group Chairman, four executive Directors and 11 non-executive Directors. The balance of the Board is illustrated by Figure 2.
The Group Chairman’s main responsibility is to lead and manage the ~~work of the~~ Board, ~~to ensure~~ensuring that it ~~operates effectively and fully~~ discharges its legal and regulatory ~~responsibilities.~~responsibilities effectively and fully. The Board has delegated the responsibility for the day-to-day ~~management~~running of the Group to the Group Chief Executive. The Group Chief Executive ~~who~~in turn leads the executive Directors in making and implementing operational decisions and is responsible for recommending strategy to the ~~Board, leading~~Board.
Although the ~~executive Directors and for making and implementing operational decisions.~~
~~The~~ Board of Directors has collective responsibility for the success of the ~~Group. However,~~Group, executive Directors ~~have direct responsibility~~are directly responsible for business operations, whereas non-executive Directors are responsible for bringing independent judgement and scrutiny to decisions taken by the ~~Board, providing objective challenge to management.~~Board. The non-executive Directors must satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are robust. The Board ~~can draw on~~has the ~~wide~~benefit of a broad range of skills, knowledge and experience ~~they~~that the non-executive Directors have built up as Directors of other companies asor business leaders, in government or in academia. ItGiven the events of 2008 and the continuing uncertainty in the global financial services industry, the Board and, in particular, the Board Corporate Governance and

146
Barclays
Annual Report 2008
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Nominations Committee, is considering both the ~~intention~~appropriate size and skills mix of the Board. As a financial services business, the Board aims to appoint non-executive Directors who have the necessary skills and experience required for a proper understanding of the Group’s activities and associated risks. The Board also aims to have ~~a broad spread of~~diverse geographical experience represented on the ~~Board. The chart below right illustrates the geographical experience of the current non-executive Directors.~~Board and this is illustrated in Figure 3.
~~Barclays has adopted a~~The Charter of Expectations, which ~~sets out,~~forms part of ‘Corporate Governance in ~~detail, the roles of~~Barclays’, includes detailed role profiles for each of the main positions on the Board, including that of the Group Chairman, Deputy Chairman, Senior Independent Director and both non-executive and executive Directors. ~~Sir Richard Broadbent continued in the role of Senior Independent Director in 2007. The Senior Independent Director is an additional contact point~~Responsibilities general to all Directors include:
1. Providing entrepreneurial leadership of the Company, within a framework of prudent and effective controls, which enable risk to be assessed and managed.
2. Approving the Company’s strategic aims, ensuring that the necessary financial and human resources are in place for the Company to meet its objectives and review management performance.
3. Setting the Company’s values and standards and ensuring that its obligations to its shareholders and others are understood and met.
In addition, non-executive Directors have a responsibility to constructively challenge and ~~also monitors~~develop proposals on strategy whilst scrutinising the performance of management in meeting the ~~Group Chairman on behalf~~Group’s strategic objectives. Following appropriate challenge and debate, the Board expects to reach clear decisions and to provide a framework of support for the executive Directors in their management of the ~~Board. Sir Nigel Rudd continued in the role of Deputy Chairman during 2007.~~Group’s business.
The Charter of Expectations, including role profiles for key Board positions, is available from:~~http://www.aboutbarclays.com~~www.aboutbarclays.com.

Sir Richard Broadbent continued in the role of Senior Independent Director during 2008. The role of the Senior Independent Director is to:

~~Barclays~~
~~Annual Report 2007~~
– ~~119~~
Be available to shareholders if they have concerns relating to matters which contact through the normal channels of Group Chairman, Group Chief Executive or Group Finance Director has failed to resolve, or for which such contact is inappropriate.
–
Maintain contact as required with major shareholders to understand their issues and concerns, including attending meetings where necessary with shareholders to listen to their views in order to help develop a balanced understanding of the issues and concerns of major shareholders.
~~Corporate governance~~
~~Corporate governance report~~

–
Meet with the non-executive Directors without the Group Chairman present at least annually and lead the Board in the ongoing monitoring and annual evaluation of the Group Chairman, including communicating results of the evaluation to the Group Chairman.
~~There is~~During the year, Sir Richard Broadbent attended meetings with a ~~strong independent element~~number of our institutional shareholders and shareholder bodies to discuss their views on the Group. Sir Richard also received feedback on the Group Chairman’s performance following the annual Board Effectiveness Review and ~~in line~~led discussions with the ~~recommendations~~other non-executive Directors and the Group Chief Executive on the Group Chairman’s performance.
Sir Nigel Rudd continued in the role of ~~the Code, at least half the Board are independent non-executive Directors. At the date of this report, the Board is comprised of~~Deputy Chairman in 2008, providing support to the Group Chairman ~~five executive Directors and 12 non-executive Directors. The balance of the Board is illustrated by the chart below left.~~as required in carrying out his responsibilities.
The Board Corporate Governance and Nominations Committee is responsible for reviewing the structure, composition and balance of the Board and its principal Committees and ~~for recommending~~recommends to the Board the appointment of any new Directors. ~~These regular~~It is important that the Board is refreshed regularly and the Committee conducts these reviews ~~aim~~ to ensure that there is an appropriate mix of skills and experience on ~~the Board, taking into account the need to progressively refresh~~ the Board. Details of the experience and skills of each of the current Directors are set out in their biographies on pages ~~111~~138 to ~~113.~~139. The length of tenure of the current non-executive Directors is illustrated byin Figure 4.
In line with the ~~chart below right.~~
~~All~~recommendations of the Code, all Directors ~~are required to~~usually seek re-election every three years and any Directors appointed during the year seek re-election at the next annual general meeting (AGM). However, for the 2009 AGM, as set out in the Group Chairman’s letter to shareholders dated 18th November 2008, all Directors will be seeking re-election, with the exception of Sir Nigel Rudd and Professor Dame Sandra Dawson, who ~~has served on~~will be retiring at the ~~Board since 1996, seeks re-election annually. These periods are in line with the recommendations~~conclusion of the ~~Code.~~AGM. Details ~~of Directors proposed for re-election~~ are ~~given~~set out in the Notice of ~~Shareholder Meetings, which is enclosed separately with this Report.~~Meeting.
~~Executive~~External appointments contribute to an executive Director’s ongoing development and experience and executive Directors are ~~allowed~~permitted to serve on one other listed company board, in addition to their role at Barclays. Other appointments may be taken up with the approval of the Group Chairman. All external appointments are considered in line with the Group’s policy on Directors’ Conflicts of Interest and, if appropriate, each appointment is authorised by the Board. Further details of the Group’s policy on Directors’ Conflicts of Interest are set out on page 148.
Independence of non-executive Directors
The Code sets out circumstances that may be relevant to the Board in determining whether each non-executive Director is independent. Barclays Charter of Expectations sets out specific criteria, which the Board ~~may find relevant when determining~~considers are essential behaviours, to assess the independence of aeach non-executive ~~Director. The Board considers that the following behaviours,~~Director, as ~~set out in our Charter of Expectations, are essential for the Board to conclude an individual is independent:~~follows:

–
provides objective challenge to management;

–
is prepared to challenge ~~others’~~other’s assumptions, beliefs or viewpoints as necessary for the good of the organisation;.

–
questions intelligently, debates constructively, challenges rigorously and decides dispassionately;

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Corporate governance
Corporate governance report

–
is willing to stand up and defend their own beliefs and viewpoints in order to support the ultimate good of the organisation; and

–
has a good understanding of the organisation’s business and affairs to enable them to properly to evaluate the information and responses provided by management.
The Board considers non-executive Director independence on an annual basis, as part of each Director’s performance review.
The Board Corporate Governance and Nominations Committee and subsequently the Board reviewed the independence of non-executive Directors in early ~~2008~~2009 and concluded that each of them continues to demonstrate these essential behaviours. In determining that each of the non-executive Directors remains independent, the Board considered in particular the following:

–
Sir Nigel Rudd has served as a non-executive Director since 1996. ~~The Code suggests that length of tenure is a factor to consider when determining independence.~~
The Code suggests that length of tenure is a factor that should be considered when determining whether a Director continues to be independent. As recommended by the Code, it is our policy that any Director who serves for more than nine years should seek annual re-election by shareholders and that all Directors subject to re-election should undergo a rigorous performance evaluation.

–

At the time of his appointment to the Board, Dr Danie Cronjé was Chairman of Absa. The Code suggests that such a business relationship is a factor to be considered by the Board when determining independence. The Code further suggests that cross-directorships may affect independence. Sir Nigel Rudd and Dr Cronjé are both non-executive Directors of Sappi Limited. Dr Cronjé retired as Chairman of Absa and left the Absa Board in 2007 and will not submit himself for re-election as a Director of Barclays when he retires at the 2008 AGM.

As a result of the annual performance review, the Board concluded that Sir Nigel Rudd ~~and Dr Cronjé both continue~~continues to demonstrate the essential characteristics of independence expected by the Board. The Board continues to be regularly refreshed and the Board considers Sir Nigel’s length of service, and ~~his~~the resulting experience and knowledge of Barclays ~~is viewed by the Board~~he has gained, as being especially ~~valuable,~~valuable. This proved particularly ~~as only one other non-executive Director~~helpful during the difficult market conditions in 2008. Sir Nigel has ~~served~~stood for ~~more than six years~~re-election annually at each AGM since 2005. Sir Nigel will, however, retire at the 2009 AGM and ~~the Board continues to be regularly refreshed.~~is not seeking re-election.

All Directors must report any changes in their circumstances to the Board and the Board reserves the right to terminate the appointment of a non-executive Director if there are any material changes in their circumstances that may conflict with their commitments as a Barclays Director or that may impact on their independence. Under UK company law, a Director must now seek authorisation before taking up any position with another company that conflicts, or may possibly conflict, with the Company’s interests. Barclays Articles of Association contain provisions to allow the Directors to authorise situations of potential conflicts of interest so that a Director is not in breach of his/her duty under company law. All existing external appointments for each Director were considered and authorised by the Board in September 2008 and additional external appointments have been authorised at subsequent Board meetings following notification to the Company Secretary. Each authorisation is set out in a Conflicts Register. The Board Corporate Governance and Nominations Committee is responsible for conducting an annual review of the Conflicts Register and confirming to the Board that, where relevant, conflicts have been dealt with appropriately, and that the process for dealing with them is operating effectively.

Conflicts of Interest

The following Directors’ Duties on Conflicts of Interest set out in the Companies Act 2006 (the Act) came into force on 1st October 2008:

– a duty not to accept benefits from third parties;

– a duty to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company (situational conflicts); and

– a duty to disclose any interest in a proposed or existing transaction or arrangement with the company (transactional conflicts).

Barclays Articles of Association were amended at the 2008 AGM to allow the Directors to authorise situational conflicts as permitted by the Act.

It is the responsibility of each Director to comply with the Act and Directors are required to notify Barclays in writing of any new situational or transactional conflicts. They are also required to consider the interests of their connected persons in case they amount to an indirect interest. Details of the potential conflict are submitted to the next Board meeting and the Directors, excluding the Director to whom the potential conflict relates, must carefully consider each potential conflict of interest before it is authorised, if appropriate.

~~120~~148

Barclays

Annual Report ~~2007~~2008

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Board and Committee Membership and Attendance

The table below sets out attendance of Directors at ~~scheduled~~ Board and Committee meetings in ~~2007.~~2008.

   Independent    Board    Board
Audit
Committee    Board HR &
Remuneration
Committee    Board
Corporate
Governance &
Nominations
Committee    Board
Risk
Committee
Number of scheduled meetings
      8    8    4    2    4
Group Chairman

Marcus Agius
   OA    8    –    4    2    –
Executive Directors

John Varley (Group Chief Executive)
   ED    8    –    –    –    –
Robert E Diamond Jr
   ED    8    –    –    –    –
Gary Hoffman
   ED    8    –    –    –    –
Chris Lucas (joined the Board 1st April 2007)
   ED    6    –    –    –    –
Frits Seegers
   ED    8    –    –    –    –
Naguib Kheraj (left the Board 31st March 2007)
   ED    2    –    –    –    –
Non-executive Directors

David Booth (joined the Board 1st May 2007)
   I    5    –    –    –    –
Sir Richard Broadbent (Senior Independent Director)
   I    8    –    4    2    4
Leigh Clifford
   I    7    –    2    –    –
Fulvio Conti
   I    7    6    –    –    –
Dr Danie Cronjé
   I    8    –    –    –    4
Professor Dame Sandra Dawson
   I    8    8    –    –    –
Sir Andrew Likierman
   I    8    8    –    –    4
Sir Nigel Rudd (Deputy Chairman)
   I    8    –    –    2    –
Stephen Russell
   I    8    8    –    2    4
Sir John Sunderland
   I    8    –    4    2    –

Independent

Scheduled

Board

Additional

Board

Audit

Committee

Board HR &

Remuneration

Committee

Board
Corporate
Governance &
Nominations
Committee

Board

Risk

Committee

Number of meetings held

Group Chairman

Marcus Agius

–

Executive Directors

John Varley (Group Chief Executive)

–

Bob Diamond

–

Gary Hoffman (left the Board 31st August 2008)

–

Chris Lucas

–

Frits Seegers

–

Non-executive Directors

David Booth

–

Sir Richard Broadbent (Senior Independent Director)

–

Leigh Clifford

–

Fulvio Conti

–

Dr Danie Cronjé (left the Board 24th April 2008)

–

Professor Dame Sandra Dawson

–

Sir Andrew Likierman

–

Sir Michael Rake

–

Sir Nigel Rudd (Deputy Chairman)

–

Stephen Russell

–

Sir John Sunderland

–

Patience Wheatcroft

–

Key


OA		Independent on appointment


ED		Executive Director


I		Independent non-executive Director

Board Committees

~~In order for~~Certain responsibilities of the Board are delegated to ~~carry~~Board Committees to assist the Board in carrying out its functions and to ensure independent oversight of internal control and risk ~~management, certain aspects~~management. Membership of ~~its role are delegated to~~ Board Committees ~~whose~~is recommended to the Board by the Board Corporate Governance and Nominations Committee, which reviews Committee composition and balance regularly to ensure the Committees are refreshed. All members of principal Board Committees are non-executive ~~Directors. The~~Directors, although the Chairman is a member of the Board HR and Remuneration Committee. Each Board Committee’s terms of reference set out the specific matters for which delegated authority has been ~~given are set out in each Board Committee’s~~given. These terms of reference, which are available on our website, are reviewed annually.

The Board has delegated authority to four principal Board Committees:

–

Board Audit Committee

–

Board Risk Committee

–

Board Corporate Governance and Nominations Committee

–

Board HR and Remuneration Committee

The Board appoints Committee members on the recommendation of the Board Corporate Governance and Nominations Committee, which regularly reviews Committee composition and balance and the need for refreshment. The number of ~~scheduled~~ meetings held and attendance at the Committee meetings is set out above in ‘Board and Committee Membership and Attendance’. The activities of the Board Committees ~~report on their activities~~are set out on the ~~following pages.~~pages 149 to 154.

The terms of reference for each of the principal Board Committees are available from the Corporate Governance section at:www.aboutbarclays.com.

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~~Annual Report 2007~~

~~121~~

~~Corporate governance~~

~~Corporate governance report~~

Board Audit Committee

Stephen Russell (Chairman)

Fulvio Conti

Professor Dame Sandra Dawson

Sir Andrew Likierman

Sir Michael Rake ~~(from 1st January 2008)~~

Secretary: Lawrence Dickinson

The Board Audit Committee terms of reference are available from the Corporate Governance section at:~~http://~~www.aboutbarclays.com.

~~There~~In addition to the members of the Committee, there are a number of regular attendees at each ~~meeting, including the~~meeting. The Group Chief Executive, Group Finance Director, Barclays Internal Audit Director, ~~Barclays~~Group Risk Director, ~~Barclays~~Group General Counsel and the lead external audit ~~partner.~~partner normally attend all scheduled Board Audit Committees. The Board Audit Committee members usually meet privately before each meeting to raise any concerns with the Chairman of the meeting and they also meet with the external auditors and the Barclays Internal Audit Director, without management present, ~~as part~~at the end of most Committee meetings. Sir Andrew Likierman ~~continued in~~continues to fulfil his role as the ‘financial expert’ as defined by the US Sarbanes-Oxley Act of 2002 and, ~~has ‘recent and relevant financial experience’ as recommended by the Code,~~ as a result of his accountancy background and his career with HM ~~Treasury. Since~~Treasury, has ‘recent and relevant financial experience’ as recommended by the ~~year end,~~Code. Sir Michael Rake ~~a former~~will succeed Stephen Russell as Chairman of the Committee in March 2009. Sir Michael has significant audit experience having worked at KPMG from 1972-2007 where he was Chairman of KPMG International ~~has been appointed a member of the Committee.~~from 2002-2007.

Barclays

Annual Report 2008

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Corporate governance

Corporate governance report

Activities in ~~2007~~2008

~~The chart below~~Figure 5 illustrates how the Committee ~~spent~~allocated its time in ~~2007.~~2008. During ~~2007,~~2008, the Committee:

–

considered the information it would require during the coming year to enable it to discharge its responsibilities;

–

considered the significant changes in financial markets and economic conditions and the impact on the areas of focus for the Committee;

–

reviewed the Annual Report and Accounts and half-year Results and Interim Management Statements;

–

reviewed in detail the valuations of Barclays Capital’s credit market exposures, reviewing mark-to-market valuations and accounting for derivatives and assessing the overall quality of earnings;

–

reviewed the Group’s accounting policies and, in particular, the accounting for leveraged loans;

–

considered control issues of Group level significance for different areas of the business;

–

received reports on the control environment in each of the following ~~areas: Barclaycard, BGI,~~businesses or functions: Barclays Wealth, Barclays Commercial Bank, Western Europe, Global Retail and Commercial Banking IT, Barclaycard, Global Payments, Emerging Markets, ~~GRCB IT, UK Retail Banking~~BGI, Absa and Barclays Capital;

–

reviewed the effectiveness and independence of the Group statutory auditor;

–

~~monitored~~approved the ~~performance~~re-appointment, remuneration and engagement letter of the ~~Internal Audit function;~~

–

~~reviewed internal control and risk management systems;~~Group statutory auditor;

–

considered the provision of non-audit services by the Group statutory auditor – more details can be found in the ~~panel opposite;~~

–

~~approved the re-appointment, remuneration and engagement letter of the Group statutory auditor;~~

–

~~reviewed the Annual Report and Accounts and Preliminary and Interim Results;~~

–

~~considered the effectiveness of internal controls over financial reporting;~~box on page 151;

–

received reports from the external and internal auditors;

–

monitored the performance of the Internal Audit function;

–

reviewed the Global Internal Audit Plan;

–

~~received regular reports on concerns raised by employees (whistleblowing – more details can be found on page 123);~~reviewed the internal control and risk management systems;

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–

~~considered the Fraud Risk Control Framework.~~

~~The Committee also received regular updates during 2007 on:~~

–

~~Basel II;~~

–

~~MiFID;~~

–

~~Sarbanes-Oxley compliance; and~~

–

~~Sanctions compliance.~~

~~In February 2008, the Committee reviewed its activities in 2007 against its terms of reference and concluded that it had discharged the responsibilities delegated to it under those terms of reference.~~

~~Non-audit services policy~~

The Committee takes seriously its responsibility to put in place safeguards to auditor objectivity and independence. It has therefore established a policy on the provision of services by the Group’s statutory auditor. The Policy describes the circumstances in which the Auditor may be permitted to undertake non-audit work for the Group. The Committee oversees compliance with the Policy and considers and approves requests to use the Auditor for non-audit work. Allowable non-audit services require pre-approval before they can be carried out. For allowable services, the Committee has pre-approved all assignments where the expected fee does not exceed £100,000, or £10,000 in the case of certain taxation services. Any assignment where the expected fee is above the relevant threshold requires specific approval from the Committee or a member of the Committee. The Company Secretary and his team deal with day-to-day administration of the Policy, facilitating requests for approval by the Committee. The Committee receives a report at each meeting on the non-audit services provided by the Auditor and the Policy is reviewed by the Committee annually. Details of the services that are prohibited and allowed are set out below.

~~Services that are prohibited include:~~

–

~~bookkeeping~~

–

~~design and implementation of financial information systems~~

–

~~appraisal or valuation services~~

–

~~actuarial services~~

–

~~internal audit outsourcing~~

–

~~management and Human Resource functions~~

–

~~broker or dealer, investment advisor or investment banking services~~

–

~~legal, expert and tax services involving advocacy~~

~~Allowable services that may be approved include:~~

–

~~statutory and regulatory audit services and regulatory non-audit services~~

–

~~other attest and assurance services~~

–

~~accountancy advice and training~~

–

~~risk management and controls advice~~

–

~~transaction support~~

–

~~taxation services~~

–

~~business support and recoveries~~

–

~~translation services~~

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~~Approval of financial statements~~

Barclays has in place a strong governance process to support its framework of disclosure controls and procedures. That process, in which the Board Audit Committee plays a key role, is illustrated below.

The membership of the Disclosure Committee and its role is set out on page 125. The Legal and Technical Review Committee is an accounting, legal and regulatory compliance committee, which is responsible for reviewing the Group’s financial reports and disclosures and for ensuring they have been subject to adequate verification. Meetings are attended by the Group’s external US lawyers and auditors. This governance process ensures that there is sufficient opportunity for both management and the Board to review and challenge the Group’s financial statements and other significant disclosures before publication. It also provides assurance for the certifications made by the Group Chief Executive and Group Finance Director as required under the Sarbanes-Oxley Act 2002 and recommended by the Turnbull Guidance on Internal Control. Further details of the Group’s system of internal control and an assessment of its effectiveness may be found on page 143.

~~Whistleblowing~~

Barclays takes any concerns of employees about the integrity and honesty of other employees very seriously and will investigate where appropriate. Information leaflets are distributed encouraging employees to report any behaviours or actions that they reasonably believe might be against accounting or regulatory requirements, as well as our internal policies. Dedicated whistleblowing hotlines and email addresses are in place so employees can talk about what has happened, or is happening, directly and in confidence. The Board Audit Committee receives reports of instances of whistleblowing and any resulting investigations.

Board Audit Committee Chairman’s Statement

We ~~had eight scheduled~~held ten meetings in ~~2007~~2008 and ~~the report set out above describes in some detail~~an overview of how we used our ~~meetings.~~ meetings is set out below.

Our areas of focus in 2008 were dominated by the continuing disruption to the credit markets and financial services sector as a whole. In early 2008, we held a separate session of the Committee on accounting for and valuation of derivatives and complex financial instruments and also reviewed the Group’s valuation methodology for these instruments. The latter comprises trading desk evaluation supported by independent price testing and benchmarking, followed by a review by Finance and Risk and by the external auditor.

When considering the Group’s preliminary and half-year results and interim management statements, we spent a significant amount of time reviewing the disclosures around and the fair value of Barclays Capital’s credit markets exposures, including asset backed securities and leveraged credit positions. As part of the approval of each results statement, we reviewed the fair value of the credit market exposures and the form and content of the disclosures. The review of the credit market exposure valuations included a review of marks by key asset categories, movements in exposures (including sales/paydowns) and a review of underlying collateral by vintage and rating. The Committee received at both the half-year and year-end and before each Interim Management Statement a specific presentation from Barclays Capital’s Chief Operating Officer and discussed the valuations with the Group Finance Director, Group Risk Director and, importantly, the Group’s external auditors. Reassurance was sought from independent Group control functions such as Risk and Finance, and the external auditors, that the individual marks were appropriate. The Committee was reassured that there were no significant variations between the prices at which assets were sold and the underlying marks. The Committee was content that the markets and models to which the valuations are marked are sufficiently robust to enable reliable and relevant valuations to be determined.

We also reviewed the controls around Barclays Capital’s complex financial instruments, as well as reviewing the overall control environment at Barclays Capital. The Committee has sought to learn lessons from events at our peers, receiving reports on the circumstances surrounding losses experienced at Société Générale and UBS. We discussed the overall impact of market conditions and the challenging financial markets on the remit of the Committee and this will help shape our agenda for 2009.

In the second half of the year, as the financial crisis started to evolve into a global economic downturn, the Committee directed increasing attention at the deepening economic downturn, reviewing the key controls by which consequent risk can be managed. As a result, impairment measurement, fraud controls, collections activities and day-to-day credit controls and security documentation are receiving increased scrutiny from the Committee. During the year we also received additional presentations and reports on the impact of the acquisition of the Lehman Brothers North

American businesses in September 2008, including an initial assessment of the risks and controls in that business and a report on the impact of the acquisition on financial reporting. In reviewing the Internal Audit Plan for 2009, we also challenged management to make sure that the Internal Audit function is appropriately resourced for the challenges ahead and is directing its attention on areas likely to come under pressure in the expected downturn.

Our reviews of the control environment in each of our businesses in ~~2007 had a particular~~2008 continued to focus on those areas where the Group’s business is expanding or which are deemed to be higher ~~risk.~~risk, including Emerging Markets. We also ~~continued to review~~reviewed the controls around our key regulatory programmes, in particular, Sarbanes-Oxley and Basel ~~II.~~ II, and received regular reports on Sanctions compliance and Know Your Customer and Anti-Money Laundering controls.

The ~~second half~~internal and external auditors are evaluated annually. Feedback on both is sought from key stakeholders in the Group via questionnaires with the results being presented to and discussed by the Committee. The Committee is satisfied with the performance of both auditors. During 2009, an external assessment of the ~~year saw significant disruption~~internal audit function will be undertaken. The Committee has recommended to the ~~credit markets~~Board and ~~we held two additional meetings~~ to ~~review~~shareholders that PwC should be re-appointed as the Group’s auditors at the AGM on 23rd April 2009. We are fully satisfied that PwC provides effective, independent challenge to management, which has been crucial in the current difficult environment, and ~~consider the statements made by the Group on its exposures~~has provided valued support to the ~~sub-prime market.~~Committee in the advice given and the clarity of their briefings and reports. The ~~Committee discussed~~feedback received from other stakeholders through the ~~timing and content~~annual evaluation exercise has been positive.

As Chairman of the ~~statements~~Committee, I have liaised as appropriate with the Chairman of the Board HR and ~~the process that had been followed~~Remuneration Committee, particularly to ~~prepare the statements, including the internal reviews conducted. We also reviewed Barclays Capital’s control environment and how effectively it had operated during the difficult market conditions.~~

In light of market events in 2007, in February 2008 we held a separate session for Committee members on accounting for and valuation of derivatives and complex investment banking instruments and subsequently considered a report reviewing the loan impairment and mark-to-market valuations aheaddraw attention to any specific aspects of the Group’s ~~2007 preliminary results.~~results which I feel he ought to be aware of when determining appropriate levels of compensation.

The Committee can confirm that it received sufficient, reliable and timely information from management to enable it to fulfil its responsibilities.

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Stephen Russell

Chairman of the Board Audit Committee

~~7th~~5th March ~~2008~~2009

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Annual Report 2008

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–

considered the effectiveness of the Group’s internal controls over financial reporting;

–

received regular reports on ‘Raising Concerns’, including whistleblowing;

–

considered the Fraud Risk Control Framework; and

–

reviewed its Terms of Reference to satisfy itself that they enable the Committee to fulfill its responsibilities.

The Committee also received regular updates during 2008 on:

–

Basel II

–

MiFID

–

Sarbanes-Oxley

–

Sanctions compliance

In February 2009, the Committee reviewed its activities in 2008 against its terms of reference and concluded that it had discharged the responsibilities delegated to it under those terms of reference.

Approval of financial statements

Barclays has a strong governance process in place to support its framework of disclosure controls and procedures. That process, in which the Board Audit Committee plays a key role, is illustrated in Figure 6.

The Legal and Technical Review Committee is an accounting, legal and regulatory compliance committee, which is responsible for reviewing the Group’s financial reports and disclosures to ensure that they have been subject to adequate verification and comply with legal and technical requirements. Meetings are attended by the Group’s auditors and US lawyers. The membership of the Disclosure Committee and its role is set out on page 154. The membership of the Executive Committee and its role is set out on pages 153 and 154.

This governance process is in place to ensure both management and the Board are given sufficient opportunity to review and challenge the Group’s financial statements and other significant disclosures before they are made public. It also provides assurance for the Group Chief Executive and Group Finance Director when providing certifications as required under the Sarbanes-Oxley Act 2002 and recommended by the Turnbull Guidance on Internal Control. Further details of the Group’s system of internal control and an assessment of its effectiveness may be found on page 173.

Non-Audit Services Policy

The Committee takes seriously its responsibility to put in place safeguards to auditor objectivity and independence. It has therefore established a policy on the provision of services by the Group’s statutory auditor. The Policy describes the circumstances in which the auditor may be permitted to undertake non-audit work for the Group. The Committee oversees compliance with the Policy and considers and approves requests to use the auditor for non-audit work. Allowable services are pre-approved up to £100,000, or £10,000 in the case of certain taxation services. The Company Secretary and his team deal with day-to-day administration of the Policy, facilitating requests for approval by the Committee. The Committee receives a report at each meeting on the non-audit services provided by the auditor and the Policy is reviewed by the Committee annually. Details of the services that are prohibited and allowed are set out below.

Services that are prohibited include:

– bookkeeping

– design and implementation of financial information systems

– appraisal or valuation services

– actuarial services

– internal audit outsourcing

– management and Human Resource functions

– broker or dealer, investment adviser or investment banking services

– legal, expert and tax services involving advocacy

Allowable services that the Committee will consider for approval include:

– statutory and regulatory audit services and regulatory non-audit services

– other attest and assurance services

– accountancy advice and training

– risk management and controls advice

– transaction support

– taxation services

– business support and recoveries

– translation services

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Annual Report ~~2007~~2008

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Corporate governance

Corporate governance report

Board Risk Committee

Sir Richard Broadbent (Chairman)

David Booth ~~(from 1st January 2008)~~

Dr Danie Cronjé (to 24th April 2008)

Sir Andrew Likierman

Stephen Russell

Secretary: Lawrence Dickinson

~~Risk is a key parameter of Barclays business. Accordingly, the Board has established a Board Risk Committee to provide Board level monitoring and oversight of all Barclays risk activities.~~

The Board Risk ~~Committee’s~~Committee terms of reference are available from the Corporate Governance section at:~~http://~~www.aboutbarclays.com.

In addition to ~~its members,~~the Members of the Committee, all meetings are usually attended by the Group Finance Director and ~~the Barclays~~Group Risk Director. ~~Attendees at meetings may also include~~ Barclays Internal Audit Director, ~~Barclays~~Group General Counsel and ~~the~~ Barclays external auditor, as well as other senior executives, ~~who join~~also attend meetings of the Board Risk Committee, where appropriate.

The Board recognises that risk is a key parameter for ~~specific topics.~~the business.

The Board Risk Committee provides monitoring and oversight of all Barclays risk activities. During 2008, the Committee received presentations and updates on key aspects of the external market conditions to ensure it was able to maintain an appropriate level of oversight and report effectively to the Board.

~~Approach~~Activities in 2008

The Committee ~~approaches~~met four times in 2008 and Figure 7 shows how the Committee allocated its ~~task primarily by:~~time at those meetings. During 2008, the Committee:

–

~~receiving from~~received regular reports on, and considered, Risk Appetite and the ~~Barclays~~Group’s risk profile, including key indicators for Risk ~~Director~~Appetite, Group Impairment, Retail Credit Risk, Wholesale Credit Risk, Market Risk, Financial Crime, Operational Risk and ~~discussing a detailed risk report at every meeting;~~Economic Capital;

–

~~reviewing in depth specific topics or areas of risk that~~reviewed at each meeting updates on asset backed securities and leveraged credit markets, including the ~~Committee identifies as meriting detailed analysis;~~Group’s exposures to sub-prime and Alt-A markets, monoline insurers and leveraged loan underwriting positions;

–

~~reviewing stress scenarios;~~reviewed updates on liquidity risk;

–

~~reviewing historic~~reviewed risk ~~tendencies~~trends and ~~experiences;~~risk management in GRCB – Emerging Markets and South Africa;

–

~~monitoring risk appetite~~received regular Forward Risk Trends reports, which set out the internal and ~~the Group’s risk profile. The Committee recommends to the Board each year an appropriate level and composition~~external indicators that are showing signs of ~~risk for the coming year.~~strain;

~~In addition, the Committee:~~

–

~~reviews~~reviewed the internal control framework;

–

~~examines~~examined the risk control framework, and ~~approves~~approved Group policies including the trading book policy, large exposures policy, liquidity policy, retail and wholesale credit impairment ~~policy~~policies and the Group’s principal risks policy; ~~and~~

–

~~receives~~reviewed Group-wide stress testing scenarios and results;

–

reviewed in greater detail the process around setting annual Risk Appetite to establish the effectiveness of the process in responding to significant changes in economic and market conditions;

–

reviewed the programme of actions being taken Group-wide to mitigate risk in view of deteriorating economic conditions in our major markets, such as the UK, US, South Africa and Spain;

–

reviewed the Risk Appetite for the Group for 2009 and made recommendations to the Board; and.

–

received updates on ~~risk measurement methodologies.~~Basel II.

~~Activities in 2007~~

The Committee requested at the end of 2006 that the US mortgage business be reviewed early in the year as one of the key risk issues. This was presented in March 2007 and included an analysis of stress loss scenarios under adverse market conditions. Management took decisions during the first half of 2007 to reduce limits in this business and, given the volatility in the credit markets during 2007, the Committee subsequently received regular reports on market conditions.

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During 2007, the Committee also reviewed, in depth, leveraged credit and asset backed securities markets, including the Group’s counterparty exposures. It considered whether there were any signs of material contagion in other markets in which the Group operates. The Committee examined how the Group’s risk controls and stress limits had operated in the prevailing market conditions and was satisfied that risk controls had operated as anticipated. The Committee reviewed the impact on impairment and mark-to-market positions and the impact on the Group’s balance sheet of the market conditions. The Committee also monitored progress in meeting the new capital regime introduced under Basel II and continued to review the retail credit experience.

~~The chart below left shows how the Committee allocated its time at its meetings in 2007.~~
Board Risk Committee Chairman’s Statement
2008 was a challenging year for risk management and this was reflected in the work of the Committee, which is detailed below. Particular areas worthy of note were:
–  The Committee monitored the Group’s sub-prime exposures throughout the year. The reduction in limits and scale of the sub-prime business in 2007 reduced the impact of the crisis, although substantial write-downs were still required during 2008, reflecting a further deterioration in the markets and underlying performance of the assets.
–  The Committee also monitored the Group’s exposure to other areas affected by the crisis, including other asset-backed securities, commercial mortgages and monoline insurers.
–  The Committee reviewed and compared the write-downs being taken in the sub-prime and related areas with those being taken by the industry.
–  The Committee monitored carefully the Group’s overall risk exposure in the light of the anticipated worsening in economic conditions and reviewed management plans to manage and mitigate the effects of the expected downturn in multiple markets.
–  The Committee also monitored the capital position throughout the year relative to regulatory requirements and the Group’s overall risk appetite. Several steps were taken throughout the year to strengthen the capital base prior to the events of October 2008 when the regulator changed the capital requirements for banks, requiring a further and substantial capital raising.
–  The Committee played an active role in informing Board debate about Risk Appetite and capital planning for 2009.
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Sir Richard Broadbent
Chairman of the Board Risk Committee
5th March 2009

In March ~~2008,~~2009, the Committee will review its activities in ~~2007~~2008 against its terms of reference.

More information on risk management and the internal control framework can be found in the Risk management report on pages 6557 to ~~73.~~136.

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Board Corporate Governance and

Nominations Committee

Marcus Agius (Chairman)

Sir Richard Broadbent

Sir Nigel Rudd

Stephen Russell

Sir John Sunderland

Secretary: Lawrence Dickinson

The Board Corporate Governance and Nominations Committee terms of reference are available from the Corporate Governance section at:~~http://www.aboutbarclays.com~~www.aboutbarclays.com.

The meetings are also attended by the Group Chief Executive.

Activities in ~~2007~~2008

~~The chart below right~~Figure 8 shows how the Committee allocated its time at its meetings in ~~2007.~~2008. During ~~2007,~~2008, the Committee:

–

~~regularly~~ reviewed Board and Board Committee composition to ensure the right mix of skills and experience are present;

–

~~recommended the appointment of David Booth, Sir Michael Rake and Patience Wheatcroft as non-executive Directors;~~

–

monitored the progress of the action plan arising from the ~~2006~~2007 Board Effectiveness Review and oversaw the conduct of the ~~2007~~2008 Board Effectiveness Review;

–

reviewed the corporate governance disclosures for the ~~2006~~2007 Annual Report and considered the proposed disclosures for ~~2007;~~2008;

–

reviewed and updated Corporate Governance in Barclays and the Charter of Expectations; and

–

reviewed succession plans for the Executive Committee and the position of Group Chief Executive.

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~~Barclays~~

~~Annual Report 2007~~

The Committee also received updates on:

–

the status of the Companies Act 2006 and, in particular, the new statutory statement of Directors’ ~~Duties; and~~

–

~~the FRC’s review~~Duties on Conflicts of ~~the Combined Code.~~Interest.

During ~~2007,~~2008, the Committee reviewed the composition of the Board and its principal Committees at each of its meetings. Following those deliberations, the Committee recommended to the Board that Sir Michael Rake succeed Stephen Russell as Chairman of the ~~appointments of David Booth (May 2007),~~Board Audit Committee with effect from March 2009. No new Directors were appointed to the Board during 2008, other than Sir Michael Rake and Patience Wheatcroft, ~~(January 2008) as~~who joined the Board with effect from 1st January 2008.

Given that Sir Nigel Rudd and Professor Dame Sandra Dawson will be retiring from the Board at the 2009 AGM and Stephen Russell will be retiring in October 2009 on completion of nine years’ service, the Committee also discussed both Board size and future Board composition and, in particular, given the continuing crisis in the world financial services industry, the type of skills and experience required in new non-executive Directors.

In ~~the case of David Booth,~~early 2009, the Committee ~~had~~ concluded that a non-executive Director with US banking experience would bring the skills and experience to the Board that had been lost on the retirement of Robert Steel as a non-executive Director in late 2006. In the case of Sir Michael Rake, the Committee sought a non-executive Director with a financial and auditing background. Patience Wheatcroft has extensive experience of institutional fund management should be sought and, with the ~~highest levels~~assistance of ~~business and politics, which will bring additional valuable skills and a wider perspective to the Board. When considering appointments, the Committee typically engages~~ external search consultants, ~~who are provided~~Simon Fraser was identified as a candidate with ~~a specification of~~ the skills and experience required, to assist with identifying potential candidates, although candidates may be recommended to the Committee from other sources. Each of David Booth, Sir Michael Rake and Patience Wheatcroftdesired experience. He met with members of the Board Corporate Governance & Nominations Committee ~~prior~~and his appointment was recommended to the ~~Committee considering their appointments~~Board, who approved his appointment as a Director. Simon will join the Board on 10th March 2009, subject to regulatory approvals.

Pursuant to an agreement entered into between Barclays and ~~recommendations being made~~China Development Bank (CDB) in August 2007 for the subscription of Barclays ordinary shares, CDB retain the right to nominate a non-executive Director to the ~~Board.~~Board of Barclays but did not take up this right during 2008.

In January ~~2008,~~2009, the Committee reviewed its activities in ~~2007~~2008 against its terms of reference and concluded that it had discharged the responsibilities delegated to it under those terms of reference.

Board HR and Remuneration Committee

Sir Richard Broadbent (Chairman)

Marcus Agius

Leigh Clifford

Sir John Sunderland

Secretary: Patrick Gonsalves

The Board HR and Remuneration Committee terms of reference are available from the Corporate Governance section at:~~http://~~www.aboutbarclays.com

~~The Committee’s independent advisers, from Towers Perrin MGMC~~Additional information on the role and ~~Kepler Associates, attended 2 meetings and 1 meeting~~activities of the Committee ~~respectively~~can be found in ~~2007.~~the Remuneration Report on pages 157 to 173, including the Group’s revised philosophy on remuneration, an explanation of the Group’s remuneration arrangements and a description of the framework for future decisions in this area.

Activities in ~~2007~~2008

~~The chart below~~Figure 9 shows how the Committee allocated its time at its meetings in ~~2007.~~ 2008. The Committee held additional meetings in November 2008 and January 2009, as a result of the rapidly changing economic environment and the intense scrutiny from regulators and other interested parties that the issue of remuneration has received.

During ~~2007,~~2008 the Committee:

–

~~held discussions with external advisers~~continued to review the ~~Committee;~~compensation frameworks in place for each area of the Group;

–

reviewed executive compensation;

–

~~considered resourcing, compensation and incentives for staff;~~reviewed the Group’s approach to remuneration in light of market conditions;

–

~~considered pensions, mobility~~approved the Pensions Strategy and ~~relocation~~other pension matters; ~~and~~

–

reviewed global staff benefits;

–

monitored the implementation of the talent agenda;

–

reviewed the ~~compensation frameworks~~Group’s Health and ~~overall level of bonus pools for each of the Group’s principal businesses.~~

~~The Committee received updates on:~~

–

~~revised ABI Guidelines on Executive Remuneration;~~Safety and Diversity and Inclusion performance;

–

~~talent;~~considered incentive funding for 2008 for each main business area;

–

~~health~~reviewed, current and ~~safety;~~future, Group and business long-term incentive arrangements; and

–

~~equality and diversity.~~held discussions with external advisers to the Committee on a range of issues, including obtaining market data on remuneration levels in specified markets.

~~In February 2008, the~~The Committee ~~reviewed~~received valuable support and advice from its ~~activities in 2007 against its terms of reference~~independent advisers, Towers Perrin MGMC and ~~concluded that it had discharged the responsibilities delegated to it under those terms of reference.~~Kepler Associates.

~~Detailed information on the role and activities of the Committee can be found in the Remuneration Report on pages 128 to 142.~~

Management

Executive Committee

~~The executive Directors bear the responsibility (under~~Under the leadership of the Group Chief ~~Executive)~~Executive, the executive Directors are responsible for managing the Group’s business and making and ~~implementing~~executing operational ~~decisions and running the Group’s business.~~decisions. The Executive Committee supports the Group Chief ~~Executive. It~~Executive and it meets ~~fortnightly~~every fortnight to ~~develop strategies~~discuss strategy development and policies to recommend to the ~~Board and to implement approved strategy.~~Board. The Executive Committee is also responsible for implementing approved strategy and is supported by other Committees, including the Disclosure Committee.

~~Executive Committee~~

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–
		~~John Varley (Chairman)~~Barclays

Annual Report 2008

–

~~Bob Diamond~~

–

~~Chris Lucas~~

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Corporate governance

Corporate governance report

–

~~Frits Seegers~~

Executive Committee

–

~~Paul Idzik~~

John Varley (Chairman)

Bob Diamond

Chris Lucas

Frits Seegers

Disclosure Committee

The Disclosure Committee is chaired by Chris Lucas, the Group Finance Director. Members include the Company Secretary, ~~Barclays~~Group General Counsel, ~~Head of~~Director, Investor Relations, ~~Barclays~~Group Risk Director, ~~Head of~~Barclays Corporate Affairs Director, Group Financial Controller and Barclays Treasurer. The Committee:

–

considers and reviews the preliminary and ~~interim~~half-year results, Annual Report/Annual Report on Form 20F and the Annual Review; and

–

considers Interim Management Statements released to the Stock ~~Exchange; and~~Exchange.

–

~~considers the content, accuracy and tone of any other announcement that is~~The Committee also considers the content, accuracy and tone of significant other announcements that are proposed to be made in accordance with the FSA’s Disclosure and Transparency Rules.

The Committee reports to the Executive Committee and also reports to the Board Audit ~~Committee.~~Committee, documenting its conclusions about the effectiveness of the design and operation of the disclosure controls and procedures. This forms part of the combined assurance given to the

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~~Annual Report 2007~~

~~125~~

~~Corporate governance~~

~~Corporate governance report~~

Board Audit Committee together with the report on the Turnbull Review of Internal Controls recommended by the Code.

Board Effectiveness

Performance Review

~~An annual~~The Code recommends that an evaluation of the effectiveness of the Board and ~~Committee effectiveness~~its Committees is conducted ~~as recommended by the Code.~~annually. The evaluation in ~~2006~~2007 was independently facilitated by Egon Zehnder International. All Directors were sent a questionnaire to complete and return to Egon Zehnder International and ~~comprised a questionnaire, supplemented by~~these were discussed in individual interviews, ~~and~~which included peer ~~reviews.~~review. The following actions were ~~set~~agreed for ~~2007:~~2008:

–

~~provision of additional training on risk issues for non-executive Directors, including specific awareness of risk management and measurement methodologies for Board Risk Committee members; and~~

–

~~continued work on Board meeting agenda management to ensure there is time for rigorous debate and exchange of ideas.~~

Training on risk issues was provided in April 2007 and feedback sought from the participants. The time allocated to Board meetings has been increased to allow for extended debate and discussion. The Board Corporate Governance and Nominations Committee monitored the progress of the action plan during 2007 and are satisfied with the steps taken to tackle the issues highlighted by the evaluation.

The 2007 evaluation was again independently facilitated by Egon Zehnder International. The evaluation took the form of detailed questionnaires completed by each Director, individual interviews and peer evaluation of fellow Directors. The results of the evaluation were presented to the Board in February 2008 and continued to demonstrate the improving trend since the current process of evaluation was adopted in 2004. The Board concluded that the Board and the principal Board Committees continue to operate effectively. Minor enhancements were recommended around:

–

minor enhancements around the form and content of Board papers and presentations; and

–

~~refinement to~~refining the Board calendar of business.

The 2008 evaluation was again independently facilitated by Egon Zehnder International and took the form of detailed questionnaires, which were completed by each Director, individual interviews and peer evaluation of fellow Directors. As in previous years, the evaluation covered the following areas:

–

Group performance;

–

Strategy and performance objectives;

–

Reporting to shareholders/stakeholders;

–

Structure, people, succession planning and remuneration;

–

Decision-making process;

–

Information flows;

–

Board structure and composition;

–

Board roles and responsibilities;

–

Board and Management relationships;

–

Board meetings; and

–

Board Committees.

The results of the evaluation were presented to the Board in December 2008. The results from the overall review showed a continuation of the five-year trend of improving scores and the Board concluded that the Board and the principal Board Committees continue to operate effectively in terms of communication, information flows and Directors’ participation and engagement, particularly during the period of difficult market conditions in 2008. The Directors recognised however, and were disappointed, that Group performance has not met shareholder expectations and acknowledged that they are accountable to shareholders for their stewardship of the Group during the exceptional events of 2008.

From the results of the 2008 evaluation, action points and issues that were discussed included:

–

continued focus on the Board’s calendar of business ~~particularly in respect~~to ensure that non-critical items are removed or kept to a minimum, thereby ensuring that sufficient time can be allocated to items fundamental to the success of the ~~timing~~Group;

–

refinements to the Board’s calendar of business, including additional time to be spent on items such as compensation strategy and ~~content~~succession planning;

–

the overall size and composition of ~~presentations on stakeholder management.~~the Board; and

–

refinements to the process for evaluating the performance of individual Directors.

The Board Corporate Governance and Nominations Committee ~~will recommend~~has agreed an action plan to ~~the Board to deliver these~~progress improvements in ~~2008.~~2009.

~~The~~In terms of individual Director performance, the Group Chairman ~~will hold~~held private meetings with ~~each Director to discuss the~~non-executive Directors in early 2009 so that individual and general results ~~and to agree areas for development~~could be discussed. Development plans relating to their own individual ~~performance. Feedback on the Group Chairman’s~~ performance ~~was provided to the~~were agreed. The Senior Independent Director ~~who discussed the results~~met privately with the other non-executive Directors and the Group Chief Executive ~~before meeting~~to discuss feedback he received on the Group Chairman’s performance. These results were then shared with the Group Chairman.

~~Training~~Director Development and Business Awareness

A ~~three part training~~comprehensive development and awareness programme is in place for Directors. This comprises:

–

an induction ~~training,~~programme, when they join the Board;

–

~~training and awareness of~~briefings on the business of Barclays; and

–

~~training and awareness of~~briefings on external technical matters.

Induction

All new Directors receive an ~~information pack that~~induction presentation, which explains ~~those disclosures they are obliged to make to the Company to comply with various laws and regulations. A presentation is given to all new Directors, which outlines~~ their responsibilities as a Director of a global, listed company and provides an overview of the Group and its businesses. ~~Each~~An information pack, that gives details of the disclosures that Directors are obliged to make to the Company to comply with various laws and regulations, is also provided to each new Director. A personal induction programme is scheduled with each new Director ~~then has a tailored induction programme to~~so that they can further ~~familiarise~~acquaint themselves with the Group and its businesses. ~~This takes the form of~~Each new Director attends sessions with each of the executive Directors and the heads of the main Group functions, ~~and~~which includes opportunities to visit operational sites to meet with senior management and employees. ~~Once they have completed the first~~The second part of their induction ~~and have a good overview of the Group, they then have further~~programme includes additional sessions with the executive Directors and senior managers from each of the ~~principal~~Group’s main business units to ~~gain a~~provide the new Director with detailed and ~~in depth~~in-depth understanding of ~~their business, which includes~~those businesses. The sessions focus on the challenges, opportunities and risks that are faced by ~~each. Marcus Agius~~each business unit. Sir Michael Rake and ~~David Booth~~Patience Wheatcroft undertook their induction ~~training in 2007. A report~~programmes during 2008.

In 2008, non-executive Directors were asked to complete a questionnaire and give feedback on topics on which they would like to receive additional briefings. Two in-depth briefing sessions were arranged during 2008 on impairment recognition and forecasting and on Barclays Capital’s traded products, including asset-backed securities, credit default swaps and collateralised debt obligations.

The Board and the ~~Group Chairman’s induction programme is set out in~~Board Audit and Board Risk Committees received further briefings to ensure they were kept up to date with the ~~panel above.~~changing global economic conditions, including updates on capital management, presentations on asset-backed securities and liquidity risk, mark-to-market valuations and briefing material to support the various capital raising proposals and acquisition of the Lehman Brothers North American businesses.

~~Group Chairman’s Induction~~

Since joining the Barclays Board in September 2006 and becoming Group Chairman in January 2007, I have been involved in a wide-ranging programme of meetings and familiarisation visits to help me get to know Barclays, our colleagues and customers.

The programme began in 2006, when I met with each member of the Executive Committee and senior management across each of the business areas and head office functions of Barclays. To broaden my understanding of the Barclays businesses, I have this year visited Retail Banking branches in the UK and Africa, Barclays Commercial Bank services in Stratford and Gadbrook Park, Barclaycard in Northampton, Barclays Capital in New York, Barclays Global Investors in San Francisco, Barclays France, Barclays Spain and the Barclays operations in Tokyo and Singapore.

~~As well as the induction meetings with senior management, I have met with shareholders and analysts and other stakeholders to gauge their views of Barclays and assess market opinion.~~

I am also Chairman of the Board Corporate Governance and Nominations Committee, a member of the Board HR and Remuneration Committee and I have attended meetings of both the Board Audit and Board Risk Committees during the year to observe at first hand how these Committees operate and the key issues they examine.

~~Marcus Agius~~

Barclays businesses and operations

During ~~2007, two off-site~~2008, one Board ~~meetings were held. In March, the~~meeting was held off-site. The Board met atin China in September and received presentations on the ~~New York offices of~~economic and political outlook in China and met key Barclays ~~Capital, where Directors were given a tour of~~staff working in the ~~site, including the trading floor, and had the opportunity~~Asia-Pacific region.

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Annual Report 2008

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Group Chief Executive, John Varley, helped to ~~meet with staff, senior management and major clients. In September, the Board met at the London office of Barclays Wealth.~~

launch UK National Branch Week ~~was held in September, where over 300~~by visiting the Coventry High Street branch. During the course of the week, around 400 senior executives from the Group went back to the floor to ~~find out what~~experience first hand the successes and challenges ~~employees~~colleagues in the branches are ~~facing at~~facing. Each day had a theme including raising the ~~sharp end~~profile of Barclays product range, employee benefits, the ~~business.~~importance of customer service, personal development and charity fundraising. A number of Directors participated and worked alongside cashiers, personal bankers and co-ordinators for the day. ~~To keep them informed of issues relevant~~

John Varley also spent time giving presentations to ~~front line employees and~~colleagues on the Group’s capital raising proposals. He kept colleagues up to date ~~with news~~on how market conditions were affecting Barclays and the decisions the Board was taking in respect of the capital raising options that were available. All colleagues were invited to attend the presentations in person or via conference call and John Varley answered questions raised by colleagues from around the ~~Group, Directors receive copies of The Globe, the magazine for employees.~~world.

External matters

Directors are regularly briefed on market opinion and receive copies of analyst research and press commentary. ~~Attendance at~~Further briefing material on market conditions was sent to Directors during 2008 and Directors continue to receive relevant publications to keep them up to date with changing market opinion. Directors are invited to attend results presentations ~~analyst rehearsals and corporate governance receptions enables Directors~~ to meet with analysts and investors to enhance their awareness of market ~~sentiment and the views of major shareholders.~~sentiment.

External speakers were invited to brief the Board in 2007 on the global economic outlook. All Directors were made aware in 2007 of their responsibilities under the FSA’s Prospectus Rules in connection with the proposed merger with ABN AMRO. A number of briefings were given to the Board on the changes being introduced by the Companies Act 2006 and, in particular, the new statutory statement of Directors’ Duties, to ensure that Directors are aware of their responsibilities. Guidance was provided to management and to the Board on the desired content of supporting Board and Committee papers, to ensure that Directors are provided with sufficient information to allow them to have regard to (amongst others) the stakeholders of the Group and the long term consequences of any decisions they make.

~~126~~

~~Barclays~~

~~Annual Report 2007~~

Statement on US Corporate Governance Standards

The statement required by NYSE is set out below.

Director independence

~~Under the~~ NYSE Rules require the majority of the Board ~~should~~to be independent. ~~Under the~~

The Code requires at least half of the Board (excluding the Chairman) ~~is required~~ to be independent. The NYSE Rules contain detailed tests for determining whether a Director ~~independence,~~is independent, whereas the Code requires the Board to determine whether each Director is independent in character and judgement and sets out criteria that may be relevant to that determination. We follow the Code’s recommendations as well as developing best practices among other UK public companies. ~~Our Board annually reviews the~~The independence of our non-executive Directors ~~taking~~is reviewed by the Board on an annual basis and it takes into account the guidance in the Code and the criteria we have established for determining independence, which are described on ~~page 120.~~pages 147 and 148.

Board Committees

We have a Board Corporate Governance and Nominations Committee and a Board HR and Remuneration (rather than Compensation) Committee, both of which are broadly ~~comparable~~similar in purpose and constitution to ~~those~~the Committees required by the NYSE Rules and whose terms of reference comply with the Code’s requirements. ~~Beyond~~As the ~~fact that~~Group Chairman was independent on appointment, the Code permits him to chair the Board Corporate Governance and Nominations Committee ~~is chaired by the Chairman of the Board~~ and ~~that the Chairman is~~be a member of the Board HR and Remuneration ~~Committee, both of which are permitted by the Code,~~Committee. Except for these appointments, both Committees are composed solely of non-executive Directors, whom the Board has determined to be independent. We follow the Code recommendation that a majority of the Nominations Committee should be independent non-executive Directors, whereas the NYSE Rules state that the Committee must be composed entirely of independent Directors. We comply with the NYSE Rules regarding the obligation to have a Board Audit Committee that meets the requirements of Rule 10A-3 of the US Securities Exchange Act, including the requirements relating to the independence of Committee members. In April ~~2007,~~2008, we made an Annual Written Affirmation of our compliance with these requirements to the NYSE. The Code also requires us to have a Board Audit Committee comprised solely of independent non-executive Directors. WeHowever, we follow the Code recommendations, rather than the NYSE Rules ~~however,~~ regarding the responsibilities of the Board Audit Committee, although both are broadly comparable. We also have a Board Risk Committee, comprised of independent non-executive Directors, which considers and discusses policies with respect to risk assessment and risk management.

Corporate Governance Guidelines

The NYSE Rules require domestic US companies to adopt and disclose corporate governance guidelines. There is no equivalent recommendation in the ~~Code. The~~Code but the Board Corporate Governance and Nominations Committee has ~~however,~~ developed corporate governance guidelines, ~~entitled Corporate~~‘Corporate Governance in ~~Barclays,~~Barclays’, which have been approved and adopted by the Board.

Code of Ethics

The NYSE Rules require that domestic US companies adopt and disclose a code of business conduct and ethics for Directors, officers and employees. Rather than a single consolidated code as envisaged in the NYSE Rules, we have a number of ‘values based’ business conduct and ethics policies which apply to all employees. In addition, we have adopted a Code of Ethics for the Group Chief Executive and senior financial officers as required by the US Securities and Exchange Commission.

Shareholder approval of equity-compensation plans

The NYSE listing standards require that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions to those plans. We comply with UK requirements, which are similar to the NYSE standards. ~~The~~However, the Board ~~however,~~ does not explicitly take into consideration the NYSE’s detailed definition of what are considered ‘material revisions’.

Relations with Shareholders

Institutional investors

~~The Board’s priorities include~~A key priority for the Board in 2008 was communicating with shareholders, particularly ahead of the General Meeting in November 2008, and also afterwards in order to provide further details to shareholders on the key decision points during the capital raising process. In the normal course of events, the Board aims to keep ~~them well~~shareholders up to date and informed about how the ~~Company’s prospects~~Company is performing and its strategy, ~~and staying abreast of~~whilst ensuring that it listens to the ~~views~~opinions of major ~~shareholders. To achieve this, executive~~shareholders and takes their views on board. Executive Directors and senior executives hold group and one to one meetings with major ~~investors.~~investors to ensure we are communicating effectively. Analyst research notes are distributed to Directors and our corporate brokers provide ~~annual~~regular feedback to the Board. The Investor Relations team organise roadshows, seminars, conferences, presentations and other activities that enable the Directors to interact with investors. ~~Prior to each AGM, the~~The Group Chairman, Senior Independent Director and Company Secretary ~~have~~conduct a series of meetings with the corporate governance representatives of our major institutional ~~shareholders.~~shareholders ahead of each AGM. Meetings were held with our major institutional shareholders to discuss the capital raising proposals.

Private shareholders

The Board has also tried to keep private shareholders up to date with information about the capital raising proposals during 2008. In June 2008, the Group Chairman sent a letter to shareholders regarding the Open Offer, which took place in July. Personalised forms were also sent to shareholders with a question and answer booklet to help explain the details of the Open Offer and how to complete the forms. Further documents were available on the Group’s website and sent to shareholders on request. In November, the Group Chairman sent a letter to shareholders and Notice of General Meeting, which set out the details of the Capital Raising that required shareholder approval. A follow-up letter was also sent to shareholders to inform them of developments and to advise shareholders that all Directors would offer themselves for re-election at the 2009 AGM and that the executive Directors had all agreed to waive their bonus for 2008. An open letter to shareholders, clients, customers and colleagues from the Group Chairman and Group Chief Executive was released to the London Stock Exchange on 26th January 2009 ahead of the publication of the annual results announcement on 9th February 2009.

The change in the law ~~now~~that allows us to communicate electronically with ~~our~~ shareholders unless they advise us that they prefer to receive paper. We have given shareholders a choice of how to receive shareholder communications going forward and those that receive documents electronically will have access to shareholder documents as soon as they are published. These new arrangements will enablehas enabled us to use less paper, which benefits the environment and lowers distribution costs for the Group. All shareholder documents are available electronically as soon as they are published but shareholders can still receive communications in paper format if they wish. This year we will continue to post the Annual Review, Notice of ~~Shareholder Meetings~~Meeting and proxy forms to all shareholders.

We encourage shareholders to hold their shares in Barclays Sharestore, where shares are held electronically in a cost-effective and secure environment. ~~Our~~Shareholders can use our e-view service ~~enables shareholders~~ to receive their shareholder documents ~~electronically. It~~electronically and they can also ~~gives shareholders~~use this service to get immediate access to information relating to their personal shareholding and dividend history. ~~Participants~~E-view participants can also change their details and dividend mandates online and receive dividend tax vouchers electronically.

Barclays

Annual Report 2008

155

Corporate governance

Corporate governance report

~~Shareholder Meetings~~Annual General Meeting/General Meeting

The ~~2007~~2008 AGM was held on ~~26th~~24th April ~~2007~~2008 at ~~the~~The Queen Elizabeth II Conference Centre in London. In accordance with best practice, all resolutions were considered on a poll and the results were made available on our website the same day. ~~54 percent~~52.9% of the shares in issue were voted and all resolutions were approved. All Directors are encouraged to attend the AGM and are available to answer shareholder questions. All Directors attended the ~~2007~~2008 AGM, with the exception of ~~Leigh Clifford,~~Dr Danie Cronjé, who ~~as Chief Executive of Rio Tinto,~~ was ~~attending that company’s AGM and~~retiring from the Board ~~meeting in Australia~~ on that day. A class meeting of ordinary shareholders was also held on 24th April 2008 for shareholders to consider the resolution of the AGM that created new preference share classes. 50.5% of the shares in issue were voted and the resolution was approved by shareholders.

~~An extraordinary~~A general meeting ~~(EGM)~~(GM) was held on ~~14th September 2007,~~24th November 2008, at ~~our head office in~~ExCel London, where shareholders were asked to approve resolutions in connection with the ~~proposed merger with ABN AMRO. 58 percent~~Capital Raising proposals. 60.8% of the shares in issue were voted on a poll and all resolutions were approved. The results of the poll were made available on our website on the same day. The Group Chairman, ~~Senior Independent Director and a majority~~all of the executive Directors and four non-executive Directors, including the Senior Independent Director, Deputy Chairman and Board Audit Committee Chairman, attended the ~~EGM. The EGM was followed by a Class Meeting of ordinary shareholders, at which 57 percent of the ordinary shares in issue were voted on a poll and the resolution was approved.~~GM.

The ~~2008~~2009 AGM will be held on ~~24th~~23rd April ~~2008~~2009 at ~~the~~The Queen Elizabeth II Conference Centre in London. The ~~AGM will be followed by a Class Meeting of ordinary shareholders. The~~ Notice of ~~Shareholder Meetings~~Meeting is enclosed with this Annual Report as a separate document. The resolutions will be considered on a poll and the results will be available on our website on ~~24th~~23rd April ~~2008.~~2009.

Signed on behalf of the Board

Marcus Agius

Group Chairman

~~7th~~5th March ~~2008~~2009

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Annual Report ~~2007~~2008

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~~Corporate governance~~ LOGO

~~Remuneration report~~Corporate governance

Remuneration Report

Statement from the Chairman of the Board HR and Remuneration Committee ~~(the Committee)~~

Context

The disruption in the capital markets that commenced in 2007 deepened in 2008 resulting in one of the most challenging years ever for the global financial services sector. As 2008 closed it was clear that the depth of the financial crisis was so severe that a significant global economic downturn was unavoidable. The extent to which remuneration structures may have played a role in contributing to the financial crisis was still being debated and under scrutiny as this statement was written. Whatever outcomes prevail it is certain the remuneration structures will be different in the future.

As a consequence of events, the Committee commenced its deliberations for the 2008 performance year earlier than usual and met more times than is typical. The agenda rapidly developed into two work streams: first, the immediate decisions for 2008; and, second, the long-term shape of remuneration. Work continues on the latter and will extend into 2009. Our guiding principle throughout all decisions has been ‘pay for performance’.

2008

Barclays delivered profit of £6,077m, 14% lower than 2007. Although profitability, on an absolute and relative basis, compares favourably across the sector, several features of performance resulted in a more severe reduction in variable remuneration:

1.	The significant under performance of the share price and the absolute reduction in market capitalisation (£20bn in 2008)

2.	The decision not to pay a final dividend for 2008

3.	The significantly lower absolute performance and weaker earnings in Barclays Capital

The variable pay for the Group reduced 48% relative to 2007. Accountability rests at the most senior levels and key factors relating to executive Directors include:

–

zero annual performance bonus for 2008

–

no salary increases for 2009

–

executive Directors who have long-term performance shares due to be released in 2009 shall agree that these be deferred for a further two years and subject to additional financial performance over that period.

–

the total 2009 long-term awards are 64% lower than last year, with no awards for the Chief Executive and President.

An assessment of Barclays remuneration structures and how well the calibration had worked during this stressed period shows significant alignment with shareholders:

–

the existing long-term performance share plan award cycles (2007/09 and 2008/10) are not expected to vest

–

the cumulative effect of delivering significant proportions of remuneration in Barclays shares (which are typically held on a long- term basis) has resulted in the executive Directors’ share interests decreasing in value by an aggregate of £63m in 2008, which when added to the decrease of £32m in 2007 totals £95m for the two year period

–

the value of employee interests in shares under Barclays employee share plans has decreased over 2007 and 2008 by approximately £2bn.

Future of Remuneration

The Committee commenced a review of remuneration during 2008. The objective of the review was to assess how the pay for performance culture and alignment with shareholders could be strengthened further. As the review advanced it became clear that the mandate ought to be extended to incorporate a broader industry wide review of remuneration. So far the Committee has:

–

revised the remuneration policy (see page 158) to accentuate risk management and the role of behaviours in the determination of remuneration

–

increased the shareholding requirements for executive Directors (from 1x to the higher of 2x times base salary or average total annual cash compensation over the prior three years)

–

announced a new plan in the first quarter of 2009 for approximately 15,000 employees to significantly increase the proportion of remuneration paid over multiple years.

The review is continuing and will address detailed remuneration plans and proposals which will be developed during 2009. The challenge for the industry is to use this period to develop robust remuneration structures that balance commercial enterprise with risk in the interests of all stakeholders.

Barclays will be engaged in extensive dialogue and consultation with shareholders in developing its new proposals. An update on progress will be provided at the AGM.

Report

The following report of the Committee provides further explanation of the current remuneration governance and arrangements for executive Directors and is divided into the following sections:

–

Committee remit, members and advisers

–

Remuneration policy and governance

–

Executive Directors’ remuneration

–

Non-executive Directors’ remuneration

–

Former Directors’ remuneration

–

Share plan descriptions

The Committee unanimously recommends that you vote at the 2009 AGM to approve the Remuneration Report as all Directors will be doing with their own Barclays shares.

On behalf of the Board

Sir Richard Broadbent

Chairman, Board HR and Remuneration Committee

5th March 2009

Barclays

Annual Report 2008

157

Corporate governance

Remuneration Report

Board HR and Remuneration Committee remit and membership

The Committee ~~meets a minimum of four~~met formally five times a year. Marcus Agius became a member of the Committee on 1st January 2007. Marcus Agius was considered independent (for the purposes of the Combined Code) on his appointment as Chairman of the Board. All other Committee members are independent non-executive Directors.

The Committee’s objective in relation to remuneration is to ensure that it incentivises excellence in business and personal performance and enables the Group to attract and retain employees of ability and experience.

~~The Committee aims to achieve this by:~~

–

~~ensuring clear and quantified individual and Group performance goals are in place supported by rigorous performance appraisal systems;~~

–

~~creating externally benchmarked remuneration frameworks for each major business that provide an evidence based approach to decisions;~~

–

~~reviewing past remuneration decisions against objectives; and~~

–

~~approving the specific remuneration packages of executive Directors and other senior executives.~~

~~The Committee’s work is supported by independent professional advice from Kepler Associates, who were re-appointed in 2007, and Towers Perrin MGMC who were appointed in 2007.~~

In relation to HR and senior management development, the Committee’s objective is to ensure that the Group’s people resources are managed to maximise business performance, support the long-term success and growth of the business and protect the welfare of all employees.

~~The Committee aims to achieve this by:~~

–

~~ensuring there are appropriate succession and talent management plans in place;~~

–

~~providing oversight of Group level policy on HR matters including those related to the mobility of employees within the Group; and~~

–

~~monitoring health and safety and equality and diversity issues across the Group.~~

~~Barclays employee remuneration is performance based. Important context to this report and the disclosures that follow is provided below:~~

–

~~Group profit before tax was £7.1bn, broadly in line with the prior year;~~

–

~~Group profit before business disposals increased by 3%; and~~

–

~~careful management of performance related remuneration has resulted in a reduction in key remuneration ratios relative to 2006, including the absorption of 2007 headcount investment.~~

The Committee takes seriously its commitment to clear and comprehensive disclosure. This report details the remuneration of the individual Directors who served Barclays in 2007. Barclays Remuneration Policy remains unchanged, including the commitment to transparency and to policies and programmes that serve well the interests of shareholders.

~~The Committee unanimously recommends that you vote to approve the report at the 2008 AGM.~~

~~Signed on behalf of the Board~~

~~Sir Richard Broadbent~~

~~Chairman, Board HR and Remuneration Committee~~

~~7th March 2008~~

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~~Barclays~~

~~Annual Report 2007~~

~~Board HR and Remuneration Committee Members~~

~~During 2007, the Committee comprised both independent non-executive Directors and~~during 2008. After each formal meeting the Chairman of the Committee presented a report to the full Board. ~~Membership~~A report on the Committee’s activities is set out on page 153 as part of the Corporate Governance Report.

The members of the Committee, ~~was as follows:~~

are Sir Richard Broadbent (Chairman)

, Marcus Agius

(Group Chairman), Leigh Clifford

and Sir John ~~Sunderland~~

Sunderland.

The non-executive Directors who ~~were~~are Committee members ~~were~~are considered by the Board to be independent of management and free from any business or other relationship that could materially affect the exercise of their independent judgement. ~~The constitution and operation of the Committee complies with the Provisions on the Design of Performance Related Remuneration in the Combined Code adopted by the Financial Reporting Council.~~

~~Marcus Agius was appointed as a member of the Committee with effect from 1st January 2007.~~

~~The Chairman of the Committee presents a report of each meeting to the full Board.~~

Advisers ~~to the Committee~~

The Committee’s work is supported by independent professional advice. The Committee ~~has access to independent consultants to ensure that it receives independent advice. Advisers are appointed by~~reviews the ~~Committee for specific work, as necessary,~~appointment of advisers each year. Towers Perrin MGMC and ~~are required to disclose to the Committee any potential conflict of interest.~~

~~In 2007,~~ Kepler Associates^awere both re-appointed by the Committee in 2008. Deloitte LLP also advised the Committee. Any potential conflicts of interest the advisers may have are disclosed to ~~provide independent advice~~the Committee. In addition to advising the Committee, ~~members on remuneration matters.~~ Towers Perrin MGMC^a~~were appointed to provide advice~~ provided remuneration benchmarking data and Deloitte LLP and its affiliates also provided remuneration benchmarking data, tax, regulatory, information technology risk, pensions , corporate finance and consulting services to the ~~Committee in 2007, primarily in relation to the provision of remuneration for employees below Board level and in the global financial services industry.~~Barclays Group.

The Group Chief Executive, the Human Resources Director and, as necessary, members of the Executive Committee, also advise the Committee, supported by their teams. ~~They are not~~No employee of Barclays Group is permitted to participate in discussions or decisions of the Committee relating to their own remuneration. The Human Resources Director is responsible for providing professional support to line management in HR policy and operations and for monitoring compliance with prescribed policy and programmes across Barclays. The Human Resources Director is not a Board Director and is not appointed by the Committee.

Remuneration Policy

Barclays policy is to use remuneration to drive a high-performance culture. Executive Directors can expect outstanding remuneration if performance is outstanding and below median remuneration for below median performance. This philosophy applies to remuneration policies and practices for all employees inDuring the ~~Group. The~~year the Committee ~~considers remuneration levels across the Group when determining remuneration for executive Directors.~~

~~The aims of~~revised the Barclays Remuneration ~~Policy are~~Policy. The revised policy is to:

1. Attract and retain those people with the ability, experience and skill to deliver the strategy.

2. Create a direct and recognisable alignment between the rewards and risk exposure of shareholders and employees, particularly executive Directors and senior management.

3. Incentivise employees to deliver sustained performance consistent with strategic goals and appropriate risk management, and to reward success in this.

4. Deliver compensation that is affordable and appropriate in terms of value allocated to shareholders and employees.

5. Encourage behaviour consistent with the principles that guide Barclays business:

i)	Winning together

–

~~incentivise excellence in~~Doing what is right for Barclays, its teams and ~~balance between both short-term (one year)~~colleagues, to achieve collective and ~~longer-term (three years plus) performance such that Group financial goals~~individual success.

ii)	Best People

–

Developing talented colleagues and ~~the goal of achieving top quartile total shareholder return (TSR) are met and sustained;~~differentiating compensation to reflect performance.

–

~~enable the Group~~Doing what is needed to ~~attract and retain people of proven ability, experience and skills~~ensure a leading position in the ~~pools in which it competes for talent;~~global financial services industry.

iii)	Customer and Client Focus

–

–Understanding what customers and clients want and need and then serving them brilliantly.

Executive Directors’ remuneration – alignment of interests with shareholders

Figure 1 shows the aggregate total direct remuneration of the executive Directors for 2007 and 2008 (as shown in Table 1) compared to the indicative fair value movements on the executive Directors’ aggregate share based remuneration and beneficial interests in Barclays shares from 1st January 2007 to 31st December 2008 (as shown in Table 7). The performance of Barclays share price has been shown for context. The chart shows that the executive Directors’ interests have decreased in value by £95m over 2007 and 2008 as a consequence of the movement in Barclays share price.

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158

~~encourage behaviour consistent with~~Barclays

Annual Report 2008

LOGO

iv)	Pioneering

–

Driving new ideas, especially those that make Barclays ~~Guiding Principles~~^b~~which leads to excellence~~profitable and ~~the appropriate balance in financial performance, governance, controls, risk management, customer service, people management, brand and reputation management;~~improve control.

–

~~promote attention to maximising personal contribution, contribution to the business in which the individual works and contribution to the Group overall; and~~Improving operational excellence.

–

~~ensure, both internally~~Adding diverse skills to stimulate new perspectives and ~~externally, that remuneration policies and programmes are transparent, well communicated, easily understood and aligned with the interests of shareholders.~~bold steps.

The graph below shows the value, at 31st December 2007, of £100 invested in Barclays on 31st December 2002 compared with the value of £100 invested in the FTSE 100 Index. The other points plotted are the values at intervening financial year ends. The FTSE 100 Index is the index of the 100 largest UK quoted companies by market capitalisation. It is a widely recognised performance comparison for large UK companies such as Barclays and this is why it has been chosen as a comparator to illustrate Barclays TSR. The graph shows that, at the end of 2007, a hypothetical £100 invested in Barclays on 31st December 2002 would have generated a total return of £63, compared with a gain of £95 if invested in the FTSE 100 Index.

~~Remuneration for executive Directors~~

~~Remuneration for the executive Directors comprises:~~

Trusted

–

~~base salary;~~Acting with the highest levels of integrity to retain the trust of customers, shareholders, other external stakeholders and colleagues.

–

~~annual bonus including mandatory deferral into Barclays shares through the Executive Share Award Scheme (ESAS);~~Taking full responsibility for decisions and actions.

–

~~long-term incentives through~~Reflecting the ~~Performance Share Plan (PSP);~~operation of independent, robust and evidence-based governance and control and complying with relevant legal and regulatory requirements.

The Committee keeps the remuneration policy and arrangements, as detailed in this Report, under review to ensure that Barclays programmes remain competitive and provide appropriate incentive for performance.

–

~~pension and other benefits.~~

Remuneration Policy Governance

~~Notes~~

a	Kepler Associates and Towers Perrin MGMC have given and not withdrawn their written consent to the inclusion of references to their name in the form and context in which it appears. Towers Perrin MGMC also provided remuneration benchmarking data to Barclays Group companies during the year.

b	Barclays Guiding Principles were introduced during 2005 and provide all parts of the Group with a unifying set of values. They are: Winning Together, Best People, Client/Customer Focused, Pioneering and Trusted.

To ensure appropriate operation of the remuneration policy, the Committee has established frameworks for the governance of remuneration in the Global Retail and Commercial Banking and Investment Banking and Investment Management businesses and for the Group as a whole. These frameworks will be reviewed in 2009. The current frameworks set out key financial ratios

achieved by Barclays and its competitors and have been used by the Committee to inform its decision-making process when approving aggregate remuneration spend, including bonus and long-term incentive expenditure, strategic investment for new hires, and the remuneration arrangements of any employee with annual total remuneration equal to or in excess of £750,000.

~~Schedule 7A of~~For all individual remuneration decisions made by the ~~Companies Act 1985 requires that~~Committee, including those for executive Directors, the ~~graph shows TSR for the five years ending with the relevant financial year.~~

~~Barclays~~

~~Annual Report 2007~~

~~129~~

~~Corporate governance~~

~~Remuneration report~~

~~The~~ Committee reviews ~~the elements~~each element of remuneration relative to ~~the policies stated in this report~~performance and to the practice of other comparable organisations. Remuneration is benchmarked against the markets in which we compete for talent. This includes benchmarking against other leading international banks and financial services organisations, and other companies of similar size to Barclays in the FTSE 100 Index.

~~The component parts for each executive Director are detailed in~~Given the ~~tables accompanying this report.~~

~~The~~materiality of Barclays pension arrangements, the Committee guideline that executive Directors should hold, as a minimum, the equivalent of one times their base salary in Barclays shares, including shares held under award through ESAS, was met by all executive Directors.

~~Each element of remuneration is important and has~~operates a specific ~~role~~framework for the management of pensions to ensure proper oversight. The Global Retirement Fund Governance Framework is operated to ensure best practice in ~~achieving the aims~~respect of regulatory compliance, governance, investment and administration. Details of the remuneration policy. The combined potential remuneration from bonus and PSP outweighs the other elements, and is subject to personal and Group performance, thereby placing the majority of total remuneration at risk.

~~Of the key elements of remuneration (salary, annual performance bonus, ESAS and PSP), salary made up a maximum of 30% of the 2007 remuneration~~pension arrangements in place for executive Directors are set out on page 164 and ~~1.4%~~for other employees on page 160.

As required by Part 3 of Schedule 7A of the Companies Act 1985, the Group’s auditors, PricewaterhouseCoopers LLP, have audited the information contained in ~~respect~~Tables 1b, 3, 5, 10, 11, 14, 16, 18, 19, 20, 21, 22 and 23 on pages 162 to 168.

Total Shareholder Return

Figure 2 shows the value, at 31st December 2008, of ~~Robert E Diamond Jr’s arrangements, which reflects general practice~~£100 invested in Barclays on 31st December 2003 compared with the value of £100 invested in the ~~investment banking~~FTSE 100 Index. The other points plotted are the values at intervening financial year ends. The FTSE 100 Index is a widely recognised performance comparison for large UK companies and ~~investment management industry.~~this is why it has been chosen as a comparator to illustrate Barclays TSR. The ~~remaining proportion~~graph shows that, at the end of 2008, a hypothetical £100 invested in Barclays on 31st December 2003 would have generated a total loss of £59, compared with a gain of £18 if invested in the ~~key compensation elements for executive Directors is at risk. The relative weighting summarised in this paragraph does not include pension and benefits.~~FTSE 100 Index.

~~The~~

LOGO

Barclays

Annual Report 2008

159

Corporate governance

Remuneration Report

Executive Director’s Pay

Table 1 explains the purpose of each element of remuneration and shows executive Directors’ remuneration for 2008 and 2007.

Base Salaries

The executive Directors ~~is summarised~~will receive no base salary increase in ~~the table below and discussed in greater detail in the sections that follow.~~2009.

~~Remuneration element~~Table 2: Base salary


	Base salary at 31st Dec 2008 £000	Base salary at 1st April 2009 £000	Date of previous increase
Executive Directors
John Varley	1,100	1,100	1st April 2008
Robert E Diamond Jr	250	250	1st March 1999
Chris Lucas	650	650	1st April 2008
Frits Seegers	700	700	n/a


Table 1a: Executive Directors’ annual remuneration
Element	Purpose	Delivery	Programme ~~detail~~summary	When normally received/ awarded

~~Base salary~~Salary	To reflect the market value of the individual and their role	– Cash – Monthly – Pensionable	– Reviewed annually, with ~~changes~~any increases typically effective on 1st April	Paid in year

Annual performancebonus ~~and ESAS~~(cash)	To incentivise the delivery of annual goals at the Group, business division and individual levels	– ~~Typically~~No more than 75% of annual performance bonus paid in cash^a – ~~Typically~~At least 25% recommended as deferred ~~Barclays shares~~ share awards under ESAS ~~– Annual~~ – Non-pensionable	– Based on annual business unit performance, performance of the Group as a whole and ~~leadership~~individual contribution	Normally paid in the following financial year

~~PSP~~^bTotal cash	Sub-total of the above

Deferred share award (ESAS)	To align annual performance with shareholder value and increase retention	– At least 25% of annual performance bonus recommended as deferred share awards under ESAS – Non-pensionable	– Discretionary awards of shares to be deferred for three to five years. No performance condition on release, as a deferred share award – 20% bonus shares releasable after three years, a further 10% after five years – Dividends normally accumulated during deferral period	Normally awarded in the following financial year

Long-term incentive (PSP)	To reward the creation of above median, sustained growth in shareholder value and Economic Profit (EP) performance	– ~~Free shares subject to~~ ~~a performance~~ ~~condition~~ – Annual awards of shares that vest after three years, subject to performance conditions – Non-pensionable	– Discretionary awards – Participation reviewed annually – Barclays performance over three years determines the ~~number of~~ performance shares eligible for release to each individual ~~– For awards made~~	Normally awarded in ~~2007, and awards to be made in 2008, EP threshold, thereafter 50% under a TSR performance condition and 50% under an EP performance condition~~ the following financial year

Total direct remuneration	Total of the above

Pension^c (or cash allowance)	To provide a market competitive post-retirement benefit	– Deferred cash or cash allowance – Monthly	– Non-contributory, defined benefit scheme and/or defined contribution scheme, or cash allowance in lieu of pension contributions	Paid or accrued during year

Other benefits	To provide market competitive benefits	– Benefit in kind, or cash allowance – Non-pensionable	– Benefits include private medical, insurance life and disability cover, accommodation overseas when required for business purposes, use of company owned vehicle or cash equivalent and tax advice	Received during year

Sub-total in accordance with Companies Act 1985	Total of Salary, Annual Cash Bonus, Other Benefits and Pension Cash Allowance

160

Barclays

Annual Report 2008

LOGO

Annual Cash Bonus and Deferred Share Awards

No annual cash bonuses or deferred share awards have been awarded to executive Directors for 2008. The maximum bonus opportunity for executive Directors is normally 250%, but is tailored to the relevant market.

Long-term incentives

PSP Vesting in 2008

The PSP awards made in 2005, due for release in March 2008 lapsed in full as the performance condition was not met.

As disclosed in the 2007 Report and Accounts, in March 2008 Robert E Diamond Jr received a cash payment of £7.425m and an award of shares deferred for one year under ESAS of £7.425m, detailed on pages 162 to 163 from the Retained Incentive Opportunity 2005-2007 in which he participated.

PSP awards due to vest in 2009

For the PSP awards made in relation to the 2006-2008 cycle, the TSR condition was not met and the EP condition was partially met. As a result, awards that are scheduled to vest in March 2009 (at the absolute discretion of the PSP trustee) are due to vest at 1.4 75 times the initial award (maximum is 3 times). This represents approximately 9% of the maximum value of the number of shares that could vest at the share price at award.

After consultation with the Remuneration Committee, the executive Directors intend to write to the PSP trustee to request that it defers the exercise of its discretion to re lease shares to them under the 2006-2008 awards for a further two year period. At the end of that period it is intended that the PSP trustee considers the re lease of the shares, subject to continued employment and a financial performance condition to be agreed and assessed by the Committee.

The maximum number of shares re leasable at the end of the two year period will be 1.475 times the initial award; there will be no opportunity to receive shares in excess of this number (except for any dividend shares that may be awarded at the PSP trustee’s discretion).

Proposed awards in 2009

It is proposed that Chris Lucas and Frits Seegers are awarded a performance share plan award in 2009.

The number of shares awarded to date and the performance conditions relating to each award are set out on pages 162 and 163.

The PSP awards are shown in Table 1b at the fair value of the re commended awards.


Table 1b: Executive Directors’ annual remuneration
	John Varley		Robert E Diamond Jr		Chris Lucas		Frits Seegers
	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000
	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000
Salary	1,075	975	250	250	638	450	700	700
Annual performance bonus (cash)	0	1,425	0	6,500	0	450	0	1,313
Total cash	1,075	2,400	250	6,750	638	900	700	2,013
Deferred share award (ESAS)	0	618	0	11,375	0	195	0	569
Fair value of long- term incentive (PSP) award	0	1,200	0	3,000	800	800	1,600	1,600
Total direct remuneration	1,075	4,218	250	21,125	1,438	1,895	2,300	4,182

Pension (or cash allowance)	Member of pension scheme. See page 164	Member of pension scheme. See page 164	Member of pension scheme. See page 164	Member of pension scheme. See page 164	159	113	175	175
Other benefits	23	18	66	14	18	22	27	24
Sub-total in accordance with Companies Act 1985	1,098	2,418	316	6,764	815	1,035	902	2,212

Barclays

Annual Report 2008

161

Corporate governance

Remuneration Report

Share Plans

Barclays operates a number of share plans to align the interests of executive Directors with shareholders. The following tables summarise the interests of each executive Director in each plan and the relevant performance conditions for outstanding PSP cycles. The interests shown are the maximum number of shares that may be received under each plan. Executive Directors do not pay for any share plan award.

During 2008, the number of shares under each award or option has been increased in accordance with the rules by 2.68% and option exercise prices per share have been correspondingly reduced to reflect the impact of the capital raising in July. No other adjustments were made for capital raisings during the year.

Summary descriptions of principal share plans operated by Barclays are shown on pages 169-172.


Table 3: Long-term plans and deferred share plans
	Number of shares under award/option 1st January 2008 (maximum)	Awarded in year (maximum)	Market price on award date		Adjusted weighted average exercise price		Number released/ exercised
John Varley
PSP 2005-2007	426,135	–	£	5.30		–	–
PSP 2006-2008	461,244	–	£	6.75		–	–
PSP 2007-2009	491,130	–	£	7.08		–	–
PSP 2008-2010	–	791,208	£	4.25		–	–
ISOP	920,000	–		–	£	4.29	–
Sharesave	3,638	–		–	£	4.70	–
ESAS	344,711	135,715	£	4.25		–	(23,214	)
Robert E Diamond Jr
PSP 2005-2007	156,249	–	£	5.30		–	–
PSP 2006-2008	2,306,208	–	£	6.75		–	–
PSP 2007-2009	2,803,548	–	£	7.08		–	–
PSP 2008-2010	–	1,978,020	£	4.25		–	–
ISOP	560,000	–		–	£	4.42	–
ESOS	100,000	–		–	£	3.97	–
RIO cash release	–	–		–		–	–
BGI EOP	100,000	–		–	£	20.11	–
ESAS	4,863,749	4,131,868	£	4.25		–	(2,131,463	)
Chris Lucas
PSP 2007-2009	248,730	–	£	7.08		–	–
PSP 2008-2010	–	527,472	£	4.25		–	–
Sharesave	3,638	–		–	£	4.70	–
ESAS	69,091	42,857	£	4.25		–	(34,546	)
Frits Seegers
PSP 2006-2008	473,184	–	£	6.30		–	–
PSP 2007-2009	409,278	–	£	7.08		–	–
PSP 2008-2010	–	1,054,944	£	4.25		–	–
Sharesave	3,390	–		–	£	4.70	–
ESAS	231,383	125,000	£	4.25		–	(80,221	)

~~Changes to Group Chairman~~Numbers shown for ESAS above represent provisional allocations that have been awarded. Numbers shown as aggregate ESAS amounts also include shares under option as at 31st December 2008. Nil cost options are normally granted under mandatory ESAS awards at the third anniversary of grant and ~~executive Directors~~

~~Marcus Agius was appointed Group Chairman with effect from 1st January 2007.~~

~~Marcus Agius receives a fee~~are exercisable (over initial allocation and two-thirds of ~~£750,000 (inclusive of Director’s fees). He is also eligible~~bonus shares) typically for ~~private health insurance.~~two years. The ~~minimum time commitment is equivalent to 60%~~aggregate exercise price of a ~~full time role. Marcus Agius~~nil cost option is not eligible to participate in Barclays bonus and share incentive plans, nor will he participate in Barclays pension plans or receive any pension contributions. The letter of appointment provides for a notice period of 12 months from Barclays and six months from Marcus Agius.

Naguib Kheraj ceased to be an executive Director on 31st March 2007. Naguib Kheraj was succeeded by Chris Lucas, who was appointed to the position of Group Finance Director with effect from 1st April 2007. The key terms of executive Directors’ service contracts are£1 (further detail is included on page ~~133.~~169). At the fifth anniversary of the provisional allocation

~~Base Salary~~the nil cost options normally lapse and the shares under provisional allocation (including bonus shares) are released at the discretion of the ESAS trustee. In 2008, nil cost options were granted to Mr Varley over 91,213 shares. Nil cost options (granted in 2003) lapsed during the year. Mr Varley held 63,447 nil cost options under ESAS as at 1st January 2008, and 146,282 as at 31st December 2008. The first and last exercise dates were 13th March 2006 and 7th March 2010 respectively.

~~The annual base salaries for the current executive Directors are shown in the table below:~~

~~As at~~Table 4: Performance conditions attaching to the share plans in which the executive Directors participate

~~31st Dec 2007~~

~~As at~~
~~1st April 2008~~

~~Date of~~
~~previous~~
~~increase~~

~~John Varley~~

~~£1,000,000~~

~~£1,100,000~~

~~1st Apr 2007~~

~~Robert E Diamond Jr~~

~~£250,000~~

~~1st Mar 1999~~

~~Gary Hoffman~~

~~£625,000~~

~~1st Apr 2006~~

~~Frits Seegers~~

~~£700,000~~

~~n/a~~

~~Chris Lucas~~

~~£600,000~~

~~£650,000~~

~~n/a~~

In respect of John Varley and Chris Lucas, having regard to the levels of salary and total compensation in comparable organisations, the Committee approved an increase to base salary effective from 1st April 2008.

~~Notes~~

Eligible executives may request that all or part of the cash bonus to which they would otherwise become entitled, be granted in the form of an additional award under ESAS or as a pension contribution by way of Special Company Contribution (Bonus Sacrifice). For 2007 Robert E Diamond Jr received 43% of his annual bonus in cash and 57% as a recommendation for an award of Barclays shares under Mandatory ESAS.

b	~~Please refer to Note 44 to the accounts for further information on PSP.~~

c	~~Please refer to Note 30 to the accounts for further information on the Group’s pension plans.~~

~~130~~Scheme

~~Barclays~~Performance

~~Annual Report 2007~~period

Performance

measure

Target

~~Annual Bonus and ESAS~~

The maximum bonus opportunity for executive Directors is tailored to the relevant market; this is typically 250% of base salary. The annual bonus is based on a qualitative and quantitative assessment of performance (including EP and PBT results) with the quantitative assessment comprising the majority. EP and PBT are considered to be good measures of value creation for shareholders.

ESAS is a deferred share award plan which operates in conjunction with the annual Barclays Group cash bonus plans (and various other cash long-term incentive plans operated by Barclays Group companies). Currently, for executive Directors, typically 75% of the annual bonus is delivered as cash. A recommendation may be made to the ESAS trustee that the remaining 25% is delivered as an award under ESAS (‘Mandatory ESAS award’).

~~In addition, executive Directors may request that any cash bonus, to which they may have otherwise become entitled, be granted as an additional award under ESAS (‘Voluntary ESAS award’).~~

Both Mandatory and Voluntary ESAS awards will normally include additional shares called bonus shares with a value of up to 30% of the bonus amount awarded in shares. The ESAS trustee may apply dividends it receives on shares held in trust in purchasing additional Barclays shares which may also be released to participants.

A Mandatory ESAS award is a provisional allocation of Barclays shares which does not give rise to any right or interest in those shares. Normally, under a Mandatory ESAS award, the ESAS trustee grants participants the right to call for the shares plus two-thirds of any bonus shares, in the form of a nil-cost option following the third anniversary of the award date. If this right is not exercised, the ESAS trustee may, following the fifth anniversary, release all the Barclays shares including all bonus shares and dividend shares to the participant.

~~Awards under Voluntary ESAS are granted in the form of a nil-cost option which is a right to acquire Barclays shares which will become fully exercisable after five years.~~

Neither the exercise of nil-cost options granted under Mandatory or Voluntary ESAS nor the release of Barclays shares under award is subject to performance conditions. As ESAS is a deferred share award plan, it would not be appropriate to attach a performance condition to options or awards.

~~If an executive ceases to be employed he may forfeit his award depending on why he leaves.~~

~~PSP~~

The PSP was approved by shareholders at the 2005 AGM and replaced the ISOP as the main performance linked share incentive plan. PSP awards to date have been granted in the form of provisional allocations of Barclays shares which do not give a participant any right to acquire, or an interest in, shares until such time as the PSP trustee decides to release the shares to the participant (i.e. when the PSP awards vest). Participants do not pay to receive an award or to receive a release of shares. Performance share awards are communicated to participants as an initial allocation. Normally, the maximum expected value of an award at the date of grant will be the higher of 150% of base salary or 75% of base salary and target bonus. ‘Expected value’ is a single value for the award at grant which takes account of the various possible performance and vesting outcomes, although it is Barclays performance over a three-year period which determines the final number of shares that may be released to participants. Dividend shares may also be released in respect of the vested shares.

~~Awards normally vest on the third anniversary of the date of grant, if and to the extent that the performance conditions are satisfied. Note that:~~

–

~~relative TSR and EP are both considered to be good measures of value creation to shareholders;~~

– PSP	~~before any shares are~~2008 -2010	50% of award calibrated against TSR	33% of maximum award released ~~Barclays cumulative~~for above median performance (6th place) with 100% released in 1st place and a scaled basis in between

		50% of award calibrated against Cumulative EP over the three year performance period ~~must normally be greater than the total for the previous three-year period;~~

–

33% of maximum award released for ~~PSP awards made in 2005, the~~£6,921m scaled to 100% of maximum award ~~depended on Barclays TSR relative to a peer group of 11 other international banks. These awards are due to lapse in 2008 as the TSR performance condition was not satisfied;~~

at £8,350m

–

33% of maximum award released for ~~PSP awards made in 2006 and 2007, 50%~~£7,618m scaled to 100% of ~~the~~maximum award ~~depends on Barclays EP and 50% of the award depends on Barclays TSR relative to a peer group of 11 other international banks;~~

at £8,668m

~~The peer group for the TSR element of the 2007 award, as for the 2006 award, is~~^a:

162

UKBarclays

Annual Report 2008

LOGO

For PSP, at the end of each performance period, independent confirmation is provided to the Committee of the extent to which each performance condition has been met. Relative Total Shareholder Return (TSR) and Cumulative Economic Profit (EP) were selected in 2005 as performance measures to support the Group’s long-term goals.

All awards and releases are recommended by the Committee and are subject to trustee discretion.

The trustees may also release dividend shares to participants which represent accumulated dividends (net of withholding) in respect of shares under award.

During 2008 Barclays highest share price was £5.06 and the lowest was £1.27. The share price at year end was £1.53.

Cash

released

Market price
on release/
exercise date

Number
lapsed in
2008

Adjustment
due to
open offer

Adjusted
number of
shares under
award/option at
31st December
2008
(maximum)

Vested
number
of shares
under option

Value of
release/
exercise

End of three
year PSP
performance
period, or first
exercise/
scheduled
release date

Last
exercise/
scheduled
release date

–

(426,135

)

–

31/12/07

16/06/08

–

12,360

473,604

–

31/12/08

21/03/09

–

13,164

504,294

–

31/12/09

22/03/10

–

21,204

812,412

–

31/12/10

20/03/11

–

24,655

944,655

–

18/05/03

22/03/14

–

3,735

–

01/11/14

01/05/15

–

4.56

–

12,255

469,467

–

0.1m

13/03/06

20/03/13

–

(156,249

)

–

31/12/07

16/06/08

–

61,806

2,368,014

–

31/12/08

21/03/09

–

75,138

2,878,686

–

31/12/09

22/03/10

–

53,010

2,031,030

–

��

–

31/12/10

20/03/11

–

15,008

575,008

–

12/03/04

22/03/14

–

(100,000

)

–

14/08/01

13/08/08

£7.425m

–

7.42m

06/02/08

15/03/08

–

100,000

–

26/03/07

26/03/14

–

4.56/£4.57

–

183,958

7,048,112

–

9.74m

28/02/06

20/03/13

–

6,666

255,396

–

31/12/09

22/03/10

–

14,136

541,608

–

31/12/10

20/03/11

–

3,735

–

01/11/14

01/05/15

–

4.45

–

2,075

79,477

–

0.16m

31/03/08

20/03/13

–

12,684

485,868

–

31/12/08

04/08/09

–

10,968

420,246

–

31/12/09

22/03/10

–

28,272

1,083,216

–

31/12/10

20/03/11

–

3,480

–

01/11/12

01/05/13

–

2.91

–

9,550

285,712

–

0.23m

29/06/07

20/03/13

Mr Diamond’s Retained Incentive Opportunity (RIO) reached the end of its performance period on 31st December 2007. Vesting was based on Barclays Capital’s cumulative EP over the three-year performance period (which exceeded the £2bn threshold at which the maximum potential value would vest). This value of the RIO award was awarded 50% in cash and 50% in shares, deferred for one year under ESAS. The ESAS number shown as awarded in the year to

Mr Diamond includes the deferred share element of his Retained Incentive Opportunity (1,631,868 shares). No bonus shares are attributable to this award. The cash release made in the year is also shown in the table above.

Mr Varley and Mr Diamond received 6,047 and 172,264 dividend shares respectively from the ESAS released during the year (share price on release date was £4.56).


TSR Peer group constituents			~~Mainland Europe~~
UK	Mainland Europe	US	Underpin	Actual performance
HBOS,	~~Banco Santander~~^b	~~Citigroup~~
HSBC,	~~BBVA~~	~~JP Morgan Chase~~
Lloyds TSB,	~~BNP Paribas~~
Royal Bank of Scotland	Banco Santander, BBVA, BNP Paribas, Deutsche Bank, UBS	Citigroup, JP Morgan Chase	Cumulative EP over performance period must exceed cumulative EP over previous three years	To be determined at vesting in March 2011
–
As above			As above	To be determined
–				at vesting in March 2010
As above			As above	Performance condition
	~~UBS~~			partially met
–

~~The performance scales for the TSR and EP elements of the 2007 award are as shown in the two charts below:~~

~~Notes~~

As above

~~The reserve companies for the 2006 and 2007 awards are UniCredit, Morgan Stanley, Bank of America and Wachovia.~~

b	~~The Committee has approved the substitution of Banco Santander for ABN AMRO in the TSR peer group for awards granted under the PSP in 2005, 2006 and 2007, in~~

As above

accordance with the Committee’s agreed peer group adjustment principles. This adjustment was made in anticipation of the takeover of ABN AMRO. Following a review of the peer group reserve banks, it was decided that Banco Santander was the most suitable substitute based on both competitive position relative to Barclays and similarity to ABN AMRO.TSR performance

condition not met

Barclays

Annual Report ~~2007~~2008

~~131~~

163

Corporate governance

Remuneration ~~report~~Report

~~EP comprises profit after tax~~Pensions

Chris Lucas and ~~minority interests less~~Frits Seegers receive a ~~capital charge.~~cash allowance of 25% of salary in lieu of joining a Group pension scheme.

~~Independent confirmation is provided to the Committee as to whether a performance condition has been met.~~

Each year a review of the Group’s share-based long-term incentives (currently the PSP) is undertaken to check that the structure and performance conditions remain appropriate in respect of the Group’s business objectives and best market practice. The 2007 review included consideration of eligibility criteria. The outcome of the review was that participation in the PSP should be restricted to executive Directors, members of the Executive Committee, Executive Committee direct reports and other key senior positions. Developing a link to Barclays share price is important and therefore, as individuals below these levels become more highly remunerated, some of their remuneration may be delivered as an award of Barclays shares (to be known as Incentive Shares). Participants would not be eligible for a release of shares until the third anniversary and the release of Incentive Shares would not be subject to performance conditions. It is intended that a new employee share plan will be established under which Incentive Shares will be granted. No Board Directors will be eligible to participate in this plan and awards will be settled using only existing Barclays shares.

~~ISOP~~

ISOP (Incentive Share Option Plan) has not been used for awards to executive Directors since 2004. Details of ISOP awards held by executive Directors can be found on page 141. Awards in 2003 and 2004 under ISOP include financial metrics or thresholds which were adjusted where necessary to neutralise the effect of the introduction of IFRS.

~~The main performance condition was TSR relative to a peer group of 11 other major international banks, combined with an EP threshold. Awards have now vested, as set out in the table on page 141.~~

~~Retained Incentive Opportunity~~

Robert E Diamond Jr received an award in February 2008 under the Retained Incentive Opportunity. This award was subject to performance criteria based on the delivery of EP at Barclays Capital over the period 2005 to 2007. The performance measure applied was cumulative EP performance of Barclays Capital during the period 1st January 2005 to 31st December 2007. In order to achieve the maximum value award under the Retained Incentive Opportunity, Barclays Capital had to successfully generate a cumulative EP of £2bn over the performance period. EP was chosen as this is an appropriate measure to align the interests of the participant with those of shareholders andJohn Varley is a ~~good measure~~member of ~~value creation for shareholders.~~

~~Details of~~ the ~~award which was made to Robert E Diamond Jr are on page 139.~~

~~Sharesave~~

All eligible employees including executive Directors may participate in Sharesave. Sharesave is an HMRC (Her Majesty’s Revenue and Customs) approved all-employee share option plan. HMRC does not permit performance conditions to be attached to the exercise of Sharesave options. Under Sharesave, participants are granted options over Barclays shares. Each participant may save up to £250 per month to purchase Barclays shares at a discount. For the 2007 grant, the discount was 20% of the market value of a share at the time the option was granted. Sharesave is also offered to employees in Spain and Ireland. Following the 2007 invitation, a total of 40,621 employees in the UK, Spain and Ireland were participants in Sharesave with 72.4 million shares under option. Details of options held by executive Directors are on page 140.

~~Sharepurchase~~

Sharepurchase was introduced in January 2002. It is an HMRC approved all-employee share plan. Sharepurchase is open to all eligible employees including executive Directors. Under Sharepurchase, participants are able to purchase up to £1,500 worth of Barclays shares each year, which, if kept in trust for five years, can be withdrawn from Sharepurchase tax-free. Any shares in Sharepurchase will earn dividends in the form of additional shares, which must normally be held by the trustee on behalf of the participant for no less than three years.

To encourage employee ownership of Barclays shares, Barclays matches, share for share, up to the first £600 each participant invests in Sharepurchase in each tax year. Matching shares must normally be held by the trustee on behalf of the participant for no less than three years.

~~At 31st December 2007, 23,097 employees were participants in Sharepurchase, with a total of 12.9 million shares held on their behalf by the Sharepurchase trustee.~~

~~Dilution Limits~~

The outstanding awards under ISOP and Sharesave are intended to be satisfied by the issue of new Barclays shares or through treasury shares within the limits agreed by shareholders when these plans were approved. These limits comply with the Association of British Insurers’ guidelines restricting dilution from employee share plans. The overall limits under the guidelines are that no more than 10% of a company’s issued share capital may be used in any ten-year period. Up to 5% may be used for executive share plans. Shares in Barclays Global Investors UK Holdings Limited issued as a result of option exercises under the BGI EOP also count towards these limits. As at 31st December 2007, Barclays headroom under these limits, i.e. the amount remaining available for issue, was 4.2% and 1.5% respectively.

~~Employees’ Benefit Trusts (EBTs)~~

The trustees of the Barclays EBTs grant awards under ESAS and PSP over existing Barclays shares which they have purchased in the market. The trustees of the Barclays EBTs have informed the Bank that their normal policy is to abstain from voting in respect of the Barclays shares held in trust.

The trustees of the Sharepurchase EBT may vote in respect of Barclays shares held in the Sharepurchase EBT, but only at the direction of the participants. The trustees will not otherwise vote in respect of shares held in the Sharepurchase EBT.

~~Pensions~~

All Group pension arrangements are managed in accordance with the Global Retirement Fund Governance Framework to ensure best practice in respect of regulatory compliance, governance, investment and administration. The framework is overseen by the Committee.

Pension benefits for executive Directors are provided through defined benefit plans, defined contribution plans, unfunded unapproved retirement benefit arrangements, cash or a combination of these. The pension benefit applicable will depend on the date an executive Director was appointed and their individual situation. Annual performance related bonuses are not included in pensionable salary.

~~The~~ Group’s closed UK defined benefit pension scheme. This non-contributory arrangement provides a pension benefit of ~~which John Varley and Gary Hoffman are members, is a non-contributory scheme. Benefits are provided on leaving service~~two thirds of his pensionable salary at the normal retirement age of 60. Should he retire at 55, an unreduced pension ~~age (60) by reference to the executive Director’s length~~ of ~~service, normally by reference to 1/60th~~60% of pensionable salary ~~for each year of pensionable service (John Varley’s pension accrual is provided through the scheme in accordance with his service contract as set out in the notes~~would be provided. There were no changes to the ~~pensions table on page 136).~~

pension arrangements for Mr Varley during the year. His increase in pension of £83,000 during the year relates to accrual under the scheme. The ~~Group’s closed UK defined benefit pension arrangement~~scheme also provides, ~~that,~~whilst in ~~the event of~~employment, a death ~~before retirement, a cash lump sum of up to four times salary is paid together with a~~in service dependant’s pension of 50% of the pension that would have been payable if employment had ~~the member remained in active service~~continued until ~~their~~ normal pension age. ~~For death~~Mr Varley also has a defined contribution benefit of £549,816 as at 31st December 2008 in ~~retirement,~~respect of a ~~dependant’s pension is payable of approximately 50% of~~previous transfer from a freestanding AVC.

Robert E Diamond Jr participates in the member’s pension at the date of death, not taking into account commutation of any cash lump sum at the time of the member’s retirement. If a member is granted a deferred pension that has not yet come into payment, the widow/widower receives a pension of 50% of the deferred pension payable. Where applicable, children’s pensions are payable, usually up to the age of 18. Enhanced benefits may be payable if it is determined that a member is unable to work as a result of serious ill-health.

~~The~~ Group’s US non-contributory defined benefit ~~arrangement, of~~arrangements which ~~Robert E Diamond Jr is a member, provides~~provide a benefit at age 65 of 1/60th of final average pensionable pay ~~plus 0.3% of final average pensionable pay in excess of the US Internal Revenue Service’s covered compensation limit~~

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~~Annual Report 2007~~

for each year of ~~pensionable~~ service ~~(up~~up to a maximum of 30 ~~years).~~years. In line with current market practice, final average pensionable pay ~~in the US~~ includes salary and an element of bonus ~~subject~~up to ~~overall~~a current combined maximum of US$350,000. The benefits are provided through the US defined benefit plan ~~limits. In~~(a funded arrangement), and the ~~event of~~US Restoration Plan (an unfunded arrangement). The scheme also provides a ~~member’s~~ death ~~before retirement, a~~in service spouse’s pension of approximately 50% of the ~~member’s~~ pension that would have been payable had ~~the member taken~~ early retirement occurred on the date of death, is payable. On death after retirement, a spouse’s pension of 50% of the pension in payment is payable. In addition, enhanced benefits are payable if the member qualifies for disability benefits.death.

~~The US Restoration Plan, of which Robert E~~Mr Diamond Jr is also a member, is an unfunded unapproved arrangement which restores reductions in the benefits provided through the approved US plan resulting from the application of relevant compensation and benefit limitations under the US Internal Revenue Code. Robert E Diamond Jr participates in this plan on similar terms to other Barclays senior executives participating in US benefit plans.

~~Robert E Diamond Jr~~ also participates in the Barclays Bank PLC 401K Thrift Savings Plan and Thrift Restoration Plan, which are both defined contribution plans. The company contributions in 2008 amounted to £11,745 (US$21,859).

Table 5 sets out the pension benefits of the executive Directors.

Pension accrued during the year represents the change in accrued pension during the year (including inflation at the prescribed rate of 5% (U K)). Pensions paid from the UK final salary section of the applicable

fund are reviewed annually and increase by a minimum of the increase in the retail prices index (capped at 5%), subject to the scheme rules.

The transfer values have been calculated in a manner consistent with the Retirement Benefit Scheme – Transfer Values (GN11) published by the Institute of Actuaries, and the Faculty of Actuaries. During 2008, the independent UK Retirement Fund Trustee changed the transfer value basis for all members. The change reflected different mortality assumptions and a lower discount rate. This contributed £1.4m of the increase in transfer value of John Varley’s pension during the year.

Other benefits

Executive Directors are provided with benefits including private medical insurance, life and disability cover, the use of a company-owned vehicle or the cash equivalent, tax advice and accommodation overseas when required for business purposes. These benefits are available on similar terms to ~~other~~each executive Director. No Director has an expense allowance.

Shareholding guideline

The Committee guideline that executive Directors should hold, as a minimum, the equivalent of one times their base salary in Barclays ~~senior executives~~shares, including shares awarded under ESAS, was met by all executive Directors at 31st December 2007. During the year the Committee increased this guideline to the higher of two times salary or one-third of total remuneration for the last three years. Executive Directors have five years from their appointment to meet this guideline and a reasonable period to build up to the guideline again, if it is not met because of a share price fall. Table 6 shows the executive Directors’ shareholdings. Table 7 shows the indicative change in value of the ~~US.~~executive Directors’ total share interests during 2008.

~~Where appropriate, cash allowances are provided~~


Table 5: Pension provision
	Age at 31st December 2008	Completed years of service	Accrued pension at 31st December 2007 £000	Pension accrued during 2008 (including increase for inflation) £000	Pension accrued during 2008 (excluding inflation) £000	Accrued pension at 31st December 2008 £000	Transfer value of accrued pension at 31st December 2007 £000	Transfer value of accrued pension at 31st December 2008 £000	Increase in transfer value during the year £000	Annual cash in lieu of pension £000
John Varley	52	26	489	83	59	572	9,463	12,328	2,865	–
Robert E Diamon Jr	57	12	38	7	5	45	214	280	66	–
Chris Lucas	48	1	–	–	–	–	–	–	–	159
Frits Seegers	50	2	–	–	–	–	–	–	–	175


Table 6: Interests in shares of Barclays PLC at 31st December 2008
	At 1st January 2008		At 31st December 2008
	Beneficial	Non- beneficial	Beneficial	Non- beneficial
Executive Directors
John Varley	470,650	–	593,266	–


Table 6: Interests in shares of Barclays PLC at 31st December 2008
	At 1st January 2008		At 31st December 2008
	Beneficial	Non- beneficial	Beneficial	Non- beneficial
Robert E Diamond Jr	3,402,192	–	5,866,965	–
Chris Lucas	38,003	–	76,038	–
Frits Seegers	699,870	–	897,747	–
Table 7: Indicative change in value of executive Director total share interests
	Indicative value at 1st January 2008 £m	Change in holdings £m	Indicative value at 31st December 2008 £m	Indicative decrease on total share interest 2008 £m
Executive Directors
John Varley	7.1	1.4	2.5	(6.0	)
Robert E Diamond Jr	50.9	22.3	23.5	(49.7	)
Chris Lucas	1.0	1.0	0.7	(1.3	)
Frits Seegers	6.2	2.6	2.8	(6.0	)

Beneficial interests include shares held either directly, or through a nominee, their spouse, and children under 18. They include any interests held through Sharepurchase. Non-beneficial interests include any

interests in shares where the executive Director holds the legal, but not beneficial interest. In addition to the shares above Mr Diamond also holds 200,000 shares in Barclays Global Investors UK Holdings Limited. Mr Seegers has granted a third party bank security over 896,346 of the ordinary shares he holds. Mr Seegers retains beneficial ownership of these shares. He also holds 1,000 ordinary shares in Absa Group Limited. Note 45 provides further information on Directors and officers shareholdings. There were no changes to the interests of executive Directors in ~~lieu~~shares of ~~being able~~Barclays PLC in the period 31st December 2008 to ~~join~~27th February 2009.

Share interests are beneficial interests plus share plan interests including any initial or provisional allocations and vested awards under ESAS, PSP, ISOP, ESOS and Sharesave.

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Performance Linked Remuneration

Each element of remuneration is important and has a ~~Group pension arrangement. Chris Lucas, Naguib Kheraj and Frits Seegers received such cash allowances~~specific role in ~~2007.~~

Inachieving the ~~event that an executive Director builds up pension benefits close to, or in excess~~aims of the ~~HMRC Lifetime Allowance,~~remuneration policy. The combined potential remuneration from annual performance bonus and PSP outweighs the ~~executive Director~~other elements, and is ~~eligible~~subject to ~~opt for a cash allowance instead~~personal and Group performance, thereby placing the majority of ~~continued pension accrual. The allowance given is no more than~~potential remuneration at risk.

Table 8 shows the ~~cost~~average proportions of ~~funding~~fixed and variable pay over the ~~existing pension benefit.~~last three years.


Table 8: Variable remuneration average over the last three years (or since joining)
			Variable
	Fixed		Cash		Shares
Executive Directors
John Varley	57	%	19	%	24	%
Robert E Diamond Jr	2	%	39	%	59	%
Chris Lucas	38	%	12	%	49	%
Frits Seegers	22	%	25	%	53	%

~~Service Contracts~~Non-executive Directors

David Booth

I722–––4

Sir Richard Broadbent (Senior Independent Director)

I721–524

Leigh Clifford

I713–4––

Fulvio Conti

I7179–––

Dr Danie Cronjé (left the Board 24th April 2008)

I2––––1

Professor Dame Sandra Dawson

I72110–––

Sir Andrew Likierman

I7188––4

Sir Michael Rake

I6217–––

Sir Nigel Rudd (Deputy Chairman)

I720––2–

Stephen Russell

I61310–23

Sir John Sunderland

I720–41–

Patience Wheatcroft

I722––––

Key


OA		Independent on appointment

ED		Executive Director

I		Independent non-executive Director

Board Committees

Certain responsibilities of the Board are delegated to Board Committees to assist the Board in carrying out its functions and to ensure independent oversight of internal control and risk management. Membership of Board Committees is recommended to the Board by the Board Corporate Governance and Nominations Committee, which reviews Committee composition and balance regularly to ensure the Committees are refreshed. All members of principal Board Committees are non-executive Directors, although the Chairman is a member of the Board HR and Remuneration Committee. Each Board Committee’s terms of reference set out the specific matters for which delegated authority has been given. These terms of reference, which are available on our website, are reviewed annually.

The Board has delegated authority to four principal Board Committees:

–

Board Audit Committee

–

Board Risk Committee

–

Board Corporate Governance and Nominations Committee

–

Board HR and Remuneration Committee

The number of meetings held and attendance at the Committee meetings is set out above in ‘Board and Committee Membership and Attendance’. The activities of the Board Committees are set out on the pages 149 to 154.

The terms of reference for each of the principal Board Committees are available from the Corporate Governance section at:www.aboutbarclays.com.

Board Audit Committee

Stephen Russell (Chairman)

Fulvio Conti

Professor Dame Sandra Dawson

Sir Andrew Likierman

Sir Michael Rake

Secretary: Lawrence Dickinson

The Board Audit Committee terms of reference are available from the Corporate Governance section at:www.aboutbarclays.com.

In addition to the members of the Committee, there are a number of regular attendees at each meeting. The Group Chief Executive, Group Finance Director, Barclays Internal Audit Director, Group Risk Director, Group General Counsel and the lead external audit partner normally attend all scheduled Board Audit Committees. The Board Audit Committee members usually meet privately before each meeting to raise any concerns with the Chairman of the meeting and they also meet with the external auditors and the Barclays Internal Audit Director, without management present, at the end of most Committee meetings. Sir Andrew Likierman continues to fulfil his role as the ‘financial expert’ as defined by the US Sarbanes-Oxley Act of 2002 and, as a result of his accountancy background and his career with HM Treasury, has ‘recent and relevant financial experience’ as recommended by the Code. Sir Michael Rake will succeed Stephen Russell as Chairman of the Committee in March 2009. Sir Michael has significant audit experience having worked at KPMG from 1972-2007 where he was Chairman of KPMG International from 2002-2007.

Barclays

~~The~~Annual Report 2008

149

Corporate governance

Corporate governance report

Activities in 2008

Figure 5 illustrates how the Committee allocated its time in 2008. During 2008, the Committee:

–

considered the information it would require during the coming year to enable it to discharge its responsibilities;

–

considered the significant changes in financial markets and economic conditions and the impact on the areas of focus for the Committee;

–

reviewed the Annual Report and Accounts and half-year Results and Interim Management Statements;

–

reviewed in detail the valuations of Barclays Capital’s credit market exposures, reviewing mark-to-market valuations and accounting for derivatives and assessing the overall quality of earnings;

–

reviewed the Group’s accounting policies and, in particular, the accounting for leveraged loans;

–

considered control issues of Group ~~has service contracts with its executive Directors. The effective dates~~level significance for different areas of the ~~contracts for~~business;

–

received reports on the ~~executive Directors who served during 2007 are shown~~control environment in each of the ~~table below. The service contracts do not have a fixed term but provide for a notice period from~~following businesses or functions: Barclays Wealth, Barclays Commercial Bank, Western Europe, Global Retail and Commercial Banking IT, Barclaycard, Global Payments, Emerging Markets, BGI, Absa and Barclays Capital;

–

reviewed the effectiveness and independence of the Group of one year and normally for retirement at age 65, except for Naguib Kheraj who has left the Group. The Committee’s policy is that executive Directors’ contracts should allow for termination with contractual notice from the Group or, in the alternative, termination by way of payment in lieu of notice (in phased instalments). In the event of gross misconduct, neither notice nor a payment in lieu of notice will be given. Payments in lieu of notice are subject to contractual mitigation.statutory auditor;

The Committee’s approach when considering payments in the event of termination is to take account of the individual circumstances including the reason for termination, contractual obligations and share and pension plan rules.



~~Directors~~^a	~~Effective~~ ~~date of~~ ~~contract~~	~~Notice~~ ~~period~~	^b	~~Potential~~ ~~compensation~~ ~~for loss of office~~

~~John Varley~~	~~1st Sept 2004~~	~~1 year~~		~~1 year’s~~ ~~contractual~~ ~~remuneration~~	^c
~~Robert E Diamond Jr~~	~~1st Jun 2005~~	~~1 year~~		“
~~Gary Hoffman~~	~~1st Jan 2004~~	~~1 year~~		“
~~Naguib Kheraj~~^d	~~1st Jan 2004~~	~~1 year~~		“
~~Chris Lucas~~^e	~~1st Apr 2007~~	~~1 year~~		“
~~Frits Seegers~~	~~7th Jun 2006~~	~~1 year~~		“

–

approved the re-appointment, remuneration and engagement letter of the Group statutory auditor;

–

considered the provision of non-audit services by the Group statutory auditor – more details can be found in the box on page 151;

–

received reports from the external and internal auditors;

–

monitored the performance of the Internal Audit function;

–

reviewed the Global Internal Audit Plan;

–

reviewed the internal control and risk management systems;

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~~Barclays Capital, BGI, Barclays Wealth and GRCB~~Board Audit Committee Chairman’s Statement

We held ten meetings in 2008 and an overview of how we used our meetings is set out below.

We also reviewed the controls around Barclays Capital’s complex financial instruments, as well as reviewing the overall control environment at Barclays Capital. The Committee has ~~established frameworks~~sought to learn lessons from events at our peers, receiving reports on the circumstances surrounding losses experienced at Société Générale and UBS. We discussed the overall impact of market conditions and the challenging financial markets on the remit of the Committee and this will help shape our agenda for 2009.

American businesses in September 2008, including an initial assessment of the risks and controls in that business and a report on the impact of the acquisition on financial reporting. In reviewing the Internal Audit Plan for 2009, we also challenged management to make sure that the Internal Audit function is appropriately resourced for the ~~governance of remuneration~~challenges ahead and is directing its attention on areas likely to come under pressure in ~~these businesses. Ranges have been set for key financial~~the expected downturn.

Impairment numbers continue to be closely reviewed by the Committee. It reviews a paper prepared by the Risk function, which examines impairment on a business-by-business basis. It examines closely any amendments or overrides to models, compares trends and ~~remuneration ratios. The Committee approves aggregate bonus~~impairment levels with peers and ~~long-term incentive expenditure, and strategic investment for new hires. The Committee also approves individual remuneration for~~seeks independent reassurance from the ~~members~~external auditor.

Our reviews of the ~~management teams, and any employee with total remuneration~~control environment in ~~excess~~each of ~~£750,000.~~

~~The BGI EOP~~

~~BGI~~our businesses in 2008 continued to focus on those areas where the Group’s business is ~~Barclays asset management business headquartered in San Francisco. The BGI EOP (BGI Equity Ownership Plan) was approved by shareholders at Barclays 2000 AGM~~expanding or which are deemed to ~~provide~~be higher risk, including Emerging Markets. We also reviewed the employee share incentive arrangements required to recruit and retain the quality of senior management and investment talent appropriate for building a global investment management business. The BGI EOP was designed to provide participants with a long-term equity interest in BGI to meet the expectations of,controls around our key regulatory programmes, in particular, ~~BGI’s~~Sarbanes-Oxley and Basel II, and received regular reports on Sanctions compliance and Know Your Customer and Anti-Money Laundering controls.

The internal and external auditors are evaluated annually. Feedback on both is sought from key ~~investment talent~~stakeholders in the ~~United States, who could expect~~Group via questionnaires with the results being presented to participate in the equity of their employer. Under the terms of the BGI EOP, options are granted at fair value to key BGI employees over shares in Barclays Global Investors UK Holdings Limited (BGI Holdings) within an overall cap of 20% of the issued ordinary share capital of BGI Holdings.

~~All grants of options are approved~~and discussed by the Committee. The Committee is satisfied with the performance of both auditors. During 2009, an external assessment of the internal audit function will be undertaken. The Committee has recommended to the Board and to shareholders that PwC should be re-appointed as the Group’s auditors at the AGM on 23rd April 2009. We are fully satisfied that PwC provides effective, independent challenge to management, which has been crucial in the current difficult environment, and has provided valued support to the Committee in the advice given and the clarity of their briefings and reports. The feedback received from other stakeholders through the annual evaluation exercise has been positive.

As Chairman of the Committee, I have liaised as appropriate with the Chairman of the Board HR and Remuneration Committee, particularly to draw attention to any specific aspects of the Group’s results which I feel he ought to be aware of when determining appropriate levels of compensation.

The Committee can confirm that it received sufficient, reliable and timely information from management to enable it to fulfil its responsibilities.

LOGO

Stephen Russell

Chairman of the Board Audit Committee

5th March 2009

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–

considered the effectiveness of the Group’s internal controls over financial reporting;

–

received regular reports on ‘Raising Concerns’, including whistleblowing;

–

considered the Fraud Risk Control Framework; and

–

reviewed its Terms of Reference to satisfy itself that they enable the Committee to fulfill its responsibilities.

The Committee also received regular updates during 2008 on:

–

Basel II

–

MiFID

–

Sarbanes-Oxley

–

Sanctions compliance

Approval of financial statements

Non-Audit Services Policy

The Committee takes seriously its responsibility to put in place safeguards to auditor objectivity and independence. It has therefore established a policy on the provision of services by the Group’s statutory auditor. The Policy describes the circumstances in which the auditor may be permitted to undertake non-audit work for the Group. The Committee oversees compliance with the Policy and considers and approves requests to use the auditor for non-audit work. Allowable services are pre-approved up to £100,000, or £10,000 in the case of certain taxation services. The Company Secretary and his team deal with day-to-day administration of the Policy, facilitating requests for approval by the Committee. The Committee receives a report at each meeting on the non-audit services provided by the auditor and the Policy is reviewed by the Committee annually. Details of the services that are prohibited and allowed are set out below.

Services that are prohibited include:

– bookkeeping

– design and implementation of financial information systems

– appraisal or valuation services

– actuarial services

– internal audit outsourcing

– management and Human Resource functions

– broker or dealer, investment adviser or investment banking services

– legal, expert and tax services involving advocacy

Allowable services that the Committee will consider for approval include:

– statutory and regulatory audit services and regulatory non-audit services

– other attest and assurance services

– accountancy advice and training

– risk management and controls advice

– transaction support

– taxation services

– business support and recoveries

– translation services

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Barclays

Annual Report 2008

151

Corporate governance

Corporate governance report

Board Risk Committee

Sir Richard Broadbent (Chairman)

David Booth

Dr Danie Cronjé (to 24th April 2008)

Sir Andrew Likierman

Stephen Russell

Secretary: Lawrence Dickinson

The Board Risk Committee terms of reference are available from the Corporate Governance section at:www.aboutbarclays.com.

In addition to the Members of the Committee, all meetings are usually attended by the Group Finance Director and Group Risk Director. Barclays Internal Audit Director, Group General Counsel and Barclays external auditor, as well as other senior executives, also attend meetings of the Board Risk Committee, where appropriate.

The Board recognises that risk is a key parameter for the business.

Activities in 2008

The Committee met four times in 2008 and Figure 7 shows how the Committee allocated its time at those meetings. During 2008, the Committee:

–

received regular reports on, and considered, Risk Appetite and the Group’s risk profile, including key indicators for Risk Appetite, Group Impairment, Retail Credit Risk, Wholesale Credit Risk, Market Risk, Financial Crime, Operational Risk and Economic Capital;

–

reviewed at each meeting updates on asset backed securities and leveraged credit markets, including the Group’s exposures to sub-prime and Alt-A markets, monoline insurers and leveraged loan underwriting positions;

–

reviewed updates on liquidity risk;

–

reviewed risk trends and risk management in GRCB – Emerging Markets and South Africa;

–

received regular Forward Risk Trends reports, which set out the internal and external indicators that are showing signs of strain;

–

reviewed the internal control framework;

–

examined the risk control framework, and approved Group policies including the trading book policy, large exposures policy, liquidity policy, retail and wholesale credit impairment policies and the Group’s principal risks policy;

–

reviewed Group-wide stress testing scenarios and results;

–

reviewed in greater detail the process around setting annual Risk Appetite to establish the effectiveness of the process in responding to significant changes in economic and market conditions;

–

reviewed the programme of actions being taken Group-wide to mitigate risk in view of deteriorating economic conditions in our major markets, such as the UK, US, South Africa and Spain;

–

reviewed the Risk Appetite for the Group for 2009 and made recommendations to the Board; and.

–

received updates on Basel II.

LOGO

Board Risk Committee Chairman’s Statement

2008 was a challenging year for risk management and this was reflected in the work of the Committee, which is detailed below. Particular areas worthy of note were:

– The Committee monitored the Group’s sub-prime exposures throughout the year. The reduction in limits and scale of the sub-prime business in 2007 reduced the impact of the crisis, although substantial write-downs were still required during 2008, reflecting a further deterioration in the markets and underlying performance of the assets.

– The Committee also ~~advised~~monitored the Group’s exposure to other areas affected by the crisis, including other asset-backed securities, commercial mortgages and monoline insurers.

– The Committee reviewed and compared the write-downs being taken in the sub-prime and related areas with those being taken by the industry.

– The Committee monitored carefully the Group’s overall risk exposure in the light of ~~option exercises~~the anticipated worsening in economic conditions and reviewed management plans to manage and mitigate the effects of the expected downturn in multiple markets.

– The Committee also monitored the capital position throughout the year relative to regulatory requirements and the Group’s overall risk appetite. Several steps were taken throughout the year to strengthen the capital base prior to the events of October 2008 when the regulator changed the capital requirements for banks, requiring a further and substantial capital raising.

– The Committee played an active role in informing Board debate about Risk Appetite and capital planning for 2009.

LOGO

Sir Richard Broadbent

Chairman of the Board Risk Committee

5th March 2009

In March 2009, the Committee will review its activities in 2008 against its terms of reference.

More information on risk management and the internal control framework can be found in the Risk management report on pages 57 to 136.

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Board Corporate Governance and

Nominations Committee

Marcus Agius (Chairman)

Sir Richard Broadbent

Sir Nigel Rudd

Stephen Russell

Sir John Sunderland

Secretary: Lawrence Dickinson

The Board Corporate Governance and Nominations Committee terms of reference are available from the Corporate Governance section at:www.aboutbarclays.com.

The meetings are also attended by the Group Chief Executive.

Activities in 2008

Figure 8 shows how the Committee allocated its time at its meetings in 2008. During 2008, the Committee:

–

reviewed Board and Board Committee composition to ensure the right mix of skills and experience are present;

–

monitored the progress of the action plan arising from the 2007 Board Effectiveness Review and oversaw the conduct of the 2008 Board Effectiveness Review;

–

reviewed the corporate governance disclosures for the 2007 Annual Report and considered the proposed disclosures for 2008;

–

reviewed and updated Corporate Governance in Barclays and the Charter of Expectations; and

–

reviewed succession plans for the Executive Committee and the position of Group Chief Executive.

The Committee also received updates on:

–

the status of the Companies Act 2006 and, in particular, the new statutory statement of Directors’ Duties on Conflicts of Interest.

During 2008, the Committee reviewed the composition of the Board and its principal Committees at each of its meetings. Following those deliberations, the Committee recommended to the Board that Sir Michael Rake succeed Stephen Russell as Chairman of the Board Audit Committee with effect from March 2009. No new Directors were appointed to the Board during 2008, other than Sir Michael Rake and Patience Wheatcroft, who joined the Board with effect from 1st January 2008.

In early 2009, the Committee concluded that a non-executive Director with experience of institutional fund management should be sought and, with the assistance of external search consultants, Simon Fraser was identified as a candidate with the desired experience. He met with members of the Board Corporate Governance & Nominations Committee and his appointment was recommended to the Board, who approved his appointment as a Director. Simon will join the Board on 10th March 2009, subject to regulatory approvals.

Pursuant to an agreement entered into between Barclays and China Development Bank (CDB) in August 2007 for the subscription of Barclays ordinary shares, CDB retain the right to nominate a non-executive Director to the Board of Barclays but did not take up this right during 2008.

In January 2009, the Committee reviewed its activities in 2008 against its terms of reference and concluded that it had discharged the responsibilities delegated to it under those terms of reference.

Board HR and Remuneration Committee

Sir Richard Broadbent (Chairman)

Marcus Agius

Leigh Clifford

Sir John Sunderland

Secretary: Patrick Gonsalves

The Board HR and Remuneration Committee terms of reference are available from the Corporate Governance section at:www.aboutbarclays.com

Additional information on the role and activities of the Committee can be found in the Remuneration Report on pages 157 to 173, including the Group’s revised philosophy on remuneration, an explanation of the Group’s remuneration arrangements and a description of the framework for future decisions in this area.

Activities in 2008

Figure 9 shows how the Committee allocated its time at its meetings in 2008. The Committee held additional meetings in November 2008 and January 2009, as a result of the rapidly changing economic environment and the intense scrutiny from regulators and other interested parties that the issue of remuneration has received.

During 2008 the Committee:

–

continued to review the compensation frameworks in place for each area of the Group;

–

reviewed executive compensation;

–

reviewed the Group’s approach to remuneration in light of market conditions;

–

approved the Pensions Strategy and other pension matters;

–

reviewed global staff benefits;

–

monitored the implementation of the talent agenda;

–

reviewed the Group’s Health and Safety and Diversity and Inclusion performance;

–

considered incentive funding for 2008 for each main business area;

–

reviewed, current and future, Group and business long-term incentive arrangements; and

–

held discussions with external advisers to the Committee on a range of issues, including obtaining market data on remuneration levels in specified markets.

The Committee received valuable support and advice from its independent advisers, Towers Perrin MGMC and Kepler Associates.

Management

Executive Committee

Under the leadership of the Group Chief Executive, the executive Directors are responsible for managing the Group’s business and making and executing operational decisions. The Executive Committee supports the Group Chief Executive and it meets every fortnight to discuss strategy development and policies to recommend to the Board. The Executive Committee is also responsible for implementing approved strategy and is supported by other Committees, including the Disclosure Committee.

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Executive Committee

John Varley (Chairman)

Bob Diamond

Chris Lucas

Frits Seegers

Disclosure Committee

The Disclosure Committee is chaired by Chris Lucas, the Group Finance Director. Members include the Company Secretary, Group General Counsel, Director, Investor Relations, Group Risk Director, Barclays Corporate Affairs Director, Group Financial Controller and Barclays Treasurer. The Committee:

–

considers and reviews the preliminary and half-year results, Annual Report/Annual Report on Form 20F and the Annual Review; and

–

considers Interim Management Statements released to the Stock Exchange.

The Committee also considers the content, accuracy and tone of significant other announcements that are proposed to be made in accordance with the FSA’s Disclosure and Transparency Rules.

The Committee reports to the Executive Committee and also reports to the Board Audit Committee, documenting its conclusions about the effectiveness of the design and operation of the disclosure controls and procedures. This forms part of the combined assurance given to the

Board Audit Committee together with the report on the Turnbull Review of Internal Controls recommended by the Code.

Board Effectiveness

Performance Review

The Code recommends that an evaluation of the effectiveness of the Board and its Committees is conducted annually. The evaluation in 2007 was independently facilitated by Egon Zehnder International. All Directors were sent a questionnaire to complete and return to Egon Zehnder International and these were discussed in individual interviews, which included peer review. The following actions were agreed for 2008:

–

minor enhancements around the form and content of Board papers and presentations; and

–

refining the Board calendar of business.

–

Group performance;

–

Strategy and performance objectives;

–

Reporting to shareholders/stakeholders;

–

Structure, people, succession planning and remuneration;

–

Decision-making process;

–

Information flows;

–

Board structure and composition;

–

Board roles and responsibilities;

–

Board and Management relationships;

–

Board meetings; and

–

Board Committees.

From the results of the 2008 evaluation, action points and issues that were discussed included:

–

continued focus on the Board’s calendar of business to ensure that non-critical items are removed or kept to a minimum, thereby ensuring that sufficient time can be allocated to items fundamental to the success of the Group;

–

refinements to the Board’s calendar of business, including additional time to be spent on items such as compensation strategy and succession planning;

–

the overall size and composition of the Board; and

–

refinements to the process for evaluating the performance of individual Directors.

The Board Corporate Governance and Nominations Committee has agreed an action plan to progress improvements in 2009.

In terms of individual Director performance, the Group Chairman held private meetings with non-executive Directors in early 2009 so that individual and general results could be discussed. Development plans relating to their own individual performance were agreed. The Senior Independent Director met privately with the other non-executive Directors and the Group Chief Executive to discuss feedback he received on the Group Chairman’s performance. These results were then shared with the Group Chairman.

Director Development and Business Awareness

A comprehensive development and awareness programme is in place for Directors. This comprises:

–

an induction programme, when they join the Board;

–

briefings on the business of Barclays; and

–

briefings on external technical matters.

Induction

All new Directors receive an induction presentation, which explains their responsibilities as a Director of a global, listed company and provides an overview of the Group and its businesses. An information pack, that gives details of the disclosures that Directors are obliged to make to the Company to comply with various laws and regulations, is also provided to each new Director. A personal induction programme is scheduled with each new Director so that they can further acquaint themselves with the Group and its businesses. Each new Director attends sessions with each of the executive Directors and the heads of the main Group functions, which includes opportunities to visit operational sites to meet with senior management and employees. The second part of their induction programme includes additional sessions with the executive Directors and senior managers from each of the Group’s main business units to provide the new Director with detailed and in-depth understanding of those businesses. The sessions focus on the challenges, opportunities and risks that are faced by each business unit. Sir Michael Rake and Patience Wheatcroft undertook their induction programmes during 2008.

The Board and the Board Audit and Board Risk Committees received further briefings to ensure they were kept up to date with the changing global economic conditions, including updates on capital management, presentations on asset-backed securities and liquidity risk, mark-to-market valuations and briefing material to support the various capital raising proposals and acquisition of the Lehman Brothers North American businesses.

Barclays businesses and operations

During 2008, one Board meeting was held off-site. The Board met in China in September and received presentations on the economic and political outlook in China and met key Barclays staff working in the Asia-Pacific region.

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Group Chief Executive, John Varley, helped to launch UK National Branch Week by visiting the Coventry High Street branch. During the course of the week, around 400 senior executives from the Group went back to the floor to experience first hand the successes and challenges colleagues in the branches are facing. Each day had a theme including raising the profile of Barclays product range, employee benefits, the importance of customer service, personal development and charity fundraising. A number of Directors participated and worked alongside cashiers, personal bankers and co-ordinators for the day.

John Varley also spent time giving presentations to colleagues on the Group’s capital raising proposals. He kept colleagues up to date on how market conditions were affecting Barclays and the decisions the Board was taking in respect of the capital raising options that were available. All colleagues were invited to attend the presentations in person or via conference call and John Varley answered questions raised by colleagues from around the world.

External matters

Directors are regularly briefed on market opinion and receive copies of analyst research and press commentary. Further briefing material on market conditions was sent to Directors during 2008 and Directors continue to receive relevant publications to keep them up to date with changing market opinion. Directors are invited to attend results presentations to meet with analysts and investors to enhance their awareness of market sentiment.

Statement on US Corporate Governance Standards

The statement required by NYSE is set out below.

Director independence

NYSE Rules require the majority of the Board to be independent.

The Code requires at least half of the Board (excluding the Chairman) to be independent. The NYSE Rules contain detailed tests for determining whether a Director is independent, whereas the Code requires the Board to determine whether each Director is independent in character and judgement and sets out criteria that may be relevant to that determination. We follow the Code’s recommendations as well as developing best practices among other UK public companies. The independence of our non-executive Directors is reviewed by the Board on an annual basis and it takes into account the guidance in the Code and the criteria we have established for determining independence, which are described on pages 147 and 148.

Board Committees

We have a Board Corporate Governance and Nominations Committee and a Board HR and Remuneration (rather than Compensation) Committee, both of which are broadly similar in purpose and constitution to the Committees required by the NYSE Rules and whose terms of reference comply with the Code’s requirements. As the Group Chairman was independent on appointment, the Code permits him to chair the Board Corporate Governance and Nominations Committee and be a member of the Board HR and Remuneration Committee. Except for these appointments, both Committees are composed solely of non-executive Directors, whom the Board has determined to be independent. We follow the Code recommendation that a majority of the Nominations Committee should be independent non-executive Directors, whereas the NYSE Rules state that the Committee must be composed entirely of independent Directors. We comply with the NYSE Rules regarding the obligation to have a Board Audit Committee that meets the requirements of Rule 10A-3 of the US Securities Exchange Act, including the requirements relating to the independence of Committee members. In April 2008, we made an Annual Written Affirmation of our compliance with these requirements to the NYSE. The Code also requires us to have a Board Audit Committee comprised solely of independent non-executive Directors. However, we follow the Code recommendations, rather than the NYSE Rules regarding the responsibilities of the Board Audit Committee, although both are broadly comparable. We also have a Board Risk Committee, comprised of independent non-executive Directors, which considers and discusses policies with respect to risk assessment and risk management.

Corporate Governance Guidelines

The NYSE Rules require domestic US companies to adopt and disclose corporate governance guidelines. There is no equivalent recommendation in the Code but the Board Corporate Governance and Nominations Committee has developed corporate governance guidelines, ‘Corporate Governance in Barclays’, which have been approved and adopted by the Board.

Code of Ethics

Shareholder approval of equity-compensation plans

The NYSE listing standards require that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions to those plans. We comply with UK requirements, which are similar to the NYSE standards. However, the Board does not explicitly take into consideration the NYSE’s detailed definition of what are considered ‘material revisions’.

Relations with Shareholders

Institutional investors

A key priority for the Board in 2008 was communicating with shareholders, particularly ahead of the General Meeting in November 2008, and also afterwards in order to provide further details to shareholders on the key decision points during the capital raising process. In the normal course of events, the Board aims to keep shareholders up to date and informed about how the Company is performing and its strategy, whilst ensuring that it listens to the opinions of major shareholders and takes their views on board. Executive Directors and senior executives hold group and one to one meetings with major investors to ensure we are communicating effectively. Analyst research notes are distributed to Directors and our corporate brokers provide regular feedback to the Board. The Investor Relations team organise roadshows, seminars, conferences, presentations and other activities that enable the Directors to interact with investors. The Group Chairman, Senior Independent Director and Company Secretary conduct a series of meetings with the corporate governance representatives of our major institutional shareholders ahead of each AGM. Meetings were held with our major institutional shareholders to discuss the capital raising proposals.

Private shareholders

The change in the law that allows us to communicate electronically with shareholders has enabled us to use less paper, which benefits the environment and lowers distribution costs for the Group. All shareholder documents are available electronically as soon as they are published but shareholders can still receive communications in paper format if they wish. This year we will continue to post the Annual Review, Notice of Meeting and proxy forms to all shareholders.

We encourage shareholders to hold their shares in Barclays Sharestore, where shares are held electronically in a cost-effective and secure environment. Shareholders can use our e-view service to receive their shareholder documents electronically and they can also use this service to get immediate access to information relating to their personal shareholding and dividend history. E-view participants can also change their details and dividend mandates online and receive dividend tax vouchers electronically.

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Annual General Meeting/General Meeting

The 2008 AGM was held on 24th April 2008 at The Queen Elizabeth II Conference Centre in London. In accordance with best practice, all resolutions were considered on a poll and the results were made available on our website the same day. 52.9% of the shares in issue were voted and all resolutions were approved. All Directors are encouraged to attend the AGM and are available to answer shareholder questions. All Directors attended the 2008 AGM, with the exception of Dr Danie Cronjé, who was retiring from the Board on that day. A class meeting of ordinary shareholders was also held on 24th April 2008 for shareholders to consider the resolution of the AGM that created new preference share classes. 50.5% of the shares in issue were voted and the resolution was approved by shareholders.

A general meeting (GM) was held on 24th November 2008, at ExCel London, where shareholders were asked to approve resolutions in connection with the Capital Raising proposals. 60.8% of the shares in issue were voted on a poll and all resolutions were approved. The results of the poll were made available on our website on the same day. The Group Chairman, all of the executive Directors and four non-executive Directors, including the Senior Independent Director, Deputy Chairman and Board Audit Committee Chairman, attended the GM.

The 2009 AGM will be held on 23rd April 2009 at The Queen Elizabeth II Conference Centre in London. The Notice of Meeting is enclosed with this Annual Report as a separate document. The resolutions will be considered on a poll and the results will be available on our website on 23rd April 2009.

Signed on behalf of the Board

Marcus Agius

Group Chairman

5th March 2009

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Corporate governance

Remuneration Report

Statement from the Chairman of the Board HR and Remuneration Committee

Context

2008

1.	The significant under performance of the share ~~sales by employees.~~price and the absolute reduction in market capitalisation (£20bn in 2008)

2.	The decision not to pay a final dividend for 2008

3.	The significantly lower absolute performance and weaker earnings in Barclays Capital

The variable pay for the Group reduced 48% relative to 2007. Accountability rests at the most senior levels and key factors relating to executive Directors include:

–

zero annual performance bonus for 2008

–

no salary increases for 2009

–

executive Directors ~~of Barclays PLC~~who have long-term performance shares due to be released in 2009 shall agree that these be deferred for a further two years and subject to additional financial performance over that period.

–

the total 2009 long-term awards are 64% lower than last year, with no awards for the Chief Executive and President.

An assessment of Barclays remuneration structures and how well the calibration had worked during this stressed period shows significant alignment with shareholders:

–

the existing long-term performance share plan award cycles (2007/09 and 2008/10) are not ~~eligible~~expected to ~~receive options~~vest

–

the value of employee interests in shares under ~~the BGI EOP.~~

~~In summary the BGI EOP operates as follows:~~

–

~~certain key BGI employees are granted options over shares in BGI Holdings;~~Barclays employee share plans has decreased over 2007 and 2008 by approximately £2bn.

–

~~the option exercise price is based on the fair value of a BGI Holdings share at the date of grant determined by an independent appraiser;~~

Future of Remuneration

–

revised the remuneration policy (see page 158) to accentuate risk management and the role of behaviours in the determination of remuneration

–

~~the options generally vest evenly over a three-year period and can normally be exercised in two annual exercise windows;~~

–

~~option holders are required to fund the exercise without any financial support from any member of the Barclays Group.~~

~~Once employees become shareholders, they are subject~~increased the shareholding requirements for executive Directors (from 1x to the ~~Articles~~higher of ~~BGI Holdings under which:~~2x times base salary or average total annual cash compensation over the prior three years)

–

announced a new plan in the first quarter of 2009 for approximately 15,000 employees to significantly increase the proportion of remuneration paid over multiple years.

Barclays will be engaged in extensive dialogue and consultation with shareholders in developing its new proposals. An update on progress will be provided at the AGM.

Report

The following report of the Committee provides further explanation of the current remuneration governance and arrangements for executive Directors and is divided into the following sections:

–

Committee remit, members and advisers

–

Remuneration policy and governance

–

Executive Directors’ remuneration

–

Non-executive Directors’ remuneration

–

Former Directors’ remuneration

–

Share plan descriptions

The Committee unanimously recommends that you vote at the 2009 AGM to approve the Remuneration Report as all Directors will be doing with their own Barclays shares.

On behalf of the Board

–

shareholders are required to hold the shares for a minimum of 355 days. As shareholders, employees derive the full risks and rewards of ownership, including voting rights and entitlement to any ordinary dividends paid by BGI Holdings;

–		~~on expiry of the minimum holding period, shareholders may, but are not obliged to, offer their shares for sale usually during two annual sales windows;~~

–		~~Barclays Bank PLC, at its discretion, has a right to purchase shares so offered, but is not obliged to do so.~~
Sir Richard Broadbent
Chairman, Board HR and Remuneration Committee
5th March 2009

~~Notes~~Barclays

~~Details of executive Directors standing for re-election at the 2008 AGM are set out on page 114.~~

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b	~~Notice period from Barclays to executive Director.~~

Board HR and Remuneration Committee remit and membership

The Committee provides governance and strategic oversight of executive and all other employee remuneration, Barclays Human Resource activities and senior management development. The Committee’s terms of reference are available in the Corporate Governance section of the websitehttp://www.aboutbarclays.com. The Committee met formally five times during 2008. After each formal meeting the Chairman of the Committee presented a report to the full Board. A report on the Committee’s activities is set out on page 153 as part of the Corporate Governance Report.

The members of the Committee, are Sir Richard Broadbent (Chairman), Marcus Agius (Group Chairman), Leigh Clifford and Sir John Sunderland.

The non-executive Directors who are Committee members are considered by the Board to be independent of management and free from any business or other relationship that could materially affect the exercise of their independent judgement.

Advisers

The Committee’s work is supported by independent professional advice. The Committee reviews the appointment of advisers each year. Towers Perrin MGMC and Kepler Associates were both re-appointed by the Committee in 2008. Deloitte LLP also advised the Committee. Any potential conflicts of interest the advisers may have are disclosed to the Committee. In addition to advising the Committee, Towers Perrin MGMC provided remuneration benchmarking data and Deloitte LLP and its affiliates also provided remuneration benchmarking data, tax, regulatory, information technology risk, pensions , corporate finance and consulting services to the Barclays Group.

The Group Chief Executive, the Human Resources Director and, as necessary, members of the Executive Committee, also advise the Committee, supported by their teams. No employee of Barclays Group is permitted to participate in discussions or decisions of the Committee relating to their own remuneration.

Remuneration Policy

During the year the Committee revised the Barclays Remuneration Policy. The revised policy is to:

1. Attract and retain those people with the ability, experience and skill to deliver the strategy.

2. Create a direct and recognisable alignment between the rewards and risk exposure of shareholders and employees, particularly executive Directors and senior management.

3. Incentivise employees to deliver sustained performance consistent with strategic goals and appropriate risk management, and to reward success in this.

One year’s contractual remuneration is calculated as follows: 12 months’ base salary, bonus, if eligible (being the average of the previous three years’ bonus awards, in some cases (Gary Hoffman, Chris Lucas and Naguib Kheraj) capped at 100% of base salary), medical benefit (while an employee) and continuation of pension benefits. Payments in lieu of notice are subject to mitigation if alternative employment is found during any period in which pay in lieu of notice is paid.

4. Deliver compensation that is affordable and appropriate in terms of value allocated to shareholders and employees.

5. Encourage behaviour consistent with the principles that guide Barclays business:

i)	Winning together

~~Naguib Kheraj ceased to be an executive Director on 31st March 2007.~~

–

Doing what is right for Barclays, its teams and colleagues, to achieve collective and individual success.

ii)	Best People

–

Developing talented colleagues and differentiating compensation to reflect performance.

–

Doing what is needed to ensure a leading position in the global financial services industry.

iii)	Customer and Client Focus

–

Understanding what customers and clients want and need and then serving them brilliantly.

Executive Directors’ remuneration – alignment of interests with shareholders

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iv)	Pioneering

–

Driving new ideas, especially those that make Barclays profitable and improve control.

–

Improving operational excellence.

–

Adding diverse skills to stimulate new perspectives and bold steps.

Trusted

–

Acting with the highest levels of integrity to retain the trust of customers, shareholders, other external stakeholders and colleagues.

–

Taking full responsibility for decisions and actions.

–

Reflecting the operation of independent, robust and evidence-based governance and control and complying with relevant legal and regulatory requirements.

Remuneration Policy Governance

For all individual remuneration decisions made by the Committee, including those for executive Directors, the Committee reviews each element of remuneration relative to performance and to the practice of other comparable organisations. Remuneration is benchmarked against the markets in which we compete for talent. This includes benchmarking against other leading international banks and financial services organisations, and other companies of similar size to Barclays in the FTSE 100 Index.

Given the materiality of Barclays pension arrangements, the Committee operates a specific framework for the management of pensions to ensure proper oversight. The Global Retirement Fund Governance Framework is operated to ensure best practice in respect of regulatory compliance, governance, investment and administration. Details of the pension arrangements in place for executive Directors are set out on page 164 and for other employees on page 160.

As required by Part 3 of Schedule 7A of the Companies Act 1985, the Group’s auditors, PricewaterhouseCoopers LLP, have audited the information contained in Tables 1b, 3, 5, 10, 11, 14, 16, 18, 19, 20, 21, 22 and 23 on pages 162 to 168.

Total Shareholder Return

Figure 2 shows the value, at 31st December 2008, of £100 invested in Barclays on 31st December 2003 compared with the value of £100 invested in the FTSE 100 Index. The other points plotted are the values at intervening financial year ends. The FTSE 100 Index is a widely recognised performance comparison for large UK companies and this is why it has been chosen as a comparator to illustrate Barclays TSR. The graph shows that, at the end of 2008, a hypothetical £100 invested in Barclays on 31st December 2003 would have generated a total loss of £59, compared with a gain of £18 if invested in the FTSE 100 Index.


e	~~Chris Lucas was appointed as an executive Director with effect from 1st April 2007.~~


~~Barclays~~

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~~Annual Report 2007~~
Barclays
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Executive Director’s Pay

Table 1 explains the purpose of each element of remuneration and shows executive Directors’ remuneration for 2008 and 2007.

Base Salaries

The executive Directors will receive no base salary increase in 2009.

Table 2: Base salary


	Base salary at 31st Dec 2008 £000	Base salary at 1st April 2009 £000	Date of previous increase
Executive Directors
John Varley	1,100	1,100	1st April 2008
Robert E Diamond Jr	250	250	1st March 1999
Chris Lucas	650	650	1st April 2008
Frits Seegers	700	700	n/a


Table 1a: Executive Directors’ annual remuneration
Element	Purpose	Delivery	Programme summary	When normally received/ awarded

Salary	To reflect the market value of the individual and their role	– Cash – Monthly – Pensionable	– Reviewed annually, with any increases typically effective on 1st April	Paid in year

Annual performance bonus (cash)	To incentivise the delivery of annual goals at the Group, business division and individual levels	– No more than 75% of annual performance bonus paid in cash – At least 25% recommended as deferred share awards under ESAS – Non-pensionable	– Based on annual business unit performance, performance of the Group as a whole and individual contribution	Normally paid in the following financial year

Total cash	Sub-total of the above			~~133~~
				~~133~~

Deferred share award (ESAS)

To align annual performance with shareholder value and increase retention

– At least 25% of annual performance bonus recommended as deferred share awards under ESAS

– Non-pensionable

~~Corporate governance~~

~~Remuneration report~~

~~The table below contains information on the number~~– Discretionary awards of shares to be deferred for three to five years. No performance condition on release, as a deferred share award

– 20% bonus shares releasable after three years, a further 10% after five years

– Dividends normally accumulated during deferral period

Normally awarded in ~~BGI Holdings~~the following financial year

Long-term incentive (PSP)

To reward the creation of above median, sustained growth in shareholder value and Economic Profit (EP) performance

– Annual awards of shares that vest after three years, subject to performance conditions

– Non-pensionable

– Discretionary awards

– Participation reviewed annually

– Barclays performance over ~~which options were granted, outstanding~~three years determines the performance shares eligible for release to each individual

Normally awarded in the following financial year

Total direct remuneration

Total of the above

Pension (or cash allowance)

To provide a market competitive post-retirement benefit

– Deferred cash or cash allowance

– Monthly

– Non-contributory, defined benefit scheme and/or defined contribution scheme, or cash allowance in lieu of pension contributions

Paid or accrued during year

Other benefits

To provide market competitive benefits

– Benefit in kind, or cash allowance

– Non-pensionable

– Benefits include private medical, insurance life and ~~exercised in 2006~~disability cover, accommodation overseas when required for business purposes, use of company owned vehicle or cash equivalent and ~~2007:~~tax advice

Year
   Number
granted
during year
(000s

)
Number
outstanding
at year end
(000s

)
Number
exercised
(000s

)

2006
   3,973 6,929 2,188
2007
   2,599 7,502 1,632

In 2007 BGI employees exercised options over 1.6m (2006: 2.2m) shares for consideration of £57m (2006: £44m); Barclays Bank PLC purchased 4.9m (2006: 4.9m) shares offered for sale by shareholders for consideration of £488m (2006: £410m). As at 31st December 2007, employees own 5.9% of BGI Holdings (2006: 9.4%).

~~BGI EOP – Accounting and disclosure~~

~~The BGI EOP is accounted for as an equity settled share-based payment~~

Received during year

Sub-total in accordance with ~~IFRS 2 ‘Share-based Payment’. The fair value~~Companies Act 1985

Total of ~~the services received from the employees is measured by reference~~Salary, Annual Cash Bonus, Other Benefits and Pension Cash Allowance

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Annual Cash Bonus and Deferred Share Awards

Long-term incentives

PSP Vesting in 2008

The PSP awards made in 2005, due for release in March 2008 lapsed in full as the performance condition was not met.

PSP awards due to vest in 2009

Proposed awards in 2009

It is proposed that Chris Lucas and Frits Seegers are awarded a performance share plan award in 2009.

The number of shares awarded to date and the performance conditions relating to each award are set out on pages 162 and 163.

The PSP awards are shown in Table 1b at the fair value of the re commended awards.


Table 1b: Executive Directors’ annual remuneration
	John Varley		Robert E Diamond Jr		Chris Lucas		Frits Seegers
	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000
	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000
Salary	1,075	975	250	250	638	450	700	700
Annual performance bonus (cash)	0	1,425	0	6,500	0	450	0	1,313
Total cash	1,075	2,400	250	6,750	638	900	700	2,013
Deferred share award (ESAS)	0	618	0	11,375	0	195	0	569
Fair value of long- term incentive (PSP) award	0	1,200	0	3,000	800	800	1,600	1,600
Total direct remuneration	1,075	4,218	250	21,125	1,438	1,895	2,300	4,182

Pension (or cash allowance)	Member of pension scheme. See page 164	Member of pension scheme. See page 164	Member of pension scheme. See page 164	Member of pension scheme. See page 164	159	113	175	175
Other benefits	23	18	66	14	18	22	27	24
Sub-total in accordance with Companies Act 1985	1,098	2,418	316	6,764	815	1,035	902	2,212

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Share Plans

Summary descriptions of principal share plans operated by Barclays are shown on pages 169-172.


Table 3: Long-term plans and deferred share plans
	Number of shares under award/option 1st January 2008 (maximum)	Awarded in year (maximum)	Market price on award date		Adjusted weighted average exercise price		Number released/ exercised
John Varley
PSP 2005-2007	426,135	–	£	5.30		–	–
PSP 2006-2008	461,244	–	£	6.75		–	–
PSP 2007-2009	491,130	–	£	7.08		–	–
PSP 2008-2010	–	791,208	£	4.25		–	–
ISOP	920,000	–		–	£	4.29	–
Sharesave	3,638	–		–	£	4.70	–
ESAS	344,711	135,715	£	4.25		–	(23,214	)
Robert E Diamond Jr
PSP 2005-2007	156,249	–	£	5.30		–	–
PSP 2006-2008	2,306,208	–	£	6.75		–	–
PSP 2007-2009	2,803,548	–	£	7.08		–	–
PSP 2008-2010	–	1,978,020	£	4.25		–	–
ISOP	560,000	–		–	£	4.42	–
ESOS	100,000	–		–	£	3.97	–
RIO cash release	–	–		–		–	–
BGI EOP	100,000	–		–	£	20.11	–
ESAS	4,863,749	4,131,868	£	4.25		–	(2,131,463	)
Chris Lucas
PSP 2007-2009	248,730	–	£	7.08		–	–
PSP 2008-2010	–	527,472	£	4.25		–	–
Sharesave	3,638	–		–	£	4.70	–
ESAS	69,091	42,857	£	4.25		–	(34,546	)
Frits Seegers
PSP 2006-2008	473,184	–	£	6.30		–	–
PSP 2007-2009	409,278	–	£	7.08		–	–
PSP 2008-2010	–	1,054,944	£	4.25		–	–
Sharesave	3,390	–		–	£	4.70	–
ESAS	231,383	125,000	£	4.25		–	(80,221	)

Numbers shown for ESAS above represent provisional allocations that have been awarded. Numbers shown as aggregate ESAS amounts also include shares under option as at 31st December 2008. Nil cost options are normally granted under mandatory ESAS awards at the third anniversary of grant and are exercisable (over initial allocation and two-thirds of bonus shares) typically for two years. The aggregate exercise price of a nil cost option is £1 (further detail is included on page 169). At the fifth anniversary of the provisional allocation

the nil cost options normally lapse and the shares under provisional allocation (including bonus shares) are released at the discretion of the ESAS trustee. In 2008, nil cost options were granted to Mr Varley over 91,213 shares. Nil cost options (granted in 2003) lapsed during the year. Mr Varley held 63,447 nil cost options under ESAS as at 1st January 2008, and 146,282 as at 31st December 2008. The first and last exercise dates were 13th March 2006 and 7th March 2010 respectively.


Table 4: Performance conditions attaching to the ~~fair value~~share plans in which the executive Directors participate

Scheme	Performance period	Performance measure	Target
Scheme	Performance period	Performance measure	Target

PSP	2008 -2010	50% of ~~the share options granted on the date~~award calibrated against TSR	33% of ~~the grant. The cost~~maximum award released for above median performance (6th place) with 100% released in 1st place and a scaled basis in between

		50% of ~~the employee services received in respect of the share options granted is recognised in the income statement~~award calibrated against Cumulative EP over the three year performance period ~~that~~	33% of maximum award released for £6,921m scaled to 100% of maximum award at £8,350m

	2007-2009	50% of award calibrated against TSR	As above

		50% of award calibrated against Cumulative EP over the ~~services are received. The cost~~three year performance period	33% of maximum award released for ~~2007~~£7,618m scaled to 100% of ~~£54.8m (2006: £37.4m, 2005: £14.9m) is included in staff costs in Note 8~~maximum award at £8,668m

	2006-2008	50% of award calibrated against TSR	As above

		50% of award calibrated against Cumulative EP over the three year performance period	33% of maximum award released for £5,661m scaled to ~~the accounts. In accordance with IFRS 2, details~~100% of ~~share options granted and exercised, together with weighted average fair values~~maximum award at grant date and weighted average exercise prices are set out in Note 44 to the accounts. In accordance with IAS 33 ‘Earnings per Share’, unexercised options are taken into account in the calculation£7,073m

	2005-2007	100% of ~~diluted earnings per share as set out in Note 11 to the accounts.~~award calibrated against TSR	As above

162

Barclays

For Group reporting, the exercise of options by employees is treated as a deemed disposal of interests in a subsidiary, as its holding in the subsidiary has been reduced for the consideration represented by the exercise price. Any subsequent purchase of shares offered for sale by employees is treated as a purchase of an additional investment in a subsidiary entity. The cash flows relating to these capital transactions are included in the consolidated cash flow statement and disclosed, along with other disposals and acquisitions, in Note 38 to the accounts and related movements in goodwill and minority interests are included in Notes 21 and 33 to the accounts respectively.Annual Report 2008

LOGO

All awards and releases are recommended by the Committee and are subject to trustee discretion.

The trustees may also release dividend shares to participants which represent accumulated dividends (net of withholding) in respect of shares under award.

During 2008 Barclays highest share price was £5.06 and the lowest was £1.27. The share price at year end was £1.53.

Cash

released

Market price
on release/
exercise date

Number
lapsed in
2008

Adjustment
due to
open offer

Adjusted
number of
shares under
award/option at
31st December
2008
(maximum)

Vested
number
of shares
under option

Value of
release/
exercise

End of three
year PSP
performance
period, or first
exercise/
scheduled
release date

Last
exercise/
scheduled
release date

–

(426,135

)

–

31/12/07

16/06/08

–

12,360

473,604

–

31/12/08

21/03/09

–

13,164

504,294

–

31/12/09

22/03/10

–

21,204

812,412

–

31/12/10

20/03/11

–

24,655

944,655

–

18/05/03

22/03/14

–

3,735

–

01/11/14

01/05/15

–

4.56

–

12,255

469,467

–

0.1m

13/03/06

20/03/13

–

(156,249

)

–

31/12/07

16/06/08

–

61,806

2,368,014

–

31/12/08

21/03/09

–

75,138

2,878,686

–

31/12/09

22/03/10

–

53,010

2,031,030

–

��

–

31/12/10

20/03/11

–

15,008

575,008

–

12/03/04

22/03/14

–

(100,000

)

–

14/08/01

13/08/08

£7.425m

–

7.42m

06/02/08

15/03/08

–

100,000

–

26/03/07

26/03/14

–

4.56/£4.57

–

183,958

7,048,112

–

9.74m

28/02/06

20/03/13

–

6,666

255,396

–

31/12/09

22/03/10

–

14,136

541,608

–

31/12/10

20/03/11

–

3,735

–

01/11/14

01/05/15

–

4.45

–

2,075

79,477

–

0.16m

31/03/08

20/03/13

–

12,684

485,868

–

31/12/08

04/08/09

–

10,968

420,246

–

31/12/09

22/03/10

–

28,272

1,083,216

–

31/12/10

20/03/11

–

3,480

–

01/11/12

01/05/13

–

2.91

–

9,550

285,712

–

0.23m

29/06/07

20/03/13

Mr Varley and Mr Diamond received 6,047 and 172,264 dividend shares respectively from the ESAS released during the year (share price on release date was £4.56).


~~Replacement~~TSR Peer group constituents
UK	Mainland Europe	US	Underpin	Actual performance
HBOS, HSBC, Lloyds TSB, Royal Bank of ~~the BGI EOP~~Scotland	Banco Santander, BBVA, BNP Paribas, Deutsche Bank, UBS	Citigroup, JP Morgan Chase	Cumulative EP over performance period must exceed cumulative EP over previous three years	To be determined at vesting in March 2011
–
As above			As above	To be determined
–				at vesting in March 2010
As above			As above	Performance condition
				partially met
–
As above			As above	TSR performance condition not met

Barclays

~~The Group will introduce a new BGI employee share plan in~~Annual Report 2008 ~~under which awards will be made using~~

163

Corporate governance

Remuneration Report

Pensions

Chris Lucas and Frits Seegers receive a cash allowance of 25% of salary in lieu of joining a Group pension scheme.

John Varley is a member of the Group’s closed UK defined benefit pension scheme. This non-contributory arrangement provides a pension benefit of two thirds of his pensionable salary at the normal retirement age of 60. Should he retire at 55, an unreduced pension of 60% of pensionable salary would be provided. There were no changes to the pension arrangements for Mr Varley during the year. His increase in pension of £83,000 during the year relates to accrual under the scheme. The scheme also provides, whilst in employment, a death in service dependant’s pension of 50% of the pension that would have been payable if employment had continued until normal pension age. Mr Varley also has a defined contribution benefit of £549,816 as at 31st December 2008 in respect of a previous transfer from a freestanding AVC.

Robert E Diamond Jr participates in the Group’s US non-contributory defined benefit arrangements which provide a benefit at age 65 of 1/60th of final average pensionable pay for each year of service up to a maximum of 30 years. In line with current market practice, final average pensionable pay includes salary and an element of bonus up to a current combined maximum of US$350,000. The benefits are provided through the US defined benefit plan (a funded arrangement), and the US Restoration Plan (an unfunded arrangement). The scheme also provides a death in service spouse’s pension of approximately 50% of the pension that would have been payable had early retirement occurred on the date of death.

Mr Diamond also participates in the Barclays Bank PLC 401K Thrift Savings Plan and Thrift Restoration Plan, which are both defined contribution plans. The company contributions in 2008 amounted to £11,745 (US$21,859).

Table 5 sets out the pension benefits of the executive Directors.

fund are reviewed annually and increase by a minimum of the increase in the retail prices index (capped at 5%), subject to the scheme rules.

Other benefits

Executive Directors are provided with benefits including private medical insurance, life and disability cover, the use of a company-owned vehicle or the cash equivalent, tax advice and accommodation overseas when required for business purposes. These benefits are available on similar terms to each executive Director. No Director has an expense allowance.

Shareholding guideline

The Committee guideline that executive Directors should hold, as a minimum, the equivalent of one times their base salary in Barclays shares, including shares awarded under ESAS, was met by all executive Directors at 31st December 2007. During the year the Committee increased this guideline to the higher of two times salary or one-third of total remuneration for the last three years. Executive Directors have five years from their appointment to meet this guideline and a reasonable period to build up to the guideline again, if it is not met because of a share price fall. Table 6 shows the executive Directors’ shareholdings. Table 7 shows the indicative change in value of the executive Directors’ total share interests during 2008.


Table 5: Pension provision
	Age at 31st December 2008	Completed years of service	Accrued pension at 31st December 2007 £000	Pension accrued during 2008 (including increase for inflation) £000	Pension accrued during 2008 (excluding inflation) £000	Accrued pension at 31st December 2008 £000	Transfer value of accrued pension at 31st December 2007 £000	Transfer value of accrued pension at 31st December 2008 £000	Increase in transfer value during the year £000	Annual cash in lieu of pension £000
John Varley	52	26	489	83	59	572	9,463	12,328	2,865	–
Robert E Diamon Jr	57	12	38	7	5	45	214	280	66	–
Chris Lucas	48	1	–	–	–	–	–	–	–	159
Frits Seegers	50	2	–	–	–	–	–	–	–	175


Table 6: Interests in shares of Barclays PLC at 31st December 2008
	At 1st January 2008		At 31st December 2008
	Beneficial	Non- beneficial	Beneficial	Non- beneficial
Executive Directors
John Varley	470,650	–	593,266	–


Table 6: Interests in shares of Barclays PLC at 31st December 2008
	At 1st January 2008		At 31st December 2008
	Beneficial	Non- beneficial	Beneficial	Non- beneficial
Robert E Diamond Jr	3,402,192	–	5,866,965	–
Chris Lucas	38,003	–	76,038	–
Frits Seegers	699,870	–	897,747	–
Table 7: Indicative change in value of executive Director total share interests
	Indicative value at 1st January 2008 £m	Change in holdings £m	Indicative value at 31st December 2008 £m	Indicative decrease on total share interest 2008 £m
Executive Directors
John Varley	7.1	1.4	2.5	(6.0	)
Robert E Diamond Jr	50.9	22.3	23.5	(49.7	)
Chris Lucas	1.0	1.0	0.7	(1.3	)
Frits Seegers	6.2	2.6	2.8	(6.0	)

interests in shares where the executive Director holds the legal, but not beneficial interest. In addition to the shares above Mr Diamond also holds 200,000 shares in Barclays Global Investors UK Holdings Limited. Mr Seegers has granted a third party bank security over 896,346 of the ordinary shares he holds. Mr Seegers retains beneficial ownership of these shares. He also holds 1,000 ordinary shares in Absa Group Limited. Note 45 provides further information on Directors and officers shareholdings. There were no changes to the interests of executive Directors in shares of Barclays PLC in the period 31st December 2008 to 27th February 2009.

Share interests are beneficial interests plus share plan interests including any initial or provisional allocations and vested awards under ESAS, PSP, ISOP, ESOS and Sharesave.

164

Barclays ~~PLC shares purchased in the market. The quantum of awards will be linked to BGI business performance. Executive Directors will not be eligible to participate in the new BGI plan.~~

~~It is intended that no further options will be granted under the BGI EOP and that the BGI EOP will not be renewed in 2010 when it comes to the end of its life.~~Annual Report 2008

LOGO

Performance Linked Remuneration

Each element of remuneration is important and has a specific role in achieving the aims of the remuneration policy. The combined potential remuneration from annual performance bonus and PSP outweighs the other elements, and is subject to personal and Group performance, thereby placing the majority of potential remuneration at risk.

Table 8 shows the average proportions of fixed and variable pay over the last three years.


Table 8: Variable remuneration average over the last three years (or since joining)
			Variable
	Fixed		Cash		Shares
Executive Directors
John Varley	57	%	19	%	24	%
Robert E Diamond Jr	2	%	39	%	59	%
Chris Lucas	38	%	12	%	49	%
Frits Seegers	22	%	25	%	53	%

Non-executive Directors

~~The Board determines the fees of non-executive Directors and the fees are reviewed annually. The fee structure as at 31st December 2007 is shown below.~~

David Booth

–

Sir Richard Broadbent (Senior Independent Director)

–

Leigh Clifford

–

Fulvio Conti

–

Dr Danie Cronjé (left the Board 24th April 2008)

–

Professor Dame Sandra Dawson

–

Sir Andrew Likierman

–

Sir Michael Rake

–

~~Base fee Plus:~~

~~65,000~~

~~Chairman of Board Audit Committee~~

~~50,000~~

~~Chairman of the Board HR and Remuneration Committee~~

~~40,000~~

~~Chairman of Board Risk Committee~~

~~30,000~~

~~Members of the Board Audit Committee~~

~~20,000~~

~~Members of the following Board Committees:~~

~~Risk, HR and Remuneration and~~

~~Corporate Governance and Nominations~~

~~15,000~~

~~As Deputy Chairman,~~ Sir Nigel Rudd ~~receives £200,000.~~ (Deputy Chairman)

–

Stephen Russell

–

Sir ~~Nigel Rudd did not receive any additional fees for serving as~~John Sunderland

–

Patience Wheatcroft

–

Key


OA		Independent on appointment

ED		Executive Director

I		Independent non-executive Director

Board Committees

The Board has delegated authority to four principal Board Committees:

–

Board Audit Committee

–

Board Risk Committee

–

Board Corporate Governance and Nominations ~~Committee. Sir Richard Broadbent receives~~Committee

–

Board HR and Remuneration Committee

The terms of reference for each of the principal Board Committees are available from the Corporate Governance section at:www.aboutbarclays.com.

Board Audit Committee

Stephen Russell (Chairman)

Fulvio Conti

Professor Dame Sandra Dawson

Sir Andrew Likierman

Sir Michael Rake

Secretary: Lawrence Dickinson

The Board Audit Committee terms of reference are available from the Corporate Governance section at:www.aboutbarclays.com.

Barclays

Annual Report 2008

149

Corporate governance

Corporate governance report

Activities in 2008

Figure 5 illustrates how the Committee allocated its time in 2008. During 2008, the Committee:

–

considered the information it would require during the coming year to enable it to discharge its responsibilities;

–

considered the significant changes in financial markets and economic conditions and the impact on the areas of focus for the Committee;

–

reviewed the Annual Report and Accounts and half-year Results and Interim Management Statements;

–

reviewed in detail the valuations of Barclays Capital’s credit market exposures, reviewing mark-to-market valuations and accounting for derivatives and assessing the overall quality of earnings;

–

reviewed the Group’s accounting policies and, in particular, the accounting for leveraged loans;

–

considered control issues of Group level significance for different areas of the business;

–

received reports on the control environment in each of the following businesses or functions: Barclays Wealth, Barclays Commercial Bank, Western Europe, Global Retail and Commercial Banking IT, Barclaycard, Global Payments, Emerging Markets, BGI, Absa and Barclays Capital;

–

reviewed the effectiveness and independence of the Group statutory auditor;

–

approved the re-appointment, remuneration and engagement letter of the Group statutory auditor;

–

considered the provision of non-audit services by the Group statutory auditor – more details can be found in the box on page 151;

–

received reports from the external and internal auditors;

–

monitored the performance of the Internal Audit function;

–

reviewed the Global Internal Audit Plan;

–

reviewed the internal control and risk management systems;

LOGO

Board Audit Committee Chairman’s Statement

We held ten meetings in 2008 and an ~~additional £30,000~~overview of how we used our meetings is set out below.

Our areas of focus in ~~respect of his role as Senior Independent Director. Marcus Agius serves~~2008 were dominated by the continuing disruption to the credit markets and financial services sector as a ~~member~~whole. In early 2008, we held a separate session of the Committee on accounting for and valuation of derivatives and complex financial instruments and also reviewed the Group’s valuation methodology for these instruments. The latter comprises trading desk evaluation supported by independent price testing and benchmarking, followed by a review by Finance and Risk and by the external auditor.

Our reviews of the control environment in each of our businesses in 2008 continued to focus on those areas where the Group’s business is expanding or which are deemed to be higher risk, including Emerging Markets. We also reviewed the controls around our key regulatory programmes, in particular, Sarbanes-Oxley and Basel II, and received regular reports on Sanctions compliance and Know Your Customer and Anti-Money Laundering controls.

The internal and external auditors are evaluated annually. Feedback on both is sought from key stakeholders in the Group via questionnaires with the results being presented to and discussed by the Committee. The Committee is satisfied with the performance of both auditors. During 2009, an external assessment of the internal audit function will be undertaken. The Committee has recommended to the Board and to shareholders that PwC should be re-appointed as the Group’s auditors at the AGM on 23rd April 2009. We are fully satisfied that PwC provides effective, independent challenge to management, which has been crucial in the current difficult environment, and has provided valued support to the Committee in the advice given and the clarity of their briefings and reports. The feedback received from other stakeholders through the annual evaluation exercise has been positive.

The Committee can confirm that it received sufficient, reliable and is timely information from management to enable it to fulfil its responsibilities.

LOGO

Stephen Russell

Chairman of the ~~Corporate Governance~~Board Audit Committee

5th March 2009

150

Barclays

Annual Report 2008

LOGO

–

considered the effectiveness of the Group’s internal controls over financial reporting;

–

received regular reports on ‘Raising Concerns’, including whistleblowing;

–

considered the Fraud Risk Control Framework; and ~~Nominations Board Committee. He does not receive any fees in relation~~

–

reviewed its Terms of Reference to ~~these appointments.~~satisfy itself that they enable the Committee to fulfill its responsibilities.

The Committee also received regular updates during 2008 on:

–

Basel II

–

MiFID

–

Sarbanes-Oxley

–

Sanctions compliance

Approval of financial statements

~~David Booth was appointed as non-executive Director with effect from 1st May 2007.~~Non-Audit Services Policy

The ~~Board’s~~Committee takes seriously its responsibility to put in place safeguards to auditor objectivity and independence. It has therefore established a policy ~~is that fees should reflect individual responsibilities~~on the provision of services by the Group’s statutory auditor. The Policy describes the circumstances in which the auditor may be permitted to undertake non-audit work for the Group. The Committee oversees compliance with the Policy and ~~membership~~considers and approves requests to use the auditor for non-audit work. Allowable services are pre-approved up to £100,000, or £10,000 in the case of Board Committees. Barclays encourages its non-executive Directors to build up a holding in Barclays shares. £20,000 of each Director’s base fee of £65,000 is used to buy Barclays shares. These shares, togethercertain taxation services. The Company Secretary and his team deal with ~~reinvested dividends, are retained on behalf~~day-to-day administration of the ~~non-executive Directors until they retire from~~Policy, facilitating requests for approval by the ~~Board. They~~Committee. The Committee receives a report at each meeting on the non-audit services provided by the auditor and the Policy is reviewed by the Committee annually. Details of the services that are ~~included in~~prohibited and allowed are set out below.

Services that are prohibited include:

– bookkeeping

– design and implementation of financial information systems

– appraisal or valuation services

– actuarial services

– internal audit outsourcing

– management and Human Resource functions

– broker or dealer, investment adviser or investment banking services

– legal, expert and tax services involving advocacy

Allowable services that the ~~table of Directors’ interests in~~ Committee will consider for approval include:

– statutory and regulatory audit services and regulatory non-audit services

– other attest and assurance services

– accountancy advice and training

– risk management and controls advice

– transaction support

– taxation services

– business support and recoveries

– translation services

LOGO

Barclays ~~shares~~

Annual Report 2008

151

Corporate governance

Corporate governance report

Board Risk Committee

Sir Richard Broadbent (Chairman)

David Booth

Dr Danie Cronjé (to 24th April 2008)

Sir Andrew Likierman

Stephen Russell

Secretary: Lawrence Dickinson

The Board Risk Committee terms of reference are available from the Corporate Governance section at:www.aboutbarclays.com.

The Board recognises that risk is a key parameter for the business.

Activities in 2008

The Committee met four times in 2008 and Figure 7 shows how the Committee allocated its time at those meetings. During 2008, the Committee:

–

received regular reports on, ~~page 142. Non-executive Directors do not receive awards under share plans for employees, nor do they accrue pension benefits from Barclays for their non-executive services.~~

Non-executive Directors do not have service contracts but each has a letter of appointment. For each non-executive Director who served during 2007, the effective date of their appointment, notice periodand considered, Risk Appetite and the Group’s ~~liability~~risk profile, including key indicators for Risk Appetite, Group Impairment, Retail Credit Risk, Wholesale Credit Risk, Market Risk, Financial Crime, Operational Risk and Economic Capital;

–

reviewed updates on liquidity risk;

–

reviewed risk trends and risk management in GRCB – Emerging Markets and South Africa;

–

received regular Forward Risk Trends reports, which set out the internal and external indicators that are showing signs of strain;

–

reviewed the internal control framework;

–

reviewed Group-wide stress testing scenarios and results;

–

reviewed in greater detail the process around setting annual Risk Appetite to establish the effectiveness of the process in responding to significant changes in economic and market conditions;

–

reviewed the programme of actions being taken Group-wide to mitigate risk in view of deteriorating economic conditions in our major markets, such as the UK, US, South Africa and Spain;

–

reviewed the Risk Appetite for the Group for 2009 and made recommendations to the Board; and.

–

received updates on Basel II.

LOGO

Board Risk Committee Chairman’s Statement

2008 was a challenging year for risk management and this was reflected in the ~~event~~work of ~~early termination are shown~~the Committee, which is detailed below. Particular areas worthy of note were:

– The Committee also monitored the Group’s exposure to other areas affected by the crisis, including other asset-backed securities, commercial mortgages and monoline insurers.

– The Committee reviewed and compared the write-downs being taken in the sub-prime and related areas with those being taken by the industry.

– The Committee monitored carefully the Group’s overall risk exposure in the light of the anticipated worsening in economic conditions and reviewed management plans to manage and mitigate the effects of the expected downturn in multiple markets.

– The Committee played an active role in informing Board debate about Risk Appetite and capital planning for 2009.

LOGO

Sir Richard Broadbent

Chairman of the Board Risk Committee

5th March 2009

In March 2009, the Committee will review its activities in 2008 against its terms of reference.

More information on risk management and the internal control framework can be found in the Risk management report on pages 57 to 136.

152

Barclays

Annual Report 2008

~~Non-executive~~

LOGO

Board Corporate Governance and

Nominations Committee

Marcus Agius (Chairman)

Sir Richard Broadbent

Sir Nigel Rudd

Stephen Russell

Sir John Sunderland

Secretary: Lawrence Dickinson

The Board Corporate Governance and Nominations Committee terms of reference are available from the Corporate Governance section at:www.aboutbarclays.com.

The meetings are also attended by the Group Chief Executive.

Activities in 2008

Figure 8 shows how the Committee allocated its time at its meetings in 2008. During 2008, the Committee:

~~Directors~~^a
–
reviewed Board and Board Committee composition to ensure the right mix of skills and experience are present;
~~Effective~~
~~date of~~
~~letter of~~
~~appointment~~ ~~Notice~~
~~period~~ ~~Group~~
~~liability in the~~
~~event of early~~
~~termination~~
~~David Booth~~

–	~~1st May 2007~~	~~6 months~~	~~6 months’~~ ~~fees~~
~~Sir Richard Broadbent~~	~~1st Sep 2003~~	“	“
~~Leigh Clifford~~	~~1st Oct 2004~~	“	“
~~Fulvio Conti~~	~~1st Apr 2006~~	“	“
~~Dr Danie Cronjé~~	~~1st Sep 2005~~	“	“
~~Professor Dame~~ ~~Sandra Dawson~~	~~1st Mar 2003~~	“	“
~~Sir Andrew Likierman~~	~~1st Sep 2004~~	“	“
~~Sir Nigel Rudd~~	~~1st Feb 1996~~	“	“
~~Stephen Russell~~	~~25th Oct 2000~~	“	“

~~Sir John Sunderland~~	~~1st Jun 2005~~	“	“

~~Sir Michael Rake~~monitored the progress of the action plan arising from the 2007 Board Effectiveness Review and ~~Patience Wheatcroft were appointed as non-executive Directors with effect from 1st January 2008.~~

~~Each appointment is for an initial six-year term, renewable for a single term~~oversaw the conduct of ~~three years thereafter, with the exception of Sir Nigel Rudd, whose appointment as Deputy Chairman is reviewed annually. Details of non-executive Directors standing for re-election at~~ the 2008 ~~AGM are set out on page 114.~~Board Effectiveness Review;

–

~~Future Policy~~reviewed the corporate governance disclosures for the 2007 Annual Report and considered the proposed disclosures for 2008;

–

~~The~~reviewed and updated Corporate Governance in Barclays and the Charter of Expectations; and

–

reviewed succession plans for the Executive Committee ~~will keep~~and the existing remuneration arrangements, as detailed in this Report, under review during 2008 and ensure that Barclays programmes remain competitive and provide appropriate incentive for performance. As usual, there will be individual reviewsposition of ~~base salary, annual bonus (including ESAS) and awards under~~ Group Chief Executive.

The Committee also received updates on:

–

the ~~long-term incentive plans.~~

~~Audited Information~~

~~As required by Part 3 of Schedule 7A~~status of the Companies Act ~~1985,~~2006 and, in particular, the new statutory statement of Directors’ Duties on Conflicts of Interest.

In January 2009, the Committee reviewed its activities in 2008 against its terms of reference and concluded that it had discharged the responsibilities delegated to it under those terms of reference.

Board HR and Remuneration Committee

Sir Richard Broadbent (Chairman)

Marcus Agius

Leigh Clifford

Sir John Sunderland

Secretary: Patrick Gonsalves

The Board HR and Remuneration Committee terms of reference are available from the Corporate Governance section at:www.aboutbarclays.com

Activities in 2008

During 2008 the Committee:

–

continued to review the compensation frameworks in place for each area of the Group;

–

reviewed executive compensation;

–

reviewed the Group’s ~~auditors, PricewaterhouseCoopers LLP, have audited~~approach to remuneration in light of market conditions;

–

approved the ~~information contained~~Pensions Strategy and other pension matters;

–

reviewed global staff benefits;

–

monitored the implementation of the talent agenda;

–

reviewed the Group’s Health and Safety and Diversity and Inclusion performance;

–

considered incentive funding for 2008 for each main business area;

–

reviewed, current and future, Group and business long-term incentive arrangements; and

–

held discussions with external advisers to the Committee on ~~pages 135~~a range of issues, including obtaining market data on remuneration levels in specified markets.

The Committee received valuable support and advice from its independent advisers, Towers Perrin MGMC and Kepler Associates.

Management

Executive Committee

LOGO

Barclays

Annual Report 2008

153

Corporate governance

Corporate governance report

Executive Committee

John Varley (Chairman)

Bob Diamond

Chris Lucas

Frits Seegers

Disclosure Committee

–

considers and reviews the preliminary and half-year results, Annual Report/Annual Report on Form 20F and the Annual Review; and

–

considers Interim Management Statements released to ~~141.~~the Stock Exchange.

The Committee also considers the content, accuracy and tone of significant other announcements that are proposed to be made in accordance with the FSA’s Disclosure and Transparency Rules.

Board Audit Committee together with the report on the Turnbull Review of Internal Controls recommended by the Code.

Board Effectiveness

Performance Review

–

minor enhancements around the form and content of Board papers and presentations; and

–

refining the Board calendar of business.

–

Group performance;

–

Strategy and performance objectives;

–

Reporting to shareholders/stakeholders;

–

Structure, people, succession planning and remuneration;

–

Decision-making process;

–

Information flows;

–

Board structure and composition;

–

Board roles and responsibilities;

–

Board and Management relationships;

–

Board meetings; and

–

Board Committees.

From the results of the 2008 evaluation, action points and issues that were discussed included:

–

refinements to the Board’s calendar of business, including additional time to be spent on items such as compensation strategy and succession planning;

–

the overall size and composition of the Board; and

–

refinements to the process for evaluating the performance of individual Directors.

The Board Corporate Governance and Nominations Committee has agreed an action plan to progress improvements in 2009.

Director Development and Business Awareness

A comprehensive development and awareness programme is in place for Directors. This comprises:

–

an induction programme, when they join the Board;

–

briefings on the business of Barclays; and

–

briefings on external technical matters.

Induction

Barclays businesses and operations

~~Note~~

a	~~Marcus Agius was a non-executive Director during 2006 and became Group Chairman on 1st January 2007. Details of his letter of appointment are set out on page 130.~~

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External matters

Statement on US Corporate Governance Standards

The statement required by NYSE is set out below.

Director independence

NYSE Rules require the majority of the Board to be independent.

Board Committees

Corporate Governance Guidelines

Code of Ethics

Shareholder approval of equity-compensation plans

The NYSE listing standards require that shareholders must be given the opportunity to vote on all equity-compensation plans and material revisions to those plans. We comply with UK requirements, which are similar to the NYSE standards. However, the Board does not explicitly take into consideration the NYSE’s detailed definition of what are considered ‘material revisions’.

Relations with Shareholders

Institutional investors

Private shareholders

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Corporate governance

Corporate governance report

Annual General Meeting/General Meeting

Signed on behalf of the Board

Marcus Agius

Group Chairman

5th March 2009

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Corporate governance

Remuneration Report

Statement from the Chairman of the Board HR and Remuneration Committee

Context

2008

1.	The significant under performance of the share price and the absolute reduction in market capitalisation (£20bn in 2008)

2.	The decision not to pay a final dividend for 2008

3.	The significantly lower absolute performance and weaker earnings in Barclays Capital

The variable pay for the Group reduced 48% relative to 2007. Accountability rests at the most senior levels and key factors relating to executive Directors include:

–

zero annual performance bonus for 2008

–

no salary increases for 2009

–

the total 2009 long-term awards are 64% lower than last year, with no awards for the Chief Executive and President.

An assessment of Barclays remuneration structures and how well the calibration had worked during this stressed period shows significant alignment with shareholders:

–

the existing long-term performance share plan award cycles (2007/09 and 2008/10) are not expected to vest

–

the value of employee interests in shares under Barclays employee share plans has decreased over 2007 and 2008 by approximately £2bn.

Future of Remuneration

–

revised the remuneration policy (see page 158) to accentuate risk management and the role of behaviours in the determination of remuneration

–

increased the shareholding requirements for executive Directors (from 1x to the higher of 2x times base salary or average total annual cash compensation over the prior three years)

–

announced a new plan in the first quarter of 2009 for approximately 15,000 employees to significantly increase the proportion of remuneration paid over multiple years.

Barclays will be engaged in extensive dialogue and consultation with shareholders in developing its new proposals. An update on progress will be provided at the AGM.

Report

The following report of the Committee provides further explanation of the current remuneration governance and arrangements for executive Directors and is divided into the following sections:

–

Committee remit, members and advisers

–

Remuneration policy and governance

–

Executive Directors’ remuneration

–

Non-executive Directors’ remuneration

–

Former Directors’ remuneration

–

Share plan descriptions

The Committee unanimously recommends that you vote at the 2009 AGM to approve the Remuneration Report as all Directors will be doing with their own Barclays shares.

On behalf of the Board

Sir Richard Broadbent

Chairman, Board HR and Remuneration Committee

5th March 2009

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Remuneration Report

Board HR and Remuneration Committee remit and membership

The members of the Committee, are Sir Richard Broadbent (Chairman), Marcus Agius (Group Chairman), Leigh Clifford and Sir John Sunderland.

Advisers

Remuneration Policy

During the year the Committee revised the Barclays Remuneration Policy. The revised policy is to:

1. Attract and retain those people with the ability, experience and skill to deliver the strategy.

2. Create a direct and recognisable alignment between the rewards and risk exposure of shareholders and employees, particularly executive Directors and senior management.

3. Incentivise employees to deliver sustained performance consistent with strategic goals and appropriate risk management, and to reward success in this.

4. Deliver compensation that is affordable and appropriate in terms of value allocated to shareholders and employees.

5. Encourage behaviour consistent with the principles that guide Barclays business:

i)	Winning together

–

Doing what is right for Barclays, its teams and colleagues, to achieve collective and individual success.

ii)	Best People

–

Developing talented colleagues and differentiating compensation to reflect performance.

–

Doing what is needed to ensure a leading position in the global financial services industry.

iii)	Customer and Client Focus

–

Understanding what customers and clients want and need and then serving them brilliantly.

Executive Directors’ remuneration – alignment of interests with shareholders

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iv)	Pioneering

–

Driving new ideas, especially those that make Barclays profitable and improve control.

–

Improving operational excellence.

–

Adding diverse skills to stimulate new perspectives and bold steps.

Trusted

–

Acting with the highest levels of integrity to retain the trust of customers, shareholders, other external stakeholders and colleagues.

–

Taking full responsibility for decisions and actions.

–

Reflecting the operation of independent, robust and evidence-based governance and control and complying with relevant legal and regulatory requirements.

Remuneration Policy Governance

Total Shareholder Return

LOGO

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Remuneration Report

Executive Director’s Pay

Table 1 explains the purpose of each element of remuneration and shows executive Directors’ remuneration for 2008 and 2007.

Base Salaries

The executive Directors will receive no base salary increase in 2009.

~~2007 Annual Remuneration~~^aTable 2: Base salary


	Base salary at 31st Dec 2008 £000	Base salary at 1st April 2009 £000	Date of previous increase
Executive Directors
John Varley	1,100	1,100	1st April 2008
Robert E Diamond Jr	250	250	1st March 1999
Chris Lucas	650	650	1st April 2008
Frits Seegers	700	700	n/a

   Salary
and
fees
£000    Benefits^b£000
Annual
cash
bonus
£000

2007
Total
£000

2006
Total
£000

Group Chairman

Marcus Agius^c
   750    1    –    751    22
Executive Directors

John Varley^d
   975    18    1,425    2,418    2,516
Robert E Diamond Jr^d,e
   250    14    6,500    6,764    10,692
Gary Hoffman^d
   625    15    506    1,146    1,108
Chris Lucas^f
   450    135    450    1,035    –
Frits Seegers^d,g
   700    199    1,313    2,212    1,630
Non-executive Directors^h

David Boothⁱ
   43    –    –    43    –
Sir Richard Broadbent
   180    –    –    180    147
Leigh Clifford
   80    –    –    80    76
Fulvio Conti
   85    –    –    85    54
Dr Danie Cronjé
   217    –    –    217    326
Professor Dame Sandra Dawson
   85    –    –    85    81
Sir Andrew Likierman
   100    –    –    100    96
Sir Nigel Rudd
   200    –    –    200    200
Stephen Russell
   145    –    –    145    137
Sir John Sunderland
   95    –    –    95    81
Former Director

Naguib Kheraj^d,j
   175    44    438    657    2,565
Forthcoming ESAS and PSP awards^k


Mandatory
ESAS – 2007
results
£000
   March 2008
PSP – value
of shares
under initial
allocation
£000
Mandatory
ESAS – 2006
results
£000
   March 2007
PSP – value
of shares
under initial
allocation
£000

Executive Directors

John Varley
      618    1,200    699    1,200
Robert E Diamond Jr^l
      11,375    3,000    4,518    6,850
Gary Hoffman
      219    625    203    625
Chris Lucas
      195    800    –    600
Frits Seegers
      569    1,600    520    1,000

~~Notes~~Table 1a: Executive Directors’ annual remuneration

a	Emoluments include amounts, if any, payable by subsidiary undertakings. Amounts payable to Dr Danie Cronjé include an amount of ZAR1,926,400 (£136,774) in respect of his Chairmanship of Absa Group Limited from which he retired on 31st July 2007 (2006: ZAR3,114,800 (£249,829)
Element		Purpose	Delivery	Programme summary	When normally received/ awarded

Salary		To reflect the market value of the individual and their role	– Cash – Monthly – Pensionable	– Reviewed annually, with any increases typically effective on 1st April	Paid in year

Annual performance bonus (cash)		To incentivise the delivery of annual goals at the Group, business division and individual levels	– No more than 75% of annual performance bonus paid in cash – At least 25% recommended as deferred share awards under ESAS – Non-pensionable	– Based on annual business unit performance, performance of the Group as a whole and individual contribution	Normally paid in the following financial year

Total cash		Sub-total of the above

Deferred share award (ESAS)		To align annual performance with shareholder value and increase retention	– At least 25% of annual performance bonus recommended as deferred share awards under ESAS – Non-pensionable	– Discretionary awards of shares to be deferred for three to five years. No performance condition on release, as a deferred share award – 20% bonus shares releasable after three years, a further 10% after five years – Dividends normally accumulated during deferral period	Normally awarded in the following financial year

Long-term incentive (PSP)		To reward the creation of above median, sustained growth in shareholder value and Economic Profit (EP) performance	– Annual awards of shares that vest after three years, subject to performance conditions – Non-pensionable	– Discretionary awards – Participation reviewed annually – Barclays performance over three years determines the performance shares eligible for release to each individual	Normally awarded in the following financial year

Total direct remuneration		Total of the above

Pension (or cash allowance)		To provide a market competitive post-retirement benefit	– Deferred cash or cash allowance – Monthly	– Non-contributory, defined benefit scheme and/or defined contribution scheme, or cash allowance in lieu of pension contributions	Paid or accrued during year

Other benefits		To provide market competitive benefits	– Benefit in kind, or cash allowance – Non-pensionable	– Benefits include private medical, insurance life and disability cover, accommodation overseas when required for business purposes, use of company owned vehicle or cash equivalent and tax advice	Received during year

Sub-total in accordance with Companies Act 1985		Total of Salary, Annual Cash Bonus, Other Benefits and Pension Cash Allowance

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Annual Cash Bonus and Deferred Share Awards

Long-term incentives

PSP Vesting in 2008

The PSP awards made in 2005, due for release in March 2008 lapsed in full as the performance condition was not met.

PSP awards due to vest in 2009

Proposed awards in 2009

It is proposed that Chris Lucas and Frits Seegers are awarded a performance share plan award in 2009.

The number of shares awarded to date and the performance conditions relating to each award are set out on pages 162 and 163.

The PSP awards are shown in Table 1b at the fair value of the re commended awards.


Table 1b: Executive Directors’ annual remuneration
	John Varley		Robert E Diamond Jr		Chris Lucas		Frits Seegers
	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000
	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000	2008 £000	2007 £000
Salary	1,075	975	250	250	638	450	700	700
Annual performance bonus (cash)	0	1,425	0	6,500	0	450	0	1,313
Total cash	1,075	2,400	250	6,750	638	900	700	2,013
Deferred share award (ESAS)	0	618	0	11,375	0	195	0	569
Fair value of long- term incentive (PSP) award	0	1,200	0	3,000	800	800	1,600	1,600
Total direct remuneration	1,075	4,218	250	21,125	1,438	1,895	2,300	4,182

Pension (or cash allowance)	Member of pension scheme. See page 164	Member of pension scheme. See page 164	Member of pension scheme. See page 164	Member of pension scheme. See page 164	159	113	175	175
Other benefits	23	18	66	14	18	22	27	24
Sub-total in accordance with Companies Act 1985	1,098	2,418	316	6,764	815	1,035	902	2,212

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Remuneration Report

Share Plans

Summary descriptions of principal share plans operated by Barclays are shown on pages 169-172.


Table 3: Long-term plans and deferred share plans
	Number of shares under award/option 1st January 2008 (maximum)	Awarded in year (maximum)	Market price on award date		Adjusted weighted average exercise price		Number released/ exercised
John Varley
PSP 2005-2007	426,135	–	£	5.30		–	–
PSP 2006-2008	461,244	–	£	6.75		–	–
PSP 2007-2009	491,130	–	£	7.08		–	–
PSP 2008-2010	–	791,208	£	4.25		–	–
ISOP	920,000	–		–	£	4.29	–
Sharesave	3,638	–		–	£	4.70	–
ESAS	344,711	135,715	£	4.25		–	(23,214	)
Robert E Diamond Jr
PSP 2005-2007	156,249	–	£	5.30		–	–
PSP 2006-2008	2,306,208	–	£	6.75		–	–
PSP 2007-2009	2,803,548	–	£	7.08		–	–
PSP 2008-2010	–	1,978,020	£	4.25		–	–
ISOP	560,000	–		–	£	4.42	–
ESOS	100,000	–		–	£	3.97	–
RIO cash release	–	–		–		–	–
BGI EOP	100,000	–		–	£	20.11	–
ESAS	4,863,749	4,131,868	£	4.25		–	(2,131,463	)
Chris Lucas
PSP 2007-2009	248,730	–	£	7.08		–	–
PSP 2008-2010	–	527,472	£	4.25		–	–
Sharesave	3,638	–		–	£	4.70	–
ESAS	69,091	42,857	£	4.25		–	(34,546	)
Frits Seegers
PSP 2006-2008	473,184	–	£	6.30		–	–
PSP 2007-2009	409,278	–	£	7.08		–	–
PSP 2008-2010	–	1,054,944	£	4.25		–	–
Sharesave	3,390	–		–	£	4.70	–
ESAS	231,383	125,000	£	4.25		–	(80,221	)


Table 4: Performance conditions attaching to the share plans in which the executive Directors participate

Scheme	Performance period	Performance measure	Target
Scheme	Performance period	Performance measure	Target

PSP	2008 -2010	50% of award calibrated against TSR	33% of maximum award released for above median performance (6th place) with 100% released in 1st place and a scaled basis in between

		50% of award calibrated against Cumulative EP over the three year performance period	33% of maximum award released for £6,921m scaled to 100% of maximum award at £8,350m

	2007-2009	50% of award calibrated against TSR	As above

		50% of award calibrated against Cumulative EP over the three year performance period	33% of maximum award released for £7,618m scaled to 100% of maximum award at £8,668m

	2006-2008	50% of award calibrated against TSR	As above

		50% of award calibrated against Cumulative EP over the three year performance period	33% of maximum award released for £5,661m scaled to 100% of maximum award at £7,073m

	2005-2007	100% of award calibrated against TSR	As above

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All awards and releases are recommended by the Committee and are subject to trustee discretion.

The trustees may also release dividend shares to participants which represent accumulated dividends (net of withholding) in respect of shares under award.

During 2008 Barclays highest share price was £5.06 and the lowest was £1.27. The share price at year end was £1.53.

Cash

released

Market price
on release/
exercise date

Number
lapsed in
2008

Adjustment
due to
open offer

Adjusted
number of
shares under
award/option at
31st December
2008
(maximum)

Vested
number
of shares
under option

Value of
release/
exercise

End of three
year PSP
performance
period, or first
exercise/
scheduled
release date

Last
exercise/
scheduled
release date

–

(426,135

)

–

31/12/07

16/06/08

–

12,360

473,604

–

31/12/08

21/03/09

–

13,164

504,294

–

31/12/09

22/03/10

–

21,204

812,412

–

31/12/10

20/03/11

–

24,655

944,655

–

18/05/03

22/03/14

–

3,735

–

01/11/14

01/05/15

–

4.56

–

12,255

469,467

–

0.1m

13/03/06

20/03/13

–

(156,249

)

–

31/12/07

16/06/08

–

61,806

2,368,014

–

31/12/08

21/03/09

–

75,138

2,878,686

–

31/12/09

22/03/10

–

53,010

2,031,030

–

��

–

31/12/10

20/03/11

–

15,008

575,008

–

12/03/04

22/03/14

–

(100,000

)

–

14/08/01

13/08/08

£7.425m

–

7.42m

06/02/08

15/03/08

–

100,000

–

26/03/07

26/03/14

–

4.56/£4.57

–

183,958

7,048,112

–

9.74m

28/02/06

20/03/13

–

6,666

255,396

–

31/12/09

22/03/10

–

14,136

541,608

–

31/12/10

20/03/11

–

3,735

–

01/11/14

01/05/15

–

4.45

–

2,075

79,477

–

0.16m

31/03/08

20/03/13

–

12,684

485,868

–

31/12/08

04/08/09

–

10,968

420,246

–

31/12/09

22/03/10

–

28,272

1,083,216

–

31/12/10

20/03/11

–

3,480

–

01/11/12

01/05/13

–

2.91

–

9,550

285,712

–

0.23m

29/06/07

20/03/13

Mr Varley and Mr Diamond received 6,047 and 172,264 dividend shares respectively from the ESAS released during the year (share price on release date was £4.56).


TSR Peer group constituents
UK	Mainland Europe	US	Underpin	Actual performance
HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland	Banco Santander, BBVA, BNP Paribas, Deutsche Bank, UBS	Citigroup, JP Morgan Chase	Cumulative EP over performance period must exceed cumulative EP over previous three years	To be determined at vesting in March 2011
–
As above			As above	To be determined
–				at vesting in March 2010
As above			As above	Performance condition
				partially met
–
As above			As above	TSR performance condition not met

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Pensions

Chris Lucas and Frits Seegers receive a cash allowance of 25% of salary in lieu of joining a Group pension scheme.

Table 5 sets out the pension benefits of the executive Directors.

fund are reviewed annually and increase by a minimum of the increase in the retail prices index (capped at 5%), subject to the scheme rules.

Other benefits

Executive Directors are provided with benefits including private medical insurance, life and disability cover, the use of a company-owned vehicle or the cash equivalent, tax advice and accommodation overseas when required for business purposes. These benefits are available on similar terms to each executive Director. No Director has an expense allowance.

Shareholding guideline


Table 5: Pension provision
	Age at 31st December 2008	Completed years of service	Accrued pension at 31st December 2007 £000	Pension accrued during 2008 (including increase for inflation) £000	Pension accrued during 2008 (excluding inflation) £000	Accrued pension at 31st December 2008 £000	Transfer value of accrued pension at 31st December 2007 £000	Transfer value of accrued pension at 31st December 2008 £000	Increase in transfer value during the year £000	Annual cash in lieu of pension £000
John Varley	52	26	489	83	59	572	9,463	12,328	2,865	–
Robert E Diamon Jr	57	12	38	7	5	45	214	280	66	–
Chris Lucas	48	1	–	–	–	–	–	–	–	159
Frits Seegers	50	2	–	–	–	–	–	–	–	175


Table 6: Interests in shares of Barclays PLC at 31st December 2008
	At 1st January 2008		At 31st December 2008
	Beneficial	Non- beneficial	Beneficial	Non- beneficial
Executive Directors
John Varley	470,650	–	593,266	–


Table 6: Interests in shares of Barclays PLC at 31st December 2008
	At 1st January 2008		At 31st December 2008
	Beneficial	Non- beneficial	Beneficial	Non- beneficial
Robert E Diamond Jr	3,402,192	–	5,866,965	–
Chris Lucas	38,003	–	76,038	–
Frits Seegers	699,870	–	897,747	–
Table 7: Indicative change in value of executive Director total share interests
	Indicative value at 1st January 2008 £m	Change in holdings £m	Indicative value at 31st December 2008 £m	Indicative decrease on total share interest 2008 £m
Executive Directors
John Varley	7.1	1.4	2.5	(6.0	)
Robert E Diamond Jr	50.9	22.3	23.5	(49.7	)
Chris Lucas	1.0	1.0	0.7	(1.3	)
Frits Seegers	6.2	2.6	2.8	(6.0	)

interests in shares where the executive Director holds the legal, but not beneficial interest. In addition to the shares above Mr Diamond also holds 200,000 shares in Barclays Global Investors UK Holdings Limited. Mr Seegers has granted a third party bank security over 896,346 of the ordinary shares he holds. Mr Seegers retains beneficial ownership of these shares. He also holds 1,000 ordinary shares in Absa Group Limited. Note 45 provides further information on Directors and officers shareholdings. There were no changes to the interests of executive Directors in shares of Barclays PLC in the period 31st December 2008 to 27th February 2009.

Share interests are beneficial interests plus share plan interests including any initial or provisional allocations and vested awards under ESAS, PSP, ISOP, ESOS and Sharesave.

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Performance Linked Remuneration

Table 8 shows the average proportions of fixed and variable pay over the last three years.


Table 8: Variable remuneration average over the last three years (or since joining)
			Variable
	Fixed		Cash		Shares
Executive Directors
John Varley	57	%	19	%	24	%
Robert E Diamond Jr	2	%	39	%	59	%
Chris Lucas	38	%	12	%	49	%
Frits Seegers	22	%	25	%	53	%

Service Contracts

The Group has service contracts with its executive Directors which do not have a fixed term but provide for a notice period from the Group of 12 months and normally for retirement at age 65. Executive Directors’ contracts allow for termination with contractual notice from the Group or, in the alternative, termination by way of payment in lieu of notice (in phased instalments) which are subject to contractual mitigation. In the event of gross misconduct, neither notice nor a payment in lieu of notice will be given.

All executive Directors are standing for re-election at the 2009 AGM – see page 141.

Other Directorships

The executive Directors hold directorships in the organisations and receive the fees shown in Table 10.


Table 9: Contract terms
	Effective date of contract	Notice period from the Company	Potential compensation for loss of office
Executive Directors
John Varley	1st September 2004	12 months	12 months base salary, bonus and continuation of medical and pension benefits whilst an employee

Robert E Diamond Jr	1st June 2005	12 months	12 months base salary, bonus and continuation of medical and pension benefits whilst an employee

Chris Lucas	1st April 2007	12 months	12 months base salary, bonus equivalent to the average of the previous three years up to 100% of base salary and continuation of medical and pension benefits whilst an employee

Frits Seegers	7th June 2006	12 months	12 months base salary, bonus and continuation of medical and pension benefits whilst an employee

The Group Chairman and executive Directors receive benefits in kind, which may include life and disability cover, the use of a Company owned vehicle or cash equivalent, medical insurance and tax advice. Benefits are provided on similar terms to other senior executives. No Director has an expense allowance.

~~Marcus Agius was appointed as a non-executive Director on 1st September 2006 and as Group Chairman from 1st January 2007.~~

Table 10: Other directorships held by the executive Directors and fees retained


		2008				2007
Director	Organisation	Fees		Fees retained		Fees		Fees retained
John Varley	British Grolux Investments Limited	£	7,788	£	7,788	£	7,613	£	7,613
	AstraZeneca plc	£	83,333	£	83,333	£	56,486	£	56,486
	International Advisory Panel of the Monetary Authority of Singapore	US$	0	US$	0	US$	10,000	US$	10,000
Robert E Diamond Jr	Old Vic Productions plc	£	0	£	0	£	0	£	0
Frits Seegers	Absa Group Limited and Absa Bank Limited	£	26,807	£	0	£	33,363	£	0
Chris Lucas	–		–		–		–		–

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Corporate governance

Remuneration Report

In 2007 John Varley was a Director of Ascot Authority (Holdings) Limited (Directorship ceased on 31st December 2007) and British Grolux Investments Limited for which he received fees of £20,085 and £7,613 respectively (2006: £26,000 and £7,500 respectively). John Varley is a non-executive Director of AstraZeneca plc for which he received fees of £56,486 in 2007 (2006: £21,075). John Varley is also a member of the International Advisory Panel of the Monetary Authority of Singapore for which he received fees of US$10,000 in 2007 (2006: US$10,000). John Varley is Chairman of Business Action on Homelessness and President of the Employers’ Forum on Disability for which he receives no fees. Robert E Diamond Jr is Chairman of Old Vic Productions plc for which he received no fees in 2007. Gary Hoffman is a Director of Visa (Europe) Limited and Visa (International) Limited for which he receives no fees. Gary Hoffman is also a Director of Trinity Mirror plc for which he received fees of £62,754 in 2007 (2006: £50,000). During the course of his Directorship Naguib Kheraj was a member of the Board of Governors of the Institute of Ismaili Studies and Chairman of the National Committee of the Aga Khan Foundation for which he received no fees in 2007. Naguib Kheraj (up to 31st March 2007) and Frits Seegers are non-executive Directors of Absa Group Limited and Absa Bank Limited. They have both waived their fees, which were paid to Barclays. Their respective fees in 2007 were ZAR136,533 (£9,694) and ZAR469,900 (£33,363) (2006: ZAR425,100 (£34,096) and ZAR75,400 (£6,048) respectively).

Group Chairman, Deputy Chairman and non-executive Directors

The Group Chairman, Deputy Chairman and non-executive Directors receive fees which reflect the individual responsibilities and membership of Board Committees. Fees are reviewed each year by the Board. Fees were last increased in June 2008.

The first £20,000 of each non-executive Director’s base fee and the Deputy Chairman’s fee is used to purchase Barclays shares. These shares, together with reinvested dividends, are retained on behalf of the non-executive Directors until they retire from the Board.

Marcus Agius, Group Chairman, has a minimum time commitment to Barclays of the equivalent to 60% of a full-time role and he receives private health insurance in addition to his fees. Marcus Agius is not

eligible to participate in Barclays bonus and share incentive plans nor will he participate in Barclays pension plans or receive any pension contributions. No other non-executive Director receives any benefits from Barclays.

Details of the remuneration received by the non-executive Directors during the year and their beneficial interests in Barclays PLC shares are set out in tables 11 and 12.

Letters of Appointment

The Group Chairman, Deputy Chairman and non-executive Directors have individual letters of appointment. Each appointment is for an initial six-year term, renewable for a single term of three years thereafter. Sir Nigel Rudd’s re-appointment as Deputy Chairman has been approved annually by shareholders.

All non-executive Directors, except Sir Nigel Rudd DL and Professor Dame Sandra Dawson, are standing for re-election at the 2009 AGM – see page 155.

The remuneration for 2007 for Robert E Diamond Jr was based on the performance of Barclays Group, Barclays Capital, Barclays Global Investors and Barclays Wealth, both on an absolute and industry relative basis. The composition of this package continues to be heavily weighted towards elements that are ‘at risk’ and reflects practice in the investment banking and investment management industry.

Table 11: Fees

Chairman
£000

Deputy
Chairman
£000

Board
Member
£000

Senior
Independent
Director
£000

Audit
Committee
£000

Board HR
and
Remuneration
Committee
£000

Board
Corporate
Governance
and
Nominations
Committee
£000

Board Risk
Committee
£000

Benefits
£000

Total
2008
£000

Total
2007
£000

Full-year fee

(at 31st Dec 08)

750

200

–

Full-year fee – Committee Chair

(at 31st Dec 08)

–

Full-year fee – Committee Member

(at 31st Dec 08)

–

Fees to 31st December 2008

Group Chairman

Marcus Agius

750

–

Ch.

–

751

Non-executive Directors

David Booth

–

Sir Richard Broadbent

–

Snr. Ind.

–

Ch.

–

188

180

Leigh Clifford AO

–

115

Fulvio Conti

–

Professor Dame Sandra Dawson

–

Sir Andrew Likierman

–

105

100

Sir Michael Rake

–

Sir Nigel Rudd DL

–

D. Ch.

–

200

Stephen Russell

–

Ch.

–

153

145

Sir John Sunderland

–

Patience Wheatcroft

–

Patience Wheatcroft was a member of the Brand and Reputation Committee for which the full year fee is £15,000. Leigh Clifford was also a member of the Asia Pacific Advisory Committee and received fees of US$60,000 (2007: US$35,000). These fees are included in those shown above.

Chris Lucas was appointed as an executive Director with effect from 1st April 2007. In addition to the amount shown in the ‘Salary and fees’ column above, Chris Lucas received an award under ESAS in recognition of forfeited compensation from his previous employment. Bonus shares are not applicable to this award. Details of this ESAS award are shown in the table on page 137 and the first table on page 138, and are not included in the table above. In addition, Chris Lucas received an award under the PSP which is shown in the table above (footnote k on this page provides further information). Chris Lucas received an allowance of 25% of base salary (£112,500) in lieu of pension contributions. This amount is included in the column for ‘Benefits’ in the table above.


Table 12: Shareholdings
	At 1st January 2008 total beneficial interests	At 31st December 2008 total beneficial interests	At 27th February 2009 total beneficial interests
Group Chairman
Marcus Agius	86,136	113,148	113,148
Non-executive Directors
David Booth	50,374	64,248	64,248
Sir Richard Broadbent	14,026	24,625	24,625
Leigh Clifford AO	18,872	26,236	26,236
Fulvio Conti	10,067	30,482	30,482
Professor Dame
Sandra Dawson	12,040	18,859	18,859
Sir Andrew Likierman	8,137	13,297	13,297
Sir Michael Rake	2,700	6,399	6,399
Sir Nigel Rudd DL	84,843	107,569	107,569
Stephen Russell	21,054	30,459	30,459
Sir John Sunderland	31,658	71,463	71,463
Patience Wheatcroft	828	4,144	4,144


Table 13: Terms of Letters of Appointment
	Effective date	Notice period from the Company	Potential compensation for loss of office
Group Chairman
Marcus Agius	1st Jan 2007	12 months	12 months contractual remuneration
Non-executive Directors
David Booth	1st May 2007	6 months	6 months fees
Sir Richard Broadbent	1st Sep 2003	6 months	6 months fees
Leigh Clifford AO	1st Oct 2004	6 months	6 months fees
Fulvio Conti	1st Apr 2006	6 months	6 months fees
Professor Dame
Sandra Dawson	1st Mar 2003	6 months	6 months fees
Sir Andrew Likierman	1st Sep 2004	6 months	6 months fees
Sir Michael Rake	1st Jan 2008	6 months	6 months fees
Sir Nigel Rudd DL	1st Feb 1996	6 months	6 months fees
Stephen Russell	25th Oct 2000	6 months	6 months fees
Sir John Sunderland	1st Jun 2005	6 months	6 months fees
Patience Wheatcroft	1st Jan 2008	6 months	6 months fees

166

Barclays

Annual Report 2008

LOGO

Former Directors

Gary Hoffman and Dr Danie Cronjé ceased to be Directors during the year.

Mr Hoffman resigned as a Director on 23rd July 2008 and ceased to be an executive Director on 31st August 2008. His employment ceased on 30th September 2008. On cessation of his directorship and employment, Mr Hoffman received no termination payments and it was mutually agreed that his full notice period would be waived without payment in lieu, to allow him to take up his appointment at Northern Rock. Dr Cronjé did not put himself forward for re-election at the 2008 AGM and received no termination payments. Their remuneration received during the year was as follows:

g	Frits Seegers received an allowance of 25% of base salary (£175,000) in lieu of pension contributions (pro-rata 2006: £84,028). This amount is included in the column for ‘Benefits’ in the table above.

Table 14: Annual remuneration

Received for 2008

Salary
and fees

£000

Annual
cash bonus

£000

Deferred
share award
(ESAS)

£000

Long term
incentive
(PSP)

£000

Benefits

£000

Total
2008

£000

Total
2007
£000

Gary Hoffman

417

298

–

724

1,146

Dr Danie Cronjé

–

217

Mr Hoffman received his normal monthly salary benefits and pro-rated annual cash bonus, total of £90,477 for the period between the cessation of his directorship and 30th September 2008.

The former Directors’ beneficial shareholdings were as follows:

h	~~£20,000 of each non-executive Director’s base fee of £65,000 is used, after tax, to buy Barclays shares. Further details are provided on page 142.~~


Table 15: Shareholdings at date of cessation as Director
	At 1st January 2008 total beneficial holdings	At date of cessation as Director total beneficial holdings
Gary Hoffman	431,761	542,979
Dr Danie Cronjé	5,146	6,416

Dr Cronjé also held 11,700 preference shares in Absa Bank Limited and 101,577 ordinary shares in Absa Bank Limited at 31st January 2008 and 24th April 2008.

Mr Hoffman participates in the UK closed defined benefit pension scheme providing a pension at the normal retirement age of 60 at an accrual rate of 1/60th of pensionable salary for each year of pensionable service.

~~David Booth was appointed as a non-executive Director on 1st May 2007.~~


Table 16: Pension provision
	Age at 31st August 2008	Completed years of service	Accrued pension at 31st December 2007 £000	Pension accrued during 2008 (including increase for inflation) £000		Pension accrued during 2008 (excluding inflation) £000		Accrued pension at 31st August 2008 £000	Transfer value of accrued pension at 31st December 2007 £000	Transfer value of accrued pension at 31st August 2008 £000	Increase in transfer value during the year £000
Gary Hoffman	47	25	273	(1	)	(15	)	272	2,598	2,824	226

In addition to the value of the accrued pension at 31st August 2008, Mr Hoffman also had defined contribution benefits in respect of Special Company Contributions (bonus sacrifice). The fund value of this arrangement was £626,412 as at 31st August 2008. The scheme also provided, whilst in employment, a death in service dependant’s pension of 50% of the pension that would have been payable if employment had continued until normal pension age.

The terms of Mr Hoffman’s contract and Dr Cronjé’s letter of appointment were:


Table 17: Terms of contract or letter of appointment
	Effective date	Notice period from the Company	Potential compensation for loss of office
Gary Hoffman	1st January 2004	12 months	12 months base salary, bonus equivalent to the average of the previous three years up to 100% of base salary, and continuation of medical and pension benefits whilst an employee
Dr Danie Cronjé	1st September 2005	6 months	6 months fees

Mr Hoffman’s other Directorships and fees retained were:

Naguib Kheraj ceased to be an executive Director on 31st March 2007. The amounts shown in the table above are in respect of the period from 1st January 2007 to 31st March 2007. During this period Naguib Kheraj received an allowance of 23% of base salary (£40,250) in lieu of pension contributions (2006: £149,500). This amount has been included in the column for ‘Benefits’ above. In order to effect a successful handover to his successor, from 1st April 2007 to 30th April 2007, Naguib Kheraj was paid in accordance with the terms of his service contract (being a total amount of £218,343 which included a discretionary bonus of £145,833). Following the termination of his service contract and taking into consideration the duty to mitigate his loss, no payments were made to Naguib Kheraj in relation to the termination of his contract. Naguib Kheraj was retained by Barclays in a corporate finance advisory role for an eight month period from 1st May 2007 to 31st December 2007. Naguib Kheraj received a payment of £600,000 per month for this period, as well as a payment of £14,178 per month for contractual benefits (including an allowance in lieu of pensions contributions). Naguib Kheraj’s corporate finance role was terminated on 31st December 2007 and no payments were made to Naguib Kheraj on termination of this arrangement.


Table 18: Other Directorships held by Gary Hoffman
	2008				2007
Organisation	Fees £000		Fees retained £000		Fees £000		Fees retained £000
Visa (Europe) Limited	£	0	£	0	£	0	£	0
Trinity Mirror plc	£	46,666	£	46,666	£	62,754	£	62,754
Barclays Pension Fund Trustees Limited	£	12,500	£	12,500		–		–

Mr Hoffman was retained as a Director of Barclays Pension Fund Trustees Limited following cessation of his employment on 30th September 2008. The fees disclosed represent those paid to him for the remainder of 2008.

Barclays

Annual Report 2008

167

Corporate governance

Remuneration Report

The amounts shown for Mandatory ESAS represent the value of Barclays shares to be recommended for an award under Mandatory ESAS for the 2007 results and, recommended for an award under Mandatory ESAS for the 2006 results, including a maximum 30% bonus share element. The Mandatory ESAS awards for the 2006 results are included in the table on page 137 and the first table on page 138. The amounts shown for PSP represent the value of Barclays shares under initial allocation to be recommended for an award under PSP in March 2008 and recommended for an award under PSP in March 2007 (May 2007 for Chris Lucas). The PSP awards granted in 2007 are included in the table on page 137 and the first table on page 139. Please refer to page 131 for further details on ESAS and PSP.

In addition to the Mandatory ESAS award shown for the 2007 results, Robert E Diamond Jr will receive a separate award under ESAS in respect of the Retained Incentive Opportunity as described in footnote f to the table on page 139. Bonus shares do not apply to the ESAS award in respect of the Retained Incentive Opportunity.

Table 19: Executive Share Award Scheme (ESAS)

Scheme

Number at
beginning
of year
(maximum)

Awarded
in year

(maximum)

Market
price on
award
date

Number
released

Market
price on
release
date

Number
lapsed

Adjustment
due to
open offer

Adjusted
number at
31/08/08
(maximum)

Value of
release

First
release
date

Last
release
date

Gary Hoffman

ESAS

177,314

48,215

4.25

(19,273

)

4.56

–

5,527

211,783

0.1m

13/03/06

20/03/11

Table 20: Voluntary Executive Share Award Scheme (VESAS)

Scheme

Number at
beginning
of year
(maximum)

Awarded
in year

(maximum)

Adjusted
exercise
price

Number
vested
in year

Number

exercised

Market
price on
exercise/
lapse

date

Number
lapsed

Adjustment
due to
open offer

Adjusted
number
31/08/08
(maximum)

Vested
number
of share
options

Value of
exercise

First
exercise
date

Last
exercise
date

Gary Hoffman

VESAS

97,088

–

nil

–

2,602

99,690

92,022

–

05/03/07

29/09/09

Table 21: Performance Share Plan (PSP)

Maximum
number of
shares at
beginning
of year

Maximum
number

of shares
awarded in

the year

Market
price on
award
date

Number

released

Market
price on
release/
lapse date

Number

lapsed

Adjustment
due to
open offer

Adjusted
maximum
number of
shares at
31/08/08

Value of

release

End of

three year

performance

period

Scheduled

release date

Gary Hoffman

2005

227,274

–

5.30

–

(227,274

)

–

31/12/07

16/06/08

2006

288,276

–

6.75

–

7,728

296,004

–

31/12/08

21/03/09

2007

255,798

–

7.08

–

6,858

262,656

–

31/12/09

22/03/10

2008

–

412,086

4.25

–

11,046

423,132

–

31/12/10

20/03/11

Table 22: Incentive Share Option Plan (ISOP)

Scheme

Number at
beginning
of year
(maximum)

Awarded
in year
(maximum)

Adjusted
weighted
exercise
price

Number
vested
in year

Number
exercised

Market
price on
exercise/
lapse date

Number
lapsed

Adjustment
due to
open offer

Adjusted
number at
31/08/08
(maximum)

Vested
number
of share
options

Value of
exercise

First
exercise
date

Last
exercise
date

Gary Hoffman

ISOP

540,000

–

4.39

–

14,472

554,472

–

12/03/04

29/09/09

Table 23: Sharesave

Number at
beginning
of year
(maximum)

Awarded
in year
(maximum)

Adjusted
weighted
exercise
price

Number
vested
in year

Number
exercised

Market
price on
exercise
date

Adjusted

number
lapsed

Adjustment
due to
open offer

Adjusted
number at
31/08/08
(maximum)

Vested
number
of share
options

Value of
exercise

First
exercise
date

Last
exercise
date

Gary Hoffman

Total

6,150

–

4.24

–

163

6,313

–

n/a


168		Barclays Annual Report 2008
~~Barclays~~ ~~Annual Report 2007~~	~~135~~
~~Barclays~~ ~~Annual Report 2007~~	~~135~~

~~Corporate governance~~

~~Remuneration report~~

LOGO

Share and Long Term Incentive Plans

Barclays operates a number of Group-wide plans. Summaries of the principal plans are set out below. Barclays has a number of employee benefit trusts which operate with these plans. In some cases, the trustees grant awards and purchase shares in the market to satisfy awards as required, in others, new issue or treasury shares may be used to satisfy awards where the appropriate shareholder approval has been obtained. The number of shares held by the trustees is set out in Note 32 on page 229. The limits on the issue of new shares comply with the guidelines issued by the Association of British Insurers.

Table 24: Plans under which awards made in 2008

Plan name

Executive ~~Directors: pension accrued assuming retirement at normal pension age~~^a,b,c
Directors
Eligible?

Age
at 31st
December
2007


Completed
years
of service


Accrued
pension
at 31st
December
2006
£000
   Pension
accrued
during 2007
(including
increase for
inflation)
£000    Pension
accrued
during
2007
(excluding
inflation)
£000
Accrued
pension
at 31st
December
2007
£000


Transfer
value of
accrued
pension
at 31st
December
2006
£000

Transfer
value of
accrued
pension
at 31st
December
2007
£000
   Increase in
transfer
value
during the
year £000
Executive Directors
John Varley^{d, e}
   51    25    418    71    55    489    7,696    9,463    1,767
Robert E Diamond Jr^{f, g}
   56    11    36    2    2    38    195    214    19
Gary Hoffman^e
   47    25    253    20    11    273    2,352    2,598    246
Chris Lucas^h
   47    –    –    –    –    –    –    –    –
Frits Seegers^h
   49    1    –    –    –    –    –    –    –
Former Director
Naguib Kheraj^h,ⁱ
   43    10    –    –    –    –    –    –    –

~~Notes~~Description

Pension accrued during the year represents the change in accrued pension (including inflation at the prescribed rate of 3.9%) which occurred during the entire year. The pensions paid from the final salary section of the applicable pension fund are reviewed annually. Pensions increase by a minimum of the increase in the retail prices index (up to a maximum of 5%), subject to the scheme rules.

b	~~The transfer values have been calculated in a manner consistent with the Retirement Benefit Scheme – Transfer Values (GN11) published by the Institute of Actuaries and the Faculty of Actuaries.~~

Performance

Share Plan

(PSP)

Yes

– PSP is a performance related share plan under which awards of Barclays shares may be made to selected employees (including executive Directors), subject to trustee discretion.

– The PSP trustee may select any employee of the Group to participate in the plan.

– Awards are granted by the PSP trustee, in consultation with the Remuneration Committee and are communicated as provisional allocations to participants. No right to the shares arises until the PSP trustee releases the shares.

– Participants do not pay for a grant or release of an award.

– Awards are normally releasable on or after the third anniversary of grant, to the extent that applicable performance conditions are satisfied, subject to trustee discretion.

– Any awards released may also include an additional number of shares equivalent to any dividends that would have been paid on the shares between the date of grant and release.

– Normally, the maximum expected value of an award made to an employee at the date of grant is the higher of 150% of base salary, or 75% of base salary and target bonus. Maximum awards reflect the relevant market for each executive Director. Awards are communicated on grant as an expected value, this is a single value for the award at grant, which takes into account the sum of the various possible performance and vesting outcomes.

– On cessation of employment, eligible leavers (as defined) normally receive an award pro rated for time and performance subject to trustee discretion. For other leavers, awards will normally lapse.

– On a change of control awards may vest at the PSP trustee’s discretion and may be pro rated for time and performance to the date of change of control.

– PSP is not an HMRC approved plan.

– The plan was approved for a ten year period by shareholders in April 2005.

c	~~With the exception of the benefits provided through the US Restoration Plan for Robert E Diamond Jr, the pension benefits for all Directors shown above are provided for on a funded basis.~~

John Varley is a member of the Group’s closed UK defined benefit pension arrangement. This non-contributory pension scheme has a normal pension age of 60 and in accordance with his service contract, the scheme provides him with a pension benefit of 66.67% of his Pensionable Salary at normal pension age. Should John Varley retire at age 55, the scheme provides for an unreduced pension of 60% of Pensionable Salary.

In addition to the transfer value of accrued pension at 31st December 2007, John Varley and Gary Hoffman also have defined contribution benefits. John Varley’s benefit is in respect of a transfer from a previous pension arrangement while Gary Hoffman’s benefit is in respect of Special Company Contributions (Bonus Sacrifice). The fund values of these arrangements as at 31st December 2007 for John Varley and Gary Hoffman were £689,214 and £702,078 respectively.

f	The benefits shown above in respect of Robert E Diamond Jr’s participation in the Group’s US non-contributory defined benefit arrangement and the US Restoration Plan have been converted to Pounds Sterling using the 2007 year-end exchange rate of US$2.00334 (2006: US$1.96).

g	Robert E Diamond Jr is also a member of the Barclays Bank PLC 401K Thrift Savings Plan and Thrift Restoration Plan. These are US defined contribution plans. Company contributions into these plans in 2007 amounted to £10,233 (US$20,500).

Chris Lucas, Naguib Kheraj and Frits Seegers do not participate in any of the Group’s pension arrangements. Instead they receive a cash allowance in lieu of pension contributions of 25%, 23% and 25% of their respective salaries. Chris Lucas’ pro-rated cash allowance in 2007 amounted to £112,500. Naguib Kheraj, who ceased to be a Director on 31st March 2007, received a pro-rated cash allowance of £40,250, while Frits Seegers’ cash allowance in 2007 was £175,000.

i	In addition to the cash allowance in lieu of pension contributions, Naguib Kheraj has defined contribution benefits in respect of a previous period of participation in afterwork. The fund value of this deferred benefit as at 31st March 2007, when he ceased to be an executive Director, was £110,821.

~~136~~

~~Barclays~~

~~Annual Report 2007~~

~~Executive Directors: illustration of change in value of Barclays PLC shares owned beneficially, or held under option or awarded under employee share plans as at 31st December 2007~~^a

Number at 31st December 2007


Notional
value based
on share
price of
£7.30^f
£000


Notional
value based
on share
price of
£5.04^g
£000

   Shares
owned
beneficially^b    ESAS^c    PSP^d

Executive
Share
Option
Scheme
(ESOS)^e
   ISOP^e    Sharesave    Total          Change in
notional
value
£000

Executive Directors

John Varley
   470,650    344,711    459,503    –    920,000    3,638    2,198,502    11,976    7,056    (4,920 )
Robert E Diamond Jr
   3,402,192    4,863,749    1,755,335    100,000    560,000    –    10,681,276    75,033    50,942    (24,091 )
Gary Hoffman
   431,761    274,402    257,116    –    540,000    6,150    1,509,429    8,555    5,187    (3,368 )
Chris Lucas
   38,003    69,091    82,910    –    –    3,638    193,642    1,382    958    (424 )
Frits Seegers
   699,870    231,383    294,154    –    –    3,390    1,228,797    8,954    6,177    (2,777 )

~~Notes~~

a	~~Under PSP, ESAS, ISOP, ESOS and Sharesave, nothing was paid by the participants on the grant of options or awards.~~

b	~~The number shown includes shares held under Sharepurchase.~~

c	~~ESAS includes the maximum potential 30% bonus share element where applicable, and any voluntary ESAS awards.~~

d	~~The number of shares shown represents the initial allocation of shares.~~

e	~~The number of shares shown represents the vested shares under option.~~

f	With the exception of Chris Lucas, the notional value is based on the share price as at 31st December 2006. The notional value for Chris Lucas is based on a share price of £7.23, which was the share price as at 2nd April 2007, the first working day after he was appointed executive Director.

g	~~The notional value is based on the share price as at 31st December 2007. The highest and lowest market prices per share during the year were £7.90 and £4.775 respectively.~~

~~Barclays~~

~~Annual Report 2007~~

~~137~~

~~Corporate governance~~

~~Remuneration report~~

~~Executive Directors: shares provisionally allocated and shares under option under ESAS~~^a,h,ⁱ^,j

      During 2007
      Number at
1st January
2007

Awarded in
respect of
the results
for 2006
   Released^c    Market
price on
Release
date £    Exercised    Market
price on
Exercise
date £    Bonus
shares
lapsed
Number
at 31st
December
2007

Executive Directors

John Varley
   278,211    95,328    28,828    7.15    –    –    –    344,711
Robert E Diamond Jr^d
   5,282,875    616,303    1,035,429    7.15    –    –    –    4,863,749
Gary Hoffman
   166,526    27,712    16,924    7.15    –    –    –    177,314
Chris Lucas^b
   –    –    –    –    –    –    –    69,091
Frits Seegers
   802,208    70,941    641,766    6.84    –    –    –    231,383

Former Director

Naguib Kheraj
   790,317    –    230,560    7.15    –    –    –    559,757

~~Shares under option under ESAS and voluntary ESAS as at 31st December 2007 (with the exception of voluntary ESAS, shares under option are included in aggregate figures above)~~

   During 2007
   Nil cost
option
granted at
3rd anniversary

^e Nil cost
option
under
voluntary
ESAS at
1st January
2007

^f Voluntary
ESAS
option
granted    Voluntary
ESAS option
exercised

^g Market price
on exercise
date of
voluntary
ESAS
option

£ Bonus
shares
lapsed on
exercise of
voluntary
ESAS option    Number
under
Voluntary
ESAS at
31st
December
2007    Date from
which
exercisable    Latest
expiry
date
Executive Directors

John Varley
   56,037 – –    – – –    –    28/02/06    05/03/09
Robert E Diamond Jr
   – – –    – – –    –    –    –
Gary Hoffman
   47,663 136,584 –    39,496 7.17 –    97,088    05/03/04    05/03/14
Chris Lucas
   – – –    – – –    –    –    –
Frits Seegers
   – – –    – – –    –    –    –
Former Director
Naguib Kheraj
   402,509 – –    – – –    –    28/02/06    30/06/08

~~Notes~~

a	~~The number of shares shown in the table includes the maximum potential 30% bonus element where applicable.~~

Figures shown in the column ‘Number at 1st January 2007’ for Chris Lucas are as at date of joining. An award of 69,091 Barclays shares was granted to Chris Lucas on 1st May 2007, following his appointment as an executive Director on 1st April 2007, in recognition of forfeited compensation from his previous employment. Bonus shares are not applicable to the award.

The trustees may release additional shares to participants which represent accumulated dividends (net of withholding) in respect of shares under award. During 2007, the trustees released the following accumulated dividend shares: 6,865 to John Varley, 100,645 to Robert E Diamond Jr, 4,030 to Gary Hoffman and 54,899 to Naguib Kheraj. These are not awarded as part of the original award and consequently are not included in the ‘Released’ column.

The number shown in the column headed ‘Number at 1st January 2007’ includes shares held by Robert E Diamond Jr which reflect interests built up over the course of successive years’ service with Barclays. The awards were related to Robert E Diamond Jr’s contribution to the performance of Investment Banking, Investment Management and the Barclays Group as a whole.

The shares under option shown in this column are already included in the numbers shown at 1st January 2007 in the first table on this page, and relate to provisional allocations made in 2003 and 2004 except that the figures do not include accumulated dividend shares under option as follows: 7,410 shares for John Varley, 6,303 shares for Gary Hoffman and 53,059 shares for Naguib Kheraj.

f	~~The shares under option in this column are not included in the numbers shown at 1st January 2007 or 31st December 2007 in the first table on this page.~~

g	~~These figures do not include 9,624 accumulated dividend shares released on exercise of voluntary ESAS options.~~

h	Awards in respect of 2007 will be made in March 2008. Including the maximum potential 30% bonus element, awards will total £617,500 to John Varley, £11,375,000 to Robert E Diamond Jr, £219,375 to Gary Hoffman, £568,750 to Frits Seegers and £195,000 to Chris Lucas.

i	~~Nothing was paid by the participants on the grant of options or awards.~~

j	~~Please refer to page 131 for further details on ESAS and voluntary ESAS.~~

~~138~~

~~Barclays~~

~~Annual Report 2007~~

~~Executive Directors: awards under PSP~~^a,e

      Shares
under
initial
allocation
at
1st January
2007    Shares
under
initial
allocation
granted
during
2007^b    Maximum
number
of shares
granted
during
2007
Market
price
on
award
date
£^c
   Performance
period^d    Scheduled
vesting
date    Shares under
initial
allocation at
31st December
2007    Maximum
number of
shares under
award at
31st December
2007    Lapses
due in 2008
based on
maximum
number
of shares
under award
Executive Directors

John Varley

2005
   142,045    –    –    –    01/01/05 - 31/12/07    16/06/08    142,045    426,135    426,135
2006
   153,748    –    –    –    01/01/06 - 31/12/08    23/03/09    153,748    461,244    –
2007
   –    163,710    491,130    7.08    01/01/07 - 31/12/09    22/03/10    163,710    491,130    –
Total
                     459,503    1,378,509
Robert E Diamond Jr

2005
   52,083    –    –    –    01/01/05 - 31/12/07    16/06/08    52,083    156,249    156,249
2006
   768,736    –    –    –    01/01/06 - 31/12/08    23/03/09    768,736    2,306,208    –
2007
   –    934,516    2,803,548    7.08    01/01/07 - 31/12/09    22/03/10    934,516    2,803,548    –
Total
                     1,755,335    5,266,005
Gary Hoffman

2005
   75,758    –    –    –    01/01/05 - 31/12/07    16/06/08    75,758    227,274    227,274
2006
   96,092    –    –    –    01/01/06 - 31/12/08    23/03/09    96,092    288,276    –
2007
   –    85,266    255,798    7.08    01/01/07 - 31/12/09    22/03/10    85,266    255,798    –
Total
                     257,116    771,348
Chris Lucas

2007
   –    82,910    248,730    7.23    01/01/07 - 31/12/09    22/03/10    82,910    248,730    –
Total
                     82,910    248,730
Frits Seegers

2006
   157,728    –    –    –    01/01/06 - 31/12/08    04/08/09    157,728    473,184    –
2007
   –    136,426    409,278    7.08    01/01/07 - 31/12/09    22/03/10    136,426    409,278    –
Total
                     294,154    882,462
Former Director

Naguib Kheraj

2005
   87,121    –    –    –    01/01/05 - 31/12/07    16/06/08    87,121    261,363    261,363
2006
   107,624    –    –    –    01/01/06 - 31/12/08    23/03/09    107,624    322,872    –
Total
                     194,745    584,235

~~Executive Directors: Retained Incentive Opportunity~~^f


	~~Date of~~ ~~award~~	~~Maximum~~ ~~potential~~ ~~value~~ ~~£000s~~	~~Performance~~ ~~period~~	~~Vesting~~ ~~date~~
~~Robert E Diamond Jr~~	~~25/05/05~~	~~14,850~~	~~01/01/05 - 31/12/07~~	~~No later~~ ~~than~~ ~~15/03/08~~

~~Notes~~

a	~~The performance conditions for the 2005 awards were not met and all awards are due to lapse in 2008.~~

In respect of John Varley, Robert E Diamond Jr, Gary Hoffman and Frits Seegers, the price used to convert the present fair value of the award to a number of shares was £7.33. This was the average over the period 20th February 2007 to 13th March 2007. In respect of Chris Lucas, the price used to convert the present fair value of the award to a number of shares was £7.23, which was the price at which shares were purchased in the market to fund the award.

c	~~The price shown is the mid-market closing price on the date of the award.~~

d	~~The details of the performance conditions for PSP are included on page 131.~~

e	~~Figures shown in the column ‘Shares under initial allocation at 1st January 2007’ for Chris Lucas are as at date of joining. Nothing was paid by the participants on the grant of awards.~~

Robert E Diamond Jr’s award under the Retained lncentive Opportunity reached the end of its performance period on 31st December 2007. Barclays Capital’s cumulative EP over the three-year performance period, which started on 1st January 2005, exceeded the £2bn threshold for the maximum potential value to vest in accordance with the terms of the award. This resulted in a vesting in February 2008 to the value of £14,850,000 with 50% payable in cash and the remaining 50% as a recommendation to the trustee of ESAS for an award of Barclays shares in the form of a provisional allocation. Any shares under the ESAS award would be releasable after 12 months from the award date. Bonus shares are not applicable to this award.

~~Barclays~~

~~Annual Report 2007~~

~~139~~

~~Corporate governance~~

~~Remuneration report~~

~~Executive Directors: shares under option under Sharesave~~^a

      During 2007          Information as at 31st December 2007


Number
held at
1st
January
2007
   Granted    Exercised    Exercise
price per
share

Market
price on
date of
exercise


Number
of shares
held under
option
   Weighted
average
exercise
price of
outstanding
options    Date from
which
exercisable    Latest
expiry
date
            £    £       £
Executive Directors

John Varley
   4,096    3,638    4,096    4.11    7.89    3,638    4.83    01/11/14    30/04/15
Robert E Diamond Jr
   –    –    –    –    –    –    –    –    –
Gary Hoffman
   6,474    –    324    3.16    5.09    6,150    4.35    01/11/08    30/04/14
Chris Lucas
   –    3,638    –    –    –    3,638    4.83    01/11/14    30/04/15
Frits Seegers
   –    3,390    –    –    –    3,390    4.83    01/11/12    30/04/13
Former Director

Naguib Kheraj
   4,007    –    –    –    –    4,007    4.08    01/01/08    30/06/08

~~Note~~

a	~~Figures shown in the column ‘Number held at 1st January 2007’ for Chris Lucas are as at date of joining. Nothing was paid by the participants on the grant of options.~~

~~140~~

~~Barclays~~

~~Annual Report 2007~~

Executive ~~Directors:~~Share Award Scheme

(ESAS)

Yes

– ESAS is a deferred share award plan operated in conjunction with various Barclays Group bonus plans for selected employees (including executive Directors), subject to trustee discretion.

– Awards are granted by the ESAS trustee having first consulted with the Remuneration Committee.

– For certain eligible employees a proportion of discretionary annual bonus is delivered in cash and a proportion is as a recommended mandatory provisional allocation of Barclays shares under ESAS. Normally, for executive Directors, a minimum of 25% of bonus is delivered as a recommended mandatory award under ESAS with 75% delivered as cash.

– The mandatory provisional allocation will normally include bonus shares equal to 30% of the value of the deferred bonus amount awarded in shares. Bonus shares are awarded to recognise the interest that a participant forgoes on the deferred part of the discretionary bonus.

– Under mandatory ESAS awards, nil cost options are typically granted three years from award, subject to the discretion of the ESAS trustee. Participants may then call for the shares plus two thirds of the bonus shares and any associated dividend shares. If the nil cost option is not exercised by the end of the two year period, the ESAS trustee may release all shares, bonus shares and any dividend shares to the participant.

– In addition to mandatory ESAS, participants may also request to waive any bonus (or part of a bonus) to which they may become entitled and request that a voluntary ESAS award be made to them in the form of a nil cost option. Voluntary ESAS awards are typically fully exercisable after five years, and include bonus shares equal to 30% of the waived bonus amount. Dividend shares may be awarded, as per mandatory ESAS awards.

– On cessation of employment, a participant may forfeit an award depending on the reason for leaving. Special provisions apply on a change of control.

– ESAS is also used into make certain awards to facilitate the retention and recruitment of new joiners to the Group who have forfeited share awards on leaving previous employment. Typically bonus shares are not awarded, though dividend shares may be awarded, as per mandatory ESAS awards.

– ESAS is not an HMRC approved plan.

Incentive shares

– Incentive shares are discretionary share awards that may be made to selected employees (excluding executive Directors), subject to trustee discretion.

– Shares are normally released after three years, ~~(ESOS, ISOP~~subject to continued employment and the ~~BGI EOP)~~discretion of the trustee. Dividends received are normally awarded as additional shares and released at the same time.

– On cessation of employment eligible leavers (as defined) normally receive an award pro rated for time in employment, subject to the discretion of the trustee; for other leavers, awards will normally lapse.

– On a change of control awards may vest, pro rated for time to the date of change of control, subject to the discretion of the trustee.

– Incentive shares is not an HMRC approved plan.

Barclays

Annual Report 2008

~~The executive Directors continue to have interests~~169

Corporate governance

Remuneration Report

Share and Long Term Incentive Plans (continued)

Table 24: Plans under which awards made in ~~Barclays PLC ordinary shares~~2008 (continued)

Plan name

Executive
Directors
Eligible?

Description

Sharesave

Yes

– Sharesave is a share option plan under ~~ESOS~~^a~~and ISOP~~^b~~, and in BGI Holdings under the BGI EOP~~^c~~(as indicated~~which all eligible employees in the ~~table below). No awards were made~~UK, Ireland and Spain (including executive Directors) are invited to ~~Directors under these plans during 2007.~~participate. It is HMRC approved in the UK and approved by the Revenue Commissioners in Ireland.

– Participants are granted options over Barclays shares which may be at a discount to the market value at the date of award (currently 20%).

– At the expiry of a fixed term (three, five or seven years) participants may use savings to acquire the shares by exercising their option within 6 months of the date of vesting. Participants may save up to £250 per month (€500 in Ireland,€135 in Spain) for this purpose.

~~Executive Directors: awards under plans used~~– On cessation of employment eligible leavers (as defined) may exercise their option to acquire shares to the extent of their savings for a period of 6 months.

– On a change of control, participants may be able to exercise their options to acquire shares to the extent of their savings for a period of 6 months (or a shorter period in ~~previous years~~^ecertain circumstances).

– The plan was approved for a ten year period by shareholders in April 2000.

Maximum
number of
shares under
option
at
1st January
2007



During 2007
   Market
price on
exercise
date
£
Maximum
number of
shares under
option at
31st
December
2007

   Weighted
average
exercise
price of
outstanding
options
£
Date from
which
exercisable


Latest
expiry
date


Vested
number
of shares
at 31st
December
2007


Exercised


Lapsed


Executive Directors

John Varley

ISOP
   2,060,000    –    1,140,000    –    920,000    4.41    18/05/03    22/03/14    920,000
Robert E Diamond Jr

ESOS
   100,000    –    –    –    100,000    3.97    14/08/01    13/08/08    100,000
ISOP
   1,340,000    –    780,000    –    560,000    4.54    12/03/04    22/03/14    560,000
BGI EOP
   100,000    –    –    –    100,000    20.11    26/03/07    26/03/14    100,000
Gary Hoffman

ISOP
   1,320,000    –    780,000    –    540,000    4.51    12/03/04    22/03/14    540,000
Chris Lucas^d

–
   –    –    –    –    –    –    –    –    –
Frits Seegers^d

–
   –    –    –    –    –    –    –    –    –
Former Director

Naguib Kheraj

ESOS
   60,000    –    –    –    60,000    3.97    14/08/01    13/08/08    60,000
ISOP
   1,360,000    –    840,000    –    520,000    4.47    12/03/04    31/12/08    520,000

~~Notes~~

Under ESOS, options granted (at market value) to executives were exercisable only if the growth in Barclays earnings per share over the three-year period was at least equal to the percentage increase in the UK Retail Prices Index plus 6% over the same period. The performance condition for the 1999 ESOS grant was met.

Sharepurchase

Under ISOP, executives were awarded options (at market value) over Barclays shares which are normally exercisable after three years. The number of shares over which options can be exercised depends upon performance against specific performance conditions. For ISOP awards granted in 2000 to 2003, the first 40,000 target shares under option for each award was subject to an EP performance condition, tested over a period of three years. Any amount over 40,000 target shares was subject to a relative TSR performance condition, to be tested initially over three years. Because the TSR performance condition was not met over three years in relation to the awards in 2003, the TSR condition was tested over a period of four years from the original start date. Awards in 2004 were subject to a relative TSR performance condition. For the 2003 and 2004 grants under ISOP, which became exercisable in 2007, Barclays was ranked 6th in the peer group under the TSR performance condition. This was sufficient for only 25% of the maximum number of shares under the TSR condition to vest. The remaining 75% lapsed.

Yes

Robert E Diamond Jr received a grant under the BGI EOP in March 2004. He was not a Director of Barclays PLC at that time. The BGI EOP is an option plan, approved by shareholders in 2000 and offered predominantly to participants in the US. Under the BGI EOP, participants receive an option to purchase shares in Barclays Global Investors UK Holdings Limited. The exercise price is based on the fair value at the time of grant. The option normally vests in three equal tranches on the first, second, and third anniversary of the date of grant. Participants must, in accordance with the Articles of Association of Barclays Global Investors UK Holdings Limited, keep their shares for 355 days after the date of exercise, before they may be offered for sale. In line with market practice, the options were not subject to performance conditions. Robert E Diamond Jr is not eligible to receive further awards under the BGI EOP. The shares shown in respect of the BGI EOP in the above table are shares in Barclays Global Investors UK Holdings Limited.

~~Frits Seegers was appointed as an executive Director on 10th July 2006, and Chris Lucas on 1st April 2007, and therefore no participation in the above plans has been offered to them.~~

– Sharepurchase is an HMRC approved share incentive plan under which all employees in the UK (including executive Directors) are invited to participate.

– Participants may purchase up to £1,500 shares each tax year. To encourage employee share ownership, Barclays matches the first £600 of shares purchased by participants on a one-for-one basis. Dividends are also earned in the form of additional shares.

e	~~Nothing was paid by the participants on the grant of options.~~

~~Barclays~~

~~Annual Report 2007~~

~~141~~

– Purchased shares may be withdrawn from the plan any time. Matching and dividend shares must be held in trust for three years before release, but may be kept in trust for five years.

– On cessation of employment participants must withdraw all shares and depending on the reason for and timing of cessation, the matching shares may be forfeited.

– On a change of control, participants are able to instruct the Sharepurchase trustee how to act or vote on their behalf.

~~Directors: interests~~– The plan was approved for a ten year period by shareholders in ~~ordinary shares of Barclays PLC~~^aApril 2000.

   At 1st January 2007^b    At 31st December 2007
      Beneficial    Non-
beneficial    Beneficial    Non-
beneficial
Group Chairman

Marcus Agius
   15,000    –    86,136    –
Executive Directors

John Varley
   375,053    –    470,650    –
Robert E Diamond Jr^e
   2,531,582    –    3,402,192    –
Gary Hoffman
   319,186    –    431,761    –
Chris Lucas^f
   –    –    38,003    –
Frits Seegers^d
   4,319    –    699,870    –
Non-executive Directors^c

David Booth^g
   –    –    50,374    –
Sir Richard Broadbent
   8,092    –    14,026    –
Leigh Clifford
   5,219    –    18,872    –
Fulvio Conti
   2,538    –    10,067    –
Dr Danie Cronjé^d
   3,547    –    5,146    –
Professor Dame Sandra Dawson
   9,953    –    12,040    –
Sir Andrew Likierman
   5,441    –    8,137    –
Sir Nigel Rudd
   51,117    –    84,843    –
Stephen Russell
   18,661    –    21,054    –
Sir John Sunderland
   10,054    –    31,658    –

~~Notes~~

Beneficial interests in the table above represent shares held by Directors who were on the Board as at 31st December 2007, either directly or through a nominee, their spouse and children under 18. They include any interests held through Sharepurchase, but do not include any awards under ESAS, ISOP, PSP, ESOS and Sharesave. The beneficial interests in ordinary shares of Barclays PLC held by all Directors as shown in the table above amounted in aggregate to 5,384,829 ordinary shares of Barclays PLC as at 31st December 2007 and 5,398,797 ordinary shares of Barclays PLC as at 27th February 2008 (which amounted to less than 1% of Barclays PLC ordinary share capital outstanding as at 31st December 2007 and 27th February 2008 respectively). Note 42 provides further information on Directors’ and Officers’ shareholdings. As at 31st December 2007, the executive Directors, together with other senior executives, were potential beneficiaries in respect of a total of 207,685,698 Barclays PLC ordinary shares (1st January 2007: 165,645,889) held by the trustees of the Barclays EBTs. As at 27th February 2008, a total of 218,235,925 shares were held by the trustees.

b	~~Or date appointed to the Board if later.~~

On 19th February 2008, the non-executive Directors acquired ordinary shares pursuant to arrangements under which part of each non-executive Director’s fee is used to buy shares in Barclays. Barclays shares were acquired by each non-executive Director as follows: David Booth – 1,183; Sir Richard Broadbent – 1,487; Leigh Clifford – 1,312; Fulvio Conti – 1,401; Dr Danie Cronjé – 1,270; Professor Dame Sandra Dawson – 1,485; Sir Andrew Likierman – 1,353; Sir Michael Rake – 204; Sir Nigel Rudd – 1,646; Stephen Russell – 1,600; Sir John Sunderland – 1,231; Patience Wheatcroft – 169. On 19th February 2008, Sir Michael Rake also acquired 1,100 ordinary shares in Barclays. On 26th February 2008, Patience Wheatcroft acquired 1,200 ordinary shares in Barclays and Sir Nigel Rudd sold 28,000 ordinary shares in Barclays and acquired 28,000 ordinary shares in Barclays in PEP and ISA accounts. Except as described in this note, there were no changes to the beneficial or non-beneficial interests of Directors in the period 31st December 2007 to 27th February 2008.

As at 1st January 2007, Frits Seegers and Dr Danie Cronjé held 1,000 and 101,577 shares in Absa Group Limited respectively. As at 31st December 2007, Frits Seegers and Dr Danie Cronjé held 1,000 and 101,577 shares in Absa Group Limited respectively. Dr Danie Cronjé also held 7,500 non-cumulative, non-redeemable preference shares in Absa Bank Limited as at 1st January 2007 and 11,700 such shares as at 31st December 2007.

e	~~As at 1st January 2007 and 31st December 2007, Robert E Diamond Jr held 200,000 ‘A’ ordinary shares in Barclays Global Investors UK Holdings Limited.~~

f	~~Appointed as an executive Director on 1st April 2007.~~

g	~~Appointed as a non-executive Director on 1st May 2007.~~

~~142~~

~~Barclays~~

~~Annual Report 2007~~

~~Corporate governance~~Table 25: New Plans under which awards are to be made 2009

Plan name

Executive
Directors
Eligible?

Description

BGI Equity Participation Plan

– The BGI Equity Participation Plan is a share plan under which awards linked to the value of BGI shares may be made to selected BGI employees (excluding executive Directors) in the form of either stock appreciation rights settled in shares or restricted share awards.

– Awards normally vest in three equal tranches following the first, second and third anniversary of grant provided there has been no significant deterioration in the performance of Barclays, with delivery in Barclays shares.

– On cessation of employment awards normally vest for eligible leavers (as defined) provided there has been no significant deterioration in the performance of Barclays; for other leavers, awards will normally lapse.

– On a change of control awards may vest provided there has been no significant deterioration in the performance of Barclays.

~~Accountability and audit~~Long Term

~~Going concern~~Cash Plan (LTCP)

– LTCP is a new forward looking plan introduced initially for 2009, under which conditional awards of cash are made to eligible employees, (excluding executive Directors).

– Awards are released in portions over a period of time (two years for 2009 awards), subject to continued employment. At the time of the final release, for 2009 awards, a service credit (10% of the initial value of the award) is added.

– Participants must normally be in employment at the time of release in order to receive each portion of the payment.

– Participants who leave employment before the release date of any portion of the award will normally forfeit any outstanding amounts. For categories of eligible leavers an award will vest, pro rated for time in service.

– On a change of control awards may vest at the discretion of the Committee.

170

Barclays

~~The~~ Annual Report 2008

LOGO

Share and Long Term Incentive Plans (continued)

Table 26: Plans under which awards not made in 2008

Plan name

Executive
Directors confirm they are satisfied that the Company and the Group have adequate resources to continue in business for the foreseeable future. For this reason, they continue to adopt the ‘going concern’ basis for preparing the accounts.
Eligible?

Description

ISOP

~~Internal control~~(Incentive Share Option Plan)

Yes

– The ~~Directors~~Incentive Share Option Plan is a share option plan under which share options were granted to selected employees (including executive Directors). No options have ~~responsibility for ensuring that management maintain an effective system~~been granted since 2004.

– ISOP contains HMRC approved and unapproved parts.

– Options were awarded at the market price at the date of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can only provide reasonable and not absolute assurance against material misstatement or loss.

Throughout the year ended 31st December 2007, and to date, the Group has operated a system of internal control which provides reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the Groupgrant calculated in accordance with the ~~guidance ‘Internal Control: Guidance for Directors on the Combined Code’ published by the Financial Reporting Council. The Board regularly reviews these processes through the Board Committees.~~

~~The Directors review the effectiveness~~rules of the system of internal control semi-annually. An internal control compliance certification process is conducted throughout the Group in support of this review. The effectiveness of controls is periodically reviewed within the business areas. Regular reports are made to the Board Audit Committee by management, Internal Auditplan.

– Options granted had an EP threshold and ~~the compliance~~a TSR performance condition associated with them. Options were normally exercisable between three and legal functions covering particularly financial controls, compliance and operational controls. The Board Audit Committee monitors resolution of any identified control issues of Group level significance through to a satisfactory conclusion.

~~The Group Internal Control and Assurance Framework (GICAF) describes the Group’s approach to internal control and details Group policies and processes. The GICAF is reviewed and approved on behalf~~ten years of the ~~Group Chief Executive~~grant date.

– All options granted which met these performance criteria have now vested and are exercisable.

– On cessation of employment eligible leavers (as defined) normally are able to exercise their options; for other leavers, options normally lapse.

– On a change of control options would remain exercisable for a specified period.

– The plan was approved for a ten year period by ~~the Group Governance and Control Committee.~~shareholders in April 2000.

Quarterly risk reports are made to the Board covering risks of Group significance including credit risk, market risk and operational risk, including legal and compliance risk. Reports covering risk measurement standards and risk appetite are made to the Board Risk Committee. Further details of risk management procedures are given in the Risk management section on pages 65 to 96.

ESOS

~~Management’s report on internal control over financial reporting~~(Executive Share

Option Scheme)

n/a

– The ~~management of Barclays PLC is responsible for establishing and maintaining adequate internal control over financial reporting. Barclays PLC’s internal control over financial reporting~~Executive Share Option Scheme is a ~~process designed~~share option plan under which share options were granted to selected employees (including executive Directors). No options have been granted since 2000.

– Options were awarded at the ~~supervision~~market price at the date of Barclays PLC’s principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposesgrant calculated in accordance with ~~International Financial Reporting Standards (IFRSs) as~~the rules of the plan.

– Options were normally exercisable between three and ten years of the grant date. All options are now vested.

– On cessation of employment eligible leavers (as defined) normally are able to exercise their option pro-rated for performance; for other leavers, options normally lapse.

– On a change of control options remain exercisable for a specified period.

– The plan was adopted for a ten year period by shareholders in 1990.

BGI EOP

(BGI Equity

Ownership Plan)

– BGI is Barclays asset management business headquartered in San Francisco. The BGI Equity Ownership Plan (BGI EOP) was approved by shareholders at Barclays 2000 AGM to provide the ~~European Union~~employee share incentive arrangements required to recruit and ~~published by~~retain the ~~International Accounting Standards Board.~~

~~Barclays PLC’s internal control over financial reporting includes policies and procedures that pertain to the maintenance~~quality of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRSs and that receipts and expenditures are being made only in accordance with authorisations ofsenior management and investment talent appropriate for building a global investment management business.

– The BGI EOP was designed to provide participants with a long-term equity interest in BGI to meet the ~~Directors~~expectations of, Barclays PLC; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of Barclays PLC’s assets that could have a material effect on Barclays PLC’s financial statements.

Internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in ~~conditions, or that the degree of compliance with the policies or procedures may deteriorate.~~

Management has assessed the effectiveness of Barclays PLC’s internal control over financial reporting as of 31st December 2007. In making its assessment, management has utilised the criteria set forth by the Committee of Sponsoring Organisations of the Treadway Commission in Internal Control – Integrated Framework. Management concluded that based on its assessment, Barclays PLC’s internal control over financial reporting was effective as of 31st December 2007.

~~The system of internal financial and operational controls is also subject to regulatory oversight~~particular, BGI’s key investment talent in the United ~~Kingdom and overseas. Further information on supervision by the financial services regulators is provided under Supervision and Regulation~~States, who could expect to participate in the ~~Risk management section on page 110.~~

~~Statement~~equity of ~~Directors’ responsibilities for accounts~~

~~The following statement, which should be read in conjunction with~~their employer. Under the ~~Auditors’ report set out on page 147, is made with a view to distinguishing for shareholders the respective responsibilities~~terms of the ~~Directors and~~BGI EOP, options were granted at fair value to key BGI employees over shares in Barclays Global Investors UK Holdings Limited (BGI Holdings) within an overall cap of ~~the auditors in relation to the accounts.~~

The Directors are required by the Companies Act 1985 to prepare accounts for each financial year and, with regards to Group accounts, in accordance with Article 4 of the IAS Regulation. The Directors have prepared individual accounts in accordance with IFRSs as adopted by the European Union. The accounts are required by law and IFRSs to present fairly the financial position of the Company and the Group and the performance for that period; the Companies Act 1985 provides, in relation to such accounts, that references in the relevant part of the law to accounts giving a true and fair view are references, to their achieving fair presentation.

The Directors consider that, in preparing the accounts on pages 149 to 249, and the additional information contained on pages 250 to 274, the Group has used appropriate accounting policies, supported by reasonable judgements and estimates, and that all accounting standards which they consider to be applicable have been followed.

The Directors have responsibility for ensuring that the Company and the Group keep accounting records which disclose with reasonable accuracy the financial position of the Company and the Group and which enable them to ensure that the accounts comply with the Companies Act 1985.

~~Barclays~~

~~Annual Report 2007~~

~~143~~

~~Corporate governance~~

~~Accountability and audit~~

~~The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.~~

~~Disclosure controls and procedures~~

The Group Chief Executive, John Varley, and the Group Finance Director, Chris Lucas, conducted with Group Management an evaluation of the effectiveness of the design and operation of the Group’s disclosure controls and procedures as at 31st December 2007, which are defined as those controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the US Securities Exchange Act of 1934 is recorded, processed, summarised and reported within the time periods specified in the US Securities and Exchange Commission’s rules and forms. As of the date of the evaluation, the Group Chief Executive and Group Finance Director concluded that the design and operation of these disclosure controls and procedures were effective. The Group Chief Executive and Group Finance Director also concluded that no significant changes were made in our internal controls or in other factors that could significantly affect these controls subsequent to their evaluation.

~~Signed on behalf of the Board~~

~~Marcus Agius~~

~~Group Chairman~~

~~7th March 2008~~

~~144~~

~~Barclays~~

~~Annual Report 2007~~


						~~Financial statements~~
						~~Presentation of information~~		~~146~~

						~~Report of the Independent Registered Public Accounting Firm~~ ~~to the Board of Directors and Shareholders of Barclays PLC~~		~~147~~

						~~Report of the Independent Registered Public Accounting Firm~~ ~~to the Board of Directors and Shareholders of Barclays Bank PLC~~		~~148~~

						~~Consolidated accounts Barclays PLC~~		~~149~~

						~~Accounting policies~~		~~149~~

						~~Accounting presentation~~		~~158~~

						~~Consolidated income statement~~		~~160~~

						~~Consolidated balance sheet~~		~~161~~

						~~Statement of recognised income and expense~~		~~162~~

						~~Consolidated cash flow statement~~		~~163~~

						~~Parent company accounts~~		~~164~~

						~~Notes to the accounts~~		~~166~~

						~~Barclays Bank PLC accounts~~		~~250~~

~~Barclays~~

~~Annual Report 2007~~

~~145~~

~~Presentation of information~~

~~Presentation of Information~~

Barclays PLC is a public limited company registered in England under company number 48839. The Company, originally named Barclay & Company Limited, was incorporated in England and Wales on 20th July 1896 under the Companies Acts 1862 to 1890 as a company limited by shares. The company name was changed to Barclays Bank Limited on 17th February 1917 and it was reregistered in 1982 as a public limited company under the Companies Acts 1948 to 1980. On 1st January 1985, the company changed its name to Barclays PLC.

Barclays Bank PLC is a public limited company registered in England under company number 1026167. The Bank was incorporated on 7th August 1925 under the Colonial Bank Act 1925 and on 4th October 1971 was registered as a company limited by shares under the Companies Acts 1948 to 1967. Pursuant to The Barclays Bank Act 1984, on 1st January 1985 the Bank was reregistered as a public limited company and its name was changed from Barclays Bank International Limited to Barclays Bank PLC.

~~All~~20% of the issued ordinary share capital of BGI Holdings.

– No options were granted under the BGI EOP in 2008 and no further options will be granted. The plan will not be renewed in 2010 when it comes to the end of its life.

– All grants of options were approved by the Committee. The Committee is also advised of option exercises and share sales by employees. Employees who were executive Directors of Barclays PLC at the date of grant were not eligible to receive options under the BGI EOP.

– In summary the BGI EOP operated as follows:

– certain key BGI employees were granted options over shares in BGI Holdings;

– the option exercise price was based on the fair value of a BGI Holdings share at the date of grant determined by an independent appraiser;

– the options generally vest evenly over a three-year period and can be exercised during the exercise windows which generally occur twice annually;

– option holders are required to fund the exercise without any financial support from any member of the Barclays Group.

– Once employees become shareholders, they are subject to the Articles of BGI Holdings under which:

– shareholders are required to hold the shares for a minimum of 355 days. As shareholders, employees derive the full risks and rewards of ownership, including voting rights and entitlement to any ordinary dividends paid by BGI Holdings;

– on expiry of the minimum holding period, shareholders may, but are not obliged to, offer their shares for sale to Barclays Bank PLC during the sales windows which generally occur twice annually;

– Barclays Bank PLC, at its discretion, has a right to purchase shares so offered, but is not obliged to do so.

– The table below contains information on the number of shares in BGI Holdings over which options were granted, outstanding and exercised in 2007 and 2008:


Year	Number granted during year (000s)	Number outstanding at year end (000s)	Number exercised (000s)
2007	2,599	7,502	1,632
2008	–	6,584	550


				– In 2008 BGI employees exercised options over 0.5m (2007: 1.6m) shares for consideration of £19m (2007: £57m); Barclays Bank PLC purchased 1.8m (2007: 4.9m) shares offered for sale by shareholders for consideration of £157m (2007: £488m). As at 31st December 2008, employees owned by 4.5% of BGI Holdings (2007: 5.9%).

Barclays ~~PLC. The~~

Annual Report 2008

171

Corporate governance

Remuneration Report

Share and Long Term Incentive Plans (continued)

Table 26: Plans under which awards not made in 2008 (continued)


Plan name	Executive Directors Eligible?	Description
		BGI EOP – Accounting and disclosure
		– The BGI EOP is accounted for as an equity settled share-based payment in accordance with IFRS 2 ‘Share-based Payment’. The fair value of the services received from the employees is measured by reference to the fair value of the share options granted on the date of the grant. The cost of the employee services received in respect of the share options granted is recognised in the income statement over the period that the services are received.
		– The cost for 2008 of £30.9m (2007: £54.8m, 2006: £37.4m) is included in staff costs in Note 8 to the accounts. In accordance with IFRS 2, details of share options granted and exercised, together with weighted average fair values at grant date and weighted average exercise prices are set out in Note 45 to the accounts. In accordance with IAS 33 ‘Earnings per Share’, unexercised options are taken into account in the calculation of diluted earnings per share as set out in Note 11 to the accounts.
		– For Group reporting, the exercise of options by employees is treated as a deemed disposal of interests in a subsidiary, as its holding in the subsidiary has been reduced for the consideration represented by the exercise price. Any subsequent purchase of shares offered for sale by employees is treated as a purchase of an additional investment in a subsidiary entity. The cash flows relating to these capital transactions are included in the consolidated cash flow statement and disclosed, along with other disposals and acquisitions, in Note 38 to the accounts and related movements in goodwill and minority interests are included in Notes 21 and 33 to the accounts respectively.

172

Barclays

Annual Report 2008

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Corporate governance

Accountability and audit

Going concern

The Group’s business activities and financial position; the factors likely to affect its future development and performance; and its objectives and policies in managing the financial risks to which it is exposed and its capital are discussed in the Business Review.

The Directors have assessed, in the light of current and anticipated economic conditions, the Group’s ability to continue as a going concern.

The Directors confirm they are satisfied that the Company and the Group have adequate resources to continue in business for the foreseeable future. For this reason, they continue to adopt the ‘going concern’ basis for preparing accounts.

Internal control

The Directors have responsibility for ensuring that management maintain an effective system of internal control and for reviewing its effectiveness. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss. Throughout the year ended 31st December 2008, and to date, the Group has operated a system of internal control which provides reasonable assurance of effective and efficient operations covering all controls, including financial and operational controls and compliance with laws and regulations. Processes are in place for identifying, evaluating and managing the significant risks facing the Group in accordance with the guidance ‘Internal Control: Revised Guidance for Directors on the Combined Code’ published by the Financial Reporting Council. The Board regularly reviews these processes through its principal Board Committees.

The Directors review the effectiveness of the system of internal control semi-annually. An internal control compliance certification process is conducted throughout the Group in support of this review. The effectiveness of controls is periodically reviewed within the business areas. Regular reports are made to the Board Audit Committee by management, Internal Audit and the compliance and legal functions covering particularly financial controls, compliance and operational controls. The Board Audit Committee monitors resolution of any identified control issues of Group level significance through to a satisfactory conclusion.

The Group Internal Control and Assurance Framework (GICAF) describes the Group’s approach to internal control and details Group policies and processes. The GICAF is reviewed and approved on behalf of the Group Chief Executive by the Group Governance and Control Committee.

Quarterly risk reports are made to the Board covering risks of Group significance including credit risk, market risk and operational risk. Reports covering risk measurement standards and risk appetite are made to the Board Risk Committee. Further details of risk management procedures are given in the Risk management section on pages 57 to 136.

Management’s Reports on Internal Control Over Financial Reporting

The management of Barclays PLC and Barclays Bank PLC (collectively “Management”) are responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed under the supervision of the principal executive and principal financial officers of Barclays PLC and Barclays Bank PLC to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and the International Accounting Standards Board (IASB).

Internal control over financial reporting includes policies and procedures that pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; provide reasonable assurances that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS and that receipts and expenditures are being made only in accordance with authorisations of management and the respective Directors of Barclays PLC and Barclays Bank PLC; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of the assets that could have a material effect on the financial statements of Barclays PLC or Barclays Bank PLC, as the case may be.

Internal control systems, no matter how well designed, have inherent limitations and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that internal controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the effectiveness of Barclays PLC’s and Barclays Bank PLC’s internal control over financial reporting as of 31 December 2008. In making its assessment, Management has utilised the criteria set forth by the Committee of Sponsoring Organisations of the Treadway Commission in Internal Control – Integrated Framework. Management concluded that, based on its assessment, the internal control over financial reporting of each of Barclays PLC and Barclays Bank PLC was effective as of 31 December 2008.

Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include internal controls relating to certain of the Lehman Brothers North American investment banking and capital markets businesses acquired from Lehman Brothers Holdings Inc. in September 2008. These businesses have been included in consolidated financial statements of both Barclays PLC and Barclays Bank PLC for the year ended 31 December 2008. The businesses which have not been included in management’s assessment represented approximately 1.1% of the Group income and 0.2% of the total Group assets for the year ended and as at 31 December 2008.

Our independent registered public accounting firm has issued a report on Barclays PLC’s internal control over financial reporting which is set out on page 177.

This annual report does not include a report of our registered public accounting firm on Barclays Bank PLC’s internal control over financial reporting. Barclays Bank PLC’s internal control over financial reporting is not subject to assessment by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit Barclays Bank PLC to provide only the management’s report in this annual report.

The system of internal financial and operational controls is also subject to regulatory oversight in the United Kingdom and overseas. Further information on supervision by the financial services regulators is provided under Supervision and Regulation in the Risk Management section on pages 135-136. The Group Chief Executive and Group Finance Director also concluded that no significant changes were made to our internal controls or in other factors that could significantly affect these controls subsequent to their evaluation.

Statement of Directors’ responsibilities for accounts

The following statement, which should be read in conjunction with the Auditors’ report set out on page 177, is made with a view to distinguishing for shareholders the respective responsibilities of the Directors and of the auditors in relation to the accounts.

The Directors are required by the Companies Act 1985 to prepare accounts for each financial year and, with regards to Group accounts, in accordance with Article 4 of the IAS Regulation. The Directors have prepared individual accounts in accordance with IFRSs as adopted by the European Union. The accounts are required by law and IFRSs to present fairly the financial position of the Company and the Group and the performance for that period. The Companies Act 1985 provides, in relation to such accounts, that references to accounts giving a true and fair view are references to fair presentation.

The Directors consider that, in preparing the accounts on pages 179 to 284, and the additional information contained on pages 315 to 323, the Group has used appropriate accounting policies, supported by reasonable judgements and estimates, and that all accounting standards which they consider to be applicable have been followed.

The Directors have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.


		BarclaysAnnual Report 2008				173

Corporate governance

Accountability and audit

Disclosure controls and procedures Sec 20F Item 15(a)

The Group Chief Executive, John Varley, and the Group Finance Director, Chris Lucas, conducted with Group Management an evaluation of the effectiveness of the design and operation of the Group’s disclosure controls and procedures as at 31st December 2008, which are defined as those controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the US Securities Exchange Act of 1934 is recorded, processed, summarised and reported within the time periods specified in the US Securities and Exchange Commission’s rules and forms. As of the date of the evaluation, the Group Chief Executive and Group Finance Director concluded that the design and operation of these disclosure controls and procedures were effective.

The Directors confirm to the best of their knowledge that:

(a) The financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of Barclays PLC and the undertakings included in the consolidation taken as a whole; and

(b) The management report includes a fair review of the development and performance of the business and the position of Barclays PLC and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

Signed on behalf of the Board

Marcus Agius

Group Chairman

5th March 2009

174

Barclays

Annual Report 2008

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								Financial statements

								Presentation of information						176

								Report of the Independent Registered Public Accounting Firm to the Board of Directors and Shareholders of Barclays PLC also contains the consolidated accounts of, and other information relating to, Barclays Bank PLC. Except where otherwise indicated, the information given is identical with respect to both Barclays PLC and Barclays Bank PLC. ~~The term ‘Companies Act 1985’ means the company law provisions~~						177

								Report of the ~~Companies Act 1985 (as amended) that remain in force. The term ‘Companies Act 2006’ means~~Independent Registered Public Accounting Firm to the ~~operative company law provisions~~Board of ~~the Companies Act 2006.~~ ~~The accounts~~Directors and Shareholders of Barclays Bank PLC ~~included in this document do not comprise statutory~~						178

								Consolidated accounts ~~within the meaning~~Barclays PLC						179

								Accounting policies						179

								Accounting developments						188

								Consolidated income statement						190

								Consolidated balance sheet						191

								Consolidated statement of ~~Section 240 of the Companies Act 1985. The statutory~~recognised income and expense						192

								Consolidated cash flow statement						193

								Parent company accounts ~~of Barclays Bank PLC,~~ ~~which contain an unqualified audit report and do not contain any statement under Section 237(2) or (3) of that Act, will be delivered~~						194

								Notes to the ~~Registrar of Companies in accordance with Section 242 of that Act and are published as a separate document.~~ accounts						196

								~~The term ‘Barclays PLC Group’ means Barclays PLC together with its subsidiaries and the term ‘Barclays Bank PLC Group’ means~~ Barclays Bank PLC together with its subsidiaries. ‘Barclays’ and ‘Group’ are terms which are used to refer to either of the preceding groups when the subject matter is identical. The term ‘Company’ or ‘parent Company’ refers to data						285

Barclays ~~PLC and the term ‘Bank’ refers~~

Annual Report 2008

175

Presentation of information

All of the issued ordinary share capital of Barclays Bank PLC is owned by Barclays PLC. The Annual Report for Barclays PLC also contains the consolidated accounts of, and other information relating to, Barclays Bank PLC. The Annual Report includes information required to be included in the Barclays PLC and Barclays Bank PLC Annual Report on Form 20-F for 2008. Form 20-F will contain as exhibits certificates pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, signed by the Group Chief Executive and Group Finance Director, with respect to both Barclays PLC and Barclays Bank PLC. Except where otherwise indicated, the information given is identical with respect to both Barclays PLC and Barclays Bank PLC.

The term ‘Companies Act 1985’ means the company law provisions of the Companies Act 1985 (as amended) that remain in force. The term ‘Companies Act 2006’ means the operative company law provisions of the Companies Act 2006.

The accounts of Barclays Bank PLC included in this document do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985. The statutory accounts of Barclays Bank PLC, which contain an unqualified audit report and do not contain any statement under Section 237(2) or (3) of that Act, will be delivered to the Registrar of Companies in accordance with Section 242 of that Act and are published as a separate document.

The term ‘Barclays PLC Group’ means Barclays PLC together with its subsidiaries and the term ‘Barclays Bank PLC Group’ means Barclays Bank PLC together with its subsidiaries. ‘Barclays’ and ‘Group’ are terms which are used to refer to either of the preceding groups when the subject matter is identical. The term ‘Company’ or ‘parent Company’ refers to Barclays PLC and the term ‘Bank’ refers to Barclays Bank PLC. The term ‘Absa Group Limited’ is used to refer to Absa Group Limited and its subsidiaries and the term ‘Absa’ is used to refer to the component of the Global Retail and Commercial Banking segment represented by this business. In this report, the abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of pounds sterling respectively; the abbreviations ‘US$m’ and ‘US$bn’ represent millions and thousands of millions of US Dollars respectively and ‘€m’ and ‘€bn’ represent millions and thousands of millions of euros respectively.

Statutory Accounts

The consolidated accounts of Barclays PLC and its subsidiaries are set out on pages ~~149~~179 to ~~249~~284 along with the accounts of Barclays PLC itself on page ~~164.~~208. The consolidated accounts of Barclays Bank PLC and its subsidiaries are set out on pages ~~250~~285 to ~~262.~~298. The accounting policies on pages ~~149~~179 to ~~157~~187 and the Notes commencing on page ~~166~~196 apply equally to both sets of accounts unless otherwise stated.

Adoption of IFRS and 2004 comparatives

The Group adopted the requirements of International Financial Reporting Standards and International Accounting Standards (collectively IFRSs) as adopted by the European Union in 2005. As permitted by IFRS 1, the accounting standards relating to financial instruments and insurance contracts have not been applied to 2004. Therefore, the 2004 comparatives are significantly different from the numbers reported in later years. n/a has been included in tables where, as a result of the application of IAS 32, IAS 39 and IFRS 4 in later years and UK GAAP in 2004, the disclosure is not applicable.

~~146~~176

Barclays

Annual Report ~~2007~~2008

Independent Registered Public Accounting Firm’s report

Report of Independent Registered Public Accounting Firm to the Board of Directors and Shareholders of Barclays PLC

In our opinion, the accompanying Consolidated income statements and the related Consolidated balance sheets, Consolidated statements of recognised income and expense and, Consolidated statements of cash flows present fairly, in all material respects, the financial position of Barclays PLC (the ‘Company’) and its subsidiaries at 31st December ~~2007~~2008 and 31st December ~~2006~~2007 and the results of their operations and cash flows for each of the three years in the period ended 31st December ~~2007,~~2008, in conformity with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board. Also, in our opinion the Company maintained, in all material respects, effective internal control over financial reporting as of 31st December ~~2007,~~2008, based on criteria established in Internal Control – Integrated Framework issued by the ~~COSO.~~Committee of Sponsoring Organizations of the Treadway Commission (‘COSO’). The Company’s management are responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in ‘Management’s report on internal control over financial reporting’ as it pertains to Barclays PLC in the section headed ~~Accountability~~‘Accountability and ~~audit.~~audit’. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our ~~audits which were~~ integrated ~~in 2007 and 2006.~~audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the

risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in ‘Management’s report on internal control over financial reporting’, management has excluded certain of the Lehman Brothers North American investment banking and capital markets businesses acquired from Lehman Brothers Holdings Inc from its assessment of internal control over financial reporting as of 31st December 2008 as they were acquired in a purchase business combination in September 2008. We have also excluded certain of the Lehman Brothers North American investment banking and capital markets businesses, acquired from Lehman Brothers Holdings Inc from our audit of internal control over financial reporting. These businesses represented approximately 1.1% of group income and 0.2% of the total Group assets for the year ended 31st December 2008.

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PricewaterhouseCoopers LLP

Chartered Accountants and Registered Auditors

London, United Kingdom

~~7th~~5th March ~~2008~~2009

Barclays

Annual Report ~~2007~~2008

~~147~~

177

Report of Independent Registered Public Accounting Firm

~~Report of Independent Registered Public Accounting Firm~~

To the Board of Directors and Shareholders of Barclays Bank PLC:

In our opinion, the accompanying Consolidated income statements and the related Consolidated balance sheets, Consolidated statements of recognised income and expense and Consolidated statements of cash flows present fairly, in all material respects, the financial position of Barclays Bank PLC and its subsidiaries at 31st December ~~2007~~2008 and 31st December ~~2006,~~2007, and the results of their operations and cash flows for each of the three years in the period ended 31st December ~~2007~~2008 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

LOGO

PricewaterhouseCoopers LLP

~~Chartered Accountants and Registered Auditors~~London

~~London,~~ United Kingdom

~~10th~~5th March ~~2008~~2009

~~148~~178

Barclays

Annual Report ~~2007~~2008

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Consolidated ~~Accounts~~accounts Barclays PLC

Accounting ~~Policies~~policies

Significant ~~Accounting Policies~~accounting policies

1. Reporting entity

These financial statements are prepared for the Barclays PLC Group (‘Barclays’ or ‘the Group’) under Section 227(2) of the Companies Act 1985. The Group is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services. In addition, individual financial statements have been prepared for the holding company, Barclays PLC (‘the Company’), under Section 226(2)(b) of the Companies Act 1985.

Barclays PLC is a public limited company, incorporated in Great Britain and having a registered office in England.

2. Compliance with International Financial Reporting Standards

The consolidated financial statements of the Barclays PLC Group, and the individual financial statements of Barclays PLC, have been prepared in accordance with International Financial Reporting Standards (IFRSs) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC), as published by the International Accounting Standards Board (IASB). They are also in accordance with IFRSs and IFRIC interpretations as adopted by the European Union.

IFRS 7 ‘Financial Instrument Disclosures’ and an amendment to IAS 1 ‘Presentation of Financial Statements’ on capital disclosures were implemented in 2007, resulting in new or revised disclosures.

The principal accounting policies applied in the preparation of the consolidated and individual financial statements are set out below. These policies have been consistently applied.

3. Basis of preparation

The consolidated and individual financial statements have been prepared under the historical cost convention modified to include the fair valuation of certain financial instruments and contracts to buy or sell non-financial items and trading inventories to the extent required or permitted under accounting standards and as set out in the relevant accounting polices. They are stated in millions of pounds Sterling (£m), the currency of the country in which Barclays PLC is incorporated.

Critical accounting estimates

The preparation of financial statements in accordance with ~~IFRS~~IFRSs requires the use of certain critical accounting estimates. It also requires management to exercise judgement in the process of applying the accounting policies. The notes to the financial statements set out areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the consolidated and individual financial statements such as fair value of financial instruments (Note ~~49)~~50), allowance for impairment (Note 47), goodwill (Note 21), intangible assets (Note 22), and retirement benefit obligations (Note 30).

4. Consolidation

Subsidiaries

The consolidated financial statements combine the financial statements of Barclays PLC and all its subsidiaries, including certain special purpose entities (SPEs) where appropriate, made up to 31st December. Entities qualify as subsidiaries where the Group has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered in assessing whether the Group controls another entity. Details of the principal subsidiaries are given in Note ~~40.~~41.

SPEs are consolidated when the substance of the relationship between the Group and that entity indicates control. Potential indicators of control ~~as set out in SIC 12 ‘Consideration – Special Purpose Entities’,~~ include, amongst others, an assessment of the Group’s exposure to the risks and benefits of the SPE.

This assessment of risks and benefits is based on arrangements in place and the assessed risk exposures at inception. The initial assessment is reconsidered at a later date if:

a)	the Group acquires additional interests in the entity;

b)	the contractual arrangements of the entity are amended such that the relative exposure to risks and benefits change; or

c)	if the Group acquires control over the main operating and financial decisions of the entity.

Subsidiaries are consolidated from the date on which control is transferred to the Group and cease to be consolidated from the date that control ceases.

The acquisition method of accounting is used to account for the purchase of subsidiaries. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed, plus any costs directly related to the acquisition.

The excess of the cost of an acquisition over the Group’s share of the fair value of the identifiable net assets acquired is recorded as goodwill. See accounting policy 14 for the accounting policy for goodwill. A gain on acquisition is recognised in profit or loss if there is an excess of the Group’s share of the fair value of the identifiable net assets acquired over the cost of the acquisition. Intra-group transactions and balances are eliminated on consolidation and consistent accounting policies are used throughout the Group for the purposes of the consolidation.

As the consolidated financial statements include partnerships where a Group member is a partner, advantage has been taken of the exemption of Regulation 7 of the Partnerships and Unlimited Companies (Accounts) Regulations 1993 with regard to the preparation and filing of individual partnership financial statements.

In the individual financial statements, investments in subsidiaries are stated at cost less impairment, if any.

Associates and joint ventures

An associate is an entity in which the Group has significant influence, but not control, over the operating and financial management policy decisions. This is generally demonstrated by the Group holding in excess of 20%, but no more than 50%, of the voting rights.

A joint venture exists where the Group has a contractual arrangement with one or more parties to undertake activities typically, though not necessarily, through entities which are subject to joint control.

Unless designated as at fair value through profit and loss as set out in policy 7, the Group’s investments in associates and joint ventures are initially recorded at cost and increased (or decreased) each year by the Group’s share of the post-acquisition profit (or loss), or other movements reflected directly in the equity of the associated or jointly controlled entity. Goodwill arising on the acquisition of an associate or joint venture is included in the carrying amount of the investment (net of any accumulated impairment loss). When the Group’s share of losses or other reductions in equity in an associate or joint venture equals or exceeds the recorded interest, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the entity.

The Group’s share of the results of associates and joint ventures is based on financial statements made up to a date not earlier than three months before the balance sheet date, adjusted to conform with the accounting polices of the Group. Unrealised gains on transactions are eliminated to the extent of the Group’s interest in the investee. Unrealised losses are also eliminated unless the transaction provides evidence of impairment in the asset transferred.

In the individual financial statements, investments in ~~subsidiaries,~~ associates and joint ventures are stated at cost less impairment, if any.

5. Foreign currency translation

~~The consolidated and individual financial statements are presented in Sterling, which is the functional currency of the parent company.~~ Items included in the financial statements of each of the Group’s entities are measured using their functional currency, being the currency of the primary economic environment in which the entity operates.

Foreign currency transactions are translated into the appropriate functional currency using the exchange rates prevailing at the dates of the transactions. Monetary items denominated in foreign currencies are retranslated at the rate prevailing at the period end. Foreign exchange gains and losses resulting from the retranslation and settlement of these items are recognised in the income statement except for qualifying cash flow hedges or hedges of net investments. See policy 12 for the policies on hedge accounting.

Non-monetary assets that are measured at fair value are translated using the exchange rate at the date that the fair value was determined. Exchange differences on equities and similar non-monetary items held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on equities classified as available for sale financial assets and non-monetary items are included directly in equity.

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Accounting policies

For the purposes of translation into the presentational currency, assets, liabilities and equity of foreign operations are translated at the closing rate, and items of income and expense are translated into Sterling at the rates prevailing on the dates of the transactions, or average rates of exchange where these approximate to actual rates.

The exchange differences arising on the translation of a foreign operation are included in cumulative translation reserves within shareholders’ equity and included in the profit or loss on disposal or partial disposal of the operation.

Goodwill and fair value adjustments arising on the acquisition of foreign subsidiaries are maintained in the functional currency of the foreign operation, translated at the closing rate and are included in hedges of net investments where appropriate.

On transition to IFRS, the Group brought forward a nil opening balance on the cumulative foreign currency translation adjustment arising from the retranslation of foreign operations, which is shown as a separate item in shareholders’ equity.

6. Interest, fees and commissions

Interest

Interest is recognised in interest income and interest expense in the income statement for all interest bearing financial instruments classified as held to maturity, available for sale or other loans and receivables using the effective interest method.

The effective interest method is a method of calculating the amortised cost of a financial asset or liability (or group of assets and liabilities) and of allocating the interest income or interest expense over the relevant period. The effective interest rate is the rate that exactly discounts the expected future cash payments or receipts through the expected life of the financial instrument, or when appropriate, a shorter period, to the net carrying amount of the instrument. The application of the method has the effect of recognising income (and expense) receivable (or payable) on the instrument evenly in proportion to the amount outstanding over the period to maturity or repayment.

In calculating effective interest, the Group estimates cash flows (using projections based on its experience of customers’ behaviour) considering all contractual terms of the financial instrument but excluding future credit losses. Fees, including those for early redemption, are included in the calculation to the extent that they can be measured and are considered to be an integral part of the effective interest rate. Cash flows arising from the direct and incremental costs of issuing financial instruments are also taken into account in the calculation. Where it is not possible to otherwise estimate reliably the cash flows or the expected life of a financial instrument, effective interest is calculated by reference to the payments or receipts specified in the contract, and the full contractual term.

Fees and commissions

Unless included in the effective interest calculation, fees and commissions are recognised on an accruals basis as the service is provided. Fees and commissions not integral to effective interest arising from negotiating, or participating in the negotiation of a transaction from a third party, such as the acquisition of loans, shares or other securities or the purchase or sale of businesses, are recognised on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts. Asset management fees related to investment funds are recognised over the period the service is provided. The same principle is applied to the recognition of income from wealth management, financial planning and custody services that are continuously provided over an extended period of time.

Commitment fees, together with related direct costs, for loan facilities where draw down is probable are deferred and recognised as an adjustment to the effective interest on the loan once drawn. Commitment fees in relation to facilities where draw down is not probable are recognised over the term of the commitment.

Insurance premiums

Insurance premiums are recognised in the period earned.

Net trading income

Income arises from the margins which are achieved through market-making and customer business and from changes in ~~market~~fair value caused by movements in interest and exchange rates, equity prices and other market variables. Trading positions are held at fair value and the resulting gains and losses are included in the income statement, together with interest and dividends arising from long and short positions and funding costs relating to trading activities.

Dividends from subsidiaries

In the individual financial statements of Barclays PLC, dividends from subsidiaries are ~~accounted for on~~recognised when the ~~basis of~~right to receive payment is established, which is when the dividends are received inor when the ~~accounting period.~~dividends are appropriately authorised by the subsidiary.

7. Financial assets and liabilities

Financial assets

The Group classifies its financial assets in the following categories: financial instruments at fair value through profit or loss; loans and receivables; held to maturity investments and available for sale financial assets. Management determines the classification of financial assets and liabilities at initial recognition.

Financial instruments at fair value through profit or loss

Financial instruments are classified in this category if they are held for trading, or if they are designated by management under the fair value option. Instruments are classified as held for trading if they are:

~~(i)~~a)

acquired principally for the purposes of selling or repurchasing in the near term;

~~(ii)~~b)

part of a portfolio of identified financial instruments that are managed together and for which there is evidence of a recent actual pattern of short-term profit-taking; or

~~(iii)~~c)

a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.

~~Financial instruments cannot be transferred into or~~It is not possible to transfer a financial instrument out of this category whilst it is held or issued with the exception of non-derivative financial assets held for trading which may be transferred out of this category from 1st July 2008 after ~~inception.~~ initial classification where:

a)	in rare circumstances, it is no longer held for the purpose of selling or repurchasing in the near term, or

b)	it is no longer held for the purpose of trading, it would have met the definition of a loan and receivable on initial classification and the Group has the intention and ability to hold it for the foreseeable future or until maturity.

Financial instruments included in this category are recognised initially at fair value and transaction costs are taken directly to the income statement. Gains and losses arising from changes in fair value are included directly in the income statement. The instruments are derecognised when the rights to receive cash flows have expired or the Group has transferred substantially all the risks and rewards of ownership and the transfer qualifies for derecognition.

Regular way purchases and sales of financial instruments held for trading or designated under the fair value option are recognised on trade date, being the date on which the Group commits to purchase or sell the asset.

The fair value option is used in the following circumstances:

~~(i)~~a)

financial assets backing insurance contracts and financial assets backing investment contracts are designated at fair value through profit or loss because the related liabilities have cash flows that are contractually based on the performance of the assets or the related liabilities are insurance contracts whose measurement incorporates current information. Fair valuing the assets through profit and loss significantly reduces the recognition inconsistencies that would arise if the financial assets were classified as available for sale;

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~~(ii)~~b)

financial assets, loans to customers, financial liabilities, financial guarantees and structured notes may be designated at fair value through profit or loss if they contain substantive embedded derivatives;

~~(iii)~~c)

financial assets, loans to customers, financial liabilities, financial guarantees and structured notes may be designated at fair value through profit or loss where doing so significantly reduces measurement inconsistencies that would arise if the related derivatives were treated as held for trading and the underlying financial instruments were carried at amortised cost; and

~~(iv)~~d)

certain private equity and other investments that are managed, and evaluated on a fair value basis in accordance with a documented risk management or investment strategy and reported to key management personnel on that basis.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and which are not classified as available for sale. Loans and receivables are initially recognised at fair value including direct and incremental transaction costs. They are subsequently valued at amortised cost, using the effective interest method (see accounting policy 6). They are derecognised when the rights to receive cash flows have expired or the Group has transferred substantially all the risks and rewards of ownership.

Regular way purchases and sales of loans and receivables are recognised on contractual settlement.

Held to maturity

Held to maturity investments are non-derivative financial assets with fixed or determinable payments that the Group’s management has the intention and ability to hold to maturity. They are initially recognised at fair value including direct and incremental transaction costs. They are subsequently valued at amortised cost, using the effective interest method (see accounting policy 6). They are derecognised when the rights to receive cash flows have expired.

Regular way purchases of held to maturity financial assets are recognised on trade date, being the date on which the Group commits to purchase the asset.

Available for sale

Available for sale assets are non-derivative financial assets that are designated as available for sale and are not categorised into any of the other categories described above. They are initially recognised at fair value including direct and incremental transaction costs. They are subsequently held at fair value. Gains and losses arising from changes in fair value are included as a separate component of equity until sale when the cumulative gain or loss is transferred to the income statement. Interest determined using the effective interest method (see accounting policy 6), impairment losses and translation differences on monetary items are recognised in the income statement. The assets are derecognised when the rights to receive cash flows have expired or the Group has transferred substantially all the risks and rewards of ownership.

Regular way purchases and sales of available for sale financial instruments are recognised on trade date, being the date on which the Group commits to purchase or sell the asset.

A financial asset classified as available for sale that would have met the definition of loans and receivables may only be transferred from the available for sale classification where the Group has the intention and the ability to hold the asset for the foreseeable future or until maturity.

Embedded derivatives

Some hybrid contracts contain both a derivative and a non-derivative component. In such cases, the derivative component is termed an embedded derivative. Where the economic characteristics and risks of the embedded derivatives are not closely related to those of the host contract, and the host contract itself is not carried at fair value through profit or loss, the embedded derivative is bifurcated and reported at fair value with gains and losses being recognised in the income statement.

Profits or losses cannot be recognised on the initial recognition of embedded derivatives unless the host contract is also carried at fair value.

Loan commitments

Loan commitments, where the Group has a past practice of selling the resulting assets shortly after origination, are held at fair value through profit or loss. Other loan commitments are accounted for in accordance with policy 23.

Financial liabilities

Financial liabilities are measured at amortised cost, except for trading liabilities and liabilities designated at fair value, which are held at fair value through profit or loss. Financial liabilities are derecognised when extinguished.

Determining fair value

Where the classification of a financial instrument requires it to be stated at fair value, fair value is determined by reference to a quoted market price for that instrument or by using a valuation model. Where the fair value is calculated using ~~financial markets pricing~~valuation models, the methodology is to calculate the expected cash flows under the terms of each specific contract and then discount these values back to a present value. These models use as their basis independently sourced market parameters including, for example, interest rate yield curves, equities and commodities prices, option volatilities and currency rates. For financial liabilities measured at fair value, the carrying amount ~~is adjusted to reflect~~reflects the effect on fair value of changes in own credit spreads by applying the appropriate Barclays credit default swap spreads. Most market parameters are either directly observable or are implied from instrument prices. The model may perform numerical procedures in the pricing such as interpolation when input values do not directly correspond to the most actively traded market trade parameters. However, where valuations include significant unobservable inputs, the transaction price is deemed to provide the best evidence of initial fair value for accounting purposes. As such, profits or losses are recognised upon trade inception only when such profits can be measured solely by reference to observable market data. ~~The~~For valuations that include significant unobservable inputs, the difference between the model valuation and the initial transaction price is recognised in profit or loss:

a)	on a straight-line basis over the term of the transaction, or over the period until all model inputs will become observable where appropriate, or;

b)	released in full where previously unobservable inputs become observable.

Various factors influence the availability of observable inputs and these may vary from product to product and change over time. Factors include for example, the depth of activity in the relevant market, the type of product, whether the product is new and not widely traded in the market place, the maturity of market modelling and the nature of the transaction (bespoke or generic). To the extent that valuation is based on models or inputs that are not observable in the market, the determination of fair value can be more subjective, dependant on the significance of the unobservable input to the overall valuation. Unobservable inputs are determined based on the best information available, for example by reference to similar assets, similar maturities or other analytical techniques.

8. Impairment of financial assets

The Group assesses at each balance sheet date whether there is objective evidence that loans and receivables or available for sale financial investments are impaired. These are impaired and impairment losses are incurred if, and only if, there is objective evidence of impairment as a result of one or more loss events that occurred after the initial recognition of the asset and prior to the balance sheet date (‘a loss event’) and that loss event or events has had an impact on the estimated future cash flows of the financial asset or the portfolio that can be reliably estimated. The criteria that the Group uses to determine that there is objective evidence of an impairment loss include:

a)	significant financial difficulty of the issuer or obligor;

b)	a breach of contract, such as a default or delinquency in interest or principal payments;

c)	the lender, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider;

d)	it becomes probable that the borrower will enter bankruptcy or other financial reorganisation;

e)	the disappearance of an active market for that financial asset because of financial difficulties; or

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Accounting policies

f)	observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including:

(i)

adverse changes in the payment status of borrowers in the portfolio;

(ii)

national or local economic conditions that correlate with defaults on the assets in the portfolio.

For loans and receivables the Group first assesses whether objective evidence of impairment exists individually for loans and receivables that are individually significant, and individually or collectively for loans and receivables that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed loan and receivable, whether significant or not, it includes the asset in a group of loans and receivables with similar credit risk characteristics and collectively assesses them for impairment. Loans and receivables that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.

The amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the asset’s original effective interest rate. The amount of the loss is recognised using an allowance account and recognised in the income statement.

~~The~~Where appropriate, the calculation of the present value of the estimated future cash flows of a collateralised loan and receivable asset reflect the cash flows that may result from foreclosure costs for obtaining and selling the collateral, whether or not foreclosure is probable.

For the purposes of a collective evaluation of impairment, loans and receivables are grouped on the basis of similar risk characteristics, taking into account asset type, industry, geographical location, collateral type, past-due status and other relevant factors. These characteristics are relevant to the estimation of future cash flows for groups of such assets by being indicative of the counterparty’s ability to pay all amounts due according to the contractual terms of the assets being evaluated.

Future cash flows in a group of loans and receivables that are collectively evaluated for impairment are estimated on the basis of the contractual cash flows of the assets in the group and historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted based on current observable data to reflect the effects of current conditions that did not affect the period on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not currently exist.

The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.

Following impairment, interest income is recognised using the ~~original~~ effective rate of interest which was used to discount the future cash flows for the purpose of measuring the impairment loss.

When a loan is uncollectable, it is written off against the related allowance for loan impairment. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined. Subsequent recoveries of amounts previously written off are credited to the income statement.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed by adjusting the allowance account. The amount of the reversal is recognised in the income statement.

Equity securities acquired in exchange for loans in order to achieve an orderly realisation are accounted for as a disposal of the loan and an acquisition of equity securities. Where control is obtained over an entity as a result of the transaction, the entity is consolidated. Any further impairment of the assets or business acquired is treated as an impairment of the relevant asset or business and not as an impairment of the original instrument.

In the case of available for sale ~~financial investments,~~equity securities, a significant or prolonged decline in the fair value of the security below its cost is also considered in determining whether impairment exists. Where such evidence exists, the cumulative net loss that has been previously recognised directly in equity is removed from equity and recognised in the income statement. In the case of debt instruments classified as available for sale, impairment is assessed based on the same criteria as all other financial assets. Reversals of impairment of debt instruments are recognised in the income statement. Reversals of impairment of equity shares are not recognised in the income statement, increases in the fair value of equity shares after impairment are recognised directly in equity.

9. Sale and repurchase agreements (including stock borrowing and lending)

Securities may be lent or sold subject to a commitment to repurchase them (a ‘repo’). Such securities are retained on the balance sheet when substantially all the risks and rewards of ownership remain with the Group, and the counterparty liability is included separately on the balance sheet ~~as appropriate.~~when cash consideration is received.

Similarly, where the Group borrows or purchases securities subject to a commitment to resell them (a ‘reverse repo’) but does not acquire the risks and rewards of ownership, the transactions are treated as collateralised loans when cash consideration is paid, and the securities are not included in the balance sheet.

The difference between sale and repurchase price is accrued over the life of the agreements using the effective interest method. Securities lent to counterparties are also retained in the financial statements. Securities borrowed are not recognised in the financial statements, unless these are sold to third parties, at which point the obligation to repurchase the securities is recorded as a trading liability at fair value and any subsequent gain or loss included in net trading income.

10. Securitisation transactions

Certain Group undertakings have issued debt securities or have entered into funding arrangements with lenders in order to finance specific loans and advances to customers.

All financial assets continue to be held on the Group balance sheet, and a liability recognised for the proceeds of the funding transaction, unless:

~~(i)~~a)

substantially all the risks and rewards associated with the financial instruments have been transferred, in which case, the assets are derecognised in full; or

~~(ii)~~b)

if a significant portion, but not all, of the risks and rewards have been transferred, the asset is derecognised entirely if the transferee has the ability to sell the financial asset, otherwise the asset continues to be recognised only to the extent of the Group’s continuing involvement.

Where ~~(i)~~a) or ~~(ii)~~b) above applies to a fully proportionate share of all or specifically identified cash flows, the relevant accounting treatment is applied to that proportion of the asset.

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~~11.~~

~~Collateral and netting~~

11. Collateral and netting

The Group enters into master agreements with counterparties whenever possible and, when appropriate, obtains collateral. Master agreements provide that, if an event of default occurs, all outstanding transactions with the counterparty will fall due and all amounts outstanding will be settled on a net basis.

Collateral

The Group obtains collateral in respect of customer liabilities where this is considered appropriate. The collateral normally takes the form of a lien over the customer’s assets and gives the Group a claim on these assets for both existing and future customer liabilities.

The Group also receives collateral in the form of cash or securities in respect of other credit instruments, such as stock borrowing contracts, and derivative contracts in order to reduce credit risk. Collateral received in the form of securities is not recorded on the balance sheet. Collateral received in the form of cash is recorded on the balance sheet with a corresponding liability. These items are assigned to deposits received from bank or other counterparties. Any interest payable or receivable arising is recorded as interest expense or interest income respectively except for funding costs relating to trading activities which are recorded in net trading income.

Netting

Financial assets and liabilities are offset and the net amount reported in the balance sheet if, and only if, there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise an asset and settle the liability simultaneously. In many cases, even though master netting agreements are in place, the lack of an intention to settle on a net basis results in the related assets and liabilities being presented gross in the balance sheet.

12. Hedge accounting

~~12.~~

~~Hedge accounting~~

Derivatives are used to hedge interest rate, exchange rate, commodity, and equity exposures and exposures to certain indices such as house price indices and retail price indices related to non-trading positions.

Where derivatives are held for risk management purposes, and when transactions meet the required criteria, ~~specified in IAS 39,~~ the Group applies fair value hedge accounting, cash flow hedge accounting, or hedging of a net investment in a foreign operation as appropriate to the risks being hedged.

When a financial instrument is designated as a hedge, the Group formally documents the relationship between the hedging instrument and hedged item as well as its risk management objectives and its strategy for undertaking the various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

The Group discontinues hedge accounting when:

~~(i)~~a)

It is determined that a derivative is not, or has ceased to be, highly effective as a hedge;

~~(ii)~~b)

the derivative expires, or is sold, terminated, or exercised;

~~(iii)~~c)

the hedged item matures or is sold or repaid; or

~~(iv)~~d)

a forecast transaction is no longer deemed highly probable.

In certain circumstances, the Group may decide to cease hedge accounting even though the hedge relationship continues to be highly effective by no longer designating the financial instrument as a hedging instrument. To the extent that the changes in the fair value of the hedging derivative differ from changes in the fair value of the hedged risk in the hedged item; or the cumulative change in the fair value of the hedging derivative differs from the cumulative change in the fair value of expected future cash flows of the hedged item, the hedge is deemed to include ineffectiveness. The amount of ineffectiveness, provided it is not so great as to disqualify the entire hedge for hedge accounting, is recorded in the income statement.

Fair value hedge accounting

Changes in fair value of derivatives that qualify and are designated as fair value hedges are recorded in the income statement, together with changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.

If the hedge relationship no longer meets the criteria for hedge accounting, it is discontinued. For fair value hedges of interest rate risk, the fair value adjustment to the hedged item is amortised to the income statement over the period to maturity of the previously designated hedge relationship using the effective interest method.

If the hedged item is sold or repaid, the unamortised fair value adjustment is recognised immediately in the income statement.

Cash flow hedges

For qualifying cash flow hedges, the fair value gain or loss associated with the effective portion of the cash flow hedge is recognised initially in shareholders’ equity, and recycled to the income statement in the periods when the hedged item will affect profit or loss. Any ineffective portion of the gain or loss on the hedging instrument is recognised in the income statement immediately.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the hedged item is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was recognised in equity is immediately transferred to the income statement.

Hedges of net investments

Hedges of net investments in foreign operations, including monetary items that are accounted for as part of the net investment, are accounted for similarly to cash flow hedges; the effective portion of the gain or loss on the hedging instrument is recognised directly in equity and the ineffective portion is recognised immediately in the income statement. The cumulative gain or loss previously recognised in equity is recognised in the income statement on the disposal or partial disposal of the foreign operation.

Hedges of net investments may include non-derivative liabilities as well as derivative financial instruments although for a non-derivative liability only the foreign exchange risk is designated as a hedge.

Derivatives that do not qualify for hedge accounting

Derivative contracts entered into as economic hedges that do not qualify for hedge accounting are held at fair value through profit or loss.

13. Property, plant and equipment

~~13.~~

~~Property, plant and equipment~~

Property and equipment is stated at cost less accumulated depreciation and provisions for impairment, if any. Additions and subsequent expenditures are capitalised only to the extent that they enhance the future economic benefits expected to be derived from the assets.

Depreciation is provided on the depreciable amount of items of property and equipment on a straight-line basis over their estimated useful economic lives. The depreciable amount is the gross carrying amount, less the estimated residual value at the end of its useful economic life.

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Accounting policies

The Group uses the following annual rates in calculating depreciation:


Freehold buildings and long-leasehold property ~~(more~~ (more than 50 years to run)		2-3.3%
Leasehold property (less than 50 years to run)		Over the remaining life of the lease
Costs of adaptation of freehold and leasehold property^a		7-10%
Equipment installed in freehold and leasehold property^a		7-10%
Computers and similar equipment		20-33%
Fixtures and fittings and other equipment		10-20%

Depreciation rates, methods and the residual values underlying the calculation of depreciation of items of property, plant and equipment are kept under review to take account of any change in circumstances.

When deciding on depreciation rates and methods, the principal factors the Group takes into account are the expected rate of technological developments and expected market requirements for, and the expected pattern of usage of, the assets. When reviewing residual values, the Group estimates the amount that it would currently obtain for the disposal of the asset after deducting the estimated cost of disposal if the asset were already of the age and condition expected at the end of its useful economic life.

No depreciation is provided on freehold land, although, in common with all long-lived assets, it is subject to impairment testing, if deemed appropriate.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the income statement.

14. Intangible assets

Goodwill

Goodwill arises on the acquisition of subsidiary and associated entities and joint ventures, and represents the excess of the fair value of the purchase consideration and direct costs of making the acquisition, over the fair value of the Group’s share of the assets acquired, and the liabilities and contingent liabilities assumed on the date of the acquisition.

For the purpose of calculating goodwill, fair values of acquired assets, liabilities and contingent liabilities are determined by reference to market values or by discounting expected future cash flows to present value. This discounting is either performed using market rates or by using risk-free rates and risk-adjusted expected future cash flows. Goodwill is capitalised and reviewed annually for impairment, or more frequently when there are indications that impairment may have occurred. Goodwill is allocated to cash-generating units for the purpose of impairment testing. Goodwill on acquisitions of associates and joint ventures is included in the amount of the investment. Gains and losses on the disposal of an entity include the carrying amount of the goodwill relating to the entity sold.

The carrying amount of goodwill in the UK GAAP balance sheet as at 31st December 2003 has been brought forward without adjustment on transition to IFRSs.

Computer software

Computer software is stated at cost, less amortisation and provisions for impairment, if any.

The identifiable and directly associated external and internal costs of acquiring and developing software are capitalised where the software is controlled by the Group, and where it is probable that future economic benefits that exceed its cost will flow from its use over more than one year. Costs associated with maintaining software are recognised as an expense when incurred.

Capitalised computer software is amortised over three to five years.

~~Note~~

a	~~Where leasehold property has a remaining useful life of less than 15 years, costs of adaptation and installed equipment are depreciated over the remaining life of the lease.~~

Other intangible assets

Other intangible assets consist of brands, customer lists, licences and other contracts, core deposit intangibles, mortgage servicing rights and customer relationships. Other intangible assets are initially recognised when they are separable or arise from contractual or other legal rights, the cost can be measured reliably and, in the case of intangible assets not acquired in a business combination, where it is probable that future economic benefits attributable to the assets will flow from their use. The value of intangible assets which are acquired in a business combination is generally determined using income approach methodologies such as the discounted cash flow method and the relief from royalty method that estimate net cash flows attributable to an asset over its economic life and discount to present value using an appropriate rate of return based on the cost of equity adjusted for risk.

Other intangible assets are stated at cost less amortisation and provisions for impairment, if any, and are amortised over their useful lives in a manner that reflects the pattern to which they contribute to future cash flows, generally over 4-25 years.

15. Impairment of property, plant and equipment and intangible assets

At each balance sheet date, or more frequently where events or changes in circumstances dictate, property, plant and equipment and intangible assets, are assessed for indications of impairment. If indications are present, these assets are subject to an impairment review. Goodwill is subject to an impairment review as at the balance sheet date each year. The impairment review comprises a comparison of the carrying amount of the asset with its recoverable amount: the higher of the asset’s or the cash-generating unit’s net selling price and its value in use. Net selling price is calculated by reference to the amount at which the asset could be disposed of in a binding sale agreement in an ~~arms-length~~arm’s length transaction evidenced by an active market or recent transactions for similar assets. Value in use is calculated by discounting the expected future cash flows obtainable as a result of the asset’s continued use, including those resulting from its ultimate disposal, at a market-based discount rate on a pre-tax basis.

The carrying values of fixed assets and goodwill are written down by the amount of any impairment and this loss is recognised in the income statement in the period in which it occurs. A previously recognised impairment loss relating to a fixed asset may be reversed in part or in full when a change in circumstances leads to a change in the estimates used to determine the fixed asset’s recoverable amount. The carrying amount of the fixed asset will only be increased up to the amount that it would have been had the original impairment not been recognised. Impairment losses on goodwill are not reversed. For the purpose of conducting impairment reviews, cash-generating units are the lowest level at which management monitors the return on investment on assets.

16. Financial guarantees

Financial guarantee contracts are contracts that require the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payments when due in accordance with the terms of a debt instrument.

Financial guarantees are initially recognised in the financial statements at fair value on the date that the guarantee was given. Other than where the fair value option is applied, subsequent to initial recognition, the bank’s liabilities under such guarantees are measured at the higher of the initial measurement, less amortisation calculated to recognise in the income statement any fee income earned over the period, and ~~the best estimate of the expenditure required to settle~~ any financial obligation arising as a result of the guarantees at the balance sheet date, in accordance with policy 23.

Any increase in the liability relating to guarantees is taken to the income statement in Provisions for undrawn contractually committed facilities and guarantees provided. Any liability remaining is recognised in the income statement when the guarantee is discharged, cancelled or expires.

~~154~~Note

a Where leasehold property has a remaining useful life of less than 15 years, costs of adaptation and installed equipment are depreciated over the remaining life of the lease.

184

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LOGO

~~17.~~

~~Issued debt and equity securities~~

17. Issued debt and equity securities

Issued financial instruments or their components are classified as liabilities where the contractual arrangement results in the Group having a present obligation to either deliver cash or another financial asset to the holder, to exchange financial instruments on terms that are potentially unfavourable or to satisfy the obligation otherwise than by the exchange of a fixed amount of cash or another financial asset for a fixed number of equity shares. Issued financial instruments, or their components, are classified as equity where they meet the definition of equity and confer on the holder a residual interest in the assets of the Company. The components of issued financial instruments that contain both liability and equity elements are accounted for separately with the equity component being assigned the residual amount after deducting from the instrument as a whole the amount separately determined as the fair value of the liability component.

Financial liabilities, other than trading liabilities and financial liabilities designated at fair value, are carried at amortised cost using the effective interest method as set out in policy 6. Derivatives embedded in financial liabilities that are not designated at fair value are accounted for as set out in policy 7. Equity instruments, including share capital, are initially recognised at net proceeds, after deducting transaction costs and any related income tax. Dividend and other payments to equity holders are deducted from equity, net of any related tax.

18. Share capital

~~18.~~

~~Share capital~~

Share issue costs

Incremental costs directly attributable to the issue of new shares or options including those issued on the acquisition of a business are shown in equity as a deduction, net of tax, from the proceeds.

Dividends on ordinary shares

Dividends on ordinary shares are recognised in equity in the period in which they are paid or, if earlier, approved by the Barclays PLC (the Company) shareholders.

Treasury shares

Where the Company or any member of the Group purchases the Company’s share capital, the consideration paid is deducted from shareholders’ equity as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in shareholders’ equity.

19. Insurance contracts and investment contracts

~~19.~~

~~Insurance contracts and investment contracts~~

The Group offers wealth management, term assurance, annuity, property and payment protection insurance products to customers that take the form of long- and short-term insurance contracts.

The Group classifies its wealth management and other products as insurance contracts where these transfer significant insurance risk, generally where the benefits payable on the occurrence of an insured event are at least 5% more than the benefits that would be payable if the insured event does not occur.

Contracts that do not contain significant insurance risk or discretionary participation features are classified as investment contracts. Financial assets and liabilities relating to investment contracts, and assets backing insurance contracts are classified and measured as appropriate under IAS 39, ‘Financial Instruments: Recognition and Measurement’.

Long-term ~~Insurance~~insurance contracts

These contracts, insure events associated with human life (for example, death or survival) over a long duration. Premiums are recognised as revenue when they become payable by the contract holder. Claims and surrenders are accounted for when notified. Maturities on the policy maturity date and regular withdrawals are accounted for when due.

A liability for contractual benefits that are expected to be incurred in the future is recorded when the premiums are recognised, based on the expected discounted value of the benefit payments and directly related administration costs, less the expected discounted value of the future premiums that would be required to meet the benefits and other expenses. The calculation of the liability contains assumptions regarding mortality, maintenance expenses and investment income.

Liabilities under unit-linked life insurance contracts (such as endowment policies) in addition reflect the value of assets held within unitised investment pools.

Short-term insurance contracts

Under its payment protection insurance products the Group is committed to paying benefits to the policyholder rather than forgiving interest or principal on the occurrence of an insured event, such as unemployment, sickness, or injury. Property insurance contracts mainly compensate the policyholders for damage to their property or for the value of property lost.

Premiums are recognised as revenue proportionally over the period of the coverage. Claims and claims handling costs are charged to income as incurred, based on the estimated liability for compensation owed to policyholders arising from events that have occurred up to the balance sheet date even if they have not yet been reported to the Group, based on assessments of individual cases reported to the Group and statistical analyses for the claims incurred but not reported.

Deferred acquisition costs (DAC)

Commissions and other costs that are related to securing new insurance and investment contracts are capitalised and amortised over the estimated lives of the relevant contracts.

Deferred income liability

Fees that are designed to recover commissions and other costs related to either securing new insurance and investment contracts or renewing existing investment contracts are included as a liability and amortised over the estimated life of the contract.

Value of business acquired

On acquisition of a portfolio of contracts, such as through the acquisition of a subsidiary, the Group recognises an intangible asset representing the value of business acquired (VOBA), representing the future profits embedded in acquired insurance contracts and investment contracts with a discretionary participation feature. The asset is amortised over the remaining terms of the acquired contracts.

Liability adequacy test

Liability adequacy tests are performed at each balance sheet date to ensure the adequacy of contract liabilities net of DAC and VOBA assets. Current best estimates of future contractual cash flows, claims handling and administration costs, and investment returns from the assets backing the liabilities are taken into account in the tests. Where a deficiency is highlighted by the test, DAC and VOBA assets are written off first, and insurance liabilities increased when these are written off in full. Any deficiency is immediately recognised in the income statement.

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Annual Report ~~2007~~2008

~~155~~

185

Consolidated accounts Barclays PLC

Accounting policies

Reinsurance

Short- and long-term insurance business is ceded to reinsurers under contracts to transfer part or all of one or more of the following risks: mortality, investment and expenses. All such contracts are dealt with as insurance contracts. The benefits to which the Group is entitled under its reinsurance contracts are recognised as reinsurance assets. The Group assesses reinsurance assets at each balance sheet date. If there is objective evidence of impairment, the carrying amount of the reinsurance asset is reduced accordingly resulting in a charge to the income statement.

20. Leases

Lessor

Assets leased to customers under agreements, which transfer substantially all the risks and rewards of ownership, with or without ultimate legal title, are classified as finance leases. When assets are held subject to a finance lease, the present value of the lease payments, discounted at the rate of interest implicit in the lease, is recognised as a receivable. The difference between the total payments receivable under the lease and the present value of the receivable is recognised as unearned finance income, which is allocated to accounting periods under the pre-tax net investment method to reflect a constant periodic rate of return.

Assets leased to customers under agreements which do not transfer substantially all the risks and rewards of ownership are classified as operating leases. The leased assets are included within property, plant and equipment on the Group’s balance sheet and depreciation is provided on the depreciable amount of these assets on a systematic basis over their estimated useful lives. Lease income is recognised on a straight-line basis over the period of the lease unless another systematic basis is more appropriate.

Lessee

The leases entered into by the Group are primarily operating leases. Operating lease rentals payable are recognised as an expense in the income statement on a straight-line basis over the lease term unless another systematic basis is more appropriate.

21. Employee benefits

The Group provides employees worldwide with post-retirement benefits mainly in the form of pensions. The Group operates a number of pension schemes which may be funded or unfunded and of a defined contribution or defined benefit nature. In addition, the Group contributes, according to local law in the various countries in which it operates, to Governmental and other plans which have the characteristics of defined contribution plans.

For defined benefit schemes, actuarial valuation of each of the scheme’s obligations using the projected unit credit method and the fair valuation of each of the scheme’s assets are performed annually, using the assumptions set out in Note 30. The difference between the fair value of the plan assets and the present value of the defined benefit obligation at the balance sheet date, adjusted for any historic unrecognised actuarial gains or losses and past service cost, is recognised as a liability in the balance sheet. An asset, arising for example, as a result of past over funding or the performance of the plan investments, is recognised to the extent that it does not exceed the present value of future contribution holidays or refunds of contributions.

Cumulative actuarial gains and losses in excess of the greater of 10% of the assets or 10% of the obligations of the plan are recognised in the income statement over the remaining average service lives of the employees of the related plan, on a straight-line basis.

For defined contribution schemes, the Group recognises contributions due in respect of the accounting period in the income statement. Any contributions unpaid at the balance sheet date are included as a liability.

The Group also provides health care to certain retired employees, which are accrued as a liability in the financial statements over the period of employment, using a methodology similar to that for defined benefit pensions plans.

Short-term employee benefits, such as salaries, paid absences, and other benefits, are accounted for on an accruals basis over the period which employees have provided services in the year. Bonuses are recognised to the extent that the Group has a present obligation to its employees that can be measured reliably.

All expenses related to employee benefits are recognised in the income statement in staff costs, which is included within operating expenses.

22. Share-based payments to employees

The Group engages in equity settled share-based payment transactions in respect of services received from certain of its employees. The fair value of the services received is measured by reference to the fair value of the shares or share options granted on the date of the grant. The cost of the employee services received in respect of the shares or share options granted is recognised in the income statement over the period that the services are received, which is the vesting period. The fair value of the options granted is determined using option pricing models, which take into account the exercise price of the option, the current share price, the risk free interest rate, the expected volatility of the share price over the life of the option and other relevant factors. Except for those which include terms related to market conditions, vesting conditions included in the terms of the grant are not taken into account in estimating fair value. Non-market vesting conditions are taken into account by adjusting the number of shares or share options included in the measurement of the cost of employee services so that ultimately, the amount recognised in the income statement reflects the number of vested shares or share options. Where vesting conditions are related to market conditions, the charges for the services received are recognised regardless of whether or not the market related vesting condition is met, provided that the non-market vesting conditions are met.

23. Provisions

Provisions are recognised for present obligations arising as consequences of past events where it is more likely than not that a transfer of economic benefit will be necessary to settle the obligation, and it can be reliably estimated.

When a leasehold property ceases to be used in the business or a demonstrable commitment has been made to cease to use a property where the costs exceed the benefits of the property, provision is made, where the unavoidable costs of the future obligations relating to the lease are expected to exceed anticipated rental income and other benefits. The net costs are discounted using market rates of interest to reflect the long-term nature of the cash flows.

Provision is made for the anticipated cost of restructuring, including redundancy costs when an obligation exists. An obligation exists when the Group has a detailed formal plan for restructuring a business and has raised valid expectations in those affected by the restructuring by starting to implement the plan or announcing its main features. The provision raised is normally utilised within nine months.

Provision is made for undrawn loan commitments and similar facilities if it is probable that the facility will be drawn and result in the recognition of an asset at an amount less than the amount advanced.

Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events or present obligations where the transfer of economic benefit is uncertain or cannot be reliably measured. Contingent liabilities are not recognised but are disclosed unless they are remote.

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24. Taxes, including deferred taxes

Income tax payable on taxable profits (‘current tax’), is recognised as an expense in the period in which the profits arise. Income tax recoverable on tax allowable losses is recognised as an asset only to the extent that it is regarded as recoverable by offset against current or future taxable profits.

Deferred income tax is provided in full, using the liability method, on temporary differences arising from the differences between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates and legislation enacted or substantially enacted by the balance sheet date and is expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. Deferred and current tax assets and liabilities are only offset when they arise in the same tax reporting group and where there is both the legal right and the intention to settle on a net basis or to realise the asset and settle the liability simultaneously.

25. Segment reporting

~~Business~~Operating segments are ~~distinguishable components~~reported in a manner consistent with the internal reporting provided to the Executive Committee. The Executive Committee, which is responsible for allocating resources and assessing performance of the ~~Group that provide products or services that are subject to risks and rewards that are different to those of other~~operating segments, has been identified as the chief operating decision maker.

All transactions between business segments. Geographical segments provide products or services within a particular economic environment that is subject to risks and rewards that are different to those of components operating in other economic environments. Business segments are ~~the primary reporting segments. Group costs are allocated to segments~~conducted on ~~a reasonable and consistent basis. Transactions between segments are generally accounted for in accordance with Group policies as if the segment were a stand-alone business~~an arm’s length basis, with intra-segment revenue and costs being eliminated in Head office.

~~The analyses by geographical~~ Income and expenses directly associated with each segment are ~~based on the location of the customer.~~included in determining business segment performance.

26. Cash and cash equivalents

For the purposes of the cash flow statement, cash comprises cash on hand and demand deposits, and cash equivalents comprise highly liquid investments that are convertible into cash with an insignificant risk of changes in value with original maturities of less than three months. ~~Repos~~

Repurchase and reverse ~~repos~~repurchase agreements are not considered to be part of cash equivalents.

27. Trust activities

The Group commonly acts as trustees and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions. These assets and income arising thereon are excluded from these financial statements, as they are not assets of the Group.

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Annual Report ~~2007~~2008

~~157~~

187

Consolidated accounts Barclays PLC

Accounting ~~presentation~~developments

Changes in accounting policy

The adoption of IFRSs and IFRICs in 2008 has resulted in no significant changes to the accounting policies except:

IFRS 8 ‘Operating Segments’ has been adopted as at 1st January 2008. IFRS 8 was issued in November 2006 and excluding early adoption would first be required to be applied to the Group’s accounting period beginning on 1st January 2009. The standard replaces IAS 14 ‘Segmental Reporting’ and aligns operating segmental reporting with segments reported to senior management as well as requiring amendments and additions to the existing segmental reporting disclosures as set out in Note 53. The standard does not change the recognition, measurement or disclosure of specific transactions in the consolidated financial statements.

Certain financial assets originally classified as held for trading have been reclassified to loans and receivables on 16th December 2008 as set out in Note 51 on page 278. Following the amendment to IAS 39 in October 2008, a non-derivative financial asset held for trading may be transferred out of the fair value through profit or loss category after 1st July 2008 where:

–

In rare circumstances, it is no longer held for the purpose of selling or repurchasing in the near term; or

–

It is no longer held for the purpose of selling or repurchasing in the near term, it would have met the definition of a loan and receivable on initial classification and the Group has the intention and ability to hold it for the foreseeable future or until maturity.

Future ~~Accounting Developments~~accounting developments

Consideration will be given during ~~2008~~2009 to the implications, if any, of the following new and revised standards and International Financial Reporting Interpretations Committee (IFRIC) interpretations, as follows:

–

IFRS 3 – Business Combinations and IAS 27 – Consolidated and Separate Financial Statements are revised standards issued in January 2008. The revised IFRS 3 applies prospectively to business combinations first accounted for in accounting periods beginning on or after 1st July 2009 and the amendments to IAS 27 apply retrospectively to periods beginning on or after 1st July 2009. The main changes in existing practice resulting from the revision to IFRS 3 affect acquisitions that are achieved in stages and acquisitions where less than 100% of the equity is acquired. In addition, acquisition related costs – such as fees paid to advisers – must be accounted for separately from the business combination, which means that they will be recognised as expenses unless they are directly connected with the issue of debt or equity securities. The revisions to IAS 27 specify that changes in a parent’s ownership interest in a subsidiary that do not result in the loss of control must be accounted for as equity transactions. Until future acquisitions take place that are accounted for in accordance with the revised IFRS 3, the main impact on Barclays will be that, from 2010, gains and losses on transactions with non-controlling interests that do not result in loss of control will no longer be recognised in the income statement but directly in equity. In ~~2007,~~2008, gains of ~~£23m~~£8m and losses of ~~£6m~~£2m were recognised in income relating to such transactions.

–

IFRIC 13 – Customer Loyalty Programs addresses accounting by entities that grant loyalty award credits (such as ‘points’ or travel miles) to customers who buy other goods or services. It requires entities to allocate some of the proceeds of the initial sale to the award credits and recognise these proceeds as revenue only when they have fulfilled their obligations. The Group is considering the implications of this interpretation and any resulting change in accounting policy would be accounted for in accordance with IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors in 2009.

–

IFRS 8 – Operating Segments was issued in November 2006 and would first be required to be applied to the Group accounting period beginning on 1st January 2009. The standard replaces IAS 14 –Segmental Reporting and would align operating segmental reporting with segments reported to senior management as well as requiring amendments and additions to the existing segmental reporting disclosures. The standard does not change the recognition, measurement or disclosure of specific transactions in the consolidated financial statements. The Group is considering the enhancements that permitted early adoption in 2008 may make to the transparency of the segmental disclosures.

–

IAS – 1 – Presentation of Financial Statements is a revised standard applicable to annual periods beginning on 1st January 2009. The amendments affect the presentation of owner changes in equity and of comprehensive income. They do not change the recognition, measurement or disclosure of specific transactions and events required by other standards.

–

IAS 23 – Borrowing Costs is a revised standard applicable to annual periods beginning on 1st January 2009. The revision does not impact Barclays. The revision removes the option not to capitalise borrowing costs on qualifying assets, which are assets that take a substantial period of time to get ready for their intended use or sale.

–

An amendment to IFRS 2 Share-based Payment was issued in January 2008 that clarifies that vesting conditions are service conditions and performance conditions only. It also specifies that all cancellations, whether by the entity or by other parties, should receive the same accounting treatment, which results in the acceleration of charge. The Group is considering the implications of the amendment, particularly to the Sharesave scheme, and any resulting change in accounting policy would be accounted for in accordance with IAS 8 Accounting policies, changes in accounting estimates and errors in 2009.

–

Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards and IAS 27 Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate were issued in May 2008. The amendment to IFRS 1 has no impact on Barclays. The amendment to IAS 27 results in dividends received from subsidiaries being treated as income in the individual financial statements of the parent, whether paid from pre or post acquisition profits, and could affect the cost of investment in subsidiaries in certain group reconstructions. The amendments, which first apply to annual periods beginning on or after 1st January 2009, are not expected to affect group accounting policies.

–

IAS 23 – Borrowing Costs is a revised standard applicable to annual periods beginning on 1st January 2009. The revision does not impact Barclays. The revision removes the option to not capitalise borrowing costs on qualifying assets, which are assets that take a substantial period of time to prepare for their intended use or sale.

–

Amendments to IAS 32 – Financial Instruments: Presentation and IAS 1 – Presentation of Financial Statements were issued in February 2008 that require some puttable ~~financial~~ instruments and some financial instruments that impose on the entity anand obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation to be classified as equity. The amendments, which are applicable to annual periods beginning on 1st January 2009, doare not expected to have a material impact on Barclays.

–

Eligible Hedged Items (an amendment to IAS 39 Financial Instruments: Recognition and Measurement) was issued in July 2008 and applies retrospectively for annual periods beginning on or after 1st July 2009. The amendment provides additional guidance where hedge accounting is to be obtained for a one sided risk in a hedged item or for inflation in a financial hedged item. No changes to accounting policies are expected as a result of the amendment.

–

‘Improvements to IFRS’ was issued in May 2008 and contains numerous amendments to IFRS which the IASB consider non-urgent but necessary. No changes to accounting policies are expected as a result of these amendments.

188

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LOGO

The following IFRIC interpretations issued during ~~2006 and~~ 2007 or 2008 which first apply to accounting periods beginning on or after 1st January ~~2008~~2009 are not expected to result in any changes to the Group’s accounting policies:

– IFRIC 13 – Customer Loyalty Programs;

–

~~IFRIC 11 IFRS 2 – Group and Treasury Share Transactions;~~

– IFRIC 15 – Agreements for the Construction of Real Estate;

– IFRIC 16 – Hedges of a Net Investment in a Foreign Operation; and

– IFRIC 17 – Distribution of Non-cash assets to owners.

– IFRIC 18 – Transfer of Assets from Customers, was issued in January 2009 and applies prospectively to transfers of assets from customers received on or after 1st July 2009. This interpretation is not expected to result in any changes to the Group’s accounting policies.

–

~~IFRIC 12 – Service Concession Arrangements;~~

–

~~IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction.~~

Acquisitions

~~2007:~~2008

On 31st March 2008, Barclays completed the acquisition of Discover Financial Services’ UK credit card business, Goldfish. Discover Financial Services is a leading credit card issuer and electronic payment services company.

On 1st July 2008, Barclays acquired 100% of the ordinary shares of Expobank. Expobank is based in Moscow and its main products and services are issuance and servicing of debit and credit cards, mortgages and loans, currency transactions, internet-banking; retail discount cards and other services.

On 22nd September 2008, Barclays completed the acquisition of Lehman Brothers North American businesses. The Lehman Brothers North American businesses include Lehman Brothers North American fixed income and equities sales, trading and research and investment banking businesses, Lehman Brothers New York Head Office at 745 Seventh Avenue and two data centres in New Jersey.

On 6th November 2008, Barclays purchased the Italian residential mortgage business of Macquarie Bank Limited. The acquired business includes a mortgage portfolio with a total outstanding balance of approximately€1.1 billion, as well as Macquarie’s operational support functions, including staff.

2007

On 8th February 2007, Barclays completed the acquisition of Indexchange Investment AG. Indexchange is based in Munich and offers exchange traded fund products.

On 28th February 2007, Barclays completed the acquisition of Nile Bank Limited. Nile Bank is based in Uganda with 18 branches and 228 employees.

~~158~~

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~~Annual Report 2007~~

On 30th March 2007, Barclays completed the acquisition of EquiFirst.

EquiFirst is a non-prime wholesale mortgage originator in the United States.

On 18th May 2007, Barclays completed the acquisition of Walbrook Group Limited. Walbrook is based in Jersey, Guernsey, Isle of Man and Hong Kong where it serves high net worth private clients and corporate customers.

~~2006:~~2006

On 1st November 2006, Barclays Bank PLC acquired the US mortgage servicing business of HomEq Servicing Corporation from Wachovia Corporation.

~~2005:~~ On 1st June 2005, Barclays Asset and Sales Finance (BASF) acquired a 51% share and controlling stake in Fiat’s Iveco Vehicle Finance Business. The transaction will expand BASF’s commercial vehicle expertise.

On 30th June 2005, EnterCard, the joint venture between Barclays Bank PLC and FöreningsSparbanken (also known as Swedbank), which was announced on 4th February 2005, began operations. Barclays Bank PLC has a 50% economic interest in the joint venture. EnterCard provides credit cards in the Nordic market, initially in Sweden and Norway.

~~On 1st July 2005, Barclays acquired the wealth business of ING Securities Bank (France) consisting of ING Ferri and ING Private Banking.~~

~~On 9th May 2005, Barclays announced the terms of a recommended acquisition of a majority stake in Absa Group Limited (‘Absa’). Barclays consolidated Absa from 27th July 2005.~~

Disposals

~~2007:~~2008

On 31st October 2008 Barclays completed the sale of Barclays Life Assurance Company Ltd to Swiss Reinsurance Company.

2007

On 4th April 2007, Barclays completed the sale of part of Monument, a credit card business.

On 24th September 2007, Barclays completed the sale of a 50% shareholding in Intelenet Global Services Pvt Ltd.

~~2006:~~2006

On 1st January 2006, Barclays completed the sale of the Barclays South African branch business to Absa Group Limited. This consists of the Barclays Capital South African operations and Corporate and Business Banking activities previously carried out by the South African branch of ~~International~~Global Retail and Commercial Banking, ~~– excluding Absa,~~ together with the associated assets and liabilities.

On 25th July 2006, Barclays Asset & Sales Finance (BASF) disposed of its interest in its motor vehicle contract hire business, Appleyard Finance Holdings Limited.

On 31st August 2006, Barclays disposed of Bankhaus Wolbern which was formerly part of Absa.

On 22nd December 2006 Barclays disposed of its interest in FirstCaribbean International Bank to Canadian Imperial Bank of Commerce.

On 31st December 2006, BA&SF disposed of its European Vendor Finance business, including Barclays Industrie Bank GmbH and Barclays Technology Finance Ltd, to CIT Group.

Recent developments

On ~~16th April 2007,~~2nd February 2009, Barclays completed the acquisition of PT Bank Akita, which was announced initially on 17th September 2008, following the ~~sale~~approval of ~~Barclays Global Investors Japan Trust & Banking Co., Ltd, a Japanese trust administration and custody operation. The sale completed on 31st January 2008.~~the Central Bank of Indonesia.

On ~~5th October 2007,~~17th February 2009, Barclays announced that asBarclays Capital will discontinue operations at ~~4th October 2007 not all~~its Equifirst subsidiary due to the market environment and strategic direction of the conditions relating to its offer for ABN AMRO Holding N.V. were fulfilled and as a result Barclays was withdrawing its offer with immediate effect. Barclays also announced that it was restarting the Barclays PLC share buy-back programme to minimise the dilutive effect of the issuance of shares to China Development Bank and Temasek Holdings (Private) Limited on existing Barclays PLC shareholders. This programme was intended to run until 31st December 2007, but was subsequently extended to 31st January 2008.

On 7th February 2008, Barclays announced the purchase of Discover’s UK credit card business for a consideration of approximately £35m. The consideration is subject to an adjustment mechanism based on the net asset value of the business at completion. Completion is subject to various conditions, including competition clearance, and is expected to occur during the first half of 2008.

On 3rd March 2008, Barclays entered into an agreement with Petropavlousk Finance (limited liability society) to acquire 100% of the Russian Bank, Expobank, for a consideration of approximately $745m (£373m). The transaction is expected to close in summer 2008 after receipt of appropriate regulatory approvals. Expobank focuses principally on Western Russia, with a substantial presence in Moscow and St Petersburg. Founded in 1994 it has grown rapidly and comprises a blend of retail and commercial banking, operating 32 branches and dealing with a range of corporate and wholesale clients. As at 31st December 2007, Expobank had net assets of $186m (£93m).Group.

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Annual Report ~~2007~~2008

~~159~~

189

Consolidated accounts Barclays PLC

~~Consolidated income statement~~

Consolidated income statement

For the year ended 31st December


	Notes	2007 £m		2006 £m		2005 £m		Notes	2008 £m		2007 £m		2006 £m

Continuing operations
Interest income	2	25,308		21,805		17,232		2	28,010		25,308		21,805
Interest expense	2	(15,698	)	(12,662	)	(9,157	)	2	(16,541	)	(15,698	)	(12,662	)
Net interest income		9,610		9,143		8,075			11,469		9,610		9,143
Fee and commission income	3	8,678		8,005		6,430		3	9,489		8,678		8,005
Fee and commission expense	3	(970	)	(828	)	(725	)	3	(1,082	)	(970	)	(828	)
Net fee and commission income		7,708		7,177		5,705			8,407		7,708		7,177
Net trading income	4	3,759		3,614		2,321		4	1,329		3,759		3,614
Net investment income	4	1,216		962		858		4	680		1,216		962
Principal transactions		4,975		4,576		3,179			2,009		4,975		4,576
Net premiums from insurance contracts	5	1,011		1,060		872		5	1,090		1,011		1,060
Other income	6	188		214		147		6	377		188		214
Total income		23,492		22,170		17,978			23,352		23,492		22,170
Net claims and benefits incurred on insurance contracts	5	(492	)	(575	)	(645	)	5	(237	)	(492	)	(575	)
Total income net of insurance claims		23,000		21,595		17,333			23,115		23,000		21,595
Impairment charges and other credit risk provisions	7	(2,795	)	(2,154	)	(1,571	)
Impairment charges and other credit provisions								7	(5,419	)	(2,795	)	(2,154	)
Net income		20,205		19,441		15,762			17,696		20,205		19,441
Staff costs	8	(8,405	)	(8,169	)	(6,318	)	8	(7,779	)	(8,405	)	(8,169	)
Administration and general expenses	9	(4,141	)	(3,914	)	(3,768	)	9	(5,666	)	(4,141	)	(3,914	)
Depreciation of property, plant and equipment	23	(467	)	(455	)	(362	)	23	(630	)	(467	)	(455	)
Amortisation of intangible assets	22	(186	)	(136	)	(79	)	22	(291	)	(186	)	(136	)
Operating expenses		(13,199	)	(12,674	)	(10,527	)		(14,366	)	(13,199	)	(12,674	)
Share of post-tax results of associates and joint ventures	20	42		46		45		20	14		42		46
Profit on disposal of subsidiaries, associates and joint ventures		28		323		–		38	327		28		323
Gains on acquisitions								39	2,406		–		–
Profit before tax		7,076		7,136		5,280			6,077		7,076		7,136
Tax	10	(1,981	)	(1,941	)	(1,439	)	10	(790	)	(1,981	)	(1,941	)
Profit after tax		5,095		5,195		3,841			5,287		5,095		5,195
Profit attributable to minority interests	33	678		624		394		33	905		678		624
Profit attributable to equity holders of the parent		4,417		4,571		3,447			4,382		4,417		4,571
		5,095		5,195		3,841			5,287		5,095		5,195
		p		p		p			p		p		p

Earnings per share
Basic earnings per share	11	68.9		71.9		54.4		11	59.3		68.9		71.9
Diluted earnings per share	11	66.7		69.8		52.6		11	57.5		66.7		69.8

Interim dividend per ordinary share		11.50		10.50		9.20			11.5		11.50		10.50
Proposed final dividend per ordinary share	1	22.50		20.50		17.40		1	–		22.50		20.50

		£m		£m		£m			£m		£m		£m
Interim dividend paid		768		666		582			906		768		666
Proposed final dividend	1	1,485		1,307		1,105		1	–		1,485		1,307

The Board of Directors approved the accounts set out on pages ~~149~~179 to ~~249~~284 on ~~7th~~5th March ~~2008.~~2009.

The accompanying notes form an integral part of the Consolidated accounts.

190

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Annual Report ~~2007~~2008

~~160~~

LOGO

~~Consolidated Accounts Barclays PLC~~

~~Consolidated balance sheet~~

Consolidated balance sheet

As at 31st December


						Notes	2008 £m		2007 £m
	Notes	2007 £m		2006 £m
Assets
Cash and balances at central banks		5,801		7,345			30,019		5,801
Items in the course of collection from other banks		1,836		2,408			1,695		1,836
Trading portfolio assets	12	193,691		177,867		12	185,637		193,691
Financial assets designated at fair value:
– held on own account	13	56,629		31,799		13	54,542		56,629
– held in respect of linked liabilities to customers under investment contracts	13	90,851		82,798		13	66,657		90,851
Derivative financial instruments	14	248,088		138,353		14	984,802		248,088
Loans and advances to banks	15	40,120		30,926		15	47,707		40,120
Loans and advances to customers	15	345,398		282,300		15	461,815		345,398
Available for sale financial investments	16	43,072		51,703		16	64,976		43,072
Reverse repurchase agreements and cash collateral on securities borrowed	17	183,075		174,090		17	130,354		183,075
Other assets	18	5,150		5,850		18	6,302		5,150
Current tax assets	19	518		557			389		518
Investments in associates and joint ventures	20	377		228		20	341		377
Goodwill	21	7,014		6,092		21	7,625		7,014
Intangible assets	22	1,282		1,215		22	2,777		1,282
Property, plant and equipment	23	2,996		2,492		23	4,674		2,996
Deferred tax assets	19	1,463		764		19	2,668		1,463

Total assets		1,227,361		996,787			2,052,980		1,227,361

Liabilities
Deposits from banks		90,546		79,562			114,910		90,546
Items in the course of collection due to other banks		1,792		2,221			1,635		1,792
Customer accounts		294,987		256,754			335,505		294,987
Trading portfolio liabilities	12	65,402		71,874		12	59,474		65,402
Financial liabilities designated at fair value	24	74,489		53,987		24	76,892		74,489
Liabilities to customers under investment contracts	13	92,639		84,637		13	69,183		92,639
Derivative financial instruments	14	248,288		140,697		14	968,072		248,288
Debt securities in issue		120,228		111,137			149,567		120,228
Repurchase agreements and cash collateral on securities lent	17	169,429		136,956		17	182,285		169,429
Other liabilities	25	10,499		10,337		25	12,640		10,499
Current tax liabilities	19	1,311		1,020			1,216		1,311
Insurance contract liabilities, including unit-linked liabilities	26	3,903		3,878		26	2,152		3,903
Subordinated liabilities	27	18,150		13,786		27	29,842		18,150
Deferred tax liabilities	19	855		282		19	304		855
Provisions	28	830		462		28	535		830
Retirement benefit liabilities	30	1,537		1,807		30	1,357		1,537

Total liabilities		1,194,885		969,397			2,005,569		1,194,885

Shareholders’ equity
Called up share capital	31	1,651		1,634		31	2,093		1,651
Share premium account	31	56		5,818		31	4,045		56
Other equity						31	3,652		–
Other reserves	32	874		390		32	2,793		874
Retained earnings	32	20,970		12,169		32	24,208		20,970
Less: treasury shares	32	(260	)	(212	)	32	(173	)	(260	)

Shareholders’ equity excluding minority interests		23,291		19,799			36,618		23,291
Minority interests	33	9,185		7,591		33	10,793		9,185

Total shareholders’ equity		32,476		27,390			47,411		32,476

Total liabilities and shareholders’ equity		1,227,361		996,787			2,052,980		1,227,361

The accompanying notes form an integral part of the Consolidated accounts.

Marcus Agius

Group Chairman

John Varley

Group Chief Executive

Christopher Lucas

Group Finance Director

~~161~~

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Annual Report ~~2007~~2008

191

Consolidated accounts Barclays PLC

Consolidated statement of recognised income and expense

~~Consolidated statement of recognised income and expense~~

For the year ended 31st December

2007
£m

2006
£m
2005
£m

Available for sale reserve:

– Net gains/(losses) from changes in fair value
   484 87 (249 )
– Losses transferred to net profit due to impairment
   13 86 –
– Net gains transferred to net profit on disposal
   (563 ) (327 ) (120 )
– Net losses transferred to net profit due to fair value hedging
   68 14 260
Cash flow hedging reserve:

– Net gains/(losses) from changes in fair value
   106 (437 ) (50 )
– Net losses/(gains) transferred to net profit
   253 (50 ) (69 )
Currency translation differences
   54 (781 ) 300
Tax
   54 253 50
Other
   22 25 (102 )

Amounts included directly in equity
   491 (1,130 ) 20
Profit after tax
   5,095 5,195 3,841

Total recognised income and expense for the year
   5,586 4,065 3,861

Attributable to:

Equity holders of the parent
   4,854 3,682 3,379
Minority interests
   732 383 482
   5,586 4, 065 3,861

~~The accompanying notes form an integral part of the Consolidated accounts.~~


	2008 £m		2007 £m		2006 £m
Available for sale reserve:
– Net (losses)/gains from changes in fair value	(1,741	)	484		87
– Losses transferred to net profit due to impairment	382		13		86
– Net gains transferred to net profit on disposal	(209	)	(563	)	(327	)
– Net (gains)/losses transferred to net profit due to fair value hedging	(2	)	68		14
Cash flow hedging reserve:
– Net gains/(losses) from changes in fair value	305		106		(437	)
– Net losses/(gains) transferred to net profit	71		253		(50	)
Currency translation differences	2,407		54		(781	)
Tax	841		54		253
Other	(5	)	22		25

Amounts included directly in equity	2,049		491		(1,130	)
Profit after tax	5,287		5,095		5,195

Total recognised income and expense for the year	7,336		5,586		4,065

Attributable to:
Equity holders of the parent	6,213		4,854		3,682
Minority interests	1,123		732		383
	7,336		5,586		4, 065

192

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Annual Report ~~2007~~2008

~~162~~

LOGO

~~Consolidated accounts Barclays PLC~~

Consolidated cash flow statement

~~Consolidated cash flow statement~~

For the year ended 31st December

   2007
£m

   2006
£m
   2005
£m

Reconciliation of profit before tax to net cash flows from operating activities:

Profit before tax    7,076    7,136    5,280
Adjustment for non-cash items:

Allowance for impairment
   2,795    2,154    1,571
Depreciation, amortisation and impairment of property, plant, equipment and intangibles
   669    612    450
Other provisions, including pensions
   753    558    654
Net profit from associates and joint ventures
   (42)    (46 )    (45 )
Net profit on disposal of investments and property, plant and equipment
   (862)    (778 )    (530 )
Net profit from disposal of associates and joint ventures
   (26)    (263 )    –
Net profit from disposal of subsidiaries
   (2)    (60 )    –
Other non-cash movements
   (1,133)    1,702    1,475
Changes in operating assets and liabilities:

Net increase in loans and advances to banks and customers
   (77,987)    (27,385 )    (63,177 )
Net increase in deposits and debt securities in issue
   90,589    46,944    67,012
Net (increase)/decrease in derivative financial instruments
   (2,144)    1,196    841
Net increase in trading portfolio assets
   (18,227)    (18,323 )    (42,589 )
Net (decrease)/increase in trading liabilities
   (6,472)    310    9,888
Net (increase)/decrease in financial investments
   (4,379)    1,538    27,129
Net (increase)/decrease in other assets
   1,299    (1,527 )    (410 )
Net decrease in other liabilities
   (1,071)    (1,580 )    (2,818 )
Tax paid
   (1,583)    (2,141 )    (1,082 )

Net cash (used in)/from operating activities
   (10,747)    10,047    3,649
Purchase of available for sale investments
   (26,899)    (47,086 )    (53,483 )
Proceeds from sale or redemption of available for sale investments
   38,423    46,069    51,111
Purchase of intangible assets
   (263)    (212 )    (91 )
Purchase of property, plant and equipment
   (1,241)    (654 )    (588 )
Proceeds from sale of property, plant and equipment
   617    786    98
Acquisitions of subsidiaries, net of cash acquired
   (270)    (248 )    (2,115 )
Disposal of subsidiaries, net of cash disposed
   383    (15 )    –
Increase in investment in subsidiaries
   (668)    (432 )    (160 )
Decrease in investment in subsidiaries
   57    44    49
Acquisition of associates and joint ventures
   (220)    (162 )    (176 )
Disposal of associates and joint ventures
   145    739    40
Other cash flows associated with investing activities
   –    17    23

Net cash from/(used in) investing activities
   10,064    (1,154 )    (5,292 )
Dividends paid
   (2,559)    (2,215 )    (1,894 )
Proceeds of borrowings and issuance of debt securities
   4,625    2,493    1,179
Repayments of borrowings and redemption of debt securities
   (683)    (366 )    (464 )
Issue of shares and other equity instruments
   2,494    179    135
Repurchase of shares and other equity instruments
   (1,802)    –    –
Net purchase of treasury shares
   (48)    (31 )    (140 )
Net issue of shares to minority interests
   1,331    632    2,267

Net cash from financing activities
   3,358    692    1,083

Exchange (loss)/gain on foreign currency cash and cash equivalents
   (550)    562    (237 )

Net increase/(decrease) in cash and cash equivalents
   2,125    10,147    (797 )

Cash and cash equivalents at beginning of year
   30,952    20,805    21,602

Cash and cash equivalents at end of year
   33,077    30,952    20,805

Cash and cash equivalents comprise:

Cash and balances at central banks
   5,801    7,345    3,906
Loans and advances to banks
   40,120    30,926    31,105
Less: amounts with original maturity greater than three months
   (19,377)    (15,892 )    (17,987 )
   20,743    15,034    13,118
Available for sale treasury and other eligible bills
   43,072    51,703    53,497

Less: non-cash and amounts with original maturity greater than three months
   (41,688)    (50,684 )    (53,281 )
   1,384    1,019    216
Trading portfolio assets
   193,691    177,867    155,723
Less: non-cash and amounts with original maturity greater than three months
   (188,556 )    (170,329 )    (152,183 )
   5,135    7,538    3,540
Other
   14    16    25
   33,077    30,952    20,805

~~In 2005 the opening cash and cash equivalents balance was adjusted to reflect the adoption of IAS 32 and IAS 39. The accompanying notes form an integral part of the Consolidated accounts.~~


	2008 £m		2007 £m		2006 £m
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax	6,077		7,076		7,136
Adjustment for non-cash items:
Allowance for impairment	5,419		2,795		2,154
Depreciation, amortisation and impairment of property, plant, equipment and intangibles	951		669		612
Other provisions, including pensions	804		753		558
Net profit from associates and joint ventures	(14	)	(42	)	(46	)
Net profit on disposal of investments and property, plant and equipment	(371	)	(862	)	(778	)
Net profit from disposal of associates and joint ventures	–		(26	)	(263	)
Net profit from disposal of subsidiaries	(327	)	(2	)	(60	)
Net gains on acquisitions	(2,406	)	–		–
Other non-cash movements	796		(1,133	)	1,702
Changes in operating assets and liabilities:
Net increase in loans and advances to banks and customers	(58,431	)	(77,987	)	(27,385	)
Net increase in deposits and debt securities in issue	77,743		90,589		46,944
Net (increase)/decrease in derivative financial instruments	(17,529	)	(2,144	)	1,196
Net decrease/(increase) in trading portfolio assets	26,919		(18,227	)	(18,323	)
Net (decrease)/increase in trading liabilities	(5,928	)	(6,472	)	310
Net decrease/(increase) in financial investments	5,229		(4,379	)	1,538
Net (increase)/decrease in other assets	(3,008	)	1,299		(1,527	)
Net decrease in other liabilities	(477	)	(1,071	)	(1,580	)
Tax paid	(1,731	)	(1,583	)	(2,141	)

Net cash from operating activities	33,716		(10,747	)	10,047
Purchase of available for sale financial investments	(57,756	)	(26,899	)	(47,086	)
Proceeds from sale or redemption of available for sale financial investments	51,429		38,423		46,069
Purchase of intangible assets	(687	)	(263	)	(212	)
Purchase of property, plant and equipment	(1,720	)	(1,241	)	(654	)
Proceeds from sale of property, plant and equipment	799		617		786
Acquisitions of subsidiaries, net of cash acquired	(961	)	(270	)	(248	)
Disposal of subsidiaries, net of cash disposed	238		383		(15	)
Increase in investment in subsidiaries	(157	)	(668	)	(432	)
Decrease in investment in subsidiaries	19		57		44
Acquisition of associates and joint ventures	(96	)	(220	)	(162	)
Disposal of associates and joint ventures	137		145		739
Other cash flows associated with investing activities	–		–		17

Net cash from investing activities	(8,755	)	10,064		(1,154	)
Dividends paid	(3,047	)	(2,559	)	(2,215	)
Proceeds of borrowings and issuance of debt securities	5,763		4,625		2,493
Repayments of borrowings and redemption of debt securities	(1,207	)	(683	)	(366	)
Net issue of shares and other equity instruments	9,493		2,494		179
Repurchase of shares and other equity instruments	(173	)	(1,802	)	–
Net disposal/(purchase) of treasury shares	87		(48	)	(31	)

Net issue of shares to minority interests	1,356		1,331		632

Net cash from financing activities	12,272		3,358		692

Effect of exchange rates on cash and cash equivalents	(5,801	)	(550	)	562

Net increase in cash and cash equivalents	31,432		2,125		10,147

Cash and cash equivalents at beginning of year	33,077		30,952		20,805

Cash and cash equivalents at end of year	64,509		33,077		30,952
Cash and cash equivalents comprise:
Cash and balances at central banks	30,019		5,801		7,345
Loans and advances to banks	47,707		40,120		30,926
Less: non-cash amounts and amounts with original maturity greater than three months	(15,428	)	(19,377	)	(15,892	)
	32,279		20,743		15,034
Available for sale treasury and other eligible bills	64,976		43,072		51,703
Less: non-cash and amounts with original maturity greater than three months	(62,876	)	(41,688	)	(50,684	)
	2,100		1,384		1,019
Trading portfolio assets	185,637		193,691		177,867
Less: non-cash and amounts with original maturity greater than three months	(185,526	)	(188,556	)	(170,329	)
	111		5,135		7,538
Other	–		14		16
	64,509		33,077		30,952

Interest received in ~~2007~~2008 was £41,017m (2007: £49,441m, ~~(2006: £38,544m, 2005: £32,124m)~~2006: £38,544m) and interest paid in ~~2007~~2008 was £38,975m (2007: £37,821m, ~~(2006: £29,372m, 2005: £23,319m)~~2006: £29,372m).

The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to ~~£1,037m~~£1,050m at 31st December ~~2007 (2006: £1,262m)~~2008 (2007: £1,037m).

~~163~~

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193

Accounts of Barclays PLC

Parent company accounts

~~Income statement~~

~~For the year ended 31st December~~


	2007 £m		2006 £m		2005 £m
Income statement For the year ended 31st December							2008 £m		2007 £m		2006 £m
Dividends received from subsidiary	3,287		1,964		2,012		1,173		3,287		1,964
Interest income	4		4		4		7		4		4
Trading loss	(13	)	–		–
Trading gain/(loss)							18		(13	)	–
Other income	15		–		–		–		15		–
Management charge from subsidiary	(4	)	(4	)	(4	)	(4	)	(4	)	(4	)
Profit before tax	3,289		1,964		2,012		1,194		3,289		1,964
Tax	–		–		–		(1	)	–		–

Profit after tax	3,289		1,964		2,012		1,193		3,289		1,964

The Company had no staff during the year ~~(2006:~~(2007: nil, ~~2005:~~2006: nil).

~~Balance sheet~~

~~As at 31st December~~


	Notes	2007 £m	2006 £m
Balance sheet As at 31st December				Notes	2008 £m	2007 £m
Assets
Non-current assets
Investment in subsidiaries	39	10,391	8,641	40	15,340	10,391
Current assets
Cash and balances at central banks		671	575		–	671
Other current assets		20	17
Other assets					3,851	20

Total assets		11,082	9,233		19,191	11,082

Liabilities
Current liabilities
Amounts payable within one year		1	4		1	1

Shareholders’ equity
Called up share capital	31	1,651	1,634	31	2,093	1,651
Share premium account	31	56	5,818	31	4,045	56
Other equity				31	3,652	–
Capital redemption reserve	32	384	309	32	394	384
Retained earnings	32	8,990	1,468	32	9,006	8,990

Total shareholders’ equity		11,081	9,229		19,190	11,081

Total liabilities and shareholders’ equity		11,082	9,233		19,191	11,082

The accompanying notes form an integral part of the accounts.

Marcus Agius

Group Chairman

John Varley

Group Chief Executive

Christopher Lucas

Group Finance Director

194

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~~164~~

LOGO

~~Statement of recognised income and expense~~

~~For the year ended 31st December~~


	2007 £m		2006 £m			2005 £m
Profit after tax	3,289		1,964			2,012
Total recognised income and expense for the year	3,289		1,964			2,012

Cash flow statement
For the year ended 31st December
	2007 £m	£	2006 m		£	2005 m
Cash flow statement For the year ended 31st December								2008 £m		2007 £m		2006 £m
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax	3,289		1,964			2,012		1,194		3,289		1,964
Changes in operating assets and liabilities:
Net (increase) in other assets	(3)		(13	)		(1	)
Net (decrease)/increase in other liabilities	(3)		–			1
Net increase in other assets								(16	)	(3	)	(13	)
Net decrease in other liabilities								–		(3	)	–

Net cash from operating activities	3,283		1,951			2,012		1,178		3,283		1,951
Capital contribution to subsidiaries	(1,434)		–			–		(4,362	)	(1,434	)	–
Purchase of shares in subsidiaries	(316)		(179	)		(135	)	(16	)	(316	)	(179	)
Liquidation of subsidiary								205		–		–

Net cash used in investing activities	(1,750)		(179	)		(135	)	(4,173	)	(1,750	)	(179	)
Proceeds from issue of shares	2,494		179			135
Issue of shares and other equity instruments								4,911		2,494		179
Dividends paid	(2,129)		(1,814	)		(1,612	)	(2,414	)	(2,129	)	(1,814	)
Repurchase of ordinary shares	(1,802)		–			–		(173	)	(1,802	)	–
Net cash used in financing activities	(1,437)		(1,635	)		(1,477	)
Net increase in cash and cash equivalents	96		137			400

Net cash from financing activities								2,324		(1,437	)	(1,635	)

Net (decrease)/increase in cash and cash equivalents								(671	)	96		137

Cash and cash equivalents at beginning of year	575		438			38		671		575		438

Cash and cash equivalents at end of year	671		575			438		–		671		575

Cash and cash equivalents comprise:
Cash and balances at central banks	671		575			438		–		671		575

Net cash from operating activities includes:
Dividends received	3,287		1,964			2,012		1,173		3,287		1,964
Interest received	4		4			4		7		4		4

The parent company’s ~~sole~~main activity is to hold the investment in its wholly-owned ~~subsidiaries,~~subsidiary, Barclays Bank ~~PLC, Barclays Investment (Netherlands) N.V. and Odysseus Jersey (No. 1) Limited.~~PLC.

The Company was not exposed at 31st December ~~2007~~2008 or ~~2006~~2007 to significant risks arising from the financial instruments it holds; which ~~mainly~~ comprised cash, ~~and~~ balances with central ~~banks.~~banks, and other assets which had no credit or market risk.

Dividends received are treated as operating income.

Non-cash transactions

During the year Barclays Bank PLC issued £4,050m of Mandatorily Convertible Notes, which mandatorily convert into ordinary shares of Barclays PLC on or before 30th June 2009. Barclays PLC has the right to receive the Notes in the future; the fair value of which has been included in other assets, with a corresponding increase net of issue costs in other equity.

The accompanying notes form an integral part of the accounts.

~~165~~

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Annual Report ~~2007~~2008

195

Notes to the accounts

For the year ended 31st December ~~2007~~2008

1 Dividends per share

As announced on 13th October 2008, the Board of Barclays has concluded that it would not be appropriate to recommend the payment of a final dividend for 2008. The ~~Directors have recommended the~~ final ~~dividends in respect of~~dividend for 2007 of ~~22.5p per ordinary share of 25p each and 10p per staff share of £1 each, amounting to a total of~~ £1,485m ~~which will be paid on 25th April 2008. The financial statements for the year ended 31st December 2007 do not reflect these dividends, which will be~~is accounted for in shareholders’ equity as an appropriation of retained profits in the year ending 31st December 2008. ~~The financial statements to 31st December 2007 include the 2006 final dividend of £1,307m.~~

2 Net interest income


	2007 £m		2006 £m		2005 £m		2008 £m		2007 £m		2006 £m
Cash and balances with central banks	145		91		9		174		145		91
Available for sale investments	2,580		2,811		2,272		2,355		2,580		2,811
Loans and advances to banks	1,416		903		690		1,267		1,416		903
Loans and advances to customers	19,559		16,290		12,944		23,754		19,559		16,290
Other	1,608		1,710		1,317		460		1,608		1,710

Interest income	25,308		21,805		17,232		28,010		25,308		21,805
Deposits from banks	(2,720	)	(2,819	)	(2,056	)	(2,189	)	(2,720	)	(2,819	)
Customer accounts	(4,110	)	(3,076	)	(2,715	)	(6,697	)	(4,110	)	(3,076	)
Debt securities in issue	(6,651	)	(5,282	)	(3,268	)	(5,910	)	(6,651	)	(5,282	)
Subordinated liabilities	(878	)	(777	)	(605	)	(1,349	)	(878	)	(777	)
Other	(1,339	)	(708	)	(513	)	(396	)	(1,339	)	(708	)

Interest expense	(15,698	)	(12,662	)	(9,157	)	(16,541	)	(15,698	)	(12,662	)

Net interest income	9,610		9,143		8,075		11,469		9,610		9,143

Interest income includes £135m (2007: £113m, ~~(2006: £98m, 2005: £76m)~~2006: £98m) accrued on impaired loans.

Other interest income principally includes interest income relating to reverse repurchase agreements. Similarly, other interest expense principally includes interest expense relating to repurchase agreements and hedging activity.

Included in net interest income is hedge ineffectiveness as detailed in Note 14.

3 Net fee and commission income


							2008 £m		2007 £m		2006 £m
	2007 £m		2006 £m		2005 £m
Fee and commission income
Brokerage fees	109		70		64		87		109		70
Investment management fees	1,787		1,535		1,250		1,616		1,787		1,535
Securities lending	241		185		151		389		241		185
Banking and credit related fees and commissions	6,363		6,031		4,805		7,208		6,363		6,031
Foreign exchange commissions	178		184		160		189		178		184

Fee and commission income	8,678		8,005		6,430		9,489		8,678		8,005
Brokerage fees paid	(970	)	(828	)	(725	)

Fee and commission expense	(970	)	(828	)	(725	)	(1,082	)	(970	)	(828	)

Net fee and commission income	7,708		7,177		5,705		8,407		7,708		7,177

196

Barclays

Annual Report ~~2007~~2008

~~166~~

LOGO

4 Principal transactions


	2007 £m		2006 £m	2005 £m	2008 £m		2007 £m		2006 £m
Rates related business	4,162		2,848	1,732	4,751		4,162		2,848
Credit related business	(403	)	766	589	(3,422	)	(403	)	766

Net trading income	3,759		3,614	2,321	1,329		3,759		3,614

Net gain from disposal of available for sale assets	560		307	120	212		560		307
Dividend income	26		15	22	196		26		15
Net gain from financial instruments designated at fair value	293		447	389	33		293		447
Other investment income	337		193	327	239		337		193

Net investment income	1,216		962	858	680		1,216		962

Principal transactions	4,975		4,576	3,179	2,009		4,975		4,576

Net trading income includes the profits and losses arising both on the purchase and sale of trading instruments and from the revaluation to ~~market~~fair value, together with the interest income ~~and expense~~earned from these instruments and the related funding cost.

Of the total net trading income, a ~~£756m~~£2,096m net loss ~~(2006: £947m gain, 2005: £498m~~(2007: £116m loss, 2006: £1,427m gain) was made on the purchase and sale of securities and the revaluation of both securities and derivatives. This included a £1,272m gain (2007: £640m, ~~gain (2006: £480m, 2005: £340m)~~2006: £480m) that was earned in foreign exchange dealings.

The net ~~gain~~loss on financial assets designated at fair value included within principal transactions was £6,602m (2007: £78m ~~(2006:~~gain, 2006: £489m ~~2005: £391m)~~gain) of which losses of £6,635m (2007: £215m ~~(2006:~~loss, 2006: £42m ~~gain, 2005: £2m~~ gain) were included in net trading income and gains of £33m (2007: £293m, ~~(2006: £447m, 2005: £389m)~~2006: £447m) were included in net investment income.

The net ~~loss~~gain on financial liabilities designated at fair value included within principal transactions was £3,328m (2007: £231m ~~(2006:~~loss, 2006: £920m ~~2005: £666m)~~loss) all of which was included within net trading income.

~~The~~Net trading income includes the net gain from widening of credit spreads relating to Barclays Capital issued structured notes held at fair value was £1,663m (2007: £658m, ~~(2006: £nil, 2005:~~2006: £nil).

5 Insurance premiums and insurance claims and benefits


	2007 £m		2006 £m		2005 £m		2008 £m		2007 £m		2006 £m
Gross premiums from insurance contracts	1,062		1,108		909		1,138		1,062		1,108
Premiums ceded to reinsurers	(51	)	(48	)	(37	)	(48	)	(51	)	(48	)

Net premiums from insurance contracts	1,011		1,060		872		1,090		1,011		1,060

	2007 £m		2006 £m		2005 £m		2008 £m		2007 £m		2006 £m
Gross claims and benefits incurred on insurance contracts	520		588		694		263		520		588
Reinsurers’ share of claims incurred	(28	)	(13	)	(49	)	(26	)	(28	)	(13	)

Net claims and benefits incurred on insurance contracts	492		575		645		237		492		575

6 Other income
	2007 £m		2006 £m		2005 £m
Increase in fair value of assets held in respect of linked liabilities to customers under investment contracts	5,592		7,417		9,234
Increase in liabilities to customers under investment contracts	(5,592	)	(7,417	)	(9,234	)
Property rentals	53		55		54
Other income	135		159		93
Other income	188		214		147

6 Other income


	2008 £m		2007 £m		2006 £m
(Decrease)/increase in fair value of assets held in respect of linked liabilities to customers under investment contracts	(10,422	)	5,592		7,417
Decrease/(increase) in liabilities to customers under investment contracts	10,422		(5,592	)	(7,417	)
Property rentals	73		53		55
Other income	304		135		159

Other income	377		188		214

Included in other income are sub-lease ~~receipts~~rentals of £18m ~~(2006:~~(2007: £18m, ~~2005:~~2006: £18m).

~~Included~~, and in ~~other income in 2007~~2008 only is a ~~loss on~~£47m gain from the ~~part disposal of Monument credit card portfolio and gains on reinsurance transactions in 2007 and 2006.~~Visa IPO.

~~167~~

Barclays

Annual Report ~~2007~~2008

197

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

7 Impairment charges and other credit provisions


	2007 £m		2006 £m		2005 £m		2008 £m		2007 £m		2006 £m
Impairment charges on loans and advances
– New and increased impairment allowances	2,871		2,722		2,129		5,116		2,871		2,722
– Releases	(338	)	(389	)	(333	)	(358	)	(338	)	(389	)
– Recoveries	(227	)	(259	)	(222	)	(174)		(227)		(259)
Impairment charges on loans and advances	2,306		2,074		1,574		4,584		2,306		2,074
Other credit provisions
Charge/(release) in respect of provision for undrawn contractually committed facilities and guarantees provided	476		(6	)	(7	)	329		476		(6)
Impairment charges on loans and advances and other credit provisions							4,913		2,782		2,068
Impairment charges on re verse repurchase agreements							124		–		–
Impairment on available for sale assets							382		13		86

Impairment charges on loans and advances and other credit provisions	2,782		2,068		1,567
Impairment on available for sale assets	13		86		4
Impairment charges and other credit provisions	2,795		2,154		1,571		5,419		2,795		2,154

An analysis of the impairment charges by class of financial instrument is included in Note ~~47 ‘Credit risk’.~~47.

8 Staff costs


	2007 £m	2006 £m	2005 £m	2008 £m	2007 £m	2006 £m
Salaries and accrued incentive payments	6,993	6,635	5,036	6,273	6,993	6,635
Social security costs	508	502	412	464	508	502
Pension costs – defined contribution plans	141	128	76	237	141	128
Pension costs – defined benefit plans (Note 30)	150	282	271	89	150	282
Other post-retirement benefits (Note 30)	10	30	27	1	10	30
Other	603	592	496	715	603	592

Staff costs	8,405	8,169	6,318	7,779	8,405	8,169

Included in salaries and incentive payments is £257m (2007: £551m, ~~(2006: £640m, 2005: £338m)~~2006: £640m) arising from equity settled share-based payments, of which £23m (2007: £60m, ~~(2006: £78m, 2005: £44m)~~2006: £78m) is a charge related to options-based schemes. Also included is £3m (2007: £8m, ~~(2006: £6m, 2005: £nil)~~2006: £6m) arising from cash settled share-based payments.

The average number of persons employed by the Group worldwide during the year was 151,500 (2007: 128,900, ~~(2006: 118,600, 2005: 92,800)~~2006: 118,600).

9 Administration and general expenses


	2007 £m		2006 £m		2005 £m	2008 £m		2007 £m	2006 £m
Administrative expenses	3,978		3,980		3,443	5,153		3,978	3,980
Impairment charges
Impairment charges/(releases)
– property and equipment (Note 23)	2		14		–	33		2	14
– intangible assets (Note 22)	14		7		9	(3	)	14	7
– goodwill (Note 21)						111		–	–
Operating lease rentals	414		345		316	520		414	345
Gain on property disposals	(267	)	(432	)	–	(148)		(267)	(432)

Administration and general expenses	4,141		3,914		3,768	5,666		4,141	3,914

Auditors’ remuneration


Auditors’ remuneration
	2007					2008
	Audit £m	Audit related £m	Taxation services £m	Other services £m	Total £m	Audit £m	Audit related £m	Taxation services £m	Other services £m	Total £m
Audit of the Group’s annual accounts	7	–	–	–	7	12	–	–	–	12
Other services:
Fees payable for the audit of the Company’s associates pursuant to legislation	12	–	–	–	12	20	–	–	–	20
Other services supplied pursuant to such legislation	6	2	–	–	8	–	2			2
Other services relating to taxation	–	–	8	–	8	–	–	10	–	10
Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Company or any of its associates	–	–	–	5	5	–	–	–	3	3
Other	–	2	–	2	4	–	4	–	1	5

Total auditors’ remuneration	25	4	8	7	44	32	6	10	4	52

198

Barclays

Annual Report ~~2007~~2008

~~168~~

LOGO

9 Administration and general expenses (continued)

~~Auditors’ remuneration (continued).~~


						2007
	2006					Audit £m	Audit related £m	Taxation services £m	Other services £m	Total £m
	Audit £m	Audit related £m	Taxation services £m	Other services £m	Total £m
Audit of the Group’s annual accounts	7	–	–	–	7	7	–	–	–	7
Other services:

Other services:
Fees payable for the audit of the Company’s associates pursuant to legislation	11	–	–	–	11	12	–	–	–	12
Other services supplied pursuant to such legislation	10	1	–	–	11	6	2	–	–	8
Other services relating to taxation	–	–	6	–	6	–	–	8	–	8
Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Company or any of its associates	–	–	–	4	4	–	–	–	5	5
Other	–	4	–	1	5	–	2	–	2	4

Total auditors’ remuneration	28	5	6	5	44	25	4	8	7	44

	2005					2006
	Audit £m	Audit related £m	Taxation services £m	Other services £m	Total £m	Audit £m	Audit related £m	Taxation services £m	Other services £m	Total £m

Audit of the Group’s annual accounts	6	–	–	–	6	7	–	–	–	7
Other services:

Other services:
Fees payable for the audit of the Company’s associates pursuant to legislation	8	–	–	–	8	11	–	–	–	11
Other services supplied pursuant to such legislation	1	–	–	–	1	10	1	–	–	11
Other services relating to taxation	–	–	4	–	4	–	–	6	–	6
Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Company or any of its associates	–	–	–	3	3	–	–	–	4	4
Other	–	7	–	–	7	–	4	–	1	5

Total auditors’ remuneration	15	7	4	3	29	28	5	6	5	44

The figures shown in the above table relate to fees paid to PricewaterhouseCoopers LLP and its associates. Fees paid to other auditors not associated with PricewaterhouseCoopers LLP in respect of the audit of the Company’s subsidiaries were £3m (2007: £2m, ~~(2006: £2m, 2005: £3m)~~2006: £2m).

Fees payable for the audit of the Company’s associates pursuant to legislation comprise the fees for the statutory audit of the subsidiaries and associated pension schemes both inside and outside Great Britain and fees for the work performed by the associates of PricewaterhouseCoopers LLP in respect of the consolidated financial statements of the Company. The fees relating to the audit of the associated pension schemes were £0.2m (2007: £0.3m, ~~(2006: £0.3m, 2005:~~2006: £0.3m).

Other services supplied pursuant to such legislation comprise services in relation to statutory and regulatory filings. These ~~includes~~include audit services for the review of the interim financial information under the Listing Rules of the UK listing authority and fees paid for reporting under Section 404 of the US Sarbanes-Oxley Act (Section 404). In 2008 fees paid for reporting under section 404 are not separately identifiable from the fees of the audit of the Group’s annual accounts and the Company’s associates. In addition, other services include Section 404 advisory, ~~IFRS advisory,~~reporting accountant work for capital raising, securitisations and services relating to acquisition activities.

Taxation services include compliance services such as tax return preparation and advisory services such as consultation on tax matters, tax advice relating to transactions and other tax planning and advice.

Services relating to corporate finance transactions comprise due diligence related to transactions and ~~accounting consultations and audits~~other work in connection with such transactions.

~~169~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

10 Tax

The charge for tax is based upon the ~~standard~~ UK corporation tax rate of ~~30% (2006:~~28.5% (2007: 30%, ~~2005:~~2006: 30%) and comprises:

      2007
£m 2006
£m 2005
£m
Current tax charge

Current year
   2,385 1,929 1,583
Adjustment for prior years
   (11 ) 8 (59 )

Total
   2,374 1,937 1,524
Deferred tax (credit)/charge

Current year
   (367 ) (16 ) (14 )
Adjustment for prior years
   (26 ) 20 (71 )

Total
   (393 ) 4 (85 )

Tax charge
   1,981 1,941 1,439

The effective tax rate for the years 2007, 2006 and 2005 is lower than the standard rate of corporation tax in the UK of 30% (2006: 30%, 2005: 30%). The differences are set out below:


      2007
£m 2006
£m 2005
£m
Profit before tax
   7,076 7,136 5,280
Tax charge at standard UK corporation tax rate of 30% (2006: 30%, 2005: 30%)
   2,123 2,141 1,584
Adjustment for prior years
   (37 ) 24 (133 )
Differing overseas tax rates
   (77 ) (17 ) (35 )
Non-taxable gains and income (including amounts offset by unrecognised tax losses)
   (136 ) (393 ) (129 )
Share-based payments
   72 27 (12 )
Deferred tax assets not previously recognised
   (158 ) (4 ) (7 )
Change in tax rates
   24 4 3
Other non-allowable expenses
   170 159 168

Overall tax charge
   1,981 1,941 1,439

Effective tax rate
   28% 27% 27%


	2008 £m		2007 £m		2006 £m

Current tax charge/(credit)
Current year	1,563		2,385		1,929
Adjustment for prior years	97		(11	)	8

	1,660		2,374		1,937

Deferred tax (credit)/charge
Current year	(597	)	(367	)	(16	)
Adjustment for prior years	(273	)	(26	)	20

	(870	)	(393	)	4

Total charge/(credit)	790		1,981		1,941

Barclays

Annual Report 2008

199

Notes to the accounts

For the year ended 31st December 2008

10 Tax (continued)

The effective tax rate for the years 2008, 2007 and 2006 is lower than the standard rate of corporation tax in the UK of 28.5% (2007: 30%, 2006: 30%). The differences are set out below:


	2008 £m		2007 £m		2006 £m

Profit before tax	6,077		7,076		7,136
Tax charge at standard UK corporation tax rate of 28.5% (2007: 30%, 2006: 30%)	1,732		2,123		2,141
Adjustment for prior years	(176	)	(37	)	24
Differing overseas tax rates	215		(77	)	(17	)
Non-taxable gains and income (including amounts offset by unrecognised tax losses)	(833	)	(136	)	(393	)
Share-based payments	229		72		27
Deferred tax assets not previously recognised	(514	)	(158	)	(4	)
Change in tax rates	(1	)	24		4
Other non-allowable expenses	138		170		159

Overall tax charge	790		1,981		1,941

Effective tax rate	13%		28%		27%

The effective rate of tax for 2008, based on profit before tax, was 13% (2007: 28%). The effective tax rate differs from the 2007 effective rate and the UK corporation tax rate of 28.5% principally due to the Lehman Brothers North American businesses acquisition. Under IFRS the gain on acquisition of £2,262m is calculated net of deferred tax liabilities included in the acquisition balance sheet and is thus not subject to further tax in calculating the tax charge for the year. Furthermore, Barclays has tax losses previously unrecognised as a deferred tax asset but capable of sheltering part of this deferred tax liability. This gives rise to a tax benefit of £492m which, in accordance with IAS 12, is included as a credit within the tax charge for the year. The effective rate has been adversely impacted by the effect of the fall in the Barclays share price on the deferred tax asset recognised on share awards. In common with prior years there have been offsetting adjustments relating to different overseas tax rates, disallowable expenditure and non taxable gains and income.

11 Earnings per share


	2007 £m		2006 £m		2005 £m		2008 £m		2007 £m		2006 £m

Profit attributable to equity holders of parent	4,417		4,571		3,447		4,382		4,417		4,571
Dilutive impact of convertible options	(25	)	(30	)	(38	)	(24	)	(25	)	(30	)

Profit attributable to equity holders of parent including dilutive impact of convertible options	4,392		4,541		3,409		4,358		4,392		4,541


	2007 million		2006 million		2005 million		2008 million		2007 million		2006 million

Basic weighted average number of shares in issue	6,410		6,357		6,337		7,389		6,410		6,357
Number of potential ordinary shares	177		150		149		188		177		150

Diluted weighted average number of shares	6,587		6,507		6,486		7,577		6,587		6,507



	p		p		p		p		p		p

Basic earnings per share	68.9		71.9		54.4		59.3		68.9		71.9
Diluted earnings per share	66.7		69.8		52.6		57.5		66.7		69.8

The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent and the number of basic weighted average number of shares excluding own shares held in employee benefits trusts and shares held for trading.

The basic and diluted weighted average number of shares in issue in the year ended 31st December 2008 reflects 1,802 million shares issued during the year and the 2,642 million shares that will be issued following conversion in full of the Mandatorily Convertible Notes, included from the date of issue and the date the contract was entered into respectively. As a result, the weighted average number of shares in issue in the year ended 31st December 2008 was increased by 1,034 million shares as a result of this increase.

When calculating the diluted earnings per share, the profit attributable to equity holders of the parent is adjusted for the conversion of outstanding options into shares within Absa Group Limited and Barclays Global Investors UK Holdings Limited. The weighted average number of ordinary shares excluding own shares held in employee benefit trusts and shares held for trading, is adjusted for the effects of all dilutive potential ordinary shares, totalling 188 million (2007: 177 million, ~~(2006:~~2006: 150 ~~million, 2005: 149~~ million).

Of the total number of employee share options and share awards at 31st December ~~2007, none~~2008, 64 million were anti-dilutive ~~(2006:~~(2007: nil, 2006: 5 ~~million, 2005: nil)~~million).

Subsequent to the balance sheet date, the Group continued to make on-market purchases of treasury shares under its various employee share schemes. No adjustment has been made to earnings per share in respect of these purchases.

200

Barclays

Annual Report ~~2007~~2008

~~170~~

LOGO

12 Trading portfolio


					2008 £m		2007 £m
	2007 £m		2006 £m
Trading portfolio assets
Treasury and other eligible bills	2,094		2,960		4,544		2,094
Debt securities	152,778		140,576		148,686		152,778
Equity securities	36,307		31,548		30,535		36,307
Traded loans	1,780		1,843		1,070		1,780
Commodities	732		940		802		732

Trading portfolio assets	193,691		177,867		185,637		193,691

Trading portfolio liabilities
Treasury and other eligible bills	(486	)	(608	)	(79	)	(486	)
Debt securities	(50,506	)	(58,142	)	(44,309	)	(50,506	)
Equity securities	(13,702	)	(12,697	)	(14,919	)	(13,702	)
Commodities	(708	)	(427	)	(167	)	(708	)

Trading portfolio liabilities	(65,402	)	(71,874	)	(59,474	)	(65,402	)

13 Financial assets designated at fair value

Held on own account


	2007 £m	2006 £m	2008 £m	2007 £m
Loans and advances	23,491	13,196	30,187	23,491
Debt securities	24,217	12,100	8,628	24,217
Equity securities	5,376	3,711	6,496	5,376
Other financial assets	3,545	2,792	9,231	3,545

Financial assets designated at fair value – held on own account	56,629	31,799	54,542	56,629

The maximum exposure to credit risk on loans and advances designated at fair value at 31st December ~~2007~~2008 was ~~£23,491m (2006: £13,196m)~~£30,187m (2007: £23,491m). The amount by which related credit derivatives and similar instruments mitigate the exposure to credit risk at 31st December was ~~£2,605m (2006: £28m)~~£2,084m (2007: £2,605m).

The net loss attributable to changes in credit risk for loans and advances designated at fair value was ~~£401m~~£2,550m in ~~2007 (2006: £nil; 2005; £nil)~~2008 (2007: £401m). The gains ~~or losses~~ on related credit derivatives was ~~£4m~~£519m for the year ~~(2006: £nil; 2005; £nil)~~(2007: £4m loss).

The cumulative net loss attributable to changes in credit risk for loans and advances designated at fair value since initial recognition is ~~£401m~~£2,149m at 31st December ~~2007 (2006: £3m; 2005: £3m)~~2008 (2007: £401m). The cumulative change in fair value of related credit derivatives at 31st December ~~2007~~2008 is ~~£4m (2006: £nil; 2005; £nil)~~£523m (2007: £4m).

Held in respect of linked liabilities to customers under investment contracts/liabilities arising from investment contracts


	2007 £m		2006 £m		2008 £m		2007 £m
Financial assets designated at fair value held in respect of linked liabilities to customers under investment contracts	90,851		82,798		66,657		90,851
Cash and bank balances within the portfolio	1,788		1,839		2,526		1,788

Assets held in respect of linked liabilities to customers under investment contracts	92,639		84,637		69,183		92,639

Liabilities to customers under investment contracts	(92,639	)	(84,637	)	(69,183	)	(92,639	)

A portion of the Group’s fund management business takes the legal form of investment contracts, under which legal title to the underlying investment is held by the Group, but the inherent risks and rewards in the investments are borne by the investors. In the normal course of business, the Group’s financial interest in such investments is restricted to fees for investment management services.

Due to the nature of these contracts, the carrying value of the assets is always the same as the value of the liabilities and any change in the value of the assets results in an equal but opposite change in the value of the amounts due to the policyholders.

The Group is therefore not exposed to the financial risks – market risk, credit risk and liquidity risk – inherent in the investments and they are omitted from the disclosures on financial risks in Notes 4647 to ~~48.~~49.

In the balance sheet, the assets are included as ‘Financial assets designated at fair value – held in respect of linked liabilities to customers under investment contracts’. Cash balances within the portfolio have been included in the Group’s cash balances. The associated obligation to deliver the value of the investments to customers at their fair value on balance sheet date is included as ‘Liabilities to customers under investment contracts’.

The increase/decrease in the value arising from the return on the investments and the corresponding increase/decrease in linked liabilities to customers is included in the Other income note in Note 6.

~~171~~

Barclays

Annual Report ~~2007~~2008

201

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

14 Derivative financial ~~instruments~~

~~Financial~~ instruments

The Group’s objectives and policies on managing the risks that arise in connection with derivatives, including the policies for hedging, are included in Note 4546 to Note ~~48 under the headings ‘Financial Risks’, ‘Market Risk’, ‘Credit Risk’ and ‘Liquidity Risk’.~~

The notional amounts of certain types of financial instruments provide a basis for comparison with instruments recognised on the balance sheet but do not necessarily indicate the amounts of future cash flows involved or the current fair value of the instruments and, therefore, do not indicate the Group’s exposure to credit or price risks. The derivative instruments become favourable (assets) or unfavourable (liabilities) as a result of fluctuations in market rates or prices relative to their terms. The aggregate contractual or notional amount of derivative financial instruments on hand, the extent to which instruments are favourable or unfavourable and, thus the aggregate fair values of derivative financial assets and liabilities can fluctuate significantly.

~~The fair value of a derivative contract represents the amount at which that contract could be exchanged in an arms-length transaction, calculated at market rates current at the balance sheet date.~~49.

The fair values and notional amounts of derivative instruments held for trading are set out in the following table:


	2007						2006					2008					2007
Year ended 31st December Derivatives held for trading	Notional contract amount £m		Fair value				Notional contract amount £m	Fair value
Year ended 31st December Derivatives held for trading									Notional contract amount £m		Fair value			Notional contract amount £m		Fair value
Year ended 31st December Derivatives held for trading	Notional contract amount £m	Notional contract amount £m		Assets £m		Liabilities £m	Notional contract amount £m	Notional contract amount £m	Notional contract amount £m	Assets £m		Liabilities £m		Notional contract amount £m	Assets £m		Liabilities £m		Assets £m		Liabilities £m
Year ended 31st December Derivatives held for trading		Notional contract amount £m						Notional contract amount £m
Forward foreign exchange	1,041,781		11,381		(11,629	)	767,734	8,074	(7,808	)		1,374,108	44,631	(46,371	)		1,041,781	11,381	(11,629	)
Currency swaps	562,682		15,617		(14,676	)	411,889	10,029	(10,088	)		828,983	47,077	(53,116	)		562,682	15,617	(14,676	)
OTC options bought and sold	464,575		3,350		(3,995	)	320,184	3,923	(3,849	)		426,739	15,405	(14,331	)		464,575	3,350	(3,995	)

OTC derivatives	2,069,038		30,348		(30,300	)	1,499,807	22,026	(21,745	)		2,629,830	107,113	(113,818	)		2,069,038	30,348	(30,300	)
Exchange traded futures – bought and sold	139,199		–		–		852	–	–			8,008	–	–			139,199	–	–
Exchange traded options – bought and sold	132		–		–		115	–	–			1,295	–	–			132	–	–

Foreign exchange derivatives	2,208,369		30,348		(30,300	)	1,500,774	22,026	(21,745	)		2,639,133	107,113	(113,818	)		2,208,369	30,348	(30,300	)

Interest rate derivatives
Interest rate swaps	11,758,215		111,746		(110,680	)	8,718,015	61,267	(61,510	)		17,624,591	498,661	(496,292	)		11,758,215	111,746	(110,680	)
Forward rate agreements	1,960,106		755		(738	)	1,335,594	337	(374	)		4,377,619	8,853	(8,224	)		1,960,106	755	(738	)
OTC options bought and sold	3,776,600		27,337		(26,944	)	2,301,239	13,977	(13,558	)		5,598,960	105,743	(101,005	)		3,776,600	27,337	(26,944	)

OTC derivatives	17,494,921		139,838		(138,362	)	12,354,848	75,581	(75,442	)		27,601,170	613,257	(605,521	)		17,494,921	139,838	(138,362	)
Exchange traded futures – bought and sold	903,516		–		–		1,057,767	188	(256	)		586,312	–	–			903,516	–	–
Exchange traded options – bought and sold	269,095		102		(64	)	848,629	241	(156	)		276,752	–	–			269,095	102	(64	)
Exchange traded swaps	4,941,417		–		–		3,405,109	–	–			9,411,001	–	–			4,941,417	–	–

Interest rate derivatives	23,608,949		139,940		(138,426	)	17,666,353	76,010	(75,854	)		37,875,235	613,257	(605,521	)		23,608,949	139,940	(138,426	)
Credit derivatives
Swaps	2,472,249		38,696		(35,814	)	1,224,548	9,275	(8,894	)		4,129,244	184,072	(170,011	)		2,472,249	38,696	(35,814	)

Equity and stock index derivatives
OTC options bought and sold	145,399		11,293		(15,743	)	114,227	11,171	(15,613	)		180,157	19,576	(19,998	)		145,399	11,293	(15,743	)
Equity swaps and forwards	36,149		1,057		(1,193	)	24,580	656	(846	)		51,267	3,432	(2,819	)		36,149	1,057	(1,193	)

OTC derivatives	181,548		12,350		(16,936	)	138,807	11,827	(16,459	)		231,424	23,008	(22,817	)		181,548	12,350	(16,936	)
Exchange traded futures – bought and sold	31,519		–		–		30,159	154	(176	)		38,340	–	–			31,519	–	–
Exchange traded options – bought and sold	30,930		848		(2,200	)	30,473	161	(171	)		121,712	5,551	(3,109	)		30,930	848	(2,200	)

Equity and stock index derivatives	243,997		13,198		(19,136	)	199,439	12,142	(16,806	)		391,476	28,559	(25,926	)		243,997	13,198	(19,136	)

Commodity derivatives
OTC options bought and sold	95,032		4,496		(4,720	)	52,899	2,568	(2,443	)		78,680	6,565	(10,261	)		95,032	4,496	(4,720	)
Commodity swaps and forwards	276,102		19,075		(18,039	)	164,863	14,933	(13,497	)		407,015	38,316	(35,556	)		276,102	19,075	(18,039	)

OTC derivatives	371,134		23,571		(22,759	)	217,762	17,501	(15,940	)		485,695	44,881	(45,817	)		371,134	23,571	(22,759	)
Exchange traded futures – bought and sold	228,465		–		–		68,710	13	(33	)		165,564	3,953	(2,745	)		228,465	–	–
Exchange traded options – bought and sold	66,732		1,197		(943	)	9,169	306	(474	)		54,435	161	(233	)		66,732	1,197	(943	)

Commodity derivatives	666,331		24,768		(23,702	)	295,641	17,820	(16,447	)		705,694	48,995	(48,795	)		666,331	24,768	(23,702	)

Derivative assets/(liabilities) held for trading	29,199,895		246,950		(247,378	)	20,886,755	137,273	(139,746	)		45,740,782	981,996	(964,071	)		29,199,895	246,950	(247,378	)

202

Barclays

Annual Report ~~2007~~2008

~~172~~

LOGO

14 Derivative financial instruments (continued)

The fair values and notional amounts of derivative instruments held for risk management are set out in the following table:


Year ended 31st December	2007						2006
	Notional contract amount £m		Fair value				Notional contract amount £m		Fair value
	Notional contract amount £m	Assets £m		Liabilities £m				Assets £m	Liabilities £m
												2008				2007
												Notional	Fair value			Notional	Fair value
Year ended 31st December Derivatives held for risk management												contract amount £m	Assets £m	Liabilities £m		contract amount £m	Assets £m	Liabilities £m
Derivatives designated as cash flow hedges							Notional contract amount £m
Currency swaps												586	–	(271	)	–	–	–
Interest rate swaps	38,453		239		(437	)	51,614		132	(312	)	60,669	1,013	(1,011	)	38,453	239	(437	)
Equity options	54		41		–		–		–	–		400	–	(154	)	54	41	–
Forward foreign exchange	2,256		178		–		–		–	–		1,871	309	(354	)	2,256	178	–
Exchange traded interest rate swaps	14,529		–		–		12,077		–	–		20,028	–	–		14,529	–	–
Commodity swaps and forwards	–		–		–		204		–	(89	)

Derivatives designated as cash flow hedges	55,292		458		(437	)	63,895		132	(401	)	83,554	1,322	(1,790	)	55,292	458	(437	)

Derivatives designated as fair value hedges
Currency swaps	4,299		81		(75	)	1,454		–	(233	)	2,666	283	(105	)	4,299	81	(75	)
Interest rate swaps	18,450		323		(195	)	16,940		240	(152	)	14,010	1,052	(357	)	18,450	323	(195	)
Equity options	1,203		58		(58	)	1,029		58	(56	)	259	124	(110	)	1,203	58	(58	)
Forward foreign exchange	–		–		–		66		–	–
Exchange traded interest rate swaps												18,767	–	–		–	–	–

Derivatives designated as fair value hedges	23,952		462		(328	)	19,489		298	(441	)	35,702	1,459	(572	)	23,952	462	(328	)

Derivatives designated as hedges of net investments
Forward foreign exchange	4,223		31		(57	)	2,730		–	(78	)	2,019	4	(76	)	4,223	31	(57	)
Currency swaps	8,397		187		(88	)	9,320		650	(31	)	3,675	21	(1,563	)	8,397	187	(88	)

Derivatives designated as hedges of net investment	12,620		218		(145	)	12,050		650	(109	)	5,694	25	(1,639	)	12,620	218	(145	)

Derivative assets/(liabilities) held for risk management	91,864		1,138		(910	)	95,434		1,080	(951	)	124,950	2,806	(4,001	)	91,864	1,138	(910	)

Interest rate derivatives, designated as cash flow hedges, primarily hedge the exposure to cash flow variability from interest rates of variable rate loans to banks and customers, variable rate debt securities held and highly probable forecast financing transactions and reinvestments.

Interest rate derivatives designated as fair value hedges primarily hedge the interest rate risk of fixed rate borrowings in issue, fixed rate loans to banks and customers and investments in fixed rate debt securities held.

Currency derivatives are primarily designated as hedges of the foreign currency risk of net investments in foreign operations.

The Group’s total derivative asset and liability position as reported on the balance sheet is as follows:


	2007								2006
	Notional contract amount £m			Fair value					Notional contract amount £m			Fair value				2008					2007
Year ended 31st December			Assets £m		Liabilities £m					Assets £m		Liabilities £m		Notional		Fair value			Notional		Fair value
Year ended 31st December																contract amount £m	Assets £m	Liabilities £m			contract amount £m	Assets £m	Liabilities £m
Year ended 31st December	Notional contract amount £m	29,199,895			246,950		(247,378	)	Notional contract amount £m		20,886,755		137,273		(139,746	)	45,740,782	981,996		(964,071	)	29,199,895	246,950		(247,378	)
Total derivative assets/(liabilities) held for risk management	91,864			1,138		(910	)		95,434			1,080	(951	)		124,950	2,806	(4,001	)		91,864	1,138	(910	)

Derivative assets/(liabilities)	29,291,759			248,088		(248,288	)		20,982,189			138,353	(140,697	)		45,865,732	984,802	(968,072	)		29,291,759	248,088	(248,288	)

Derivative assets and liabilities subject to counterparty netting agreements amounted to ~~£199bn (2006: £102bn)~~£862bn (2007: £199bn). Additionally, wethe Group held ~~£17bn (2006: £8bn)~~£55bn (2007: £17bn) of collateral against the net derivative assets exposure.

~~173~~

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Annual Report ~~2007~~2008

203

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

14 Derivative financial instruments (continued)

The Group has hedged the following forecast cash flows, which primarily vary with interest rates. These cash flows are expected to impact the income statement in the following periods, excluding any hedge adjustments that may be applied:


	2007							2008
	Total £m	Up to one year £m	Between one to two years £m	Between two to three years £m	Between three to four years £m	Between four to five years £m	More than five years £m	Total £m	Up to one year £m	Between one to two years £m	Between two to three years £m	Between three to four years £m	Between four to five years £m	More than five years £m
Forecast receivable cash flows	4,329	1,593	987	903	535	254	57	2,569	875	586	596	347	127	38
Forecast payable cash flows	2,121	394	369	335	283	244	496	974	275	166	175	145	123	90

	2006							2007
	Total £m	Up to one year £m	Between one to two years £m	Between two to three years £m	Between three to four years £m	Between four to five years £m	More than five years £m	Total £m	Up to one year £m	Between one to two years £m	Between two to three years £m	Between three to four years £m	Between four to five years £m	More than five years £m
Forecast receivable cash flows	5,111	1,500	1,452	954	689	410	106	4,329	1,593	987	903	535	254	57
Forecast payable cash flows	1,280	704	349	121	73	30	3	2,121	394	369	335	283	244	496

The maximum length of time over which the Group hedges exposure to the variability in future cash flows for forecast transactions, excluding those forecast transactions related to the payment of variable interest on existing financial instruments, is 10seven years ~~(2006: 8~~(2007: ten years).

All gains or losses on hedging derivatives relating to forecast transactions, which are no longer expected to occur, have been recycled to the income statement.

A ~~loss~~gain of ~~£66m~~£2,439m on hedging instruments was recognised in relation to fair value hedges in net interest income ~~(2006: £460m)~~(2007: £66m loss). A ~~gain~~loss of ~~£70m~~£2,423m on the hedged items was recognised in relation to fair value hedges in net interest income ~~(2006: £465m)~~(2007: £70m gain).

Ineffectiveness recognised in relation to cash flow hedges in net interest income was a gain of ~~£21m (2006: loss of £23m)~~£14m (2007: £21m). Ineffectiveness recognised in relation to hedges of net investment was a gain of ~~£4m (2006: £13m)~~£2m (2007: £4m).

15 Loans and advances to banks and customers


	2007 £m		2006 £m		2008 £m	2007 £m
Gross loans and advances to banks					47,758	40,123
Less: Allowance for impairment					(51)	(3)

Loans and advances to banks	40,123		30,930		47,707	40,120

Gross loans and advances to customers					468,338	349,167
Less: Allowance for impairment	(3	)	(4	)	(6,523)	(3,769)
Loans and advances to banks	40,120		30,926

Loans and advances to customers	349,167		285,631		461,815	345,398
Less: Allowance for impairment	(3,769	)	(3,331	)
Loans and advances to customers	345,398		282,300

204

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Annual Report ~~2007~~2008

~~174~~

LOGO

16 Available for sale financial investments


	2007 £m		2006 £m		2008 £m		2007 £m
Debt securities	38,673		47,912		58,831		38,673
Treasury bills and other eligible bills	2,723		2,420		4,003		2,723
Equity securities	1,676		1,371		2,142		1,676

Available for sale financial investments	43,072		51,703		64,976		43,072

Movement in available for sale financial investments	2007 £m		2006 £m		2008 £m		2007 £m
At beginning of year	51,703		53,497		43,072		51,703
Exchange and other adjustments	1,499		(3,999	)	14,275		1,499
Acquisitions and transfers	26,920		47,086		59,703		26,920
Disposals (through sale and redemption)	(37,498	)	(44,959	)	(50,501	)	(37,498	)
Gains from changes in fair value recognised in equity	486		162
(Losses)/gains from changes in fair value recognised in equity					(1,174	)	486
Impairment	(13	)	(86	)	(382	)	(13	)
Amortisation of discounts/premium	(25	)	2		(17	)	(25	)

At end of year	43,072		51,703		64,976		43,072

17 Securities borrowing, securities lending, repurchase and reverse repurchase agreements

Amounts included in the balance sheet and reported on a net basis where the Group has the intention and the legal ability to settle net or realise simultaneously were as follows:

(a)	Reverse repurchase agreements and cash collateral on securities borrowed

Amounts advanced to counterparties under reverse repurchase agreements and cash collateral provided under stock borrowing agreements are treated as collateralised loans receivable. The related securities purchased or borrowed subject to an agreement with the counterparty to repurchase them are not recognised on balance sheet where the risks and rewards of ownership remain with the counterparty.


	2008 £m	2007 £m
Banks	55,471	86,710
Customers	74,883	96,365
Reverse repurchase agreements and cash collateral held on securities borrowed	130,354	183,075

~~(a)~~(b)

~~Reverse repurchase~~Repurchase agreements and cash collateral on securities ~~borrowed~~lent

      2007
£m    2006
£m
Banks
   86,710    85,336
Customers
   96,365    88,754
Reverse repurchase agreements and cash collateral held on securities borrowed
   183,075    174,090

~~(b) Repurchase agreements and cash collateral on securities lent~~

Securities that are not recorded on the balance sheet (for example, securities that have been obtained as a result of reverse repurchase and stock borrow transactions) may also be lent or sold subject to a commitment to repurchase – such securities remain ~~off balance~~off-balance sheet. In both instances, amounts received from counterparty are treated as liabilities, which at 31st December were as follows:

      2007
£m    2006
£m
Banks
   97,297    79,833
Customers
   72,132    57,123
Repurchase agreements and cash collateral on securities lent
   169,429    136,956
18 Other assets

      2007
£m    2006
£m
Sundry debtors
   4,042    4,298
Prepayments
   551    658
Accrued income
   400    722
Reinsurance assets    157    172
Other assets    5,150    5,850


	2008 £m	2007 £m
Banks	87,403	97,297
Customers	94,882	72,132
Repurchase agreements and cash collateral on securities lent	182,285	169,429

18 Other assets


	2008 £m	2007 £m
Sundry debtors	4,814	4,042
Prepayments	882	551
Accrued income	483	400
Reinsurance assets	123	157
Other assets	6,302	5,150

Included in the above are balances of ~~£3,859m (2006: £5,065m)~~£4,704m (2007: £3,859m) expected to be recovered within no more than 12 months after the balance sheet date; and balances of ~~£1,291m (2006: £785m)~~£1,598m (2007: £1,291m) expected to be recovered more than 12 months after the balance sheet date.

Other assets ~~comprise £3,966m (2006: £4,097m)~~include £3,096m (2007: £3,966m) of receivables which meet the definition of financial assets.

~~175~~

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Annual Report ~~2007~~2008

205

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

19 ~~Current and deferred~~Deferred tax

The components of deferred taxes disclosed on the balance sheet are as follows:

   2007    2006
      Assets
£m    Liabilities
£m    Assets
£m Liabilities
£m
Current tax
   518    1,311    557 1,020
Deferred tax
   2,334    1,726    2,005 1,523
Deferred taxes are calculated on all temporary differences under the liability method. The movement on the deferred tax account is as follows:

                  2007
£m
2006
£m

At beginning of year
         482 (14 )
Income statement credit/(charge)          393 (4 )
Equity
Available for sale investments
         13 4
Cash flow hedges
         (132 ) 128
Share-based payments
         (63 ) 24
Other equity movements
         (125 ) 48
Acquisitions and disposals          33 264
Exchange and other adjustments          7 32

At end of year
         608 482
Deferred tax assets and liabilities are attributable to the following items:

                  2007
£m
2006
£m

Deferred tax liabilities

Accelerated tax depreciation          803 705
Available for sale investments          101 116
Cash flow hedges          51 –
Other          771 702

Deferred tax liabilities
         1,726 1,523

Deferred tax assets

Pensions and other retirement benefits          491 622
Allowance for impairment on loans          108 69
Other provisions          377 436
Cash flow hedges          44 91
Tax losses carried forward
         215 1
Share-based payments          428 380
Other          671 406

Deferred tax assets
         2,334 2,005

Net deferred tax asset

               608 482

Disclosed as deferred tax liabilities
         855 282
Disclosed as deferred tax assets          1,463 764

Net deferred tax asset
         608 482


	2008 £m	2007 £m
Deferred tax liability	304	855
Deferred tax asset	2,668	1,463
Net deferred tax	2,364	608

~~Barclays~~

~~Annual Report 2007~~

~~176~~

Deferred taxes are calculated on all temporary differences under the liability method. The movement on the deferred tax account is as follows:

~~19 Current and deferred tax (continued)~~

Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to set off and the balances relate to income tax payable to the same taxation authority on either the same taxable entity or different taxable entities within the same tax group where there is the intention and ability to settle on a net basis or realise the assets and liabilities simultaneously.


	Fixed asset timing differences £m		Available for sale investments £m		Cash flow hedges £m		Pensions and other retirement benefits £m		Allowance for impairment on loans £m	Other provisions £m		Tax losses carried forward £m	Share based payments £m		Other £m		Total £m
Liabilities	(803	)	(101	)	(51	)	–		–	–		–	–		(771	)	(1,726	)
Assets	–		–		44		491		108	377		215	428		671		2,334
At 1st January 2008	(803	)	(101	)	(7	)	491		108	377		215	428		(100	)	608
Income statement	124		8		5		(90	)	223	(10	)	598	(215	)	227		870
Equity	–		103		(161	)	–		–	–		750	(33	)	(13	)	646
Acquisitions and disposals	(195	)	–		–		–		–	56		–	75		(211	)	(275	)
Exchange and other adjustments	16		1		41		2		25	109		96	87		138		515

	(858	)	11		(122	)	403		356	532		1,659	342		41		2,364
Liabilities	(945	)	(46	)	(368	)	–		–	–		–	–		(1,075	)	(2,434	)
Assets	87		57		246		403		356	532		1,659	342		1,116		4,798

At 31st December 2008	(858	)	11		(122	)	403		356	532		1,659	342		41		2,364


Liabilities	(705	)	(116	)	–		–		–	–		–	–		(702	)	(1,523	)
Assets	–		–		91		622		69	436		1	380		406		2,005
At 1st January 2007	(705	)	(116	)	91		622		69	436		1	380		(296	)	482
Income statement	(118	)	1				(96	)	28	165		214	100		99		393
Equity	–		13		(132	)	–		–	–		–	(63	)	(125	)	(307	)
Acquisitions and disposals	–		–		–		–		–	45		–	–		(12	)	33
Exchange and other adjustments	20		1		34		(35	)	11	(269	)	–	11		234		7

	(803	)	(101	)	(7	)	491		108	377		215	428		(100	)	608
Liabilities	(803	)	(101	)	(51	)	–		–	–		–	–		(771	)	(1,726	)
Assets	–		–		44		491		108	377		215	428		671		2,334

At 31st December 2007	(803	)	(101	)	(7	)	491		108	377		215	428		(100	)	608

The amount of deferred tax liability expected to be settled after more than 12 months is ~~£1,468m (2006: £1,046m)~~£1,949m (2007: £1,468m).

The amount of deferred tax asset expected to be recovered after more than 12 months is ~~£1,950m (2006: £1,582m)~~£4,593m (2007: £1,950m).

The deferred tax assets balance includes ~~£450m (2006: £106m)~~£2,139m (2007: £450m) which is the excess deferred tax assets over deferred tax liabilities in entities which have suffered a loss in either the current or prior year. This is based on management assessment that it is probable that the relevant entities will have taxable profits against which the temporary differences can be utilised.

~~The deferred~~Deferred tax ~~(credit)/charge~~assets have not been recognised in ~~the income statement comprises the following~~respect of deductible temporary ~~differences:~~

      2007
£m 2006
£m
Accelerated tax depreciation
   118 120
Pensions and other retirement benefits
   96 (24 )
Allowance for impairment on loans
   (28 ) (30 )
Other provisions
   (165 ) (105 )
Tax losses carry forward
   (214 ) 25
Available for sale investments
   (1 ) 8
Cash flow hedges
   – (14 )
Share-based payments
   (100 ) (77 )
Other
   (99 ) 101
Total

   (393 ) 4

Deferred tax assets have not been recognised in respect of the following items:

   2007
£m    2006
£m
Deductible temporary differences (gross)
   247    395
Unused tax losses (gross)
   1,683    190
Unused tax credits
   126    98

differences (gross) £9m (2007: £247m), unused tax losses (gross) of £4,083m (2007: £1,683m) and unused tax credits of £46m (2007: £126m). The following tax losses expire: ~~£9m~~£3,854m in ~~2008 to 2011, £9m in 2011, £9m in 2012 and £1,201m in 2027.~~2028. The other tax losses, tax credits and temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise ~~the~~ benefits. The unused tax losses include amounts relating to non-UK branches of Barclays Bank PLC where the future tax benefit might be restricted to the amount in excess of the UK rate.

The amount of temporary differences associated with investments in subsidiaries, branches, associates and joint ventures for which deferred tax liabilities have not been recognised is ~~£5,722m (2006: £3,387m)~~£8,429m (2007: £5,722m).

The tax charge for the period was based on a UK corporation tax rate of 30% (2006: 30%). The effective rate of tax for 2007, based on profit before tax, was 28% (2006: 27.2%). The effective tax rate differed from 30% as it took account of the different tax rate applied to profits earned outside the UK, non-taxable gains and income and adjustments to prior year tax provisions. The forthcoming change in the UK rate of corporation tax from 30% to 28% on 1st April 2008 led to an additional tax charge in 2007 as a result of its effect on the Group’s net deferred tax asset.

~~177~~206

Barclays

Annual Report ~~2007~~2008

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

LOGO

20 ~~Investment~~Investments in associates and joint ventures

Share of net assets

Share of net assets


Associates
Joint ventures Total
      2007
£m 2006
£m 2007
£m 2006
£m 2007
£m 2006
£m

At beginning of year
   74 427 154 119 228 546
Share of results before tax
   35 63 10 (6 ) 45 57
Share of tax
   (2 ) (10 ) (1 ) (1 ) (3 ) (11 )

Share of post-tax results
   33 53 9 (7 ) 42 46

Dividends paid
   – (17 ) – – – (17 )
New investments
   7 2 8 7 15 9
Acquisitions
   56 51 150 102 206 153
Disposals
   (47 ) (404 ) (72 ) (72 ) (119 ) (476 )
Exchange and other adjustments
   (33 ) (38 ) 38 5 5 (33 )

At end of year
   90 74 287 154 377 228
Goodwill included above:



Associates
Joint ventures Total
      2007
£m 2006
£m 2007
£m 2006
£m 2007
£m 2006
£m

Cost


At beginning of year
   1 122 40 83 41 205
Acquisitions
   – – – – – –
Disposals
   (1 ) (121 ) (16 ) – (17 ) (121 )
Transfer
   – – 3 (43 ) 3 (43 )

At end of year
   – 1 27 40 27 41


	Associates				Joint ventures				Total
	2008 £m		2007 £m		2008 £m		2007 £m		2008 £m		2007 £m

At beginning of year	90		74		287		154		377		228
Share of results before tax	25		35		(6	)	10		19		45
Share of tax	(3	)	(2	)	(2	)	(1	)	(5	)	(3	)

Share of post-tax results	22		33		(8	)	9		14		42
New investments	6		7		27		8		33		15
Acquisitions	62		56		1		150		63		206
Disposals	(20	)	(47	)	(117	)	(72	)	(137	)	(119	)
Exchange and other adjustments	15		(33	)	(24	)	38		(9	)	5

At end of year	175		90		166		287		341		377

Goodwill included above:


	Associates				Joint ventures				Total
	2008 £m		2007 £m		2008 £m		2007 £m		2008 £m		2007 £m

Cost

At beginning of year	–		1		27		40		27		41
Disposals	–		(1	)	–		(16	)	–		(17	)
Exchange and other adjustments	–		–		4		3		4		3

At end of year	–		–		31		27		31		27

The Group has investments in two associates listed on the Johannesburg Stock Exchange. The fair value of the Group’s investment in Ambit Properties Limited ~~an associate listed on~~is £51m (2007: £42m) and in Pinnacle Point Group Limited, acquired during 2008, is £60m.

Acquisitions of joint ventures and associates

During the ~~Johannesburg Stock Exchange, is £42m.~~

~~Disposal of~~year the Group made additional investments in associates and joint ventures

~~On 29th June 2007 and 2nd July 2007, the Group disposed of its investment in Gabetti Property Solutions~~ for aggregate cash consideration ~~net~~ of ~~transaction costs of £13m, which after deducting the Group’s share of its net assets on the dates of disposal, resulted in a profit of £8m.~~

~~On 24th September 2007, the~~£96m (2007: £221m), including new associates and joint ventures amounting to £63m (2007: £206m) primarily relating to Pinnacle Point Group disposed of its investment in Intelenet Global Services for a cash consideration, net of transaction costs of £22m, which, after deducting the Group’s share of its net assets on the date of disposal, resulted in a profit of £13m.Limited.

Summarised financial information for the Group’s associates and joint ventures is set out below:


	2007				2006				2008				2007
	Associates £m		Joint ventures £m		Associates £m		Joint ventures £m		Associates £m		Joint ventures £m		Associates £m		Joint ventures £m
Property, plant and equipment	588		632		599		142		788		104		588		632
Financial investments	239		8		4		2		124		–		239		8
Trading portfolio assets	–		–		1		–
Loans to banks and customers	516		2,372		1,378		797		271		2,883		516		2,372
Other assets	1,387		314		541		199		1,343		418		1,387		314

Total assets	2,730		3,326		2,523		1,140		2,526		3,405		2,730		3,326
Deposits from banks and customers	1,515		2,189		1,421		769		1,376		2,207		1,515		2,189
Trading portfolio liabilities	–		–		1		–
Other liabilities	902		458		887		187		985		890		902		458
Shareholders’ equity	313		679		214		184		165		308		313		679

Total liabilities	2,730		3,326		2,523		1,140		2,526		3,405		2,730		3,326

Net income	528		340		538		178		859		357		528		340

Operating expenses	(404	)	(292	)	(334	)	(178	)	(732	)	(364	)	(404	)	(292	)
Profit before tax	124		48		204		–
Profit after tax	104		40		186		(2	)

Profit/(loss) before tax									127		(7	)	124		48

Profit/(loss) after tax									52		(11	)	104		40

The amounts included above, which include the entire assets, liabilities and net income of the investees, not just the Group’s share, are based on accounts made up to 31st December ~~2007~~2008 with the exception of certain undertakings for which the amounts are based on accounts made up to dates not earlier than three months before the balance sheet date.

Associates and joint ventures in ~~2007~~2008 includes ~~£1,728m (2006: £1,525m)~~£1,651m (2007: £1,728m) of assets, ~~£1,537m (2006: £1,380m)~~£1,525m (2007: £1,537m) of liabilities and ~~£18m (2006: £25m)~~£9m (2007: £18m) of profit after tax in associates and joint ventures within the Absa Group.

The Group’s share of commitments and contingencies of its associates and joint ventures is ~~£6m (2006: £nil)~~£nil (2007: £6m).

Barclays

Annual Report ~~2007~~2008

~~178~~

207

Notes to the accounts

For the year ended 31st December 2008

21 Goodwill


					2008 £m		2007 £m
	2007 £m		2006 £m
Net book value
At beginning of year	6,092		6,022		7,014		6,092
Acquisitions	879		390		400		879
Disposals	(17	)	(14	)	(10	)	(17	)
Impairment charge					(111	)	–
Exchange and other adjustments	60		(306	)	332		60

At end of year	7,014		6,092		7,625		7,014

Goodwill is allocated to business operations according to business segments identified by the Group under ~~IAS 14,~~IFRS 8, as follows:

2007
£m
   2006
£m

UK Banking
   3,131    3,132
Barclaycard
   400    403
International Retail and Commercial Banking
   1,682    1,481
Barclays Capital
   147    86
Barclays Global Investors
   1,261    673
Barclays Wealth
   393    317

Goodwill
   7,014    6,092

The Barclays Financial Planning business previously managed and reported within Barclays Wealth, is now managed and reported within UK Banking. Goodwill of £312m relating to this business has been transferred to UK Banking and the comparative figures restated.


	2008 £m	2007 £m

UK Retail Banking	3,139	3,138
Barclays Commercial Bank	10	9
Barclaycard	413	408
GRCB – Western Europe	705	551
GRCB – Emerging Markets	292	45
GRCB – Absa	1,084	1,062
Barclays Capital	95	147
Barclays Global Investors	1,496	1,261
Barclays Wealth	391	393

Goodwill	7,625	7,014

Goodwill is reviewed annually for impairment, or more frequently when there are ~~indications~~indicators that impairment may have occurred, by comparing the carrying value to its recoverable amount.

Impairment testing of goodwill

The recoverable amount of each operation’s goodwill is based on value-in-use or fair value less costs to sell calculations. The ~~calculation is~~calculations are based upon discounting expected pre-tax cash flows at a risk adjusted interest rate appropriate to the cash generating unit, the determination of both of which requires the exercise of judgement. The estimation of pre-tax cash flows is sensitive to the periods for which forecasts are available and to assumptions regarding the long-term sustainable cash flows. While forecasts are compared with actual performance and external economic data, expected cash flows naturally reflect management’s view of future performance.

At 31st December ~~2007,~~2008, the goodwill allocated to UK Retail Banking ~~of £3,131m (2006: £3,132m) included~~was £3,139m (2007: £3,138m) including £3,130m ~~(2006:~~(2007: £3,130m) relating to Woolwich, the goodwill allocated to GRCB – Absa was £1,084m (2007: £1,062m) and the ~~amount~~goodwill allocated to ~~International Retail and Commercial Banking of £1,682m (2006: £1,481m) included £1,054m (2006: £953m) relating to Absa.~~

Barclays Global Investors was £1,496m (2007: £1,261m). The remaining aggregate of goodwill of ~~£2,830m (2006: £2,009m) comprised~~£1,915m (2007: £1,561m) consists of balances relating to multiple business operations which are not considered individually significant.

Goodwill impairment of £111m (2007: £nil) reflects the full write-down of £74m relating to EquiFirst, a US non-prime mortgage originator and a partial write-down of £37m relating to FirstPlus following its closure to new business in August 2008.

Key assumptions used in ~~value in use calculations~~impairment testing for significant goodwill

~~The values assigned to key assumptions reflect past experience and management judgement.~~ UK Retail Banking

The recoverable amount of UK Retail Banking has been determined based on a value in use calculation. The calculation uses cash flow projections based on financial budgets approved by management covering a three year period, and a discount rate of 17.48%. For the purposes of the calculations, ~~performed~~cash flows beyond that period have been extrapolated using a steady 3% growth rate. The growth rate does not exceed the long-term average growth rate for the ~~significant amounts of goodwill are sensitive to changes~~market in which UK Retail Banking operates. Management believes that any reasonable possible change in the ~~following~~ key ~~assumptions:~~assumptions on which UK Retail Banking’s recoverable amount is based would not cause its carrying amount to exceed its recoverable amount.

~~Term~~Global Retail and Commercial Banking – Absa

The recoverable amount of GRCB – Absa has been determined based on a value in use calculation. The calculation uses cash flow ~~forecasts and growth rates~~

~~Cash flows are~~projections based on ~~internal~~financial budgets approved by management ~~information for~~covering a three year period, and a discount rate of ~~up to three years, after which a growth factor suitable for~~14.10%. For the ~~business is applied. Growth rates are based on~~purposes of the ~~projected local inflation rates over the term of estimated cash flows.~~

~~The business operation containing Woolwich has applied a growth factor of 2% (proxy for inflation) to~~calculations, cash flows ~~for the~~beyond that period ~~2011 to 2016. Absa has applied~~have been extrapolated using a growth rate of 8% to cash flows for the ~~three~~two years ~~2011~~2012 to 2013, and a rate of 4%6% for the ten years 2014 to ~~2021.~~2023. The ~~use of longer cash flow projections is justified by~~growth rate does not exceed the long-term ~~nature of these businesses within~~average growth rate for the ~~Barclays Group.~~

~~Discount rates~~

~~The business operation containing Woolwich has applied a discount factor of 15%, and~~market in which GRCB – Absa ~~has applied 13.62% to forecast cash flows used in the impairment testing.~~

operates. Management believes that any reasonable ~~changes~~possible change in the key assumptions ~~used~~on which GRCB – Absa’s recoverable amount is based would not cause its carrying amount to ~~determine~~exceed its recoverable amount.

Barclays Global Investors

The recoverable amount of BGI has been determined based on a fair value methodology approach which includes both a discounted cash flow valuation and comparable company valuation multiples based on revenue, EBITDA and assets under management. The calculation uses earnings projections based on financial budgets approved by management covering a three year period and a discount rate of 11.5%. For the purposes of the calculations, cash flows beyond that period have been extrapolated using growth rates of between 2% and 11% for cash flows from 2012 to 2017, and a terminal growth factor of 4% for 2018 and beyond. The growth rate does not exceed the long-term average growth rate for the market in which BGI operates. Management believes that any reasonable possible change in the key assumptions on which BGI’s recoverable ~~amounts of Absa and Woolwich goodwill will~~amount is based would not ~~result in impairment.~~

~~No impairment was identified in 2007 or 2006.~~cause its carrying amount to exceed its recoverable amount.

~~179~~208

Barclays

Annual Report ~~2007~~2008

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

LOGO

22 Intangible assets


																	2008
																	Internally generated software £m		Other software £m		Core deposit intangibles £m		Brands £m		Customer lists £m		Mortgage servicing rights £m		Licences and other £m		Total £m

Cost
At 1st January 2008																	388		188		244		149		524		126		161		1,780
Acquisitions																	–		127		17		6		992		–		210		1,352
Additions/disposals																	274		5		–		–		–		–		3		282
Exchange and other adjustments																	59		8		–		–		49		47		52		215

At 31st December 2008																	721		328		261		155		1,565		173		426		3,629

Accumulated amortisation and impairment
At 1st January 2008																	(163	)	(57	)	(37	)	(38	)	(101	)	(64	)	(38	)	(498	)
Disposals																	11		7		–		–		–		–		–		18
Amortisation charge																	(86	)	(33	)	(14	)	(15	)	(62	)	(22	)	(59	)	(291	)
Impairment release																	3		–		–		–		–		–		–		3
Exchange and other adjustments																	(49	)	14		(1	)	(2	)	(9	)	(30	)	(7	)	(84	)

At 31st December 2008																	(284	)	(69	)	(52	)	(55	)	(172	)	(116	)	(104	)	(852	)

Net book value																	437		259		209		100		1,393		57		322		2,777

																	2007
	2007																Internally generated software £m		Other software £m		Core deposit intangibles £m		Brands £m		Customer lists £m		Mortgage servicing rights £m		Licences and other £m		Total £m
	Internally generated software £m		Other software £m		Core deposit intangibles £m		Brands £m		Customer lists £m		Mortgage servicing rights £m		Licences and other £m		Total £m
Cost
At 1st January 2007	267		123		242		145		467		122		140		1,506		267		123		242		145		467		122		140		1,506
Acquisitions	–		–		–		–		54		–		23		77		–		–		–		–		54		–		23		77
Additions	118		56		–		3		–		4		–		181		118		56		–		3		–		4		–		181
Exchange and other adjustments	3		9		2		1		3		–		(2	)	16		3		9		2		1		3		–		(2)		16

At 31st December 2007	388		188		244		149		524		126		161		1,780		388		188		244		149		524		126		161		1,780

Accumulated amortisation and impairment
At 1st January 2007	(116	)	(29	)	(24	)	(22	)	(64	)	(10	)	(26	)	(291	)	(116	)	(29	)	(24	)	(22	)	(64	)	(10	)	(26	)	(291	)
Amortisation charge	(45	)	(13	)	(11	)	(15	)	(36	)	(54	)	(12	)	(186	)	(45	)	(13	)	(11	)	(15	)	(36	)	(54	)	(12	)	(186	)
Impairment charge	–		(14	)	–		–		–		–		–		(14	)	–		(14	)	–		–		–		–		–		(14	)
Exchange and other adjustments	(2	)	(1	)	(2	)	(1	)	(1	)	–		–		(7	)	(2	)	(1	)	(2	)	(1	)	(1	)	–		–		(7	)

At 31st December 2007	(163	)	(57	)	(37	)	(38	)	(101	)	(64	)	(38	)	(498	)	(163	)	(57	)	(37	)	(38	)	(101	)	(64	)	(38	)	(498	)

Net book value	225		131		207		111		423		62		123		1,282		225		131		207		111		423		62		123		1,282

	2006
	Internally generated software £m		Other software £m		Core deposit intangibles £m		Brands £m		Customer lists £m		Mortgage servicing rights £m		Licences and other £m		Total £m
Cost
At 1st January 2006	188		43		306		183		582		–		139		1,441
Acquisitions	–		–		–		–		–		114		2		116
Additions	95		86		–		–		–		16		13		210
Exchange and other adjustments	(16	)	(6	)	(64	)	(38	)	(115	)	(8	)	(14	)	(261	)
At 31st December 2006	267		123		242		145		467		122		140		1,506
Accumulated amortisation and impairment
At 1st January 2006	(90	)	(18	)	(7	)	(9	)	(29	)	–		(19	)	(172	)
Amortisation charge	(29	)	(7	)	(20	)	(16	)	(44	)	(11	)	(9	)	(136	)
Impairment charge	(2	)	(5	)	–		–		–		–		–		(7	)
Exchange and other adjustments	5		1		3		3		9		1		2		24
At 31st December 2006	(116	)	(29	)	(24	)	(22	)	(64	)	(10	)	(26	)	(291	)
Net book value	151		94		218		123		403		112		114		1,215

~~Impairment charges reflect the~~The impairment ~~of certain IT assets where the future economic benefit did not exceed the carrying value.~~

~~Impairment charges~~release detailed above ~~have~~has been included within other operating expenses.

Barclays

Annual Report ~~2007~~2008

~~180~~

209

Notes to the accounts

For the year ended 31st December 2008

23 Property, plant and equipment


	2007								2006								2008								2007
	Property £m		Equipment £m		Operating leased assets £m		Total £m		Property £m		Equipment £m		Operating leased assets £m		Total £m		Property £m		Equipment £m		Operating leased assets £m		Total £m		Property £m		Equipment £m		Operating leased assets £m		Total £m

Cost
At 1st January	2,154		2,429		365		4,948		2,450		2,541		365		5,356		2,451		2,995		413		5,859		2,154		2,429		365		4,948
Acquisitions and disposals	5		13		–		18		–		–		–		–		992		218		–		1,210		5		13		–		18
Additions	506		638		105		1,249		180		475		–		655		493		846		126		1,465		506		638		105		1,249
Disposals	(241	)	(112	)	(57	)	(410	)	(422	)	(382	)	–		(804	)	(485	)	(276	)	(235	)	(996	)	(241	)	(112	)	(57	)	(410	)
Fully depreciated assets written off	(1	)	(8	)	–		(9	)	(1	)	(89	)	–		(90	)	(15	)	(7	)	–		(22	)	(1	)	(8	)	–		(9	)
Exchange and other adjustments	28		35		–		63		(53	)	(116	)	–		(169	)	188		168		–		356		28		35		–		63

At 31st December	2,451		2,995		413		5,859		2,154		2,429		365		4,948		3,624		3,944		304		7,872		2,451		2,995		413		5,859

Accumulated depreciation and impairment
At 1st January	(993	)	(1,454	)	(9	)	(2,456	)	(1,022	)	(1,575	)	(5	)	(2,602	)	(1,044	)	(1,804	)	(15	)	(2,863	)	(993	)	(1,454	)	(9	)	(2,456	)
Acquisitions and disposals	(1	)	(7	)	–		(8	)	–		–		–		–		(8	)	(12	)	–		(20	)	(1	)	(7	)	–		(8	)
Depreciation charge	(91	)	(370	)	(6	)	(467	)	(118	)	(335	)	(2	)	(455	)	(124	)	(475	)	(31	)	(630	)	(91	)	(370	)	(6	)	(467	)
Impairment charge	(2	)	–		–		(2	)	(14	)	–		–		(14	)	–		(33	)	–		(33	)	(2	)	–		–		(2	)
Disposals	58		37		–		95		148		341		–		489		168		185		3		356		58		37		–		95
Fully depreciated assets written off	1		8		–		9		1		89		–		90		15		7		–		22		1		8		–		9
Exchange and other adjustments	(16	)	(18	)	–		(34	)	12		26		(2	)	36		(18	)	(12	)	–		(30	)	(16	)	(18	)	–		(34	)

At 31st December	(1,044	)	(1,804	)	(15	)	(2,863	)	(993	)	(1,454	)	(9	)	(2,456	)	(1,011	)	(2,144	)	(43	)	(3,198	)	(1,044	)	(1,804	)	(15	)	(2,863	)

Net book value	1,407		1,191		398		2,996		1,161		975		356		2,492		2,613		1,800		261		4,674		1,407		1,191		398		2,996

Operating leased assets represent assets such as plant and equipment leased to customers under operating leases.

Certain of the Group’s equipment is held on finance leases. See Note 37.

In 2007 the value of an existing office building in the UK property portfolio was impaired by £2m reflecting local market conditions that had prevented its disposal in the year. In 2008 the freehold of the building will be disposed of by a short- or long-term leaseback. Consequently the value has been written down to fair value, less cost of sale.

210

Barclays

Annual Report 2008

LOGO

24 Financial liabilities designated at fair value


	2007		2006		2008		2007
	Fair value £m	Contractual amount due on maturity £m	Fair value £m	Contractual amount due on maturity £m	Fair value £m	Contractual amount due on maturity £m	Fair value £m	Contractual amount due on maturity £m
Debt securities	52,320	62,167	32,261	37,393	61,297	69,197	52,320	62,167
Deposits	17,319	18,140	19,990	20,465	10,518	10,109	17,319	18,140
Other	4,850	6,239	1,736	2,913	5,077	6,761	4,850	6,239

Financial liabilities designated at fair value	74,489	86,546	53,987	60,771	76,892	86,067	74,489	86,546

At 31st December 2008, the own credit adjustment arose from the fair valuation of £54.5bn of Barclays Capital structured notes (2007: £40.7bn). The ~~amount~~widening of ~~change~~Barclays credit spreads in the year affected the fair value of ~~financial liabilities attributable to changes~~these notes and as a result revaluation gains of £1,663m were recognised in ~~own credit risk of these liabilities in 2007 is £658m.~~

~~There were no significant gains or losses attributable to changes in own credit risk for financial liabilities in 2006.~~trading income (2007: £658m).

25 Other liabilities


	2007 £m	2006 £m	2008 £m	2007 £m
Accruals and deferred income	6,075	6,127	6,495	6,075
Sundry creditors	4,341	4,118	6,049	4,341
Obligations under finance leases (Note 37)	83	92	96	83
Other liabilities	10,499	10,337	12,640	10,499

Included in the above are balances of ~~£9,043m (2006: £9,265m)~~£11,068m (2007: £9,043m) expected to be settled within no more than 12 months after the balance sheet date; and balances of ~~£1,456m (2006: £1,072m)~~£1,572m (2007: £1,456m) expected to be settled more than 12 months after the balance sheet date.

Accruals and deferred income included ~~£102m (2006: £107m)~~£nil (2007: £102m) in relation to deferred income from investment contracts and ~~£677m (2006: £822m)~~£nil (2007: £677m) in relation to deferred income from insurance contracts.

~~181~~

Barclays

Annual Report ~~2007~~2008

211

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

26 Insurance assets and liabilities

Insurance assets

Reinsurance assets are ~~£157m (2006: £172m)~~£123m (2007: £157m) and relate principally to the Group’s long-term business. Reinsurers’ share of provisions relating to the Group’s short-term business are ~~£94m (2006: £82m)~~£32m (2007: £94m). The reinsurance assets expected to be recovered after more than one year are ~~£63m (2006: £92m)~~£91m (2007: £63m).

Insurance contract liabilities including unit-linked liabilities

Insurance liabilities comprise the following:


	2007 £m	2006 £m	2008 £m	2007 £m

Insurance contract liabilities:
– linked liabilities	1,398	1,591	125	1,398
– non-linked liabilities	2,347	2,121	1,908	2,347
Provision for claims	158	166	119	158

Insurance contract liabilities including unit-linked liabilities	3,903	3,878	2,152	3,903

Insurance contract liabilities relate principally to the Group’s long-term business. Insurance contract liabilities associated with the Group’s short-term non-life business are ~~£174m (2006: £198m)~~£73m (2007: £174m).

Movements in insurance liabilities and reinsurance assets

Movements in insurance assets and insurance contract liabilities were as follows:


									2008						2007
	2007				2006				Gross £m		Reinsurance £m		Net £m		Gross £m	Reinsurance £m		Net £m
	Gross £m	Reinsurance £m		Net £m	Gross £m	Reinsurance £m		Net £m
At beginning of year	3,878	(172	)	3,706	3,767	(114	)	3,653	3,903		(157	)	3,746		3,878	(172	)	3,706
Change in year	25	15		40	111	(58	)	53	(1,751	)	34		(1,717	)	25	15		40
At end of year	3,903	(157	)	3,746	3,878	(172	)	3,706	2,152		(123	)	2,029		3,903	(157	)	3,746

Assumptions used to measure insurance liabilities

The assumptions that have the greatest effect on the measurement of the amounts recognised above, and the processes used to determine them were as follows:

Long-term business – linked and non-linked

Mortality – mortality estimates are based on standard industry and national mortality tables, adjusted where appropriate to reflect the Group’s own experience. A margin is added to ensure prudence – for example, future mortality improvements for annuity business.

Renewal expenses level and inflation – expense reserves are a small part of overall insurance liabilities, however, increases in expenses caused by unanticipated inflation or other unforeseen factors could lead to expense reserve increases. Expenses are therefore set using prudent assumptions. Initial renewal expense levels are set by considering expense forecasts for the business and, where appropriate, building in a margin to allow for the increasing burden of fixed costs on the UK closed life book of business. The inflation assumption is set by adding a margin to the market rate of inflation implied by index-linked gilt yields.

Short-term business

Short-term business – for single premium policies the proportion of unearned premiums is calculated based on estimates of the frequency and severity of incidents.

Changes in assumptions

There have been no changes in assumptions in ~~2007~~2008 that have had a material effect on the financial statements.

Uncertainties associated with cash flows related to insurance contracts and risk management activities

Long-term insurance contracts (linked and non-linked)

For long-term insurance contracts where death is the insured risk, the most significant factors that could detrimentally affect the frequency and severity of claims are the incidence of disease, such as AIDS, or general changes in lifestyle, such as in eating, exercise and smoking. Where survival is the insured risk, advances in medical care and social conditions are the key factors that increase longevity.

The Group manages its exposure to risk by operating in part as a unit-linked business, prudent product design, applying strict underwriting criteria, transferring risk to reinsurers, managing claims and establishing prudent reserves.

Short-term insurance contracts

For payment protection contracts where inability to make payments under a loan contract is the insured risk, the most significant factors are the health of the policyholder and the possibility of unemployment which depends upon, among other things, long-term and short-term economic factors. The Group manages its exposure to such risks through prudent product design, efficient claims management, prudent reserving methodologies and bases, regular product, economic and market reviews and regular adequacy tests on the size of the reserves.

Absa insures property and motor vehicles, for which the most significant factors that could effect the frequency and severity of claims are climatic change and crime. Absa manages its exposure to risk by diversifying insurance risks accepted and transferring risk to reinsurers.

212

Barclays

Annual Report ~~2007~~2008

~~182~~

LOGO

26 Insurance assets and liabilities (continued)

Sensitivity analysis

The following table presents the sensitivity of the level of insurance contract liabilities disclosed in this note to movements in the actuarial assumptions used to calculate them. The percentage change in variable is applied to a range of existing actuarial modelling assumptions to derive the possible impact on net profit after tax. The disclosure is not intended to explain the impact of a percentage change in the insurance assets and liabilities disclosed above.


					2008		2007
	2007		2006		Change in variable %	Net profit after tax impact £m	Change in variable %	Net profit after tax impact £m
	Change in variable %	Net profit after tax impact £m	Change in variable %	Net profit after tax impact £m
Long-term insurance contracts:
Improving mortality (annuitants only)	10	21	10	23	10	1	10	21
Worsening of mortality (assured lives only)	10	29	10	25	10	20	10	29
Worsening of base renewal expense level	20	43	20	23	20	19	20	43
Worsening of expense inflation rate	10	10	10	9	10	1	10	10

Short-term insurance contracts:
Worsening of claim expense assumptions	10	3	10	9	10	3	10	3

Any change in net profit after tax would result in a corresponding increase or decrease in shareholders’ equity.

The above analyses are based on a change in a single assumption while holding all other assumptions constant. In practice this is unlikely to occur.

Options and guarantees

The Group’s contracts do not contain options or guarantees that could confer material risk.

Concentration of insurance risk

The Group considers that the concentration of insurance risk that is most relevant to the Group financial statements is according to the type of cover offered and the location of insured risk. The following table shows the maximum amounts payable under all of the Group’s insurance products. It ignores the probability of insured events occurring and the contribution from investments backing the insurance policies. The table shows the broad product types and the location of the insured risk, before and after the impact of reinsurance that represents the risk that is passed to other insurers.


	2007				2006				2008				2007
	Before Reinsurance £m	Reinsurance £m		After Reinsurance £m	Before Reinsurance £m	Reinsurance £m		After Reinsurance £m	Before Reinsurance £m	Reinsurance £m		After Reinsurance £m	Before Reinsurance £m	Reinsurance £m		After Reinsurance £m
Total benefits insured by product type
Long-term insurance contracts	31,205	(10,497	)	20,708	24,934	(9,445	)	15,489	19,193	(3,591	)	15,602	31,205	(10,497	)	20,708
Short-term insurance contracts	31,464	(1,139	)	30,325	39,870	(901	)	38,969	36,228	(2,735	)	33,493	31,464	(1,139	)	30,325
Total benefits insured	62,669	(11,636	)	51,033	64,804	(10,346	)	54,458	55,421	(6,326	)	49,095	62,669	(11,636	)	51,033

	2007				2006				2008				2007
	Before Reinsurance £m	Reinsurance £m		After Reinsurance £m	Before Reinsurance £m	Reinsurance £m		After Reinsurance £m	Before Reinsurance £m	Reinsurance £m		After Reinsurance £m	Before Reinsurance £m	Reinsurance £m		After Reinsurance £m
Total benefits insured by geographic location
United Kingdom	22,538	(7,473	)	15,065	25,403	(8,010	)	17,393	8,120	(525	)	7,595	22,538	(7,473	)	15,065
Other European Union	4,304	(2,479	)	1,825	3,317	(1,802	)	1,515	6,519	(2,305	)	4,214	4,304	(2,479	)	1,825
Africa	35,827	(1,684	)	34,143	36,084	(534	)	35,550	40,782	(3,496	)	37,286	35,827	(1,684	)	34,143
Total benefits insured	62,669	(11,636	)	51,033	64,804	(10,346	)	54,458	55,421	(6,326	)	49,095	62,669	(11,636	)	51,033

Reinsurer credit risk

For the long-term business, reinsurance programmes are in place to restrict the amount of cover toon any single life. The reinsurance cover is spread across highly rated companies to diversify the risk of reinsurer solvency. Net insurance reserves include a margin to reflect reinsurer credit risk.

~~183~~

Barclays

Annual Report ~~2007~~2008

213

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

27 Subordinated liabilities

Subordinated liabilities comprise dated and undated loan capital as follows:


			2007 £m	2006 £m		2008 £m	2007 £m
Undated loan capital	(a	)	6,631	5,422
Undated lo an capital					(a)	13,673	6,631
Dated loan capital	(b	)	11,519	8,364	(b)	16,169	11,519
						29,842	18,150
			18,150	13,786
(a) Undated loan capital
	Notes		2007 £m	2006 £m	Notes	2008 £m	2007 £m
Non-convertible
The Bank
6% Callable Perpetual Core Tier One Notes	a,p		392	404	a,q	487	392
6.86% Callable Perpetual Core Tier One Notes (US$1,000m)	a,p		624	571	a,q	1,118	624
5.3304% Step-up Callable Perpetual Reserve Capital Instruments	b,q		520	501	b,r	652	520
5.926% Step-up Callable Perpetual Reserve Capital Instruments (US$1,350m)	c,r		708	690	c,s	1,109	708
6.3688% Step-up Callable Perpetual Reserve Capital Instruments	n,ad		526	–	n,ae	600	526
7.434% Step-up Callable Perpetual Reserve Capital Instruments (US$1,250m)	o,ae		660	–	o,af	1,055	660
14% Step-up Callable Perpetual Reserve Capital Instruments					e,t	2,514	–
Junior Undated Floating Rate Notes (US$121m)	d,s		61	62	d,u	83	61
7.7% Undated Subordinated Notes (US$2,000m)					p,ah	1,644	–
Undated Floating Rate Primary Capital Notes Series 3	d,t		147	146	d,v	147	147
9.875% Undated Subordinated Notes	e,u		319	319		–	319
9.25% Perpetual Subordinated Bonds (ex-Woolwich plc)	f,v		171	178	f, w	232	171
9% Permanent Interest Bearing Capital Bonds	g,w		102	102	g,x	120	102
8.25% Undated Subordinated Notes					p,ag	1,092	–
7.125% Undated Subordinated Notes	h,x		535	550	h,y	620	535
6.875% Undated Subordinated Notes	i,y		657	656	i, z	729	657
6.375% Undated Subordinated Notes	j,z		482	481	j, aa	526	482
6.125% Undated Subordinated Notes	k,aa		560	571	k,ab	666	560
6.5% Undated Subordinated Notes (FFr 1,000m)	l,ab		115	105
6.5% Undated Subordinated Notes (FFr1,000m)					l,ac	151	115
5.03% Reverse Dual Currency Undated Subordinated Loan (Yen 8,000m)	m,ac		21	34	m,ad	51	21
5% Reverse Dual Currency Undated Subordinated Loan (Yen 12,000m)	m,ac		31	52
Undated loan capital – non-convertible			6,631	5,422
5% Reverse Dual Currency Undated Subordinated Loan (Yen12,000m)					m,ad	77	31

Undated lo an capital – non-convertible						13,673	6,631

Security and subordination

None of the undated loan capital of the Bank is secured.

The Junior Undated Floating Rate Notes (the ‘Junior Notes’) rank behind the claims against the Bank of depositors and other unsecured unsubordinated creditors and holders of dated loan capital.

All other issues of the Bank’s undated loan capital rank pari passu with each other and behind the claims of the holders of the Junior Notes, except for the 6% and 6.86% Callable Perpetual Core Tier One Notes (the ‘TONs’) and the 5.3304%, 5.926%, 6.3688%, 7.434% and ~~7.434%~~14% Step-up Callable Perpetual Reserve Capital Instruments (the ‘RCIs’) (such issues, excluding the TONs and the RCIs, being the ‘Undated Notes and Loans’).

The TONs and the RCIs rank pari passu with each other and behind the claims of the holders of the Undated Notes and Loans.

Interest

Notes

a	These TONs bear a fixed rate of interest until 2032. After that date, in the event that the TONs are not redeemed, the TONs will bear interest at rates fixed periodically in advance, based on London interbank rates.

b	These RCIs bear a fixed rate of interest until 2036. After that date, in the event that the RCIs are not redeemed, the RCIs will bear interest at rates fixed periodically in advance, based on London interbank rates.

c	These RCIs bear a fixed rate of interest until 2016. After that date, in the event that the RCIs are not redeemed, the RCIs will bear interest at rates fixed periodically in advance, based on London interbank rates.

d	These Notes bear interest at rates fixed periodically in advance, based on London interbank rates.

These ~~Notes~~RCIs bear a fixed rate of interest until ~~2008.~~2019. After that date, in the event that the ~~Notes~~RCIs are not redeemed, the ~~coupon~~RCIs will ~~be reset to a~~bear interest at rates fixed ~~margin over a reference gilt rate for a further period of five years.~~periodically in advance, based on London interbank rates.

f	These Bonds bear a fixed rate of interest until 2021. After that date, in the event that the Bonds are not redeemed, the coupon will be reset to a fixed margin over a reference gilt rate for a further period of five years.

g	The interest rate on these Bonds is fixed for the life of this issue.

h	These Notes bear a fixed rate of interest until 2020. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixed margin over a reference gilt rate for a further period of five years.

i	These Notes bear a fixed rate of interest until 2015. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixed margin over a reference gilt rate for a further period of five years.

214

Barclays

Annual Report ~~2007~~2008

~~184~~

LOGO

27 Subordinated liabilities (continued)

j	These Notes bear a fixed rate of interest until 2017. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixed margin over a reference gilt rate for a further period of five years.

k	These Notes bear a fixed rate of interest until 2027. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixed margin over a reference gilt rate for a further period of five years.

l	These Notes bear a fixed rate of interest until 2009. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on European interbank rates.

These Loans bear a fixed rate of interest until 2028 based on a US Dollar principal amount, but the interest payments have been swapped, resulting in a Yen interest rate payable, which is fixed periodically in advance based on London interbank rates. After that date, in the event that the Loans are not redeemed, the Loans will bear Yen interest rates fixed periodically in advance, based on London interbank rates.

n	These RCIs bear a fixed rate of interest until 2019. After that date, in the event that the RCIs are not redeemed, the RCIs will bear interest at rates fixed periodically in advance, based on London interbank rates.

o	These RCIs bear a fixed rate of interest until 2017. After that date, in the event that the RCIs are not redeemed, the RCIs will bear interest at rates fixed periodically in advance, based on London interbank rates.

p	These Notes bear a fixed rate of interest until 2018. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance, based on London interbank rates.

The Bank is not obliged to make a payment of interest on its Undated Notes and Loans excluding the 9.25% Perpetual Subordinated Bonds, 7.7% Undated Subordinated Notes and 8.25% Undated Subordinated Notes if, in the preceding six months, a dividend has not been declared or paid on any class of shares of Barclays PLC or, in certain cases, any class of preference shares of the Bank. The Bank is not obliged to make a payment of interest on its 9.25% Perpetual Subordinated Bonds if, in the immediately preceding 12 months interest period, a dividend has not been paid on any class of its share capital. Interest not so paid becomes payable in each case if such a dividend is subsequently paid or in certain other circumstances. During the year, the Bank declared and paid dividends on its ordinary shares and on all classes of preference shares.

No payment of principal or any interest may be made unless the Bank satisfies a specified solvency test.

The Bank may elect to defer any payment of interest on the 7.7% Undated Subordinated Notes and 8.25% Undated Subordinated Notes. Until such time as any deferred interest has been paid in full, neither the Bank nor Barclays PLC may declare or pay a dividend, subject to certain exceptions, on any of its ordinary shares, preference shares, or other share capital or satisfy any payments of interest or coupons on certain other junior obligations.

The Bank may elect to defer any payment of interest on the RCIs (b, c, e, n and o above). Any such deferred payment of interest must be paid on the earlier of (i) the date of redemption of the RCIs, ~~and~~ (ii) the coupon payment date falling on or nearest to the tenth anniversary of the date of deferral of such ~~payment.~~payment, and (iii) in respect of e above only, substitution. Whilst such deferral is continuing, neither the Bank nor Barclays PLC may declare or pay a dividend, subject to certain exceptions, on any of its ordinary shares or ~~Preference Shares.~~preference shares.

The Bank may elect to defer any payment of interest on the TONs if it determines that it is, or such payment would result in it being, in non-compliance with capital adequacy requirements and policies of the FSA. Any such deferred payment of interest will only be payable on a redemption of the TONs. Until such time as the Bank next makes a payment of interest on the TONs, neither the Bank nor Barclays PLC may (i) declare or pay a dividend, subject to certain exceptions, on any of their respective ordinary shares or Preference Shares, or make payments of interest in respect of the Bank’s Reserve Capital Instruments and (ii) certain restrictions on the redemption, purchase or reduction of their respective share capital and certain other securities also apply.

Repayment

Notes

pq	These TONs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after June 2032.

qr	These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2036.

rs	These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2016.

st	These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after June 2019.

u	These Notes are repayable, at the option of the Bank, in whole or in part on any interest payment date.

tv	These Notes are repayable, at the option of the Bank, in whole on any interest payment date.

u	~~These Notes are repayable, at the option of the Bank, in whole in 2008, or on any fifth anniversary thereafter.~~

vw	These Bonds are repayable, at the option of the Bank, in whole in 2021, or on any fifth anniversary thereafter.

wx	These Bonds are repayable, at the option of the Bank, in whole at any time.

xy	These Notes are repayable, at the option of the Bank, in whole in 2020, or on any fifth anniversary thereafter.

yz	These Notes are repayable, at the option of the Bank, in whole in 2015, or on any fifth anniversary thereafter.

zaa	These Notes are repayable, at the option of the Bank, in whole in 2017, or on any fifth anniversary thereafter.

aaab	These Notes are repayable, at the option of the Bank, in whole in 2027, or on any fifth anniversary thereafter.

abac	These Notes are repayable, at the option of the Bank, in whole in 2009, or on any fifth anniversary thereafter.

acad	These Loans are repayable, at the option of the Bank, in whole in 2028, or on any fifth anniversary thereafter.

~~ad These RCIs are repayable at the option of the Bank, in whole on any coupon payment date falling in or after December 2019.~~

ae	These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2019.

~~ae These RCIs are repayable at the option of the Bank, in whole on any coupon payment date falling in or after December 2017.~~

af	These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2017.

ag	These Notes are repayable, at the option of the Bank, in whole on any interest payment date falling in or after December 2018.

ah	These Notes are repayable, at the option of the Bank, in whole on any interest payment date falling in or after April 2018.

In addition, each issue of undated loan capital is repayable, at the option of the Bank, in whole for certain tax reasons, either at any time, or on an interest payment date. There are no events of default except non-payment of principal or mandatory interest.

Any repayments require the prior notification to the FSA.

All issues of undated loan capital have been made in the eurocurrency market and/or under Rule 144A, and no issues have been registered under the US Securities Act of 1933.

~~185~~

Barclays

Annual Report ~~2007~~2008

215

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

27 Subordinated liabilities(continued)

(b) Dated loan capital

Dated loan capital, issued by the Bank for the development and expansion of the Group’s business and to strengthen its capital base, by Barclays Bank Spain SA (Barclays Spain), Barclays Bank of Botswana Ltd (BBB), Barclays Bank Zambia PLC (Barclays Zambia) and Barclays Bank of Kenya (Barclays Kenya) to enhance their respective capital bases and by Absa and Barclays Bank of Ghana Ltd (BBG) for general corporate purposes, comprise:


	Notes	2007 £m	2006 £m	Notes	2008 £m	2007 £m
Non-convertible
The Bank
7.4% Subordinated Notes 2009 (US$400m)	a	200	204	a	275	200
Subordinated Fixed to CMS-Linked Notes 2009 (€31m)	b	23	21	b	31	23
12% Unsecured Capital Loan Stock 2010	a	27	27	a	27	27
5.75% Subordinated Notes 2011 (€1,000m)	a	724	676	a	943	724
5.25% Subordinated Notes 2011 (€250m) (ex-Woolwich plc)	a	200	186	a	260	200
Floating Rate Subordinated Notes 2012		–	301
Callable Subordinated Floating Rate Notes 2012		–	44
Step-up Callable Floating Rate Subordinated Bonds 2012 (ex-Woolwich plc)		–	151
Callable Subordinated Floating Rate Notes 2012 (US$150m)		–	77
Floating Rate Subordinated Notes 2012 (US$100m)		–	51
Capped Floating Rate Subordinated Notes 2012 (US$100m)		–	51
Floating Rate Subordinated Notes 2013 (US$1,000m)	b,n	501	513		–	501
5.015% Subordinated Notes 2013 (US $ 150m)	a	77	77
5.015% Subordinated Notes 2013 (US$150m)				a	112	77
4.875% Subordinated Notes 2013 (€750m)	a	583	540	a	750	583
5.5% Subordinated Notes 2013 (DM 500m)	d,n	196	179		–	196
Floating Rate Subordinated Step-up Callable Notes 2013 (Yen 5,500m)	b,n	25	24		–	25
Floating Rate Subordinated Notes 2013 (AU$150m)	c,n	67	61		–	67
5.93% Subordinated Notes 2013 (AU $100m)	e,n	44	41
5.93% Subordinated Notes 2013 (AU$100m)					–	44
Callable Floating Rate Subordinated Notes 2015 (US$1,500m)	b,n	753	767	b,k	1,031	753
4.38% Fixed Rate Subordinated Notes 2015 (US$75m)	a	30	37	a	88	30
4.75% Fixed Rate Subordinated Notes 2015 (US$150m)	a	85	76	a	81	85
Floating Rate Subordinated Step-up Callable Notes 2016 (US$750m)	b,n	375	382	b,k	514	375
Callable Floating Rate Subordinated Notes 2016 (€1,250m)	b,n	927	844	b,k	1,211	927
Callable Floating Rate Subordinated Notes 2017 (US$500m)	b,n	250	255	b,k	343	250
10.125% Subordinated Notes 2017 (ex-Woolwich plc)	k,n	111	113	h,k	109	111
Floating Rate Subordinated Step-up Callable Notes 2017 (US$1,500m)	b,n	749	–	b,k	1,029	749
Floating Rate Subordinated Step-up Callable Notes 2017 (€1,500m)	b,n	1,106	–	b,k	1,444	1,106
6.05% Fixed Rate Subordinated Notes 2017 (US$2,250m)	a	1,125	–	a	1,856	1,125
Floating Rate Subordinated Notes 2018 (€40m)	b	29	27	b	38	29
6% Fixed Rate Subordinated Notes due 2018 (€1,750m)				a	1,767	–
CMS-Linked Subordinated Notes due 2018 (€100m)				b	100	–
CMS-Linked Subordinated Notes due 2018 (€135m)				b	135	–
Floating Rate Subordinated Notes 2019 (€50m)	b	36	32	b	47	36
Callable Fixed/Floating Rate Subordinated Notes 2019 (€1,000m)	l	761	696	i	984	761
9.5% Subordinated Bonds 2021 (ex-Woolwich plc)	a	282	290	a	298	282
Subordinated Floating Rate Notes 2021 (€100m)	b	72	66	b	94	72
Subordinated Floating Rate Notes 2022 (€50m)	b	37	34	b	49	37
Subordinated Floating Rate Notes 2023 (€50m)	b	37	34	b	48	37
Fixed/Floating Rate Subordinated Callable Notes 2023	r,n	505	–	o,k	571	505
5.75% Fixed Rate Subordinated Notes 2026	a	600	608	a	690	600
5.4% Reverse Dual Currency Subordinated Loan 2027 (Yen 15,000m)	m	71	66	j	128	71
6.33% Subordinated Notes 2032	a	49	50	a	53	49
Subordinated Floating Rate Notes 2040 (€100m)	b	73	67	b	96	73
Barclays Bank SA, Spain (Barclays Spain)
Subordinated Floating Rate Capital Notes 2011 (€30m)	b	10	22
Subordinated Floating Rate Capital Notes 2011 (€11m)				b	11	10
Absa
14.25% Subordinated Callable Notes 2014 (ZAR 3,100m)	f,n	253	269	c,k	240	253
10.75% Subordinated Callable Notes 2015 (ZAR 1,100m)	g,n	87	89	d,k	85	87
Subordinated Callable Notes 2015 (ZAR 400m)	h,n	29	29	e,k	30	29
8.75% Subordinated Callable Notes 2017 (ZAR 1,500m)	i,n	111	113	f,k	115	111
Subordinated Callable Notes 2018 (ZAR 3,700m)				e,k	144	–
8.8% Subordinated Fixed Rate Callable Notes 2019 (ZAR 1,725m)	s,n	123	–	p,k	146	123
8.1% Subordinated Callable Notes 2020 (ZAR 2,000m)	j,n	138	143	g,k	130	138
Barclays Bank of Ghana Ltd (BBG)
14% Fixed Rate BBG Subordinated Callable Notes 2016 (GHC 100,000m)	a,n	5	6	a,k	5	5
Barclays Bank of Kenya (Barclays Kenya)
Floating Rate Subordinated Notes 2014 (KES 1,000m)	t	8	–
Floating Rate Subordinated Notes 2014 (KES 2,965m)				q	26	8

Dated loan capital – non-convertible		11,494	8,339		16,134	11,494

216

Barclays

Annual Report ~~2007~~2008

~~186~~

LOGO

27 Subordinated liabilities (continued)


	Notes	2007 £m	2006 £m	Notes	2008 £m	2007 £m
Convertible
Barclays Bank of Botswana (BBB)
Subordinated Unsecured Floating Rate Capital Notes 2014 (BWP 100m)	n,o	8	9
Subordinated Unsecured Floating Rate Capital Notes 2014 (BWP 190m)				k,l	17	8
Barclays Bank Zambia PLC (Barclays Zambia)
Subordinated Unsecured Floating Rate Capital Notes 2015 (ZMK 40,000m)	n,p	6	5
Subordinated Unsecured Floating Rate Capital Notes 2015 (ZMK 49,086m)				k,m	7	6
Absa
Redeemable cumulative option-holding preference shares (ZAR 147m)	q	11	11	n	11	11

Total convertible		25	25		35	25

None of the Group’s dated loan capital is secured. The debt obligations of the Bank, Barclays Spain, BBG, BBB, Barclays Zambia, Barclays Kenya and Absa rank ahead of the interests of holders of their equity. Dated loan capital of the Bank, Barclays Spain, BBG, BBB, Barclays Zambia, Barclays Kenya and Absa has been issued on the basis that the claims there under are subordinated to the respective claims of their depositors and other unsecured unsubordinated creditors.

Interest

Notes

a	The interest rates on these Notes are fixed for the life of those issues.

b	These Notes bear interest at rates fixed periodically in advance based on London or European interbank rates.

c	These Notes bear ~~interest at rates fixed periodically in advance based on Sydney Bill of exchange rates.~~

d	These Notes bear a fixed rate of interest until 2008. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on London interbank rates.

e	These Notes bear a fixed rate of interest until 2008. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on Sydney Bill of exchange rates.

f	~~These Notes bear~~ a fixed rate of interest until 2009. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixed margin over a reference rate for a further period of five years.

gd	These Notes bear a fixed rate of interest until 2010. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.

he	These Notes bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.

if	These Notes bear a fixed rate of interest until 2012. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.

jg	These Notes bear a fixed rate of interest until 2015. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.

kh	These Notes bear a fixed rate of interest until 2012. After that date, in the event that the Notes are not redeemed, the coupon will be reset to a fixed margin over a reference gilt rate for a further period of five years.

li	These Notes bear a fixed rate of interest until 2014. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on European interbank rates.

mj	This Loan bears a fixed rate of interest based on a US Dollar principal amount, but the interest payments have been swapped, resulting in a Yen interest rate payable which is fixed periodically in advance based on London interbank rates.

nk	Repayable at the option of the issuer, prior to maturity, on conditions governing the respective debt obligations, some in whole or in part, and some only in whole.

These Notes bear interest at rates fixed periodically in advance based on the Bank of Botswana Certificate Rate. All of these Notes will be compulsorily converted to Preference Shares of BBB, having a total par value equal in sum to the principal amount of Notes outstanding at the time of conversion, should BBB experience pre-tax losses in excess of its retained earnings and other capital surplus accounts.

These Notes bear interest at rates fixed periodically in advance based on the Bank of Zambia Treasury Bill rate. All of these Notes will be compulsorily converted to Preference Shares of Barclays Zambia, having a total par value equal in sum to the principal amount of Notes outstanding at the time of conversion, should Barclays Zambia experience pre-tax losses in excess of its retained earnings and other capital surplus accounts.

The dividends are compounded and payable semi-annually in arrears on 30th September and 31st March of each year. The shares were issued by Absa Group Limited on 1st July 2004 and the redemption dates commence on the first business day after the third anniversary of the date of issue of the redeemable preference shares and ending on the fifth anniversary of the date of issue. Such exercise and notice will be deemed to be effective only on the option exercise dates, being 1st March, 1st June, 1st September or 1st December of each year. The shares are convertible into ordinary shares at the option of the preference shareholders on the redemption dates in lots of 100.

ro	These Notes bear a fixed rate of interest until 2018. After that date in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on London interbank rates.

sp	These Notes bear a fixed rate of interest until 2014. After that date, in the event that the Notes are not redeemed, the Notes will bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.

tq	These Notes bear interest at rates fixed periodically in advance based on the Central Bank of Kenya Treasury Bill rates.

~~187~~

Barclays

Annual Report ~~2007~~2008

217

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

27 Subordinated liabilities (continued)

The 7.4% Subordinated Notes 2009 (the ‘7.4% Notes’) issued by the Bank have been registered under the US Securities Act of 1933. All other issues of dated loan capital by the Bank, Barclays Spain, BBG, BBB, Barclays Zambia, Barclays Kenya and Absa, which were made in non-US markets, have not been so registered. With respect to the 7.4% Notes, the Bank is not obliged to make (i) a payment of interest on any interest payment date unless a dividend is paid on any class of share capital and (ii) a payment of principal until six months after the respective maturity date with respect to such Notes.

Repayment terms

Unless otherwise indicated, the Group’s dated loan capital outstanding at 31st December ~~2007~~2008 is redeemable only on maturity, subject in particular cases, to provisions allowing an early redemption in the event of certain changes in tax law or, in the case of BBB and Barclays Zambia to certain changes in legislation or regulations.

Any repayments prior to maturity require in the case of the Bank, the prior notification to the FSA, in the case of BBB, the prior approval of the Bank of Botswana, in the case of Barclays Zambia, the prior approval of the Bank of Zambia, and in the case of Absa, the prior approval of the South African Registrar of Banks.

There are no committed facilities in existence at the balance sheet date which permit the refinancing of debt beyond the date of maturity.

28 Provisions


	Onerous contracts £m		Redundancy and restructuring £m		Undrawn contractually committed facilities and guarantees provided £m		Sundry provisions £m		Total £m		Onerous contracts £m		Redundancy and restructuring £m		Undrawn contractually committed facilities and guarantees provided £m		Sundry provisions £m		Total £m
At 1st January 2008											64		82		475		209		830
Acquisitions and disposals of subsidiaries											9		(9	)	–		(1	)	(1	)
Exchange											2		–		63		15		80
Additions											12		269		461		102		844
Amounts used											(41	)	(213	)	(794	)	(42	)	(1,090	)
Unused amounts reversed											–		(11	)	(96	)	(25	)	(132	)
Amortisation of discount											4		–		–		–		4

At 31st December 2008											50		118		109		258		535

At 1st January 2007	71		102		46		243		462		71		102		46		243		462
Acquisitions and disposals of subsidiaries	1		(2	)	–		74		73		1		(2	)	–		74		73
Exchange	–		–		8		5		13		–		–		8		5		13
Additions	18		117		560		121		816		18		117		560		121		816
Amounts used	(25	)	(117	)	(113	)	(60	)	(315	)	(25	)	(117	)	(113	)	(60	)	(315	)
Unused amounts reversed	(5	)	(18	)	(26	)	(174	)	(223	)	(5	)	(18	)	(26	)	(174	)	(223	)
Amortisation of discount	4		–		–		–		4		4		–		–		–		4

At 31st December 2007	64		82		475		209		830		64		82		475		209		830

At 1st January 2006	79		74		55		309		517
Exchange	(2	)	2		–		(16	)	(16	)
Additions	45		180		35		159		419
Amounts used	(53	)	(133	)	(9	)	(94	)	(289	)
Unused amounts reversed	(2	)	(21	)	(35	)	(115	)	(173	)
Amortisation of discount	4		–		–		–		4

At 31st December 2006	71		102		46		243		462

Provisions expected to be recovered or settled within no more than 12 months after 31st December ~~2007~~2008 were ~~£645m (2006: £388m)~~£333m (2007:£645m).

Sundry provisions are made with respect to commission clawbacks, warranties and litigation claims.

~~Undrawn~~There were no undrawn contractually committed facilities and guarantees provided ~~includes £360m (2006: £nil) provision~~ against undrawn facilities on ABS CDO Super Senior ~~positions.~~positions (2007: £360m).

218

Barclays

Annual Report ~~2007~~2008

~~188~~

LOGO

29 Securitisations

The Group was party to securitisation transactions involving Barclays residential mortgage loans, business loans and credit card balances. In addition, the Group acts as a conduit for commercial paper, whereby it acquires static pools of residential mortgage loans from other lending institutions for securitisation transactions.

In these transactions, the assets, or interests in the assets, or beneficial interests in the cash flows arising from the assets, are transferred to a special purpose entity, or to a trust which then transfers its beneficial interests to a special purpose entity, which then issues floating rate debt securities to third-party investors.

Securitisations may, depending on the individual arrangement result in continued recognition of the securitised assets and the recognition of the debt securities issued in the transaction; lead to partial continued recognition of the assets to the extent of the Group’s continuing involvement in those assets or to derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and obligations created or retained in the transfer. Full derecognition only occurs when the Group transfers both its contractual right to receive cash flows from the financial assets, or retains the contractual rights to receive the cash flows, but assumes a contractual obligation to pay the cash flows to another party without material delay or reinvestment, and also transfers substantially all the risks and rewards of ownership, including credit risk, prepayment risk and interest rate risk.

The following table shows the carrying amount of securitised assets, stated at the amount of the Group’s continuing involvement where appropriate, together with the associated liabilities, for each category of asset in the balance sheet:


	2007			2006			2008			2007
	Carrying amount of assets £m	Associated liabilities £m		Carrying amount of assets £m	Associated liabilities £m		Carrying amount of assets £m	Associated liabilities £m		Carrying amount of assets £m	Associated liabilities £m
Loans and advances to customers
Residential mortgage loans	16,000	(16,786	)	12,577	(13,271	)	12,754	(13,172	)	16,000	(16,786	)
Credit card receivables	4,217	(3,895	)	5,700	(5,195	)	1,888	(2,109	)	4,217	(3,895	)
Other personal lending	422	(485	)	229	(255	)	212	(256	)	422	(485	)
Wholesale and corporate loans and advances	8,493	(8,070	)	5,852	(5,303	)	7,702	(8,937	)	8,493	(8,070	)

Total	29,132	(29,236	)	24,358	(24,024	)	22,556	(24,474	)	29,132	(29,236	)

Assets designated at fair value through profit or loss
Retained interest in residential mortgage loans	895	–		628	–		316	–		895	–

Retained interests in residential mortgage loans are ~~interest only strips~~securities which represent a continuing exposure to the prepayment and credit risk in the underlying securitised ~~assets, the~~assets. The total amount of ~~which~~the loans was ~~£23,097m (2006: £15,063m)~~£31,734m (2007:£23,097m). ~~These are~~The retained interest is initially recorded as an allocation of the original carrying amount based on the relative fair values of the portion derecognised and the portion retained.

~~189~~

Barclays

Annual Report ~~2007~~2008

219

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

30 Retirement benefit obligations

Pension schemes

The UK Retirement Fund (UKRF), which is the main scheme of the Group, amounting to ~~94%~~91% of all the Group’s schemes in terms of benefit obligations, comprises ten sections.

The 1964 Pension Scheme

Most employees recruited before July 1997 are members of this non-contributory defined benefit scheme. Pensions are calculated by reference to service and pensionable salary and are normally subject to a deduction from State pension age.

The Retirement Investment Scheme (RIS)

A defined contribution plan for most joiners between July 1997 and 1st October 2003. This was closed to new entrants on 1st October 2003 and the large majority of existing members of the RIS transferred to~~afterwork~~ afterwork in respect of future benefit accrual with effect from 1st January 2004. There are now no longer any active members of the RIS.

The Pension Investment Plan (PIP)

A defined contribution plan created from 1st July 2001 to provide benefits for certain employees of Barclays Capital.

afterwork

Combines a contributory cash balance element with a voluntary defined contribution element. New employees since 1st October 2003 are eligible to join~~afterwork.~~ afterwork. In addition, the large majority of active members of the RIS (now closed) were transferred to~~afterwork~~ afterwork in respect of future benefit accrual after 1st January 2004.

Career Average Section

The Career Average Section was established in the UKRF with effect from 1st May 2004 following the transfer of members from the Woolwich Pension Fund. The Career Average Section is a non-contributory career average scheme and was closed to new entrants on 1st December 2006.

1951 Fund Section, AP89 Section, BCPS Section, CCS Section and Mercantile Section

Five new sections were established in the UKRF with effect from 31st March 2007 following the merger of the UKRF with five smaller schemes sponsored from within the Group. All five sections are closed to new members.

The 1951 Fund Section, AP89 Section and Mercantile Section provide final salary benefits calculated by reference to service and pensionable salary.

The BCPS and CCS Sections provide defined contribution benefits. The benefits built up in these sections in relation to service before 6th April 1997 are subject to a defined benefit minimum.

In addition, the costs of ill-health retirements and death in service benefits are generally borne by the UKRF for each of the ten sections. From November 2008, members were given the option to pay member contributions by way of salary sacrifice.

Governance

The assets of the UKRF are held separately from the assets of the Group and are administered by trustees.

Barclays Pension Fund Trustees Ltd (BPFTL) acts as corporate trustee for the UKRF. BPFTL is a private limited company, incorporated on 20th December 1990, and is a subsidiary of Barclays Bank PLC.

As the corporate trustee for the UKRF, BPFTL is the legal owner of the assets of the UKRF and BPFTL holds these assets in trust for the beneficiaries of the scheme.

BPFTL comprises nine Directors, of which six are Employer Directors selected by the Bank and three are Employee Directors nominated by the Pension Fund Advisory Committee (PFAC). Employee Directors are selected from those eligible active employees and pensioner members who apply to be considered for the role.

Employee Director vacancies are advertised to all eligible active and pensioner members. This enables any eligible member with an interest in becoming an Employee Director to express that interest and be considered for the role. The PFAC provides the mechanism through which Employee Directors are selected. The PFAC will accept nominations from eligible members and select from amongst all properly nominated candidates.

There are also three Alternate Employer Directors and three Alternate Employee Directors. The selection process for these appointments are as detailed above. The role of alternate directors is to provide cover for individual directors, should they not be available for meetings.

~~Currently, the Bank decides the funding rate after consulting with the trustees.~~ Under the Pensions Act 2004 ~~which has practical impact for the UKRF for the triennial valuation currently in progress with an effective date of 30th September 2007,~~ the Bank and the ~~trustee~~Trustee must agree on the funding rate (including a recovery plan to fund any deficit against the scheme specific statutory funding objective). The first ongoing funding valuation to be completed under this legislation had an effective date of 30th September 2007.

In addition to the UKRF, there are other defined benefit and defined contribution schemes in the UK and overseas. The same approach to pensions governance applies to the other schemes in the UK but different legislation covers schemes outside of the UK where in most cases the Bank has the power to determine the funding rate.

220

Barclays

Annual Report ~~2007~~2008

~~190~~

LOGO

30 Retirement benefit obligations (continued)

The following tables present an analysis of defined benefit obligation and fair value of plan assets for all the Group’s pension schemes and post-retirement benefits (the latter are unfunded) and present the amounts recognised in the income statement including those related to post-retirement health care.

Income statement charge


	2007							2006					2005
	Pensions £m		Other post- retirement benefits £m	Total £m		Pensions £m		Other post- retirement benefits £m	Total £m		Pensions £m		Other post- retirement benefits £m	Total £m		2008						2007					2006
																Pensions £m		Other post- retirement benefits £m		Total £m		Pensions £m		Other post- retirement benefits £m	Total £m		Pensions £m		Other post- retirement benefits £m	Total £m
Staff cost charge
Current service cost	332		2	334		378		21	399		348		22	370		299		2		301		332		2	334		378		21	399
Interest cost	905		8	913		900		8	908		853		4	857		991		8		999		905		8	913		900		8	908
Expected return on scheme assets	(1,074	)	–	(1,074	)	(999	)	–	(999	)	(898	)	–	(898	)	(1,175	)	–		(1,175	)	(1,074	)	–	(1,074	)	(999	)	–	(999	)
Recognised actuarial loss	(1	)	–	(1	)	3		1	4		4		–	4
Recognised actuarial (gain)/loss																(23	)	(1	)	(24	)	(1	)	–	(1	)	3		1	4
Past service cost	20		–	20		29		–	29		13		1	14		2		(8	)	(6	)	20		–	20		29		–	29
Curtailment or settlements	(32	)	–	(32	)	(29	)	–	(29	)	(49	)	–	(49	)	(5	)	–		(5	)	(32	)	–	(32	)	(29	)	–	(29	)

Total included in staff costs	150		10	160		282		30	312		271		27	298		89		1		90		150		10	160		282		30	312

Staff costs are included in other operating expenses.

Change in benefit obligation


	2007										2006
	Pensions				Post-retirement benefits				Total		Pensions				Post-retirement benefits				Total		2008										2007
	UK £m		Overseas £m		UK £m		Overseas £m		£m		UK £m		Overseas £m		UK £m		Overseas £m		£m		Pensions				Post-retirement benefits				Total		Pensions				Post-retirement benefits				Total
																					UK £m		Overseas £m		UK £m		Overseas £m		£m		UK £m		Overseas £m		UK £m		Overseas £m		£m
Benefit obligation at beginning of the year	(17,256	)	(894	)	(97	)	(76	)	(18,323	)	(18,149	)	(938	)	(103	)	(79	)	(19,269	)	(16,563	)	(913	)	(60	)	(98	)	(17,634	)	(17,256	)	(894	)	(97	)	(76	)	(18,323	)
Current service cost	(317	)	(15	)	(1	)	(1	)	(334	)	(358	)	(20	)	(20	)	(1	)	(399	)	(276	)	(23	)	–		(2	)	(301	)	(317	)	(15	)	(1	)	(1	)	(334	)
Interest cost	(869	)	(36	)	(4	)	(4	)	(913	)	(863	)	(37	)	(4	)	(4	)	(908	)	(946	)	(45	)	(3	)	(5	)	(999	)	(869	)	(36	)	(4	)	(4	)	(913	)
Past service cost	(20	)	–		–		–		(20	)	(4	)	(25	)	–		–		(29	)	(2	)	(11	)	7		–		(6	)	(20	)	–		–		–		(20	)
Curtailments or settlements	35		1		–		–		36		43		2		–		–		45		7		2		–		–		9		35		1		–		–		36
Actuarial gain/(loss)	1,292		25		19		1		1,337		1,566		15		11		(3	)	1,589		2,807		–		11		(5	)	2,813		1,292		25		19		1		1,337
Contributions by plan participants	(19	)	(2	)	–		–		(21	)	(15	)	(2	)	–		–		(17	)	(20	)	(3	)	–		–		(23	)	(19	)	(2	)	–		–		(21	)
Benefits paid	589		31		2		15		637		536		40		19		4		599		598		42		2		9		651		589		31		2		15		637
Business combinations	–		–		–		–		–		–		11		–		–		11		–		–		–		–		–		–		–		–		–		–
Exchange and other adjustments	2		(23	)	21		(33	)	(33	)	(12	)	60		–		7		55		–		(269	)	–		(24	)	(293	)	2		(23	)	21		(33	)	(33	)

Benefit obligation at end of the year	(16,563	)	(913	)	(60	)	(98	)	(17,634	)	(17,256	)	(894	)	(97	)	(76	)	(18,323	)	(14,395	)	(1,220	)	(43	)	(125	)	(15,783	)	(16,563	)	(913	)	(60	)	(98	)	(17,634	)

The benefit obligation arises from plans that are wholly unfunded and wholly or partly funded as follows:


	2007 £m		2006 £m		2008 £m		2007 £m
Unfunded obligations	(248	)	(237	)	(297	)	(248	)
Wholly or partly funded obligations	(17,386	)	(18,086	)	(15,486	)	(17,386	)

Total	(17,634	)	(18,323	)	(15,783	)	(17,634	)

~~191~~

Barclays

Annual Report ~~2007~~2008

221

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

30 Retirement benefit obligations (continued)

Change in plan assets


	2007										2006

	Pensions				Post-retirement benefits				Total		Pensions				Post- retirement benefits				Total		2008										2007
	UK £m		Overseas £m		UK £m		Overseas £m		£m		UK £m		Overseas £m		UK £m		Overseas £m		£m		Pensions				Post-retirement benefits				Total		Pensions				Post-retirement benefits				Total
																					UK £m		Overseas £m		UK £m		Overseas £m		£m		UK £m		Overseas £m		UK £m		Overseas £m		£m
Fair value of plan assets at beginning of the year	16,761		745		–		–		17,506		15,571		819		–		–		16,390		17,231		796		–		–		18,027		16,761		745		–		–		17,506
Expected return on plan assets	1,041		33		–		–		1,074		965		34		–		–		999		1,134		41		–		–		1,175		1,041		33		–		–		1,074
Employer contribution	355		34		2		15		406		357		26		2		4		389		336		71		2		9		418		355		34		2		15		406
Settlements	–		(1	)	–		–		(1	)	(11	)	(2	)	–		–		(13	)	–		(2	)	–		–		(2	)	–		(1	)	–		–		(1	)
Contributions by plan participants	19		2		–		–		21		15		2		–		–		17		20		3		–		–		23		19		2		–		–		21
Actuarial (loss)/gain	(332	)	(11	)	–		–		(343	)	423		25		–		–		448
Actuarial loss																					(4,534	)	(121	)	–		–		(4,655	)	(332	)	(11	)	–		–		(343	)
Benefits paid	(589	)	(31	)	(2	)	(15	)	(637	)	(536	)	(30	)	(2	)	(4	)	(572	)	(598	)	(42	)	(2	)	(9	)	(651	)	(589	)	(31	)	(2	)	(15	)	(637	)
Business combinations	–		–		–		–		–		–		–		–		–		–		–		–		–		–		–		–		–		–		–		–
Exchange and other adjustments	(24	)	25		–		–		1		(23	)	(129	)	–		–		(152	)	(52	)	213		–		–		161		(24	)	25		–		–		1

Fair value of plan assets at the end of the year	17,231		796		–		–		18,027		16,761		745		–		–		17,506		13,537		959		–		–		14,496		17,231		796		–		–		18,027

Amounts recognised on balance sheet

The pension and post-retirement benefit assets and liabilities recognised on the balance sheet are as follows:


	2007										2006

	Pensions				Post- retirement benefits				Total		Pensions				Post-retirement benefits				Total		2008										2007
	UK £m		Overseas £m		UK £m		Overseas £m		£m		UK £m		Overseas £m		UK £m		Overseas £m		£m		Pensions				Post-retirement benefits				Total		Pensions				Post-retirement benefits				Total
																					UK £m		Overseas £m		UK £m		Overseas £m		£m		UK £m		Overseas £m		UK £m		Overseas £m		£m
Benefit obligation at end of period	(16,563	)	(913	)	(60	)	(98	)	(17,634	)	(17,256	)	(894	)	(97	)	(76	)	(18,323	)	(14,395	)	(1,220	)	(43	)	(125	)	(15,783	)	(16,563	)	(913	)	(60	)	(98	)	(17,634	)
Fair value of plan assets at end of period	17,231		796		–		–		18,027		16,761		745		–		–		17,506		13,537		959		–		–		14,496		17,231		796		–		–		18,027
Net asset/(deficit)	668		(117	)	(60	)	(98	)	393		(495	)	(149	)	(97	)	(76	)	(817	)
Net (deficit)/asset																					(858	)	(261	)	(43	)	(125	)	(1,287	)	668		(117	)	(60	)	(98	)	393
Unrecognised actuarial (gains)/losses	(1,912	)	7		(3	)	14		(1,894	)	(953	)	20		17		14		(902	)	(167	)	150		(11	)	23		(5	)	(1,912	)	7		(3	)	14		(1,894	)

Net recognised liability	(1,244	)	(110	)	(63	)	(84	)	(1,501	)	(1,448	)	(129	)	(80	)	(62	)	(1,719	)	(1,025	)	(111	)	(54	)	(102	)	(1,292	)	(1,244	)	(110	)	(63	)	(84	)	(1,501	)
Recognised assets	–		36		–		–		36		53		35		–		–		88		–		65		–		–		65		–		36		–		–		36
Recognised liability	(1,244	)	(146	)	(63	)	(84	)	(1,537	)	(1,501	)	(164	)	(80	)	(62	)	(1,807	)	(1,025	)	(176	)	(54	)	(102	)	(1,357	)	(1,244	)	(146	)	(63	)	(84	)	(1,537	)

Net recognised liability	(1,244	)	(110	)	(63	)	(84	)	(1,501	)	(1,448	)	(129	)	(80	)	(62	)	(1,719	)	(1,025	)	(111	)	(54	)	(102	)	(1,292	)	(1,244	)	(110	)	(63	)	(84	)	(1,501	)

The UKRF funded status, as measured using the IAS 19 assumptions, has ~~moved over the year~~decreased from a ~~£0.5bn deficit~~£0.7bn surplus at 31st December ~~2006~~2007 to a ~~surplus~~deficit of ~~£0.7bn~~£0.9bn at 31st December ~~2007.~~2008.

The assumptions used for the current year and prior year are detailed ~~on the next page.~~below. Among the reasons for this change were the large loss on the assets over the year and, to a lesser extent, a strengthening of the allowance made for future improvements in mortality. Offsetting these were the increase in AA long-term corporate bond yields which resulted in a higher discount rate of ~~5.82%~~6.75% (31st December ~~2006: 5.12%~~2007: 5.82%), ~~partially offset by lower than expected returns, and an increase~~a decrease in the inflation assumption to ~~3.45%~~3.16% (31st December ~~2006: 3.08%~~2007: 3.45%). A number of additional changes were made to the assumptions used in valuing the liabilities, including a decrease in the assumed rate of real salary increases to 0.5% (31st December 2006: 1%). Mortality assumptions changed from those in force at 31st December 2006.

~~Barclays~~

~~Annual Report 2007~~

~~192~~

~~30 Retirement benefit obligations (continued)~~ and contributions paid.

Assumptions

Obligations arising under defined benefit schemes are actuarially valued using the projected unit credit method. Under this method, where a defined benefit scheme is closed to new members, such as in the case of the 1964 Pension Scheme, the current service cost expressed as a percentage of salary is expected to increase in the future, although this higher rate will be applied to a decreasing payroll. The latest actuarial IAS valuations were carried out as at 31st December using the following assumptions:


	UK schemes		Overseas schemes
	2007 % p.a.	2006 % p.a.	2007 % p.a.	2006 % p.a.	UK schemes		Overseas schemes
					2008 % p.a.	2007 % p.a.	2008 % p.a.	2007 % p.a.
Discount rate	5.82	5.12	7.51	6.94	6.75	5.82	7.09	7.51
Rate of increase in salaries	3.95	4.08	5.60	5.66	3.66	3.95	5.93	5.60
Inflation rate	3.45	3.08	4.13	3.94	3.16	3.45	3.98	4.13
Rate of increase for pensions in payment	3.45	2.88	3.55	3.58	3.06	3.45	3.17	3.55
Rate of increase for pensions in deferment	3.30	3.08	2.50	2.24	3.16	3.30	4.37	2.50
Initial health care inflation	8.00	8.93	10.00	9.93	8.00	8.00	9.00	10.00
Long-term health care inflation	5.00	5.00	5.01	5.00	5.00	5.00	5.01	5.01
Expected return on plan assets	6.70	6.32	7.84	7.89	6.80	6.70	7.95	7.84

222

Barclays

Annual Report 2008

LOGO

30 Retirement benefit obligations (continued)

Assumptions (continued)

The expected return on plan assets assumption is weighted on the basis of the fair value of these assets. Health care inflation assumptions are weighted on the basis of the health care cost for the period. All other assumptions are weighted on the basis of the defined benefit obligation at the end of the period.

The UK Schemes discount rate assumption is based on ~~the yield on the iBoxx (over 15 year)~~a liability-weighted rate derived from a AA corporate bond ~~index.~~yield curve.

The overseas health care inflation assumptions relate to the US and Mauritius.

Mortality assumptions

The post-retirement mortality assumptions used in valuing the liabilities of the UKRF were based on the standard 2000 series tables as published by the Institute and Faculty of Actuaries. These tables are considered to be most relevant to the population of the UKRF based on their mortality history. These were then adjusted in line with the actual experience of the UKRF’s own pensioners relative to the standard table. An allowance has been made for future mortality improvements based on the medium cohort projections published by the ~~CMIB.~~CMIB subject to a floor of 1% pa on future improvements. On this basis the post-retirement mortality assumptions for the UKRF includes:

   2007    2006    2005    2004    2003
Longevity at 60 for current pensioners (years)
– Males
   26.7    25.8    25.8    25.7    23.3
– Females
   27.9    29.5    29.5    29.4    26.4
Longevity at 60 for future pensioners currently aged 40 (years)
– Males
   28.0    27.1    27.1    27.0    24.9
– Females
   29.1    30.7    30.6    30.6    27.9

~~193~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~30 Retirement benefit obligations (continued)~~

~~Assumptions (continued)~~


	2008	2007	2006	2005	2004
Longevity at 60 for current pensioners (years)
– Males	27.4	26.7	25.8	25.8	25.7
– Females	28.5	27.9	29.5	29.5	29.4
Longevity at 60 for future pensioners currently aged 40 (years)
– Males	29.5	28.0	27.1	27.1	27.0
– Females	30.5	29.1	30.7	30.6	30.6

Sensitivity analysis

Sensitivity analysis for each of the principal assumptions used to measure the benefit obligation of the UKRF are as follows:


Impact on UKRF benefit obligation
					Impact on UKRF benefit obligation
	(Decrease) /Increase %		(Decrease)/ Increase £bn		(Decrease)/ Increase %		(Decrease)/ Increase £bn
0.5% increase to:
– Discount rate	(8.5	)	(1.4	)	(8.5	)	(1.2	)
– Rate of inflation	8.8		1.4		8.8		1.3
– Rate of salary growth	1.3		0.2		1.0		0.2
1 year increase to longevity at 60	2.5		0.4		2.5		0.4

Post-retirement health care

A one percentage point change in assumed health care trend rates, assuming all other assumptions remain constant would have the following effects for ~~2007:~~2008:


	1% increase £m	1% decrease £m		1% increase £m	1% decrease £m
Effect on total of service and interest cost components	1.9	(1.3	)	1	(1	)
Effect on post-retirement benefit obligation	19.9	(14.6	)	17	(14	)

Assets

A long-term strategy has been set for the asset allocation of the UKRF which comprises a mixture of equities, bonds, property and other appropriate assets. This recognises that different asset classes are likely to produce different long-term returns and some asset classes may be more volatile than others.

The long-term strategy ensures that investments are adequately diversified. Asset managers are permitted some flexibility to vary the asset allocation from the long-term strategy within control ranges agreed with the trustee from time to time.

The UKRF also employs derivative instruments, where appropriate, to achieve a desired exposure or return, or to match assets more closely to liabilities. The value of assets shown below reflects the actual physical assets held by the scheme, with any derivative holdings reflected on a mark to market basis. The expected return on asset assumptions, both for individual asset classes and overall, have been based on the portfolio of assets created after allowing for the net impact of the derivatives on the risk and return profile of the holdings.

Barclays

Annual Report 2008

223

Notes to the accounts

For the year ended 31st December 2008

30 Retirement benefit obligations (continued)

Assets (continued)

The value of the assets of the schemes, their percentage in relation to total scheme assets, and their expected rate of return at 31st December ~~2007~~2008 and 31st December ~~2006~~2007 were as follows:

   2007
   UK schemes    Overseas schemes    Total
   Value
£m

% of
total fair
value of
scheme
assets
   Expected
rate
of
return
%
   Value
£m
% of
total fair
value of
scheme
assets
   Expected
rate
of
return
%
   Value
£m

% of
total fair
value of
scheme
assets
   Expected
rate
of
return
%
Equities
   7,467 43    8.3    441 55    8.4    7,908 44    8.3
Bonds
   7,445 43    5.1    300 38    7.6    7,745 43    5.2
Property
   1,712 10    7.0    16 2    11.5    1,728 10    7.0
Derivatives
   (12 ) –    0.0    – –    –    (12 ) –    –
Cash
   284 2    5.1    42 5    5.6    326 1    5.2
Other
   335 2    5.3    (3 ) –    –    332 2    5.4
Fair value of plan assets^a
   17,231 100    6.7    796 100    7.8    18,027 100    6.8

~~Note~~

a	~~Excludes £782m (2006: £613m) representing the money purchase assets of the UKRF.~~

~~Barclays~~

~~Annual Report 2007~~

~~194~~

~~30 Retirement benefit obligations (continued)~~

~~Assets (continued)~~


	2006										2008
	UK schemes			Overseas schemes			Total				UK schemes					Overseas schemes				Total
	Value £m	% of total fair value of scheme assets	Expected rate of return %	Value £m	% of total fair value of scheme assets	Expected rate of return %	Value £m	% of total fair value of scheme assets	Expected rate of return	%	Value £m		% of total fair value of scheme assets		Expected rate of return %	Value £m		% of total fair value of scheme assets	Expected rate of return %	Value £m		% of total fair value of scheme assets		Expected rate of return %

Equities	7,285	43	7.9	337	45	9.4	7,622	44	8.0		5,813		43		8.5	217		23	9.3	6,030		42		8.5
Bonds	6.930	41	4.7	300	40	6.2	7,230	41	4.7		6,360		47		5.3	166		17	6.2	6,526		45		5.3
Property	1,995	12	6.4	15	2	13.4	2,010	11	6.6		1,214		9		7.2	16		2	13.4	1,230		8		7.3
Derivatives	21	–	n/a	–	–	–	21	–	n/a		(420	)	(3	)	–	–		–	–	(420	)	(3	)	–
Cash	293	2	4.6	37	5	5.9	330	2	4.8		(131	)	(1	)	2.0	415		43	7.6	284		2		3.9
Other	237	2	5.9	56	8	9.4	293	2	6.6		701		5		7.4	145		15	6.4	846		6		7.2
Fair value of plan asset^a	16,761	100	6.3	745	100	7.9	17,506	100	6.4

Fair value of plan assets^a											13,537		100		6.8	959		100	8.0	14,496		100		6.9

											2007
											UK schemes					Overseas schemes				Total
											Value £m		% of total fair value of scheme assets		Expected rate of return %	Value £m		% of total fair value of scheme assets	Expected rate of return %	Value £m		% of total fair value of scheme assets		Expected rate of return %

Equities											7,467		43		8.3	441		55	8.4	7,908		44		8.3
Bonds											7,445		43		5.1	300		38	7.6	7,745		43		5.2
Property											1,712		10		7.0	16		2	11.5	1,728		10		7.0
Derivatives											(12	)	–		–	–		–	–	(12	)	–		–
Cash											284		2		5.1	42		5	5.6	326		1		5.2
Other											335		2		5.3	(3	)	–	–	332		2		5.4

Fair value of plan assets^a											17,231		100		6.7	796		100	7.8	18,027		100		6.8

The UKRF plan assets include ~~£39m~~£27m relating to UK private equity investments ~~(2006: £27m)~~(2007: £39m) and ~~£664m~~£735m relating to overseas private equity investments ~~(2006: £447m)~~(2007: £664m). These are disclosed within Equities.

Amounts included in the fair value of plan assets include ~~£6m (2006: £7m)~~£5m (2007: £6m) relating to shares in Barclays Group, ~~£6m (2006: £10m)~~£11m (2007: £6m) relating to bonds issued by the Barclays Group, £nil ~~(2006: £1m)~~(2007: £nil) relating to other investments in the Barclays Group, and ~~£10m (2006: £8m)~~£17m (2007: £10m) relating to property occupied by Group companies.

The expected return on assets is determined by calculating a total return estimate based on weighted average estimated returns for each asset class. Asset class returns are estimated using current and projected economic and market factors such as inflation, credit spreads and equity risk premiums.

The Group actual return on plan assets was a decrease of £3,480m (2007: £731m ~~(2006: £1,447m).~~increase.)

Note

a	Excludes £675m (2007: £782m) representing the money purchase assets of the UKRF.

224

Barclays

Annual Report 2008

LOGO

30 Retirement benefit obligations (continued)

Actuarial gains and losses

The actuarial gains and losses arising on plan liabilities and plan assets are as follows:

UK schemes
Overseas schemes Total
   2007
£m
2006
£m
2005
£m
2004
£m
2007
£m
2006
£m
2005
£m
2004
£m
2007
£m
2006
£m
2005
£m
2004
£m

Present value of obligations
   (16,623 ) (17,353 ) (18,252 ) (15,574 ) (1,011 ) (970 ) (1,017 ) (587 ) (17,634 ) (18,323 ) (19,269 ) (16,161 )
Fair value of plan assets    17,231 16,761 15,571 13,261 796 745 819 436 18,027 17,506 16,390 13,697

Net surplus/(deficit) in the plans
   608 (592 ) (2,681 ) (2,313 ) (215 ) (225 ) (198 ) (151 ) 393 (817 ) (2,879 ) (2,464 )
Experience gains and losses on plan liabilities
– amount
   (297 ) 48 (2 ) 16 (79 ) (54 ) (2 ) (31 ) (376 ) (6 ) (4 ) (15 )
– as percentage of plan liabilities
   (2% ) – – – (8% ) (6% ) – (5% ) (2% ) – – –

Difference between actual and expected return on net assets

– amount
   (332 ) 423 1,599 570 (11 ) 25 2 9 (343 ) 448 1,601 579
– as percentage of plan assets
   (2% ) 3% 10% 4% – 3% – 2% (2% ) 3% 10% 4%

~~Note~~

a	~~Excludes £782m (2006: £613m) representing the money purchase assets of the UKRF.~~


	UK schemes
	2008 £m		2007 £m		2006 £m		2005 £m		2004 £m
Present value of obligations	(14,438	)	(16,623	)	(17,353	)	(18,252	)	(15,574	)
Fair value of plan assets	13,537		17,231		16,761		15,571		13,261
Net (deficit)/surplus in the plans	(901	)	608		(592	)	(2,681	)	(2,313	)
Experience gains and (losses) on plan liabilities
– amount	(81	)	(297	)	48		(2	)	16
– as percentage of plan liabilities	(1%	)	(2%	)	–		–		–
Difference between actual and expected return on plan assets
– amount	(4,534	)	(332	)	423		1,599		570
– as percentage of plan assets	(33%	)	(2%	)	3%		10%		4%

	Overseas schemes
	2008 £m		2007 £m		2006 £m		2005 £m		2004 £m
Present value of obligations	(1,345	)	(1,011	)	(970	)	(1,017	)	(587	)
Fair value of plan assets	959		796		745		819		436
Net (deficit)/surplus in the plans	(386	)	(215	)	(225	)	(198	)	(151	)
Experience losses on plan liabilities
– amount	(96)		(79	)	(54	)	(2	)	(31	)
– as percentage of plan liabilities	(7%	)	(8%	)	(6%	)	–		(5%	)
Difference between actual and expected return on plan assets
– amount	(121	)	(11	)	25		2		9
– as percentage of plan assets	(13%	)	–		3%		–		2%

	Total UK and Overseas schemes
	2008 £m		2007 £m		2006 £m		2005 £m		2004 £m
Present value of obligations	(15,783	)	(17,634	)	(18,323	)	(19,269	)	(16,161	)
Fair value of plan assets	14,496		18,027		17,506		16,390		13,697
Net (deficit)/surplus in the plans	(1,287	)	393		(817	)	(2,879	)	(2,464	)
Experience losses on plan liabilities
– amount	(177	)	(376	)	(6	)	(4	)	(15	)
– as percentage of plan liabilities	(1%	)	(2%	)	–		–		–
Difference between actual and expected return on plan assets
– amount	(4,655	)	(343	)	448		1,601		579
– as percentage of plan assets	(32%	)	(2%	)	3%		10%		4%

~~195~~

Barclays

Annual Report ~~2007~~2008

225

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

30 Retirement benefit obligations (continued)

Funding

The most recent triennial funding valuation of the UK Retirement Fund was performed inwith an effective date of 30th September 2007. In compliance with the Pensions Act 2004, the Group and Trustee have agreed a scheme specific funding target, statement of funding principles, and a schedule of contributions. This agreement forms the basis of the Group’s commitment that the fund has sufficient assets to make payments to members in respect of their accrued benefits as and when they fall due. This funding valuation uses a discount rate that reflects a prudent expectation of long-term future investment returns from the current and assumed future ~~return from the actual asset allocation at that date,~~investment strategy, and takes into account projected future salary increases when assessing liabilities arising from accrued service. ~~The~~

As at 30th September 2007 the funding valuation ~~is updated annually on the basis of interim assumptions. The UK Retirement Fund recorded~~showed a ~~funding~~ surplus of ~~£1.2bn~~£0.2bn. The Scheme Actuary prepares an annual update of the funding position as at ~~31st December 2007 (2006: £1.3bn).~~30th September. The first annual update was carried out as at 30th September 2008 and showed a deficit of £2.2bn.

The Group has agreed funding contributions which, in aggregate, are no less than those which are sufficient to meet the Group’s share of the cost of benefits accruing over each year. The Group has, in the recent past, chosen to make funding contributions in excess of this, more consistent with the IAS service cost.

Defined benefit contributions paid with respect to the UKRF were as follows:

      £m
Contributions paid

2007
   355
2006
   351
2005
   354

There is a triennial valuation currently in progress with an effective date of 30th September 2007. To comply with the requirements of the Pensions Act 2004, the Group and trustees plan to agree a scheme specific funding target, statement of funding principles, and a schedule of contributions which in 2008 will supersede those in place under the current actuarial funding valuation.


		£m
Contributions paid
2008		336
2007		355
2006		351

Excluding the UKRF, the Group is expected to pay contributions of approximately £2m to UK schemes and ~~£41m~~£53m to overseas schemes in ~~2008.~~2009.

The total contribution to be paid in ~~2008~~2009 to the UKRF is not expected to be significantly different than in previous years.

31 Ordinary shares, share premium, and other equity

Ordinary shares and share premium

   Number of
shares
m

Ordinary
shares
£m

Share
premium
£m

Total
£m

At 1st January 2007
   6,535 1,634 5,818 7,452
Issued to staff under the Sharesave Share Option Scheme
   19 6 62 68
Issued under the Incentive Share Option Plan
   10 2 40 42
Issued under the Executive Share Option Scheme^a
   – – 1 1
Issued under the Woolwich Executive Share Option Plan^a
   – – 1 1
Transfer to retained earnings
   – – (7,223 ) (7,223 )
Issue of new ordinary shares
   337 84 1,357 1,441
Repurchase of shares
   (300 ) (75 ) – (75 )

At 31st December 2007
   6,601 1,651 56 1,707

At 1st January 2006
   6,490 1,623 5,650 7,273
Issued to staff under the Sharesave Share Option Scheme
   18 5 67 72
Issued under the Incentive Share Option Plan
   25 6 96 102
Issued under the Executive Share Option Scheme^a
   1 – 3 3
Issued under the Woolwich Executive Share Option Plan^a
   1 – 2 2

At 31st December 2006
   6,535 1,634 5,818 7,452

The authorised share capital of Barclays PLC is £2,500m (2006: £2,500m), comprising 9,996 million (2006: 9,996 million) ordinary shares of 25p each and 1 million (2006: 1 million) staff shares of £1 each. All issued shares are fully paid.

Called up share capital, allotted and fully paid
   2007
£m

2006
£m

Ordinary shares:

At beginning of year
   1,633 1,622
Issued to staff under the Sharesave Share Option Scheme
   6 5
Issued under Incentive Share Option Plan
   2 6
Issue of new ordinary shares
   84 –
Repurchase of shares
   (75 ) –

At end of year
   1,650 1,633
Staff shares
   1 1
Total
   1,651 1,634


	Number of shares m		Ordinary shares £m		Share premium £m		Total £m

At 1st January 2008	6,601		1,651		56		1,707
Issued to staff under the Sharesave Share Option Scheme	3		1		13		14
Issued under the Incentive Share Option Plan^a	1		–		3		3
Issued to staff under the Share Incentive Plan^a	1		–		2		2
Issue of new ordinary shares	1,803		451		3,971		4,422
Repurchase of shares	(37	)	(10	)	–		(10	)

At 31st December 2008	8,372		2,093		4,045		6,138

At 1st January 2007	6,535		1,634		5,818		7,452
Issued to staff under the Sharesave Share Option Scheme	19		6		62		68
Issued under the Incentive Share Option Plan	10		2		40		42
Issued under the Executive Share Option Scheme^b	–		–		1		1
Issued under the Woolwich Executive Share Option Plan^b	–		–		1		1
Transfer to retained earnings	–		–		(7,223	)	(7,223	)
Issue of new ordinary shares	337		84		1,357		1,441
Repurchase of shares	(300	)	(75	)	–		(75	)

At 31st December 2007	6,601		1,651		56		1,707

Note

a	The nominal value for share options issued during 2008 for the Incentive Share Option Plan and Share Incentive Plan was less than £500,000 in each case.

b	The nominal value for share options issued during 2007 ~~and 2006~~ for the Executive Share Option Scheme and Woolwich ~~ESOP~~Executive Share Option Plan was less than £500,000 in each case.

226

Barclays

Annual Report ~~2007~~2008

~~196~~

LOGO

31 Ordinary shares, ~~and~~ share premium, and other equity (continued)

The authorised share capital of Barclays PLC is £3,540m, $77.5m,€40m and ¥4,000m. (31st December 2007: £2,500m) comprising 13,996 million (31st December 2007: 9,996 million) ordinary shares of 25p each, 0.4 million Sterling preference shares of £100 each, 0.4 million US Dollar preference shares of $100 each, 150 million US Dollar preference shares of $0.25 each, 0.4 million Euro preference shares of€100 each, 0.4 million Yen preference shares of ¥10,000 each and 1 million (31st December 2007: 1 million) staff shares of £1 each.


Called up share capital, allotted and fully paid	2008 £m		2007 £m
Ordinary shares:
At beginning of year	1,650		1,633
Issued to staff under the Sharesave Share Option Scheme	1		6
Issued under the Incentive Share Option Plan	–		2
Issue of new ordinary shares	451		84
Repurchase of shares	(9	)	(75	)

At end of year	2,093		1,650
Staff shares:
At beginning of year	1		1
Repurchase of shares	(1	)	–

At end of year	–		1

Total	2,093		1,651

Issue of new ordinary shares

During the year, the following share issues took place:

On ~~14th August 2007, 336.8~~4th July 2008, Barclays PLC raised approximately £500m (before issue costs) through the issue of 168.9 million new ordinary shares ~~with an aggregate nominal value~~at £2.96 per share in a firm placing to Sumitomo Mitsui Banking Corporation.

On 22nd July 2008, Barclays PLC raised approximately £3,969m (before issue costs) through the issue of ~~£84~~1,407.4 million ~~were issued for~~new ordinary shares at £2.82 per share in a ~~cash consideration, before issue costs,~~placing to Qatar Investment Authority, Challenger Universal Limited (a company representing the beneficial interests of ~~£2,425m. The shares were issued to Temasek~~His Excellency Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, the Chairman of Qatar Holding LLC, and his family), China Development Bank, Temasek Holdings (Private) Limited and certain leading institutional shareholders and other investors, which shares were available for clawback in full by means of an open offer to existing shareholders. Valid applications under the open offer were received from qualifying shareholders in respect of approximately 267 million new ordinary shares in aggregate, representing 19.0 per cent. of the shares offered pursuant to the open offer. Accordingly, the remaining 1,140.3 million shares were allocated to the various investors with whom they had been conditionally placed.

On 18th September 2008, Barclays PLC raised approximately £701m (before issue costs) through the issue of 226 million new ordinary shares at ~~a market price of £7.20~~£3.10 per ~~share.~~share to certain institutional investors. The proceeds of the ~~Temasek~~ issuance, in excess of the nominal value and issue costs, of ~~£941m~~£634m were credited to retained earnings. This resulted from the operation of section 131 of the Companies Act 1985 with regard to the issue of shares by Barclays PLC in exchange for shares in ~~Odysseus~~Long Island Investments Jersey ~~(No1)~~No. 1 Limited and the subsequent redemption of ~~the no par value~~ redeemable preference shares of that company for cash.

During the period from 27th November 2008 to 31st December 2008, 33,000 ordinary shares have been issued following conversion of Mandatorily Convertible Notes (see below) at the option of their holders.

Share repurchase

During the year Barclays PLC purchased in the market ~~300~~36 million of its own ordinary shares of 25p each at a total cost of ~~£1,802m in order to minimise the dilutive effect of the issuance of Barclays shares to Temasek and China Development Bank on existing shareholders.~~£173m. These transactions represent ~~4.54%~~less than 0.5% of the issued share capital at 31st December ~~2007. All~~2008. These shares purchased during the period were open market transactions.

Barclays PLC purchased all of its staff shares in issue, following approval for such purchase being given at the 2008 Annual General Meeting, at a total cost of £1m.

At the ~~2007~~2008 AGM on ~~26th~~24th April, Barclays PLC was authorised to repurchase ~~980,840,000~~984,960,000 of its ordinary shares of 25p. The authorisation is effective until the AGM in ~~2008.~~2009.

Cancellation of share premium account

On 11th October 2007, the order of the High Court confirming the cancellation of £7,223m of the share premium account was registered with the Registrar of Companies. This created £7,223m of additional distributable reserves in Barclays PLC. The purpose of the cancellation of the share premium account was to create distributable profits in order to allow the payment of dividends following the completion of the share buy-back programme, the redemption of the preference shares which were to have been issued in connection with the proposed merger with ABN AMRO, and to provide maximum flexibility to manage the Group’s capital resources.

Warrants

On 31st October 2008 Barclays PLC issued, in conjunction with a simultaneous issue of Reserve Capital Instruments, warrants to subscribe for up to 1516.9 million new ordinary shares at a price of £1.97775 to Qatar Holding and HH Sheikh Mansour Bin Zayed Al Nahyan. A fair value of £800m before transaction costs of £24m was attributed to the warrants, which may be exercised at any time up to close of business 31st October 2013.

The fair value (net of transaction costs) of the warrants have been included in retained earnings (see Note 32).

Shares under option

The Group has four schemes that give employees rights to subscribe for new shares in Barclays PLC. A summary of the key terms of each scheme are included in Note ~~44.~~45.

At 31st December ~~2007,~~2008, 94.1 million (2007: 74.0 ~~million (2006: 78.9~~ million) options were outstanding under the terms of the Sharesave Share Option Scheme (Sharesave), ~~1.4~~0.5 million ~~(2006: 1.7~~(2007: 1.4 million) options were outstanding under the terms of the Executive Share Option Scheme (ESOS), ~~0.5~~0.4 million ~~(2006: 0.7~~(2007: 0.5 million) options were outstanding under the terms of the Woolwich Executive Share Option Plan (Woolwich ESOP) and 20.5 million ~~(2006: 77.5~~(2007: 20.5 million) options were outstanding under the terms of the Incentive Share Option Plan (ISOP), enabling certain Directors and members of staff to subscribe for ordinary shares between ~~2007~~2008 and 2016 at prices ranging from ~~176p~~144p to ~~562p.~~

Options and awards arising under the Executive Share Award Scheme, Performance Share Plan and Sharepurchase Scheme, which are described in Note 44 are not settled by the issuance of new shares but from shares held in employee benefit trusts. Details concerning the shares held in such trusts are provided in Note 32.551p.

~~197~~

Barclays

Annual Report ~~2007~~2008

227

Notes to the accounts

For the year ended 31st December ~~2007~~2008

31 Ordinary shares, share premium, and other equity (continued)

In addition to the above, the independent trustee of the Barclays Group (ESAS) Employees’ Benefit Trust (ESAS Trust), established by Barclays Bank PLC in 1996, operates the Executive Share Award Scheme (ESAS). ESAS is a deferred share bonus plan for employees of the Group. The key terms of the ESAS are described in Note 45. The independent trustees of the ESAS Trust make awards of Barclays shares and grant options over Barclays shares to beneficiaries of the ESAS Trust. Beneficiaries of the ESAS Trust include employees and former employees of the Barclays Group.

The independent trustee of the Barclays Group (PSP and ESOS) Employees’ Benefit Trust (PSP Trust), established by Barclays Bank PLC in 1996, operates the Performance Share Plan (PSP) and may satisfy awards under the ESOS. No awards have been made under this trust since 1999. All awards are in the form of options over Barclays shares.

The Sharepurchase scheme which was established in 2002 is open to all eligible UK employees, including executive Directors. The key terms of the Sharepurchase scheme are described in Note 45.

Other equity – Mandatorily Convertible Notes

On 27th November 2008, Barclays Bank PLC issued £4,050m of 9.75% Mandatorily Convertible Notes (MCNs) maturing on 30th September 2009 to Qatar Holding LLC, Challenger Universal Limited and entities representing the beneficial interests of HH Sheikh Mansour Bin Zayed Al Nahyan, a member of the Royal Family of Abu Dhabi and existing institutional shareholders and other institutional investors. If not converted at the holders’ option beforehand, these instruments mandatorily convert to ordinary shares of Barclays PLC on 30th June 2009. The conversion price is £1.53276, and, after taking into account MCNs that were converted on or before 31st December 2008, will result in the issue of 2,642 million new ordinary shares. Following conversion the relevant amounts will be credited to share capital and share premium.

Of the proceeds of the MCNs, £233m has been included in the Group’s liabilities, being the fair value of the coupon before issue costs at the date of issue. The remaining proceeds are included in other equity and will be transferred to share capital and share premium on conversion in both the Barclays PLC Group and Company.

32 Reserves

Other reserves – Barclays PLC Group


	Capital redemption reserve £m	Other capital reserve £m	Available for sale reserve £m		Cash flow hedging reserve £m		Currency translation reserve £m		Total £m		Capital redemption reserve £m	Other capital reserve £m	Available for sale reserve £m		Cash flow hedging reserve £m		Currency translation reserve £m		Total £m
At 1st January 2007	309	617	132		(230	)	(438	)	390
Net gains from changes in fair value	–	–	480		182		–		662
At 1st January 2008											384	617	154		26		(307	)	874
Net (losses)/gains from changes in fair value											–	–	(1,736	)	252		–		(1,484	)
Net (gains)/losses transferred to net profit	–	–	(560	)	198		–		(362	)	–	–	(212	)	19		–		(193	)
Currency translation differences	–	–	–		–		29		29		–	–	–		–		2,307		2,307
Losses transferred to net profit due to impairment	–	–	13		–		–		13		–	–	382		–		–		382
Changes in insurance liabilities	–	–	22		–		–		22		–	–	17		–		–		17
Net losses transferred to net profit due to fair value hedging	–	–	68		–		–		68
Net gains transferred to net profit due to fair value hedging											–	–	(2	)	–		–		(2	)
Tax	–	–	(1	)	(124	)	102		(23	)	–	–	207		(165	)	840		882
Repurchase of shares	75	–	–		–		–		75		10	–	–		–		–		10
At 31st December 2007	384	617	154		26		(307	)	874


	Capital redemption reserve £m	Other capital reserve £m	Available for sale reserve £m		Cash flow hedging reserve £m		Currency translation reserve £m		Total £m
At 1st January 2006	309	617	225		70		156		1,377
Net gains/(losses) from changes in fair value	–	–	71		(421	)	–		(350	)
Net gains transferred to net profit	–	–	(308	)	(51	)	–		(359	)
Currency translation differences	–	–	–		–		(464	)	(464	)
Losses transferred to net profit due to impairment	–	–	86		–		–		86
Changes in insurance liabilities	–	–	23		–		–		23
Net losses transferred to net profit due to fair value hedging	–	–	13		–		–		13
Tax	–	–	22		172		(130	)	64
At 31st December 2006	309	617	132		(230	)	(438	)	390
At 31st December 2008											394	617	(1,190	)	132		2,840		2,793


	Capital redemption reserve £m	Other capital reserve £m	Available for sale reserve £m		Cash flow hedging reserve £m		Currency translation reserve £m		Total £m
At 1st January 2007	309	617	132		(230	)	(438	)	390
Net gains from changes in fair value	–	–	480		182		–		662
Net (gains)/losses transferred to net profit	–	–	(560	)	198		–		(362	)
Currency translation differences	–	–	–		–		29		29
Losses transferred to net profit due to impairment	–	–	13		–		–		13
Changes in insurance liabilities	–	–	22		–		–		22
Net losses transferred to net profit due to fair value hedging	–	–	68		–		–		68
Tax	–	–	(1	)	(124	)	102		(23	)
Repurchase of shares	75	–	–		–		–		75

At 31st December 2007	384	617	154		26		(307	)	874

The capital redemption reserve and other capital reserve represent transfers from retained earnings in accordance with relevant legislation. These reserves are not distributable.

The available for sale reserve represents the unrealised change in the fair value of available for sale investments since initial recognition.

The cash flow hedging reserve represents the cumulative gains and losses on effective cash flow hedging instruments that will be recycled to the income statement when the hedged transactions affect profit or loss.

The currency translation reserve represents the cumulative gains and losses on the retranslation of the Group’s net investment in foreign operations, net of the effects of hedging.

Transfers from cash flow hedging reserve

Gains and losses transferred from the cash flow hedging reserve were to: interest income: ~~£93m~~£4m loss ~~(2006: £7m loss)~~(2007: £93m), interest expense: £74m loss (2007: £11m ~~gain (2006: £73m~~ gain), net trading income: £119m gain (2007: £100m ~~loss (2006: £15m~~ loss), and administration and general expenses: £60m loss (2007: £16m ~~loss (2006: £nil)~~loss).

228

Barclays

Annual Report ~~2007~~2008

~~198~~

LOGO

32 Reserves (continued)

Retained earnings and treasury shares – Barclays PLC Group


							Retained earnings £m		Treasury shares £m		Total £m
At 1st January 2008							20,970		(260	)	20,710
Profit attributable to equity holders of the parent							4,382		–		4,382
Equity-settled share schemes							463		–		463
Tax on equity-settled share schemes							(4	)	–		(4	)
Other taxes							(52	)	–		(52	)
Net purchases of treasury shares							–		(350	)	(350	)
Transfer							(437	)	437		–
Dividends paid							(2,344	)	–		(2,344	)
Repurchase of shares							(173	)	–		(173	)
Arising on share issue							634		–		634
Issue of warrants							776		–		776
Other							(7	)	–		(7	)

At 31st December 2008							24,208		(173	)	24,035
	Retained earnings £m		Treasury shares £m		Total £m
At 1st January 2007	12,169		(212	)	11,957		12,169		(212	)	11,957
Profit attributable to equity holders of the parent	4,417		–		4,417		4,417		–		4,417
Equity-settled share schemes	567		–		567		567		–		567
Tax on equity-settled share schemes	28		–		28		28		–		28
Net purchases of treasury shares	–		(572	)	(572	)	–		(572	)	(572	)
Transfer	(524	)	524		–		(524	)	524		–
Dividends paid	(2,079	)	–		(2,079	)	(2,079	)	–		(2,079	)
Repurchase of shares	(1,802	)	–		(1,802	)	(1,802	)	–		(1,802	)
Transfer from share premium account	7,223		–		7,223		7,223		–		7,223
Arising on share issue	941		–		941		941		–		941
Other	30		–		30		30		–		30

At 31st December 2007	20,970		(260	)	20,710		20,970		(260	)	20,710
At 1st January 2006	8,957		(181	)	8,776
Profit attributable to equity holders of the parent	4,571		–		4,571
Equity-settled share schemes	663		–		663
Tax on equity-settled share schemes	96		–		96
Net purchases of treasury shares	–		(425	)	(425	)
Transfer	(394	)	394		–
Dividends paid	(1,771	)	–		(1,771	)
Other	47		–		47
At 31st December 2006	12,169		(212	)	11,957

The Treasury shares primarily relate to Barclays PLC shares held by employee benefit trusts in relation to the Executive Share Award Scheme, Performance Share Plan and Sharepurchase Scheme, to the extent that such shares have not been allocated to employees. These schemes are described in Note ~~44.~~45.

The total number of Barclays shares held in Group employee benefit trusts at 31st December ~~2007~~2008 was ~~211.4~~217.9 million ~~(2006: 168~~(2007: 211.4 million). Dividend rights have been waived on nil ~~(2006:~~(2007: nil) of these shares. The total market value of the shares held in trust based on the year-end share price of ~~£5.04 (2006: £7.30)~~£1.53 (2007: £5.04) was ~~£1,065m (2006: £1,227m)~~£333m (2007: £1,065m). As at 31st December ~~2007,~~2008, options over ~~16.6~~19.1 million ~~(2006: 9.6~~(2007: 16.6 million) of the total shares held in the trusts were exercisable.

The Group operates in a number of countries subject to regulations under which a local subsidiary has to maintain a minimum level of capital. The current policy of the Group is that local capital requirements are met, as far as possible, by the retention of profit. Certain countries operate exchange control regulations which limit the amount of dividends that can be remitted to non-resident shareholders. It is not possible to determine the amount of profit retained and other reserves that are restricted by these regulations, but the net profit retained of overseas subsidiaries, associates and joint ventures at 31st December ~~2007~~2008 totalled ~~£7,311m (2006: £5,667m)~~£4,581m (2007: £7,311m). If such overseas reserves were to be remitted, other tax liabilities, which have not been provided for in the accounts, might arise.

Retained earnings – Barclays PLC (Parent company)


						Retained earnings £m		Capital redemption reserve £m	Total £m
At 1st January 2008						8,990		384	9,374
Profit after tax						1,193		–	1,193
Dividends paid						(2,414	)	–	(2,414	)
Arising on share issue						634		–	634
Repurchase of shares						(173	)	10	(163	)
Issue of warrants						776		–	776

At 31st December 2008						9,006		394	9,400
	Retained earnings £m		Capital redemption reserve £m	Total £m
At 1st January 2007	1,468		309	1,777		1,468		309	1,777
Profit after tax	3,289		–	3,289		3,289		–	3,289
Dividends paid	(2,129	)	–	(2,129	)	(2,129	)	–	(2,129	)
Transfer from share premium account	7,223		–	7,223		7,223		–	7,223
Arising on share issue	941		–	941		941		–	941
Repurchase of shares	(1,802	)	75	(1,727	)	(1,802	)	75	(1,727	)

At 31st December 2007	8,990		384	9,374		8,990		384	9,374
At 1st January 2006	1,318		309	1,627
Profit after tax	1,964		–	1,964
Dividends paid	(1,814	)	–	(1,814	)
At 31st December 2006	1,468		309	1,777

Details of principal subsidiaries held through Barclays Bank PLC are shown in Note ~~40.~~

The operation of section 131 of the Companies Act 1985 with regard to the issue of shares by Barclays PLC in exchange for shares in Odysseus Jersey (No 1) Limited and the subsequent redemption of the no par value redeemable preference shares of that company for cash, has resulted in additional distributable profits of £941m.

On 11th October 2007, the order of the High Court confirming the cancellation of £7,223m of the share premium account was registered with the Registrar of Companies. This created £7,223m additional distributable reserves in Barclays PLC. The purpose of the cancellation of the share premium account was to create distributable profits in order to allow the payment of dividends following the completion of the share buy-back programme, the redemption of the preference shares which were to have been issued in connection with the proposed merger with ABN AMRO, and to provide maximum flexibility to manage the company’s capital resources.41.

~~199~~

Barclays

Annual Report ~~2007~~2008

229

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

33 Minority interests


	2007 £m		2006 £m		2008 £m		2007 £m
At beginning of year	7,591		7,004		9,185		7,591
Share of profit after tax	678		624		905		678
Dividend and other payments	(480	)	(452	)	(703	)	(480	)
Equity issued by subsidiaries	1,381		639		1,349		1,381
Available for sale reserve: net gain/(loss) from changes in fair value	1		(2	)
Cash flow hedges: net loss from changes in fair value	(16	)	(9	)
Available for sale reserve: net (loss)/gain from changes in fair value					(1	)	1
Cash flow hedges: net gain/(loss) from changes in fair value					76		(16	)
Currency translation differences	25		(317	)	100		25
Additions	142		51		–		27
Disposals	(111	)	(34	)	(11	)	(111	)
Other	(26	)	87		(107	)	89

At end of year	9,185		7,591		10,793		9,185

During the year, ~~subsidiaries~~Barclays Bank PLC issued the following Preference Shares:

106 million Preference Shares of nominal US$0.25 each (Principal amount: US$2,650m; £1,345m) with a 8.125% dividend issued on 11th April 2008 and 25th April 2008.

~~1.9 million Preference Shares of nominal ZAR0.01 each (Principal amount: ZAR1,652m; £118m) with a variable dividend issued in 2007~~

~~55 million Preference Shares of nominal US$0.25 each (Principal amount: US$1,375m; £677m) with a 7.1% dividend issued on 13th September 2007~~

~~46 million Preference Shares of nominal US$0.25 each (Principal amount: US$1,150m; £567m) with a 7.75% dividend issued on 7th December 2007~~

34 Contingent liabilities and commitments

Contingent liabilities and commitments

The following table summarises the nominal principal amount of contingent liabilities and commitments with off-balance sheet risk:


	2007 £m	2006 £m	2008 £m	2007 £m
Acceptances and endorsements	365	287	585	365
Guarantees and letters of credit pledged as collateral security	35,692	31,252	15,652	12,973
Securities lending arrangements			38,290	22,719
Other contingent liabilities	9,717	7,880	11,783	9,717

Contingent liabilities	45,774	39,419	66,310	45,774

Documentary credits and other short-term trade related transactions	522	414	859	522
Undrawn note issuance and revolving underwriting facilities:
Forward asset purchases and forward deposits placed	283	360	291	283
Standby facilities, credit lines and other	191,834	204,730	259,666	191,834

Commitments	192,639	205,504	260,816	192,639

Nature of instruments

In common with other banks, the Group conducts business involving acceptances, performance bonds and indemnities. The majority of these facilities are offset by corresponding obligations of third parties.

An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. The Group expects most acceptances to be presented, but reimbursement by the customer is normally immediate. Endorsements are residual liabilities of the Group in respect of bills of exchange, which have been paid and subsequently rediscounted.

~~Barclays~~

~~Annual Report 2007~~

~~200~~

~~34 Contingent liabilities and commitments (continued)~~

Guarantees and letters of credit are given as security to support the performance of a customer to third parties. As the Group will only be required to meet these obligations in the event of the customer’s default, the cash requirements of these instruments are expected to be considerably below their nominal amounts.

The Group facilitates securities lending arrangements for its investment management clients whereby securities held by funds are lent to third parties. The borrowers provide the funds with collateral in the form of cash or other assets equal to at least 100% of the securities lent plus a margin of at least 2% up to 8%. Over the period of the loan, the funds may make margin calls to the extent that the collateral is less than the market value of the securities lent. Amounts disclosed above represent the total market value of the lent securities at 31st December 2008. The market value of collateral held by the funds was £39,690m (2007: £23,559m).

230

Barclays

Annual Report 2008

LOGO

34 Contingent liabilities and commitments (continued)

Other contingent liabilities include transaction related customs and performance bonds and are, generally, short-term commitments to third parties which are not directly dependent on the customer’s creditworthiness.

Commitments to lend are agreements to lend to a customer in the future, subject to certain conditions. Such commitments are either made for a fixed period, or have no specific maturity but are cancellable by the lender subject to notice requirements.

Documentary credits commit the Group to make payments to third parties, on production of documents, which are usually reimbursed immediately by customers.

Capital commitments

At 31st December ~~2007~~2008 the commitments for capital expenditure under contract amounted to ~~£6m (2006: £9m)~~£48m (2007: £6m).

Assets pledged

Assets are pledged as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as security deposits relating to ~~futures and options.~~derivatives. The disclosure includes any asset transfers associated with liabilities under repurchase agreements and securities lending transactions.

The following table summarises the nature and carrying amount of the assets pledged as security against these liabilities:


			2008 £m	2007 £m
	2007 £m	2006 £m
Trading portfolio assets	76,226	77,255	81,186	76,226
Loans and advances	32,846	23,715	28,789	32,846
Available for sale investments	16,378	20,495	32,321	16,378
Other	580	4	3,812	580

Assets pledged	126,030	121,469	146,108	126,030

Collateral held as security for assets

Under certain transactions, including reverse repurchase agreements and stock borrowing transactions, the Group is allowed to resell or repledge the collateral held. The fair value at the balance sheet date of collateral accepted and repledged to others was as follows:


			2008 £m	2007 £m
	2007 £m	2006 £m
Fair value of securities accepted as collateral	343,986	279,591	424,819	343,986
Of which fair value of securities repledged / transferred to others	269,157	210,182	374,222	269,157

35 Legal proceedings

Barclays has for some time been party to proceedings, including a class action, in the United States against a number of defendants following the collapse of Enron; the class action claim is commonly known as the Newby litigation. On 20th July 2006 Barclays received an Order from the United States District Court for the Southern District of Texas Houston Division which dismissed the claims against Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. in the Newby litigation. On 4th December 2006 the Court stayed Barclays dismissal from the proceedings and allowed the plaintiffs to file a supplemental complaint. On 19th March 2007 the United States Court of Appeals for the Fifth Circuit issued its decision on an appeal by Barclays and two other financial institutions contesting a ruling by the District Court allowing the Newby litigation to proceed as a class action. The Court of Appeals held that because no proper claim against Barclays and the other financial institutions had been alleged by the plaintiffs, the case could not proceed against them. The plaintiffs applied to the United States Supreme Court for a review of this decision. On 22nd January 2008, the United States Supreme Court denied the plaintiffs’ request for review. Following the Supreme Court’s decision, the District Court ordered a further briefing concerning the status of the plaintiffs’ claims. Barclays ~~plans to seek~~is seeking the dismissal of the plaintiffs’ claims.

Barclays considers that the Enron related claims against it are without merit and is defending them vigorously. It is not possible to estimate Barclays possible loss in relation to these matters, nor the effect that they might have upon operating results in any particular financial period.

Barclays has been in negotiations with the staff of the US Securities and Exchange Commission with respect to a settlement of the Commission’s investigations of transactions between Barclays and Enron. Barclays does not expect that the amount of any settlement with the Commission would have a significant adverse effect on its financial position or operating results.

Like other UK financial services institutions, ~~Barclays~~the Group faces numerous County Court claims and complaints by customers who allege that its unauthorised overdraft charges either contravene the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCR) or are unenforceable penalties or both. In July 2007, by agreement with all parties, the OFT commenced proceedings against seven banks and one building society, including Barclays, to resolve the matter by way of a ‘test case’ process. Preliminary issues hearings took place in January, July and December 2008 with judgments handed down in April and October 2008 and January 2009 (a further judgment not concerning Barclays terms). As to current terms, in April 2008 the Court held in favour of the banks on the issue of the penalty doctrine. The OFT did not appeal that decision. In the same judgment the Court held in favour of the OFT on the issue of the applicability of the UTCCR. The banks appealed that decision. As to past terms, in a judgment on 8th October 2008, the Court held that Barclays historic terms, including those of Woolwich, were not capable of being penalties. The OFT indicated at the January 2009 hearing that it was not seeking permission to appeal the Court’s findings in relation to the applicability of the penalty doctrine to historic terms. Accordingly, it is now clear that no declarations have or will be made against Barclays that any of its unauthorised overdraft terms assessed in the test case constitute unenforceable penalties and that the OFT will not pursue this aspect of the test case further. The proceedings will now concentrate exclusively on UTCCR issues. The banks’ appeal against the decision in relation to the applicability of the UTCCR (to current and historic terms) took place at a hearing in late October 2008. On 26th February 2009 the Court of Appeal dismissed the banks’ appeal, holding, in a judgment of broad application, that the relevant charges were not exempt from the UTCCR. The banks will petition the House of Lords for leave to appeal the decision. It is likely that the proceedings will still take a significant period of time to conclude. Pending resolution of the test case ~~referred to below (the ‘test case’),~~process, existing and new claims in the County Courts ~~are~~remain stayed, and there is an FSA waiver of the complaints handling process (which is reviewable in July 2009) and a standstill of Financial Ombudsman Service decisions. In July 2007, and by agreement with all parties, the OFT launched the test case by commencing proceedings against seven banks and one building society including Barclays, the first stage of which seeks declarations on two issues of legal principle. The ~~hearing commenced on 17th January 2008. Barclays~~Group is defending the test case vigorously. It is not practicable to estimate ~~Barclays~~the Group’s possible loss in relation to these matters, nor the effect that they may have upon operating results in any particular financial period.

Barclays

Annual Report 2008

231

Notes to the accounts

For the year ended 31st December 2008

35 Legal proceedings (continued)

Barclays is engaged in various other litigation proceedings both in the United Kingdom and a number of overseas jurisdictions, including the United States, involving claims by and against it which arise in the ordinary course of business. Barclays does not expect the ultimate resolution of any of the proceedings to which Barclays is party to have a significant adverse effect on the financial position of the Group and Barclays has not disclosed the contingent liabilities associated with these claims either because they cannot reasonably be estimated or because such disclosure could be prejudicial to the conduct of the claims.

~~201~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

36 Competition and regulatory matters

The scale of regulatory change remains challenging, arising in part from the implementation of some key European Union (EU) directives. Many changes to financial services legislation and regulation have come into force in recent years and further changes will take place in the near future. Concurrently, there is continuing political and regulatory scrutiny of the operation of the retail banking and consumer credit industries in the UK and elsewhere. The nature and impact of future changes in policies and regulatory action are not predictable and beyond the Group’s control but could have an impact on the Group’s businesses and earnings. In June 2005 an inquiry into retail banking in all of the then 25 Member States was launched by the European Commission’s Directorate General for Competition. The inquiry looked at retail banking in Europe generally. In January 2007 the European Commission announced that the inquiry had identified barriers to competition in certain areas of retail banking, payment cards and payment systems in the EU. The Commission indicated it will use its powers to address these barriers, and will encourage national competition authorities to enforce European and national competition laws where appropriate. Any action taken by the Commission and national competition authorities could have an impact on the payment cards and payment systems businesses of Barclays and on its retail banking activities in the EU countries in which it operates.

In September 2005, the UK Office of Fair Trading (OFT) received a super-complaint from the Citizens Advice Bureau relating to payment protection insurance (PPI). As a result, the OFT commenced a market study on PPI in April 2006. In October 2006 the OFT announced the outcome of the market study and ~~following a period of consultation,~~ the OFT referred the PPI market to the UK Competition Commission (CC) for an in-depth inquiry in February 2007. ~~This inquiry could last~~In June 2008, the CC published its provisional findings. The CC published its final report into the PPI market on 29th January 2009. The CC’s conclusion is that the businesses which offer PPI alongside credit face little or no competition when selling PPI to their credit customers. The CC has set out a package of measures which it considers will introduce competition into the market (the ‘Remedies’). The Remedies, which are expected to be implemented (following consultation) in 2010, are: a ban on sale of PPI at the point of sale; a prohibition on the sale of single premium PPI; mandatory personal PPI quotes to customers; annual statements for upall regular premium policies, including the back book (for example credit card and mortgage protection policies); measures to ~~two years. Also in~~ensure that improved information is available to customers; obliging providers to give information to the OFT to monitor the Remedies and to provide claims ratios to any person on request. Barclays is reviewing the report and considering the next steps, including how this might affect the Group’s different products.

In October 2006, the ~~UK Financial Services Authority (FSA)~~FSA published the outcome of its broad industry thematic review of PPI sales practices in which it concluded that some firms fail to treat customers ~~fairly.~~fairly and that the FSA would strengthen its actions against such firms. Tackling poor PPI sales practices remains a priority for the FSA, with their most recent update on their thematic work published in September 2008. Barclays voluntarily complied with the FSA’s request to cease selling single premium PPI by the end of January 2009. There has been no enforcement action against Barclays in respect of its PPI products. The Group has cooperated fully with these investigations into PPI and will continue to do so.

In April 2006, the OFT commenced a review of the undertakings given following the conclusion of the Competition Commission inquiry in 2002 into the supply of banking services to small and medium enterprises. Based on the OFT’s report, the Competition Commission issued its final decision on 21st December 2007 and decided to release the UK’s four largest clearing banks (including Barclays) from most of the transitional undertakings given by them in 2002.

The OFT has carried out investigations into Visa and MasterCard credit card interchange rates. The decision by the OFT in the MasterCard interchange case was set aside by the Competition Appeals Tribunal in June 2006. The ~~OFT’s investigation~~OFT is progressing its investigations in the Visa interchange case ~~is at an earlier stage~~ and a second MasterCard interchange case isin parallel and both are ongoing. The outcome is not known but these investigations may have an impact on the consumer credit industry in general and therefore on ~~Barclays~~the Group’s business in this sector. In February 2007 the OFT announced that it was expanding its investigation into interchange rates to include debit cards.

In April 2007, the UK consumer interest association known as Which? submitted a super-complaint to the OFT pursuant to the Enterprise Act 2002. The super-complaint criticises the various ways in which credit card companies calculate interest charges on credit card accounts. In June 2007, the OFT announced a new programme of work with the credit card industry and consumer bodies in order to make the costs of credit cards easier for consumers to understand. This OFT decision follows the receipt by the OFT of the super-complaint from Which? This new work will explore the issues surrounding the costs of credit for credit cards including purchases, cash advances, introductory offers and payment allocation. The OFT’s programme of work is expected to take six months.

On 11th February 2008, the OFT announced its recommendations, which include the introduction of an FSA price comparison website, improvements to customer information in summary boxes and the use of standard terminology.

In September 2006, the OFT announced that it had decided to undertake a fact find on the application of its statement on credit card fees ~~made in April 2006~~ to current account unauthorised overdraft fees. The fact find was completed in March 2007. On 29th March 2007, the OFT announced its decision to conduct a formal investigation into the fairness of bank current account charges. The OFT ~~announced~~initiated a market study into personal current accounts (PCAs) in the UK on 26th April 2007. The market study will look at: (i) whether the provision of ‘free if in credit’ PCAs delivers sufficiently high levels of transparency and value for customers; (ii) the implications for competition and consumers if there were to be a shift away from ‘free if in credit’ PCAs; (iii) the fairness and impact on consumers generally of the incidence, level and consequences of account charges; and (iv) what steps could be taken to improve customers’ ability to secure better value for money, in particular to help customers make more informed current account choices and drive competition. The study willstudy’s focus onwas PCAs but ~~will include~~it also included an examination of other retail banking products, in particular savings accounts, credit cards, personal loans and mortgages in order to take into account the competitive dynamics of UK retail banking. On 16th July 2008, the OFT published its market study report, in which it concluded that certain features of the UK PCA market were not working well for consumers. The OFT ~~will publish its interim findings after~~reached the ~~test case (see below).~~

Inprovisional view that some form of regulatory intervention is necessary in the UK PCA market. On 16th July ~~2007,~~2008, the OFT ~~commenced~~also announced a ~~test case~~consultation to seek views on the findings and possible measures to address the issues raised in its report. The consultation period closed on 31st October 2008. The Group has participated fully in the ~~High Court by agreement with Barclays~~market study process and ~~seven other financial institutions in which the parties seek declarations on two legal issues arising from the banks’ terms and conditions relating~~will continue to overdraft charges. The test case does not encompass claims from local, medium or larger business customers. The proceedings will run in parallel with the ongoing OFT dual inquiry into unauthorised overdraft charges and PCAs. Please also refer to Note 35.

In January 2007, the FSA issued a statement of good practice relating to mortgage exit administration fees. Barclays agreed to charge the fee applicable at the time the customer took out the mortgage, which was one of the options recommended by the FSA.do so.

US laws and regulations require compliance with US economic sanctions, administered by the Office of Foreign Assets Control, against designated foreign countries, nationals and others. HM Treasury regulations similarly require compliance with sanctions adopted by the UK government. ~~Barclays~~The Group has been conducting an internal review of its conduct with respect to US ~~dollar~~Dollar payments involving countries, persons orand entities subject to these sanctions and has been reporting to governmental ~~agencies~~authorities about the results of that review. ~~Barclays~~The Group received inquiries relating to these sanctions and certain US ~~dollar~~Dollar payments processed by its New York branch from the New York County District Attorney’s Office and the US Department of Justice, which along with other authorities, has been reported to be conducting investigations of sanctions compliance by non-US financial institutions. ~~Barclays~~The Group has responded to those inquiries and is cooperating with the regulators, the Department of Justice and the District Attorney’s Office in connection with their investigations of Barclays conduct with respect to sanctions compliance. Barclays has also received a formal notice of investigation from the FSA, and has been keeping the FSA informed of the progress of ~~these~~the US investigations and Barclays internal review. Barclays review is ongoing. It is currently not possible to predict the ultimate resolution of the issues covered by Barclays review and the investigations, including the timing and potential financial ~~effect~~impact of any resolution, which could be substantial.

The Financial Services Compensation Scheme provides compensation to customers of financial institutions in the event that an institution is unable, or is likely to be unable, to pay claims against it. During the year, a number of institutions, including Bradford & Bingley plc, Heritable Bank plc, Kaupthing Singer & Friedlander Limited, Landsbanki ‘Icesave’, and London Scottish Bank plc, were declared in default by the FSA. In order to meet its obligations to the depositors of these institutions, the FSCS has borrowed £19.7 billion from HM Treasury, which is on an interest only basis until September 2011. These borrowings are anticipated to be repaid wholly or substantially from the realisation of the assets of the above named institutions. The FSCS raises annual levies from the banking industry to meet its management expenses and compensation costs. Individual institutions make payments based on their level of market participation (in the case of deposits, the proportion that their protected deposits represent of total market protected deposits) at 31st December each year. If an institution is a market participant on this date it is obligated to pay a levy. Barclays ~~does not expect these matters to have~~Bank PLC was a ~~material adverse effect~~market participant at 31st December 2007 and 2008. The Group has accrued £101m for its share of levies that will be raised by the FSCS including the interest on the ~~financial position~~loan from HM Treasury in respect of the ~~Group, but~~levy years to 31st March 2010. The accrual includes estimates for the interest FSCS will pay on the loan and estimates of Barclays market participation in the relevant periods. Interest will continue to accrue on the HM Treasury loan to the FSCS until September 2011 and will form part of future FSCS management expenses levies. If the assets of the defaulting institutions are insufficient to repay the HM Treasury loan in 2011, the FSCS will agree a schedule of repayments with HM Treasury, which will be recouped from the industry in the form of additional levies. At the date of these financial statements, it is not possible to estimate whether there will ultimately be additional levies on the industry, the level of Barclays market participation or other factors that may affect the amounts or timing of amounts that may ultimately become payable, nor the effect ~~they might~~that such levies may have upon operating results in any particular financial period.

232

Barclays

Annual Report ~~2007~~2008

~~202~~

LOGO

37 Leasing

The Group is both lessor and lessee under finance and operating leases, providing asset financing for its customers and leasing assets for its own use. In addition, assets leased by the Group may be sublet to other parties. An analysis of the impact of these transactions on the Group balance sheet and income statement is as follows:

(a) As Lessor

Finance lease receivables

The Group specialises in asset-based lending and works with a broad range of international technology, industrial equipment and commercial companies to provide customised finance programmes to assist manufacturers, dealers and distributors of assets.

Finance lease receivables are included within loans and advances to customers.

The Group’s net investment in finance lease receivables was as follows:


	2007					2006					2008					2007
	Gross investment in finance lease receivables £m	Future finance income £m		Present value of minimum lease payments receivable £m	Unguaranteed residual values £m	Gross investment in finance lease receivables £m	Future finance income £m		Present value of minimum lease payments receivable £m	Unguaranteed residual values £m	Gross investment in finance lease receivables £m	Future finance income £m		Present value of minimum lease payments receivable £m	Unguaranteed residual values £m	Gross investment in finance lease receivables £m	Future finance income £m		Present value of minimum lease payments receivable £m	Unguaranteed residual values £m
Not more than one year	3,657	(780	)	2,877	213	3,650	(734	)	2,916	166	3,929	(689	)	3,240	149	3,657	(780	)	2,877	213
Over one year but not more than five years	7,385	(1,613	)	5,772	374	5,824	(1,490	)	4,334	334	8,668	(1,673	)	6,995	355	7,385	(1,613	)	5,772	374
Over five years	3,476	(935	)	2,541	14	3,790	(898	)	2,892	15	3,419	(768	)	2,651	25	3,476	(935	)	2,541	14

Total	14,518	(3,328	)	11,190	601	13,264	(3,122	)	10,142	515	16,016	(3,130	)	12,886	529	14,518	(3,328	)	11,190	601

The allowance for uncollectable finance lease receivables included in the allowance for impairment amounted to ~~£113m~~£189m at 31st December ~~2007 (2006: £99m)~~2008 (2007: £113m).

Operating lease receivables

The Group acts as lessor, whereby items of plant and equipment are purchased and then leased to third parties under arrangements qualifying as operating leases. The items purchased to satisfy these leases are treated as plant and equipment in the Group’s financial statements and are generally disposed of at the end of the lease term (see Note 23).

The future minimum lease payments expected to be received under non-cancellable operating leases at 31st December ~~2007~~2008 were as follows:


	2007 Plant and equipment £m	2006 Plant and equipment £m	2008 Plant and equipment £m	2007 Plant and equipment £m
Not more than one year	29	18	80	29
Over one year but not more than two years	24	5	42	24
Over two years but not more than three years	22	3	36	22
Over three years but not more than four years	20	3	24	20
Over four years but not more than five years	11	3	13	11
Over five years	10	7	39	10

Total	116	39	234	116

(b) As Lessee

Finance lease commitments

The Group leases items of property, plant and equipment on terms that meet the definition of finance leases. Finance lease commitments are included within other liabilities (see Note 25).

Obligations under finance leases were as follows:


	2007 Total future minimum payments £m	2006 Total future minimum payments £m	2008 Total future minimum payments £m	2007 Total future minimum payments £m
Not more than one year	12	6	35	12
Over one year but not more than two years	14	21	13	14
Over two years but not more than three years	13	11	14	13
Over three years but not more than four years	12	14	17	12
Over four years but not more than five years	15	9	14	15
Over five years	17	31	3	17

Net obligations under finance leases	83	92	96	83

~~203~~

Barclays

Annual Report ~~2007~~2008

233

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

37 Leasing ~~(continued)~~

~~(b) As Lessee~~ (continued)

The carrying amount of assets held under finance leases at the balance sheet date was:


					2008 £m		2007 £m
	2007 £m		2006 £m
Cost	94		44		87		94
Accumulated depreciation	(24	)	(25	)	(67	)	(24	)

Net book value	70		19		20		70

Operating lease commitments

The Group leases various offices, branches and other premises under non-cancellable operating lease arrangements. The leases have various terms, escalation and renewal rights. There are no contingent rents payable. The Group also leases equipment under non-cancellable lease arrangements.

Where the Group is the lessee the future minimum lease payment under non-cancellable operating leases are as follows:


					2008		2007
	2007		2006		Property £m	Equipment £m	Property £m	Equipment £m
	Property £m	Equipment £m	Property £m	Equipment £m
Not more than one year	191	6	335	9	275	5	191	6
Over one year but not more than two years	396	1	337	9	354	1	396	1
Over two years but not more than three years	357	1	311	2	334	1	357	1
Over three years but not more than four years	323	–	268	–	315	–	323	–
Over four years but not more than five years	287	–	223	–	465	5	287	–
Over five years	2,225	–	2,057	–	2,744	1	2,225	–

Total	3,779	8	3,531	20	4,487	13	3,779	8

The total of future minimum sublease payments to be received under non-cancellable subleases at the balance sheet date is ~~£167m (2006: £251m)~~£158m (2007: £167m).

38 Disposals

The Group made the following material disposals in 2008:


	% Disposal	Date
Barclays Life Assurance Limited	100	31/10/08


	2008 £m
Total disposal consideration	762
Costs associated with disposal	(33	)
Net assets disposed	(403	)
Profit on disposal of subsidiaries	326

Total disposal consideration	762
Costs associated with disposal	(7	)
Repayment of loan on disposal	(386	)
Cash and cash equivalents disposed of	(131	)
Disposal of subsidiaries, net of cash disposed	238

Cash received in respect of disposal of ownership in BGI UK Holdings Limited through the exercise of options under the BGI EOP scheme	19
Decrease in investment in subsidiaries	19

234

Barclays

Annual Report 2008

LOGO

39 Acquisitions

The Group made the following material acquisitions in ~~2007:~~2008:


		Acquisition date	Gains on acquisitions £m	Goodwill £m
Lehman Brothers North American businesses	(a)	22nd September 2008	2,262	–

Macquarie Bank Limited residential mortgage businesses	(b)	6th November 2008	52	–

Goldfish credit card UK businesses	(b)	31st March 2008	92	–

Expobank (100% of ordinary shares)	(c)	1st July 2008	–	243
Gains on acquisitions			2,406

(a) ~~Indexchange Investment AG~~Lehman Brothers North American businesses

On ~~8th February 2007,~~22nd September 2008, the Group completed the acquisition of Lehman Brothers North American businesses.

The assets and liabilities of Lehman Brothers North American businesses after the acquisition, details of the purchase price and the gain on acquisition arising were as follows:


	Fair values £m

Assets
Cash and balances at central banks	861
Trading portfolio assets	23,837
Loans and advances to customers	3,642
Available-for-sale financial investments	1,948
Other assets	41
Intangible assets^a	888
Property, plant and equipment	886
Deferred tax asset	229

Total assets	32,332

Liabilities
Customer accounts	2,459
Derivative financial instruments	599
Repurchase agreements and cash collateral on securities lent	24,409
Other liabilities	1,049
Deferred tax liabilities	517

Total liabilities	29,033
Net assets acquired (excludes Obligation to be settled in shares)	3,299
Obligation to be settled in shares^b	(163	)

Acquisition cost
Cash paid	834
Attributable costs	40

Total consideration	874

Gain on acquisition	2,262

The acquired assets and liabilities summarised in the table above do not represent the entire balance sheet of Lehman Brothers North American businesses, or of discrete business lines within those operations. For this reason it is not practical to reliably determine the carrying amount of the assets and liabilities in the pre-acquisition books and records of Lehman Brothers.

Notes

a	Intangible assets included an amount of £636m relating to customer lists.

Under the terms of the acquisition, the Group assumed an obligation to make payments to employees of the acquired business in respect of their pre-acquisition service provided to Lehman Brothers. This amount represents the equity-settled portion of that obligation and is recognised as a component of shareholders’ equity.

Barclays

Annual Report 2008

235

Notes to the accounts

For the year ended 31st December 2008

39 Acquisitions (continued)

Certain assets were received subsequent to the acquisition date, since it was first necessary to agree their status as assets of the Group with the relevant regulators, custodians, trustees, exchanges and bankruptcy courts. Such assets were initially classified within loans and advances. Once they were received, the related receivable was derecognised and the resulting asset recognised within the appropriate balance sheet category. In the table such assets are classified accordingly.

The initial accounting for the acquisition has been determined only provisionally. Any revisions to fair values that result from the conclusion of the acquisition process with respect to assets not yet received by the Group will be recognised as an adjustment to the initial accounting. Any such revisions must be effected within 12 months of the acquisition date and would result in a restatement of the 2008 income statement and balance sheet.

The excess of the fair value of net assets acquired over consideration paid resulted in £2,262m of gain on acquisition.

It is impracticable to disclose the profit or loss of the acquired Lehman Brothers North American businesses since the acquisition date. The acquired business has been integrated into the corresponding existing business lines and there is no reliable basis for allocating post-acquisition results between the acquirer and the acquiree. Similarly, it is impracticable to disclose the revenue and profit or loss of the combined entity as though the acquisition date had been 1st January 2008. Only parts of Lehman Brothers US and Canadian businesses, and specified assets and liabilities, were acquired. There is no reliable basis for identifying the proportion of the pre-acquisition results of Lehman Brothers that relates to the business acquired by the Group.

(b) Macquarie Bank Limited Italian residential mortgage businesses and Goldfish credit card UK businesses

On 6th November 2008, the Group purchased the Italian residential mortgage businesses of Macquarie Bank Limited.

On 31st March 2008, the Group completed the acquisition of Discover’s UK credit card businesses, Goldfish.

The assets and liabilities of Macquarie Bank Limited Italian residential mortgage businesses and Goldfish credit card UK businesses before and after the acquisition, details of the purchase price and gains on acquisitions arising were as follows:


	Macquarie Bank businesses				Goldfish credit card UK businesses
	Carrying value pre-acquisition £m	Fair value adjustments £m		Fair values £m	Carrying value pre-acquisition £m	Fair value adjustments £m		Fair values £m
Assets
Cash and balances at central banks	3	–		3	172	–		172
Loans and advances to banks	–	–		–	8	–		8
Loans and advances to customers	833	(20	)	813	1,900	(34	)	1,866
Other assets	–	–		–	39	(1	)	38
Intangible assets	–	–		–	–	32		32
Property, plant and equipment	1	–		1	39	1		40
Deferred tax asset	–	–		–	–	12		12

Total assets	837	(20)		817	2,158	10		2,168
Liabilities
Long- and short-term borrowings	–	–		–	1,974	–		1,974
Other liabilities	–	–		–	55	–		55
Deferred tax liabilities	–	–		–	–	9		9

Total liabilities	–	–		–	2,029	9		2,038

Net assets acquired	837	(20)		817	129	1		130

Acquisition cost
Cash paid				765				35
Attributable costs				–				3

Total consideration				765				38

Gains on acquisitions				52				92

The contribution to the consolidated profit before tax of the acquired businesses in the table above for the period from the acquisition date to 31st December 2008 is £1m loss for Macquarie Bank Limited businesses and £40m profit for the Goldfish credit card UK businesses.

The excess remaining after the reassessment of the acquirees’ identifiable assets, liabilities and contingent liabilities which has been recognised within the consolidated income statement as a gain on acquisition is £52m for Macquarie Bank Limited businesses and £92m for Goldfish credit card UK businesses.

236

Barclays

Annual Report 2008

LOGO

39 Acquisitions (continued)

On 1st July 2008, the Group acquired 100% of the ordinary shares of ~~Indexchange Investment AG, based in Munich offering exchange traded fund products.~~Expobank, a Russian bank.

~~(b) Equifirst Corporation~~

~~On 30th March 2007, the Group acquired 100%~~The assets and liabilities of the ~~ordinary shares of Equifirst Corporation, a sub-prime mortgage origination business.~~

~~(c) Walbrook Group Limited~~

~~On 18th May 2007,~~Russian bank, Expobank before and after the ~~Group acquired 100%~~acquisition, details of the ~~ordinary shares of Walbrook Group Limited. The business serves high net worth private clients~~purchase price and ~~corporate customers.~~

~~Barclays~~

~~Annual Report 2007~~

~~204~~

~~38 Acquisitions (continued)~~

~~Details of~~ the ~~net assets of material companies acquired and consideration paid~~goodwill arising were as follows:


	Carrying value pre-acquisition £m	Fair value adjustments £m		2007 £m	Carrying value pre-acquisition £m	Fair value adjustments £m	Fair values £m
Assets
Cash and balances at central banks	51	–		51	73	–	73
Assets designated at fair value	133	–		133
Goodwill	41	(41	)	–
Property, plant and equipment	7	–		7
Trading portfolio assets					52	–	52
Loans and advances to customers					446	5	451
Other assets	19	–		19	9	–	9
Intangible assets	–	53		53	–	45	45
Deferred tax assets	10	–		10
Property, plant and equipment					28	–	28

Total assets	261	12		273	608	50	658

Liabilities
Deposits from banks	162	–		162	71	–	71
Deferred tax liabilities	–	4		4
Customer accounts					318	–	318
Debt securities in issue					103	–	103
Other liabilities	98	(38	)	60	16	–	16

Total liabilities	260	(34	)	226	508	–	508

Net assets acquired				47	100	50	150

Goodwill				267			243

Total				314			393

Acquisition cost
Cash paid							386
Attributable costs							7

Total consideration							393

The excess of proceeds over the net assets acquired has generated goodwill of ~~£267m, based on the exchange rate at the date of acquisition~~£243m and is attributable to the operational synergies and earnings potential expected to be realised over the longer term.

~~In aggregate,~~The results of the ~~acquired businesses generated a~~business’s operations have been included from 1st July 2008 and contributed £13m loss ~~of (£15m)~~ to the consolidated profit before ~~tax for the period from acquisition date to 31st December 2007.~~tax.

~~If all of the above acquisitions had occurred on 1st January 2007 the impact on total Group income and net profit for the year would have been immaterial.~~


		~~2007~~ £m
~~Acquisition cost~~
~~Cash paid~~		~~297~~
~~Deferred consideration~~		11
~~Attributable costs~~		6
~~Total consideration~~		~~314~~

Cash outflows in respect of acquisitions

The aggregate net outflow of cash from the acquisition of the above Group businesses and entities was as follows:


	~~2007~~2008 £m
Cash ~~paid~~consideration on acquisitions	~~297~~2,070
Cash and cash equivalents acquired	(511,109	)

~~Net cash~~Cash outflow on acquisition	~~246~~961

Cash paid in respect of acquisition of shares in Barclays Global Investors UK Holdings Limited	~~488~~157
~~Cash paid in respect of acquisition of shares in Absa Bank Limited~~			~~180~~
Increase in investment in subsidiaries	~~668~~157

Barclays

Annual Report 2008

237

Notes to the accounts

For the year ended 31st December 2008

3940 Investment in subsidiaries

The investment in Barclays Bank PLC is stated in the balance sheet of Barclays PLC at a cost of ~~£10,186m (2006: £8,641m)~~£15,340m (2007: £10,186m). The increase of ~~£1,545m (2006: £179m)~~£5,154m (2007: £1,545m) during the year represents the cost of additional shares of ~~£111m (2006: £179m)~~£16m (2007: £111m), capital contributions of £4,362m (2007: £1,434m), and a non-cash capital contribution of ~~£1,434m (2006: £nil).~~£776m.

The investment in Barclays Investments (Netherlands) N.V. iswas liquidated in September 2008. The investment was stated in the balance sheet of Barclays PLC at a cost of £205m ~~(2006: £nil). The increase of £205m (2006: £nil) during the year represents the cost of the initial share issue.~~in 2007.

The investment in Odysseus Jersey (No. 1) Limited iswas liquidated in September 2008. The investment was stated in the balance sheet of Barclays PLC at a cost of £0.1m ~~(2006: £nil). The increase of £0.1m (2006: £nil) during the year represents the cost of the initial share issue.~~

~~205~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~in 2007.

~~For the year ended 31st December 2007~~

4041 Principal subsidiaries


Country of registration or incorporation	Company name	Nature of business	Percentage of equity capital held %

Botswana	Barclays Bank of Botswana Limited	Banking	74.9
Egypt	Barclays Bank Egypt SAE	Banking	100
England	Barclays Bank PLC	Banking, holding company	100	*
England	Barclays Mercantile Business Finance Limited	Loans and advances including leases to customers	100	*
England	Barclays Global Investors UK Holdings Limited	Holding company	~~94.1~~95.5
England	Barclays Global Investors Limited	Investment management	~~94.1~~95.5	*
England	Barclays ~~Life Assurance~~Bank Trust Company Limited	~~Life assurance~~ Banking, securities industries and trust services	100	*
England	Barclays Stockbrokers Limited	Stockbroking	100	*
England	Barclays Capital Securities Limited	Securities dealing	100	*
England	Barclays Global Investors Pensions Management Limited	Investment management	95.5	*
England	FIRSTPLUS Financial Group PLC	Secured loan provider	100
England	~~Barclays Bank Trust Company Limited~~	~~Banking, securities industries and trust services~~	~~100~~
~~England~~	~~Barclays Stockbrokers Limited~~	~~Stockbroking~~	~~100~~
~~England~~	~~Barclays Capital Securities Limited~~	~~Securities dealing~~	~~100~~
~~England~~	~~Barclays Global Investors Pensions Management Limited~~	~~Investment management~~	~~94.1~~	*
~~England~~	~~FIRSTPLUS Financial Group PLC~~	~~Secured loan provider~~	~~100~~
~~England~~	Gerrard Investment Management Limited	Investment management	100	*
Ghana	Barclays Bank of Ghana Limited	Banking	100
Ireland	Barclays Insurance (Dublin) Limited	Insurance provider	100	*
Ireland	Barclays Assurance (Dublin) Limited	Insurance provider	100	*
Isle of Man	Barclays Private Clients International Limited^a	Banking	100	*
Japan	Barclays Capital Japan Limited	Securities dealing	100	*
Jersey	Barclays Private Bank & Trust Limited	Banking, trust company	100	*
Kenya	Barclays Bank of Kenya Limited	Banking	68.5
Russia	Barclays Bank LLC	Banking	100	*
South Africa	Absa Group Limited	Banking	~~58.8~~58.6
Spain	Barclays Bank SA	Banking	99.7
Switzerland	Barclays Bank (Suisse) S.A.	Banking and trust services	100
USA	Barclays Capital Inc.	Securities dealing	100	*
USA	Barclays ~~Capital Inc.~~Financial Corporation	~~Securities dealing~~ Holding company for US credit card issuer	100	*
USA	Barclays ~~Financial Corporation~~Global Investors, National Association	~~Holding company for US credit card issuer~~ Investment management and securities industry	~~100~~95.5	*
USA	Barclays ~~Global Investors, National Association~~Group USA Inc.	~~Investment management and securities industry~~ Holding company	~~94.1~~100	*
Zimbabwe	Barclays Bank of Zimbabwe Limited	Banking	67.8	*

In accordance with Section 231(5) of the Companies Act 1985, the above information is provided solely in relation to principal subsidiaries.

The country of registration or incorporation is also the principal area of operation of each of the above subsidiaries. Investments in these subsidiaries are held directly by Barclays Bank PLC except where marked *.

Full information of all subsidiaries will be included in the Annual Return to be filed at Companies House.

Note

a	BBPLC is the beneficial owner of 38.1% of shares and Barclays Holdings (Isle of Man) Limited is the beneficial owner of 61.9% of shares.

238

Barclays

Annual Report ~~2007~~2008

~~206~~

LOGO

4142 Other entities

There are a number of entities that do not qualify as subsidiaries under UK Law but which are consolidated when the substance of the relationship between the Group and the entity (usually a Special Purpose Entity (SPE)) indicates that the entity is controlled by the Group. Such entities are deemed to be controlled by the Group when relationships with such entities gives rise to benefits that are in substance no different from those that would arise were the entity a subsidiary.

The consolidation of such entities may be appropriate in a number of situations, but primarily when:

-–

the operating and financial ~~polices~~policies of the entity are closely defined from the outset (i.e. it operates on an ‘autopilot’ basis) with such policies being largely determined by the Group;

-–

the Group has rights to obtain the majority of the benefits of the entity and/or retains the majority of the residual or ownership risks related to the entity; or

-–

the activities of the entity are being conducted largely on behalf of the Group according to its specific business objectives.

Such entities are created for a variety of purposes including securitisation, structuring, asset realisation, intermediation and management.

Entities may have a different reporting date from that of the parent of 31st December. Dates may differ for a variety of reasons including local reporting regulations or tax laws. In accordance with our accounting policies, for the purpose of inclusion in the consolidated financial statements of Barclays PLC, entities with different reporting dates are made up until 31st December.

Entities may have restrictions placed on their ability to transfer funds, including payment of dividends and repayment of loans, to their parent entity. Reasons for the restrictions include:

-–

Central bank restrictions relating to local exchange control laws.

-–

Central bank capital adequacy requirements.

-–

Company law restrictions relating to treatment of the entities as going concerns.

Although the Group’s interest in the equity voting rights in certain entities exceeds 50%, or it may have the power to appoint a majority of their Boards of Directors, they are excluded from consolidation because the Group either does not direct the financial and operating policies of these entities, or on the grounds that another entity has a superior economic interest in them. Consequently, these entities are not deemed to be controlled by Barclays.

The table below includes information in relation to such entities as required by the Companies Act 1985, Section 231(5).

Country of registration
or incorporation

Name

Percentage of
ordinary share
capital held
%

Equity
share-
holders’
funds
£m

Retained

profit for

the year

£m

Name

Percentage of
ordinary share
capital held

Equity
share-
holders’
funds
£m

Retained
loss for
the year
£m

Oak Dedicated Limited

100

)

Oak Dedicated Limited

100

)

Oak Dedicated Two Limited

100

)

Oak Dedicated Two Limited

100

)

–

Oak Dedicated Three Limited

100

Oak Dedicated Three Limited

100

–

Fitzroy Finance Limited

100

–

Fitzroy Finance Limited

100

–

Cayman Islands

St James Fleet Investments Two Limited

100

–

St James Fleet Investments Two Limited

100

–

Cayman Islands

BNY BT NewCo Limited

–

BNY BT NewCo Limited

–

~~207~~

Barclays

Annual Report ~~2007~~2008

239

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

4243 Related party transactions and Directors’ remuneration

(a) Related party transactions

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operation decisions, or one other party controls both. The definition includes subsidiaries, associates, joint ventures and the Group’s pension schemes, as well as other persons.

Subsidiaries

Transactions between Barclays PLC and subsidiaries also meet the definition of related party transactions. Where these are eliminated on consolidation, they are not disclosed in the Group financial statements. Transactions between Barclays PLC and its subsidiary, Barclays Bank PLC are fully disclosed directly in its balance sheet and income statement. A list of the Group’s principal subsidiaries is shown in Note ~~40.~~41.

Associates, joint ventures and other entities

The Group provides banking services to its associates, joint ventures, ~~and~~ the Group pension funds (principally the UK Retirement Fund), and to entities under common directorships, providing loans, overdrafts, interest and non-interest bearing deposits and current accounts to these entities as well as other services. Group companies, principally within Barclays Global Investors, also provide investment management and custodian services to the Group pension schemes. The Group also provides banking services for unit trusts and investment funds managed by Group companies and are not individually material. All of these transactions are conducted on the same terms as third-party transactions.

Amounts included in the accounts, in aggregate, by category of related party entity are as follows:


	For the year ended and as at 31st December 2007									For the year ended and as at 31st December 2008
	Associates £m		Joint ventures £m		Entities under common directorships £m		Pension funds unit trusts and investment funds £m	Total £m		Associates £m		Joint ventures £m		Entities under common directorships £m	Pension funds unit trusts and investment funds £m		Total £m

Income statement:
Interest received	5		75		1		–	81		–		105		3	–		108
Interest paid	(1	)	(58	)	(1	)	–	(60	)	–		(73	)	–	–		(73	)
Fees received for services rendered (including investment management and custody and commissions)	1		34		–		26	61		–		15		–	5		20
Fees paid for services provided	(52	)	(78	)	–		–	(130	)	(44	)	(146	)	–	–		(190	)
Principal transactions	(24	)	47		(16	)	–	7		8		59		60	(25	)	102

Assets:
Loans and advances to banks and customers	142		886		40		–	1,068		110		954		34	–		1,098
Derivative transactions	–		4		36		–	40		–		9		311	15		335
Other assets	19		18		–		14	51		67		276		–	3		346

Liabilities:
Deposits from banks	11		–		–		–	11		–		592		–	–		592
Customer accounts	–		61		33		12	106		–		167		74	10		251
Derivative transactions	–		10		50		–	60		–		–		111	41		152
Other liabilities	4		125		–		–	129		3		18		–	28		49

240

Barclays

Annual Report ~~2007~~2008

~~208~~

LOGO

4243 Related party transactions and Directors’ remuneration (continued)


											For the year ended and as at 31st December 2007^a
	For the year ended and as at 31st December 2006										Associates £m		Joint ventures £m		Entities under common directorships £m		Pension funds unit trusts and investment funds £m	Total £m
	Associates £m		Joint ventures £m		Entities under common directorships £m		Pension funds unit trusts and investment funds £m		Total £m
Income statement:
Interest received	45		38		–		2		85		5		88		1		–	94
Interest paid	(31	)	(57	)	–		–		(88	)	(1	)	(58	)	(1	)	–	(60	)
Fees received for services rendered (including investment management and custody and commissions)	14		7		–		28		49		1		34		–		26	61
Fees paid for services provided	(115	)	(51	)	–		(1	)	(167	)	(52	)	(78	)	–		–	(130	)
Principal transactions	3		–		(2	)	–		1		(27	)	45		(16	)	–	2

Assets:
Loans and advances to banks and customers	784		146		65		–		995		142		1,285		40		–	1,467
Derivative transactions	–		–		–		–		–		–		4		36		–	40
Other assets	19		3		–		17		39		213		106		–		14	333

Liabilities:
Deposits from banks	9		–		–		3		12		11		–		–		–	11
Customer accounts	19		18		5		34		76		–		61		33		12	106
Derivative transactions	–		–		2		–		2		–		10		50		–	60
Other liabilities	13		8		–		–		21		4		125		–		–	129


									For the year ended and as at 31st December 2006^a
	For the year ended and as at 31st December 2005								Associates £m		Joint ventures £m		Entities under common directorships £m		Pension funds unit trusts and investment funds £m		Total £m
	Associates £m		Joint ventures £m		Entities under common directorships £m	Pension funds unit trusts and investment funds £m	Total £m
Income statement:
Interest received	23		14		–	–	37		45		38		–		2		85
Interest paid	(37	)	(45	)	–	–	(82	)	(31	)	(57	)	–		–		(88	)
Fees received for services rendered (including investment management and custody and commissions)	5		7		–	17	29		14		7		–		28		49
Fees paid for services provided	(120	)	(34	)	–	–	(154	)	(115	)	(51	)	–		(1	)	(167	)
Principal transactions	33		–		–	1	34		3		–		(2	)	–		1

Assets:
Loans and advances to banks and customers	632		19		–	–	651		784		146		65		–		995
Derivative transactions	36		–		–	–	36		–		–		–		–		–
Other assets	26		1		–	19	46		19		3		–		17		39

Liabilities:
Deposits from banks	827		–		–	–	827		9		–		–		3		12
Customer accounts	13		22		–	501	536		19		18		5		34		76
Derivative transactions	1		–		–	–	1		–		–		2		–		2
Other liabilities	22		6		–	–	28		13		8		–		–		21

No guarantees, pledges or commitments have been given or received in respect of these transactions in 2008, 2007 ~~2006~~ or ~~2005.~~

~~There are no leasing transactions between related parties for 2007, 2006 or 2005.~~2006.

Derivatives transacted on behalf of the Pensions Funds Unit Trusts and Investment Funds amounted to £318m (2007: £22m, ~~(2006: £1,209m, 2005: £280m)~~2006: £1,209m).

In ~~2007~~2008 Barclays paid ~~£18m (2006: £19m)~~£12m (2007: £18m) of its charitable donations through the Charities Aid Foundation, a registered charitable organisation, in which a Director of the Company is a Trustee.

Note

a	The amounts reported in prior periods have been restated to reflect new related parties.

~~209~~

Barclays

Annual Report ~~2007~~2008

241

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

4243 Related party transactions and Directors’ remuneration (continued)

Key Management Personnel

The Group’s Key Management Personnel, and persons connected with them, are also considered to be related parties for disclosure purposes. Key Management Personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of Barclays PLC (directly or indirectly) and comprise the Directors of Barclays PLC and the Officers of the Group, certain direct reports of the Group Chief Executive and the heads of major business units.

In the ordinary course of business, the Bank makes loans to companies where a Director or other member of Key Management Personnel (or any connected person) is also a Director or other member of Key Management Personnel (or any connected person) of Barclays. These loans are made on substantially the same criteria and terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and did not involve more than the normal risk of collectability or present other unfavourable features.

There were no material related party transactions with companies where a Director or other member of Key Management Personnel (or any connected person) is also a Director or other member of Key Management Personnel (or any connected person) of Barclays.

The Group provides banking services to Directors and other Key Management Personnel and persons connected to them. Transactions during the year and the balances outstanding at 31st December ~~2007~~2008 were as follows:

     Directors, other Key
Management Personnel
and connected persons

         2007
£m

     2006
£m

   2005
£m

Loans outstanding at 1st January
     7.8    7.4    7.8
Loans issued during the year
     2.7    2.7    3.4
Loan repayments during the year

     (3.2 )    (2.3 )    (3.2 )

Loans outstanding at 31st December

     7.3    7.8    8.0

Interest income earned

     0.4    0.3    0.4

~~No allowances for impairment were recognised in respect of loans to Directors or other members of Key Management Personnel (or any connected person) in 2007, 2006 or 2005.~~


								Directors, other Key Management Personnel and connected persons
								2008 £m		2007 £m		2006 £m

Loans outstanding at 1st January								7.4		7.8		7.4
Loans issued during the year								6.9		2.7		2.7
Loan repayments during the year								(5.5	)	(3.2	)	(2.3	)

Loans outstanding at 31st December								8.8		7.3		7.8

Interest income earned								0.4		0.4		0.3
No allowances for impairment were recognised in respect of loans to Directors or other members of Key Management Personnel (or any connected person) in 2008, 2007 or 2006.							No allowances for impairment were recognised in respect of loans to Directors or other members of Key Management Personnel (or any connected person) in 2008, 2007 or 2006.
	2007 £m		2006 £m		2005 £m			2008 £m		2007 £m		2006 £m

Deposits outstanding at 1st January	15.0		4.7		2.5			8.9		15.0		4.7
Deposits received during the year	114.4		105.2		20.4			235.7		114.4		105.2
Deposits repaid during the year	(115.0	)	(94.8	)	(18.2	)		(221.9	)	(115.0	)	(94.8	)

Deposits outstanding at 31st December	14.4		15.1		4.7			22.7		14.4		15.1

Interest expense on deposits	0.6		0.2		0.1			0.5		0.6		0.2

Of the loans outstanding above, £1.6m (2007: £nil, ~~(2006: £nil, 2005: £0.7m)~~2006: £nil) relates to Directors and other Key Management Personnel (and persons connected to them) that left the Group during the year. Of the deposits outstanding above, £6.1m (2007: £2.8m, ~~(2006: £0.1m, 2005: £nil)~~2006: £0.1m) related to Directors and other Key Management Personnel (and persons connected to them) that left the Group during the year.

All loans are provided on normal commercial terms to Directors and other Key Management Personnel (and persons connected to them), with the exception of ~~£1,540 of loans which are provided to non-Director members of Key Management Personnel on staff preferential interest rates (5%) and £665~~£692 of loans which are provided on an interest free basis.

The loans of £1,540 provided at staff preferential rates of interest reflects the amortized principal amount of a home mortgage loan that was provided by Barclays to a non-Director member of key management personnel. The home mortgage loan was granted at a time when Barclays had in place a corporate policy of providing home mortgage loans at preferential rates of interest to all staff members. This policy has since been discontinued by Barclays. These home mortgage loans were made on substantially the same terms, including interest rates and collateral, to all staff members, who applied for such loans. The loans of £665£692 provided on an interest free basis relate to the granting of loans to one non-Director member of Barclays key management to purchase commuter rail tickets. The commuter rail ticket loans are still provided to all Barclays staff members upon request on the same terms.

All loans to Directors and other key management personnel (a) were made in the ordinary course of business, (b) were made on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other persons and (c) did not involve more than a normal risk of collectability or present other unfavourable features.

242

Barclays

Annual Report ~~2007~~2008

~~210~~

LOGO

4243 Related party transactions and Directors’ remuneration(continued)

Remuneration of Directors and other Key Management Personnel

   Directors, other Key Management
Personnel and connected persons
   2007
£m
   2006
£m
   2005
£m

Salaries and other short-term benefits
   23.7    34.2    32.9
Pension costs
   1.1    0.8    1.1
Other long-term benefits
   9.2    9.3    21.5
Termination benefits
   –    1.4    1.5
Share-based payments
   31.7    27.2    25.3
Employer social security charges on emoluments
   7.8    10.0    10.4
   73.5    82.9    92.7
(b) Disclosure required by the Companies Act 1985
The following information is presented in accordance with the Companies Act 1985:
Directors’ remuneration

      2007
£m    2006
£m
Aggregate emoluments
      29.2    32.0
Gains made on the exercise of share options
      0.3    5.5
Amounts paid under long-term incentive schemes
      –    –
Actual pension contributions to money purchase scheme (2007: one Director, £10,233 and 2006: one Director, £11,414)       –    –
Notional pension contributions to money purchase scheme (2007: no Directors and 2006: no Directors)       –    –
      29.5    37.5


	Directors, other Key Management Personnel and connected persons
	2008 £m	2007 £m	2006 £m
Salaries and other short-term benefits	10.7	23.7	34.2
Pension costs	0.9	1.1	0.8
Other long-term benefits	1.6	9.2	9.3
Termination benefits	–	–	1.4
Share-based payments	11.8	31.7	27.2
Employer social security charges on emoluments	2.7	7.8	10.0
	27.7	73.5	82.9

(b) Disclosure required by the Companies Act 1985

The following information is presented in accordance with the Companies Act 1985:

Directors’ remuneration


	2008 £m	2007 £m
Aggregate emoluments	6.0	29.2
Gains made on the exercise of share options	–	0.3
Amounts paid under long-term incentive schemes	7.4	–
Actual pension contributions to money purchase scheme (2008: one Director, £11,745 and 2007: one Director, £10,233)	–	–
Notional pension contributions to money purchase scheme (2008: no Directors and 2007: no Directors)	–	–
	13.4	29.5

As at 31st December ~~2007, three~~2008, two Directors were accruing retirement benefits under a defined benefit scheme ~~(2006: four~~(2007: three Directors).

~~Two Directors (Naguib Kheraj and Frits~~One Director (Frits Seegers) agreed to waive ~~their~~his fees as non-executive ~~Directors~~Director of Absa Group Limited and Absa Bank Limited. The ~~respective~~fees for 2008 were ZAR 0.4m (£0.03m). The fees for 2007 were ZAR ~~0.1m (£0.01m) and ZAR~~ 0.5m (£0.03m). ~~The fees for 2006 were ZAR 0.4m (£ 0.03m) for Naguib Kheraj and ZAR 0.1m (£ 0.01m) for Frits Seegers.~~ In both ~~2006~~2007 and ~~2007~~2008 the fees were paid to Barclays.

Directors’ and Officers’ shareholdings and options

The beneficial ownership of the ordinary share capital of Barclays PLC by all Directors and Officers of Barclays PLC (involving 2120 persons) and Barclays Bank PLC (involving 2221 persons) at 31st December ~~2007~~2008 amounted to ~~5,774,219~~8,036,962 ordinary shares of 25p each ~~(0.09%~~(0.10% of the ordinary share capital outstanding) and ~~5,776,370~~8,037,498 ordinary shares of 25p each ~~(0.09%~~(0.10% of the ordinary share capital outstanding), respectively.

Executive Directors and Officers of Barclays PLC as a group (involving 108 persons) held, at 31st December ~~2007,~~2008, options to purchase ~~3,097,762~~2,185,380 Barclays PLC ordinary shares of 25p each at prices ranging from ~~373p~~255p to 510p under Sharesave and at 397p under the Executive Share Option Scheme and ranging from ~~326p~~317p to 534p under the Incentive Share Option Plan, respectively.

Contracts with Directors (and their connected persons) and Managers

The aggregate amounts outstanding at 31st December ~~2007~~2008 under transactions, arrangements and agreements made by banking companies within the Group for persons who are, or were during the year, Directors of Barclays PLC and persons connected with them, as defined in the Companies Act 2006, and for Managers, within the meaning of the Financial Services and Markets Act 2000, of Barclays Bank PLC were:


	Number of Directors or Managers	Number of connected persons	Amount £m
				Number of Directors or Managers	Number of connected persons	Amount £m
Directors
Loans	2	5	2.1	1	1	6.1
Quasi-loans and credit card accounts	12	18	–	8	1	–
Managers
Loans	12	n/a	13.2	3	n/a	14.0
Quasi-loans and credit card accounts	11	n/a	–	7	n/a	–

For US disclosure purposes, the aggregate emoluments of all Directors and Officers of Barclays PLC who held office during the year ~~(2007:~~(2008: 24 persons, 2007: 22 persons, 2006: 24 ~~persons, 2005: 25~~ persons) for the year ended 31st December ~~2007~~2008 amounted to £26.8m (2007: £64.6m, ~~(2006: £72.1m, 2005: £75.2m)~~2006: £72.1m). In addition, the aggregate amount set aside for the year ended 31st December ~~2007,~~2008, to provide pension benefits for the Directors and Officers amounted to £0.9m (2007: £1.1m, ~~(2006: £0.8m, 2005: £0.2m)~~2006: £0.8m). The aggregate emoluments of all Directors and Officers of Barclays Bank PLC who held office during the year ~~(2007:~~(2008: 25 persons, 2007: 23 persons, 2006: 25 ~~persons, 2005: 26~~ persons) for the year ended 31st December ~~2007~~2008 amounted to £26.9m, (2007: £64.9m ~~(2006: £72.2m, 2005: £75.4m)~~and 2006: £72.2m). In addition, the aggregate amount set aside by the Bank and its subsidiaries for the year ended 31st December ~~2007,~~2008, to provide pension benefits for the Directors and Officers amounted to £0.9m (2007: £1.1m, ~~(2006: £0.8m, 2005: £0.2m)~~2006: £0.8m).

~~211~~

Barclays

Annual Report ~~2007~~2008

243

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

4344 Events after the balance sheet date

On ~~3rd March~~2nd February 2009, Barclays completed the acquisition of PT Bank Akita, which was announced initially on 17th September 2008, ~~Barclays entered into an agreement with Petropavlovsk Finance (Limited Liability Society) to acquire 100%~~following the approval of the ~~Russian~~Central Bank ~~Expobank, for a consideration~~ of ~~approximately $745m (£373m). The transaction is expected~~Indonesia.

On 17th February 2009, Barclays announced that Barclays Capital will discontinue operations at its Equifirst subsidiary due to ~~close in summer 2008 after receipt~~the market environment and strategic direction of appropriate regulatory approvals. Expobank focuses principally on Western Russia, with a substantial presence in Moscow and St Petersburg. Founded in 1994, it has grown rapidly and comprises a blend of retail and commercial banking, operating 32 branches and dealing with a range of corporate and wholesale clients. As at 31st December 2007, Expobank had net assets of $186m (£93m).the Group.

4445 Share-based payments

The Group operates share schemes for employees throughout the world. The main current schemes are:

Sharesave

Eligible employees in the UK, Spain and Ireland may participate in the Barclays Sharesave scheme. Under this scheme, employees may enter into contracts to save up to £250 per month (Ireland:€~~320,~~500, Spain:€~~90)~~135) and, at the expiry of a fixed term of three, five or seven years (Spain: three years), have the option to use these savings to acquire shares in the Company at a discount, calculated in accordance with the rules of the scheme. The discount is currently 20% of the market price at the date the options are granted. Participants in the scheme have six months from the date of vest in which the option can be exercised.

Sharepurchase

Sharepurchase was introduced in January 2002. It is an HM Revenue & Customs approved all-employee share plan. The plan is open to all eligible UK employees, including executive Directors. Under the plan, participants are able to purchase up to £1,500 worth of Barclays PLC ordinary shares per tax year, which, if kept in trust for five years, can be withdrawn from the plan tax-free. Matching shares were introduced to the scheme during 2005 where the purchase of Barclays shares by the participant are matched equally by the Company up to a value of £600 per tax year. Any shares in the plan will earn dividends in the form of additional shares, which must normally be held by the trustee for three years before being eligible for release.

Executive Share Award Scheme (ESAS)

For certain employees of the Group an element of their annual bonus is in the form of a deferred award of a provisional allocation of Barclays PLC shares under ESAS. The total value of the bonus made to the employee of which ESAS is an element is dependent upon the business unit, Group and individual employee performance. The ESAS element of the annual bonus must normally be held for at least three years. Additional bonus shares are subsequently awarded to recipients of the provisional allocation and vest upon achieving continued service for three and five years from the date of award. ESAS awards are also made to eligible employees for recruitment purposes. All awards are subject to potential forfeit if the individual resigns and commences work with a competitor business.

Performance Share Plan (PSP)

The Performance Share Plan (PSP) was approved by shareholders at the 2005 AGM to replace the ISOP scheme. Performance shares are ‘free’ Barclays shares for which no exercise price is payable and which qualify for dividends. Performance share awards are communicated to participants as an initial allocation. Barclays performance over a three-year period determines the final number of shares that may be released to participants.

Incentive Share Plan (Incentive Shares)

The Incentive Share Plan (Incentive Shares) was introduced in March 2008. Incentive Shares are granted to participants in the form of a provisional allocation of Barclays shares which vest upon achieving continued service after three years. Participants do not pay to receive an award or to receive a release of shares. Incentive Shares qualify for dividends.

Options granted under the following schemes are over subsidiaries of Barclays PLC:

Absa Group Broad-based Black Economic Empowerment Transaction (BEE)

On 25th June 2004, Absa shareholders approved the allocation of 73,152,300, redeemable cumulative option-holding Absa preference shares to Batho Bonke Capital Limited. Each redeemable preference share carries the option to acquire one Absa ordinary share. The shares carry the same rights as ordinary shares including voting rights, and receive dividends which are payable semi-annually. Options vested immediately on date of issue and lapse after five years from the date of issue. Exercise may occur in lots of 100 only and within a price range varying from R48 to R69 (£3.16–£4.55) dependent on the 30-day volume weighted trading price on the JSE Limited. Options are redeemed by Absa on the final exercise date.

244

Barclays

Annual Report 2008

LOGO

45 Share-based payments(continued)

Absa Group Limited Share Incentive Trust (AGLSIT)

In terms of the rules of Absa Group Limited Share Incentive Trust, the maximum number of shares which may be issued or transferred and/or in respect of which options may be granted to the participants shall be limited to shares representing 10% of the total number of issued shares from time to time. This is an equity-settled share-based payment arrangement and options are allocated to Absa employees according to the normal human resources talent management processes. The options issued up to August 2005 had no performance criteria linked to them and vested in equal tranches after three, four and five years respectively. No dividends accrue to the option holder over the vesting period. The options expire after a period of ten years from the issuing date. Options issued since August 2005 have performance criteria associated with them, which require headline earnings per share to exceed an agreed benchmark over a three-year period from the grant date for the options to vest. Participants need to be in the employ of Absa at the vesting date in order to be entitled to the options.

Absa Group Limited Share Ownership Administrative Trust (AGLSOT)

AGLSOT enabled all Absa employees to participate in a one-off offer to purchase 200 redeemable cumulative option-holding preference shares. Each redeemable preference share carries the option to acquire one Absa ordinary share. Options vest after three years and lapse after five years from the date of issue. Exercise may occur in lots of 100 only and within a price range varying from R48 to R69 (£3.16–£4.55) dependent on the 30-day volume weighted trading price on the JSE Limited. Options are redeemed by Absa on the final exercise date.

Absa Group Limited Executive Share Award Scheme (AGLESAS)

The ESAS is an equity-settled share-based payment arrangement, where the participant’s notional bonus comprises a number of restricted nil-cost options, based on the allocation price of ordinary shares. Such an initial allocation is held in trust or in the name of the participant. If the participant is in the employ of the Group after the three-year vesting period, the participant will receive 20% matched shares. If the bonus award remains in the ESAS for another two years, the participant receives another 10% matched shares. Dividend shares are paid to participants on the ordinary shares as if the shares were held from inception. The number of dividend shares awarded is therefore calculated on the initial allocation and on the 20% and/or 10% matched shares, over the three- or five-year period. Employees that receive a performance bonus in excess of a predetermined amount were compelled to place a set percentage of their bonus award into the ESAS. Employees also had the option of utilising more of their bonus award for voluntary ESAS options.

In addition, options remain outstanding under the following closed schemes:

Barclays Global Investors Equity Ownership Plan (BGI EOP)

The Equity Ownership Plan ~~extends~~was extended to key employees of BGI. The exercise price of the options iswas determined by the Remuneration Committee of Barclays PLC based on the fair value of BGI as determined by an independent appraiser. The options ~~are~~were granted over shares in Barclays Global Investors UK Holdings Limited, a subsidiary of Barclays Bank PLC.

Options are not exercisable until vesting, with a third of the options held generally becoming exercisable at each anniversary of grant. The shareholder has the right to offer to sell the shares to Barclays Bank PLC 355 days following the exercise of the option. Barclays Bank PLC may accept the offer and purchase the shares at the most recently agreed valuation but is under no obligation to do so. Options lapse ten years after grant. The most recently agreed valuation was ~~£106.03~~£87.22, at ~~30th June 2007.~~

~~Absa Group Limited Black Economic Empowerment (BEE) Transaction~~

On 25th June 2004, Absa shareholders approved the allocation of 73,152,300, redeemable cumulative option-holding Absa preference shares to Batho Bonke Capital Limited. Each redeemable preference share carries the option to acquire one Absa ordinary share. The shares carry the same rights as ordinary shares including voting rights, and receive dividends which are payable semi-annually. Options vest after three years and lapse after five years from the date of issue. Exercise may only occur in lots of 100 and within a price range varying from ZAR48 to ZAR69 (£3.40-£4.89) dependent on the 30-day volume weighted trading price on the JSE Limited. Options are redeemed by Absa on the final exercise date.

~~Barclays~~

~~Annual Report 2007~~

~~212~~

~~44 Share-based payments (continued)~~

~~Absa Group Limited Share Incentive Trust (AGLSIT)~~

In terms of the rules of Absa Group Limited Share Incentive Trust the maximum number of shares which may be issued or transferred and/or in respect of which options may be granted to the participants shall be limited to shares representing 10% of the total number of issued shares. Options are allocated to Absa employees according to the normal Human Resources talent management process. The options issued up to August 2005 had no performance criteria linked to them and vested in equal tranches after three, four and five years respectively.31st March 2008. No dividends accrue to the option holder over the period. The options expire after a period of ten years from the issuing date. Options issued since August 2005 have vesting performance criteria associated with them, which require headline earnings per share to exceed an agreed benchmark over a three-year period from July 2005 for the options to vest

~~Absa Group Limited Share Ownership Trust (AGLSOT)~~

The Absa Group Limited Share Ownership Trust (AGLSOT) enabled all Absa employees to participate in a one-off offer to purchase 200 redeemable cumulative option-holding preference shares. Each redeemable preference share carries the option to acquire one Absa ordinary share. Options vest after three years and lapse after five years from the date of issue. Exercise may only occur in lots of 100 and within a price range varying from ZAR48 to ZAR69 (£3.40-£4.89) dependent on the 30-day volume weighted trading price on the JSE Limited. Options are redeemed by Absa on the final exercise date.

~~Absa Group Limited Executive Share Award Scheme (AGLESAS)~~

~~For certain employees of Absa an element of their annual bonus is in the form of a deferred award of a provisional allocation of Absa Group Limited shares under Absa ESAS. The total value of the bonus~~awards were made to the employee of which ESAS is an element is dependent upon the business unit and individual employee performance. The ESAS element of the annual bonus must be held for at least three years. Additional bonus shares are subsequently awarded to recipients of the provisional allocation and vest upon achieving continued service for three and five years from the date of award. All awards are subject to potential forfeit if the individual resigns.

~~In addition, options remain outstanding~~ under the ~~following closed schemes:~~BGI EOP in 2008.

Incentive Share Option Plan (ISOP)

The ISOP was open by invitation to the employees and Directors of Barclays PLC. Options were granted at the market price at the date of grant calculated in accordance with the rules of the plan, and are normally exercisable between three and ten years from that date. The final number of shares over which the option may be exercised is determined by reference to set performance criteria. The number of shares under option represents the maximum possible number that may be exercised. No awards were made under ISOP during ~~2006 or 2007.~~2008.

Executive Share Option Scheme (ESOS)

The ESOS is a long-term incentive scheme and was available by invitation to certain senior executives of the Group with grants usually made annually. Options were issued with an exercise price equivalent to the market price at the date of the grant without any discount, calculated in accordance with the rules of the scheme, and are normally exercisable between three and ten years from that date. No further awards are made under ESOS.

Woolwich Executive Share Option Plan (Woolwich ESOP)

Options originally granted over Woolwich PLC shares at market value were exercised in 2001 or exchanged, in accordance with the proposals made under the offer to acquire the Woolwich, for options over Barclays PLC shares. Under the rules of ESOP, the performance conditions attached to the exercise of options were disapplied on acquisition of Woolwich PLC by Barclays. Options lapse ten years after grant.

At the balance sheet date ~~no options remained outstanding or exercisable in respect of~~ the following ~~closed scheme:~~

~~Woolwich Save as You Earn (Woolwich SAYE)~~

Under this scheme, employees entered into contracts to save up to £250 per month and, at the expiry of a fixed term of three, five, or seven years, have the option to use these savings to acquire the shares in the Company at a discount calculated in accordance with the rules of the scheme. The discount was 20% of the market price at the date the options were granted.

~~At the balance sheet date the following cash settled~~cash-settled schemes operated within the ~~group:~~

~~Barclays Africa Share Plan~~

The Barclays Africa Share Plan grants a number of notional shares and settles in a cash award linked to the Barclays PLC share price. The exercise price of options is equal to the increment of the market price of Barclays shares over the original price on the date of grant. The final number of notional shares over which the option may be exercised is determined by reference to set performance criteria. Awards vest three years from grant and expire four years from that date.Group:

Absa Group Limited Phantom Performance Share Plan ~~(Absa Phantom~~(Phantom PSP)

The ~~Absa~~ Phantom PSP ~~was implemented during 2006~~is a cash-settled plan and payments made to ~~replace~~participants in respect of their awards are in the ~~Absa Group Limited Share Incentive Trust (AGLSIT) scheme. Shares~~form of cash. The Phantom PSP shares (and any associated notional dividend shares) are awarded at no cost to ~~participants and~~ the ~~cash~~participants. The amount that is ultimately paid to the participants is equal to the market value of a number of ordinary shares as determined after a three-year vesting period. The vesting of ~~Absa Group Limited. The~~the Phantom PSP awards will be subject to two non-market performance ~~of Absa~~conditions which will be measured over a three-year period, ~~determines~~starting on the ~~final number~~first day of ~~notional shares that any cash payment would be based on. Awards~~the financial year in which the award is made. The award will vest after three years to the extent that the performance conditions are satisfied. These awards are forfeited in total if Absa performance fails to meet the minimum criteria

Absa Group Limited Phantom Executive Share Award Scheme (Phantom ESAS)

The Phantom ESAS is a cash-settled share-based payment arrangement, where the participant’s notional bonus comprises a number of restricted nil-cost options, based on the allocation price of ordinary shares. If the participant is in the employ of the Group after the three-year vesting period, the participant will receive 20% bonus phantom shares. If the bonus award remains in the Phantom ESAS for another two years, the participant receives an additional 10% bonus phantom shares. Dividend phantom shares are paid to participants on the ordinary phantom shares as if the shares were held from inception. The number of dividend phantom shares awarded is therefore calculated on the initial allocation and on the 20% and 10% bonus phantom shares, over the five-year period. Employees that receive performance bonuses in excess of a predetermined amount are compelled to place a set percentage of the bonus award in the Phantom ESAS. Employees also have the option of utilising more of their bonus award for voluntary ESAS phantom shares.

~~213~~

Barclays

Annual Report ~~2007~~2008

245

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

4445 Share-based payments(continued)

The weighted average fair value per option granted during the year is as follows:


	2007 £	2006 £	2008 £	2007 £

Sharesave	1.25	1.88	0.92	1.25
Sharepurchase	6.84	6.55	3.38	6.84
ISP			4.22	n/a
ESAS	6.96	6.73	4.09	6.96
PSP	8.03	7.53	4.89	8.03
BGI EOP	22.18	21.18	n/a	22.18
AGLSIT	3.18	2.70	n/a	3.18
AGLESAS	n/a	8.42	7.17	n/a

Fair values for Sharesave, PSP, , BGI EOP and AGLSIT are calculated at the date of grant using either a Black-Scholes model or Monte Carlo simulation. No further grants have been made under the BGI EOP since 2008. Sharepurchase, ESAS, and AGLESAS are nil cost awards on which the performance conditions are substantially completed at the date of grant. Consequently the fair value of these awards is based on the market value at that date.

As described above, the terms of the ESAS scheme require shares to be held for a set number of years from the date of vest. The calculation of the vest date fair value of such awards includes a reduction for this post-vesting restriction. This discount is determined by calculating how much a willing market participant would rationally pay to remove the restriction using a Black-Scholes option pricing model. The total discount required in ~~2007~~2008 is £10m (2007: £66m, ~~(2006: £62m, 2005: £36m)~~2006: £62m).

The significant weighted average assumptions used to estimate the fair value of the options granted in 2008 are as follows:


	2008

	Sharesave	PSP	AGLESAS

Weighted average share price	3.11	5.45	7.17
Weighted average exercise price	2.51	2.07	–
Expected volatility	37%	37%	0%
Expected option life	4 years	3 years	5 years

The significant weighted average assumptions used to estimate the fair value of the options granted in 2007 are as follows:


		2007
						2007
		Sharesave	PSP	BGI EOP	AGLSIT
						Sharesave	PSP	BGI EOP	AGLSIT
Weighted average share price		5.82	7.07	95.33	9.18	5.82	7.07	95.33	9.18
Weighted average exercise price		4.81	–	95.33	7.62	4.81	–	95.33	7.62
Expected volatility		25%	25%	20%	30%	25%	25%	20%	30%
Expected option life		4 years	3 years	4 years	5 years	4 years	3 years	4 years	5 years
The significant weighted average assumptions used to estimate the fair value of the options granted in 2006 are as follows:
		2006

		Sharesave	PSP	BGI EOP	AGLSIT

Weighted average share price		6.20	6.74	81.12	8.92
Weighted average exercise price		5.11	–	81.12	6.57
Expected volatility		25%	25%	24%	29%
Expected option life		4 years	3 years	4 years	5 years
The significant weighted average assumptions used to estimate the fair value of the options granted in 2005 are as follows:
	2005
	Sharesave	PSP	BGI EOP	AGLSIT	ISOP
Weighted average share price	5.71	5.33	39.09	8.25	5.73
Weighted average exercise price	4.44	n/a	39.09	8.41	5.66
Expected volatility	24%	20%	25%	n/a	34%
Option life	4 years	3 years	4 years	5-8 years	5 years

The significant weighted average assumptions used to estimate the fair value of the options granted in 2006 are as follows:


	2006
	Sharesave	PSP	BGI EOP	AGLSIT
Weighted average share price	6.20	6.74	81.12	8.92
Weighted average exercise price	5.11	–	81.12	6.57
Expected volatility	25%	25%	24%	29%
Expected option life	4 years	3 years	4 years	5 years

Expected volatility and dividend yield on the date of grant have been used as inputs into the respective valuation models for Sharesave and PSP. Expected volatility has been determined using historical volatility of its peers over the expected life of the options for BGI EOP and AGLSIT applies a five-year rolling period.

The yield on UK government bonds with a commensurate life has been used to determine the risk-free discount rate of 5%4% for all schemes other than AGLSIT. Option life is estimated based upon historical data for the holding period of options between grant and exercise dates. The risk-free rate on the AGLSIT scheme represents the yield, recorded on date of option grant, on South African government zero coupon bond of a term commensurate to the expected life of the option.

246

Barclays

Annual Report ~~2007~~2008

~~214~~

LOGO

4445 Share-based payments(continued)

For the purposes of determining the expected life and number of options to vest, historical exercise patterns have been used, together with an assumption that a certain percentage of options will lapse due to leavers.

The assumed dividend yield for Barclays PLC is the average annual dividend yield on the date of grant of 4%5%. Dividend yield for AGLSIT of 3.5% was based on the average 12-month trailing yield over the year to grant date.

Analysis of the movement in the number and weighted average exercise price of options is set out below:


													Sharesave^a						Sharepurchase^a,^c
	Sharesave^a						Sharepurchase^a,^d
													Number (000s)				Weighted average ex. price (£)		Number (000s)				Weighted average ex. price (£)
	Number (000s)				Weighted average ex. price (£)		Number (000s)				Weighted average ex. price (£)
													2008		2007		2008	2007	2008		2007		2008	2007
	2007		2006		2007	2006	2007		2006		2007	2006
Outstanding at beginning of year	78,929		85,686		4.22	3.95	2,472		1,126		–	–	74,027		78,929		4.48	4.22	3,824		2,472		–	–
Granted in the year	18,748		17,449		4.81	5.11	1,852		1,561		–	–	56,024		18,748		2.51	4.81	3,834		1,852		–	–
Adjustment in grants for open offer													1,354		–		4.33	–	–		–		–	–
Exercised/released in the year	(18,018	)	(18,727	)	3.70	3.84	(256	)	(113	)	–	–	(3,357	)	(18,018	)	3.71	3.70	(64	)	(256	)	–	–
Less: forfeited in the year	(5,632	)	(5,479	)	4.53	4.11	(244	)	(102	)	–	–	(33,917	)	(5,632	)	4.35	4.53	(633	)	(244	)	–	–
Less: expired in the year	–		–		–	–	–		–		–	–	–		–		–	–	–		–		–	–
Outstanding at end of year	74,027		78,929		4.48	4.22	3,824		2,472		–	–	94,131		74,027		1.83	4.48	6,961		3,824		–	–

Of which exercisable:	2,324		915		3.69	3.87	–		–		–	–	4,025		2,324		3.71	3.69	737		–		–	–

													ESAS^a,^c						PSP^a,^c
	ESAS^{a, d}						PSP^{a, d}
													Number (000s)				Weighted average ex. price (£)		Number (000s)				Weighted average ex. price (£)
	Number (000s)				Weighted average ex. price (£)		Number (000s)				Weighted average ex. price (£)
													2008		2007		2008	2007	2008		2007		2008	2007
	2007		2006		2007	2006	2007		2006		2007	2006
Outstanding at beginning of year	142,359		121,515		–	–	42,832		20,269		–	–	182,200		142,359		–	–	63,163		42,832		–	–
Granted in the year	76,064		59,758		–	–	20,331		22,563		–	–	141,269		76,064		–	–	8,528		20,331		–	–
Adjustment in grants for open offer													6,884		–		–	–	1,370		–		–	–
Exercised/released in the year	(31,036	)	(33,663	)	–	–	–		–		–	–	(56,231	)	(31,036	)	–	–	(1,467	)	–		–	–
Less: forfeited in the year	(5,187	)	(5,251	)	–	–	–		–		–	–	(6,185	)	(5,187	)	–	–	(20,865	)	–		–	–
Less: expired in the year	–		–		–	–	–		–		–	–	–		–		–	–	–		–		–	–
Outstanding at end of year	182,200		142,359		–	–	63,163		42,832		–	–	267,937		182,200		–	–	50,729		63,163		–	–

Of which exercisable:	16,587		9,607		–	–	–		–		–	–	15,131		16,587		–	–	–		–		–	–

													ISP^{a ,c}						Absa BEE^b

	BGI EOP^b						Absa BEE^c						Number (000s)				Weighted average ex. price (£)		Number (000s)				Weighted average ex. price (£)

	Number (000s)				Weighted average ex. price (£)		Number (000s)				Weighted average ex. price (£)		2008		2007		2008	2007	2008		2007		2008	2007
	2007		2006		2007	2006	2007		2006		2007	2006
Outstanding at beginning of year/acquisition date	6,929		5,442		57.79	25.26	73,152		73,152		3.50-5.03	4.41-6.35	–		–		–	–	73,152		73,152		3.40-3.89	3.50-5.03
Granted in the year	2,599		3,973		95.33	81.12	–		–		–	–	6,923		–		–	–	–		–		–	–
Adjustment in grants for open offer													177		–		–	–	–		–		–	–
Exercised/released in the year	(1,632	)	(2,188	)	34.99	19.92	–		–		–	–	–		–		–	–	–		–		–	–
Less: forfeited in the year	(394	)	(298	)	59.63	52.66	–		–		–	–	–		–		–	–	–		–		–	–
Less: expired in the year	–		–		–	–	–		–		–	–	–		–		–	–	–		–		–	–
Outstanding at end of year	7,502		6,929		75.66	57.79	73,152		73,152		3.40-3.89	3.50-5.03	7,100		–		–	–	73,152		73,152		3.16-4.55	3.40-3.89

Of which exercisable:	1,556		1,050		47.00	18.99	73,152		–		3.40-3.89	–	–		–		–	–	73,152		73,152		3.16-4.55	3.40-3.89

													AGLSIT^b						AGLSOT^b
	AGLSIT^c						AGLSOT^c
													Number (000s)				Weighted average ex. price (£)		Number (000s)				Weighted average ex. price (£)
	Number (000s)				Weighted average ex. price (£)		Number (000s)				Weighted average ex. price (£)
													2008		2007		2008	2007	2008		2007		2008	2007
	2007		2006		2007	2006	2007		2006		2007	2006
Outstanding at beginning of year/acquisition date	18,778		25,126		3.87	4.38	4,847		5,359		3.50-5.03	4.41-6.35	13,618		18,778		4.81	3.87	946		4,847		3.40-3.89	3.50-5.03
Granted in the year	260		586		7.62	6.57	–		–		–	–	–		260		–	7.62	–		–		–	–
Exercised/released in the year	(4,668	)	(6,137	)	3.60	2.86	(3,592	)	–		–	–	(3,252	)	(4,668	)	3.37	3.60	(368	)	(3,592	)	–	–
Less: forfeited in the year	(752	)	(797	)	5.22	4.12	(309	)	(512	)	3.40-3.89	3.85-5.53	(399	)	(752	)	4.96	5.22	(19	)	(309	)	3.16-4.55	3.40-3.89
Less: expired in the year	–		–		–	–	–		–		–	–	–		–		–	–	–		–		–	–
Outstanding at end of year	13,618		18,778		4.81	3.87	946		4,847		3.40-3.89	3.50-5.03	9,967		13,618		4.91	4.81	559		946		3.16-4.55	3.40-3.89

Of which exercisable:	5,603		5,305		3.25	2.43	946		–		3.40-3.89	–	5,944		5,603		3.86	3.25	559		946		3.16-4.55	3.40-3.89

Notes

a	Options/award granted over Barclays PLC shares.

b	Options/award granted over Absa Group Limited shares.

c	Nil cost award.

Barclays

Annual Report 2008

247

Notes to the accounts

For the year ended 31st December 2008

45 Share-based payments(continued)

AGLESAS^c,^d

BGI EOP^b

Number
(000s)

Weighted average

ex. price (£)

Number

(000s)

Weighted average

ex. price (£)

2008

2007

2008

2007

2008

2007

2008

2007

Outstanding at beginning of year/acquisition date

–

7,502

6,929

75.66

57.79

Granted in the year

1,019

–

2,599

–

95.33

Exercised/released in the year

–

(550

)

(1,632

)

34.35

34.99

Less: forfeited in the year

(41

)

–

(368

)

(394

)

86.57

59.63

Less: expired in the year

–

Outstanding at end of year

1,015

–

6,584

7,502

78.50

75.66

Of which exercisable:

–

3,631

1,556

69.29

47.00

ISOP^a

ESOS^a

Number

(000s)

Weighted average

ex. price (£)

Number

(000s)

Weighted average

ex. price (£)

2008

2007

2008

2007

2008

2007

2008

2007

Outstanding at beginning of year

20,549

77,507

4.56

4.59

1,423

1,748

4.13

4.14

Granted in the year

–

Adjustment in grants for open offer

537

–

4.44

–

4.33

–

Exercised/released in the year

(539

)

(9,718

)

4.06

4.35

(70

)

(325

)

3.97

4.20

Less: forfeited in the year

–

(47,240

)

–

4.66

(892

)

–

3.97

–

Less: expired in the year

–

Outstanding at end of year

20,547

20,549

4.44

4.56

473

1,423

4.33

4.13

Of which exercisable:

20,547

20,238

4.44

4.54

473

1,423

4.33

4.13


	Woolwich ESOP^a
	Number (000s)				Weighted average ex. price (£)
	2008		2007		2008	2007
Outstanding at beginning of year	540		700		3.81	3.81
Granted in the year	–		–		–	–
Adjustment in grants for open offer	12		–		3.70	–
Exercised/released in the year	(104	)	(160	)	3.10	3.84
Less: forfeited in the year	(6	)	–		3.65	–
Less: expired in the year	–		–		–	–
Outstanding at end of year	442		540		3.70	3.81
Of which exercisable:	442		540		3.70	3.81

The table below shows the weighted average share price at the date of exercise/release of shares:


	2008 £	2007 £
Sharesave^a	4.70	5.72
Sharepurchase^a,^d	1.59	6.74
ESAS^a,^d	4.07	6.71
PSP	2.07	n/a
BGI EOP^b	87.22	97.06
AGLSIT^c	6.78	9.52
AGLSOT^c	6.79	n/a
ISOP^a	4.59	7.31
ESOS^a	4.74	7.26
Woolwich ESOP^a	4.72	7.24

Notes

a	Options/award granted over Barclays PLC shares.

b	Options/award granted over Barclays Global Investors UK Holdings Limited shares.

c	Options/award granted over Absa Group Limited shares.

d	Nil cost award.

~~215~~248

Barclays

Annual Report ~~2007~~2008

~~Notes to the accounts~~ LOGO

~~For the year ended 31st December 2007~~

4445 Share-based payments (continued)

      AGLESAS^{c, d}
      Number
(000s)

Weighted average
ex. price (£)
                        2007 2006 2007    2006
Outstanding at beginning of year/acquisition date
         37 – –    –
Granted in the year
         – 37 –    –
Exercised/released in the year
         – – –    –
Less: forfeited in the year
         – – –    –
Less: expired in the year
         – – –    –
Outstanding at end of year

         37 37 –    –
Of which exercisable:

         – – –    –

   ISOP^a    ESOS^a
   Number
(000s)

Weighted average
ex. price (£)
   Number
(000s)

Weighted average
ex. price (£)
      2007 2006 2007    2006    2007 2006 2007    2006
Outstanding at beginning of year
   77,507 105,081 4.59    4.46    1,748 2,552 4.14    4.16
Granted in the year
   – – –    –    – – –    –
Exercised/released in the year
   (9,718 ) (25,122 ) 4.35    4.04    (325 ) (768 ) 4.20    4.20
Less: forfeited in the year
   (47,240 ) (2,452 ) 4.66    4.75    – (36 ) –    4.71
Less: expired in the year
   – – –    –    – – –    –
Outstanding at end of year

   20,549 77,507 4.56    4.59    1,423 1,748 4.13    4.14
Of which exercisable:

   20,238 14,544 4.54    4.29    1,423 1,748 4.13    4.14

   Woolwich ESOP^a    Woolwich SAYE^a
   Number
(000s)

Weighted average
ex. price (£)
   Number
(000s)

Weighted average
ex. price (£)
      2007 2006 2007    2006    2007 2006 2007    2006
Outstanding at beginning of year
   700 1,260 3.81    3.80    – 3 –    3.32
Granted in the year
   – – –    –    – – –    –
Exercised/released in the year
   (160 ) (560 ) 3.84    3.79    – (1 ) –    3.32
Less: forfeited in the year
   – – –    –    – (2 ) –    3.32
Less: expired in the year
   – – –    –    – – –    –
Outstanding at end of year

   540 700 3.81    3.81    – – –    –
Of which exercisable:

   540 700 3.81    3.81    – – –    –

~~The table below shows the weighted average share price at the date of exercise/release of shares:~~

      2007
£    2006
£
Sharesave^a
   5.72    6.95
Sharepurchase^{a, d}
   6.74    6.59
ESAS^{a, d}
   6.71    6.78
BGI EOP^b
   97.06    81.08
AGLSIT^c
   9.52    8.81
ISOP^a
   7.31    6.75
ESOS^a
   7.26    6.64
Woolwich ESOP^a
   7.24    6.65
Woolwich SAYE^a

   n/a    6.09

The exercise price range, the weighted average contractual remaining life and number of options outstanding (including those exercisable) at the balance sheet date are as follows:

~~Notes~~

a	~~Options/award granted over Barclays PLC shares.~~

b	~~Options/award granted over Barclays Global Investors UK Holdings Limited shares.~~

c	~~Options/award granted over Absa Group Limited shares.~~

d	~~Nil cost award.~~

~~Barclays~~

~~Annual Report 2007~~

~~216~~

~~44 Share-based payments (continued)~~


	2007		2006		2008		2007
Exercise Price Range	Weighted average remaining contractual life in years	Number of options outstanding	Weighted average remaining contractual life in years	Number of options outstanding	Weighted average remaining contractual life in years	Number of options outstanding	Weighted average remaining contractual life in years	Number of options outstanding

Sharesave^a
£1.44-£2.49					3	2,121,926	–	–
£2.50-£3.49	–	328,822	1	2,177,121	4	54,437,940	–	328,822
£3.50-£4.49	2	40,371,606	2	59,531,668	1	19,986,642	2	40,371,606
£4.50-£5.49	4	33,327,119	4	17,220,043	3	17,584,689	4	33,327,119
Sharepurchase^{a, d}	2	3,824,021	3	2,472,304	2	6,960,593	2	3,824,021
ESAS^{a, d}	3	182,200,170	3	142,359,494	3	267,936,513	3	182,200,170
ISP^a,^d					2	7,099,655	–	–
PSP^{a, d}	1	63,162,894	2	42,832,026	1	50,729,245	1	63,162,894
BGI EOP^b
£6.11-£13.99	4	239,717	5	602,914	4	101,000	4	239,717
£14.00-£20.11	6	285,671	7	771,553	5	236,503	6	285,671
£20.12-£56.94	7	1,059,430	8	1,716,714	6	759,213	7	1,059,430
£56.95-£95.33	9	5,916,863	9	3,838,000	8	5,487,520	9	5,916,863
Absa BEE^c
£3.40-£4.89	2	73,152,300	3	73,152,300
£3.16-£4.55					1	73,152,300	2	73,152,300
AGLSIT^c
£3.60-£7.62	7	13,618,000	7	18,778,473
£1.66-£7.50					6	9,967,000	7	13,618,000
AGLSOT^c
£3.40-£4.89	2	946,000	3	4,847,400
£3.16-£4.55					1	559,000	2	946,000
AGLESAS^{c, d}	3	37,059	3	37,059	3	1,015,000	3	37,059
ISOP^a
£2.50-£3.49	5	3,965,300	6	11,055,352	4	3,862,322	5	3,965,300
£3.50-£4.49	3	1,409,828	4	2,411,828	2	1,558,449	3	1,409,828
£4.50-£5.49	5	14,896,227	7	63,746,456	4	14,899,933	5	14,896,227
£5.50-£6.49	7	277,096	8	293,096	7	225,894	7	277,096
ESOS^a
£2.50-£3.49	–	4,000	1	45,288	–	–	–	4,000
£3.50-£4.49	1	1,418,818	2	1,702,612	1	472,561	1	1,418,818
Woolwich ESOP^a
£2.50-£3.49	2	110,616	3	128,624	1	89,644	2	110,616
£3.50-£4.49	2	429,584	3	571,836	1	352,961	2	429,584

There were no modifications to the share-based payment arrangements in the years 2008, 2007 ~~2006~~ and ~~2005.~~2006. As at 31st December ~~2007,~~2008, the total liability arising from cash-settled share-based payment transactions was ~~£16m (2006: £7m)~~£23m (2007: £16m).

At 31st December ~~2007,~~2008, 6.6 million (2007: 7.5 ~~million (2006: 6.9~~ million) options were outstanding under the terms of the BGI EOP (which would represent a ~~8.1%~~7.3% interest if exercised). Employees in BGI own ~~5.9%~~4.5% of the shares in Barclays Global Investors UK Holdings Limited ~~(2006: 9.4%~~(2007: 5.9%). If all the current options were exercised, ~~£567.6m (2006: £400.5m)~~£516.9m (2007: £567.6m) would be subscribed. Since the scheme was introduced, options over ~~20.9~~21.5 million ~~(2006: 19.3~~(2007: 20.9 million) shares have been exercised, of which ~~5.0~~3.8 million are still held by employees and represent a minority interest in the Group.

At 31st December ~~2007,~~2008, there were 73.2 million, ~~13.6~~10 million and ~~0.9~~0.6 million options granted over Absa Group Limited shares under the Absa Group Limited Black Economic Empowerment Transaction, Absa Group Limited Share Incentive Trust and Absa Group Limited Share Ownership Administrative Trust respectively. In aggregate, these options would represent a ~~13.1%~~11.0% interest in Absa Group Limited if exercised.

Impact of capital raising

During 2008, the number of shares in each award or option has been increased by 2.68% and any corresponding option exercise price has been decreased by 2.68% to reflect the impact of the capital raising in July. No adjustments were made for any other capital raising during 2008.

Notes

a	~~Options/award~~Options /award granted over Barclays PLC shares.

b	~~Options/award~~Options /award granted over Barclays Global Investors UK Holdings Limited shares.

c	~~Options/award~~Options /award granted over Absa Group Limited shares.

d	Nil cost award.

~~217~~

Barclays

Annual Report ~~2007~~2008

249

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

4546 Financial risks

Financial risk management

Barclays PLC is a major global financial services provider engaged in retail and commercial banking, credit cards, investment banking, wealth management and investment management services. Financial instruments are fundamental to the Group’s business and managing financial risks, especially credit risk, is a fundamental part of its business activity. Barclays achieves its risk management goals by keeping risk management at the centre of the executive agenda and by building a culture where risk management is part of everyday business decision-making. Barclays ensures that it has the capacity to manage the risk in its established businesses as well as new and growing ones, and that its business plans are consistent with risk appetite, that is, the level of risk Barclays is willing to accept in fulfilling its business objectives.

Barclays risk management policies and processes are designed to identify and analyse risk, to set appropriate risk appetite, limits, and controls, and to monitor the risks and adherence to limits by means of reliable and up-to-date data. Risk management policies, models and systems are regularly reviewed to reflect changes to markets, products and best market practice. ~~Individual responsibility and accountability, instilled through training, are designed to deliver a disciplined, conservative and constructive culture of risk management and control.~~

Risk responsibilities

The Board approves risk appetite and the Board Risk Committee monitors the Group’s risk profile against this appetite:

–

The Group Risk Director, under delegated authority from the Group Chief Executive and Group Finance Director, has responsibility for ensuring effective risk management and control;

–

Business Heads are responsible for the identification and management of risk in their businesses;

–

Business risk teams, each under the management of a Business Risk Director, are responsible for assisting Business Heads in the identification and management of their business risk profiles for implementing appropriate controls. These risk management teams also assist Group Risk in the formulation of Group Risk policy and the implementation of it across the businesses;

–

Within Group ~~risk,~~Risk, Risk-Type Heads and their teams are responsible for establishing a risk control framework and risk oversight; and

–

Internal Audit is responsible for the independent review of risk management and the control environment.

Oversight of risk management is exercised by the Risk Oversight Committee which is chaired by the Group Risk Director under authority delegated by the Group Finance Director. The Risk Oversight Committee oversees management of the Group’s risk profile, exercised through the setting, review and challenge of the size and constitution of the profile when viewed against the Group risk appetite.

The ~~Group~~ Executive Committee monitors and manages risk-adjusted performance of businesses and receives a ~~regularly quarterly~~regular update on forward risk ~~update including a copy of~~trends and the Group Risk Profile Report.

The Board Risk Committee (BRC) reviews the Group risk profile, approves the Group Control Framework and approves minimum control requirements for principal risks.

The Board Audit Committee (BAC) considers the adequacy and effectiveness of the Group Control Framework and receives quarterly reports on control issues of significance and half-yearly reports on impairment allowances and regulatory reports.

Both BRC and BAC also receive reports dealing in more depth with specific issues relevant at the time. The proceedings of both Committees are reported to the full Board. The Board approves the overall Group risk appetite.

The Risk Oversight Committee is chaired by the Group Risk Director and oversees the management of the Group’s risk profile and all of its significant risks. Oversight is exercised through the setting, review and challenge of the size and constitution of the profile when viewed against the Group’s risk appetite. It has delegated and apportioned responsibility for credit risk management to the Retail and Wholesale Credit Risk Management Committees.

The main financial risks affecting the Group are discussed in Notes 4647 to ~~48.~~

~~46 Market risk~~

~~Most market risk arises from trading activities. Barclays is also exposed to interest rate and potential foreign exchange risks arising from financial assets and liabilities not held for trading.~~

~~Market risk management and control responsibilities~~

The Board approves the overall market risk appetite. The Market Risk Director is responsible for the market risk control framework and, under delegated authority from the Group Risk Director, sets a limit framework within the context of the approved market risk appetite.

The head of each business, assisted by the business risk management team, is accountable for identifying, measuring and managing all market risks associated with the business’ activities. Oversight and support is provided by the Market Risk Director, assisted by the central market risk team.

~~Market risk measurement~~

~~The measurement techniques used to measure and control market risk include:~~

–

~~Daily Value at Risk;~~

–

~~Stress Tests; and~~

–

~~Annual Earnings at Risk.~~

~~Daily Value at Risk (DVaR)~~

DVaR is an estimate of the potential loss which might arise from unfavourable market movements, if the current positions were to be held unchanged for one business day, measured to a confidence level of 98%. Daily losses exceeding the DVaR figure are likely to occur, on average, twice in every 100 business days.

~~In Barclays Capital, DVaR is an important market risk measurement and control tool. DVaR is calculated using the historical simulation method with a historical sample of two years.~~

~~Barclays~~

~~Annual Report 2007~~

~~218~~

~~46 Market risk (continued)~~

~~DVaR Back-testing~~

~~The DVaR model is regularly assessed. The main approach employed is the technique known as back-testing which counts the number of days when trading losses exceed the corresponding DVaR estimate.~~

~~Annual Earnings at Risk (AEaR)~~

AEaR measures the sensitivity of net interest income (NII) over the next 12 months. It is calculated as the difference between the estimated income using the current yield curve and the lowest estimated income following a 50 basis points increase or decrease in interest rates.

~~AEaR is used primarily to measure interest rate risk arising on non-trading assets and liabilities.~~

~~Traded market risk~~

~~Traded market risk management~~

In Barclays Capital, the Head of Market Risk is responsible for implementing the market risk control framework. Day to day responsibility for market risk lies with the senior management of Barclays Capital, supported by the Market Risk Management team that operates independently of the trading areas. Daily market risk reports are produced for the main Barclays Capital business areas covering the different risk categories including: interest rate, credit spread, commodity, equity and foreign exchange. A more detailed trading market risk presentation is produced fortnightly and discussed at Barclays Capital’s Traded Products Risk Review meeting. This meeting is attended by the senior managers from Barclays Capital and the central market risk team.

~~Analysis of trading market risk exposures~~

~~The table below shows the DVaR statistics for Barclays Capital’s trading and non-trading activities. DVaR is the main measure for internal risk management within Barclays Capital.~~

Barclays Capital’s market risk exposure, as measured by average total Daily Value at Risk (DVaR), increased by 13% to £42.0m (2006: £37.1m). Interest rate and credit spread risks were broadly unchanged while commodity DVaR and equity DVaR increased by £8.9m and £3.4m respectively. The growth in both these risks is consistent with Barclays Capital’s business plan. Diversification across risk types remained significant, reflecting the broad product mix. Total DVaR as at 31st December 2007 was £53.9m (31st December 2006 £41.9m). This growth reflected the increased market volatility in the second half of the year.

~~Barclays Capital DVaR: Summary table for 2007 and 2006~~

12 months to
31st December 2007
   Average
£m

High
£m
   Low
£m
Interest rate risk
   20.0 33.3    12.6
Credit spread risk
   24.9 43.3    14.6
Commodities risk
   20.2 27.2    14.8
Equities risk
   11.2 17.6    7.3
Foreign exchange risk
   4.9 9.6    2.9
Diversification effect^a

   (39.2 ) n/a    n/a

Total DVaR

   42.0 59.3    33.1

12 months to
31st December 2006
   Average
£m

High
£m
   Low
£m
Interest rate risk
   20.1 28.8    12.3
Credit spread risk
   24.3 33.1    17.9
Commodities risk
   11.3 21.6    5.7
Equities risk
   7.8 11.6    5.8
Foreign exchange risk
   4.0 7.7    1.8
Diversification effect^a

   (30.4 ) n/a    n/a

Total DVaR

   37.1 43.2    31.3

~~Note~~

The high (and low) DVaR figures reported for each category did not necessarily occur on the same day as the high (and low) DVaR reported as a whole. Consequently, a diversification effect number for the high (and low) DVaR figures would not be meaningful and it is therefore omitted from the above table.

~~219~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~46 Market risk (continued)~~

~~Non-trading interest rate risk~~

~~Asset and liability market risk~~

Interest rate risk arises from the provision of retail and wholesale (non-trading) banking products and services, as well as foreign currency translational exposures within the Group’s balance sheet.

The Group’s approach is to transfer risk from the businesses either into local treasuries or to Group Treasury using an internal transfer price or interest rate swap. The methodology used to transfer this risk depends on whether the product contains yield curve risk, basis risk or customer optionality. Limits exist to ensure there is no material risk retained within any business or product area.

~~Sensitivity analysis~~

~~Set out below are the impacts on net interest income and equity of a reasonably possible change in market rates of interest, based on the AEaR model described above.~~

~~(a) Impact on net interest income~~

The sensitivity of the income statement is the effect of the assumed changes in interest rates on the net interest income for one year, based on the non-trading financial assets and financial liabilities held at 31st December 2007, including the effect of hedging instruments.

~~The effect on net interest income, and therefore profit before tax, of a 50 basis points change would be as follows:~~

+50 basis
points
2007
£m

–50 basis
points
2007
£m

+50 basis
points
2006
£m

–50 basis
points
2006
£m

GBP
   19 (19 ) 11 (11 )
USD
   (1 ) 1 (4 ) 4
EUR
   (11 ) 11 (9 ) 9
ZAR
   9 (9 ) 12 (12 )
Others

   2 (2 ) 1 (1 )

Total

   18 (18 ) 11 (11 )

As percentage of net interest income

   0.19% (0.19% ) 0.12% (0.12% )

~~Note: This table excludes exposures held or issued by Barclays Capital as these are measured and managed using DVaR.~~

~~(b) Impact on equity~~

~~Interest rate changes affect equity in the following three ways:~~

~~Higher or lower profit after tax resulting from higher or lower net interest income~~

~~Higher or lower available for sale reserves reflecting higher or lower fair values of available for sale financial instruments~~

~~Higher or lower values of derivatives held in the cash flow hedging reserves~~

The sensitivities of equity shown below are based on scenarios constructed from actual exposures and consider the impact on the cash flow hedging reserve and the available for sale reserve only. They are calculated by revaluing fixed rate available-for-sale financial assets, including the effect of any associated hedges, and derivatives designated as cash flow hedges, for the effect of the assumed changes in interest rates. They are based on the assumption that there are parallel shifts in the yield curve. The effects of taxation have been estimated using the Group’s effective tax rate of 28% (2006: 27%).

+50 basis
points
2007
£m

–50 basis
points
2007
£m

+50 basis
points
2006
£m

–50 basis
points
2006
£m

Net interest income
   18 (18 ) 11 (11 )
Taxation effects on the above

   (5 ) 5 (3 ) 3
Effect on profit for the year

   13 (13 ) 8 (8 )
As percentage of net profit after tax

   0.26% (0.26% ) 0.15% (0.15% )
Effect on profit for year (per above)
   13 (13 ) 8 (8 )
Available for sale reserve
   (150 ) 150 (185 ) 185
Cashflow hedging reserve
   (225 ) 225 (304 ) 304
Taxation effects on the above

   105 (105 ) 132 (132 )
Effect on equity

   (257 ) 257 (349 ) 349
As a percentage of equity

   (0.79% ) 0.79% (1.28% ) 1.28%

~~Barclays~~

~~Annual Report 2007~~

~~220~~

~~46 Market risk (continued)~~

~~Concentrations of interest rate risk~~

The table below summarises the repricing profiles of the Group’s financial instruments and other assets and liabilities at their carrying value on 31st December 2007. Items are allocated to time periods by reference to the earlier of the next contractual interest rate repricing date and the maturity date.

As at 31st December 2007
   Not more
than three
months
£m

Over three
months
but not
more
than six
months
£m

Over six
months
but not
more
than one
year
£m

Over one
year
but not
more
than three
years
£m

Over three
years
but not
more
than five
years
£m

Over five
years
but not
more
than ten
years
£m

Over ten
years
£m

Trading
portfolio
and
derivatives
£m
   Non-
interest
bearing
£m
   Total
£m

Assets

Cash and balances at central banks    4,370 – – – – – – –    1,431    5,801
Items in course of collection from other banks    194 – – – – – – –    1,642    1,836
Trading portfolio assets
   – – – – – – – 193,691    –    193,691
Financial assets designated at fair value:
Held on own account
   21,436 12,587 9,208 3,526 2,706 1,339 2,753 –    3,074    56,629
Derivative financial instruments
   – – – – – – 248,088    –    248,088
Loans and advances to banks
   33,770 501 500 164 181 158 – –    4,846    40,120
Loans and advances to customers
   246,776 20,481 14,452 20,312 10,864 10,082 5,193 –    17,238    345,398
Available for sale financial instruments    25,989 2,370 2,223 3,632 1,466 4,414 2,057 –    921    43,072
Reverse repurchase agreements and cash collateral on securities borrowed

   175,679

3,307

2,032

802

191

118

946

–

   –

   183,075

Total financial assets

   508,214 39,246 28,415 28,436 15,408 16,111 10,949 441,779    29,152    1,117,710

Other assets

   – – – – – – – –    109,651    109,651

Total assets

   508,214 39,246 28,415 28,436 15,408 16,111 10,949 441,779    138,803    1,227,361

Liabilities

Deposits from other banks
   81,802 2,244 907 235 1 21 181 –    5,155    90,546
Items in course of collection due to other banks    76 – – – – – – –    1,716    1,792
Customer accounts
   233,474 8,812 3,844 2,511 377 59 1,217 –    44,693    294,987
Trading portfolio liabilities
   – – – – – – – 65,402    –    65,402
Financial liabilities designated at fair value:
Held on own account
   27,030 7,993 3,874 3,122 2,323 724 766 –    28,657    74,489
Derivative financial instruments
   – – – – – – – 248,288    –    248,288
Debt securities in issue
   102,883 10,034 4,529 1,821 632 209 120 –    –    120,228
Repurchase agreements and cash collateral on securities lent    163,112 1,789 2,085 37 92 4 – –    2,310    169,429
Subordinated liabilities

   5,735 695 59 650 1,134 5,465 4,410 –    2    18,150

Total financial liabilities

   614,112 31,567 15,298 8,376 4,559 6,482 6,694 313,690    82,533    1,083,311

Other liabilities

   – – – – – – – –    111,574    111,574

Total liabilities

   614,112 31,567 15,298 8,376 4,559 6,482 6,694 313,690    194,107    1,194,885
Interest rate repricing gap

   (105,898 ) 7,679 13,117 20,060 10,849 9,629 4,255

Cumulative gap

   (105,898 ) (98,219 ) (85,102 ) (65,042 ) (54,193 ) (44,564 ) (40,309 )

Financial assets designated at fair value held in respect of linked liabilities to customers under investment contracts, and the related liabilities, have been omitted from the above analysis as the Group is not exposed to the interest rate risk inherent in these assets or liabilities.

~~221~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~46 Market risk (continued)~~

As at 31st December 2006
   Not more
than three
months
£m

Over three
months
but not
more
than six
months
£m

Over six
months
but not
more
than one
year
£m

Over one
year
but not
more
than three
years
£m

Over three
years
but not
more
than five
years
£m

Over five
years
but not
more
than ten
years
£m

Over ten
years
£m

Trading
portfolio
and
derivatives
£m
   Non-
interest
bearing
£m
   Total
£m

Assets

Cash and balances at central banks
   7,012 – – – – – – –    333    7,345
Items in course of collection from other banks    654 – – – – – – –    1,754    2,408
Trading portfolio assets
   – – – – – – – 177,867    –    177,867
Financial assets designated at fair value:
Held on own account
   17,831 834 387 1,121 2,544 1,131 6,231 –    1,720    31,799
Derivative financial instruments
   – – – – – – – 138,353    –    138,353
Loans and advances to banks
   25,012 483 233 211 69 36 1 –    4,881    30,926
Loans and advances to customers
   195,500 15,048 14,225 24,850 9,485 6,399 7,699 –    9,094    282,300
Available for sale financial instruments    25,899 2,427 7,780 3,737 3,234 6,701 1,091 –    834    51,703
Reverse repurchase agreements and cash collateral on securities borrowed

   157,592

4,721

8,338

–

3,431

–

–

–

   8

   174,090

Total financial assets

   429,500 23,513 30,963 29,919 18,763 14,267 15,022 316,220    18,624    896,791

Other assets

   – – – – – – – –    99,996    99,996

Total assets

   429,500 23,513 30,963 29,919 18,763 14,267 15,022 316,220    118,620    996,787

Liabilities

Deposits from other banks
   72,353 1,377 763 351 – 7 199 –    4,512    79,562
Items in course of collection due to other banks    20 – – – – – – –    2,201    2,221
Customer accounts
   207,023 3,965 3,963 2,371 506 43 216 –    38,667    256,754
Trading portfolio liabilities
   – – – – – – – 71,874    –    71,874
Financial liabilities designated at fair value:
Held on own account
   20,186 5,635 3,800 1,538 1,607 1,843 774 –    18,604    53,987
Derivative financial instruments
   – – – – – – – 140,697    –    140,697
Debt securities in issue
   92,649 5,624 2,430 4,020 1,630 3,249 1,535 –    –    111,137
Repurchase agreements and cash collateral on securities lent    122,612 6,132 2,348 1,662 – – 2,818 –    1,384    136,956
Subordinated liabilities

   3,192 377 21 1,074 783 3,475 4,842 –    22    13,786

Total financial liabilities

   518,035 23,110 13,325 11,016 4,526 8,617 10,384 212,571    65,390    866,974

Other liabilities

   – – – – – – – –    102,423    102,423

Total liabilities

   518,035 23,110 13,325 11,016 4,526 8,617 10,384 212,571    167,813    969,397
Interest rate repricing gap

   (88,535 ) 403 17,638 18,903 14,237 5,650 4,638

Cumulative gap

   (88,535 ) (88,132 ) (70,494 ) (51,591 ) (37,354 ) (31,704 ) (27,066 )

~~Barclays~~

~~Annual Report 2007~~

~~222~~

~~46 Market risk (continued)~~

~~Effective interest rates~~

~~Weighted average effective interest rates were as follows:~~

   2007
%    2006
%
As at 31st December


Assets

Cash and balances at central banks
   4.2    4.1
Loans and advances to banks
   4.5    4.1
Loans and advances to customers
   7.1    6.5
Available for sale financial instruments
   5.0    4.6
Reverse repurchase agreements and cash collateral on securities borrowed

   4.2    4.2

Liabilities

Deposits from other banks
   4.2    4.3
Customer accounts
   3.8    3.4
Debt securities in issue
   5.3    5.0
Repurchase agreements and cash collateral on securities lent
   3.9    4.2
Subordinated liabilities

   5.9    5.9

~~Foreign exchange risk~~

~~The group is exposed to two sources of foreign exchange risk.~~

~~(a) Transactional foreign currency exposure~~

~~Transactional foreign exchange exposures represent exposure on banking assets and liabilities, denominated in currencies other than the functional currency of the transacting entity.~~

The Group’s risk management policies prevent the holding of significant open positions in foreign currencies outside the trading portfolio managed by Barclays Capital which is monitored through DVaR.

There were no material net transactional foreign currency exposures outside the trading portfolio at either 31st December 2007 or 2006. Due to the low level of non-trading exposures no reasonably possible change in foreign exchange rates would have a material effect on either the Group’s profit or movements in equity for the year ended 31st December 2007 or 2006.

~~(b) Translational foreign exchange exposure~~

The Group operates in a number of economic environments resulting in structural foreign exchange exposures on net investments in branches, subsidiaries or associated undertakings, the functional currencies of which are currencies other than Sterling.

Exchange differences are created by the translation of these net assets measured in their functional currencies to Sterling, the Group’s presentational currency. These exchange differences are recorded in the consolidated translation reserve and reflected in the statement of recognised income and expense. Additionally the Group’s regulatory capital ratios are sensitive to foreign exchange movements in reserves, goodwill, minority interests and other non-Sterling debt capital as well as non sterling risk weighted assets.

The Group’s policy is to economically hedge foreign currency net investments, where practical, after taking consideration of available markets to conduct hedging, the size of the investment and the cost of hedging; unless doing so would result in capital ratios which are overly sensitive to foreign exchange movements.

~~223~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~46 Market risk (continued)~~

The Group uses foreign currency borrowings and derivatives to hedge its foreign currency net investments. There was no ineffectiveness arising from these hedges in the year ended 31st December 2007. The carrying value of the Group’s foreign currency net investments and the foreign currency borrowings and derivatives used to hedge them as at 31st December 2007 were as follows:

At 31st December 2007
Functional currency of the operation involved

   Foreign
currency
net
investments
£m    Borrowings
which hedge
the net
investments
£m    Derivatives
which hedge
the net
investments
£m    Structural
currency
exposures
pre economic
hedges
£m
   Economic
hedges
£m    Remaining
structural
currency
exposures
£m

United States Dollar
   3,273    1,000    –    2,273    3,575    (1,302 )
Euro
   3,690    1,506    –    2,184    2,387    (203 )
Rand
   3,205    –    2,599    606    165    441
Japanese Yen
   2,986    180    2,773    33    –    33
Swiss Franc
   2,140    –    2,131    9    –    9
Other

   1,847    53    465    1,329    –    1,329
Total

   17,141    2,739    7,968    6,434    6,127    307

At 31st December 2006
Functional currency of the operation involved

   Foreign
currency
net
investments
£m    Borrowings
which hedge
the net
investments
£m    Derivatives
which hedge
the net
investments
£m    Structural
currency
exposures
pre economic
hedges
£m
   Economic
hedges
£m    Remaining
structural
currency
exposures
£m

United States Dollar
   4,462    2,141    –    2,321    2,361    (40 )
Euro
   3,409    1,185    –    2,224    2,180    44
Rand
   2,849    –    2,665    184    165    19
Japanese Yen
   2,754    202    2,527    25    –    25
Swiss Franc
   2,071    158    1,900    13    –    13
Other

   2,069    205    410    1,454    742    712
Total

   17,614    3,891    7,502    6,221    5,448    773

The economic hedges represent the US Dollar and Euro Preference Shares and Reserve Capital Instruments in issue that are treated as equity under IFRS, and do not qualify as hedges for accounting purposes.

~~The impact of a change in the exchange rate between Sterling and any of the major currencies would be:~~

–	~~A higher or lower profit after tax, arising from changes in the exchange rates used to translate items in the consolidated income statement~~

–	A higher or lower currency translation reserve within equity, representing the retranslation of non Sterling subsidiaries, branches and associated undertakings net of the revaluation of the hedges of net investments.

–	~~A higher or lower value of available for sale investments denominated in foreign currencies, impacting the available for sale reserve.~~

The impact of foreign exchange rate changes on derivatives and borrowings designated as IFRS net investment hedges would be fully offset by the impact on the hedged net investments, resulting in no impact on the Group profit or equity.

~~Barclays~~

~~Annual Report 2007~~

~~224~~

49.

47 Credit risk

Credit risk is the risk of suffering financial loss, should any of the Group’s customers, clients or market counterparties fail to fulfil their contractual obligations to the Group. Credit risk arises mainly from commercial and consumer loans and advances, credit cards, and loan commitments arising from such lending activities, but can also arise from credit enhancement provided, such as financial guarantees, letters of credit, endorsements and acceptances.

Barclays is also exposed to other credit risks arising from investments in debt securities and other exposures arising from its trading activities (‘trading exposures’) including, non-equity trading portfolio assets, derivatives as well as settlement balances with market counterparties and reverse ~~repo~~repurchase loans.

Losses arising from exposures held for trading (derivatives, debt securities) are accounted for as trading losses, rather than impairment charges, even though the fall in value causing the loss may be attributable to credit deterioration.

Maximum exposure to credit risk before collateral held or other credit enhancements

The following table presents the maximum exposure at 31st December 2008 and 2007 to credit risk of balance sheet and off balance sheet financial instruments, before taking account of any collateral held or other credit enhancements and after allowance for impairment and netting where appropriate.

For financial assets recognised on the balance sheet, the exposure to credit risk equals their carrying amount. For financial guarantees granted, the maximum exposure to credit risk is the maximum amount that Barclays would have to pay if the guarantees were to be called upon. For loan commitments and other credit related commitments that are irrevocable over the life of the respective facilities, the maximum exposure to credit risk is the full amount of the committed facilities.

This analysis and all subsequent analyses of credit risk include only financial assets subject to credit risk. They exclude other financial assets, mainly equity securities held in trading portfolio or available for sale as well as non-financial assets. The nominal value of off-balance sheet credit related instruments are also shown, where appropriate.

Financial assets designated at fair value held in respect of linked liabilities to customers under investment contracts have not been included as the Group is not exposed to credit risk on these assets. Credit losses in these portfolios, if any, would lead to a reduction in the linked liabilities and result in no direct loss to the Group.

250

Barclays

Annual Report 2008

LOGO

47 Credit risk(continued)

Whilst the Group’s maximum exposure to credit risk is the carrying value of the assets or, in the case of off-balance sheet items, the amount guaranteed, committed, accepted or endorsed, in most cases the likely exposure is far less due to collateral, credit enhancements and other actions taken to mitigate the Group’s exposure.

A description of the credit risk management and ~~control responsibilities~~measurement methodologies, the credit quality of the assets and the collateral and other credit enhancements held against them is included in the relevant sections within this Note, for each of the categories in the following table:

As at 31st December 2008


	Loans and advances £m	Debt securities £m	Derivatives £m	Reverse repurchase agreements £m	Others £m	Total £m	Credit market exposure £m
On-balance sheet:
Cash and balances at central banks					30,019	30,019
Items in course of collection from other banks					1,695	1,695
Trading portfolio:
Treasury and other eligible bills		4,544				4,544
Debt securities		148,686				148,686	4,745
Traded loans	1,070					1,070
Total trading portfolio	1,070	153,230				154,300
Financial assets designated at fair value held on own account:
Loans and advances	30,057				130	30,187	14,429
Debt securities		8,628				8,628
Other financial assets	1,469			7,283	479	9,231
Total financial assets designated at fair value held on own account	31,526	8,628		7,283	609	48,046
Derivative financial instruments			984,802			984,802	9,234
Loans and advances to banks	47,707					47,707
Loans and advances to customers:
Residential mortgage loans	135,077					135,077
Credit card receivables	22,304					22,304
Other personal lending	32,038					32,038
Wholesale and corporate loans and advances	259,699					259,699
Finance lease receivables	12,697					12,697
Total loans and advances to customers	461,815					461,815	12,808
Available for sale financial investments:
Treasury and other eligible bills		4,003				4,003
Debt securities		58,831				58,831	727
Total available for sale financial investments		62,834				62,834
Reverse repurchase agreements				130,354		130,354
Other assets					3,096	3,096	109
Total on-balance sheet	542,118	224,692	984,802	137,637	35,419	1,924,668
Off-balance sheet:
Acceptances and endorsements						585
Guarantees and letters of credit pledged as collateral security and securities lending arrangements						53,942
Commitments						260,816	1,030
Total off-balance sheet						315,343
Total maximum exposure at 31st December						2,240,011

Barclays

Annual Report 2008

251

Notes to the accounts

For the year ended 31st December 2008

47 Credit risk (continued)

At 31st December 2007


	Loans and advances £m	Debt securities £m	Derivatives £m	Reverse repurchase agreements £m	Others £m	Total £m	Credit market exposure £m
On-balance sheet:
Cash and balances at central banks					5,801	5,801
Items in course of collection from other banks					1,836	1,836
Trading portfolio:
Treasury and other eligible bills		2,094				2,094
Debt securities		152,778				152,778	6,239
Traded loans	1,780					1,780
Total trading portfolio	1,780	154,872				156,652
Financial assets designated at fair value held on own account:
Loans and advances	23,334				157	23,491	15,218
Debt securities		24,217				24,217
Other financial assets	98			3,056	391	3,545
Total financial assets designated at fair value held on own account	23,432	24,217		3,056	548	51,253
Derivative financial instruments			248,088			248,088	445
Loans and advances to banks	40,120					40,120
Loans and advances to customers:
Residential mortgage loans	106,619					106,619
Credit card receivables	14,289					14,289
Other personal lending	29,857					29,857
Wholesale and corporate loans and advances	183,556					183,556	11,535
Finance lease receivables	11,077					11,077
Total loans and advances to customers	345,398					345,398
Available for sale financial investments:
Treasury and other eligible bills		2,723				2,723
Debt securities		38,673				38,673	1,244
Total available for sale financial in vestments		41,396				41,396
Reverse repurchase agreements				183,075		183,075	225
Other assets					3,966	3,966	57
Total on-balance sheet	410,730	220,485	248,088	186,131	12,151	1,077,585
Off-balance sheet:
Acceptances and endorsements						365
Guarantees and letters of credit pledged as collateral security and securities lending arrangements						35,692
Commitments						192,639	3,225
Total off-balance sheet						228,696
Total maximum exposure at 31st December						1,306,281

252

Barclays

Annual Report 2008

LOGO

47 Credit risk(continued)

Credit risk concentrations

A concentration of credit risk exists when a number of counterparties are engaged in similar activities and have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions.

The ~~granting~~analyses of credit ~~is one~~risk concentrations presented below are based on the location of the ~~Group’s major sources~~counterparty or customer or the industry in which they are engaged.

Credit risk concentrations by geographical sector


	2008
	United Kingdom £m	Other European Union £m	United States £m	Africa £m	Rest of the World £m	Total £m
On-balance sheet:
Cash and balances at central banks	8,406	11,039	8,381	1,712	481	30,019
Items in the course of collection from other banks	1,447	59	–	169	20	1,695
Trading portfolio	23,865	35,396	66,084	2,770	26,185	154,300
Financial assets designated at fair value held on own account	14,158	7,388	19,738	2,904	3,858	48,046
Derivative financial instruments	317,621	215,054	366,161	4,403	81,563	984,802
Loans and advances to banks	7,524	12,591	13,616	2,189	11,787	47,707
Loans and advances to customers	213,079	91,109	75,826	44,373	37,428	461,815
Available for sale financial investments	15,423	18,928	16,583	3,351	8,549	62,834
Reverse repurchase agreements	22,659	41,724	47,034	848	18,089	130,354
Other assets	1,198	548	550	520	280	3,096
Total on-balance sheet	625,380	433,836	613,973	63,239	188,240	1,924,668

Off-balance sheet:
Acceptances and endorsements	274	–	6	41	264	585
Guarantees and letters of credit pledged as collateral security and securities lending arrangements	4,433	3,742	42,227	1,738	1,802	53,942
Commitments	103,548	32,445	90,298	23,210	11,315	260,816
Total off-balance sheet	108,255	36,187	132,531	24,989	13,381	315,343

Total	733,635	470,023	746,504	88,228	201,621	2,240,011

Credit risk concentrations by geographical sector


	2007
	United Kingdom £m	Other European Union £m	United States £m	Africa £m	Rest of the World £m	Total £m
On-balance sheet:
Cash and balances at central banks	1,458	2,170	206	1,406	561	5,801
Items in the course of collection from other banks	1,638	75	–	110	13	1,836
Trading portfolio	28,959	41,675	53,208	877	31,933	156,652
Financial assets designated at fair value held on own account	15,713	5,907	20,396	958	8,279	51,253
Derivative financial instruments	60,534	75,017	82,975	2,229	27,333	248,088
Loans and advances to banks	5,515	11,102	13,443	2,581	7,479	40,120
Loans and advances to customers	187,824	56,189	39,944	38,653	22,788	345,398
Available for sale financial investments	5,934	18,354	7,818	2,944	6,346	41,396
Reverse repurchase agreements	42,160	51,734	67,018	2,156	20,007	183,075
Other assets	1,813	617	424	698	414	3,966
Total on-balance sheet	351,548	262,840	285,432	52,612	125,153	1,077,585

Off-balance sheet:
Acceptances and endorsements	227	5	5	34	94	365
Guarantees and letters of credit pledged as collateral security and securities lending arrangements	7,377	1,468	23,696	1,286	1,865	35,692
Commitments	90,964	23,946	48,657	20,471	8,601	192,639
Total off-balance sheet	98,568	25,419	72,358	21,791	10,560	228,696

Total	450,116	288,259	357,790	74,403	135,713	1,306,281

Barclays

Annual Report 2008

253

Notes to the accounts

For the year ended 31st December 2008

47 Credit risk(continued)


Credit risk concentrations by industrial sector

	2008
	Government and Central Banks £m	Financial Services £m	Transport, Postal and communication and Business and other services £m	Agriculture, Manufacturing and Wholesale and retail trade £m	Construction and Property £m	Energy and water £m	Residential mortgage loans £m	Other personal lending £m	Finance lease receivables £m	Total £m
On-balance sheet:
Cash and balances at central banks	30,019	–	–	–	–	–	–	–	–	30,019
Items in the course of collection from other banks	10	1,685	–	–	–	–	–	–	–	1,695
Trading portfolio	68,962	73,729	3,320	2,590	1,404	4,272	–	4	19	154,300
Financial assets designated at fair value held on own account	5,871	21,860	1,080	1,286	17,415	271	–	263	–	48,046
Derivative financial instruments	10,370	928,793	9,265	14,420	3,779	18,054	–	121	–	984,802
Loans and advances to banks	2,794	44,913	–	–	–	–	–	–	–	47,707
Loans and advances to customers	5,296	112,506	52,243	49,068	29,988	14,078	135,077	50,862	12,697	461,815
Available for sale financial investments	14,891	44,865	1,288	436	333	354	569	98	–	62,834
Reverse repurchase agreements	17,939	110,645	536	428	806	–	–	–	–	130,354
Other assets	103	1,397	602	260	8	12	155	554	5	3,096
Total on-balance sheet	156,255	1,340,393	68,334	68,488	53,733	37,041	135,801	51,902	12,721	1,924,668
Off-balance sheet:
Acceptances and endorsements	–	151	180	231	14	3	–	6	–	585
Guarantees and letters of credit pledged as collateral security and securities lending arrangements	–	44,858	4,161	2,275	778	1,604	–	266	–	53,942
Commitments	5,096	33,746	32,769	36,815	11,405	16,279	12,196	112,510	–	260,816
Total off-balance sheet	5,096	78,755	37,110	39,321	12,197	17,886	12,196	112,782	–	315,343
Total	161,351	1,419,148	105,444	107,809	65,930	54,927	147,997	164,684	12,721	2,240,011

254

Barclays

Annual Report 2008

LOGO

47 Credit risk(continued)


Credit risk concentrations by industrial sector

	2007
	Government and Central Banks £m	Financial Services £m	Transport, Postal and communication and Business and other services £m	Agriculture, Manufacturing and Wholesale and retail trade £m	Construction and Property £m	Energy and water £m	Residential mortgage loans £m	Other personal lending £m	Finance lease receivables £m	Total £m
On-balance sheet:
Cash and balances at central banks	5,801	–	–	–	–	–	–	–	–	5,801
Items in the course of collection from other banks	8	1,828	–	–	–	–	–	–	–	1,836
Trading portfolio	58,608	83,790	4,434	3,928	924	4,072	895	1	–	156,652
Financial assets designated at fair value held on own account	10,914	23,742	570	699	11,325	396	3,509	98	–	51,253
Derivative financial instruments	2,886	227,609	2,771	5,567	1,106	8,031	87	31	–	248,088
Loans and advances to banks	7,881	32,239	–	–	–	–	–	–	–	40,120
Loans and advances to customers	2,036	70,699	41,678	38,170	22,288	8,623	106,619	44,208	11,077	345,398
Available for sale financial investments	8,880	29,693	2,142	249	167	246	–	19	–	41,396
Reverse repurchase agreements	1,713	179,459	416	735	752	–	–	–	–	183,075
Other assets	270	1,506	542	307	168	5	112	1,056	–	3,966
Total on-balance sheet	98,997	650,565	52,553	49,655	36,730	21,373	111,222	45,413	11,077	1,077,585
Off-balance sheet:
Acceptances and endorsements	–	125	111	91	21	4	–	13	–	365
Guarantees and letters of credit pledged as collateral security and securities lending arrangements	51	17,021	12,847	1,867	538	2,687	1	680	–	35,692
Commitments	4,511	30,492	26,370	32,388	11,282	9,961	10,969	66,666	–	192,639
Total off-balance sheet	4,562	47,638	39,328	34,346	11,841	12,652	10,970	67,359	–	228,696
Total	103,559	698,203	91,881	84,001	48,571	34,025	122,192	112,772	11,077	1,306,281

Loans and advances to customers in the above table has been reanalysed between Agriculture, Manufacturing and Wholesale and retail trade, Residential mortgage loans and Other personal to reflect changes in classification of ~~income~~assets.

Barclays

Annual Report 2008

255

Notes to the accounts

For the year ended 31st December 2008

47 Credit risk(continued)

Loans and ~~is therefore one of its most significant risks,~~advances

Credit risk management

Governance and ~~the Group dedicates considerable resources to controlling it effectively.~~responsibilities

The credit risk management teams in each business are accountable to the Business Risk Directors in those businesses who, in turn, report to the heads of their businesses and also to the Group Risk Director.

The ~~Credit Risk~~credit risk function provides Group-wide direction of credit risk-taking. The teams within this function manage the resolution of all significant credit policy issues and run the Credit Committee, which approves major credit decisions.

Each business segment has an embedded credit risk management team. These teams assist Group Risk in the formulation of Group Risk policy and ~~the~~its implementation ~~of it~~ across the businesses. ~~Examples include ensuring that:~~

–	~~Maximum exposure guidelines are in place relating to the exposures to any individual customer or counterparty;~~

–	~~Country risk policy specifies risk appetite by country and avoids excessive concentration of credit risk by country; and~~

–	~~Policies are in place to monitor exposures to individual industrial sectors.~~

The principal committees that review credit risk management, formulate overall Group credit policy and resolve all significant credit policy issues are the Wholesale Credit Risk Management Committee, the Retail Credit Risk Management Committee, the Risk Oversight Committee and the Board Risk Committee. ~~All these Committees receive regular and comprehensive reports on risk issues.~~

The Retail Credit Risk Management Committee (RCRMC) oversees exposures, which comprise unsecured personal lending (including small businesses), mortgages and credit cards. The RCRMC monitors the risk profile and performance of the retail portfolios by receipt of key risk measures and indicators at an individual portfolio level, ensuring mitigating actions taken to address performance are appropriate and timely. Metrics reviewed will consider portfolio composition and both an overall stock and new flow level.

The Wholesale Credit Risk Management Committee (WCRMC) oversees wholesale exposures, comprising lending to businesses, banks and other financial institutions. The WCRMC monitors exposure by country, industry sector, individual large exposures and exposures to sub-investment grade countries.

The monthly Wholesale and Retail Credit Risk Management Committees exercise oversight through review and challenge of the size and constitution of the portfolios when viewed against Group risk appetite for wholesale and retail credit risks. They are chaired by the Group Wholesale and Retail Credit Risk Directors.

~~Corporate~~Credit monitoring

Wholesale and ~~commercial lending~~

~~Corporate accounts~~corporate loans which are deemed to contain heightened levels of risk are recorded on ~~graded problem loan lists known as~~ early-warning or watch lists. ~~These are updated monthly and circulated to the relevant risk control points. Once listing has taken place, exposures are closely monitored and, where appropriate, reduced.~~

These lists are graded in line with the perceived severity of the risk attached to the lending and its probability of default. ~~Businesses with exposure to~~The lists are updated on a monthly basis and are closely monitored.

Regardless of whether they are recorded on early-warning or watch lists, all wholesale and corporate customers all work to three categories of increasing concern. By the time an account becomes impaired it will normally have passed through all three categories, which reflect the need for ever-increasing caution and control.

~~Where an obligor’s financial health gives grounds for concern, it is immediately placed into the appropriate category. All obligors, regardless of financial health,~~loans are subject to a full review of all facilities on, at least, an annual basis. More frequent interim reviews may be undertaken should circumstances dictate.

Retail ~~lending~~

~~Within the retail portfolios, which~~loans (which tend to comprise homogeneous ~~assets, statistical techniques more readily allow the risk of impairment to be~~assets) are monitored on a portfolio basis. ~~This applies to UK Retail Banking, Barclays Wealth, International Retail and Commercial Banking and Barclaycard.~~

Within Local Business, accounts that are deemed to have a heightened level of risk, or that exhibit some unsatisfactory features which could affect viability in the short or medium term, are transferred to a separate ‘Caution’ refer stream where a cautious approach is appropriate. Accounts on the Caution refer stream are reviewed on at least a quarterly basis at which time consideration will be given to continuing with the agreed strategy, returning the customer to a lower risk refer stream, or instigating recovery or exit action if the strategy has failed.

~~Debt securities~~

Managing credit risk associated with debt securities differs in important respects from the process for loans originated by the Group. Firstly, market prices are generally available for listed bonds and securities and these prices are a good indicator of the credit standing of the issuer. Secondly, most listed and some unlisted securities are rated by external rating agencies which is another strong indicator of overall credit quality. Where such ratings are not available or are not current, the Group will have regard to its own internal ratings for the securities.

~~225~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~47 Credit risk (continued)~~

~~Settlement risk~~

The Group is exposed to settlement risk in its dealings with market counterparties (predominantly other financial institutions). These risks arise, for example, in foreign exchange transactions when Barclays pays away its side of the transaction to another bank or other counterparty before receiving payment from the other side. The risk is that the counterparty may not meet its obligation. It also arises on derivative contracts where the carrying value of the financial asset is related to the credit condition of the counterparty.

~~Settlement risk also arises through the operation of a number of systems through which Barclays makes and receives payments on behalf of its customers.~~

While these exposures are of short duration, they can be large. In recent years, settlement risk has been reduced by several industry initiatives that have enabled simultaneous and final settlement of transactions to be made (such as payment-versus-payment through Continuous Linked Settlement and delivery-versus-payment in central bank money).

Barclays has worked with its peers in the development of these arrangements. Increasingly the majority of high value transactions are settled by such mechanisms. Where these mechanisms are not available, the risk is further reduced by dealing predominantly with highly-rated counterparties, holding collateral and limiting the size of the exposures according to the rating of the counterparty, with smaller exposures to those of higher risk.

~~Country risk~~

Credit risk is manifested as country risk where difficulties may arise in the country in which the exposure is domiciled, thus impeding or reducing the value of the asset, or where the counterparty is the country itself.

Barclays manages country risk by setting a country risk appetite, which is known as the Country Guideline and agreed at the Group Credit Committee. All cross-border or domestic foreign currency transactions are aggregated to give the current utilisation, in terms of country loss given default (CLGD), against country appetite. The level of CLGD incurred by a counterparty transaction will largely depend on three main factors: the country severity, the product severity and counterparty grade. The calculation and loss given default is described under ‘Credit Risk measurement’ below.

CLGD is incurred in the country of direct risk, defined as where the majority of operating assets are held. This may differ from the country of incorporation. However, where transactions are secured with collateral, the country risk can be transferred from the country of the borrower to the country of the collateral provider. This is only permitted where the collateral definitely covers the borrowing and is not expected to decrease over time.

Credit risk measurement

Barclays uses statistical modelling techniques throughout its business in its credit rating systems. ~~These systems assist the Bank in frontline credit decisions on new commitments and in managing the portfolio of existing exposures.~~ They enable a coherent approach to risk measurement across all credit exposures, retail and wholesale. The key building blocks in the measurement system are the probability of customer default (PD), exposure in the event of default (EAD), and severity of loss-given-default (LGD). ~~Using these, Barclays builds the analyses that lead to its decision support systems in the Risk Appetite context described previously.~~

~~Where financial models are used to monitor credit risk, they are based upon customers’ personal and financial performance information over recent periods as a predictor for future performance.~~ The models are reviewed regularly to monitor their robustness relative to actual performance and amended as necessary to optimise their effectiveness.

For wholesale and corporate ~~and wholesale customers,~~lending, Barclays ~~also~~ assesses the credit quality of borrowers and other counterparties and assigns them an internal risk rating. There are two different categories of default rating used. The first reflects the statistical probability of a customer in a rating class defaulting within the next 12-month period, and is referred to as a point in time rating (PIT). The second also reflects the statistical probability of a customer in a rating class defaulting, but the period of assessment is 12 months of average credit conditions for the customer type. This type of rating therefore provides a measure of risk that is independent of the current credit conditions for a particular customer type, is much more stable over time than a PIT rating and is referred to as a through the cycle (TTC) rating.

Country risk grades are assigned to all countries where the Group has, or is likely to have, exposure and are reviewed every quarter to ensure they remain appropriate. Country grades, which are derived from long-term sovereign foreign currency ratings, range from 1 (lowest probability of default) to 21 (highest probability of default). A ceiling is applied where a country is graded 12 or lower so that the counterparty cannot be graded higher than the country, unless some form of protection is available in the event of a cross-border event, such as a significant portion of a counterparty’s assets or income being held or generated in a convertible currency.

~~As noted above, for listed debt securities, the Group has regard to both external credit ratings and internal default grades where such ratings are not available or current.~~

Multiple rating methodologies may be used to inform the rating decision on individual large credits, such as internal and external models, rating agency grades and, for wholesale assets, market information such as credit spreads. For smaller credits, a single source may suffice, such as the result from a rating model.

~~For debt securities and counterparties where third party ratings are used to inform credit decisions, the Group mainly uses those provided by Standards and Poors’ or Moody’s.~~

Barclays ~~wholesale~~ credit rating contains 21 grades, representing the Group’s best estimate of credit risk for a counterparty based on current economic conditions.

Retail customers are not all assigned internal risk ratings in this way for account management purposes, ~~although a mapping of the PIT~~therefore their probability of default ~~to one of eight Barclays Retail Grades (BRG)~~ is ~~used for some internal reporting purposes.~~considered.

The ~~tables below detail how external rating grades, Default Grades~~Group considers Credit Risk Loans (defined as all customers overdue by 90 days or more, and/or individually impaired or restructured) and ~~Barclays Retail Grades relate~~loan loss rates when assessing the credit performance of its loan portfolios, other than those held at fair value. For the purposes of historical and business unit comparison, loan loss rates are defined as total credit impairment charge (excluding available for sale assets and reverse repurchase agreements) divided by gross loans and advances to customers and banks (at amortised cost).

Credit risk mitigation

Where appropriate, the Group takes action to mitigate credit risk such as reducing amounts outstanding (in discussion with the customers, clients or counterparties if appropriate), using credit derivatives, securitising assets; and selling them.

Diversification to avoid unwanted credit risk concentrations is achieved through setting maximum exposure guidelines to individual counterparties. Excesses are reported to the ~~categories~~Risk Oversight Committee and the Board Risk Committee. Mandate and scale limits are used to limit the stock of ~~credit quality selected for~~current exposures in a loan portfolio and the ~~financial statements. Where applicable,~~flow of new exposures into a loan portfolio. Limits are typically based on the ~~internal measure~~tenor and nature of ~~probability of default has been presented for indicative purposes.~~

~~Barclays~~

~~Annual Report 2007~~

~~226~~

the lending.

~~47 Credit risk (continued)~~Collateral and security

~~Listed~~The Group routinely obtains collateral and ~~unlisted debt securities~~security to mitigate credit risk.

The Group ensures that any collateral held is sufficiently liquid, legally effective, enforceable and regularly reassessed. Before attaching value to collateral, businesses holding specific, agreed classes of collateral must ensure that they are holding a correctly perfected charge.

Before reliance is placed on third party protection in the form of bank, government or corporate guarantees or credit derivative protection from financial intermediary counterparties, a credit assessment is undertaken.

Security structures and legal covenants are subject to regular review, at least annually, to ensure that they remain fit for purpose and remain consistent with accepted local market ~~counterparties where external ratings are available~~practice.

256

~~External ratings~~Barclays

Annual Report 2008

LOGO

47 Credit risk(continued)

All loans and advances are categorised as either:

– neither past due nor individually impaired;

– past due but not individually impaired; or

– individually impaired.

The impairment allowance includes allowances against financial assets that have been individually impaired and those subject to collective impairment.

Credit risk loans comprise loans and advances to banks and customers 90 days overdue or more and those subject to individual impairment. The coverage ratio is calculated by reference to the total impairment allowance and the carrying value (before impairment) of credit risk loans.


	As at 31st December 2008
	Neither past due nor individually impaired^a £m	Past due but not individually impaired^b £m	Individually impaired £m	Total £m	Impairment allowance £m		Total carrying value £m	Credit Risk Loans £m	Coverage ratio %
Trading portfolio:
Traded loans	1,070	–	–	1,070	–		1,070	–	–
Financial assets designated at fair value held on own account:
Loans and advances	29,182	875	–	30,057	–		30,057	–	–
Other financial assets	1,469	–	–	1,469	–		1,469	–	–
Loans and advances to banks	46,665	1,045	48	47,758	(51	)	47,707	48	100.0
Loans and advances to customers:
Residential mortgage loans	126,363	7,413	1,608	135,384	(307	)	135,077	2,403	12.8
Credit card receivables	21,092	1,426	1,231	23,749	(1,445	)	22,304	1,990	72.6
Other personal lending	30,539	1,342	2,040	33,921	(1,883	)	32,038	2,685	70.1
Wholesale and corporate loans and advances	246,505	8,307	7,586	262,398	(2,699	)	259,699	8,277	32.6
Finance lease receivables	12,367	285	234	12,886	(189	)	12,697	297	63.6
Total	515,252	20,693	12,747	548,692	(6,574	)	542,118	15,700	41.9

	As at 31st December 2007
	Neither past due nor individually impaired^a £m	Past due but not individually impaired^b £m	Individually impaired £m	Total £m	Impairment allowance £m		Total carrying value £m	Credit Risk Loans £m	Coverage ratio %
Trading portfolio:
Traded loans	1,780	–	–	1,780	–		1,780	–	–
Financial assets designated at fair value held on own account:
Loans and advances	22,977	357	–	23,334	–		23,334	–	–
Other financial assets	98	–	–	98	–		98	–	–
Loans and advances to banks	37,601	2,522	–	40,123	(3	)	40,120	–	–
Loans and advances to customers:
Residential mortgage loans	100,323	5,813	615	106,751	(132	)	106,619	1,014	13.0
Credit card receivables	12,587	1,026	1,517	15,130	(841	)	14,289	1,568	53.6
Other personal lending	28,569	1,020	1,641	31,230	(1,373	)	29,857	1,822	75.4
Wholesale and corporate loans and advances	171,949	7,987	4,930	184,866	(1,310	)	183,556	5,058	25.9
Finance lease receivables	10,890	159	141	11,190	(113	)	11,077	179	63.1
Total	386,774	18,884	8,844	414,502	(3,772	)	410,730	9,641	39.1

Notes

a	Financial assets subject to collective impairment allowance are included in this column if they are not past due.

b	Financial assets subject to collective impairment allowance are included in this column if they are past due.

Barclays

Annual Report 2008

257

Notes to the accounts

For the year ended 31st December 2008

47 Credit risk(continued)

Credit quality of loans and advances neither past due nor individually impaired


	2008				2007
	Strong £m	Satisfactory £m	Higher risk £m	Total £m	Strong £m	Satisfactory £m	Higher risk £m	Total £m
Trading portfolio:
Traded loans	759	220	91	1,070	223	1,228	329	1,780
Financial assets designated at fair value held on own account:
Loans and advances	25,665	2,792	725	29,182	13,687	6,186	3,104	22,977
Other financial assets	–	1,469	–	1,469	98	–	–	98
Loans and advances to banks	40,181	6,384	100	46,665	35,635	1,955	11	37,601
Loans and advances to customers:
Residential mortgage loans	82,363	42,770	1,230	126,363	60,563	38,000	1,760	100,323
Credit card receivables	–	20,426	666	21,092	–	12,582	5	12,587
Other personal lending	7,549	21,750	1,240	30,539	5,061	22,619	889	28,569
Wholesale and corporate loans and advances	141,868	94,453	10,184	246,505	114,693	54,828	2,428	171,949
Finance lease receivables	4,214	7,504	649	12,367	4,586	6,036	268	10,890
Total loans and advances	302,599	197,768	14,885	515,252	234,546	143,434	8,794	386,774

For the purposes of the analysis of credit quality, the following internal measures of credit quality have been used:


	Retail lending		Wholesale lending
Financial statements description

~~AAA, AA+, AA, AA-, A+, A, A-,BBB+, BBB, BBB-~~	~~Strong~~
~~BB+, BB, BB-, B+, B~~	~~Satisfactory~~
~~B-, CCC+, CCC and lower~~	~~Weak / Substandard~~

~~Wholesale lending~~
~~Default Grade~~Probability of default	~~Financial statements description~~		Probability of default

~~1-3~~	~~Strong~~		~~0.0-0.05%~~
~~4-5~~			~~0.05-0.15%~~
~~6-8~~			~~0.15-0.30%~~
~~9-11~~			~~0.30-0.60%~~
~~12-14~~	~~Satisfactory~~		~~0.60-2.15%~~
~~15-19~~			~~2.15-11.35%~~
~~20-21~~	~~Weak / Substandard~~		~~11.35% +~~

~~Retail lending~~
~~Barclays Retail Grade~~	~~Financial statements description~~Default grade
Strong	0.0-0.60%		0.0-0.05% 0.05-0.15% 0.15-0.30% 0.30-0.60%	~~Probability of default~~ 1-3 4-5 6-8 9-11

1 Satisfactory	~~Strong~~		~~0.0-0.15%~~
2 0.60-10.00%			~~0.15-0.30%~~
3 0.60-2.15% 2.15-11.35%			~~0.30-0.60%~~
		11-14 15-19
~~4-5~~	~~Satisfactory~~		~~0.60-2.50%~~
~~5-7~~Higher risk			~~2.50-10.00%~~
810.00% +	~~Weak / Substandard~~ 11.35% +		~~10.00% +~~ 20-21

Financial statement descriptions can be summarised as follows:

Strong – there is a very high likelihood of the asset being recovered in full. ~~If it is a debt security, then it will be investment grade.~~

Satisfactory – whilst there is a high likelihood that the asset will be recovered and therefore, of no cause for concern to the Group, the asset may not be collateralised, or may relate to retail facilities, such as credit card balances and unsecured loans, which have been ~~conservatively~~ classified as satisfactory, regardless of the fact that the output of internal grading models may have indicated a higher classification. At the lower end of this grade there are customers that are being more carefully monitored, for example, corporate customers which are indicating some evidence of some deterioration, mortgages with a high loan to value ratio, and unsecured retail loans operating outside normal product guidelines.

~~Weak/Sub-standard~~Higher risk – there is concern over the obligor’s ability to make payments when due. However, these have not yet converted to actual delinquency. There may also be doubts over ~~the~~ value of collateral or security provided. However, the borrower or counterparty is continuing to make payments when due and is expected to settle all outstanding amounts of principal and interest.

~~Credit risk mitigation, collateral, security, and other credit enhancements~~

The Group uses a wide variety of techniques to reduce credit risk on its lending. The most important of these is performing an assessment of the ability of a borrower to service the proposed level of borrowing. Barclays policy is to establish that loans are within the customer’s capacity to repay, rather than to rely excessively on security. As a result no security is required for a wide range of lending products.

~~Credit risk mitigation~~

Barclays actively manages its credit exposures. When weaknesses in exposures are detected – either in individual exposures or in groups of exposures –the Group takes action to mitigate the risks. Such actions may, for example, include; reducing the amounts outstanding (in discussion with the customers, clients or counterparties if appropriate); using credit derivatives securitising the assets; and, on occasion, selling them.

Barclays maintains the diversification of its portfolio to avoid unwanted credit risk concentrations. Maximum exposure guidelines are in place relating to the exposures to any individual counterparty. These permit higher exposures to higher-rated borrowers than to lower-rated borrowers. They also distinguish between types of counterparty, for example, between sovereign governments, banks and corporations. Excesses are considered individually at the time of credit sanctioning, are reviewed regularly, and are reported to the Risk Oversight Committee and the Board Risk Committee.

~~Similarly, country risk policy specifies risk appetite by country and avoids excessive concentrations of credits in individual countries, whilst other policies limit lending to certain industries.~~

A further protection against undesirable concentration of risk is the mandate and scale framework. Mandate and scale limits, which can also be set at Group level to reflect overall risk appetite, can relate either to the stock of current exposures in the relevant portfolio or to the flow of new exposures into that portfolio. Typical limits include the proportion of lending with maturity in excess of seven years and the proportion of new mortgage business that is buy-to-let.

~~227~~258

Barclays

Annual Report ~~2007~~2008

LOGO

47 Credit risk(continued)

Loans and advances that are past due but not individually impaired

An age analysis of loans and advances that are past due but not individually impaired is set out below.

For the purposes of this analysis an asset is considered past due and included below when any payment due under strict contractual terms is received late or missed. The amount included is the entire financial asset, not just the payment, of principal or interest or both, overdue.

The table below provides a breakdown of total financial assets past due but not individually impaired. In general, retail and wholesale loans fall into this category for two separate reasons. Retail loans and advances to customers may come under this category because the impairment allowance on such loans is calculated on a collective – not individual – basis. This reflects the homogenous nature of the assets, which allows statistical techniques to be used, rather than individual assessment.

In contrast, some loans to wholesale and corporate customers and banks may come under this category because of instances where a payment on a loan is past due without requiring an individual impairment allowance. For example, an individual impairment allowance will not be required when a loss is not expected due to a corporate loan being fully secured or collateralised. As a result, it is past due but not individually impaired.


	2008
	Past due up to 1 month £m	Past due 1-2 months £m	Past due 2-3 months £m	Past due 3-6 months £m	Past due 6 months and over £m	Total £m	Of which Credit Risk Loans £m
Financial assets designated at fair value held on own account:
Loans and advances	315	147	81	82	250	875	–
Loans and advances to banks	1,044	1	–	–	–	1,045	–
Loans and advances to customers:
Residential mortgage loans	4,420	1,568	630	713	82	7,413	795
Credit card receivables	293	224	150	291	468	1,426	759
Other personal lending	220	204	273	338	307	1,342	645
Wholesale and corporate loans and advances	6,229	540	847	477	214	8,307	691
Finance lease receivables	130	53	39	63	–	285	63
Total loans and advances to customers	11,292	2,589	1,939	1,882	1,071	18,773	2,953
Total financial assets past due but not individually impaired	12,651	2,737	2,020	1,964	1,321	20,693	2,953

	2007
	Past due up to 1 month £m	Past due 1-2 months £m	Past due 2-3 months £m	Past due 3-6 months £m	Past due 6 months and over £m	Total £m	Of which Credit Risk Loans £m
Financial assets designated at fair value held on own account:
Loans and advances	261	4	1	24	67	357	–
Loans and advances to banks	2,031	305	186	–	–	2,522	–
Loans and advances to customers:
Residential mortgage loans	3,609	1,349	456	215	184	5,813	399
Credit card receivables	558	155	107	205	1	1,026	51
Other personal lending	271	199	193	152	205	1,020	181
Wholesale and corporate loans and advances	6,970	622	267	62	66	7,987	128
Finance lease receivables	75	28	18	38	–	159	38
Total loans and advances to customers	11,483	2,353	1,041	672	456	16,005	797
Total financial assets past due but not individually impaired	13,775	2,662	1,228	696	523	18,884	797

Loans and advances individually assessed as impaired

An analysis of financial assets individually assessed as impaired is as follows:


	2008				2007
	Original carrying amount £m	Impairment allowance £m		Revised carrying amount £m	Original carrying amount £m	Impairment allowance £m		Revised carrying amount £m

Loans and advances to banks individually impaired	48	(44	)	4	–	–		–
Loans and advances to customers:
Residential mortgage loans	1,608	(227	)	1,381	615	(88	)	527
Credit card receivables	1,231	(727	)	504	1,517	(725	)	792
Other personal lending	2,040	(1,250	)	790	1,641	(1,030	)	611
Wholesale and corporate loans and advances	7,586	(2,310	)	5,276	4,930	(944	)	3,986
Finance lease receivables	234	(140	)	94	141	(102	)	39
Total loans and advances individually impaired	12,747	(4,698	)	8,049	8,844	(2,889	)	5,955
Collective impairment allowance		(1,876	)			(883	)
Total impairment allowance		(6,574	)			(3,772	)

Barclays

Annual Report 2008

259

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

47 Credit risk(continued)

~~Businesses~~The movements on the impairment allowance during the year were as follows:


	2008
	At beginning of year £m	Acquisitions and disposals £m		Unwind of discount £m		Exchange and other adjustments £m	Amounts written off £m		Recoveries £m	Amounts charged to income statement £m	Balance at 31st December £m
Loans and advances to banks	3	–		–		1	–		7	40	51
Loans and advances to customers:
Residential mortgage loans	132	–		(35	)	19	(44	)	3	232	307
Credit card receivables	841	306		(68	)	94	(845	)	69	1,048	1,445
Other personal lending	1,373	1		(32	)	134	(525	)	42	890	1,883
Wholesale and corporate loans and advances	1,310	–		–		506	(1,428	)	41	2,270	2,699
Finance lease receivables	113	–		–		37	(77)		12	104	189
Total loans and advances to customers	3,769	307		(135)		790	(2,919)		167	4,544	6,523
Total impairment allowance	3,772	307		(135)		791	(2,919)		174	4,584	6,574

	2007
	At beginning of year £m	Acquisitions and disposals £m		Unwind of discount £m		Exchange and other adjustments £m	Amounts written off £m		Recoveries £m	Amounts charged to income statement £m	Balance at 31st December £m
Loans and advances to banks	4	–		–		–	(1)		13	(13)	3
Loans and advances to customers:
Residential mortgage loans	124	–		–		2	(5	)	5	6	132
Credit card receivables	1,030	(75	)	(60	)	4	(819	)	103	658	841
Other personal lending	1,139	–		(53	)	10	(668	)	54	891	1,373
Wholesale and corporate loans and advances	939	1		–		37	(440	)	46	727	1,310
Finance lease receivables	99	1		–		–	(30	)	6	37	113
Total loans and advances to customers	3,331	(73)		(113)		53	(1,962)		214	2,319	3,769
Total impairment allowance	3,335	(73)		(113)		53	(1,963)		227	2,306	3,772


Loan Loss Rates
	Gross loans and advances £m	Impairment allowance £m		Loans and advances net of impairment £m	Impairment charge £m	Loan Loss Rate basis point
As at 31st December 2008	516,096	(6,574	)	509,522	4,913	95
As at 31st December 2007	389,290	(3,772	)	385,518	2,782	71

260

Barclays

Annual Report 2008

LOGO

47 Credit risk(continued)

Renegotiated loans and advances

Loans and advances are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstances of the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under which the Group offers a concessionary rate of interest to genuinely distressed borrowers. This will result in the asset continuing to be overdue and will be individually impaired where the renegotiated payments of interest and principal will not recover the original carrying amount of the asset. In other cases, renegotiation will lead to a new agreement, which is treated as a new loan.

Collateral and other credit enhancements held

Financial assets that are past due or individually assessed as impaired may ~~put in place~~be partially or fully collateralised or subject to other forms of credit ~~risk mitigation, such as credit derivatives or~~enhancement.

Assets in these categories subject to collateralisation are mainly corporate loans, residential mortgage loans and finance lease receivables. Credit card receivables and other ~~forms~~personal lending are generally unsecured (although in some instances a charge over the borrowers property of ~~credit protection in accordance with their procedures or policies. Hedges and mitigants are monitored and risk appetite reviewed to ensure that credit risk~~other assets may be sought).

Corporate loans

Security is ~~kept to acceptable levels.~~

~~Collateral and security~~

~~Collateral and security can be an important mitigant of credit risk.~~

~~The Group routinely obtains collateral and security, such as~~usually taken in the ~~case~~form of a ~~residential~~fixed charge over the borrower’s property or ~~commercial mortgage, a reverse repurchase agreement, or a commercial loan with~~ a floating charge over ~~book debts and inventories.~~

~~The Group ensures that any collateral held~~the assets of the borrower. Loan covenants may be put in place to safeguard the Group’s financial position. If the exposure is sufficiently liquid, legally effective, enforceable and regularly reassessed. Before attaching value to collateral, businesses holding specific, agreed classes of collateral must ensure that they are holding a correctly perfected charge.

~~The principal collateral and security types are as follows:~~

–	~~Personal lending – mortgages over residential properties;~~

–	~~Commercial and industrial sector – charges over business assets such as premises, stock and debtors, and third party~~large, either individually or at the portfolio level, credit ~~protection (i.e. guarantees);~~

–	~~Commercial real estate sector – charges over the properties being financed; and,~~

–	Over-The-Counter (OTC ) trading exposures – cash; direct debt obligation government (G14+) bonds denominated in the domestic currency of the issuing country, debt issued by supranationals and letters of credit issued by an institution with a long-term unsecured debt rating of A+/A3 or better.

~~Valuation of the collateral and security taken is within agreed parameters.~~

~~Before reliance is placed on third party~~ protection in the form of ~~bank, government~~guarantees, credit derivatives or ~~corporate guarantees~~insurance may be taken out.

For these and other reasons collateral given is only accurately valued on origination of the loan or ~~credit derivative protection from financial intermediary counterparties,~~in the course of enforcement actions and as a ~~credit assessment~~result it is ~~undertaken. Eligibility parameters for guarantees~~not practicable to estimate the fair value of the collateral held.

Residential mortgage loans

These are secured by a fixed charge over the property.

A description and ~~credit derivative are similar to those applied to~~the estimated fair value of collateral held ~~against OTC traded exposures.~~

~~Any collateral taken~~ in respect of ~~OTC trading exposures will be subject to a ‘haircut’ which~~residential mortgage loans that are past due or individually assessed as impaired is ~~negotiated at~~as follows:


Nature of assets
	2008 Fair value £m	2007 Fair value £m
Residential property	7,264	6,488

Collateral included in the time of signing the collateral agreement. A haircut is the valuation percentage applicable to each type of collateral and will be largely based on liquidity and price volatility of the underlying security.

The Group also uses various forms of specialised legal agreements to reduce risk, including entering into master netting agreement with counterparties, which the Group uses to restrict its exposure to credit losses. Group policy requires all netting arrangements to be legally documented. The ISDA Master Agreement isabove table reflects the Group’s ~~preferred agreement for documenting OTC activity. It provides~~interest in the contractual framework within which dealing activities across a full range of OTC products are conducted and contractually binds both parties to apply close-out netting across all outstanding transactions covered by an agreement if either party defaults or other pre-determined events occur. In the normal course of events, where the master agreement is ISDA, the collateral document will be the ISDA Credit Support Annex (CSA). The collateral document must give Barclays the power to realise any collateral placed with itproperty in the event of default. That held in the ~~failure~~form of charges against residential property in the UK is restricted to the outstanding loan balance. In other territories, where the Group is not obliged to return any sale proceeds to the mortgagee, the full estimated fair value has been included.

Finance lease receivables

The net investment in the lease is secured through retention of legal title to the leased assets.

Collateral and other credit enhancements obtained

The carrying value of assets held by the Group as at 31st December 2008 as a result of the ~~counterparty, and to place further~~enforcement of collateral ~~when requested or in the event of insolvency, administration or similar processes,~~was as ~~well as in the case of early termination.~~follows:

~~Security structures and legal covenants are subject to regular review, at least annually, to ensure that they remain fit for purpose and remain consistent with accepted local market practice.~~


Nature of assets
	2008 Carrying amount £m	2007 Carrying amount £m
Residential property	171	34
Commercial and industrial property	2	1
Other credit enhancements	61	–
Total	234	35

Any properties repossessed are made available for sale in an orderly and timely fashion, with any proceeds realised being used to reduce or repay the outstanding loan. For business customers, in some circumstances, where excess funds are available after repayment in full of the outstanding loan, they are offered to any other, lower ranked, secured lenders. Any additional funds are returned to the customer. Barclays does not, as a rule, occupy repossessed properties for its business use.

~~Maximum exposure to credit risk before collateral held or other credit enhancements~~

The following table presents the maximum exposure at 31 December 2007 and 2006 to credit risk of balance sheet and off balance sheet financial instruments, before taking account of any collateral held or other credit enhancements and after allowance for impairment and netting where appropriate.

~~Barclays~~

~~Annual Report 2007~~

~~228~~

~~47 Credit risk (continued)~~

This analysis and all subsequent analyses of credit risk include financial assets subject to credit risk only. They exclude other financial assets, mainly equity securities held in trading portfolio or available for sale as well as non-financial assets. The nominal value of off-balance sheet credit related instruments are also shown, where appropriate.

   2007
£m
   2006
£m
On balance sheet:


Cash and balances at central banks

   5,801    7,345
Items in course of collection from other banks

   1,836    2,408
Trading portfolio:

Treasury and other eligible bills
   2,094    2,960
Debt securities
   152,778    140,576
Traded Loans

   1,780    1,843
Total trading portfolio

   156,652    145,379
Financial assets designated at fair value held on own account:

Loans and advances
   23,491    13,196
Debt securities
   24,217    12,100
Other financial assets

   3,545    2,792
Total financial assets designated at fair value held on own account

   51,253    28,088
Derivative financial investments

   248,088    138,353
Loans and advances to banks

   40,120    30,926
Loans and advances to customers:

Residential mortgage loans
   111,955    94,511
Credit card receivables
   14,289    13,399
Other personal lending
   24,968    20,511
Wholesale and corporate loans and advances
   183,109    143,836
Finance lease receivables

   11,077    10,043
Total loans and advances to customers

   345,398    282,300
Available for sale financial investments:

Treasury and other eligible bills
   2,723    2,420
Debt securities

   38,673    47,912
Total available for sale financial investments:

   41,396    50,332
Reverse repurchase agreements
   183,075    174,090
Other assets

   3,966    4,097
Total on balance sheet

   1,077,585    863,318
Off balance sheet:

Acceptances and endorsements
   365    287
Guarantees and letters of credit pledged as collateral security
   35,692    31,252
Commitments

   192,639    205,504
Total off balance sheet

   228,696    237,043
Total maximum exposure at 31st December

   1,306,281    1,100,361

~~229~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~47 Credit risk (continued)~~

Whilst the Group’s maximum exposure to credit risk is the carrying value of the assets, or, in the case of off-balance sheet items the amount guaranteed, committed, accepted or endorsed, in most cases the likely exposure is far less due to collateral, credit enhancements and other actions taken to mitigate the Group’s exposure, described below for each class of financial instrument:


~~Asset~~		~~Nature of collateral obtained or other credit risk mitigation~~

~~Cash with central banks, items in the course of collection, and loans and advances to banks~~		~~Due to the nature of the counterparties, collateral is generally not sought on these balances which are considered to be low risk.~~

~~Trading portfolio~~		The credit risk of these assets is reflected in their fair values. No collateral or enhancements are obtained directly from the issuer or counterparty but may be implicit in the terms of the instrument.

~~Financial assets designated at fair value held on own account~~		~~The credit risk of these assets is reflected in their fair values. Debt securities may be collateralised, according to their terms. Loans and advances included in this category may be collateralised.~~

~~Derivatives~~		Credit risk is also minimised where possible through netting agreements whereby derivative assets and liabilities with the same counterparty can be offset. Collateral will also be sought, depending on the creditworthiness of the counterparty and/or nature of the transaction.

~~Loans and advances to customers~~

~~– Residential mortgage loans~~		~~These are secured by a fixed charge over the property. In addition, portfolios may be securitised.~~

~~– Credit card receivables~~		~~This lending is generally unsecured. Balances may be securitised.~~

~~– Other personal lending~~		~~In general this is unsecured. For certain personal lending, a charge over the borrower’s property or other assets may be sought.~~

~~– Wholesale and corporate loans and advances~~		Various forms of collateral may be sought for these loans, often in the form of a fixed charge over the borrower’s property and a floating charge over the current assets of a corporate borrower. Loan covenants may be put in place to safeguard the bank’s financial position. If the exposure is sufficiently large, either individually or at the portfolio level, credit protection in the form of guarantees, credit derivatives or insurance may be taken out.

~~– Finance lease receivables~~		~~The net investment in the lease is secured through retention of legal title to the leased assets.~~

~~Available for sale assets~~		~~No collateral or enhancements are obtained although collateral may be inherent in the structure of the asset.~~

~~Reverse repurchase agreements and cash collateral on securities borrowed~~		~~These loans are fully collateralised with the securities legally transferred to the Group. The level of collateral is monitored daily and further collateral calls made when required.~~

~~Off balance sheet~~		The Group applies the same risk management policies for off balance sheet risks as it does for its on balance sheet risks. Collateral may be sought, depending on the strength of the counterparty and/or nature of the transaction.

~~Acceptances and endorsements~~		~~Amounts paid are normally repaid by the customer on presentation.~~

~~Guarantees and letters of credit pledged as security~~		~~The Group is only required to meet its obligations should the customer default, in which case the Group will generally have recourse to the customer.~~

~~Commitments~~		~~These are commitments to future lending and are subject to the Group’s normal lending policies including taking collateral depending on the customers’ circumstances.~~

~~Financial assets that would be past due or impaired had their terms not been renegotiated~~

Financial assets are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstances of the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under which the Group offers a concessionary rate of interest to genuinely distressed borrowers. This will result in the asset continuing to be overdue (delinquent) and will be individually impaired where the renegotiated payments of interest and principal will not recover the original carrying amount of the asset. In other cases, renegotiation will lead to a new agreement, which is treated as a new loan.

~~Credit risk concentrations~~

The analyses of credit risk concentrations presented below are based on the location of the counterparty or customer or the industry in which they are engaged, otherwise, the product type in accordance with the manner in which the Group manages credit risk.

~~Barclays~~

~~Annual Report 2007~~

~~230~~

~~47 Credit risk (continued)~~

~~Analyses of the Group’s credit exposure are set out below:~~

~~Credit risk concentrations by geographical sector~~

   2007
   United
Kingdom
£m
   Other
European
Union
£m
   United
States
£m
   Africa
£m
   Rest of
the
World
£m
   Total
£m
On balance sheet:

Cash and balances at central banks
   1,458    2,170    206    1,406    561    5,801
Items in the course of collection from other banks
   1,638    75    –    110    13    1,836
Trading portfolio
   28,959    41,675    53,208    877    31,933    156,652
Financial assets designated at fair value held on own account
   15,713    5,907    20,396    958    8,279    51,253
Derivative financial instruments
   60,534    75,017    82,975    2,229    27,333    248,088
Loans and advances to banks
   5,515    11,102    13,443    2,581    7,479    40,120
Loans and advances to customers
   187,824    56,189    39,944    38,653    22,788    345,398
Available for sale financial investments
   5,934    18,354    7,818    2,944    6,346    41,396
Reverse repurchase agreements
   42,160    51,734    67,018    2,156    20,007    183,075
Other assets

   1,813    617    424    698    414    3,966
Total on balance sheet

   351,548    262,840    285,432    52,612    125,153    1,077,585
Off balance sheet:

Acceptances and endorsements
   227    5    5    34    94    365
Guarantees and letters of credit pledged as collateral security
   7,377    1,468    23,696    1,286    1,865    35,692
Commitments

   90,964    23,946    48,657    20,471    8,601    192,639
Total off balance sheet

   98,568    25,419    72,358    21,791    10,560    228,696
Total

   450,116    288,259    357,790    74,403    135,713    1,306,281
Credit risk concentrations by geographical sector


   2006
   United
Kingdom
£m
   Other
European
Union
£m
   United
States
£m
   Africa
£m
   Rest of
the
World
£m
   Total
£m
On balance sheet:

Cash and balances at central banks
   4,367    2,275    109    515    79    7,345
Items in the course of collection from other banks
   2,296    21    –    82    9    2,408
Trading portfolio assets
   27,900    30,508    55,674    762    30,535    145,379
Financial assets designated at fair value held on own account
   9,969    4,559    10,951    244    2,365    28,088
Derivative financial instruments
   44,022    41,424    35,485    1,639    15,783    138,353
Loans and advances to banks
   6,227    8,511    9,056    2,219    4,913    30,926
Loans and advances to customers
   168,043    43,121    25,577    31,274    14,285    282,300
Available for sale financial investments
   9,262    22,288    9,132    2,287    7,363    50,332
Reverse repurchase agreements
   33,544    41,725    73,415    1,147    24,259    174,090
Other assets

   1,288    1,433    237    982    157    4,097
Total on balance sheet

   306,918    195,865    219,636    41,151    99,748    863,318
Off balance sheet:

Acceptances and endorsements
   220    6    –    47    14    287
Guarantees and letters of credit pledged as collateral security
   5,210    3,489    19,682    1,196    1,675    31,252
Commitments

   88,731    27,355    56,546    20,880    11,992    205,504
Total off balance sheet

   94,161    30,850    76,228    22,123    13,681    237,043
Total

   401,079    226,715    295,864    63,274    113,429    1,100,361

~~231~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~47 Credit risk (continued)~~

~~Credit risk concentrations by industrial sector~~

   2007
   Government
and Central
Banks
£m
   Financial
Services
£m
   Transport,
Postal and
communication
and
Business
and other
services
£m
   Agriculture,
Manufacturing
and
Wholesale
and retail
trade
£m
   Construction
and
Property
£m
   Energy
and
water
£m
   Residential
mortgage
loans
£m
   Other
personal
lending
£m
   Finance
lease
receivables
£m
   Total
£m
On balance sheet:
Cash and balances at central banks    5,801    –    –    –    –    –    –    –    –    5,801
Items in the course of collection from other banks    8    1,828    –    –    –    –    –    –    –    1,836
Trading portfolio assets    58,608    83,790    4,434    3,928    924    4,072    895    1    –    156,652
Financial assets designated at fair value held on own account    10,914    23,742    570    699    11,325    396    3,509    98    –    51,253
Derivative financial instruments    2,886    227,609    2,771    5,567    1,106    8,031    87    31    –    248,088
Loans and advances to banks    7,881    32,239    –    –    –    –    –    –    –    40,120
Loans and advances to customers    2,036    70,699    41,678    37,722    22,288    8,623    111,955    39,320    11,077    345,398
Available for sale financial investments    8,880    29,693    2,142    249    167    246    –    19    –    41,396
Reverse repurchase agreements    1,713    179,459    416    735    752    –    –    –    –    183,075
Other assets

   270    1,506    542    307    168    5    112    1,056    –    3,966
Total on balance sheet

   98,997    650,565    52,553    49,207    36,730    21,373    116,558    40,525    11,077    1,077,585
Off balance sheet:
Acceptances and endorsements    –    125    111    91    21    4    –    13    –    365
Guarantees and letters of credit pledged as collateral security    51    17,021    12,847    1,867    538    2,687    1    680    –    35,692
Commitments

   4,511

   30,492

   26,370

   32,388

   11, 282

   9,961

   10,969

   66,666

   –

   192,639

Total off balance sheet

   4,562

   47,638

   39,328

   34,346

   11,841

   12,652

   10,970

   67,359

   –

   228,696

Total

   103,559    698,203    91,881    83,553    48,571    34,025    127,528    107,884    11,077    1,306,281

~~Barclays~~

~~Annual Report 2007~~

~~232~~

~~47 Credit risk (continued)~~

~~Credit risk concentrations by industrial sector~~

   2006
   Government
and Central
Banks
£m
   Financial
Services
£m
   Transport,
Postal and
communication
and Business
and other
services
£m
   Agriculture,
Manufacturing
and
Wholesale
and retail
trade
£m
   Construction
and
Property
£m
   Energy
and
water
£m
   Residential
mortgage
loans
£m
   Other
personal
lending
£m
   Finance
lease
receivables
£m
   Total
£m
On balance sheet:
Cash and balances at central banks    7,345    –    –    –    –    –    –    –    –    7,345
Items in the course of collection from other banks    5    2,403    –    –    –    –    –    –    –    2,408
Trading portfolio assets    56,222    78,322    2,793    3,333    792    3,043    871    3    –    145,379
Financial assets designated at fair value held on
own account
   6,412    12,101    269    325    6,797    162    2,022    –    –    28,088
Derivative financial instruments    1,701    119,812    2,496    5,945    642    7,681    53    23    –    138,353
Loans and advances to banks    2,221    28,705    –    –    –    –    –    –    –    30,926
Loans and advances to customers    2,426    45,033    34,543    34,755    20,542    6,810    94,511    33,538    10,142    282,300
Available for sale financial investments    10,055    39,105    733    9    141    257    31    1    –    50,332
Reverse repurchase agreements    1,205    171,146    107    435    918    20    –    259    –    174,090
Other assets

   43    2,637    469    78    97    5    –    768    –    4,097
Total on balance sheet

   87,635

   499,264

   41,410

   44,880

   29,929

   17,978

   97,488

   34,592

   10,142

   863,318

Off balance sheet:
Acceptances and endorsements    11    99    38    114    21    1    1    2    –    287
Guarantees and letters of credit pledged as collateral security    12    20,999    4,313    1,915    907    2,900    9    197    –    31,252
Commitments

   4,914    49,917    23,807    29,164    15,263    12,401    19,375    50,663    –    205,504
Total off balance sheet

   4,937

   71,015

   28,158

   31,193

   16,191

   15,302

   19,385

   50,862

   –

   237,043

Total

   92,572    570,279    69,568    76,073    46,120    33,280    116,873    85,454    10,142    1,100,361

~~233~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~47 Credit risk (continued)~~

~~Financial assets subject to credit risk~~

~~For the purposes of the Group’s disclosures regarding credit quality, its financial assets have been analysed as follows:~~

   As at 31st December 2007
   Neither past
due nor
individually
impaired
£m    Past due
but not
individually
impaired
£m    Individually
impaired
£m    Total
£m
   Impairment
allowance
£m

Total
carrying
value
£m
Cash and balances at central banks    5,801    –    –    5,801    – 5,801
Items in the course of collection from other banks    1,836    –    –    1,836    – 1,836
Trading portfolio    156,652    –    –    156,652    – 156,652
Financial assets designated at fair value held on own account    50,896    357    –    51,253    – 51,253
Derivatives    248,088    –    –    248,088    – 248,088
Loans and advances to banks    37,601    2,522    –    40,123    (3 ) 40,120
Loans and advances to customers    324,318    16,005    8,844    349,167    (3,769 ) 345,398
Available for sale financial investments    41,304    92    –    41,396    – 41,396
Reverse repurchase agreements    183,075    –    –    183,075    – 183,075
Other assets

   3,966    –    –    3,966    – 3,966

Total



1,053,537


18,976


8,844


1,081,357


(3,772

)

1,077,585

   As at 31st December 2006
      Neither past
due nor
individually
impaired
£m    Past due
but not
individually
impaired
£m    Individually
impaired
£m    Total
£m
Impairment
allowance
£m

Total
carrying
value
£m

Cash and balances at central banks
   7,345    –    –    7,345    – 7,345
Items in the course of collection from other banks
   2,408    –    –    2,408    – 2,408
Trading portfolio
   145,379    –    –    145,379    – 145,379
Financial assets designated at fair value held on own account
   28,088    –    –    28,088    – 28,088
Derivatives
   138,353    –    –    138,353    – 138,353
Loans and advances to banks
   29,355    1,575    –    30,930    (4 ) 30,926
Loans and advances to customers
   270,321    10,989    4,321    285,631    (3,331 ) 282,300
Available for sale financial investments
   50,156    176    –    50,332    – 50,332
Reverse repurchase agreements
   174,090    –    –    174,090    – 174,090
Other assets

   4,097    –    –    4,097    – 4,097
Total

   849,592    12,740    4,321    866,653    (3,335 ) 863,318

~~Financial assets designated at fair value, derivatives, and trading portfolios are not subject to impairment allowances as credit losses are fully reflected in their fair values.~~

The impairment allowance above includes allowances against financial assets that have been individually impaired and those subject to collective impairment. Assets subject to a collective impairment allowance are included in financial assets neither past due nor individually impaired or financial assets past due but not individually impaired, as appropriate.

~~Barclays~~

~~Annual Report 2007~~

~~234~~

~~47 Credit risk (continued)~~

~~(a) Credit quality of financial assets neither past due nor individually impaired~~

~~The credit quality of financial assets subject to credit risk, that were neither past due nor impaired, based on the credit ratings on page 227, was as follows:~~

   2007
      Strong
£m    Satisfactory
£m    Weak/sub-
standard
£m    Total £m
Cash and balances at central banks

�� 5,801    –    –    5,801
Items in the course of collection from other banks

   1,713    123    –    1,836
Trading portfolio:

Treasury bills and other eligible bills
   1,984    110    –    2,094
Debt securities
   143,161    8,958    659    152,778
Traded loans

   223    1,228    329    1,780
Total trading portfolio

   145,368    10,296    988    156,652
Financial assets designated at fair value held on own account

Loans and advances
   13,844    6,186    3,104    23,134
Debt securities
   10,010    14,207    –    24,217
Other financial assets

   3,541    4    –    3,545
Total financial assets designated at fair value held on own account

   27,395    20,397    3,104    50,896
Derivative financial instruments

   243,491    3,630    967    248,088
Loans and advances to banks

   35,635    1,955    11    37,601
Loans and advances to customers:

Residential mortgage loans
   62,748    41,144    1,761    105,653
Credit card receivables
   –    12,582    5    12,587
Other personal lending
   2,882    19,915    889    23,686
Wholesale and corporate loans and advances
   114,695    54,380    2,427    171,502
Finance lease receivables

   4,586    6,036    268    10,890
Total loans and advances to customers

   184,911    134,057    5,350    324,318
Available for sale financial investments:

Debt securities
   36,623    1,528    430    38,581
Treasury bills and other eligible bills

   2,130    593    –    2,723
Total available for sale financial investments:

   38,753    2,121    430    41,304
Reverse repurchase agreements

   180,637    2,391    47    183,075
Other assets

   2,410    1,452    104    3,966
Total financial assets neither past due nor individually impaired

   866,114    176,422    11,001    1,053,537

~~235~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~47 Credit risk (continued)~~

~~(a) Credit quality of financial assets neither past due nor individually impaired (continued)~~

   2006
   Strong
£m    Satisfactory
£m    Weak/sub-
standard
£m    Total
£m
Cash and balances at central banks

   7,345    –    –    7,345
Items in the course of collection from other banks

   1,814    594    –    2,408
Trading portfolio:

Treasury bills and other eligible bills
   2,947    13    –    2,960
Debt securities
   133,230    5,907    1,439    140,576
Traded loans

   405    1,425    13    1,843
Total trading portfolio

   136,582    7,345    1,452    145,379
Financial assets designated at fair value:

Loans and advances
   10,586    2,228    382    13,196
Debt securities
   5,307    6,793    –    12,100
Other financial assets

   2,637    155    –    2,792
Total financial assets designated at fair value

   18,530    9,176    382    28,088
Derivative financial instruments held on own account

   133,980    4,194    179    138,353
Loans and advances to banks

   29,008    336    11    29,355
Loans and advances to customers:

Residential mortgage loans
   53,760    34,019    1,316    89,095
Credit card receivables
   –    11,858    49    11,907
Other personal lending
   2,832    16,652    110    19,594
Wholesale and corporate loans and advances
   92,912    44,583    2,295    139,790
Finance lease receivables

   4,481    5,349    105    9,935
Total loans and advances to customers

   153,985    112,461    3,875    270,321
Available for sale financial investments:

Debt securities
   47,687    49    –    47,736
Treasury bills and other eligible bills

   2,313    107    –    2,420
Total available for sale financial investments:

   50,000    156    –    50,156
Reverse repurchase agreements

   171,725    856    1,509    174,090
Other assets

   2,548    1,546    3    4,097
Total financial assets neither past due nor individually impaired

   705,517    136,664    7,411    849,592

~~Barclays~~

~~Annual Report 2007~~

~~236~~

~~47 Credit risk (continued)~~

~~(b) Financial assets that are past due but not individually impaired~~

~~An age analysis of financial assets that are past due but not individually impaired is set out below.~~

For the purposes of this analysis an asset is considered past due and included below when any payment due under the strict contractual terms is received late or missed. The amount included is the entire financial asset, not just the payment, of principal or interest or both, overdue.

The Group expends considerable effort in monitoring overdue assets. Assets may be overdue for a number of reasons, including late processing of payments or documentation, for example, over weekends and holiday periods. Where assets are considered to be uncollectable they are subject to individual impairment.

Trading portfolio and derivative assets are measured on a fair value basis such that their carrying amount reflects expected defaults. Amounts that are past due as a result of counterparty credit issues are not significant.

   2007
   Past
due
up to 1
month
£m
   Past
due
1-2
months
£m
   Past
due
2-3
months
£m
   Past
due
3-6
months
£m
   Past
due
6 months
and over
£m
   Total
£m
Financial assets designated at fair value held on own account

Loans and advances

   261    4    1    24    67    357
Total financial assets designated at fair value held on own account

   261    4    1    24    67    357
Loans and advances to banks

   2,031    305    186    –    –    2,522
Loans and advances to customers:

Residential mortgage loans
   3,609    1,349    456    215    184    5,813
Credit card receivables
   558    155    107    205    1    1,026
Other personal lending
   271    199    193    152    205    1,020
Wholesale and corporate loans and advances
   6,970    622    267    62    66    7,987
Finance lease receivables

   75    28    18    38    –    159
Total loans and advances to customers

   11,483    2,353    1,041    672    456    16,005
Available for sale financial investments:

Debt securities

   92    –    –    –    –    92
Total available for sale financial investments:

   92    –    –    –    –    92
Total financial assets past due but not individually impaired

   13,867    2,662    1,228    696    523    18,976

   2006
   Past
due
up to 1
month
£m
   Past
due 1-2
months
£m    Past
due 2-3
months
£m    Past
due
3-6 months
£m
   Past
due
6 months
and over
£m
   Total
£m
Financial assets designated at fair value held on own account

Loans and advances

   –    –    –    –    –    –
Total financial assets designated at fair value held on own
account

   –

   –

   –

   –

   –

   –

Loans and advances to banks

   1,004    234    337    –    –    1,575
Loans and advances to customers:

Residential mortgage loans
   3,394    1,124    280    208    150    5,156
Credit card receivables
   622    202    144    304    –    1,272
Other personal lending
   276    118    119    253    1    767
Wholesale and corporate loans and advances
   3,322    130    180    20    53    3,705
Finance lease receivables

   35    10    22    22    –    89
Total loans and advances to customers

   7,649    1,584    745    807    204    10,989
Available for sale financial investments:

Debt securities

   131    22    –    23    –    176
Total available for sale financial investments:

   131    22    –    23    –    176
Total financial assets past due but not individually impaired

   8,784    1,840    1,082    830    204    12,740

~~237~~

~~Barclays~~

~~Annual Report 2007~~

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~47 Credit risk (continued)~~

~~(c) Impaired financial assets~~

~~Financial assets individually assessed as impaired~~

~~An analysis of financial assets individually assessed as impaired is as follows:~~

   2007    2006
   Original
carrying
amount
£m    Impairment
allowance
£m

Revised
carrying
amount
£m    Original
carrying
amount
£m    Impairment
allowance
£m

Revised
carrying
amount
£m

Loans and advances to customers:
Residential mortgage loans    621    (88 ) 533    384    (75 ) 309
Credit card receivables    1,517    (725 ) 792    1,250    (839 ) 411
Other personal lending    1,635    (1,030 ) 605    1,289    (954 ) 335
Wholesale and corporate loans and advances    4,930    (944 ) 3,986    1,280    (589 ) 691
Finance lease receivables

   141    (102 ) 39    118    (79 ) 39
Total loans and advances to customers individually impaired

   8,844    (2,889) 5,955    4,321    (2,536) 1,785
Collective impairment allowance

         (883)             (799)
Total impairment allowance

         (3,772)             (3,335)

In addition to the above, there are impaired available for sale debt securities with a carrying value at 31st December 2007 of £432m, after a write-down of £13m. In 2006, all impaired available for sale debt securities had been disposed of prior to 31st December.

~~The movements on the impairment allowance during the year were as follows:~~

   2007
      At
beginning
of year
£m    Acquisitions
and
disposals
£m    Unwind
of
discount
£m    Exchange
and other
adjustments
£m    Amounts
written
off
£m    Recoveries
£m    Amounts
charged to
income
statement
£m    Balance
at 31st
December
£m
Loans and advances to banks

   4    –    –    –    (1)    13    (13)    3
Loans and advances to customers:
Residential mortgage loans    124    –    –    2    (5)    5    6    132
Credit card receivables    1,030    (75)    (60)    4    (819)    103    658    841
Other personal lending    1,139    –    (53)    10    (668)    54    891    1,373
Wholesale and corporate loans and
advances    939    1    –    37    (440)    46    727    1,310
Finance lease receivables

   99    1    –    –    (30)    6    37    113
Total loans and advances to customers

   3,331    (73)    (113)    53    (1,962)    214    2,319    3,769
Total impairment allowance

   3,335    (73)    (113)    53    (1,963)    227    2,306    3,772
   2006
      At
beginning
of year
£m    Acquisitions
and
disposals
£m    Unwind
of
discount
£m    Exchange
and other
adjustments
£m    Amounts
written off
£m    Recoveries
£m    Amounts
charged to
income
statement
£m    Balance
at 31st
December
£m
Loans and advances to banks

   4    –    –    –    –    33    (33)    4
Loans and advances to customers:
Residential mortgage loans    139    –    (8)    (8)    (51)    14    38    124
Credit card receivables    978    –    (66)    (21)    (887)    101    925    1,030
Other personal lending    975    –    (22)    (42)    (557)    63    722    1,139
Wholesale and corporate loans and
advances    1,253    (12)    (2)    (69)    (626)    41    354    939
Finance lease receivables

   101    (11)    –    (13)    (53)    7    68    99
Total loans and advances to customers

   3,446    (23)    (98)    (153)    (2,174)    226    2,107    3,331
Total impairment allowance

   3,450    (23)    (98)    (153)    (2,174)    259    2,074    3,335

~~Barclays~~

~~Annual Report 2007~~

~~238~~

~~47 Credit risk (continued)~~

~~Collateral and other credit enhancements held~~

~~Financial assets that are past due or individually assessed as impaired may be partially or fully collateralised or subject to other forms of credit enhancement.~~

~~Assets in these categories subject to collateralisation are mainly corporate and residential mortgage loans.~~

For corporate loans, security may be in the form of floating charges where the value of the collateral varies with the level of assets such as inventory and receivables held by the customer. For these and other reasons collateral given is only accurately valued on origination of the loan or in the course of enforcement actions and as a result it is not practicable to estimate the fair value of the collateral held.

~~A description and the estimated fair value of collateral held in respect of residential mortgage loans that are past due or individually assessed as impaired was as follows:~~

   2007    2006
      Fair
value
£m    Fair
value
£m
Nature of assets

– Residential Property

   6,488    6,183
Total

   6,488    6,183

Collateral included in the above table reflects the Group’s interest in the property in the event of default.That held in the form of charges against residential property in the UK is restricted to the outstanding loan balance. In other territories, where the Group is not obliged to return any sale proceeds to the mortgagee, the full estimated fair value has been included.

~~Collateral and other credit enhancements obtained~~

~~The carrying value of assets held by the Group as at 31st December 2007 as a result of the enforcement of collateral was as follows:~~

   2007    2006
   Carrying
Amount
£m    Carrying
Amount
£m
Nature of assets

– Residential Property
   34    12
– Commercial and industrial property
   1    2
– Other credit enhancements

   –    –
Total

   35    14

The Group does not use assets obtained in its operations. Assets obtained are normally sold, generally at auction, or realised in an orderly manner for the maximum benefit of the Group, the borrower and the borrower’s other creditors in accordance with the relevant insolvency regulations.

~~239~~

Barclays

Annual Report ~~2007~~2008

261

Notes to the accounts

For the year ended 31st December 2008

47 Credit risk(continued)

Debt securities

Trading portfolio assets, financial assets designated at fair value and available for sale assets are measured on a fair value basis. The fair value will reflect, among other things, the credit risk of the issuer.

Most listed and some unlisted securities are rated by external rating agencies. The Group mainly uses external credit ratings provided by Standard & Poors’ or Moody’s. Where such ratings are not available or are not current, the Group will use its own internal ratings for the securities.

An analysis of the credit quality of the Group’s debt securities is set out below:


	2008				2007
	AAA to BBB- (investment grade) £m	BB+ to B £m	B- and below £m	Total £m	AAA to BBB- (investment grade) £m	BB+ to B £m	B- and below £m	Total £m
Trading portfolio:
Treasury and other eligible bills	4,491	53	–	4,544	1,984	110	–	2,094
Debt securities	141,454	5,556	1,676	148,686	143,161	8,958	659	152,778
Total trading portfolio	145,945	5,609	1,676	153,230	145,145	9,068	659	154,872
Financial assets designated at fair value held on own account:
Debt securities	1,222	7,406	–	8,628	10,010	14,207	–	24,217
Available for sale financial investments:
Treasury and other eligible bills	2,823	1,180	–	4,003	2,130	593	–	2,723
Debt securities	55,817	2,347	667	58,831	36,623	1,528	522	38,673
Total available for sale financial investments	58,640	3,527	667	62,834	38,753	2,121	522	41,396
Total debt securities	205,807	16,542	2,343	224,692	193,908	25,396	1,181	220,485
%	91.6	7.4	1.0	100.0	88.0	11.5	0.5	100

In addition to the above, there are impaired available for sale debt securities with a carrying value at 31st December 2008 of £329m (2007: £432m), after a write-down of £363m (2007: £13m).

Collateral is not generally obtained directly from the issuers of debt securities. Certain debt securities may be collateralised by specifically identified assets that would be obtained in the event of default.

Derivatives

Derivatives are measured on a fair value basis.

The credit quality of the Group’s derivative assets according to the credit quality of the counterparty at 31st December 2008 and 2007 was as follows:


	2008				2007
	AAA to BBB- (investment grade) £m	BB+ to B £m	B– and below £m	Total £m	AAA–BBB- (investment grade) £m	BB+ to B £m	B– and below £m	Total £m
Derivatives	939,071	42,266	3,465	984,802	243,491	3,630	967	248,088
%	95.3	4.3	0.4	100.0	98.1	1.5	0.4	100.0

Credit risk from derivatives is mitigated where possible through netting agreements whereby derivative assets and liabilities with the same counterparty can be offset. Group policy requires all netting arrangements to be legally documented. The ISDA Master Agreement is the Group’s preferred agreement for documenting OTC derivatives. It provides the contractual framework within which dealing activities across a full range of OTC products are conducted and contractually binds both parties to apply close-out netting across all outstanding transactions covered by an agreement if either party defaults or other pre-determined events occur.

Collateral is obtained against derivative assets, depending on the creditworthiness of the counterparty and/or nature of the transaction. Any collateral taken in respect of OTC trading exposures will be subject to a ‘haircut’ which is negotiated at the time of signing the collateral agreement. A haircut is the valuation percentage applicable to each type of collateral and will be largely based on liquidity and price volatility of the underlying security. The collateral obtained for derivatives is either cash, direct debt obligation government (G14+) bonds denominated in the domestic currency of the issuing country, debt issued by supranationals or letters of credit issued by an institution with a long-term unsecured debt rating of A+/A3 or better. Where the Group has ISDA master agreements, the collateral document will be the ISDA Credit Support Annex (CSA). The collateral document must give Barclays the power to realise any collateral placed with it in the event of the failure of the counterparty, and to place further collateral when requested or in the event of insolvency, administration or similar processes, as well as in the case of early termination.

Derivative assets and liabilities would be £917,074m (2007: £215,585m) lower than reported if netting were permitted for assets and liabilities with the same counterparty or for which the Group holds cash collateral.

262

Barclays

Annual Report 2008

LOGO

47 Credit risk(continued)

Reverse repurchase agreements

Reverse repurchase agreements and securities borrowing arrangements are collateralised loans typically of short maturities.

The loans are fully collateralised with highly liquid securities legally transferred to the Group. The level of collateral is monitored daily and further collateral called when required.


	2008				2007
	AAA to BBB– (investment grade) £m	BB+ to B £m	B– and below £m	Total £m	AAA to BBB– (investment grade) £m	BB+ to B £m	B– and below £m	Total £m
Financial assets designated at fair value held on own account:
Other financial assets	3,882	3,401	–	7,283	3,056	–	–	3,056
Reverse repurchase agreements	122,188	6,101	2,065	130,354	180,637	2,391	47	183,075
Total Reverse repurchase agreements	126,070	9,502	2,065	137,637	183,693	2,391	47	186,131
%	91.6	6.9	1.5	100.0	98.7	1.3	–	100.0

No reverse repurchase agreements held by the Group at 31st December 2008 or 2007 were individually impaired, however during the year, the Group wrote off £124m of reverse repurchase agreements (2007: £nil).

Other credit risk assets

The Group’s other assets that are subject to credit risk are cash with central banks of £30,019m (2007: £5,801m), items in course of collection from other Banks £1,695m (2007: £1,836m), other financial assets £3,096m (2007: £3,966m).

Cash and balances at central banks

Substantially all balances are held with central banks. There is limited credit risk in relation to balances at central banks.

Items in the course of collection from other banks

There is limited credit risk in relation to items in the course of collection through the clearing system from other banks.

Other financial assets

Other financial assets comprise £3,096m (2007: £3,966m) of other assets and £609m (2007: £548m) of assets held at fair value.

Off-balance sheet

The Group applies fundamentally the same risk management policies for off-balance sheet risks as it does for its on-balance sheet risks. In the case of committments to lend, customers and counterparties will be subject to the same credit management policies as for loans and advances. Collateral may be sought depending on the strength of the counterparty and the nature of the transaction.

Credit market exposures

The exposures are set out by asset class below:


US Residential Mortgages	As at 31.12.08 £m	As at 31.12.07 £m
ABS CDO Super Senior	3,104	4,671
Other US sub- prime	3,441	5,037
Alt-A	4,288	4,916
US RMBS exposure wrapped by monoline insurers	1,639	730
Commercial mortgages
Commercial real estate	11,578	11,103
Commercial mortgage-backed securities	735	1,296
CMBS exposure wrapped by monoline insurers	1,854	197
Other Credit Market Exposures
Leveraged finance	10,391	9,027
SIVs and SIV-Lites	963	784
CDPCs	150	19
CLO and other exposure wrapped by monoline insurers	4,939	408

Barclays

Annual Report 2008

263

Notes to the accounts

For the year ended 31st December 2008

48 Market risk

Market risk management

Market risk is the risk that Barclays earnings or capital, or its ability to meet business objectives, will be adversely affected by changes in the level or volatility of market rates or prices such as interest rates, credit spreads, commodity prices, equity prices and foreign exchange rates. Market risk mainly arises from trading activities. Barclays is also exposed to market risk through interest rate risk on its non-trading activities and through the pension fund.

Organisation and structure

The head of each business, assisted by the business risk management team, is accountable for all market risks associated with its activities. Each business is responsible for the identification, measurement, management, control and reporting of market risk as outlined in Barclays Market Risk Control Framework. Oversight and support is provided to the business by the Market Risk Director, assisted by the central market risk team. The Market Risk Committee reviews, approves, and makes recommendations concerning the market risk profile across Barclays including risk appetite, limits and utilisation. The Committee meets monthly and is chaired by the Market Risk Director. Attendees include the Risk Director, respective business risk managers and senior managers from the central market risk team.

Traded market risk

Risk measurement and control

The measurement techniques used to measure and control traded market risk include Daily Value at Risk (DVaR), Expected Shortfall (ES), stress testing and scenario testing.

DVaR is an estimate of the potential loss arising from unfavourable market movements, if the current positions were to be held unchanged for one business day. Barclays Capital uses the historical simulation method with a two year unweighted historical period.

The historical simulation calculation can be split into three parts:

– Calculate hypothetical daily profit or loss for each position over the most recent two years, using observed daily market moves.

– Sum hypothetical profit or losses, for day 1 giving one total profit or loss. This is repeated for all other days in the two year history.

– DVaR is the 95th percentile selected from the two years of daily hypothetical total profit or loss.

DVaR is an important market risk measurement and control tool and consequently the model is regularly assessed. The main approach employed is the technique known as back-testing which counts the number of days when a loss (as defined by the FSA in BIPRU 7.10), exceeds the corresponding DVaR estimate, measured at the 99% confidence level.

The FSA categorises a DVaR model as green (being best), amber or red. A green model is consistent with a good working DVaR model and is achieved for models that have four or less back-testing exceptions in a 12-month period. For Barclays Capital’s trading book, green model status was maintained for 2008 and 2007.

264

Barclays

Annual Report 2008

LOGO

48 Market risk(continued)

To further improve the control framework, formal daily monitoring of ES was started. This metric is the average of all the hypothetical losses beyond DVaR. Other controls, includes stress testing and scenario testing.

Analysis of traded market risk exposures

Barclays Capital market risk exposure, as measured by average total DVaR (95%), increased by 64% to £53.4m in 2008. This was mainly due to higher market volatility within the credit spread and interest rate DVaRs.

Total DVaR increased significantly in the fourth quarter, mainly due to extreme market volatility following the failure of several financial intuitions and a material deterioration in the global economic outlook. Total DVaR (95%) at 31st December 2008 was £86.6m (31st December 2007: £39.6m), which was within limit.

On a 98% basis, average total DVaR increased 82% to £76.5m.

The daily average, maximum and minimum values of DVaR, 95% and 98%, were calculated as below.


DVaR (95%)
	12 months to 31st December 2008				12 months to 31st December 2007
	Average £m		High £m	Low £m	Average £m		High £m	Low £m
Interest rate risk	28.9		47.8	15.1	15.3		26.5	10.0
Credit spread risk	31.1		71.7	15.4	17.3		28.0	10.8
Commodity risk	18.1		25.4	12.5	15.3		19.0	10.7
Equity risk	9.1		21.0	4.8	8.0		12.1	4.5
Foreign exchange risk	5.9		13.0	2.1	3.8		7.2	2.1
Diversification effect^a	(39.7	)	n/a	n/a	(27.2	)	n/a	n/a
Total DVaR	53.4		95.2	35.5	32.5		40.9	25.2


DVaR (98%)
	12 months to 31st December 2008				12 months to 31st December 2007
	Average £m		High £m	Low £m	Average £m		High £m	Low £m
Interest rate risk	45.0		80.9	21.0	20.0		33.3	12.6
Credit spread risk	54.0		143.4	30.1	24.9		43.3	14.6
Commodity risk	23.9		39.6	16.5	20.2		27.2	14.8
Equity risk	12.8		28.9	6.7	11.2		17.6	7.3
Foreign exchange risk	8.1		21.0	2.9	4.9		9.6	2.9
Diversification effect^a	(67.3	)	n/a	n/a	(39.2	)	n/a	n/a
Total DVaR	76.5		158.8	47.5	42.0		59.3	33.1

The average ES in 2008 was £70.0m, a rise of £34.7m compared with 2007.

Note

Barclays

Annual Report 2008

265

Notes to the accounts

For the year ended 31st December 2008

48 Market risk(continued)

Non-trading interest rate risk

Non-traded interest rate risk arises from the provision of retail and wholesale (non-traded) banking products and services.

Barclays objective is to minimise non-traded risk. This is achieved by transferring risk from the business to a local treasury or Group Treasury, who in turn hedge the net exposure with the external market. Limits exist to ensure no material risk is retained within any business or product area. The majority of exposures are within Global Retail and Commercial Banking .

Risk measurement and control

Annual Earnings at Risk (AEaR) measures the sensitivity of net interest income (NII) over the next 12 months. It is calculated as the difference between the estimated income using the current yield curve and the lowest estimated income following a 100 basis points increase or decrease in interest rates.

DVaR is also used as a complementary tool to AEaR.

Analysis of Net Interest Income sensitivity

The tables below show the pre-tax net interest income sensitivity for the non-trading financial assets and financial liabilities held at 31st December 2008. The sensitivity has been measured using AEaR methodology as described above. The benchmark interest rate for each currency is set as at 31st December 2008. The figures include the effect of hedging instruments but exclude exposures held or issued by Barclays Capital as these are measured and managed using DVaR.


Net interest in come sensitivity(AEaR) by currency
	+100 basis points 2008 £m		–100 basis points 2008 £m		+100 basis points 2007 £m		–100 basis points 2007 £m
GBP	3		(273	)	36		(37	)
USD	(25	)	7		(3	)	1
EUR	(34	)	30		(23	)	23
ZAR	13		(13	)	19		(19	)
Others	–		(8	)	4		(5	)
Total	(43	)	(257	)	33		(37	)
As percentage of net interest in come	(0.37%	)	(2.24%	)	0.34%		(0.39%	)

Non-traded interest rate risk, as measured by AEaR, was £257m in 2008, an increase of £220m compared to 2007. This estimate takes into account the rates in place as at 31st December 2008. The increase mainly reflects the reduced spread generated on retail and commercial banking liabilities in the lower interest rate environment. If the interest rate hedges had not been in place then the AEaR risk for 2008 would have been £670m.

DVaR is also used to control market risk in GRCB – Western Europe, and Group Treasury. The indicative average DVaRs for 2008, using a simplified DVaR approach, were £1.3m and £0.6m respectively.

Analysis of Equity sensitivity


	+100 basis points 2008 £m		–100 basis points 2008 £m		+100 basis points 2007 £m		–100 basis points 2007 £m
Net interest income	(43	)	(257	)	33		(37	)
Taxation effects on the above	6		33		(9	)	10
Effect on profit for the year	(37	)	(224	)	24		(27	)
As percentage of net profit after tax	(0.70%	)	(4.24%	)	0.47%		(0.53%	)
Effect on profit for the year (per above)	(37	)	(224	)	24		(27	)
Available for sale reserve	(806	)	806		(390	)	390
Cash flow hedging reserve	(473	)	474		(476	)	476
Taxation effects on the above	166		(166	)	242		(242	)
Effect on equity	(1,150	)	890		(600	)	597
As a percentage of equity	(2.43%	)	1.88%		(1.85%	)	1.84%

266

Barclays

Annual Report 2008

LOGO

48 Market risk(continued)

Foreign exchange risk

The Group is exposed to two sources of foreign exchange risk.

(a) Transactional foreign currency exposure

Transactional foreign exchange exposures represent exposure on banking assets and liabilities, denominated in currencies other than the functional currency of the transacting entity.

There were no material net transactional foreign currency exposures outside the trading portfolio at either 31st December 2008 or 2007. Due to the low level of non-trading exposures no reasonably possible change in foreign exchange rates would have a material effect on either the Group’s profit or movements in equity for the year ended 31st December 2008 or 2007.

(b) Translational foreign exchange exposure

The Group’s translational foreign currency exposure arises from both its capital resources (including investments in subsidiaries and branches, intangible assets, minority interests and debt capital) and risk weighted assets denominated in non-Sterling currencies. Changes in foreign exchange rates result in changes in the Sterling equivalent value of non-Sterling denominated capital resources and risk weighted assets. As a result, the Group’s regulatory capital ratios are sensitive to foreign exchange rate movements.

The Group’s hedge strategy is to minimise the volatility of all capital ratios whilst taking into account the impact on hedging of non-Sterling net investments, the cost of hedging, the availability of a suitable foreign exchange market and prevailing foreign exchange rates.

To minimise volatility in the equity ratio, the Group aims over time to maintain the ratio of foreign currency equity capital resources to RWAs the same as the Group’s equity ratio. To create equity capital resources denominated in non-Sterling currencies, the Group leaves some investments in core non-Sterling subsidiaries and branches un-hedged. The resultant change in the Sterling value of the investments is captured in the currency translation reserve, resulting in an equity capital movement.

Depending on the value of non-Sterling net investments, it may not always be possible to maintain the ratio, leaving some capital ratio sensitivity to foreign exchange movements.

The exposure of Tier 1 and Total capital ratios is managed by issuing, where possible, debt capital in non-Sterling currencies such that the ratio of Tier 1 and total capital resources to risk weighted assets is the same as the Group’s Tier 1 and Total capital ratios. This is primarily achieved by the issuance of debt capital from Barclays Bank PLC in major currencies, but can also be achieved by subsidiaries issuing capital in local currencies.

The carrying value of the Group’s foreign currency net investments in subsidiaries and branches and the foreign currency borrowings and derivatives used to hedge them as at 31st December 2008 were as follows:


At 31st December 2008 Functional currency of the operation involved	Foreign currency net investments £m	Borrowings which hedge the net investments £m	Derivatives which hedge the net investments £m	Structural currency exposures pre economic hedges £m		Economic hedges £m	Remaining structural currency exposures £m
United States Dollar	14,577	6,019	–	8,558		6,720	1,838
Euro	6,336	2,922	–	3,414		3,125	289
Rand	3,725	–	1,306	2,419		164	2,255
Japanese Yen	5,009	801	4,212	(4	)	–	(4	)
Swiss Franc	3,042	2,936	101	5		–	5
Other	2,940	–	880	2,060		–	2,060
Total	35,629	12,678	6,499	16,452		10,009	6,443


At 31st December 2007 Functional currency of the operation involved	Foreign currency net investments £m	Borrowings which hedge the net investments £m	Derivatives which hedge the net investments £m	Structural currency exposures pre economic hedges £m	Economic hedges £m	Remaining structural currency exposures £m
United States Dollar	3,273	1,000	–	2,273	3,575	(1,302	)
Euro	3,690	1,506	–	2,184	2,387	(203	)
Rand	3,205	–	2,599	606	165	441
Japanese Yen	2,986	180	2,773	33	–	33
Swiss Franc	2,140	–	2,131	9	–	9
Other	1,847	53	465	1,329	–	1,329
Total	17,141	2,739	7,968	6,434	6,127	307

Barclays

Annual Report 2008

267

Notes to the accounts

For the year ended 31st December 2008

48 Market risk(continued)

The impact of a change in the exchange rate between Sterling and any of the major currencies would be:

– A higher or lower Sterling equivalent value of non-Sterling denominated capital resources and risk weighted assets. This includes a higher or lower currency translation reserve within equity, representing the retranslation of non-Sterling subsidiaries, branches and associated undertakings net of the impact of foreign exchange rate changes on derivatives and borrowings designated as hedges of net investments.

– A higher or lower profit after tax, arising from changes in the exchange rates used to translate items in the consolidated income statement.

– A higher or lower value of available for sale investments denominated in foreign currencies, impacting the available for sale reserve.

49 Liquidity risk

Liquidity risk ~~management and measurement~~

~~This~~ is the risk that the Group is unable to meet its obligations when they fall due as a result of customer deposits being withdrawn, cash requirements from contractual commitments, or other cash outflows, such as debt maturities. Such outflows would deplete available cash resources for client lending, trading activities and investments. In extreme circumstances lack of liquidity could result in reductions in balance sheet and sales of assets, or potentially an inability to ~~replace funds when they are withdrawn, with consequent failure to repay depositors and~~ fulfil ~~commitments to lend.~~lending commitments. The risk that it will be unable to ~~meet its obligations~~do so is inherent in all banking operations and can be ~~impacted~~affected by a range of ~~institution specific~~institution-specific and market-wide events including, but not limited to, credit events, merger and acquisition activity, systemic shocks and natural disasters.

Liquidity risk management and measurement

Liquidity management within the Group has several components.

Intraday liquidity

The Group policy is that each operation must ensure that it has access to sufficient intraday liquidity to meet any obligations it may have to clearing and settlement systems. Major currency payment flows and payment system collateral are monitored and managed in real time to ensure that at all times there is sufficient collateral to make payments. The Group actively engages in payment system development to help ensure that new payment systems are robust.

Day to day funding

Day to day funding is managed ~~by short-term mismatch~~through limits ~~for the next day, week~~on wholesale borrowings, secured borrowings and ~~month which control cash flows to~~funding mismatches. These ensure that ~~requirements can be met.~~on any day and over any period there is a limited amount of refinancing required. These requirements include ~~replenishment~~replacement of funds as ~~they~~liabilities mature or are borrowed by customers. The Retail and Commercial Bank together with Wealth maintain no reliance on wholesale funding. The Group maintains an active presence in global money markets through Barclays Capital, and monitors and manages the wholesale money market capacity for the Group’s name to enable that to happen.

In addition to cash flow management, ~~Barclays~~ Treasury also monitors ~~unmatched medium-term~~term mismatches between assets and liabilities, as well as the level and type of undrawn lending commitments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees.

Liquid ~~Assets~~assets

Diversification of liquidity sources

Structural liquidity

The Group policy is to fund the balance sheet assets of the ~~retail~~Retail and ~~commercial bank~~Commercial Bank together with Wealth and Head office functions on a global basis with customer deposits and capital without recourse to the wholesale markets. This provides protection from the liquidity risk of wholesale market funding. The exception to this policy is ~~ABSA,~~Absa, which has a large portion of wholesale funding due to the structural nature of the South African financial sector.

~~Stress tests~~Scenario analysis and stress testing

Stress testing is undertaken to assess and plan for the impact of various scenarios which may put the Group’s liquidity at risk.

Treasury develops and monitors a range of stress tests on the Group’s projected cash flows. These stress scenarios include Barclays-specific scenarios such an unexpected rating downgrade and operational problems, and external scenarios such as Emerging Market crises, payment system disruption and ~~macroeconomic~~macro-economic shocks. The output informs both the liquidity mismatch limits and the Group’s contingency funding plan. This is maintained by Treasury and is aligned with the Group and country business resumption plans to encompass decision-making authorities, internal and external communication and, in the event of a systems failure, the restoration of liquidity management and payment systems.

268

Barclays

Annual Report ~~2007~~2008

~~240~~

LOGO

49 Liquidity risk(continued)

Year-end assessment of liquidity

Global Retail and Commercial Banking

The sum of liabilities in Global Retail and Commercial Banking, Barclays Wealth and Head office functions exceeds assets in those businesses. As a result they have no reliance on wholesale funding. The balance sheet is modelled to reflect behavioural experience in both assets and liabilities, and is managed to maintain a positive cash profile.

Throughout 2008 Global Retail and Commercial Banking continued to grow the amount of customer deposits despite competitive pressures.

Barclays Capital

Barclays Capital manages liquidity to be self-funding through wholesale sources, managing access to liquidity to ensure that potential cash outflows in a stressed environment are covered.

Funding reliability is maintained by accessing a wide variety of investors and geographies and by building and maintaining strong relationships with these providers of liquidity. The depositors include asset managers, money market funds, corporates, government bodies, central banks and other financial institutions. Deposits are predominantly sourced from Western Europe and North America.

Unsecured Funding

Additionally, unsecured funding is managed within specific term limits. The term of unsecured liabilities has been extended, with average life increasing year over year.

Our capital markets debt issuance includes issues of senior and subordinated debt in US registered offerings and medium-term note programmes and European medium-term note programs. Substantially all of our unsecured senior issuance is without covenants that trigger increased cost or accelerate maturity.

Secured Funding

Barclays funds securities based on liquidity characteristics. Limits are in place for each security asset class reflecting liquidity in the cash and financing markets for these assets. The vast majority of assets funded in repurchase and stock loan transactions are fundable within central bank facilities (excluding Bank of England Emergency facilities and the Federal Reserve Primary Dealer Credit Facility). These are largely composed of G7 government securities, US mortgage agency debentures and mortgage backed securities, investment grade corporate securities and listed equities.

Liquidity risk to secured funding is also mitigated by:

–	selecting reliable counterparties

–	maintaining term financing and by limiting the amount of overnight funding

–	limiting overall secured funding usage

48Readily available liquidity

Barclays

Annual Report 2008

269

Notes to the accounts

For the year ended 31st December 2008

49 Liquidity risk(continued)

Contractual maturity of financial assets and liabilities

Details of contractual maturities for assets and liabilities form an important source of information for the management of liquidity risk. In order to more accurately reflect the expected behaviour of the Group’s assets and liabilities measurement and modelling of each is constructed. This forms the foundation of the liquidity controls.

The table below provides detail on the contractual maturity of all financial instruments and other assets and liabilities. Derivatives (other than those designated in a hedging relationship) and trading portfolio assets and liabilities which are included in the on demand column at their fair value. Liquidity risk on these items is not managed on the basis of contractual maturity since they are not held for settlement according to such maturity and will frequently be settled before contractual maturity at fair value. Derivatives designated in a hedging relationship are included according to their contractual maturity.

Financial assets designated at fair value in respect of linked liabilities to customers under investment contracts have been included in Other assets and Other liabilities as the Group is not exposed to liquidity risk arising from them; any request for funds from creditors would be met by simultaneously liquidating or transferring the related ~~investment.~~investment

At 31st December 2007

   On
demand
£m

Not more
than three
months
£m

Over three
months
but not
more
than six
months
£m

Over six
months
but not
more
than one
year
£m

Over one
year
but not
more
than three
years
£m

Over three
years
but not
more
than five
years
£m

Over five
years
but not
more
than ten
years
£m

Over
ten
years
£m
   Total
£m
Assets

Cash and balances at central banks
   4,785 1,016 – – – – – –    5,801
Items in course of collection from other banks    1,651 185 – – – – – –    1,836
Trading portfolio assets
   193,691 – – – – – – –    193,691
Financial assets designated at fair value:
– held on own account
   1,901 3,202 657 3,029 13,882 7,022 10,637 16,299    56,629
Derivative financial instruments:

– held for trading
   246,950 – – – – – – –    246,950
– designated for risk management
   – 76 92 39 260 105 317 249    1,138
Loans and advances to banks
   5,882 22,143 446 3,189 1,259 1,035 5,680 486    40,120
Loans and advances to customers    43,469 62,294 12,793 19,307 35,195 30,926 47,297 94,117    345,398
Available for sale financial instruments    994 9,009 4,544 2,377 10,831 6,466 5,268 3,583    43,072
Reverse repurchase agreements and cash collateral on securities borrowed

   –

158,475

7,369

7,835

4,921

4,348

127

–

   183,075

Total financial assets

   499,323 256,400 25,901 35,776 66,348 49,902 69,326 114,734    1,117,710
Other assets

   – – – – – – – 109,651    109,651
Total assets

   499,323 256,400 25,901 35,776 66,348 49,902 69,326 224,385    1,227,361
Liabilities

Deposits from other banks    16,288 69,049 1,977 991 651 1,171 231 188    90,546
Items in the course of collection due to other banks    1,781 11 – – – – – –    1,792
Customer accounts
   174,269 101,667 5,692 4,097 1,656 1,240 993 5,373    294,987
Trading portfolio liabilities    65,402 – – – – – – –    65,402
Financial liabilities designated at fair value:

– held on own account
   655 18,022 8,331 6,933 10,830 11,601 12,625 5,492    74,489
Derivative financial instruments:

– held for trading
   247,378 – – – – – – –    247,378
– designated for risk management    – 51 43 82 310 150 215 59    910
Debt securities in issue    698 70,760 11,798 6,945 13,308 7,696 3,123 5,900    120,228
Repurchase agreements and cash collateral on securities lent    – 160,822 2,906 5,547 40 92 22 –    169,429
Subordinated liabilities

   – – – – 250 934 7,511 9,455    18,150
Total financial liabilities

   506,471 420,382 30,747 24,595 27,045 22,884 24,720 26,467    1,083,311
Other liabilities

   – – – – – – – 111,574    111,574
Total liabilities

   506,471 420,382 30,747 24,595 27,045 22,884 24,720 138,041    1,194,885
Cumulative liquidity gap

   (7,148 ) (171,130 ) (175,976 ) (164,795 ) (125,492 ) (98,474 ) (53,868 ) 32,476    32,476

At 31st December 2008


	On demand £m	Not more than three months £m		Over three months but not more than six months £m		Over six months but not more than one year £m		Over one year but not more than three years £m		Over three years but not more than five years £m		Over five years but not more than ten years £m		Over ten years £m	Total £m

Assets
Cash and balances at central banks	29,774	245		–		–		–		–		–		–	30,019
Items in the course of collection from other banks	1,619	76		–		–		–		–		–		–	1,695
Trading portfolio assets	185,637	–		–		–		–		–		–		–	185,637
Financial assets designated at fair value:
– held on own account	661	13,861		1,648		5,861		5,420		6,738		4,159		16,194	54,542
Derivative financial instruments:
– held for trading	981,996	–		–		–		–		–		–		–	981,996
– designated for risk management	–	381		91		542		505		336		419		532	2,806
Loans and advances to banks	4,882	35,690		505		1,892		1,887		1,854		52		945	47,707
Loans and advances to customers	51,155	87,624		12,447		21,976		60,927		44,982		57,409		125,295	461,815
Available for sale financial investments	132	11,539		5,129		13,461		10,266		6,660		9,779		8,010	64,976
Reverse repurchase agreements and cash collateral on securities borrowed	29	107,415		8,947		2,582		10,124		1,019		238		–	130,354

Total financial assets	1,255,885	256,831		28,767		46,314		89,129		61,589		72,056		150,976	1,961,547

Other assets	–	–		–		–		–		–		–		91,433	91,433

Total assets	1,255,885	256,831		28,767		46,314		89,129		61,589		72,056		242,409	2,052,980

Liabilities
Deposits from other banks	10,850	94,083		6,040		1,273		1,585		461		433		185	114,910
Items in the course of collection due to other banks	1,633	2		–		–		–		–		–		–	1,635
Customer accounts	195,728	112,582		9,389		10,099		2,451		1,555		1,395		2,306	335,505
Trading portfolio liabilities	59,474	–		–		–		–		–		–		–	59,474
Financial liabilities designated at fair value:
– held on own account	1,043	16,573		10,630		5,115		12,229		12,041		11,825		7,436	76,892
Derivative financial instruments:
– held for trading	964,071	–		–		–		–		–		–		–	964,071
– designated for risk management	–	222		141		1,345		1,197		108		781		207	4,001
Debt securities in issue	2,567	79,600		10,049		17,197		23,355		9,856		2,528		4,415	149,567
Repurchase agreements and cash collateral on securities lent	69	176,169		3,409		2,067		245		267		59		–	182,285
Subordinated liabilities	–	260		49		281		1,345		999		10,176		16,732	29,842

Total financial liabilities	1,235,435	479,491		39,707		37,377		42,407		25,287		27,197		31,281	1,918,182

Other liabilities	–	–		–		–		–		–		–		87,387	87,387

Total liabilities	1,235,435	479,491		39,707		37,377		42,407		25,287		27,197		118,668	2,005,569

Cumulative liquidity gap	20,450	(202,210	)	(213,150	)	(204,213	)	(157,491	)	(121,189	)	(76,330	)	47,411	47,411

~~241~~270

Barclays

Annual Report ~~2007~~2008

LOGO

49 Liquidity risk(continued)

At 31st December 2007


	On demand £m		Not more than three months £m		Over three months but not more than six months £m		Over six months but not more than one year £m		Over one year but not more than three years £m		Over three years but not more than five years £m		Over five years but not more than ten years £m		Over ten years £m	Total £m

Assets
Cash and balances at central banks	4,785		1,016		–		–		–		–		–		–	5,801
Items in course of collection from other banks	1,651		185		–		–		–		–		–		–	1,836
Trading portfolio assets	193,691		–		–		–		–		–		–		–	193,691
Financial assets designated at fair value:
– held on own account	1,901		3,202		657		3,029		13,882		7,022		10,637		16,299	56,629
Derivative financial instruments:
– held for trading	246,950		–		–		–		–		–		–		–	246,950
– designated for risk management	–		76		92		39		260		105		317		249	1,138
Loans and advances to banks	5,882		22,143		446		3,189		1,259		1,035		5,680		486	40,120
Loans and advances to customers	43,469		62,294		12,793		19,307		35,195		30,926		47,297		94,117	345,398
Available for sale financial investments	994		9,009		4,544		2,377		10,831		6,466		5,268		3,583	43,072
Reverse repurchase agreements and cash collateral on securities borrowed	–		158,475		7,369		7,835		4,921		4,348		127		–	183,075

Total financial assets	499,323		256,400		25,901		35,776		66,348		49,902		69,326		114,734	1,117,710

Other assets	–		–		–		–		–		–		–		109,651	109,651

Total assets	499,323		256,400		25,901		35,776		66,348		49,902		69,326		224,385	1,227,361

Liabilities
Deposits from other banks	16,288		69,049		1,977		991		651		1,171		231		188	90,546
Items in the course of collection due to other banks	1,781		11		–		–		–		–		–		–	1,792
Customer accounts	174,269		101,667		5,692		4,097		1,656		1,240		993		5,373	294,987
Trading portfolio liabilities	65,402		–		–		–		–		–		–		–	65,402
Financial liabilities designated at fair value:
– held on own account	655		18,022		8,331		6,933		10,830		11,601		12,625		5,492	74,489
Derivative financial instruments:
– held for trading	247,378		–		–		–		–		–		–		–	247,378
– designated for risk management	–		51		43		82		310		150		215		59	910
Debt securities in issue	698		70,760		11,798		6,945		13,308		7,696		3,123		5,900	120,228
Repurchase agreements and cash collateral on securities lent	–		160,822		2,906		5,547		40		92		22		–	169,429
Subordinated liabilities	–		–		–		–		250		934		7,511		9,455	18,150

Total financial liabilities	506,471		420,382		30,747		24,595		27,045		22,884		24,720		26,467	1,083,311

Other liabilities	–		–		–		–		–		–		–		111,574	111,574

Total liabilities	506,471		420,382		30,747		24,595		27,045		22,884		24,720		138,041	1,194,885

Cumulative liquidity gap	(7,148	)	(171,130	)	(175,976	)	(164,795	)	(125,492	)	(98,474	)	(53,868	)	32,476	32,476

Barclays

Annual Report 2008

271

Notes to the accounts

For the year ended 31st December ~~2007~~

2008

4849 Liquidity risk ~~(continued)~~

At 31st December 2006

   On
demand
£m

Not more
than three
months
£m

Over three
months
but not
more
than six
months
£m

Over six
months
but not
more
than one
year
£m

Over one
year
but not
more
than three
years
£m

Over three
years
but not
more
than five
years
£m

Over five
years
but not
more
than ten
years
£m

Over
ten
years
£m
   Total
£m
Assets

Cash and balances at central banks
   7,050 295 – – – – – –    7,345
Items in course of collection from other banks    1,782 626 – – – – – –    2,408
Trading portfolio assets
   177,867 – – – – – – –    177,867
Financial assets designated at fair value:

– held on own account
   1,899 1,975 295 942 5,692 5,239 4,018 11,739    31,799
Derivative financial instruments:

– held for trading
   137,273 – – – – – – –    137,273
– designated for risk management
   – 72 88 37 249 100 296 238    1,080
Loans and advances to banks
   2,887 18,806 800 3,063 1,595 1,130 1,012 1,633    30,926
Loans and advances to customers
   32,492 44,424 9,901 15,508 31,986 27,668 38,036 82,285    282,300
Available for sale financial instruments
   564 9,084 2,516 8,733 13,854 4,621 6,999 5,332    51,703
Reverse repurchase agreements and cash collateral on securities borrowed

   –

149,872

4,670

11,025

1,375

6,939

168

41

   174,090

Total financial assets

   361,814 225,154 18,270 39,308 54,751 45,697 50,529 101,268    896,791
Other assets

   – – – – – – – 99,996    99,996
Total assets

   361,814 225,154 18,270 39,308 54,751 45,697 50,529 201,264    996,787
Liabilities
Deposits from other banks
   19,163 55,534 1,418 891 593 1,406 367 190    79,562
Items in the course of collection due to other banks    2,154 67 – – – – – –    2,221
Customer accounts
   153,642 89,079 5,594 3,604 1,655 1,436 807 937    256,754
Trading portfolio liabilities
   71,874 – – – – – – –    71,874
Financial liabilities designated at fair value:
– held on own account
   6 13,958 6,297 5,143 7,090 8,447 10,978 2,068    53,987
Derivative financial instruments:
– held for trading
   139,746 – – – – – – –    139,746
– designated for risk management    – 306 13 59 230 284 51 8    951
Debt securities in issue
   17 70,805 8,669 5,311 10,408 3,798 4,017 8,112    111,137
Repurchase agreements and cash collateral on securities lent    – 121,278 6,362 2,659 2,305 – – 4,352    136,956
Subordinated liabilities

   – – – – 236 911 4,623 8,016    13,786
Total financial liabilities

   386,602 351,027 28,353 17,667 22,517 16,282 20,843 23,683    866,974
Other liabilities

   – – – – – – – 102,423    102,423
Total liabilities

   386,602 351,027 28,353 17,667 22,517 16,282 20,843 126,106    969,397
Cumulative liquidity gap

   (24,788 ) (150,661 ) (160,744 ) (139,103 ) (106,869 ) (77,454 ) (47,768 ) 27,390    27,390
~~Barclays~~
~~Annual Report 2007~~
~~242~~

~~48 Liquidity risk~~ (continued)

Contractual maturity of financial liabilities on an undiscounted basis

The table below presents the cash flows payable by the Group under financial liabilities by remaining contractual maturities at the balance sheet date. The amounts disclosed in the table are the contractual undiscounted cash flows of all financial liabilities (i.e nominal values), whereas the Group manages the inherent liquidity risk based on discounted expected cash inflows. Derivative financial instruments held for trading and trading portfolio liabilities are included in the on demand column at their fair value.

At 31st December 2007

   On
demand
£m    Within
one year
£m    Over one
year
but less
than five
years
£m
   Over five
years
£m    Total
£m
Deposits from other banks
   16,288    72,533    2,099    275    91,195
Items in the course of collection due to other banks
   1,781    11    –    –    1,792
Customer accounts
   174,269    112,875    3,739    10,280    301,163
Trading portfolio liabilities
   65,402    –    –    –    65,402
Financial liabilities designated at fair value:

– held on own account
   655    34,008    25,870    31,868    92,401
Derivative financial instruments:

– held for trading
   247,378    –    –    –    247,378
– designated for risk management
   –    226    479    186    891
Debt securities in issue
   698    91,201    22,926    15,020    129,845
Repurchase agreements and cash collateral on securities lent
   –    169,725    146    23    169,894
Subordinated liabilities
   –    463    4,964    17,875    23,302
Other financial liabilities

   –    2,968    1,456    –    4,424
Total financial liabilities

   506,471    484,010    61,679    75,527    1,127,687
Off balance sheet items

Loan commitments
   183,784    3,111    4,513    963    192,371
Other commitments

   453    200    145    12    810

Total off balance sheet items

   184,237    3,311    4,658    975    193,181
Total financial liabilities and off balance sheet items

   690,708    487,321    66,337    76,502    1,320,868

At 31st December 2008


At 31st December 2006	On demand £m	Within one year £m	Over one year but not more than five years £m	Over five years £m	Total £m
							On demand £m	Within one year £m	Over one year but less than five years £m	Over five years £m	Total £m

Deposits from other banks	19,163	58,101	2,317	590	80,171		10,850	101,537	2,224	671	115,282
Items in the course of collection due to other banks	2,154	68	–	–	2,222		1,633	2	–	–	1,635
Customer accounts	153,642	99,165	3,593	2,836	259,236		195,728	132,927	5,249	5,807	339,711
Trading portfolio liabilities	71,874	–	–	–	71,874		59,474	–	–	–	59,474
Financial liabilities designated at fair value:
– held on own account	6	27,539	13,861	19,827	61,233		1,043	33,860	28,300	30,427	93,630
Derivative financial instruments:
– held for trading	139,746	–	–	–	139,746		964,071	–	–	–	964,071
– designated for risk management	–	378	584	199	1,161		–	1,809	1,671	1,206	4,686
Debt securities in issue	17	89,222	13,932	15,668	118,839		2,567	108,955	34,510	11,853	157,885
Repurchase agreements and cash collateral on securities lent	–	137,040	366	–	137,406		69	181,895	547	24	182,535
Subordinated liabilities	–	837	7,487	9,411	17,735		–	1,273	10,166	22,593	34,032
Other financial liabilities	–	3,138	1,072	–	4,210		–	4,573	1,572	–	6,145

Total financial liabilities	386,602	415,488	43,212	48,531	893,833		1,235,435	566,831	84,239	72,581	1,959,086

Off balance sheet items
Loan commitments	192,293	10,939	1,255	624	205,111		222,801	30,502	5,799	917	260,019
Other commitments	313	370	38	56	777		493	318	340	–	1,151

Total off balance sheet items	192,606	11,309	1,293	680	205,888		223,294	30,820	6,139	917	261,170

Total financial liabilities and off balance sheet items	579,208	426,797	44,505	49,211	1,099,721		1,458,729	597,651	90,378	73,498	2,220,256

At 31st December 2007						At 31st December 2007

							On demand £m	Within one year £m	Over one year but not more than five years £m	Over five years £m	Total £m

Deposits from other banks							16,288	72,533	2,099	275	91,195
Items in the course of collection due to other banks							1,781	11	–	–	1,792
Customer accounts							174,269	112,875	3,739	10,280	301,163
Trading portfolio liabilities							65,402	–	–	–	65,402
Financial liabilities designated at fair value:
– held on own account							655	34,008	25,870	31,868	92,401
Derivative financial instruments:
– held for trading							247,378	–	–	–	247,378
– designated for risk management							–	226	479	186	891
Debt securities in issue							698	91,201	22,926	15,020	129,845
Repurchase agreements and cash collateral on securities lent							–	169,725	146	23	169,894
Subordinated liabilities							–	463	4,964	17,875	23,302
Other financial liabilities							–	2,968	1,456	–	4,424

Total financial liabilities							506,471	484,010	61,679	75,527	1,127,687

Off balance sheet items
Loan commitments							183,784	3,111	4,513	963	192,371
Other commitments							453	200	145	12	810

Total off balance sheet items							184,237	3,311	4,658	975	193,181

Total financial liabilities and off balance sheet items							690,708	487,321	66,337	76,502	1,320,868

Financial liabilities designated at fair value in respect of linked liabilities under investment contracts have been excluded from this analysis as the Group is not exposed to liquidity risk arising from them. Any request for funds from investors would be met simultaneously from the linked assets.

The balances in the above table will not agree directly to the balances in the consolidated balance sheet as the table incorporates all cash flows, on an undiscounted basis, related to both principal as well as those associated with all future coupon payments.

The principal due under perpetual subordinated liability instruments has been included in the over five years category. Further interest payments have not been included on this amount, which according to their strict contractual terms, could carry on indefinitely.

~~243~~272

Barclays

Annual Report ~~2007~~2008

~~Notes to the accounts~~ LOGO

~~For the year ended 31st December 2007~~

4950 Fair value of financial instruments

The fair value of a financial instrument is the amount for which an asset could be exchanged, or a liability settled, in an ~~arms-length~~arm’s length transaction between knowledgeable willing parties.

Comparison of carrying amounts and fair values

The following table summarises the carrying amounts of financial assets and ~~financial~~ liabilities presented on the Group’s balance sheet, and their fair ~~values:~~values differentiating between financial assets and liabilities subsequently measured at fair value and those subsequently measured at amortised cost:


		2007		2006			2008		2007
	Notes	Carrying amount £m	Fair value £m	Carrying amount £m	Fair value £m	Notes	Carrying amount £m	Fair value £m	Carrying amount £m	Fair value £m
Financial assets:

Financial assets:
Cash and balances at central banks	a	5,801	5,801	7,345	7,345	a	30,019	30,019	5,801	5,801
Items in the course of collection from other banks	a	1,836	1,836	2,408	2,408	a	1,695	1,695	1,836	1,836
Trading portfolio assets
– Treasury and other eligible bills	b	2,094	2,094	2,960	2,960	b	4,544	4,544	2,094	2,094
– Debt securities	b	152,778	152,778	140,576	140,576	b	148,686	148,686	152,778	152,778
– Equity securities	b	36,307	36,307	31,548	31,548	b	30,535	30,535	36,307	36,307
– Traded Loans	b	1,780	1,780	1,843	1,843	b	1,070	1,070	1,780	1,780
– Commodities	b	732	732	940	940	b	802	802	732	732

Financial assets designated at fair value:
held in respect of linked liabilities under investment contracts	b	90,851	90,851	82,798	82,798	b	66,657	66,657	90,851	90,851
held under own account:
– Equity securities	b	5,376	5,376	3,711	3,711	b	6,496	6,496	5,376	5,376
– Loans and advances	b	23,491	23,491	13,196	13,196	b	30,187	30,187	23,491	23,491
– Debt securities	b	24,217	24,217	12,100	12,100	b	8,628	8,628	24,217	24,217
– Other financial assets designated at fair value	b	3,545	3,545	2,793	2,793	b	9,231	9,231	3,545	3,545
Derivative financial instruments	b	248,088	248,088	138,353	138,353	b	984,802	984,802	248,088	248,088
Loans and advances to banks	c	40,120	40,106	30,926	30,895	c	47,707	47,594	40,120	40,106
Loans and advances to customers:
Loans and advances to customers
– Residential mortgage loans	c	111,955	111,951	94,511	94,511	c	135,077	133,605	106,619	106,615
– Credit card receivables	c	14,289	14,289	13,399	13,399	c	22,304	22,312	14,289	14,289
– Other personal lending	c	24,968	24,968	20,511	20,488	c	32,038	31,264	29,857	29,857
– Wholesale and corporate loans and advances	c	183,109	181,589	143,835	143,621	c	259,699	247,798	183,556	182,036
– Finance lease receivables	c	11,077	11,066	10,044	10,042	c	12,697	12,697	11,077	11,066
Available for sale financial instruments
– Treasury and other eligible bills	b	2,723	2,723	2,420	2,420	b	4,003	4,003	2,723	2,723
– Debt securities	b	38,673	38,673	47,912	47,912	b	58,831	58,831	38,673	38,673
– Equity securities	b	1,676	1,676	1,371	1,371	b	2,142	2,142	1,676	1,676
Reverse repurchase agreements and cash collateral on securities borrowed	c	183,075	183,075	174,090	174,090	c	130,354	129,296	183,075	183,075

Financial liabilities:
Financial liabilities:
Deposits from banks	d	90,546	90,508	79,562	79,436	d	114,910	114,912	90,546	90,508
Items in the course of collection due to other banks	a	1,792	1,792	2,221	2,221	a	1,635	1,635	1,792	1,792
Customer accounts:
– Current and demand accounts	d	80,006	80,006	77,216	77,216	d	82,515	82,515	80,006	80,006
– Savings accounts	d	74,599	74,599	65,784	65,792	d	76,008	76,008	74,599	74,599
– Other time deposits	d	140,382	141,917	113,754	113,653	d	176,982	176,966	140,382	141,917
Trading portfolio liabilities:
– Treasury and other eligible bills	b	486	486	608	608	b	79	79	486	486
– Debt securities	b	50,506	50,506	58,142	58,142	b	44,309	44,309	50,506	50,506
– Equity securities	b	13,702	13,702	12,697	12,697	b	14,919	14,919	13,702	13,702
– Commodities	b	708	708	427	427	b	167	167	708	708
Financial liabilities designated at fair value:
– Held on own account						b	76,892	76,892	74,489	74,489
– Liabilities to customers under investment contracts	b	92,639	92,639	84,637	84,637	b	69,183	69,183	92,639	92,639
– Held on own account	b	74,489	74,489	53,987	53,987
Derivative financial instruments	b	248,288	248,288	140,697	140,697	b	968,072	968,072	248,288	248,288
Debt securities in issue	e	120,228	120,176	111,137	111,131	d	149,567	148,736	120,228	120,176
Repurchase agreements and cash collateral on securities lent	d	169,429	169,429	136,956	136,956	d	182,285	182,285	169,429	169,429
Subordinated liabilities	f	18,150	17,410	13,786	13,976	d	29,842	22,944	18,150	17,410

Barclays

Annual Report ~~2007~~2008

~~244~~

273

Notes to the accounts

For the year ended 31st December 2008

4950 Fair value of financial instruments (continued)

Notes

a	Fair value approximates carrying value due to the short-term nature of these financial assets and liabilities.

~~Financial~~The carrying value of financial instruments subsequently measured at fair value (including those held for trading, designated at fair value, derivatives and available for sale) is determined in accordance with accounting policy 7 on page 180 and further description and analysis of these fair values are set out below.

The carrying value of financial assets subsequently measured at amortised cost (including loans and advances, and other lending such as reverse repurchase agreements and cash collateral on securities borrowed) is determined in accordance with the accounting policy 7 on page 180. In many cases the fair value disclosed approximates the carrying value because the instruments are short term in nature or have interest rates that reprice frequently. In other cases, fair value is determined using discounted cash flows, applying either ~~priced~~market derived interest rates or, where the counterparty is a bank, rates currently offered by other financial institutions for placings with ~~reference~~similar characteristics. Additionally, fair value can be determined by applying an average of available regional and industry segmental credit spreads to athe loan portfolio, taking the contractual maturity of the loan facilities into consideration.

The carrying value of financial liabilities subsequently measured at amortised cost (including customer accounts and other deposits such as repurchase agreements and cash collateral on securities lent, debt securities in issue, subordinated liabilities) is determined in accordance with the accounting policy 7 on page 180. In many cases, the fair value disclosed approximates the carrying value because the instruments are short term in nature or have interest rates that reprice frequently such as customer accounts and other deposits and short term debt securities. Fair values of other debt securities in issue are based on quoted ~~market price for that instrument~~prices where available, or bywhere these are unavailable, are estimated using a valuation model. ~~Where~~Fair values for dated and undated convertible and non-convertible loan capital are based on quoted market rates for the issue concerned or similar issues with similar terms and conditions.

Valuation methodology

The table below shows the Group’s financial assets and liabilities that are recognised and measured at fair value analysed by valuation technique. A description of the nature of the techniques used to calculate valuations based on observable inputs and valuations based on unobservable inputs is set out on the next page.


	At 31st December 2008
	Valuations		Valuations based on unobservable inputs
	based on observable inputs £m		Vanilla products £m		Exotic products £m		Total £m		Total £m
Trading portfolio assets	174,168		11,469		–		11,469		185,637
Financial assets designated at fair value:
– held on own account	37,618		16,559		365		16,924		54,542
– held in respect of linked liabilities to customers under investment contracts	66,657		–		–		–		66,657
Derivative financial assets	970,028		12,436		2,338		14,774		984,802
Available for sale assets	63,149		1,827		–		1,827		64,976

Total assets	1,311,620		42,291		2,703		44,994		1,356,614
Trading portfolio liabilities	(59,436	)	(38	)	–		(38	)	(59,474	)
Financial liabilities designated at fair value	(71,044	)	(290	)	(5,558	)	(5,848	)	(76,892	)
Liabilities to customers under investment contracts	(69,183	)	–		–		–		(69,183	)
Derivative financial liabilities	(959,518	)	(6,151	)	(2,403	)	(8,554	)	(968,072	)

Total liabilities	(1,159,181	)	(6,479	)	(7,961	)	(14,440	)	(1,173,621	)

	At 31st December 2007
	Valuations		Valuations based on unobservable inputs
	based on observable inputs £m		Vanilla products £m		Exotic products £m		Total £m		Total £m
Trading portfolio assets	189,234		4,457		–		4,457		193,691
Financial assets designated at fair value:
– held on own account	39,810		16,819		–		16,819		56,629
– held in respect of linked liabilities to customers under investment contracts	90,851		–		–		–		90,851
Derivative financial assets	245,381		1,118		1,589		2,707		248,088
Available for sale assets	42,262		810		–		810		43,072

Total assets	607,538		23,204		1,589		24,793		632,331
Trading portfolio liabilities	(65,360	)	(42	)	–		(42	)	(65,402	)
Financial liabilities designated at fair value	(68,317	)	(951	)	(5,221	)	(6,172	)	(74,489	)
Liabilities to customers under investment contracts	(92,639	)	–		–		–		(92,639	)
Derivative financial liabilities	(243,906	)	(1,178	)	(3,204	)	(4,382	)	(248,288	)

Total liabilities	(470,222	)	(2,171	)	(8,425	)	(10,596	)	(480,818	)

Of the total Group assets of £1,356,614m measured at fair value, £44,994m (2007: £24,793m) were valued using models with unobservable inputs. While the derivative assets associated with our Monoline exposure accounted for a significant portion of the increase in assets valued using unobservable inputs, further increases arose due to weakness in Sterling, as well as increased illiquidity in the market.

274

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LOGO

50 Fair value of financial instruments (continued)

The nature of the valuation techniques set out in the table above are summarised as follows:

Valuations based on observable inputs

Valuations based on observable inputs include

–	Financial instruments for which their valuations are determined by reference to unadjusted quoted prices in active markets where the quoted price is readily available and the price represents actual and regularly occurring market transactions on an arm’s length basis;

–

Financial instruments valued using recent arm’s length market transactions or with reference to the current fair value ~~is calculated using a valuation model, the methodology is to calculate the expected cash flows under the terms~~ of ~~each specific contract and then discount these values back to a present value.~~similar instruments;

~~The expected~~

–	Linear financial instruments such as swaps and forwards which are valued using market standard pricing techniques;

–	Options that are commonly traded in markets whereby all the inputs to the market-standard pricing models are deemed observable.

Valuations based on unobservable inputs

Valuations based on unobservable inputs include:

(a) Vanilla products

Products valued using simple models, such as discounted cash ~~flows~~flow or Black Scholes models, where some of the inputs are not observable. This would include, for ~~each contract~~example, commercial loans, commercial mortgage backed securities, selected mortgage products, Alt As and subprime loans, as well as long-dated vanilla options with tenors different to those commonly traded in the markets and hence unobservable volatilities.

(b) Exotic products

Exotic products are ~~determined either directly by reference~~over-the-counter products that are relatively bespoke, not commonly traded in the markets, and are valued using sophisticated mathematical models where some of the inputs are not observable.

In determining the value of vanilla and exotic products the following are the principal inputs that can require judgement:

(i) Volatility

Volatility is a critical input to ~~actual cash flows implicit~~all option pricing models, across all asset classes. In most cases volatility is observable from the vanilla options that are traded across the various asset classes but, on occasion, volatility is unobservable, for example, for long maturity option.

(ii) Correlation

Across asset classes, correlation is another important input to some pricing models, for example for products whose value depends on two equity indices. In some developed markets there are products traded from which correlation can be implied, for example spread products in ~~observable market prices or through modelling cash flows using appropriate financial-markets pricing models. Wherever possible these~~commodities.

(iii) Model input parameters

Some exotic models ~~use as their basis observable market prices and rates including,~~have input parameters that define the models, for example interest rate models tend to have parameters that are needed to capture the rich dynamics of the yield curve. These model parameters are typically not directly observable but may be inferred from observable inputs.

(iv) Spreads to discount rates

For certain product types, particularly credit related such as asset backed financial instruments, the discount rate is set at a spread to the standard discount (LIBOR) rates. In these cases, in addition to standard discount rates, the spread is a significant input to the valuation. For some assets this spread data can be unobservable.

(v) Default rates and recovery rates

In certain credit products valued using pricing models, default rates and recovery rates may be necessary inputs. Some default rates and recovery rates are deemed observable but for others which are less frequently traded in the markets they may not be.

(vi) Prepayment rates

For products in the securitisation businesses, for example mortgage backed securities, prepayment rates are key inputs. Some of the drivers of prepayment are understood (such as the nature of assets/loans, e.g. quality of mortgage pool and macroeconomic factors) however, future prepayment rates are considered unobservable.

The following summary sets out the principal instruments whose valuation may involve judgmental inputs.

Corporate bonds

Corporate bonds are generally valued using observable quoted prices or recently executed transactions. Where observable price quotations are not available, the fair value is determined based on cash flow models where significant inputs may include yield curves, ~~equities and commodities prices, option volatilities and currency rates. The process of calculating fair value on illiquid instruments~~bond or from a valuation model may require estimation of certain pricing parameters, assumptions or model characteristics. These estimates are calibrated against industry standards, economic models and observed transaction prices. Changes to assumptions or estimated levels can potentially impactsingle name credit default swap spreads.

Mortgage whole loans

Wherever possible, the fair value of mortgage whole loans is determined using observable quoted prices or recently executed transactions for comparable assets. Where observable price quotations or benchmark proxies are not available, fair value is determined using cash flow models where significant inputs include yield curves, collateral specific loss assumptions, asset specific prepayment assumptions, yield spreads and expected default rates.

Commercial mortgage backed securities and asset backed securities

Commercial mortgage backed securities and asset backed securities (ABS) (residential mortgages, credit cards, auto loans, student loans and leases) are valued using observable information to the greatest extent possible. Wherever possible, the fair value is determined using quoted prices or recently executed transactions. Where observable price quotations are not available, fair value is determined based on cash flow models where the significant inputs may include yield curves, credit spreads and prepayment rates. Securities that are backed by the residual cash flows of an ~~instrument~~asset portfolio are generally valued using similar cash flow models. The fair value of home equity loan bonds are determined using models which use scenario analysis with significant inputs including age, rating, internal grade, and index prices.

Barclays

Annual Report 2008

275

Notes to the accounts

For the year ended 31st December 2008

50 Fair value of financial instruments (continued)

Collateralised debt obligations

The valuation of collateralised debt obligations (CDOs) notes is first based on an assessment of the probability of an event of default occurring due to a credit deterioration. This is determined by reference to the probability of event of default occurring and the probability of exercise of contractual rights related to event of default. The notes are then valued by determining appropriate valuation multiples to be applied to the contractual cash flows. These are based on inputs including the prospective cash flow performance of the underlying securities, the structural features of the transaction and the net asset value of the underlying portfolio.

Private equity

The fair value of private equity is determined using appropriate valuation methodologies which, dependent on the nature of the investment, may include discounted cash flow analysis, enterprise value comparisons with similar companies, price:earnings comparisons and turnover multiples. For each investment the relevant methodology is applied consistently over time.

OTC Derivatives

Derivative contracts can be exchange traded or over the counter (OTC). OTC derivative contracts include forward, swap and option contracts related to interest rates, bonds, foreign currencies, credit standing of reference entities, equity prices, fund levels, commodity prices or indices on these assets.

The fair value of OTC derivative contracts are modelled using a series of techniques, including closed form analytical formulae (such as ~~reported.~~ the Black-Scholes option pricing model) and simulation based models. The choice of model is dependant on factors such as; the complexity of the product, inherent risks and hedging strategy: statistical behaviour of the underlying, and ability of the model to price consistently with observed market transactions. For many pricing models there is no material subjectivity because the methodologies employed do not necessitate significant judgement and the pricing inputs are observed from actively quoted markets, as is the case for generic interest rate swaps and option markets. In the case of more established derivative products, the pricing models used are widely accepted and used by the other market participants. Significant inputs used in these models may include yield curves, credit spreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices or foreign exchange rates and, in some cases, correlation between these inputs. These inputs are determined with reference to quoted prices, recently executed trades, independent market quotes and consensus data.

New, long dated or complex derivative products may require a greater degree of judgement in the implementation of appropriate valuation techniques, due to the complexity of the valuation assumptions and the reduced observability of inputs. The valuation of more complex products may use more generic derivatives as a component to calculating the overall value.

Derivatives where valuation involves a significant degree of judgement include:

Fund derivatives

Fund derivatives are derivatives whose underlyings include mutual funds, hedge funds, indices and multi-asset portfolios. They are valued using underlying fund prices, yield curves and available market information on the level of the hedging risk. Some fund derivatives are valued using unobservable information, generally where the level of the hedging risk is not observable in the market. These are valued taking account of risk of the underlying fund or collection of funds, diversification of the fund by asset, concentration by geographic sector, strategy of the fund, size of the transaction and concentration of specific fund managers.

Commodity derivatives

Commodity derivatives are valued using models where the significant inputs may include interest rate yield curves, commodity price curves, volatility of the underlying commodities and, in some cases, correlation between these inputs, which are generally observable. This approach is applied to base metal, precious metal, energy, power, gas, emissions, soft commodities and freight positions. Due to the significant time span in the various market closes, curves are constructed using differentials to a benchmark curve to ensure that all curves are valued using the dominant market base price.

Structured credit derivatives

Collateralised synthetic obligations (CSOs) are structured credit derivatives which reference the loss profile of a portfolio of loans, debts or synthetic underlyings. The reference asset can be a corporate credit or an asset backed credit. For CSOs that reference corporate credits an analytical model is used. For CSOs on asset backed underlyings, due to the path dependent nature of a CSO on an amortising portfolio a Monte Carlo simulation is used rather than analytic approximation. The expected loss probability for each reference credit in the portfolio is derived from the single name credit default swap spread curve and in addition, for ABS references, a prepayment rate assumption. A simulation is then used to compute survival time which allows us to calculate the marginal loss over each payment period by reference to estimated recovery rates. Significant inputs include prepayment rates, cumulative default rates, and recovery rates.

Sensitivity analysis of valuations using unobservable inputs

As part of our risk management processes, stress tests are applied on the significant unobservable parameters to generate a range of potentially possible alternative valuations. The financial instruments that most impact this sensitivity analysis are those with the more illiquid and/or structured portfolios. The stresses are applied independently and do not take account of any cross correlation between separate asset classes that would reduce the overall effect on the valuations.


At 31st December 2008	Significant unobservable parameters^a	Potential effect recorded in profit or loss Favourable (Unfavourable)			Potential effect recorded in equity Favourable (Unfavourable)
At 31st December 2008		£m	£m		£m	£m
Asset backed securities and loans and derivatives with asset backed underlyings	iii, iv, v, vi	1,470	(1,896	)	46	(54	)
Private equity^b	iii, iv	209	(208	)	64	(142	)
Derivative assets and liabilities and financial liabilities designated at fair value:
– Derivative exposure to Monoline insurers	iii, iv, v, vi	21	(329	)	–	–
– Funds derivatives and structured notes	iii	226	(123	)	–	–
– Other structured derivatives and notes	i, ii, iii	304	(196	)	–	–
Other	i, ii, iii, iv, v, vi	55	(43	)	–	–

Total		2,285	(2,795	)	110	(196	)

Notes

a	(i )-(vi) refer to valuation inputs listed on page 275.

b	Available for sale assets (Private Equity) and assets designated at fair value (Principal Investments).

276

Barclays

Annual Report 2008

LOGO

50 Fair value of financial instruments (continued)


At 31st December 2007	Significant unobservable parameters^a	Potential effect recorded in profit or loss Favourable (Unfavourable)			Potential effect recorded in equity Favourable (Unfavourable)
At 31st December 2007		£m	£m		£m	£m
Asset backed securities and loans and derivatives with asset backed underlyings	iii, iv, v, vi	868	(868	)	5	(5	)
Private equity	iii, iv	75	(75	)	36	(36	)
Derivative assets and liabilities and financial liabilities designated at fair value:
– Fund derivatives and structured notes	iii	441	(147	)	–	–
– Other structured derivatives and notes	i, ii, iii	57	(56	)	–	–
Other	i, ii, iii, iv, v, vi	3	(1	)	–	–
Total		1,444	(1,147	)	41	(41	)

The effect of ~~changing these~~stressing the significant unobservable assumptions for those financial instruments for which the fair values were measured using valuation techniques that are determined in full or in part on assumptions that are not supported by observable market prices, to a range of reasonably possible ~~alternative assumptions,~~alternatives would be to increase the fair ~~value~~values by up to ~~£1.5bn (2006: £0.1bn)~~£2.4bn (2007: £1.5bn) or to decrease the fair ~~value~~values by up to ~~£1.2bn (2006: £0.1bn)~~£3.0bn (2007: £1.2bn) with substantially all the potential effect being recorded in profit or loss rather than equity.

Asset backed securities and loans, and derivatives with asset backed underlyings

Asset backed securities, loans and related derivatives contribute most to the sensitivity analysis as at 31st December 2008. The stress effect increased in this area in 2008 due to continued market dislocation and increased levels of unobservability. The stresses having the most significant impact on the analysis are: for commercial mortgage backed securities and loans, changing the spreads to discount rates to close to originated levels (favourable stress) and increasing spreads to between 2 and 6% (unfavourable stress); for residential mortgage backed securities and loans, changing the spreads to discount rates by +/-10%; and for collateralised debt obligations that reference asset backed securities and loans, primarily by changing the spreads to discount rates by +/-20%.

~~These variations in~~Private equity

The sensitivity amounts are calculated by stressing the ~~assumptions have been estimated~~key valuation inputs to each individual valuation – generally either price:earnings ratios or EBITDA analysis. The stresses are then determined by comparing these metrics with a range of similar companies.

Derivative exposure to Monoline insurers

The favourable stress is calculated by reference to counterparty quotes for second loss protection on the appropriate reference obligations. The unfavourable stress is calculated by applying a ~~product by product basis~~default scenario to the monolines that are rated BBB or below.

Fund derivatives and ~~form part of the Bank’s internal control processes over the determination of fair value.~~structured notes

The valuation of these transactions takes into account the risk that the underlying fund-linked asset value will decrease too quickly to be able to re-hedge with risk-free instruments (‘gap risk’). The sensitivity amounts are determined by applying stresses to market quotes for hedging the relevant gap risk. The unfavourable stress is based on a shift in the gap risk price of 34bp, the favourable stress applies to a pricing level that assumes no gap event will occur.

Other structured derivatives and notes

The sensitivity amounts are calculated principally by adjusting the relevant correlation sensitivity used in the valuation model ~~used for~~by a ~~particular instrument,~~range based on structured derivative data available in consensuses pricing services. The range applied to correlation sensitivity is an adverse or beneficial move of 15bp applied to the ~~quality and liquidity~~correlation sensitivity.

Unrecognised gains as a result of ~~market data used for pricing, other fair value adjustments not specifically captured by~~ the ~~model, market data and assumptions or estimates in these are all subject to internal review and approval procedures and consistent application between accounting periods.~~use of valuation models using unobservable inputs

The amount that has yet to be recognised in income that relates to the difference between the transaction price (the fair value at initial recognition) and the amount that would have arisen had valuation models using unobservable inputs been used on initial recognition, less amounts subsequently recognised, was as follows:


At 31st December	2007 £m		2006 £m		2008 £m		2007 £m
At 1st January	534		260		154		534
New transactions	134		359		77		134
Amounts recognised in profit or loss during the year	(514	)	(85	)	(103	)	(514	)
At 31st December	154		534		128		154

The net asset fair value position of the related financial instruments increased by ~~£2,842m~~£16,357m for the year ended 31st December ~~2007~~2008 (31st December ~~2006: £2,814m)~~2007: £2,842m). In many cases these changes in fair values were offset by changes in fair values of other financial instruments, which were priced in active markets or valued by using a valuation technique which is supported by observable market prices or rates, or by transactions which have been realised.

Notes

~~The fair value for loans and advances, and other lending (including reverse repurchase agreements and cash collateral~~(i )-(vi) refer to valuation inputs listed on securities borrowed) is calculated using discounted cash flows, applying either market rates where practicable or, where the counterparty is a bank, rates currently offered by other financial institutions for placings with similar characteristics. In many cases the fair value approximates carrying value because the instruments are short term in nature or have interest rates that reprice frequently.page 289.

The fair value of customer accounts other deposits and other borrowings (including repurchase agreements and cash collateral on securities lent) is estimated using market rates at the balance sheet date. The fair value of these instruments approximate to carrying amount in most cases because, in general, they are short term in nature and reprice frequently.

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Notes to the accounts

e	Fair values of short-term debt securities in issue are approximately equal to their carrying amount. Fair values of other debt securities in issue are based on quoted prices where available, or where these are unavailable, are estimated using other valuation techniques.

For the year ended 31st December 2008

f	~~The calculated fair values for dated and undated convertible and non-convertible loan capital were based upon quoted market rates~~ 51 Reclassification of financial assets held for trading On 16th December the ~~issue concerned or equivalent issues with similar terms and conditions.~~

~~The~~ Group ~~considers~~reclassified certain financial assets originally classified as held for trading that ~~given~~were no longer held for the ~~lack~~purpose of ~~an established market,~~selling or repurchasing in the ~~diversity~~near term out of ~~fee structures~~fair value through profit or loss to loans and receivables. In making this reclassification, the ~~difficulty~~Group identified those trading assets, comprising portfolios of ~~separating~~bank-issued fixed rate notes and mortgage and other asset backed securities, for which it had a clear change of intent to hold for the ~~value~~foreseeable future or until maturity rather than to trade in the short term. At the time of the ~~instruments from~~transfer, the ~~value~~Group identified rare circumstances permitting such reclassification, being severe illiquidity in the relevant market.

The following table shows carrying values and fair values of the ~~overall transaction, it is~~assets reclassified at 16th December 2008.


	16th December 2008	31st December 2008
	Carrying value £m	Carrying value £m	Fair value £m
Trading assets reclassified to loans and receivables	4,046	3,986	3,984
Total financial assets reclassified to loans and receivables	4,046	3,986	3,984

As at the date of reclassification, the effective interest rates on reclassified trading assets ranged from 0.18% to 9.29% with expected recoverable cash flows of £7.4bn.

If the reclassifications had not ~~meaningful to provide an estimate of~~been made, the Group’s income statement for 2008 would have included unrealised fair value losses on the reclassified trading assets of £1.5m.

After reclassification, the reclassified financial ~~commitments and contingent liabilities.~~assets contributed the following amounts to the 2008 income before income taxes.


~~245~~		~~Barclays~~2008 £m ~~Annual Report 2007~~
Net interest income		4
Provision for credit losses		–
Income before income taxes on reclassified trading assets		4

~~Notes~~Prior to reclassification in 2008, £144m of unrealised fair value losses on the ~~accounts~~reclassified trading assets was recognised in the consolidated income statement for 2008 (2007: £218m loss).

~~For the year ended 31st December 2007~~

5052 Capital Management

Barclays operates a centralised capital management model, considering both regulatory and economic capital. The capital management strategy is to continue to maximise shareholder value through optimising both the level and mix of capital resources. Decisions on the allocation of capital resources are conducted as part of the strategic planning review.

The Group’s capital management objectives are to:

–	~~Support~~Maintain sufficient capital resources to meet the ~~Group’s AA credit rating.~~minimum regulatory capital requirements set by the FSA and the US Federal Reserve Bank’s requirements that a financial holding company be well capitalised.

–	Maintain sufficient capital resources to support the Group’s risk appetite and economic capital requirements.

–	~~Maintain sufficient capital resources to meet~~Support the ~~FSA’s minimum regulatory capital requirements and the US Federal Reserve Bank’s requirements that a financial holding company be well capitalised.~~Group’s credit rating.

–	Ensure locally regulated subsidiaries can meet their minimum capital requirements.

–	Allocate capital to businesses to support the Group’s strategic objectives, including optimising returns on economic and regulatory capital.

External Regulatory Capital Requirements

The Group is subject to minimum capital requirements imposed by the Financial Services Authority (FSA), following guidelines developed by the Basel Committee on Banking Supervision (the Basel Committee) and implemented in the UK via European Union Directives.

Minimum requirements under FSA’s Basel rules are expressed as a ratio of capital resources to risk weighted assets (Risk Asset Ratio). Risk weighted assets are a function of risk weights applied to the Group’s assets using calculations developed by the Basel Committee on Banking Supervision.

Under Basel II, effective from 1st January 2008, the Group has ~~been granted~~ approval by the FSA to ~~adopt~~use the advanced approaches to credit and operational risk management. Pillar 1 ~~risk weighted assets will be~~capital requirements are generated using the Group’s risk models. ~~Pillar 1 minimum capital requirements under Basel II are Pillar 1 risk weighted assets multiplied by 8%, the internationally agreed minimum ratio.~~

Under Pillar 2 of Basel II, the Group is subject to an overall regulatory capital requirement based on individual capital guidance (‘ICG’) received from the FSA. The ICG imposes additional capital requirements in excess of Pillar 1 minimum capital requirements. ~~Barclays received its ICG from the FSA in December 2007.~~

Outside the UK, the Group has operations (and main regulators) located in continental Europe, in particular France, Germany, Spain, Portugal and Italy (local central banks and other regulatory authorities); Asia Pacific (various regulatory authorities including the Hong Kong Monetary Authority, the Japanese FSA and the Monetary Authority of Singapore); Africa, where the Group’s operations are headquartered in Johannesburg, South Africa (The South African Reserve Bank and the Financial Services Board (FSB)) and the United States of America (the Board of Governors of the Federal Reserve System (FRB) and the Securities and Exchange Commission).

The Group manages its capital resources to ensure that those Group entities that are subject to local capital adequacy regulation in individual countries meet their minimum capital requirements. Local management manages compliance with subsidiary entity minimum regulatory capital requirements with reporting to local Asset and Liability Committees and to Treasury Committee, as required.

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52 Capital Management(continued)

Regulatory Capital ~~Ratios~~

The table below provides details ~~under Basel I~~ of the ~~Group’s~~regulatory capital ~~ratios and risk weighted assets at 31st December 2007 and 2006.~~resources managed by the Group.

   2007
%
   2006
%
Capital Ratios

Tier 1 ratio
   7.8    7.7
Risk asset ratio
   12.1    11.7
   £m    £m
Total risk weighted assets
   353,476    297,833

The table below provides details of the regulatory capital resources managed by the Group.

   2007
£m
2006
£m

Total qualifying Tier 1 capital
   27,408 23,005
Total qualifying Tier 2 capital
   17,123 14,036
Total deductions
   (1,889 ) (2,330 )
Total net capital resources
   42,642 34,711


	Basel ll 2008 £m		Basel I 2007 £m
Total qualifying Tier 1 capital	37,250		27,408
Total qualifying Tier 2 capital	22,333		17,123
Total deductions	(856	)	(1,889	)
Total net capital resources	58,727		42,642

Insurance businesses

Insurance businesses are subject to separate regulation regarding Capital management and have constraints on the transfer of capital. Capital resource requirements are assessed at company level in accordance with local laws and regulations. However, the requirement is that each life fund should be able to meet its own liabilities. In the event that this should not be the case, shareholders’ equity would be required to meet its liabilities to the extent that they could not otherwise be met.

The capital resource requirement of the insurance businesses at 31st December ~~2007~~2008 was ~~£216m~~£192m (31st December ~~2006: £225m)~~2007: £216m).

53 Segmental reporting

The following section analyses the Group’s performance by business. For management and reporting purposes, Barclays is organised into the following business groupings:

Global Retail and Commercial Banking

–	UK Retail Banking

–	Barclays Commercial Bank

–	Barclaycard

–	GRCB – Western Europe

–	GRCB – Emerging Markets

–	GRCB – Absa

Investment Banking and Investment Management

–	Barclays Capital

–	Barclays Global Investors

–	Barclays Wealth

Head Office Functions and Other Operations

UK Retail Banking

UK Retail Banking comprises Personal Customers, Home Finance, Local Business, Consumer Lending and Barclays Financial Planning. This cluster of businesses aims to build broader and deeper relationships with its Personal and Local Business customers through providing a wide range of products and financial services. Personal Customers and Home Finance provide access to current account and savings products, Woolwich branded mortgages and general insurance. Consumer Lending provides unsecured loan and protection products and Barclays Financial Planning provides investment advice and products. Local Business provides banking services, including money transmission, to small businesses.

Barclays Commercial Bank

Barclays Commercial Bank provides banking services to organisations with an annual turnover of more than £1m. Customers are served via a network of relationship and industry sector specialists, which provides solutions constructed from a comprehensive suite of banking products, support, expertise and services, including specialist asset financing and leasing facilities. Customers are also offered access to the products and expertise of other businesses in the Group, particularly Barclays Capital, Barclaycard and Barclays Wealth.

Barclaycard

Barclaycard is a multi-brand credit card and consumer lending business which also processes card payments for retailers and merchants and issues credit and charge cards to corporate customers and the UK Government. It is one of Europe’s leading credit card businesses and has an increasing presence in the United States and South Africa.

In the UK, Barclaycard comprises Barclaycard UK Cards, Barclaycard Partnerships, Barclays Partner Finance and FirstPlus.

Outside the UK, Barclaycard provides credit cards in the United States, Germany, South Africa (through management of the Absa credit card portfolio) and in the Scandinavian region, where Barclaycard operates through Entercard, a joint venture with Swedbank.

Barclaycard works closely with other parts of the Group, including UK Retail Banking, Barclays Commercial Bank and GRCB – Western Europe and GRCB – Emerging Markets, to leverage their distribution capabilities.

Global Retail and Commercial Banking – Western Europe

GRCB – Western Europe encompasses Barclays Global Retail and Commercial Banking as well as Barclaycard operations in Spain, Italy, Portugal and France. GRCB – Western Europe serves customers through a variety of distribution channels. GRCB – Western Europe provides a variety of products including retail mortgages, current and deposit accounts, commercial lending, unsecured lending, credit cards, investments, and insurance serving the needs of Barclays retail, mass affluent, and corporate customers.

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Notes to the accounts

For the year ended 31st December 2008

53 Segmental reporting(continued)

Global Retail and Commercial Banking – Emerging Markets

GRCB – Emerging Markets encompasses Barclays Global Retail and Commercial Banking, as well as Barclaycard operations, in 14 countries organised in six geographic areas: India and Indian Ocean (India, Mauritius and Seychelles); Middle East and North Africa (UAE and Egypt); East and West Africa (Ghana, Tanzania, Uganda and Kenya); Southern Africa (Botswana, Zambia and Zimbabwe); Russia; and Pakistan (from 23rd July 2008). GRCB – Emerging Markets serves its customers through a variety of distribution channels. GRCB – Emerging Markets provides a variety of traditional retail and commercial products including retail mortgages, current and deposit accounts, commercial lending, unsecured lending, credit cards, treasury and investments. In addition to this, it provides specialist services such as Sharia compliant products and mobile banking.

Global Retail and Commercial Banking – Absa

GRCB – Absa represents Barclays consolidation of Absa, excluding Absa Capital and Absa Card which is included as part of Barclays Capital and Barclaycard respectively. Absa Group Limited is a South African financial services organisation serving personal, commercial and corporate customers predominantly in South Africa. GRCB – Absa serves retail customers through a variety of distribution channels and offers a full range of banking services, including current and deposit accounts, mortgages, instalment finance, credit cards, bancassurance products and wealth management services. It also offers customised business solutions for commercial and large corporate customers.

Barclays Capital

Barclays Capital is the investment banking division of Barclays that provides large corporate, institutional and government clients with solutions to their financing and risk management needs.

Barclays Capital services a wide variety of client needs, covering strategic advisory and M&A; equity and fixed income capital raising and corporate lending; and risk management across foreign exchange, interest rates, equities and commodities.

Activities are organised into three principal areas: Global Markets, which includes commodities, credit products, equities, foreign exchange, interest rate products; Investment Banking, which includes corporate advisory, Mergers and Acquisitions, equity and fixed-income capital raising and corporate lending; and Private Equity and Principal Investments. Barclays Capital includes Absa Capital, the investment banking business of Absa. Barclays Capital works closely with all other parts of the Group to leverage synergies from client relationships and product capabilities.

Barclays Global Investors

BGI is an asset manager and a provider of investment management products and services.

BGI offers structured investment strategies such as indexing, global asset allocation and risk controlled active products including hedge funds and provides related investment services such as securities lending, cash management and portfolio transition services. BGI collaborates with the other Barclays businesses, particularly Barclays Capital and Barclays Wealth, to develop and market products and leverage capabilities to better serve the client base.

Barclays Wealth

Barclays Wealth serves high net worth, affluent and intermediary clients worldwide, providing private banking, asset management, stockbroking, offshore banking, wealth structuring and financial planning services and managed the closed life assurance activities of Barclays and Woolwich in the UK.

Barclays Wealth works closely with all other parts of the Group to leverage synergies from client relationships and product capabilities.

Head Office Functions and Other Operations

Head Office Functions and Other Operations comprises head office and central support functions, businesses in transition and inter-segment adjustments.

Head office and central support functions comprises the following areas: Executive Management, Finance, Treasury, Corporate Affairs, Human Resources, Strategy and Planning, Internal Audit, Legal, Corporate Secretariat, Property, Tax, Compliance and Risk. Costs incurred wholly on behalf of the businesses are recharged to them.

Businesses in transition principally relate to certain lending portfolios that are centrally managed with the objective of maximising recovery from the assets.

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53 Segmental reporting(continued)


As at 31st December 2008	UK Retail Banking £m		Barclays Commercial Bank £m		Barclaycard £m		GRCB – Western Europe £m		GRCB – Emerging Markets £m		GRCB– Absa £m		Barclays Capital £m		Barclays Global Investors £m		Barclays Wealth £m		Head office functions and other operations £m		Total £m
Interest income from external customers	2,816		1,589		1,677		808		644		1,223		2,026		(52	)	496		242		11,469
Other income from external customers	1,702		1,068		1,492		625		375		946		2,989		1,890		914		(355	)	11,646

Income from external customers, net of insurance claims	4,518		2,657		3,169		1,433		1,019		2,169		5,015		1,838		1,410		(113	)	23,115
Inter-segment income	(36	)	88		50		(3	)	–		29		216		6		(86	)	(264	)	–

Total income net of insurance claims	4,482		2,745		3,219		1,430		1,019		2,198		5,231		1,844		1,324		(377	)	23,115

Impairment charges and other credit provisions	(602	)	(414	)	(1,097	)	(296	)	(166	)	(347	)	(2,423	)	–		(44	)	(30	)	(5,419	)
Segment expenses – external	(2,138	)	(934	)	(1,405	)	(1,108	)	(856	)	(1,576	)	(3,789	)	(1,231	)	(809	)	(520	)	(14,366	)
Inter-segment expenses	(381	)	(129	)	(17	)	179		137		271		15		(18	)	(126	)	69		–
Total expenses	(2,519	)	(1,063	)	(1,422	)	(929	)	(719	)	(1,305	)	(3,774	)	(1,249	)	(935	)	(451	)	(14,366	)

Share of post-tax results of associates and joint ventures	8		(2	)	(3	)	–		–		5		6		–		–		–		14

Profit on disposal of subsidiaries, associates and joint ventures	–		–		–		–		–		1		–		–		326		–		327
Gains on acquisitions	–		–		92		52		–		–		2,262		–		–		–		2,406

Business segment profit before tax	1,369		1,266		789		257		134		552		1,302		595		671		(858	)	6,077

Additional information
Depreciation and amortisation	111		69		114		69		58		117		272		40		40		31		921
Impairment loss – intangible assets	–		–		–		–		–		–		–		–		(3	)	–		(3	)
Impairment of goodwill	–		–		37		–		–		–		74		–		–		–		111
Investments in associates and joint ventures	1		(3	)	(13	)	–		–		84		150		–		–		122		341

Total assets	101,384		84,029		30,925		64,732		14,653		40,391		1,629,117		71,340		13,263		3,146		2,052,980
Total liabilities	104,640		64,997		3,004		37,250		10,517		20,720		1,603,093		68,372		45,846		47,130		2,005,569

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Notes to the accounts

For the year ended 31st December 2008

53 Segmental reporting(continued)


As at 31st December 2007	UK Retail Banking £m		Barclays Commercial Bank £m		Barclaycard £m		GRCB – Western Europe £m		GRCB – Emerging Markets £m		GRCB – Absa £m		Barclays Capital £m		Barclays Global Investors £m		Barclays Wealth £m		Head office functions and other operations £m		Total £m
Net interest income from external customers	2,725		1,624		1,303		472		344		1,140		1,536		(2	)	453		15		9,610
Other income from external customers	1,652		922		1,086		474		189		832		5,398		1,917		890		30		13,390
Income from external customers, net of insurance claims	4,377		2,546		2,389		946		533		1,972		6,934		1,915		1,343		45		23,000
Inter-segment income	(80	)	18		141		(9	)	–		27		185		11		(56	)	(237	)	–

Total income net of insurance claims	4,297		2,564		2,530		937		533		1,999		7,119		1,926		1,287		(192	)	23,000

Impairment charges and other credit provisions	(559	)	(292	)	(827	)	(76	)	(39	)	(146	)	(846	)	–		(7	)	(3	)	(2,795	)

Segment expenses – external	(2 ,154	)	(785	)	(1,079	)	(859	)	(553	)	(1,518	)	(3,989	)	(1,180	)	(829	)	(253	)	(13,199	)
Inter-segment expenses	(316	)	(144	)	(14	)	186		158		251		16		(12	)	(144	)	19		–
Total expenses	(2 ,470	)	(929	)	(1,093	)	(673	)	(395	)	(1,267	)	(3,973	)	(1,192	)	(973	)	(234	)	(13,199	)

Share of post-tax results of associates and joint ventures	7		–		(7	)	–		1		6		35		–		–		–		42

Profit on disposal of subsidiaries, associates and joint ventures	–		14		–		8		–		5		–		–		–		1		28

Business segment profit before tax	1,275		1,357		603		196		100		597		2,335		734		307		(428	)	7,076
Additional information
Depreciation and amortisation	101		33		79		42		30		121		181		22		18		26		653
Impairment loss – intangible assets	–		13		–		–		–		1		–		–		–		–		14
Investments in associates and joint ventures	(7	)	1		(8	)	–		–		108		171		–		–		112		377

Total assets	88,477		74,566		22,121		43,702		9,188		36,368		839,850		89,218		18,188		5,683		1,227,361
Total liabilities	101,516		66,251		1,952		24,004		7,507		17,176		811,704		87,096		44,152		33,527		1,194,885


As at 31st December 2006	UK Retail Banking £m		Barclays Commercial Bank £m		Barclaycard £m		GRCB – Western Europe £m		GRCB – Emerging Markets £m		GRCB – Absa £m		Barclays Capital £m		Barclays Global Investors £m		Barclays Wealth £m		Head office functions and other operations £m		Total £m
Net interest income from external customers	2,649		1,618		1,294		389		274		1,030		1,460		17		404		8		9,143
Other income from external customers	1,673		771		1,226		364		122		967		4,746		1,653		795		135		12,452
Income from external customers, net of insurance claims	4,322		2,389		2,520		753		396		1,997		6,206		1,670		1,199		143		21,595
Inter-segment income	24		15		56		(2	)	–		34		61		(5	)	(39	)	(144	)	–

Total income net of insurance claims	4,346		2,404		2,576		751		396		2,031		6,267		1,665		1,160		(1	)	21,595

Impairment charges and other credit provisions	(635	)	(253	)	(1,053	)	(38	)	(30	)	(112	)	(42	)	–		(2	)	11		(2,154	)

Segment expenses – external	(2 ,263	)	(696	)	(861	)	(693	)	(461	)	(1,529	)	(3,988	)	(940	)	(772	)	(471	)	(12,674	)
Inter-segment expenses	(269	)	(172	)	(132	)	143		191		210		(21	)	(11	)	(141	)	202		–

Total expenses	(2 ,532	)	(868	)	(993	)	(550	)	(270	)	(1,319	)	(4,009	)	(951	)	(913	)	(269	)	(12,674	)

Share of post-tax results of associates and joint ventures	2		3		(8	)	(1	)	41		9		–		–		–		–		46

Profit on disposal of subsidiaries, associates and joint ventures	–		76		–		–		247		–		–		–		–		–		323

Business segment profit before tax	1,181		1,362		522		162		384		609		2,216		714		245		(259	)	7,136

Additional information
Depreciation and amortisation	100		23		69		44		28		141		132		13		10		31		591
Impairment loss – intangible assets	–		–		–		1		1		5		–		–		–		–		7
Investments in associates and joint ventures	(6	)	9		7		(1	)	–		51		71		–		–		97		228

Total assets	81,693		66,224		20,033		33,487		5,219		29,575		657,922		80,515		15,023		7,096		996,787
Total liabilities	94,694		62,335		2,062		17,545		5,207		13,974		632,208		79,366		37,652		24,354		969,397

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53 Segmental reporting(continued)

Revenue by products and services

An analysis of revenue from external customers by product or service is presented below:


As at 31st December	2008 £m		2007 £m		2006 £m
Net interest income
Cash and balances with central banks	174		145		91
Available for sale investments	2,355		2,580		2,811
Loans and advances to banks	1,267		1,416		903
Loans and advances to customers	23,754		19,559		16,290
Other	460		1,608		1,710
Interest income	28,010		25,308		21,805
Deposits from banks	(2,189	)	(2,720	)	(2,819	)
Customer accounts	(6,697	)	(4,110	)	(3,076	)
Debt securities in issue	(5,910	)	(6,651	)	(5,282	)
Subordinated liabilities	(1,349	)	(878	)	(777	)
Other	(396	)	(1,339	)	(708	)
Interest expense	(16,541	)	(15,698	)	(12,662	)
Net interest income	11,469		9,610		9,143
Net fee and commission income
Brokerage fees	87		109		70
Investment management fees	1,616		1,787		1,535
Securities lending	389		241		185
Banking and credit related fees and commissions	7,208		6,363		6,031
Foreign exchange commissions	189		178		184
Fee and commission income	9,489		8,678		8,005
Fee and commission expense	(1,082	)	(970	)	(828	)
Net fee and commission income	8,407		7,708		7,177
Principal transactions
Rates related business	4,751		4,162		2,848
Credit related business	(3,422	)	(403	)	766
Net investment income	680		1,216		962
Principal transactions	2,009		4,975		4,576
Net premiums from insurances contracts	1,090		1,011		1,060
Net claims and benefits incurred on insurance contracts	(237	)	(492	)	(575	)
Other income	377		188		214
Total income net of insurance claims	23,115		23,000		21,595

Interest income

Cash and balances with central banks interest income consists of interest income from cash on deposit with central banks. Available for sale investments interest income consists of the interest yield on debt securities, treasury bills and other eligible bills. Loans and advances to banks interest income consists of interest income from loans and advances to other banks. Loans and advances to customers interest income consists of interest income from loans, mortgages, advances and credit cards to customers. Other interest income principally consists of interest income relating to reverse repurchase agreements.

Interest expense

Deposits from banks interest expense consists of interest expense paid to other banks on their deposits with Barclays. Customer accounts interest expense consists of interest expense paid to customers on their current and savings account with Barclays. Debt securities in issue interest expense consists of interest expense paid to customers who hold Barclays debt securities in issue. Subordinated liabilities interest expense consists of interest expense paid to customers who hold Barclays subordinated liabilities. Other interest expense principally consists of interest expense relating to repurchase agreements and hedging activity.

Fee and commission income

Brokerage fees income consists of fees charged to facilitate transactions between buyers and sellers. The brokerage fee is charged for services such as negotiations, sales, purchases, delivery or advice on the transaction. Investment management fees are levied on assets under management. Securities lending fees are charged when stock is lent to third parties. Banking and credit related fees and commissions consist of fees and commissions charged on banking and credit card transactions. Foreign exchange commissions are earned on foreign exchange transactions with customers.

Fee and commission expense

Fee and commission expense consists of fees paid to third parties to facilitate transactions between buyers and sellers. The fee is charged for services such as negotiations, sales, purchases, delivery or advice on the transaction.

Barclays

Annual Report 2008

283

Notes to the accounts

For the year ended 31st December 2008

53 Segmental reporting (continued)

Principal transactions

Rates and Credit related business consists of profits and losses arising both on the purchase and sale of trading instruments and from the revaluation to market value together with the interest income and expense from these instruments and the related funding costs. Net investment income consists of the net gain from disposal of available for sale assets, dividend income, net gain from financial instruments designated at fair value and other investment income.

Total income net of insurance claims

Net premiums from insurance contracts consists of gross premiums from insurance contracts and premiums ceded to reinsurers. Net claims and benefits incurred on insurance contracts consists of gross claims and benefits incurred on insurance contracts and reinsurers’ share of claims incurred. Other income consists of increase in fair value of assets held under linked liabilities to customers under investment contracts, increase in liabilities to customers under investment contracts, property rentals and other income.

Geographical information

(i) A geographical analysis of revenues from external customers is presented below:


	2008 £m	2007 £m	2006 £m
Attributed to the UK	12,277	13,127	12,154
Attributed to other regions
Other European Union	3,633	3,374	2,882
United States	710	2,209	2,840
Africa	3,633	3,188	2,791
Rest of the World	2,862	1,102	928

Total	23,115	23,000	21,595
Individual countries included in Other European Union, Africa and Rest of the World contributing to more than 5% of income from external customers are as follows:
South Africa	2,618	2,374	2,359

284

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Barclays Bank PLC data


~~Barclays~~Consolidated income statement ~~Annual Report 2007~~		~~246~~ 286

Consolidated balance sheet		287

Consolidated statement of recognised income and expense		288

Consolidated cash flow statement		289

Notes to the accounts		290

Financial data		299

~~51 Segmental reporting~~

~~Business segments~~

The Group reports the results of its operations through seven business segments: UK Banking, Barclaycard, International Retail and Commercial Banking, Barclays Capital, Barclays Global Investors, Barclays Wealth, and Head Office and other operations.

UK Banking provides banking solutions to Barclays UK retail and commercial banking customers. Barclaycard provides credit card services across Europe and the United States. International Retail and Commercial Banking provides banking services to personal and corporate customers in Europe, Africa and the Middle East. Barclays Capital conducts the Group’s investment banking business providing corporate, institutional and government clients with financing and risk management products. Barclays Global Investors provides investment management products and services to international institutional clients. Barclays Wealth provides banking and asset management services to affluent and high net worth clients. Head Office functions and other operations comprise all the Group’s central function costs and other central items including businesses in transition.

During 2007 Barclays realigned a number of reportable business segments to better reflect the type of client served, the nature of the products offered and the associated risks and rewards. The changes have no impact on the Group Income Statement or Balance Sheet, and are summarised as follows:

UK Retail Banking. The unsecured lending business, previously managed and reported within Barclaycard and the Barclays Financial Planning business, previously managed and reported within Barclays Wealth are now managed and reported within UK Retail Banking. The changes combine these products with related products already offered by UK Retail Banking. In the UK certain UK Premier customers are now managed and reported within Barclays Wealth.

~~Barclaycard. The unsecured lending portfolio, previously managed and reported within Barclaycard, is now managed and reported within UK Retail Banking.~~

International Retail and Commercial Banking – excluding Absa. A number of high net worth customers are now managed and reported within Barclays Wealth in order to better match client profiles to wealth services.

Barclays Wealth. In the UK and Western Europe certain Premier and high net worth customers are now managed and reported within Barclays Wealth having been previously reported within UK Retail Banking and International Retail and Commercial Banking – excluding Absa.

The Barclays Financial Planning business previously managed and reported within Barclays Wealth, is now managed and reported within UK Retail Banking. Finally with effect from 1st January 2007 Barclays Wealth – closed life assurance activities continues to be managed within Barclays Wealth and for reporting purposes has been combined rather than being reported separately.

~~The structure and reporting remains unchanged for Barclays Commercial Bank, International Retail and Commercial Banking – Absa, Barclays Capital and Barclays Global Investors.~~

All transactions between business segments are conducted on an arms length basis. Internal charges and transfer pricing adjustments are reflected in the performance of each business. Head office functions and other operations contains a centralised treasury function, which deals with the Group’s funding requirements. The funding requirements of each business segment reflects funding at market rates and not internally generated transfer prices and is therefore not separately disclosed within inter-segment net income.

~~247~~

Barclays

Annual Report ~~2007~~2008

285

~~Notes to the accounts~~

~~For the year ended 31st December 2007~~

~~51 Segmental reporting (continued)~~

As at 31st December 2007    UK
Banking
£m Barclaycard
£m
International
Retail and
Commercial
Banking
£m
Barclays
Capital
£m Barclays
Global
Investors
£m Barclays
Wealth
£m Head office
functions
and other
operations
£m
Total
£m

Income from external customers, net of insurance claims    6,913 2,340 3,510 6,934 1,915 1,343 45 23,000
Inter-segment income
   (62 ) 146 13 185 11 (56 ) (237 ) –
Total income net of insurance claims
   6,851 2,486 3,523 7,119 1,926 1,287 (192 ) 23,000
Impairment charge and other credit provisions    (849 ) (838 ) (252 ) (846 ) – (7 ) (3 ) (2,795 )
Segment expenses – external
   (2,521 ) (909 ) (3,494 ) (3,989 ) (1,180 ) (829 ) (277 ) (13,199 )
Inter-segment expenses
   (849 ) (192 ) 1,138 16 (12 ) (144 ) 43 –
Total expenses
   (3,370 ) (1,101 ) (2,356 ) (3,973 ) (1,192 ) (973 ) (234 ) (13,199 )
Share of post-tax results of associates and joint ventures    7 (7 ) 7 35 – – – 42
Profit on disposal of subsidiaries, associates and joint ventures    14 – 13 – – – 1 28

Business segment performance before tax    2,653 540 935 2,335 734 307 (428 ) 7,076
Additional information

Depreciation and amortisation
   107 57 242 181 22 18 26 653
Impairment loss – intangible assets
   13 – 1 – – – – 14
Capital expenditure^a
   393 105 456 407 687 196 55 2,299
Investments in associates and joint ventures    (6 ) 19 108 171 – – 85 377

Total assets
   161,777 22,164 89,457 839,662 89,224 18,024 7,053 1,227,361
Total liabilities
   166,988 1,559 48,809 811,516 87,101 43,988 34,924 1,194,885

As at 31st December 2006    UK
Banking
£m Barclaycard
£m
International
Retail and
Commercial
Banking
£m
Barclays
Capital
£m Barclays
Global
Investors
£m Barclays
Wealth
£m Head office
functions
and other
operations
£m Total
£m
Income from external customers, net of insurance claims    6,804 2,355 3,220 6,206 1,670 1,198 142 21,595
Inter-segment income
   (63 ) 159 29 61 (5 ) (38 ) (143 ) –
Total income net of insurance claims    6,741 2,514 3,249 6,267 1,665 1,160 (1 ) 21,595
Impairment charge and other credit provisions    (887 ) (1,067 ) (167 ) (42 ) – (2 ) 11 (2,154 )
Segment expenses – external
   (2,626 ) (712 ) (2,177 ) (3,988 ) (940 ) (772 ) (1,459 ) (12,674 )
Inter-segment expenses
   (763 ) (269 ) 15 (21 ) (11 ) (141 ) 1,190 –
Total expenses    (3,389 ) (981 ) (2,162 ) (4,009 ) (951 ) (913 ) (269 ) (12,674 )
Share of post-tax results of associates and joint ventures    5 (8 ) 49 – – – – 46
Profit on disposal of subsidiaries, associates and joint ventures    76 – 247 – – – – 323

Business segment performance before tax    2,546 458 1,216 2,216 714 245 (259 ) 7,136
Additional information
Depreciation and amortisation
   96 45 180 132 13 10 115 591
Impairment loss – intangible assets
   – – 7 – – – – 7
Capital expenditure^a
   232 84 206 246 406 45 152 1,371
Investments in associates and joint ventures
   12 89 56 71 – – – 228

Total assets
   147,576 20,082 68,588 657,922 80,515 15,022 7,082 996,787
Total liabilities
   156,906 1,812 37,031 632,208 79,366 37,652 24,422 969,397

~~Note~~

a	~~Capital expenditure comprises purchased goodwill, intangible assets and property, plant and equipment acquired during the year.~~

~~Barclays~~

~~Annual Report 2007~~

~~248~~

~~51 Segmental reporting (continued)~~

As at 31st December 2005
   UK
Banking
£m

Barclaycard
£m

International
Retail and
Commercial
Banking
£m

Barclays
Capital
£m

Barclays
Global
Investors
£m

Barclays
Wealth
£m

Head office
functions
and other
operations
£m

Total
£m

Income from external customers, net of insurance claims
   6,240 2,138 1,904 4,388 1,318 1,051 294 17,333
Inter-segment income    (4 ) 161 12 117 – (17 ) (269 ) –
Total income net of insurance claims    6,236 2,299 1,916 4,505 1,318 1,034 25 17,333
Impairment charge and other credit provisions    (671 ) (753 ) (33 ) (111 ) – (2 ) (1 ) (1,571 )
Segment expenses – external    (2,663 ) (736 ) (1,338 ) (2,952 ) (769 ) (765 ) (1,304 ) (10,527 )
Inter-segment expenses    (663 ) (172 ) 2 (11 ) (10 ) (103 ) 957 –
Total expenses    (3,326 ) (908 ) (1,336 ) (2,963 ) (779 ) (868 ) (347 ) (10,527 )
Share of post-tax results of associates and joint ventures    (3 ) 1 46 – 1 – – 45
Business segment performance before tax    2,236 639 593 1,431 540 164 (323 ) 5,280
Additional information
Depreciation and amortisation    54 40 111 99 10 8 119 441
Impairment loss – intangible assets    – 6 3 – – – – 9
Capital expenditure^a    78 153 2,580 294 155 14 192 3,466
Investments in associates and joint ventures    31 80 415 20 – – – 546
Total assets
   137,981 18,236 63,383 601,193 80,900 13,401 9,263 924,357
Total liabilities
   140,658 1,561 34,458 576,350 80,115 34,802 31,983 899,927
Geographic segments
Year ended 31st December 2007

United
Kingdom
£m

Other
European
Union
£m

United
States
£m

Africa
£m

Rest of
the World
£m

Total
£m

Total income net of insurance claims    13,127 3,374 2,209 3,188 1,102 23,000
Total assets (by location of asset)    429,443 285,719 301,973 56,117 154,109 1,227,361
Capital expenditure (by location of asset)^a    894 303 789 225 88 2,299
Year ended 31st December 2006

United
Kingdom
£m

Other
European
Union
£m

United
States
£m

Africa
£m

Rest of the
World
£m

Total
£m

Total income net of insurance claims    12,154 2,882 2,840 2,791 928 21,595
Total assets (by location of asset)    406,328 203,929 229,779 44,696 112,055 996,787
Capital expenditure (by location of asset)^a    569 62 565 136 39 1,371
Year ended 31st December 2005

United
Kingdom
£m

Other
European
Union
£m

United
States
£m

Africa
£m

Rest of the
World
£m

Total
£m

Total income net of insurance claims    10,697 1,995 2,421 1,445 775 17,333
Total assets (by location of asset)    348,703 196,965 230,200 48,803 99,686 924,357
Capital expenditure (by location of asset)^a    449 119 276 2,586 36 3,466

~~Note~~

a	~~Capital expenditure comprises purchased goodwill, intangible assets and property, plant and equipment acquired during the year.~~

~~249~~

~~Barclays~~

~~Annual Report 2007~~

Barclays Bank PLC data

Consolidated income statement

~~Consolidated income statement~~

For the year ended 31st December


	Notes	2007 £m		2006 £m		2005 £m		Notes	2008 £m		2007 £m		2006 £m

Continuing operations
Interest income	a	25,308		21,805		17,232		a	28,010		25,308		21,805
Interest expense	a	(15,707	)	(12,662	)	(9,157	)	a	(16,595	)	(15,707	)	(12,662	)

Net interest income		9,601		9,143		8,075			11,415		9,601		9,143

Fee and commission income	b	8,682		8,005		6,430		b	9,489		8,682		8,005
Fee and commission expense	b	(970	)	(828	)	(725	)	b	(1,082	)	(970	)	(828	)

Net fee and commission income		7,712		7,177		5,705			8,407		7,712		7,177

Net trading income	c	3,759		3,632		2,321		c	1,260		3,759		3,632
Net investment income	c	1,216		962		858		c	680		1,216		962

Principal transactions		4,975		4,594		3,179			1,940		4,975		4,594

Net premiums from insurance contracts	5	1,011		1,060		872		5	1,090		1,011		1,060
Other income	d	224		257		178		f	454		224		257

Total income		23,523		22,231		18,009			23,306		23,523		22,231
Net claims and benefits incurred on insurance contracts	5	(492	)	(575	)	(645	)	5	(237	)	(492	)	(575	)

Total income net of insurance claims		23,031		21,656		17,364			23,069		23,031		21,656
Impairment charges	7	(2,795	)	(2,154	)	(1,571	)	7	(5,419	)	(2,795	)	(2,154	)

Net income		20,236		19,502		15,793			17,650		20,236		19,502

Staff costs	8	(8,405	)	(8,169	)	(6,318	)	8	(7,779	)	(8,405	)	(8,169	)
Administration and general expenses	9	(4,141	)	(3,914	)	(3,768	)	d	(5,662	)	(4,141	)	(3,914	)
Depreciation of property, plant and equipment	23	(467	)	(455	)	(362	)	23	(630	)	(467	)	(455	)
Amortisation of intangible assets	22	(186	)	(136	)	(79	)	22	(291	)	(186	)	(136	)

Operating expenses		(13,199	)	(12,674	)	(10,527	)		(14,362	)	(13,199	)	(12,674	)

Share of post-tax results of associates and joint ventures	20	42		46		45		20	14		42		46
Profit on disposal of subsidiaries, associates and joint ventures		28		323		–			327		28		323
Gains on acquisitions								39	2,406		–		–

Profit before tax		7,107		7,197		5,311			6,035		7,107		7,197
Tax	10	(1,981	)	(1,941	)	(1,439	)	e	(786	)	(1,981	)	(1,941	)

Profit after tax		5,126		5,256		3,872			5,249		5,126		5,256

Profit attributable to minority interests		377		342		177			403		377		342
Profit attributable to equity holders		4,749		4,914		3,695			4,846		4,749		4,914
		5,126		5,256		3,872
									5,249		5,126		5,256

The note numbers refer to the notes on pages ~~166~~196 to ~~249,~~289, whereas the note letters refer to those on pages ~~254~~290 to ~~262.~~298.

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~~250~~

LOGO

Barclays Bank PLC data

Consolidated balance sheet

~~Consolidated balance sheet~~

As at 31st December


	Notes	2007 £m		2006 £m		Notes	2008 £m	2007 £m

Assets
Cash and balances at central banks		5,801		6,795			30,019	5,801
Items in the course of collection from other banks		1,836		2,408			1,695	1,836
Trading portfolio assets	e	193,726		177,884		g	185,646	193,726
Financial assets designated at fair value:
– held on own account	13	56,629		31,799		13	54,542	56,629
– held in respect of linked liabilities to customers under investment contracts	13	90,851		82,798		13	66,657	90,851
Derivative financial instruments	14	248,088		138,353		14	984,802	248,088
Loans and advances to banks	15	40,120		30,926		15	47,707	40,120
Loans and advances to customers	15	345,398		282,300		15	461,815	345,398
Available for sale financial investments	f	43,256		51,952		h	65,016	43,256
Reverse repurchase agreements and cash collateral on securities borrowed	17	183,075		174,090		17	130,354	183,075
Other assets	g	5,153		5,850		i	6,302	5,153
Current tax assets	19	518		557			389	518
Investments in associates and joint ventures	20	377		228		20	341	377
Goodwill	21	7,014		6,092		21	7,625	7,014
Intangible assets	22	1,282		1,215		22	2,777	1,282
Property, plant and equipment	23	2,996		2,492		23	4,674	2,996
Deferred tax assets	19	1,463		764		19	2,668	1,463

Total assets		1,227,583		996,503			2,053,029	1,227,583

Liabilities
Deposits from banks		90,546		79,562			114,910	90,546
Items in the course of collection due to other banks		1,792		2,221			1,635	1,792
Customer accounts		295,849		256,754			335,533	295,849
Trading portfolio liabilities	e	65,402		71,874		12	59,474	65,402
Financial liabilities designated at fair value	24	74,489		53,987		24	76,892	74,489
Liabilities to customers under investment contracts	13	92,639		84,637		13	69,183	92,639
Derivative financial instruments	14	248,288		140,697		14	968,072	248,288
Debt securities in issue		120,228		111,137			153,426	120,228
Repurchase agreements and cash collateral on securities lent	17	169,429		136,956		17	182,285	169,429
Other liabilities	h	10,514		10,337		j	12,640	10,514
Current tax liabilities	19	1,311		1,020			1,215	1,311
Insurance contract liabilities, including unit-linked liabilities	26	3,903		3,878		26	2,152	3,903
Subordinated liabilities	27	18,150		13,786		27	29,842	18,150
Deferred tax liabilities	19	855		282		19	304	855
Provisions	28	830		462		28	535	830
Retirement benefit liabilities	30	1,537		1,807		30	1,357	1,537

Total liabilities		1,195,762		969,397			2,009,455	1,195,762

Shareholders’ equity
Called up share capital	i	2,382		2,363		k	2,398	2,382
Share premium account	i	10,751		9,452		k	12,060	10,751
Other reserves	j	(170	)	(484	)	l	1,723	(170	)
Other shareholders’ equity	k	2,687		2,534		m	2,564	2,687
Retained earnings	j	14,222		11,556		l	22,457	14,222

Shareholders’ equity excluding minority interests		29,872		25,421			41,202	29,872
Minority interests	l	1,949		1,685		n	2,372	1,949

Total shareholders’ equity		31,821		27,106			43,574	31,821

Total liabilities and shareholders’ equity		1,227,583		996,503			2,053,029	1,227,583

The note numbers refer to the notes on pages ~~166~~196 to ~~249,~~284, whereas the note letters refer to those on pages ~~254~~290 to ~~262.~~298.

These financial statements have been approved for issue by the Board of Directors on ~~7th~~5th March ~~2008.~~2009.

~~251~~

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287

Barclays Bank PLC data

Consolidated statement of recognised income and expense

For the year ended 31st December

~~Consolidated statement of recognised income and expense~~


For the year ended 31st December
	2007 £m		2006 £m		2005 £m		2008 £m		2007 £m		2006 £m

Available for sale reserve:
– Net gains/(losses) from changes in fair value	389		107		(217	)
– Net (losses)/gains from changes in fair value							(1,757	)	389		107
– Losses transferred to net profit due to impairment	13		86		–		382		13		86
– Net gains transferred to net profit on disposal	(563	)	(327	)	(120	)	(209	)	(563	)	(327	)
– Net losses transferred to net profit due to fair value hedging	68		14		260
– Net (gains)/losses transferred to net profit due to fair value hedging							(2	)	68		14
Cash flow hedging reserve:
– Net gains/(losses) from changes in fair value	106		(437	)	(50	)	305		106		(437	)
– Net losses/(gains) transferred to net profit	253		(50	)	(69	)	71		253		(50	)
Currency translation differences	54		(781	)	300		2,407		54		(781	)
Tax	54		253		50		841		54		253
Other	22		25		(102	)	(56	)	22		25

Amounts included directly in equity	396		(1,110	)	52		1,982		396		(1,110	)
Profit after tax	5,126		5,256		3,872		5,249		5,126		5,256

Total recognised income and expense for the year	5,522		4,146		3,924		7,231		5,522		4,146

Attributable to:
Equity holders	5,135		4,132		3,659		6,654		5,135		4,132
Minority interests	387		14		265		577		387		14

	5,522		4,146		3,924		7,231		5,522		4,146

288

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~~252~~

LOGO

Barclays Bank PLC data

~~Consolidated cash flow statement~~

Consolidated cash flow statement

For the year ended 31st December

            2007
£m       2006
£m
2005
£m

Reconciliation of profit before tax to net cash flows from operating activities:

Profit before tax
      7,107    7,197    5,311
Adjustment for non-cash items:

Allowance for impairment
      2,795    2,154    1,571
Depreciation and amortisation and impairment of property, plant, equipment and intangibles
      669    612    450
Other provisions, including pensions
      753    558    654
Net profit from associates and joint ventures
      (42 )    (46 )    (45 )
Net profit on disposal of investments and property, plant and equipment
      (862 )    (778 )    (530 )
Net profit from disposal of associates and joint ventures
      (26 )    (263 )    –
Net profit from disposal of subsidiaries
      (2 )    (60 )    –
Other non-cash movements
      (1,471 )    1,661    1,505
Changes in operating assets and liabilities:

Net (increase) in loans and advances to banks and customers
      (77,987 )    (27,385 )    (63,177 )
Net increase in deposits and debt securities in issue
      91,451    46,944    67,012
Net (increase)/decrease in derivative financial instruments
      (2,144 )    1,196    841
Net (increase) in trading portfolio assets
      (18,245 )    (18,333 )    (42,585 )
Net (decrease)/increase in trading liabilities
      (6,472 )    310    9,888
Net (increase)/decrease in financial investments
      (4,379 )    1,538    27,129
Net (increase)/decrease in other assets
      1,296    (1,527 )    (411 )
Net (decrease) in other liabilities
      (1,056 )    (1,580 )    (2,852 )
Tax paid

      (1,583 )    (2,141 )    (1,082 )
Net cash from operating activities

      (10,198 )    10,057    3,679
Purchase of available for sale investments
      (26,947 )    (47,109 )    (53,626 )
Proceeds from sale or redemption of available for sale investments
      38,423    46,069    51,114
Purchase of intangible assets
      (263 )    (212 )    (91 )
Purchase of property, plant and equipment
      (1,241 )    (654 )    (588 )
Proceeds from sale of property, plant and equipment
      617    786    98
Acquisition of subsidiaries, net of cash acquired
      (270 )    (248 )    (2,115 )
Disposal of subsidiaries, net of cash disposed
      383    (15 )    –
Increase in investment in subsidiaries
      (668 )    (432 )    (160 )
Decrease in investment in subsidiaries
      57    44    49
Acquisition of associates and joint ventures
      (220 )    (162 )    (176 )
Disposal of associates and joint ventures
      145    739    40
Other cash flows associated with investing activities

      –    17    23
Net cash used in investing activities

      10,016    (1,177 )    (5,432 )
Dividends paid
      (3,418 )    (2,373 )    (2,325 )
Proceeds from borrowings and issuance of debt securities
      4,625    2,493    1,179
Repayments of borrowings and redemption of debt securities
      (683 )    (366 )    (464 )
Issue of shares and other equity instruments
      1,355    585    2,383
Capital injection from Barclays PLC
      1,434    –    –
Net issues of shares to minority interests

      199    226    20
Net cash from financing activities

      3,512    565    793
Exchange (loss)/gain on foreign currency cash and cash equivalents

      (654 )    552    (237 )
Net increase/(decrease) in cash and cash equivalents

      2,676    9,997    (1,197 )
Cash and cash equivalents at beginning of year

      30,402    20,405    21,602
Cash and cash equivalents at end of year

      33,078    30,402    20,405
Cash and cash equivalents comprise:

Cash in hand
      5,801    6,795    3,506
Loans and advances to banks
      40,120    30,926    31,105
Less: amounts with original maturity greater than three months
      (19,376 )    (15,892 )    (17,987 )
      20,744    15,034    13,118
Available for sale financial investments
      43,256    51,952    53,703
Less: non-cash and amounts with original maturity greater than three months
      (41,872 )    (50,933 )    (53,487 )
      1,384    1,019    216
Trading portfolio assets
      193,726    177,884    155,730
Less: non-cash and amounts with maturity greater than three months
      (188,591 )    (170,346 )    (152,190 )
      5,135    7,538    3,540
Other
      14    16    25
      33,078

   30,402

   20,405

~~In 2005, the opening cash and cash equivalents balance was adjusted to reflect the adoption of IAS 32 and IAS 39.~~


	2008 £m		2007 £m		2006 £m

Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax	6,035		7,107		7,197
Adjustment for non-cash items:
Allowance for impairment	5,419		2,795		2,154
Depreciation and amortisation and impairment of property, plant, equipment and intangibles	951		669		612
Other provisions, including pensions	804		753		558
Net profit from associates and joint ventures	(14	)	(42	)	(46	)
Net profit on disposal of investments and property, plant and equipment	(371	)	(862	)	(778	)
Net profit from disposal of associates and joint ventures	–		(26	)	(263	)
Net profit from disposal of subsidiaries	(327	)	(2	)	(60	)
Net gains on acquisitions	(2,406	)	–		–
Other non-cash movements	830		(1,471	)	1,661

Changes in operating assets and liabilities:
Net increase in loans and advances to banks and customers	(58,432	)	(77,987	)	(27,385	)
Net increase in deposits and debt securities in issue	76,886		91,451		46,944
Net (increase)/decrease in derivative financial instruments	(17,529	)	(2,144	)	1,196
Net decrease/(increase) in trading portfolio assets	26,945		(18,245	)	(18,333	)
Net (decrease)/increase in trading liabilities	(5,928	)	(6,472	)	310
Net decrease/(increase) in financial investments	5,229		(4,379	)	1,538
Net (increase)/decrease in other assets	(3,005	)	1,296		(1,527	)
Net decrease in other liabilities	(492	)	(1,056	)	(1,580	)
Tax paid	(1,725	)	(1,583	)	(2,141	)

Net cash from operating activities	32,870		(10,198	)	10,057

Purchase of available for sale financial investments	(57,756	)	(26,947	)	(47,109	)
Proceeds from sale or redemption of available for sale financial investments	51,429		38,423		46,069
Purchase of intangible assets	(687	)	(263	)	(212	)
Purchase of property, plant and equipment	(1,720	)	(1,241	)	(654	)
Proceeds from sale of property, plant and equipment	799		617		786
Acquisition of subsidiaries, net of cash acquired	(961	)	(270	)	(248	)
Disposal of subsidiaries, net of cash disposed	238		383		(15	)
Increase in investment in subsidiaries	(157	)	(668	)	(432	)
Decrease in investment in subsidiaries	19		57		44
Acquisition of associates and joint ventures	(96	)	(220	)	(162	)
Disposal of associates and joint ventures	137		145		739
Other cash flows associated with investing activities	–		–		17

Net cash from investing activities	(8,755	)	10,016		(1,177	)

Dividends paid	(1,796	)	(3,418	)	(2,373	)
Proceeds from borrowings and issuance of debt securities	9,645		4,625		2,493
Repayments of borrowings and redemption of debt securities	(1,207	)	(683	)	(366	)
Net issue of shares and other equity instruments	1,327		1,355		585
Capital injection from Barclays PLC	5,137		1,434		–

Net issues of shares to minority interests	11		199		226

Net cash from financing activities	13,117		3,512		565

Effect of exchange rates on cash and cash equivalents	(5,801	)	(654	)	552

Net increase in cash and cash equivalents	31,431		2,676		9,997

Cash and cash equivalents at beginning of year	33,078		30,402		20,405

Cash and cash equivalents at end of year	64,509		33,078		30,402

Cash and cash equivalents comprise:
Cash and balances at central banks	30,019		5,801		6,795
Loans and advances to banks	47,707		40,120		30,926
Less: non-cash amounts and amounts with original maturity greater than three months	(15,428	)	(19,376	)	(15,892	)
	32,279		20,744		15,034
Available for sale treasury and other eligible bills	65,016		43,256		51,952
Less: non-cash and amounts with original maturity greater than three months	(62,916	)	(41,872	)	(50,933	)
	2,100		1,384		1,019
Trading portfolio assets	185,646		193,726		177,884
Less: non-cash and amounts with maturity greater than three months	(185,535	)	(188,591	)	(170,346	)
	111		5,135		7,538
Other	–		14		16

	64,509		33,078		30,402

~~253~~

Barclays

Annual Report ~~2007~~2008

289

Barclays Bank PLC data

Notes to the accounts

a Net interest income


	2007 £m		2006 £m		2005 £m
							2008 £m		2007 £m		2006 £m
Cash and balances with central banks	145		91		9		174		145		91
Available for sale investments	2,580		2,811		2,272		2,355		2,580		2,811
Loans and advances to banks	1,416		903		690		1,267		1,416		903
Loans and advances to customers	19,559		16,290		12,944		23,754		19,559		16,290
Other	1,608		1,710		1,317		460		1,608		1,710

Interest income	25,308		21,805		17,232		28,010		25,308		21,805

Deposits from banks	(2,720	)	(2,819	)	(2,056	)	(2,189	)	(2,720	)	(2,819	)
Customer accounts	(4,110	)	(3,076	)	(2,715	)	(6,714	)	(4,110	)	(3,076	)
Debt securities in issue	(6,651	)	(5,282	)	(3,268	)	(5,947	)	(6,651	)	(5,282	)
Subordinated liabilities	(878	)	(777	)	(605	)	(1,349	)	(878	)	(777	)
Other	(1,348	)	(708	)	(513	)	(396	)	(1,348	)	(708	)

Interest expense	(15,707	)	(12,662	)	(9,157	)	(16,595	)	(15,707	)	(12,662	)

Net interest income	9,601		9,143		8,075		11,415		9,601		9,143

Interest income includes £135m (2007: £113m, ~~(2006: £98m, 2005: £76m)~~2006: £98m) accrued on impaired loans.

Included in net interest income is hedge ineffectiveness as detailed in Note 14.

b Net fee and commission income

      2007
£m 2006
£m 2005
£m
Fee and commission income

Brokerage fees
   109 70 64
Investment management fees
   1,787 1,535 1,250
Securities lending
   241 185 151
Banking and credit related fees and commissions
   6,367 6,031 4,805
Foreign exchange commissions

   178 184 160
Fee and commission income

   8,682 8,005 6,430
Brokerage fees paid

   (970 ) (828 ) (725 )
Fee and commission expense

   (970 ) (828 ) (725 )
Net fee and commission income

   7,712 7,177 5,705

~~Barclays~~

~~Annual Report 2007~~

~~254~~


	2008 £m		2007 £m		2006 £m
Fee and commission income
Brokerage fees	87		109		70
Investment management fees	1,616		1,787		1,535
Securities lending	389		241		185
Banking and credit related fees and commissions	7,208		6,367		6,031
Foreign exchange commissions	189		178		184
Fee and commission income	9,489		8,682		8,005
Fee and commission expense	(1,082	)	(970	)	(828	)
Net fee and commission in come	8,407		7,712		7,177

c Principal transactions


	2007 £m		2006 £m	2005 £m
					2008 £m		2007 £m		2006 £m
Rates related business	4,162		2,866	1,732	4,682		4,162		2,866
Credit related business	(403	)	766	589	(3,422	)	(403	)	766

Net trading income	3,759		3,632	2,321

Gain from disposal of available for sale assets/investment securities	560		307	120
Dividend income on equity investments	26		15	22
Net trading in come					1,260		3,759		3,632
Net gain from disposal of available for sale assets					212		560		307
Dividend income					196		26		15
Net gain from financial instruments designated at fair value	293		447	389	33		293		447
Other investment income	337		193	327	239		337		193

Net investment income	1,216		962	858

Net investment in come					680		1,216		962
Principal transactions	4,975		4,594	3,179	1,940		4,975		4,594

Of the total net trading income, a ~~£756m~~£2,096m net loss ~~(2006: £947m gain, 2005: £498m~~(2007: £116m loss, 2006: £1,427m gain) was made on the purchase and sale of securities and the revaluation of both securities and derivatives. This included a £1,272m gain (2007: £640m gain, ~~(2006:~~2006: £480m ~~2005: £340m)~~gain) that was earned in foreign exchange dealings.

290

Barclays

Annual Report 2008

LOGO

c Principal transactions(continued)

The net ~~loss~~gain on financial liabilities designated at fair value included within principal transactions was £3,328m (2007: £231m ~~(2006:~~loss, 2006: £920m ~~2005: £666m)~~loss), all of which was included within net trading income.

~~The~~Net trading income includes the net gain from widening of credit spreads relating to Barclays Capital issued notes held at fair value was £1,663m (2007: £658m, ~~(2006: £nil, 2005:~~2006: £nil).

d ~~Other income~~Administration and general expenses

   2007
£m
2006
£m
2005
£m

Increase in fair value of assets held in respect of linked liabilities to customers under investment contracts
   5,592 7,417 9,234
Increase in liabilities to customers under investment contracts
   (5,592 ) (7,417 ) (9,234 )
Property rentals
   53 55 54
Other income

   171 202 124
Other income

   224 257 178

~~Included in other income are sub-lease receipts of £18m (2006: £18m, 2005: £18m).~~

~~Included in other income in 2007 is a loss on the part disposal of Monument credit card portfolio and gains on reinsurance transactions in 2007 and 2006.~~


	2008 £m		2007 £m		2006 £m
Administrative expenses	5,149		3,978		3,980
Impairment charges/(releases):
– property and equipment (Note 23)	33		2		14
– intangible assets (Note 22)	(3	)	14		7
– goodwill (Note 21)	111		–		–
Operating lease rentals	520		414		345
Gain on property disposals	(148	)	(267	)	(432	)
Administration and general expenses	5,662		4,141		3,914

~~e Trading portfolio assets~~Auditors’ remuneration

      2007
£m    2006
£m
Trading portfolio assets

Treasury and other eligible bills
      2,094    2,960
Debt securities
      152,778    140,576
Equity securities
      36,342    31,565
Traded loans
      1,780    1,843
Commodities
      732    940
Trading portfolio assets

      193,726    177,884


	2008
	Audit £m	Audit related £m	Taxation services £m	Other services £m	Total £m
Audit of the Group’s annual accounts	12	–	–	–	12
Other services:
Fees payable for the audit of the Bank’s associates pursuant to legislation	20	–	–	–	20
Other services supplied pursuant to such legislation	–	2	–	–	2
Other services relating to taxation	–	–	10	–	10
Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Bank or any of its associates	–	–	–	3	3
Other	–	4	–	1	5
Total auditors’ remuneration	32	6	10	4	52

	2007
	Audit £m	Audit related £m	Taxation services £m	Other services £m	Total £m
Audit of the Group’s annual accounts	7	–	–	–	7
Other services:
Fees payable for the audit of the Bank’s associates pursuant to legislation	12	–	–	–	12
Other services supplied pursuant to such legislation	6	2	–	–	8
Other services relating to taxation	–	–	8	–	8
Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Bank or any of its associates	–	–	–	5	5
Other	–	2	–	2	4
Total auditors’ remuneration	25	4	8	7	44

	2006
	Audit £m	Audit related £m	Taxation services £m	Other services £m	Total £m
Audit of the Group’s annual accounts	7	–	–	–	7
Other services:
Fees payable for the audit of the Bank’s associates pursuant to legislation	11	–	–	–	11
Other services supplied pursuant to such legislation	10	1	–	–	11
Other services relating to taxation	–	–	6	–	6
Services relating to corporate finance transactions entered into or proposed to be entered into by or on behalf of the Bank or any of its associates	–	–	–	4	4
Other	–	4	–	1	5
Total auditors’ remuneration	28	5	6	5	44

The figures shown in the above table relate to fees paid to PricewaterhouseCoopers LLP and its associates. Fees paid to other auditors not associated with PricewaterhouseCoopers LLP in respect of the audit of the Bank’s subsidiaries were £3m (2007: £2m, 2006: £2m).

~~255~~

Barclays

Annual Report ~~2007~~2008

291

Barclays Bank PLC data

Notes to the accounts

d Administration and general expenses(continued)

Fees payable for the audit of the Bank’s associates pursuant to legislation comprise the fees for the statutory audit of the subsidiaries and associated pension schemes both inside and outside Great Britain and fees for the work performed by the associates of PricewaterhouseCoopers LLP in respect of the consolidated financial statements of the Bank. The fees relating to the audit of the associated pension schemes were £0.2m (2007: £0.3m, 2006: £0.3m).

Other services supplied pursuant to such legislation comprise services in relation to statutory and regulatory filings. These includes audit services for the review of the interim financial information under the Listing Rules of the UK listing authority and fees paid for reporting under Section 404 of the US Sarbanes-Oxley Act (Section 404). In 2008 fees paid for reporting under Section 404 are not separately identifiable from the fees of the audit of the Bank’s annual accounts and the Bank’s associates. Fees for the audit of Barclays Bank PLC Group accounts are not separately identifiable from Barclays PLC, therefore there is no difference in the amounts reported in both Annual Reports. In addition, other services include Section 404 advisory, reporting accountant work for capital raising, securitisations and services relating to acquisition activities.

Services relating to corporate finance transactions comprise due diligence related to transactions and other work in connection with such transactions.

e Tax

The charge for tax is based upon the UK corporation tax rate of 28.5% (2007: 30%, 2006: 30%) and comprises:


	2008 £m		2007 £m		2006 £m
Current tax charge/(credit)
Current year	1,559		2,385		1,929
Adjustment for prior years	97		(11	)	8
	1,656		2,374		1,937
Deferred tax (credit)/charge
Current year	(597	)	(367	)	(16	)
Adjustment for prior years	(273	)	(26	)	20
	(870	)	(393	)	4
Total charge	786		1,981		1,941
The effective tax rate for the years 2008, 2007 and 2006 is lower than the standard rate of corporation tax in the UK of 28.5% (2007: 30%, 2006: 30%). The differences are set out below:
	2008 £m		2007 £m		2006 £m
Profit before tax	6,035		7,107		7,197
Tax charge at standard UK corporation tax rate of 28.5% (2007: 30%, 2006: 30%)	1,720		2,132		2,159
Adjustment for prior years	(176	)	(37	)	24
Differing overseas tax rates	215		(77	)	(17	)
Non-taxable gains and income (including amounts offset by unrecognised tax losses)	(833	)	(136	)	(393	)
Share-based payments	229		72		27
Deferred tax assets not previously recognised	(514	)	(158	)	(4	)
Change in tax rates	(1	)	24		4
Other non-allowable expenses	146		161		141
Overall tax charge	786		1,981		1,941
Effective tax rate	13	%	28	%	27	%

292

Barclays

Annual Report 2008

LOGO

f Other income


	2008 £m		2007 £m		2006 £m
(Decrease)/increase in fair value of assets held in respect of linked liabilities to customers under investment contracts	(10,422	)	5,592		7,417
Decrease/(increase) in liabilities to customers under investment contracts	10,422		(5,592	)	(7,417	)
Property rentals	73		53		55
Other income	381		171		202
Other income	454		224		257

~~f Available for sale financial investments~~Included in other income are sub-lease rentals of £18m (2007: £18m, 2006: £18m), and in 2008 only is a £47m gain from the Visa IPO.

2007
£m

2006
£m

Debt securities
   38,673 47,912
Treasury bills and other eligible bills
   2,723 2,420
Equity securities

   1,860 1,620
Available for sale financial investments

   43,256 51,952

Movement in available for sale financial investments


2007
£m

2006
£m

At beginning of year
   51,952 53,703
Exchange and other adjustments
   1,499 (3,999 )
Acquisitions and transfers
   26,950 47,109
Disposals (sale and redemption)
   (37,498 ) (44,959 )
Gains from changes in fair value recognised in equity
   391 182
Impairment
   (13 ) (86 )
Amortisation of discounts/premium

   (25 ) 2
At end of year

   43,256 51,952

g ~~Other~~Trading portfolio assets


			2008 £m		2007 £m
Trading portfolio assets
Treasury and other eligible bills			4,544		2,094
Debt securities			148,686		152,778
Equity securities			30,544		36,342
Traded loans			1,070		1,780
Commodities			802		732
Trading portfolio assets			185,646		193,726
h Available for sale financial investments
			2008 £m		2007 £m
Debt securities			58,831		38,673
Treasury bills and other eligible bills			4,003		2,723
Equity securities			2,182		1,860
Available for sale financial investments			65,016		43,256

Movement in available for sale financial investments
			2008 £m		2007 £m
At beginning of year			43,256		51,952
Exchange and other adjustments			14,275		1,499
Acquisitions and transfers			59,703		26,950
Disposals (through sale and redemption)			(50,629	)	(37,498	)
(Losses)/gains from changes in fair value recognised in equity			(1,190	)	391
Impairment			(382	)	(13	)
Amortisation of discounts/premium			(17	)	(25	)
At end of year			65,016		43,256

i Other assets
	2007 £m	2006 £m	2008 £m		2007 £m
Sundry debtors	4,045	4,298	4,814		4,045
Prepayments	551	658	882		551
Accrued income	400	722	483		400
Reinsurance assets	157	172	123		157

Other assets	5,153	5,850	6,302		5,153

Included in the above Group balances are ~~£4,541m (2006: £5,065m)~~£4,704m (2007: £4,541m) expected to be recovered within no more than 12 months after the balance sheet date; and balances of ~~£612m (2006: £785m)~~£1,598m (2007: £612m) expected to be recovered more than 12 months after the balance sheet date.

Other assets ~~comprise £3,966m (2006: £4,097m)~~include £3,096m (2007: £3,966m) of receivables which meet the definition of financial assets.

Barclays

Annual Report 2008

293

Barclays Bank PLC data

Notes to the accounts

hj Other liabilities


	2007 £m	2006 £m	2008 £m	2007 £m
Accruals and deferred income	6,075	6,127	6,495	6,075
Sundry creditors	4,356	4,118	6,049	4,356
Obligations under finance leases	83	92	96	83

Other liabilities	10,514	10,337	12,640	10,514

Included in the above are balances of ~~£9,058m (2006: £9,265m)~~£11,068m (2007: £9,058m) expected to be settled within no more than 12 months after the balance sheet date; and balances of ~~£1,456m (2006: £1,072m)~~£1,572m (2007: £1,456m) expected to be settled more than 12 months after the balance sheet date.

~~Barclays~~

~~Annual Report 2007~~

~~256~~

ik Called up share capital

Ordinary Shares

The authorised ordinary share capital of the Bank, as at 31st December ~~2007,~~2008, was 3,000 million ~~(2006:~~(2007: 3,000 million) ordinary shares of £1 each.

During the year, the Bank issued 71 million ordinary shares, ~~with an aggregate nominal value of £7m,~~ for cash consideration of ~~£111m.~~£17m.

Preference Shares

The authorised preference share capital of Barclays Bank PLC, as at 31st December ~~2007,~~2008, was 1,000 Preference Shares ~~(2006:~~(2007: 1,000) of £1; 400,000 Preference Shares of€100 each ~~(2006:~~(2007: 400,000); 400,000 Preference Shares of £100 each ~~(2006:~~(2007: 400,000); 400,000 Preference Shares of US$100 each ~~(2006:~~(2007: 400,000); ~~150~~300 million Preference Shares of US$0.25 each ~~(2006: 80~~(2007: 150 million).

The issued preference share capital of Barclays Bank PLC, as at 31st December ~~2007,~~2008, comprised 1,000 ~~(2006:~~(2007: 1,000) Sterling Preference Shares of £1 each; 240,000 ~~(2006:~~(2007: 240,000) Euro Preference Shares of€100 each; 75,000 ~~(2006:~~(2007: 75,000) Sterling Preference Shares of £100 each; 100,000 ~~(2006:~~(2007: 100,000) US Dollar Preference Shares of US$100 each; ~~131~~237 million ~~(2006: 30~~(2007: 131 million) US Dollar Preference Shares of US$0.25 each.

   2007
£m    2006
£m
Called up share capital, allotted and fully paid

At beginning of year
   2,329    2,318
Issued for cash

   7    11
At end of year
   2,336    2,329
Called up preference share capital, allotted and fully paid

At beginning of year
   34    30
Issued for cash

   12    4
At end of year
   46    34
Called up share capital

   2,382    2,363

~~Share premium~~


	2008 £m	2007 £m
Called up share capital, allotted and fully paid
At beginning of year	2,336	2,329
Issued for cash	2	7
At end of year	2,338	2,336
Called up preference share capital, allotted and fully paid
At beginning of year	46	34
Issued for cash	14	12
At end of year	60	46
Called up share capital	2,398	2,382

Share premium
	2008 £m	2007 £m
At beginning of year	10,751	9,452
Ordinary shares issued for cash	15	104
Preference shares issued for cash	1,294	1,195
At end of year	12,060	10,751

   2007
£m    2006
£m

At beginning of year
   9,452    8,882
Ordinary shares issued for cash
   104    168
Preference shares issued for cash

   1,195    402
At end of year

   10,751    9,452

294

Barclays

Annual Report 2008

LOGO

k Called up share capital(continued)

Sterling £1 Preference Shares

1,000 Sterling cumulative callable preference shares of £1 each (the ‘£1 Preference Shares’) were issued on 31st December 2004 at nil premium.

The £1 Preference Shares entitle the holders thereof to receive ~~sterling~~Sterling cumulative cash dividends out of distributable profits of Barclays Bank PLC, semi-annually at a rate reset semi-annually equal to the ~~sterling~~Sterling interbank offered rate for six-month sterling deposits.

Barclays Bank PLC shall be obliged to pay such dividends ifif: (1) it has profits available for the purpose of distribution under the Companies Act 1985 as at each dividend payment ~~date~~date; and (2) it is solvent on the relevant dividend payment date, provided that a capital regulations condition is satisfied on such dividend payment date. The dividends shall not be due and payable on the relevant dividend payment date except to the extent that Barclays Bank PLC could make such payment and still be solvent immediately thereafter. Barclays Bank PLC shall be considered solvent on any date ifif: (1) it is able to pay its debts to senior creditors as they fall ~~due~~due; and (2) its auditors have reported within the previous six months that its assets exceed its liabilities.

If Barclays Bank PLC shall not pay, or shall pay only in part, a dividend for a period of seven days or more after the due date for payment, the holders of the £1 Preference Shares may institute proceedings for the winding-up of Barclays Bank PLC. No remedy against Barclays Bank PLC shall be available to the holder of any £1 Preference Shares for the recovery of amounts owing in respect of £1 Preference Shares other than the institution of proceedings for the winding-up of Barclays Bank PLC and/or proving in such winding-up.

On a winding-up or other return of capital (other than a redemption or purchase by Barclays Bank PLC of any of its issued shares, or a reduction of share capital, permitted by the Articles of Barclays Bank PLC and under applicable law), the assets of Barclays Bank PLC available to shareholders shall be applied in priority to any payment to the holders of ordinary shares and any other class of shares in the capital of Barclays Bank PLC then in issue ranking junior to the £1 Preference Shares on such a return of capital and pari passu on such a return of capital with the holders of any other class of shares in the capital of Barclays Bank PLC then in issue (other than any class of shares in the capital of Barclays Bank PLC then in issue ranking in priority to the £1 Preference Shares on a winding-up or other such return of capital), in payment to the holders of the £1 Preference Shares of a sum equal to the aggregate of: (1) an amount equal to the dividends accrued thereon for the then current dividend period (and any accumulated arrears thereof) to the date of the commencement of the winding-up or other such return of capital; and (2) an amount equal to £1 per £1 Preference Share.

After payment of the full amount of the liquidating distributions to which they are entitled, the holders of the £1 Preference Shares will have no right or claim to any of the remaining assets of Barclays Bank PLC and will not be entitled to any further participation in such return of capital. The £1 Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, subject to the Companies Act 1985 and its Articles. Holders of the £1 Preference Shares are not entitled to receive notice of, or to attend, or vote at, any general meeting of Barclays Bank PLC.

~~257~~

~~Barclays~~

~~Annual Report 2007~~

~~Barclays Bank PLC data~~

~~Notes to the accounts~~

~~i Called up share capital (continued)~~

Euro Preference Shares

100,000 Euro 4.875% non-cumulative callable preference shares of€100 each (the ‘4.875% Preference Shares’) were issued on 8th December 2004 for a consideration of€993.6m (£688.4m), of which the nominal value was€10m and the balance was share premium. The 4.875% Preference Shares entitle the holders thereof to receive Euro non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, annually at a fixed rate of 4.875% per annum on the amount of€10,000 per preference share until 15th December 2014, and thereafter quarterly at a rate reset quarterly equal to 1.05% per annum above the Euro interbank offered rate for three-month Euro deposits.

The 4.875% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th December 2014, and on each dividend payment date thereafter at€10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

140,000 Euro 4.75% non-cumulative callable preference shares of€100 each (the ‘4.75% Preference Shares’) were issued on 15th March 2005 for a consideration of€1,383.3m (£966.7m), of which the nominal value was€14m and the balance was share premium. The 4.75% Preference Shares entitle the holders thereof to receive Euro non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, annually at a fixed rate of 4.75% per annum on the amount of€10,000 per preference share until 15th March 2020, and thereafter quarterly at a rate reset quarterly equal to 0.71% per annum above the Euro interbank offered rate for three-month Euro deposits.

The 4.75% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th March 2020, and on each dividend payment date thereafter at€10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

Sterling Preference Shares

75,000 Sterling 6.0% non-cumulative callable preference shares of £100 each (the ‘6.0% Preference Shares’) were issued on 22nd June 2005 for a consideration of £732.6m, of which the nominal value was £7.5m and the balance was share premium. The 6.0% Preference Shares entitle the holders thereof to receive Sterling non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, annually at a fixed rate of 6.0% per annum on the amount of £10,000 per preference share until 15th December 2017, and thereafter quarterly at a rate reset quarterly equal to 1.42% per annum above the London interbank offered rate for three-month Sterling deposits.

The 6.0% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th December 2017, and on each dividend payment date thereafter at £10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

US Dollar Preference Shares

100,000 US Dollar 6.278% non-cumulative callable preference shares of US$100 each (the ‘6.278% Preference Shares’), represented by 100,000 American Depositary Shares, Series 1, were issued on 8th June 2005 for a consideration of US$995.4m (£548.1m), of which the nominal value was US$10m and the balance was share premium. The 6.278% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, semi-annually at a fixed rate of 6.278% per annum on the amount of US$10,000 per preference share until 15th December 2034, and thereafter quarterly at a rate reset quarterly equal to 1.55% per annum above the London interbank offered rate for three-month US Dollar deposits.

The 6.278% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th December 2034, and on each dividend payment date thereafter at US$10,000 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

30 million US Dollar 6.625% non-cumulative callable preference shares of US$0.25 each (the ‘6.625% Preference Shares’), represented by 30 million American Depositary Shares, Series 2, were issued on 25th and 28th April 2006 for a consideration of US$727m (£406m), of which the nominal value was US$7.5m and the balance was share premium. The 6.625% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, quarterly at a fixed rate of 6.625% per annum on the amount of US$25 per preference share.

Barclays

Annual Report 2008

295

Barclays Bank PLC data

Notes to the accounts

k Called up share capital(continued)

The 6.625% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole but not in part only, on 15th September 2011, and on each dividend payment date thereafter at US$25 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

55 million US Dollar 7.1% non-cumulative callable preference shares of US$0.25 each (the ‘7.1% Preference Shares’), represented by 55 million American Depositary Shares, Series 3, were issued on 13th September 2007 for a consideration of US$1,335m (£657m), of which the nominal value was US$13.75m and the balance was share premium. The 7.1% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, quarterly at a fixed rate of 7.1% per annum on the amount of US$25 per preference share.

The 7.1% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole or in part, on 15th December 2012, and on each dividend payment date thereafter at US$25 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

46 million US Dollar 7.75% non-cumulative callable preference shares of US$0.25 each (the ‘7.75% Preference Shares’), represented by 46 million American Depositary Shares, Series 4, were issued on 7th December 2007 for a consideration of US$1,116m (£550m), of which the nominal value was US$11.5m and the balance was share premium. The 7.75% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, quarterly at a fixed rate of 7.75% per annum on the amount of US$25 per preference share.

The 7.75% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole or in part, on 15th December 2013, and on each dividend payment date thereafter at US$25 per share plus any dividends accrued for the then current dividend period to the date fixed for redemption.

~~Barclays~~

~~Annual Report 2007~~

~~258~~

106 million US Dollar 8.125% non-cumulative callable preference shares of US$0.25 each (the ‘8.125% Preference Shares’), represented by 106 million American Depositary Shares, Series 5, were issued on 11th April 2008 and 25th April 2008 for a total consideration of US$2,650m (£1,345m), of which the nominal value was US$26.5m and the balance was share premium. The 8.125% Preference Shares entitle the holders thereof to receive US Dollar non-cumulative cash dividends out of distributable profits of Barclays Bank PLC, quarterly at a fixed rate of 8.125% per annum on the amount of US$25 per preference share.

~~i Called up~~The 8.125% Preference Shares are redeemable at the option of Barclays Bank PLC, in whole or in part, on 15th June 2013, and on each dividend payment date thereafter at US$25 per share ~~capital (continued)~~plus any dividends accrued for the then current dividend period to the date fixed for redemption.

No redemption or purchase of any 4.875% Preference Shares, the 4.75% Preference Shares, the 6.0% Preference Shares, the 6.278% Preference Shares, the 6.625% Preference Shares, the 7.1% Preference Shares, the 7.75% Preference Shares and the ~~7.75%~~8.125% Preference Shares (together, the ‘Preference Shares’) may be made by Barclays Bank PLC without the prior notification to the UK FSA and any such redemption will be subject to the Companies Act 1985 and the Articles of Barclays Bank PLC.

On a winding-up of Barclays Bank PLC or other return of capital (other than a redemption or purchase of shares of Barclays Bank PLC, or a reduction of share capital), a holder of Preference Shares will rank in the application of assets of Barclays Bank PLC available to ~~shareholders~~shareholders: (1) junior to the holder of any shares of Barclays Bank PLC in issue ranking in priority to the Preference ~~Shares,~~Shares; (2) equally in all respects with holders of other preference shares and any other shares of Barclays Bank PLC in issue ranking pari passu with the Preference ~~Shares~~Shares; and (3) in priority to the holders of ordinary shares and any other shares of Barclays Bank PLC in issue ranking junior to the Preference Shares.

The holders of the £400m 6% Callable Perpetual Core Tier One Notes and the US$1,000m 6.86% Callable Perpetual Core Tier One Notes of Barclays Bank PLC (together, the ‘TONs’) and the holders of the US$1,250m 8.55% Step-up Callable Perpetual Reserve Capital Instruments, the US$750m 7.375% Step-up Callable Perpetual Reserve Capital Instruments, the€850m 7.50% Step-up Callable Perpetual Reserve Capital Instruments, the £500m 5.3304% Step-up Callable Perpetual Reserve Capital Instruments, the US$1,350m 5.926% Step-up Callable Perpetual Reserve Capital Instruments, the £500m 6.3688% Step-up Callable Perpetual Reserve Capital Instruments, ~~and~~ the US$1,250m 7.434% Step-up Callable Perpetual Reserve Capital Instruments and the £3,000m 14% Step-up Callable Perpetual Reserve Capital Instruments of Barclays Bank PLC (together, the ‘RCIs’) would, for the purposes only of calculating the amounts payable in respect of such securities on a winding-up of Barclays Bank PLC, subject to limited exceptions and to the extent that the TONs and the RCIs are then in issue, rank pari passu with the holders of the most senior class or classes of preference shares then in issue in the capital of Barclays Bank PLC. Accordingly, the holders of the preference shares would rank equally with the holders of such TONs and RCIs on such a winding-up of Barclays Bank PLC (unless one or more classes of shares of Barclays Bank PLC ranking in priority to the preference shares are in issue at the time of such winding-up, in which event the holders of such TONs and RCIs would rank equally with the holders of such shares and in priority to the holders of the preference shares).

Subject to such ranking, in such event, holders of the preference shares will be entitled to receive out of assets of Barclays Bank PLC available for distributions to shareholders, liquidating distributions in the amount of€10,000 per 4.875% Preference Share,€10,000 per 4.75% Preference Share, £10,000 per 6.0% Preference Share, US$10,000 per 6.278% Preference Share, US$25 per 6.625% Preference Share, US$25 per 7.1% Preference Share, ~~and~~ US$25 per 7.75% Preference Share and US$0.25 per 8.125% Preference Share, plus, in each case, an amount equal to the accrued dividend for the then current dividend period to the date of the commencement of the winding-up or other such return of capital. If a dividend is not paid in full on any preference shares on any dividend payment date, then a dividend restriction shall apply.

This dividend restriction will mean that neither Barclays Bank PLC nor Barclays PLC may (a) declare or pay a dividend (other than payment by Barclays PLC of a final dividend declared by its shareholders prior to the relevant dividend payment date, or a dividend paid by Barclays Bank PLC to Barclays PLC or to a wholly owned subsidiary) on any of their respective ordinary shares, other preference shares or other share capital or (b) redeem, purchase, reduce or otherwise acquire any of their respective share capital, other than shares of Barclays Bank PLC held by Barclays PLC or a wholly owned subsidiary, until the earlier ofof: (1) the date on which Barclays Bank PLC next declares and pays in full a preference ~~dividend~~dividend; and (2) the date on or by which all the preference shares are redeemed in full or purchased by Barclays Bank PLC.

Holders of the preference shares are not entitled to receive notice of, or to attend, or vote at, any general meeting of Barclays Bank PLC. Barclays Bank PLC is not permitted to create a class of shares ranking as regards participation in the profits or assets of Barclays Bank PLC in priority to the preference shares, save with the sanction of a special resolution of a separate general meeting of the holders of the preference shares (requiring a majority of not less than three-fourths of the holders of the preference shares voting at the separate general meeting), or with the consent in writing of the holders of three-fourths of the preference shares.

Except as described above, the holders of the preference shares have no right to participate in the surplus assets of Barclays Bank PLC.

~~259~~296

Barclays

Annual Report ~~2007~~2008

~~Barclays Bank PLC data~~ LOGO

~~Notes to the accounts~~l Reserves

~~j Reserves~~

~~Other reserves~~


Other reserves
	Available for sale reserve £m		Cash flow hedging reserve £m		Translation reserve £m		Total £m		Available for sale reserve £m		Cash flow hedging reserve £m	Translation reserve £m		Total £m
At 1st January 2007	184		(230	)	(438	)	(484	)
Net gains from changes in fair value	385		182		–		567
At 1st January 2008									111		26	(307	)	(170	)
Net (losses)/gains from changes in fair value									(1,752	)	252	–		(1,500	)
Net (gains)/losses transferred to net profit	(560	)	198		–		(362	)	(212	)	19	–		(193	)
Currency translation differences	–		–		29		29		–		–	2,307		2,307
Losses transferred to net profit due to impairment	13		–		–		13		382		–	–		382
Changes in insurance liabilities	22		–		–		22		17		–	–		17
Net losses transferred to net profit due to fair value hedging	68		–		–		68
Net gains transferred to net profit due to fair value hedging									(2	)	–	–		(2	)
Tax	(1	)	(124	)	102		(23	)	207		(165)	840		882

At 31st December 2007	111		26		(307	)	(170	)
At 31st December 2008									(1,249)		132	2,840		1,723


Retained earnings

	Retained earnings £m

At 1st January ~~2007~~2008	~~11,556~~14,222
Profit attributable to equity holders	~~4,749~~4,846
Equity-settled share schemes	~~567~~463
Tax on equity-settled shares schemes	28(4	)
Other taxes	(52	)
Vesting of Barclays PLC shares under share-based payment schemes	(~~524~~437	)
Dividends paid	(~~3,287~~1,160	)
Dividends on preference shares and other shareholders’ equity	(~~345~~502	)
Capital injection from Barclays PLC	~~1,434~~5,137
Other movements	44(56)

At 31st December ~~2007~~2008	~~14,222~~22,457

At 1st January ~~2006~~2007	~~8,462~~11,556
Profit attributable to equity holders	~~4,914~~4,749
Equity-settled share schemes	~~663~~567
Tax on equity-settled shares schemes	9628
Vesting of Barclays PLC shares under share-based payment schemes	(~~394~~524	)
Dividends paid	(~~1,964~~3,287	)
Dividends on preference shares and other shareholders’ equity	(~~329~~345	)
Capital injection from Barclays PLC	1,434
Other movements	~~108~~44

At 31st December ~~2006~~2007	~~11,556~~14,222

Transfers from the ~~cashflow~~cash flow hedging reserve to the income statement were: interest income ~~£93m~~£4m loss ~~(2006: £7m~~(2007: £93m loss), interest expense £74m loss (2007: £11m ~~gain (2006: £73m~~ gain), net trading income £119m gain (2007: £100m ~~loss (2006: £15m~~ loss) and administration and general expenses of £60m loss (2007: £16m ~~loss (2006: £nil)~~loss).

km Other shareholders’ equity


	2007 £m	2006 £m	2008 £m	2007 £m
At 1st January	2,534	2,490	2,687	2,534
Appropriations	8	44	23	8
Other movements	145	–	(146)	145

At 31st December	2,687	2,534	2,564	2,687

Included in other shareholders’ equity are:

Issuances of reserve capital instruments which bear a fixed rate of interest ranging between 7.375%-8.55% until 2010 or 2011. After these dates, in the event that the reserve capital instruments are not redeemed, they will bear interest at rates fixed periodically in advance, based on London or European interbank rates. These instruments are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after June or December 2010 or 2011. The Bank may elect to defer any payment of interest on the reserve capital instruments for any period of time. Whilst such deferral is continuing, neither the Bank nor Barclays PLC may declare or pay a dividend, subject to certain exceptions, on any of its ordinary shares or preference shares.

Issuance of capital notes which bear interest at rates fixed periodically in advance, based on London interbank rates. These notes are repayable in each case, at the option of the Bank, in whole on any interest payment date. The Bank is not obliged to make a payment of interest on its capital notes if, in the preceding six months, a dividend has not been declared or paid on any class of shares of Barclays PLC.

Barclays

Annual Report ~~2007~~2008

~~260~~

297

Barclays Bank PLC data

Notes to the accounts

n Minority interests


	2008 £m		2007 £m
At beginning of year	1,949		1,685
Share of profit after tax	403		377
Dividend and other payments	(134	)	(131	)
Equity issued by subsidiaries	4		137
Available for sale reserve: net (loss)/gain from changes in fair value	(1	)	1
Cash flow hedges: net gain/(loss) from changes in fair value	76		(16	)
Currency translation differences	59		16
Additions	–		27
Disposals	(11	)	(111	)
Other	27		(36	)
At end of year	2,372		1,949

~~l Minority interests~~o Dividends

      2007
£m 2006
£m

At beginning of year
   1,685 1,578
Share of profit after tax
   377 342
Dividend and other payments
   (131 ) (127 )
Equity issued by subsidiaries
   137 233
Available for sale reserve: net gain/(loss) from changes in fair value
   1 (2 )
Cash flow hedges: net loss from changes in fair value
   (16 ) (9 )
Currency translation differences
   16 (316 )
Additions
   27 20
Disposals
   (111 ) (34 )
Other
   (36 ) –
At end of year

   1,949 1,685

~~m Dividends~~


	2007 £m	2006 £m	2008 £m	2007 £m
On ordinary shares
Final dividend	791	730	1,030	791
Interim dividends	2,496	1,234	130	2,496

Dividends	3,287	1,964	1,160	3,287

These dividends are paid to enable Barclays PLC to fund its dividends to its shareholders and in 2007, to fund the repurchase by Barclays PLC of ordinary share capital.

Dividends paid on preference shares amounted to ~~£193m (2006: £174m)~~£390m (2007: £193m). Dividends paid on other equity instruments as detailed in Note km amounted to ~~£152m (2006: £151m)~~£112m (2007: £152m).

np Financial risks

The only significant financial instruments that are held by Barclays Bank PLC and not Barclays PLC are investments in Barclays PLC ordinary shares, dealt with as trading portfolio equity assets, debt securities and available for sale financial investments as appropriate.

There consequently are no significant differences in exposures to market risk, credit risk, liquidity risk and the fair value of financial instruments between Barclays PLC and Barclays Bank PLC, and no differences in the manner in which these financial risks are managed. Therefore the disclosures regarding financial risks appearing in Notes 4546 to 4849 are in all material respects the same for Barclays Bank PLC and Barclays PLC.

oq Capital

The Barclays Bank PLC Group’s policies and objectives for managing capital are the same as those for the Barclays PLC Group, disclosed in Note ~~50.~~52.

~~The table below provides details under Basel I of the Barclays Bank PLC Group capital ratios and risk weighted assets at 31st December 2007 and 2006.~~

2007
%

2006
%
Capital Ratios

Tier 1 ratio
   7.5    7.5
Risk asset ratio

   11.8    11.5

2007
£m

2006
£m
Total risk weighted assets

   353,471    297,833

The table below provides details of the ~~regulatory capital resources of~~ Barclays Bank PLC ~~Group.~~Group at 31st December 2008 and 2007.


	2007 £m		2006 £m
					2008 Basel II £m		2007 Basel I £m
Total qualifying Tier 1 capital	26,534		22,455		37,101		26,534

Total qualifying Tier 2 capital	17,123		14,036		22,356		17,123

Total deductions	(1,889	)	(2,330	)	(964	)	(1,889	)

Total net capital resources	41,768		34,161		58,493		41,768

r Segmental reporting

Segmental reporting by Barclays Bank PLC is the same as that presented in Note 53 to the Barclays PLC financial statements, except for:

–	the difference in profit before tax of £42m (2007: £31m) between Barclays PLC and Barclays Bank PLC is included in Head office functions and other operations.

–	the difference in total assets of £49m (2007: £222m) is represented by holdings of Barclays PLC shares held by the businesses.

~~261~~298

Barclays

Annual Report ~~2007~~2008

LOGO

Barclays Bank PLC data

~~Notes to the accounts~~Financial Data

~~p Segmental analysis~~

Year ended 31st December 2007
   United
Kingdom
£m

Other
European
Union
£m

United
States
£m    Africa
£m
Rest of
the World
£m    Total
£m

Total income

   13,310 3,600 2,209    3,302 1,102    23,523
Insurance claims and benefits

   (152 ) (226 ) –    (114 ) –    (492 )
Total income net of insurance claims

   13,158 3,374 2,209    3,188 1,102    23,031
Percentage of total income net of insurance claims (%)

   57% 15% 9%    14% 5%    100%
Total assets (by location of asset)

   429,665 285,719 301,973    56,117 154,109    1,227,583
Percentage of total assets (%)

   35% 23% 25%    4% 13%    100%
Capital expenditure (by location of asset)^a



894

303

789


225

88


2,299

Year ended 31st December 2006
   United
Kingdom
£m

Other
European
Union
£m

United
States
£m
   Africa
£m
Rest of
the World
£m    Total
£m

Total income

   12,503 3,063 2,840    2,897 928    22,231
Insurance claims and benefits

   (288 ) (181 ) –    (106 ) –    (575 )
Total income net of insurance claims

   12,215 2,882 2,840    2,791 928    21,656
Percentage of total income net of insurance claims (%)

   57% 13% 13%    13% 4%    100%
Total assets (by location of asset)

   406,044 203,929 229,779    44,696 112,055    996,503
Percentage of total assets (%)

   41% 20% 23%    5% 11%    100%
Capital expenditure (by location of asset)^a

   569 62 565    136 39    1,371

~~Note~~

a~~Capital expenditure comprises purchased goodwill, intangible assets and property, plant and equipment acquired during the year.~~

~~Barclays~~

~~Annual Report 2007~~

~~262~~

~~Barclays Bank PLC~~

~~Financial Data~~

   IFRS
Selected financial statistics
   2007
%

2006
%

2005
%

2004^a
%

Attributable profit as a percentage of:

– average total assets
   0.4 0.4 0.4 0.5
– average shareholders’ equity
   16.3 20.2 17.4 21.3
Average shareholders’ equity as a percentage of average total assets

   2.2 2.2 2.2 2.4
Selected income statement data

   £m £m £m £m
Interest income
   25,308 21,805 17,232 13,880
Interest expense
   (15,707 ) (12,662 ) (9,157 ) (7,047 )
Non-interest income
   13,922 13,088 9,934 8,543
Operating expenses
   (13,199 ) (12,674 ) (10,527 ) (8,536 )
Provisions – bad and doubtful debts
   n/a n/a n/a n/a
– contingent liabilities and commitments
   n/a n/a n/a n/a
Impairment charges
   (2,795 ) (2,154 ) (1,571 ) (1,093 )
Share of post-tax results of associates and joint ventures
   42 46 45 56
Profit on disposal of subsidiaries, associates and joint ventures
   28 323 – 45
Exceptional items
   n/a n/a n/a n/a
Profit before tax
   7,107 7,197 5,311 4,589
Attributable profit

   4,749 4,914 3,695 3,263
Selected balance sheet data

   £m £m £m £m
Total shareholders’ equity
   31,821 27,106 24,243 16,849
Subordinated liabilities
   18,150 13,786 12,463 12,277
Deposits from banks, customer accounts and debt securities in issue
   506,623 447,453 417,139 412,358
Loans and advances to banks and customers
   385,518 313,226 300,001 343,041
Total assets

   1,227,583 996,503 924,170 538,300


					IFRS

Selected financial statistics	2008 %		2007 %		2006 %		2005 %		2004^a %

Attributable profit as a percentage of:
– average total assets	0.3		0.4		0.4		0.4		0.5
– average shareholders’ equity	13.8		16.3		20.2		17.4		21.3
Average shareholders’ equity as a percentage of average total assets	2.0		2.2		2.2		2.2		2.4

Selected income statement data	£m		£m		£m		£m		£m

Interest income	28,010		25,308		21,805		17,232		13,880
Interest expense	(16,595	)	(15,707	)	(12,662	)	(9,157	)	(7,047	)
Non-interest income	11,891		13,922		13,088		9,934		8,543
Operating expenses	(14,362	)	(13,199	)	(12,674	)	(10,527	)	(8,536	)
Impairment charges	(5,419	)	(2,795	)	(2,154	)	(1,571	)	(1,093	)
Share of post-tax results of associates and joint ventures	14		42		46		45		56
Profit on disposal of subsidiaries, associates and joint ventures	327		28		323		–		45
Gains on acquisitions	2,406		–		–		–		–
Profit before tax	6,035		7,107		7,197		5,311		4,589
Attributable profit	4,846		4,749		4,914		3,695		3,263

Selected balance sheet data	£m		£m		£m		£m		£m

Total shareholders’ equity	43,574		31,821		27,106		24,243		16,849
Subordinated liabilities	29,842		18,150		13,786		12,463		12,277
Deposits from banks, customer accounts and debt securities in issue	603,869		506,623		447,453		417,139		412,358
Loans and advances to banks and customers	509,522		385,518		313,226		300,001		343,041
Total assets	2,053,029		1,227,583		996,503		924,170		538,300

Note

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

~~263~~

Barclays

Annual Report ~~2007~~2008

299

Barclays Bank PLC data

Financial Data

Ratio of earnings to fixed charges – Barclays Bank PLC


	2007		2006		2005		2004	^a	2008		2007		2006		2005		2004^a
	(in £m except for ratios)								(in £m except for ratios)

Ratio of earnings to fixed charges
IFRS: Fixed charges
IFRS/UK GAAP:
Fixed charges
Interest expense	37,903		30,385		20,965		14,464		38,235		37,903		30,385		20,965		14,464
Rental expense	161		137		126		93		240		161		137		126		93

Total fixed charges	38,064		30,522		21,091		14,557		38,475		38,064		30,522		21,091		14,557

Earnings
Income before taxes and minority interests	7,107		7,197		5,311		4,589		6,035		7,107		7,197		5,311		4,589
Less: Unremitted pre-tax income of associated companies and joint ventures	(45	)	(41	)	(28	)	(51	)	(19	)	(45	)	(41	)	(28	)	(51	)
	7,062		7,156		5,283		4,538		6,016		7,062		7,156		5,283		4,538
Fixed charges	38,064		30,522		21,091		14,557		38,475		38,064		30,522		21,091		14,557

Total earnings including fixed charges	45,126		37,678		26,374		19,095		44,491		45,126		37,678		26,374		19,095

Ratio of earnings to fixed charges	1.19		1.23		1.25		1.31		1.16		1.19		1.23		1.25		1.31

Ratio of earnings to fixed charges and preference shares – Barclays Bank PLC

   2007 2006 2005 2004 ^a
   (in £m except for ratios)
Combined fixed charges, preference share dividends and similar appropriations

IFRS:

Interest expense
   37,903 30,385 20,965 14,464
Rental expense

   161 137 126 93
Fixed charges
   38,064 30,522 21,091 14,557
Preference share dividends and similar appropriations

   345 395 304 3
Total fixed charges

   38,409 30,917 21,395 14,560
Earnings

Income before taxes and minority interests
   7,107 7,197 5,311 4,589
Less: Unremitted pre-tax (income)/loss of associated companies and joint ventures

   (45 ) (41 ) (28 ) (51 )
   7,062 7,156 5,283 4,538
Fixed charges

   38,409 30,917 21,091 14,557
Total earnings including fixed charges

   45,471 38,073 26,374 19,095
Ratio of earnings to combined fixed charges, preference share dividends and similar appropriations

   1.18 1.23 1.23 1.31


	2008		2007		2006		2005		2004^a
	(in £m except for ratios)
Combined fixed charges, preference share dividends and similar appropriations
IFRS/UK GAAP:
Interest expense	38,235		37,903		30,385		20,965		14,464
Rental expense	240		161		137		126		93

Fixed charges	38,475		38,064		30,522		21,091		14,557
Preference share dividends and similar appropriations	583		345		395		304		3

Total fixed charges	39,058		38,409		30,917		21,395		14,560

Earnings
Income before taxes and minority interests	6,035		7,107		7,197		5,311		4,589
Less: Unremitted pre-tax income of associated companies and joint ventures	(19	)	(45	)	(41	)	(28	)	(51	)
	6,016		7,062		7,156		5,283		4,538
Fixed charges	39,058		38,409		30,917		21,091		14,557

Total earnings including fixed charges	45,074		45,471		38,073		26,374		19,095

Ratio of earnings to combined fixed charges, preference share dividends and similar appropriations	1.15		1.18		1.23		1.23		1.31

~~Notes~~Note

a	Does not reflect the application of IAS 32, IAS 39 and IFRS 4 which became effective from 1st January 2005.

~~Barclays~~

~~Annual Report 2007~~

~~264~~

~~SEC FORM 20-F Other Information~~

~~Currency of presentation~~

In this report, unless otherwise specified, all amounts are expressed in Pounds Sterling. For the months indicated, the high and low noon buying rates in New York City for cable transfers in Pounds Sterling, as certified for customs purposes by the Federal Reserve Bank of New York (the noon buying rate), were:

   (US Dollars per Pound Sterling)
   February    January    December    November    October    September
      2008          2007
High
   1.9923    1.9895    2.0658    2.1104    2.0777    2.0389
Low
   1.9404    1.9515    1.9774    2.0478    2.0279    1.992

~~For the years indicated, the average of the noon buying rates on the last day of each month were:~~

   (US Dollars per Pound Sterling)
   2007    2006    2005    2004    2003
Average
   2.00    1.86    1.81    1.84    1.64

~~On March 18, 2008, the noon buying rate in New York City for cable transfers in Pound Sterling was $2.0216.~~

No representation is made that Pounds Sterling amounts have been, or could have been, or could be, converted into US Dollars at any of the above rates. For the purpose of presenting financial information in this report, exchange rates other than those shown above may have been used.

~~265~~300

Barclays

Annual Report ~~2007~~2008

LOGO

~~Glossary~~


~~Term used in Annual Report~~		~~US equivalent or brief description~~

~~Accounts~~		~~Financial statements~~

~~Allotted~~		~~Issued~~

~~Attributable profit~~		~~Net income~~

~~Called up share capital~~		~~Ordinary shares, issued and fully paid~~

~~Capital allowances~~		~~Tax term equivalent to US tax depreciation allowances~~

~~Cash at bank and in hand~~		~~Cash~~

~~Class of business~~		~~Industry segment~~

~~Finance lease~~		~~Capital lease~~

~~Freehold~~		~~Ownership with absolute rights in perpetuity~~

~~Loans and advances~~		~~Lendings~~

~~Loan capital~~		~~Long-term debt~~

~~Net asset value~~		~~Book value~~

~~Profit~~		~~Income~~

~~Share capital~~		~~Ordinary shares, capital stock or common stock issued and fully paid~~

~~Share premium account~~		~~Additional paid-up capital or paid-in surplus (not distributable)~~

~~Shares in issue~~		~~Shares outstanding~~

~~Write-offs~~		~~Charge-offs~~

~~Barclays~~

~~Annual Report 2007~~

~~266~~

Shareholder information

Dividends on the ordinary shares of Barclays PLC

Barclays PLC has paid dividends on its ordinary shares every year without interruption since its incorporation in 1896.

As announced on 13th October 2008, in the light of the new capital ratios agreed with the FSA and in recognition of the need to maximise capital resources in the current economic climate, the Board has concluded that it would not be appropriate to pay a final dividend for 2008. The Board intends to resume dividend payments in the second half of 2009, at which time it is intended to pay dividends quarterly.

The dividends declared for each of the last five years were:

~~Pence per 25p ordinary share~~

   2007    2006    2005    2004    2003

Interim
   11.50    10.50    9.20    8.25    7.05
Final

   22.50    20.50    17.40    15.75    13.45
Total

   34.00    31.00    26.60    24.00    20.50
US Dollars per 25p ordinary share

   2007    2006    2005    2004    2003
Interim
   0.23    0.20    0.16    0.15    0.12
Final

   0.45    0.41    0.31    0.30    0.24
Total

   0.68    0.61    0.47    0.45    0.36

~~The gross dividends applicable to an American Depositary Share (ADS) representing four ordinary shares, before deduction of withholding tax, are as follows:~~


US Dollars per American Depositary Share
Pence per 25p ordinary share
							2008	2007	2006	2005	2004
	2007	2006	2005	2004	2003
Interim	0.93	0.80	0.65	0.60	0.48		11.50	11.50	10.50	9.20	8.25
Final	1.79	1.64	1.24	1.20	0.95		–	22.50	20.50	17.40	15.75

Total	2.72	2.44	1.89	1.80	1.43		11.50	34.00	31.00	26.60	24.00


US Dollars per 25p ordinary share
							2008	2007	2006	2005	2004

Interim							0.20	0.23	0.20	0.16	0.15
Final							–	0.45	0.41	0.31	0.30

Total							0.20	0.68	0.61	0.47	0.45

The gross dividends applicable to an American Depositary Share (ADS) representing four ordinary shares, before deduction of withholding tax, are as follows:						The gross dividends applicable to an American Depositary Share (ADS) representing four ordinary shares, before deduction of withholding tax, are as follows:


US Dollars per American Depositary Share
							2008	2007	2006	2005	2004

Interim							0.82	0.93	0.80	0.65	0.60
Final							–	1.78	1.64	1.24	1.20

Total							0.82	2.71	2.44	1.89	1.80

Dividends expressed in Dollars are translated at the Noon Buying Rates in New York City for cable transfers in Pounds Sterling as certified for customs purposes by the Federal Reserve Bank of New York (the ‘Noon Buying Rate’) for the days on which dividends are ~~paid, except for the 2007 final dividend, payable in the UK on 25th April 2008, which is translated at the Noon Buying Rate applicable on 27th February 2008.~~paid. No representation is made that Pounds Sterling amounts have been, or could have been, or could be, converted into Dollars at these rates.

Trading market for ordinary shares of Barclays PLC

The nominal capital of Barclays PLC is divided into ~~9,996,000,000~~13,996,000,000 ordinary shares of 25p each (ordinary shares) 0.4 million Sterling preference shares of £100 each, 0.4 million US Dollar preference shares of $100 each, 150 million US Dollar preference shares of $0.25 each, 0.4 million Euro preference shares of€100 each, 0.4 million Yen preference shares of ¥10,000 each and ~~1,000,000~~1 million staff shares of £1 ~~each (staff shares).~~each. At the close of business on 31st December ~~2007, 6,600,181,801~~2008, 8,371,830,617 ordinary shares ~~and 875,000 staff shares~~ were outstanding.

The principal trading market for Barclays PLC ordinary shares is the London Stock Exchange. Ordinary share listings were also obtained on the Tokyo Stock Exchange with effect from 1st August 1986 and the New York Stock Exchange (NYSE) with effect from 9th September 1986. During the year, the Company de-listed from the Tokyo Stock Exchange with effect from 28th June 2008.

Trading on the NYSE is in the form of ADSs under the symbol ‘BCS’. Each ADS represents four ordinary shares and is evidenced by an American Depositary Receipt (ADR). The ADR depositary is ~~The~~J P Morgan Chase Bank, ~~of New York.~~N.A. Details of trading activity are published in the stock tables of leading daily newspapers in the US.

There were ~~838~~926 ADR holders and ~~1,434~~1,528 recorded holders of ordinary shares with US addresses at 31st December ~~2007,~~2008, whose shareholdings represented approximately ~~3.94%~~4.22% of total outstanding ordinary shares on that date. Since certain of the ordinary shares and ADRs were held by brokers or other nominees, the number of recorded holders in the US may not be representative of the number of beneficial holders or of their country of residence.

302

Barclays

Annual Report ~~2007~~2008

~~267~~

LOGO

The following table shows the high and low sales price for the ordinary shares during the periods indicated, based on mid-market prices at close of business on the London Stock Exchange and the high and low sale price for ADSs as reported on the NYSE composite tape.


	25p ordinary shares		American Depositary Shares		25p ordinary shares		American Depositary Shares
	High p	Low p	High US$	Low US$	High p	Low p	High US$	Low US$

2008
2009
By month:
January	508.5	420.75	41.37	33.75	184.6	51.2	10.97	3.07
February	520.0	427.5	41.58	33.23	116.2	92.3	6.99	5.32

2007
2008
By month:
July	738.5	681.0	60.35	54.93	356.5	260.5	28.2	20.76
August	712.5	589.0	57.75	46.61	379.5	311.0	29.52	23.62
September	639.0	580.0	51.47	47.10	389.0	301.0	32.5	21.48
October	665.5	580.0	54.48	47.30	368.0	178.9	25.9	10.73
November	571.5	474.5	47.23	39.86	195.9	127.7	12.68	7.37
December	569.0	499.0	46.90	39.90	162.0	138.2	9.81	8.45

By quarter:
First quarter	790.0	673.5	62.46	53.35	506.42	382.25	41.39	32.27
Second quarter	756.0	696.0	60.37	55.79	490.83	291.5	39.89	23.15
Third quarter	738.5	580.0	60.35	46.61	389.0	260.5	32.5	20.76
Fourth quarter	665.5	474.5	54.48	39.86	368.0	127.7	25.9	7.37

2006
2007
First quarter					790.0	673.5	62.46	53.35
Second quarter					756.0	696.0	60.37	55.79
Third quarter					738.5	580.0	60.35	46.61
Fourth quarter	737	676	61.52	51.02	665.5	474.5	54.48	39.86
Third quarter	680	586	51.75	42.90
Second quarter	701	588	51.03	43.20
First quarter	684	587.5	48.00	41.80

2008					506.42	127.7	41.39	7.37
2007	790	474.5	62.46	39.86	790.0	474.5	62.46	39.86
2006	737	586	61.52	41.80	737.0	586.0	61.52	41.80
2005	615	520	47.00	37.16	615.0	520.0	47.0	37.16
2004	586	443	45.99	32.78	586.0	443.0	45.99	32.78
2003	527	311	36.57	20.30	527.0	311.0	36.57	20.30

This section incorporates information on the prices at which securities of Barclays PLC have traded. It is emphasised that past performance cannot be relied upon as a guide to future performance.


Shareholdings at 31st December 2007^a
	Shareholders			Shares held as a percentage of issued ordinary shares
Shareholdings at 31st December 2008^a				Shares held as a percentage of issued ordinary shares
	Number	Percentage of total holders	Number of shares held (millions)	Shares held as a percentage of issued ordinary shares	Number of shareholders	Percentage of holders	Shares held (millions)	Percentage of capital

Classification of shareholders				Shares held as a percentage of issued ordinary shares
Personal holders	724,760	97.3	462.0	7.0	732,093	97.10	750.24	8.97
Banks and nominees	18,232	2.45	5,993.6	90.8	20,516	2.72	6,522.72	77.90
Other companies	1,810	0.25	144.19	2.18	1,758	0.18	1,098.84	13.13
Insurance companies	14	0.0	0.2	0.02	13	0.00	0.00	0.00
Pensions funds	16	0.0	0.019	0.0	23	0.00	0.00	0.00

Totals	744,832	100	6,600	100	754,403	100	8,371.8	100

Shareholding range
1-100	28,398	3.81	0.69	0.01	30,074	4.02	1.27	0.02
101-250	273,942	36.78	19.8	0.3	232,523	30.8	48.9	0.58
251-500	212,358	28.51	28.3	0.43	240,892	31.9	82.3	0.98
501-1,000	108,967	14.63	36.9	0.56	117,044	15.5	82.2	0.98
1,001-5,000	92,200	12.38	134.5	2.01	102,416	13.6	210.1	2.51
5,001-10,000	15,350	2.06	89.7	1.36	16,943	2.25	119.71	1.43
10,001-25,000	9,253	1.24	119.5	1.81	10,083	1.34	152.72	1.82
25,001-50,000	2,231	0.30	67.0	1.02	2,318	0.31	79.4	0.96
50,001 and over	2,133	0.29	6,104	92.5	2,110	0.28	7,595.2	90.72

Totals	744,832	100	6,600	100	754,403	100	8,371.8	100

United States holdings	1,434	0.16	2.27	0.034	1,528	0.2	3.23	0.04

Note

a	These figures include Barclays Sharestore members.

~~268~~

Barclays

Annual Report ~~2007~~2008

303

SEC FORM 20-F Other Information

Currency of presentation

In this report, unless otherwise specified, all amounts are expressed in Pounds Sterling. For the months of September through December 2008, the high and low noon buying rates in New York City for cable transfers in Pounds Sterling, as certified for customs purposes by the Federal Reserve Bank of New York (noon buying rate), were as set out in the table below.

Effective January 1, 2009, the Federal Reserve Bank of New York discontinued the publication of noon buying rates. For January and February 2009, the closing spot rates for Pounds Sterling as determined by Bloomberg at 5:00 p.m. (New York time) (the “Closing Spot Rate”), expressed in US Dollars per Pound Sterling were as set out in the table below.


	(US Dollars per Pound Sterling)
	February	January	December	November	October	September
		2009			2008
High	1.49	1.52	1.55	1.62	1.78	1.86

Low	1.42	1.38	1.44	1.48	1.55	1.75

For the years indicated, the averages of the noon buying rates on the last day of each month were:


	(US Dollars per Pound Sterling)
Average	2008	2007	2006	2005	2004
	1.84	2.0	1.86	1.81	1.64

On March 20, 2009, the Closing Spot Rate in Pound Sterling was $1.45.

304

Barclays

Annual Report 2008

Shareholder information

Memorandum and Articles of Association

The Company was incorporated in England on 20th July 1896 under the Companies Acts 1862 to 1890 as a company limited by shares and was reregistered in 1982 as a public limited company under the Companies Acts 1948 to 1980. The Company is registered under company number 48839. The Company was reregistered as Barclays PLC on 1st January 1985.

The objects of the Company are set out in full in clause 4 of its Memorandum of Association which provides, among other things, that the Company’s objects are to carry on business as an investment and holding company and the business of banking in all its aspects.

The Company may, by special resolution, amend its Articles of Association. The Company is proposing to adopt new Articles of Association at its annual general meeting in 2008, to update its Articles of Association for the operative provisions of the Companies Act 2006. A summary of the proposed changes may be found in the notice of annual general meeting that accompanies this report.

Directors

(i) The minimum number of Directors (excluding alternate Directors) is five. There is no maximum limit. There is no age limit for Directors.

(ii) Excluding executive remuneration and any other entitlement to remuneration for extra services (including service on board committees) under the Articles, a Director is entitled to a fee at a rate determined by the Board but the aggregate fees paid to all Directors shall not exceed £1,000,000 per annum or such higher amount as may be approved by an ordinary resolution of the Company. Each Director is entitled to reimbursement for all travelling, hotel and other expenses properly incurred by him/her in or about the performance of his/her duties.

(iii) No ~~auditor~~Director may act (either himself/herself or ~~member of a firm of auditors~~through his/her firm) as an auditor of the ~~Group of companies may be appointed a Director.~~Company. A Director may hold any other office of the Company on such terms as the Board shall determine.

(iv) At each annual general meeting (‘AGM’) of the Company, one third of the Directors (rounded down) are required to retire from office by rotation and may offer themselves for re-election. The Directors so retiring are those who have been longest in office (and in the case of equality of service length are selected by lot). Other than a retiring Director, no person shall (unless recommended by the Board) be eligible for election unless a member notifies the Company Secretary in advance of his/her intention to propose a person for election.

(v) The Board has the power to appoint additional Directors or to fill a casual vacancy amongst the Directors. Any Director so appointed holds office until the next AGM, when he/she may offer himself/herself for re-election. He/she is not taken into account in determining the number of Directors retiring by rotation.

(vi) The Board may appoint any Director to any executive position or employment in the Company on such terms as they determine.

(vii) A Director may appoint either another Director or some other person approved by the Board to act as his/her alternate with power to attend Board meetings and generally to exercise the functions of the appointing Director in his/her absence (other than the power to appoint an alternate).

(viii) From 1st October 2008, the Board may authorise any matter in relation to which a Director has, or can have, a direct interest that conflicts, or possibly may conflict with, the Company’s interests. Only Directors who have no interest in the matter being considered will be able to authorise the relevant matter and they may impose limits or conditions when giving authorisation if they think this is appropriate.

(ix) A Director may hold positions with or be interested in other companies and, subject to legislation applicable to the Company and the FSA’s requirements, may contract with the Company or any other company in which the Company is interested. A Director may not vote or count towards the quorum on any resolution concerning any proposal in which he/she (or any person connected with him/her) has a material interest (other than by virtue of his/her interest in securities of the

Company) or if he/she has a duty which conflicts or may conflict with the interests of the Company, unless the resolution relates to any proposal:

(a)	to indemnify a Director or provide him/her with a guarantee or security in respect of money lent by him/her to, or any obligation incurred by him/her or any other person for the benefit of (or at the request of), the Company (or any other member of the Group);

(b)	to indemnify or give security or a guarantee to a third party in respect of a debt or obligation of the Company (or any other member of the Group) for which the Director has personally assumed responsibility;

(c)	to ~~indemnify a Director or provide him/her with a guarantee or security for any liability which he/she may incur in the performance of his/her duties or to~~ obtain insurance ~~against such a liability;~~for the benefit of Directors;

(d)	involving the acquisition by a Director of any securities of the Company pursuant to an offer to existing holders of securities or to the public;

(e)	that the Director underwrite any issue of securities of the Company (or any of its subsidiaries);

(f)

concerning any other company in which the Director is interested as an officer or creditor or shareholder but, broadly, only if he/she (together with his/her connected persons) is directly or indirectly interested in less than 1% of either any class of the issued equity share capital or of the voting rights of that company; and

(g)

concerning any superannuation fund or retirement, death or disability benefits scheme under which a Director may benefit or any employees’ share scheme, so long as any such fund or scheme does not give additional advantages to the Director which are not granted to the employees who are in the fund or scheme; and

~~(h)~~

concerning any other arrangement for the benefit of employees of the Company (or any other member of the Group) under which the Director benefits or stands to benefit in a similar manner to the employees concerned and which does not give the Director any advantage which the employees to whom the arrangement relates would not receive.

~~(ix)~~(x) A Director may not vote or be counted in the quorum on any resolution which concerns his/her own employment or appointment to any office of the Company or any other company in which the Company is interested.

~~(x)~~(xi) Subject to applicable legislation, the provisions described in sub-paragraphs ~~(viii)~~(ix) and ~~(ix)~~(x) may be relaxed or suspended by an ordinary resolution of the ~~Company.~~members of the Company or any applicable governmental or other regulatory body.

~~(xi)~~(xii) A Director is required to hold an interest in ordinary shares having a nominal value of at least £500, which currently equates to 2,000 Ordinary ~~Shares.~~Shares unless restricted from acquiring or holding such interest by any applicable law or regulation or any applicable governmental or other regulatory body. A Director may act before acquiring those ~~Ordinary Shares~~shares but must acquire the qualification ~~Ordinary Shares~~shares within two months from ~~his or~~ his/her appointment. Where a Director is unable to acquire the requisite number of ~~Ordinary Shares~~shares within that time owing to ~~legislative, regulatory~~law, regulation or ~~share-dealing restrictions,~~requirement of any governmental or other relevant authority, he/she must acquire the ~~Ordinary Shares~~shares as soon as reasonably practicable once the restriction(s) end.

~~(xii)~~(xiii) The Board may exercise all of the powers of the Company to borrow money, to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities.

Classes of share

The Company only has ~~two classes of shares,~~ Ordinary Shares in issue. However, the Company has authorised but unissued preference shares of £100, $100, $0.25,€100 and ~~Staff Shares,~~¥10,000 each (together, the ‘Preference Shares’) which may (pursuant to ~~which~~a resolution passed by the shareholders of the Company at the AGM) be issued by the Board from time to time in one or more series with such rights and subject to such restrictions and limitations as the Board may determine. The Company also has authorised but unissued staff shares of £1 each. The Articles of Association contain provisions ~~set out below apply:~~to the following effect:

(i) Dividends

Subject to the provisions of the Articles and applicable legislation, the Company in ~~general meeting~~General Meeting may declare dividends on the Ordinary Shares by ordinary resolution, but such dividend may not exceed the amount recommended by the Board. The Board may also pay interim or final dividends if it appears they are justified by the Company’s financial position.

Each Preference Share confers the right to a non-cumulative preferential dividend (‘Preference Dividend’) payable in such currency at such rates (whether fixed or calculated by reference to or in accordance with a specified procedure or mechanism), on such dates and on such other terms as may be determined by the Board prior to allotment thereof.

The Preference Shares rank in regard to payment of dividend in priority to the holders of Ordinary Shares and any other class of shares in the Company ranking junior to the Preference Shares.

Dividends may be paid on the Preference Shares if, in the opinion of the Board, the Company has sufficient distributable profits, after payment in full or the setting aside of a sum to provide for all dividends payable on (or in the case of shares carrying a cumulative right to dividends, before) the relevant dividend payment date on any class of shares in the Company rankingpari passuwith or in priority to the relevant series of Preference Shares as regards participation in the profits of the Company.

If the Board considers that the distributable profits of the Company available for distribution are insufficient to cover the payment in full of Preference Dividends, Preference Dividends shall be paid to the extent of the distributable profits on apro ratabasis.

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Annual Report 2008

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Notwithstanding the above, the Board may, at its absolute discretion, determine that any Preference Dividend which ~~are resolved to~~would otherwise be ~~distributed~~payable may either not be payable at all or only payable in part.

If any Preference Dividend on a series of Preference Shares is not paid, or is only paid in part, for the reasons described above, holders of Preference Shares will not have a claim in respect of such nonpayment.

If any ~~period are applied first~~dividend on a series of Preference Shares is not paid in ~~payment of a fixed dividend of 20% per annum~~full on the ~~Staff~~relevant dividend payment date, a dividend restriction shall apply. The dividend restriction means that, subject to certain exceptions, neither the Company nor Barclays Bank may (a) pay a dividend on, or (b) redeem, purchase, reduce or otherwise acquire, any of their respective ordinary shares, other preference shares or other share capital ranking equal or junior to the relevant series of Preference Shares ~~and then~~until the earlier of such time as the Company next pays in ~~payment of dividends~~full a dividend on the ~~Ordinary Shares. No dividend will be declared~~relevant series of Preference Shares or the date on which all of the ~~Staff~~relevant series of Preference Shares unless a dividend is also paid on the Ordinary Shares in respect of that period. Any Staff Share held by anyone not an employee of Barclays or Barclays Bank (an ‘Employee’) will be treated as a Ordinary Share in respect of dividends, up to a maximum dividend of 6% for the year upon the amount paid up on that share.are redeemed.

All unclaimed dividends payable in respect of aany share may be invested or otherwise made use of by the Board for the benefit of the Company until claimed. If a dividend is not claimed after 12 years of it becoming payable, it is forfeited and reverts to the Company.

The Board may (although it currently does not), with the approval of an ordinary resolution of the Company, offer shareholders the right to choose to receive an allotment of additional fully paid Ordinary Shares instead of cash in respect of all or part of any dividend.

~~Barclays~~

~~Annual Report 2007~~

~~269~~

(ii) Voting

Every member who is present in person or by proxy, or represented at any general meeting of the Company and who is entitled to vote has one vote on a show of hands. On a poll, every member who is present or represented has one vote for every share held. Any joint holder may vote in respect of jointly owned shares, but the vote of the senior holder (as determined by order in the share register) shall take precedence. If any sum payable remains unpaid in relation to a member’s shareholding, that member is not entitled to vote that share or exercise any other right in relation to a meeting of the Company unless the Board otherwise determine.

If any member, or any other person appearing to be interested in any of the Company’s Ordinary Shares, is served with a notice under Section 793 of the Companies Act 2006 and does not supply the Company with the information required in the notice, then the Board, in its absolute discretion, may direct that that member shall not be entitled to attend or vote at any meeting of the Company.

The Board may further direct that if the shares of the defaulting member represent 0.25% or more of the issued shares of the relevant class, that dividends or other monies payable on those shares shall be retained by the Company until the direction ceases to have effect and that no transfer of those shares shall be registered (other than certain specified ‘approved transfers’). A direction ceases to have effect seven days after the Company has received the information requested, or when the Company is notified that an ‘approved transfer’ to a third party has occurred, or as the Board otherwise determines.

(iii) Transfers

Ordinary Shares may be held in either certificated or uncertificated form. Certificated ~~shares~~Ordinary Shares shall be transferred in writing in any usual or other form approved by the Board and executed by or on behalf of the transferor. Transfers of uncertificated ~~shares~~Ordinary Shares shall be made in accordance with the applicable regulations. The Board may make any arrangements to regulate and evidence the transfer of ~~shares~~Ordinary Shares as they consider fit in accordance with applicable legislation and the rules of the FSA.

In order to transfer a Staff Share, the transferor must serve a notice on the Company (a ‘Transfer Notice’) indicating his/her wish to transfer such share at such sum as he/she specifies as the fair value (subject to a maximum amount determined in accordance with the Articles). The Staff Shares must be transferred at the specified fair value to such Employee as is willing to purchase it and who has been identified by the Board within 60 days of the Transfer Notice. If the Company has not found a person willing to purchase the share within 60 days of the Transfer Notice, the Staff Share may be freely transferred at any price (although the Board may decline to prepare or register the transfer). Such a procedure may also be initiated by the Board if a Staff Share is held by a non-Employee.

Registration of ~~shares~~Ordinary Shares may be suspended, subject to applicable legislation, for such periods as the Board may determine (but for not more than 30 days in any calendar year).

The Board is not bound to register a transfer of partly paid ~~shares,~~Ordinary Shares, or fully paid shares in exceptional circumstances approved by the FSA. The Board may also decline to register an instrument of transfer of certificated ~~shares~~Ordinary Shares unless it is duly stamped and deposited at the prescribed place and accompanied by the share certificate(s) and such other evidence as reasonably required by the Board to evidence right to transfer, it is in respect of one class of shares only, and it is in favour of not more than four transferees (except in the case of executors or trustees of a member).

Preference Shares may be represented by share warrants to bearer or be in registered form.

Preference Shares represented by share warrants to bearer are transferred by delivery of the relevant warrant. Preference Shares in registered form shall be transferred in writing in any usual or other form approved by the Board and executed by or on behalf of the transferor. The Company’s registrar shall register such transfers of Preference Shares in registered form by making the appropriate entries in the register of Preference Shares.

(iv) Return of Capital and Liquidation

In the event of any return of capital by reduction of capital or on liquidation, the holders of Ordinary Shares ~~and the Staff Shares rank equally~~are entitled to receive such capital in proportion to the amounts paid up or credited as paid up on the shares of each ~~class, except that~~class.

Each Preference Share shall confer, in the event of a winding up or any return of capital by reduction of capital (other than, unless otherwise provided by their terms of issue, a redemption or purchase by the Company of any of its issued shares, or a reduction of share capital), the right to receive out of the surplus assets of the Company available for distribution amongst the members and in priority to the holders of the ~~Staff~~Ordinary Shares ~~are only entitled to participate~~and any other shares in the ~~surplus assets available for distribution up~~Company ranking junior to the relevant series of Preference Shares andpari passuwith any other class of Preference Shares, repayment of the amount paid up onor treated as paid up in respect of the ~~Staff Shares plus 10%~~nominal value of ~~such amount.~~the Preference Share together with any premium which was paid or treated as paid when the Preference Share was issued in addition to an amount equal to accrued and unpaid dividends.

(v) Redemption and Purchase

Subject to applicable legislation and the rights of the other shareholders, any share may be issued on terms that it is, at the option of the Company or the holder of such share, redeemable. ~~The~~While the Company currently has no redeemable shares in ~~issue.~~

issue, any series of Preference Shares issued in the future will be redeemable, in whole or in part, at the option of the Company on a date not less than five years after the date on which such series of Preference Shares was first issued. The Company may purchase its own shares subject to the provisions of applicable legislation, the Articles and the approval of any class of convertible shares in issue (by ~~extraordinary~~special resolution or written consent of 75% of such class).

(vi) Calls on capital

The Directors may make calls upon the members in respect of any monies unpaid on their shares. A person upon whom a call is made remains liable even if the shares in respect of which the call is made have been transferred. Interest will be chargeable on any unpaid amount called at a rate determined by the Board (of not more than 20%).

If a member fails to pay any call in full (following notice from the Board that such failure will result in forfeiture of the relevant shares), such shares (including any dividends declared but not paid) may be forfeited by a resolution of the Board, and will become the property of the Company. Forfeiture shall not absolve a previous member for amounts payable by him/her (which may continue to accrue interest).

The Company also has a lien over all partly paid shares of the Company for all monies payable or called on that share and over the debts and liabilities of a member to the Company. If any monies which are the subject of the lien remain unpaid after a notice from the Board demanding payment, ~~Barclays~~the Company may sell such shares.

(vii) Variation of Rights

The rights attached to any class of shares may be varied with the sanction of ~~an extraordinary~~a special resolution passed at a separate meeting of the holders of the shares of that class.

The rights of shares shall not (unless expressly provided by the rights attached to such shares) be deemed varied by the creation of further shares ranking equally with them.

Annual and ~~extraordinary~~other general meetings

The Company is required to hold aan annual general meeting ~~each year as its AGM~~ in addition to such other ~~meetings (called extraordinary~~ general ~~meetings)~~meetings as the Directors think fit. The type of the meeting will be specified in the notice calling it. Under the Companies Act ~~1985, not more than 15 months may elapse between the date of one AGM and the next. Under the Companies Act~~ 2006, the AGM must be held within six months of the financial year end. ~~An extraordinary~~A general meeting may be convened by the Board on requisition in accordance with the applicable legislation.

306

Barclays

Annual Report 2008

Shareholder information

In the case of an AGM, ~~or a meeting for the passing of a special resolution (i.e. requiring the consent of a 75% majority)~~ 21 clear days’ notice is required. In other cases 14 clear days’ notice is required. The notice must be in writing and must specify the place, the day and the hour of the meeting, and the general nature of the business to be transacted. A notice convening a meeting to pass ~~an extraordinary or~~a special resolution shall specify the intention to propose the resolution as such. The accidental ~~omission~~failure to give notice of a general meeting or the non-receipt of such notice will not invalidate the proceedings at such meeting.

Subject as noted above, all shareholders are entitled to attend and vote at general meetings. The Articles do, however, provide that arrangements may be made for simultaneous attendance at a general meeting at a place other than that specified in the notice of meeting, in which case shareholders may be excluded from the specified place.

Holders of Preference Shares have no right to receive notice of, attend or vote at, any general meetings of the Company as a result of holding Preference Shares.

~~270~~

~~Barclays~~

~~Annual Report 2007~~

~~Shareholder information~~

Limitations on foreign shareholders

There are no restrictions imposed by the Company’s Memorandum or Articles of Association or (subject to the effect of any economic sanctions that may be in force from time to time) by ~~English law~~current UK laws which relate only to non-residents of the UK and which limit the rights of such non-residents to hold or (when entitled to do so) vote the Company’s Ordinary Shares.

Notices

A document or information may be sent by the Company in hard copy form, electronic form, by being made available on a website, or by another means agreed with the recipient. A document or information may only be sent in electronic form to a person who has agreed to receive it in that form or, in the case of a company, who has been deemed to have so agreed pursuant to applicable legislation. A document or information may only be sent by being made available on a website if the recipient has agreed to receive it in that form or has been deemed to have so agreed pursuant to applicable legislation, and has not revoked that agreement.

In respect of joint holdings, documents or information shall be sent to the joint holder whose name stands first in the register.

A member who (having no registered address within the UK) has not supplied an address in the UK at which documents or information may be sent is not entitled to have documents or information sent to him/her.

Alteration of share capital

The Company may, by way of ordinary resolution:

–

increase its share capital by a sum to be divided into shares of an amount prescribed by the resolution;

–

consolidate and divide all or any of its share capital into shares of a larger nominal amount;

–

subject to legislation, sub-divide all or part of its shares into shares of a smaller nominal amount and may decide by that resolution that the resulting shares have preference or other advantage or restrictions; and

–

cancel any shares which, at the date of the resolution, have not been subscribed or agreed to have been subscribed for and diminish the amount of its share capital by the amount of the shares so cancelled.

The Company may also, by special resolution, reduce its share capital or capital redemption reserve or any share premium account or other undistributable reserve in any manner authorised by legislation.

The Company may, by ordinary resolution, upon the recommendation of the Board capitalise all or any part of an amount standing to the credit of a reserve or fund to be set free for distribution provided that amounts from the share premium account, capital redemption reserve or any profits not available for distribution should be applied only in paying up unissued shares issued to members and no unrealised profits shall be applied in paying up debentures of the Company or any amount unpaid on any share in the capital of the Company.

Indemnity

Subject to applicable legislation, every current and former ~~Barclays~~ Director or other officer ~~and auditor~~ of ~~Barclays~~the Company (other than any person engaged by the company as auditor) shall be indemnified by ~~Barclays~~the Company against any liability ~~incurred by him/her~~ in relation to the ~~actual~~Company, other than (broadly) any liability to the Company or ~~purported exercise~~a member of the Group, or ~~in connection with, his/her duties and powers.~~any criminal or regulatory fine.


Officers of the Group
Peter Estlin	Group Financial Controller	Appointed 2008
Lawrence Dickinson	Company Secretary	Appointed 2002
Patrick Gonsalves	Joint Secretary,
	Barclays Bank PLC	Appointed 2002
Mark Harding	Group General Counsel	Appointed 2003
Robert Le Blanc	Group Risk Director	Appointed 2004

Taxation

The following is a summary of the principal tax consequences for holders of Ordinary Shares of Barclays PLC, Preference Shares of the Bank, or ADSs representing such Ordinary Shares or Preference Shares, and who are citizens or residents of the UK or US, or otherwise who are subject to UK tax or US federal income tax on a net income basis in respect of such securities, that own the shares or ADSs as capital assets for tax purposes. It is not, however, a comprehensive analysis of all the potential tax consequences for such holders, and it does not discuss the tax consequences of members of special classes of holders subject to special rules or holders that, directly or indirectly, hold 10% or more of Barclays voting stock. Investors are advised to consult their tax advisers regarding the tax implications of their particular holdings, including the consequences under applicable state and local law, and in particular whether they are eligible for the benefits of the Treaty, as defined below.

A US holder is a beneficial owner of shares or ADSs that is, for US federal income tax purposes, (i) a citizen or resident of the US, (ii) a US domestic corporation, (iii) an estate whose income is subject to US federal income tax regardless of its source, or (iv) a trust if a US court can exercise primary supervision over the trust’s administration and one or more US persons are authorised to control all substantial decisions of the trust.

Unless otherwise noted, the statements of tax laws set out below are based on the tax laws of the UK in force as at 27th February ~~2008~~2009 and are subject to any subsequent changes in UK law, in particular any announcements made in the Chancellor’s expected UK Budget in ~~March 2008.~~April 2009.

This section is also based on the Internal Revenue Code of 1986, as amended, its legislative history, existing and proposed regulations, published rulings and court decisions (the Code), and on the Double Taxation Convention between the UK and the US as entered into force in March 2003 (the Treaty), all of which are subject to change, possibly on a retroactive basis.

This section is based in part upon the representations of the ADR Depositary and the assumption that each obligation of the Deposit

Barclays

Annual Report 2008

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Agreement and any related agreement will be performed in accordance with its terms.

For purposes of the Treaty, the Estate and Gift Tax Convention between the United Kingdom and the United States, and the Code, the holders of ADRs evidencing ADSs will be treated as owners of the underlying ordinary shares or preference shares, as the case may be. Generally, exchanges of shares for ADRs and ADRs for shares will not be subject to US federal income tax or to UK capital gains tax.

~~Barclays~~

~~Annual Report 2007~~

~~271~~

Taxation of UK holders

Taxation of dividends

In accordance with UK law, Barclays PLC and the Bank pay dividends on ordinary shares and preference shares without any deduction or withholding tax in respect of any taxes imposed by the UK government or any UK taxing authority.

If the shareholder is a UK resident individual liable to income tax only at the basic ~~rate or the lower~~ rate, then there will be no further tax liability in respect of the dividend received. If, however, the individual shareholder is subject to income tax at the higher rate (currently 40%), there will be a further liability to tax. Higher rate taxpayers are taxable on dividend income at a special rate (currently 32.5%) against which can be offset a tax credit of one-ninth of the cash dividend received. Tax credits are not repayable to shareholders with no tax liability.

Taxation of shares under the Dividend Reinvestment Plan

Where a shareholder elects to purchase shares using their cash dividend, the individual will be liable for income tax on dividends reinvested in the Plan on the same basis as if they had received the cash and arranged the investment themselves. They should accordingly include the dividend received in their annual tax return in the normal way. The tax consequences for a UK individual are the same as described in ‘Taxation of dividends’ above.

Taxation of capital gains

Where shares are disposed of by open market sale, a capital gain may result if the disposal proceeds exceed the sum of the base cost of the shares sold and any other allowable deductions such as share dealing costs and indexation relief (up to 5th April 1998) ~~and taper relief (expected to be withdrawn for disposals after 5th April 2008)~~. To arrive at the total base cost of any Barclays PLC shares held, the amount subscribed for rights taken up in 1985 and 1988 must be added to the cost of all other shares held. For this purpose, current legislation permits the market valuation at 31st March 1982 to be substituted for the original cost of shares purchased before that date.

The calculations required to compute chargeable capital gains ~~particularly taper and indexation reliefs,~~ may be complex. Capital gains may also arise from the gifting of shares to connected parties such as relatives (although not spouses or civil partners) and family trusts. Shareholders are advised to consult their personal financial adviser if further information regarding a possible tax liability in respect of their holdings of Barclays PLC shares is required.

Stamp duty

Stamp duty or stamp duty reserve tax at the rate of 0.5% is normally payable on the purchase price of shares acquired.

Inheritance tax

An individual may be liable to inheritance tax on the transfer of ordinary shares or preference shares. Where an individual is liable, inheritance tax may be charged on the amount by which the value of his or her estate is reduced as a result of any transfer by way of gift or other gratuitous transaction made by them or treated as made by them.

Taxation of US holders

Taxation of dividends

ASubject to PFIC rules discussed below, a US holder is subject to US federal income taxation on the gross amount of any dividend paid by Barclays PLC or the Bank, as applicable, out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). Dividends paid to a non-corporate US holder in taxable years beginning before 1st January 2011 that constitute qualified dividend income will be taxable to the holder at a maximum tax rate of 15%, provided that the holder has a holding period of the shares or ADSs of more than 60 days during the 121-day period beginning 60 days before the ex-dividend date (or, in the case of preference shares or ADSs relating thereto, if the dividend is attributable to a period or periods aggregating over 366 days, provided that the holder holds the shares or ADSs for more than 90 days during the 181-day period beginning 90 days before the ex-dividend date) and meets certain other holding period requirements. Dividends paid by Barclays PLC or the Bank, as applicable, with respect to the ordinary or preference shares or ADSs will generally be qualified dividend income.

A US holder will not be subject to UK withholding tax. The US holder will include in gross income for US federal income tax purposes the amount of the dividend actually received from Barclays PLC or the Bank. Dividends must be included in income when the US holder, in the case of shares, or the Depositary, in the case of ADSs, actually or constructively receives the dividend, and will not be eligible for the dividends-received deduction generally allowed to US corporations in respect of dividends received from other US corporations. For foreign tax credit purposes, dividends will generally be income from sources outside the United States and will, depending on a US holder’s circumstances, be either ‘passive’ or ‘general’ income for purposes of computing the foreign tax credit allowable to a US holder.

The amount of the dividend distribution includable in income will be the US Dollar value of the pound Sterling payments made, determined at the spot Pound Sterling/US Dollar rate on the date the dividend distribution is includable in income, regardless of whether the payment is in fact converted into US Dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includable in income to the date the payment is converted into US Dollars will be treated as ordinary income or loss and, for foreign tax credit limitation purposes, from sources within the US and will not be eligible for the special tax rate applicable to qualified dividend income.

Distributions in excess of current or accumulated earnings and profits, as determined for US federal income tax purposes, will be treated as a return of capital to the extent of the US holder’s basis in the shares or ADSs and thereafter as capital gain.

~~272~~308

Barclays

Annual Report ~~2007~~2008

Shareholder information

Taxation of capital gains

~~Generally,~~Subject to PFIC rules discussed below, generally, US holders will not be subject to UK tax, but will be subject to US tax on capital gains realised on the sale or other disposition of ordinary shares, preference shares or ADSs. Capital gain of a noncorporate US holder that is recognised in taxable years beginning before 1st January 2011 is generally taxed at a maximum rate of 15% where the holder has a holding period of greater than one year. The gain or loss will generally be income or loss from sources within the United States for foreign tax credit limitation purposes.

Taxation of premium on redemption or purchase of shares

No refund of tax will be available under the Treaty in respect of any premium paid on a redemption of preference shares by the Bank or on a purchase by Barclays PLC of its own shares. For US tax purposes, redemption premium generally will be treated as an additional amount realised in the calculation of gain or loss.

Taxation of passive foreign investment companies (PFICs)

Barclays PLC and the Bank believe that their respective shares and ADSs should not be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If Barclays PLC or the Bank were to be treated as a PFIC, unless a US holder elects to be taxed annually on a mark-to-market basis with respect to the shares or ADSs, gain realised on the sale or other disposition of their shares or ADSs would in general not be treated as capital gain. Instead, for a US holder, such gain and certain ‘excess distributions’ would be treated as having been realised ratably over the holding period for the shares or ADSs and would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, a US holder’s shares or ADSs will be treated as stock in a PFIC if Barclays PLC or the Bank was a PFIC at any time during such holder’s holding period in their shares or ADSs. Dividends that a US holder receives from Barclays PLC or the Bank will not be eligible for the special tax rates applicable to qualified dividend income if Barclays PLC or the Bank are treated as a PFIC with respect to such US holder either in the taxable year of the distribution or the preceding taxable year, but instead will be taxable at rates applicable to ordinary income.

Stamp duty

No UK stamp duty is payable on the transfer of an ADS, provided that the separate instrument of transfer is not executed in, and remains at all times outside, the UK.

Estate and gift tax

Under the Estate and Gift Tax Convention between the United Kingdom and the United States, a US holder generally is not subject to UK inheritance tax.

Exchange controls and other limitations affecting security holders

Other than certain economic sanctions which may be in force from time to time, there are currently no UK laws, decrees or regulations which would affect the transfer of capital or remittance of dividends, interest and other payments to holders of Barclays securities who are not residents of the UK. There are also no restrictions under the Articles of Association of either Barclays PLC or the Bank, or (subject to the effect of any such economic sanctions) under current UK laws, which relate only to non-residents of the UK, and which limit the right of such non-residents to hold Barclays securities or, when entitled to vote, to do so.

Documents on display

It is possible to read and copy documents that have been filed by Barclays PLC and Barclays Bank PLC with the US Securities and Exchange Commission at the US Securities and Exchange Commission’s office of Investor Education and Assistance located at 100 F Street, NE, Washington DC ~~20549-0213.~~20549. Please call the US Securities and Exchange Commission at 1-800-SEC-0330 for further information on the public reference rooms and their copy charges. Filings with the US Securities and Exchange Commission are also available to the public from commercial document retrieval services, and from the website maintained by the US Securities and Exchange Commission atwww.sec.gov.

Barclays

Annual Report ~~2007~~2008

~~273~~

309

LOGO

~~Shareholders~~Shareholder enquiries

Investors who have any questions about their investment in Barclays, or about Barclays in general,

may write to the Director, Investor Relations at our head office as follows:

Director, Investor Relations

Barclays PLC

1 Churchill Place

London

E14 5HP

or, in the United States of America,

The Corporate Communications Department

Barclays Bank PLC

200 Park Avenue

New York, NY 10166, USA

Registered and Head office:

1 Churchill Place

London

E14 5HP

Tel: +44 (0) 20 7116 1000

Registrar:

The Registrar to Barclays ~~PLC~~

Aspect House

Spencer Road

Lancing

West Sussex

BN99 6DA

Tel: 0871 384 2055*

or +44 (0) 121 415 7004 (from overseas)

Email: questions@share-registers.co.uk

ADR Depositary:

~~The~~JPMorgan Chase Bank, ~~of New York~~N.A.

PO Box ~~11258~~64504

~~Church Street Station~~St. Paul

~~New York~~MN 55164-0504

~~NY 10286-1258~~USA

Tel: ~~1-888-BNY-ADRS~~1-800-990-1135 (toll-free for US domestic callers)

or +1 ~~212 815 3700~~651 453 2128

Email: ~~shareowners@bankofny.com~~jpmorgan.adr@wellsfargo.com

*	~~Calls to this number are charged at 8p per minute if using a BT landline.~~

~~Call~~

~~charges may vary if using other telephone providers.~~

*Calls to this number are charged at 8p per minute if using a BT landline.

Call charges may vary if using other telephone providers.

~~274~~310

Barclays

Annual Report ~~2007~~2008

Annual ~~report 2007~~Report 2008 index

Accountability and Audit    143      Corporate sustainability    59
Accounting         Credit risk    225
    developments    158      Critical accounting estimates    48
    policies    149      Currency of presentation    149
    presentation    158      Currency risk    223
Acquisitions         Derivatives and other financial instruments
    notes to the accounts    204          notes to the accounts    172
Allowance for impairment         Directors’ and officers’
    notes to the accounts    238          biographies    112
    risk management    104          emoluments    115
Annual General Meeting    116          interests    115
Annual Report and Accounts (approval)    160          notes to the accounts    211
Assets         Directors’ report    114
    by class of business    248      Dividends    166
    by geographical region    249      Earnings per share    171
    other    175
Employees

Auditors
    equality and diversity
   115
    reports    147
    involvement
   115
Available for sale investments    175
Events after the balance sheet date
   212
Balance sheet
Fair values of financial instruments
   244
    average    54
Financial assets designated at fair value
   171
    consolidated    161
Financial Data

    consolidated (Barclays Bank)    251
    Barclays Bank PLC
   263
Barclaycard
    Barclays PLC
   6
    business analysis    18
Financial liabilities designated at fair value
   181
    business description    8, 17
Financial review
   3
Barclays Bank PLC
Financial risks
   218
    consolidated accounts    250
Glossary
   2
    financial data    263
Goodwill
   179
    notes to the accounts    254
Head office functions and other operations

Barclays Capital
    business analysis
   32
    business analysis    26
    business description
   9, 31
    business description    9, 25
Impairment charges

Barclays Commercial Bank
    notes to the accounts
   168
    business analysis    16
    risk management
   84
    business description    8, 15
Income statement

Barclays Global Investors
    consolidated
   160
    business analysis    28
    consolidated (Barclays Bank)
   251
    business description    9, 27
Insurance assets and liabilities
   182
    BGI Equity Ownership Plan (EOP)    133
Insurance premiums and insurance claims and benefits
   167
Barclays Wealth
Intangible assets
   180
    business analysis    30
Interest rate risk
   220
    business description    9, 29
Internal control
   143
Capital adequacy data
International Retail and Commercial Banking

    total assets and risk weighted assets    40
    business analysis
   20
    capital management    42
    business description
   8, 19
    capital ratios    43
International Retail and Commercial Banking

    capital resources    44
– excluding Absa

Capital management    246
    business analysis
   22
Cash flow statement
    business description
   8, 21
    consolidated    163
    consolidated (Barclays Bank)    253
    notes to the accounts    166
Competition and regulatory matters    202
Concentrations of credit risk    230
Contingent liabilities and commitments    200
Contractual obligations    46
Corporate governance
    corporate governance report    117
    attendance at board meetings    118



Absa
business analysis		44
business description		43
Accountability and Audit		173
Accounting
developments		188
policies		179
presentation		178
Acquisitions
notes to the accounts		235
Allowance for impairment
notes to the accounts		259
risk management		129
Annual General Meeting		142
Annual Report and Accounts (approval)		190
Assets
by class of business		281
other		205
Auditors
reports		177
Available for sale investments		205
Balance sheet
average		21
consolidated		191
consolidated (Barclays Bank)		287
Barclaycard
business analysis		38
business description		37
Barclays Bank PLC
consolidated accounts		286
financial data		299
notes to the accounts		290
Barclays Capital
business analysis		46
business description		45
Barclays Commercial Bank
business analysis		36
business description		35
Barclays Global Investors
business analysis		48
business description		47
BGI Equity Ownership Plan (EOP)		171
Barclays Wealth
business analysis		50
business description		49
Capital adequacy data
total assets and risk weighted assets		14
capital management		17
capital ratios		17
capital resources		17
Capital management		278
Cash flow statement
consolidated		193
consolidated (Barclays Bank)		289
notes to the accounts		196
Competition and regulatory matters		232
Concentrations of credit risk		253
Contingent liabilities and commitments		230
Contractual obligations		19



Corporate governance
corporate governance report		143
attendance at board meetings		149
Corporate sustainability		53
Credit risk		250
Critical accounting estimates		27
Currency of presentation		179
Currency risk		267
Derivatives and other financial instruments
notes to the accounts		202
Directors’ and officers’
biographies		138
emoluments		141
interests		141
notes to the accounts		240
Directors’ report		140
Dividends		196
Earnings per share		200
Emerging Markets
business analysis		42
business description		41
Employees
equality and diversity		141
involvement		141
Events after the balance sheet date		244
Fair value of financial instruments		273
Financial assets designated at fair value		201
Financial data
Barclays Bank PLC		299
Barclays PLC		2
Financial liabilities designated at fair value		211
Financial review		2
Financial risks		250
Global Retail and Commercial Banking
business analysis		31
Glossary		313
Goodwill		208
Head office functions and other operations
business analysis		52
business description		51
Impairment charges
notes to the accounts		198
risk management		87
Income statement
consolidated		190
consolidated (Barclays Bank)		286
Insurance assets and liabilities		212
Insurance premiums and insurance claims and benefits		197

Barclays

Annual Report 2008

311

LOGO



Intangible assets		209
Interest rate risk		266
Investment Banking and Investment Management
business analysis		32
Investment in associates and joint ventures		207
Leasing		233
Legal proceedings		231
Liabilities
other		211
Liquidity risk		268
Loans and advances to banks
interest rate sensitivity		123
maturity analysis		123
notes to the accounts		204
Loans and advances to customers
interest rate sensitivity		123
maturity analysis		123
notes to the accounts		204
Market risk		264
Memorandum and Articles of Association		305
Minority interests		230
Net fee and commission income
notes to the accounts		196
summary		5
Net interest income
notes to the accounts		196
summary		4
Off-balance sheet arrangements		25
Operating expenses
administration and general expenses		198
staff costs		198
summary		8
Ordinary shares, share premiums, and other equity
called up		226
Other entities		239
Other income
notes to the accounts		197
summary		6
Our people		55
Parent company accounts (Barclays PLC)		194
Pensions
directors		164
notes to the accounts		220
Principal subsidiaries		238
Principal transactions
notes to the accounts		197
summary		6
Potential credit risk loans		84
Presentation of information		176
Property, plant and equipment		210
Provisions		218
Recent developments		189
Related party transactions		240



Remuneration report
2008 annual remuneration		157
Group Chairman and executive Directors: beneficial shareholdings		163
Reserves		228
Results by business		31
Risk factors		57
Risk management
Barclays approach to risk management		62
credit risk management		67
market risk management		106
liquidity risk management		111
capital risk management		114
operational risk management		117
financial crime risk management		120
statistical information		122
supervision and regulation		135
Risk Tendency		122
Risk weighted assets		14
Securities borrowing, securities lending, repurchase and reverse repurchase agreements		205
Securitisation		219
Segmental reporting
by class of business		281
by geographical segments		284
Share-based payments		244
Shareholder information		301
Short-term borrowings		18
Statement of recognised income and expense
consolidated		192
consolidated (Barclays Bank)		288
Subordinated liabilities		214
Taxation
notes to the accounts		199
shareholder information		307
Total assets		14
Trading portfolio		201
Trust activities		187
UK Retail Banking
business analysis		34
business description		33
Western Europe
business analysis		40
business description		39

312

Barclays

Annual Report 2008

Glossary of terms


~~Barclays~~ Term used in Annual Report ~~2007~~		~~275~~US equivalent or brief description
Accounts		Financial statements
Allotted		Issued
Attributable profit		Net income
Called up share capital		Ordinary shares, issued and fully paid
Capital allowances		Tax term equivalent to US tax depreciation allowances
Cash at bank and in hand		Cash
Class of business		Industry segment
Finance lease		Capital lease
Freehold		Ownership with absolute rights in perpetuity
Loans and advances		Lendings
Loan capital		Long-term debt
Net asset value		Book value
Profit		Income
Share capital		Ordinary shares, capital stock or common stock issued and fully paid
Share premium account		Additional paid-up capital or paid-in surplus (not distributable)
Shares in issue		Shares outstanding
Write-offs		Charge-offs

International Retail and Commercial Banking
      Results by nature of income and expense    33
– Absa       Risk factors    63
    business analysis    22    Risk management
    business description    8, 21        allowances for impairment    84
Investment in associates and joint ventures    178        capital and liquidity risk management    64
Leasing
   203        credit risk management    63
Legal proceedings
   201        disclosures about certain trading activities
Liabilities
          including non-exchange contracts    90
    other
   181        governance structure    69
Liquidity risk
   240        insurance risk    64
Loans and advances to banks
          loans and advances to customers    98
    interest rate sensitivity
   98        management of operational risk and business risk    63
    maturity analysis
   98        market risk management    63
    notes to the accounts
   174        potential credit risk loans    82
Loans and advances to customers
          risk responsibilities    218
    interest rate sensitivity
   98        statistical information    97
    maturity analysis
   101        taxation risk    64
    notes to the accounts
   174    Risk Tendency    66
Market risk
   218    Risk weighted assets    246
Memorandum and Articles of Association
   269    Securities borrowing, securities lending, repurchase and reverserepurchase agreements    175
Minority interests    200
Net fee and commission income
      Securitisation    189
    notes to the accounts
   166    Segmental reporting
    summary
   34        by class of business    248
Net interest income
          by geographical segments    249
    notes to the accounts
   166    Share-based payments    212
    summary
   32    Shareholder information    267
Off-balance sheet arrangements
   51    Short-term borrowings    45
Operating expenses
      Statement of recognised income and expense
    administration and general expenses
   36        consolidated    162
    staff costs
   37        consolidated (Barclays Bank)    252
    summary
   36    Subordinated liabilities    184
Ordinary shares and share premium
      Supervision and regulation    110
    called up
   197    Taxation
Other entities
   207        notes to the accounts    170
Other income
          shareholder information    271
    notes to the accounts
   167    Total assets    40
    summary
   35    Trading portfolio    171
Parent company accounts (Barclays PLC)
   164    Trust activities    157
Pensions
      UK Banking
    directors
   136        business analysis    12
    notes to the accounts
   190        business description    8, 11
Principal subsidiaries
   206    UK Retail Banking
Principal transactions
          business analysis    14
    notes to the accounts
   167        business description    8, 13
    summary
   34
Potential credit risk loans
   82
Presentation of information
   146
Property, plant and equipment
   181
Provisions
   188
Recent developments
   159
Related party transactions
   208
Remuneration report

    2007 annual remuneration
   128
    chairman and executive directors: beneficial shareholdings
   137
Reserves
   198
Results by business
   10

‘Income’ refers to total income net of insurance claims, unless otherwise specified.

‘Profit before business disposals’ represents profit before tax and disposal of subsidiaries, associates and joint ventures.

‘Cost:income ratio’ is defined as operating expenses compared to total income net of insurance claims.

‘Risk Tendency’ is a statistical estimate of the average loss for each loan portfolio for a 12-month period, taking into account the size of the portfolio and its risk characteristics under current economic conditions, and is used to track the change in risk as the portfolio of loans changes over time.

‘Daily Value at Risk (DVaR)’is an estimate of the potential loss which might arise from unfavourable market movements, if the current positions were to be held unchanged for one business day, measured to a confidence level of 98%.

‘Absa Group Limited’refers to the consolidated results of the South African group of which the parent company is listed on the Johannesburg Stock Exchange (JSE Limited) in which Barclays owns a controlling stake.

‘Absa’refers to the results for Absa Group Limited as consolidated into the results of Barclays PLC; translated into Sterling with adjustments for amortisation of intangible assets, certain head office adjustments, transfer pricing and minority interests.

‘Global Retail and Commercial Banking – Absa’ is the portion of Absa’s results that is reported by Barclays within the Global Retail and Commercial Banking business.

‘Absa Capital’ is the portion of Absa’s results that is reported by Barclays within the Barclays Capital business.

~~276~~

Barclays

Annual Report ~~2007~~2008

313

Signatures

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this annual report on its behalf.


Date March ~~26, 2008~~24, 2009	Barclays PLC (Registrant)

	By	/s/ Chris Lucas
		Chris Lucas, Group Finance Director

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorised the undersigned to sign this annual report on its behalf.


Date March ~~26, 2008~~24, 2009	Barclays Bank PLC (Registrant)

	By	/s/ Chris Lucas
		Chris Lucas, Group Finance Director

~~Barclays~~

~~Annual Report 2007~~

~~277~~

EXHIBIT INDEX


EXHIBIT NUMBER		DESCRIPTION
1.1		Memorandum and Articles of Association of Barclays PLC

1.2		Memorandum and Articles of Association of Barclays Bank PLC

2.1		Long term debt instruments

4.1		Rules of the Barclays Group Performance Share Plan (2005) (incorporated by reference to the 2006 Form 20-F filed on March 26^th, 2007)

4.2		Rules of the Barclays PLC Renewed 1986 Executive Share Option Scheme (incorporated by reference to the ~~2000~~Barclays PLC Registration Statement on Form ~~20-F~~S-8 (File no. 333-153723) filed on ~~April 16~~September 29^th, ~~2001)~~2008)

4.3		Rules of the Barclays PLC Approved Incentive Share Option ~~Plans and Appendix relating to eligible employees resident in France~~Plan (incorporated by reference to the ~~2004~~Barclays PLC Registration Statement on Form ~~20-F~~S-8 (File no. 333-153723) filed on ~~March 24~~September 29^th, ~~2005)~~2008)

4.4		Rules of the Barclays PLC Unapproved Incentive Share Option Plans (incorporated by reference to the Barclays PLC Registration Statement on Form S-8 (File no. 333-153723) filed on September 29^th, 2008)

4.5		Rules of the Barclays PLC Executive Share Award Scheme (incorporated by reference to the Barclays PLC Registration Statement on Form S-8 (File no. 333-153723) filed on September 29^th, 2008)

4.6		Rules of the Barclays Group Special Award Performance Share Plan (incorporated by reference to the Barclays PLC Registration Statement on Form S-8 (File no. 333-153723) filed on September 29^th, 2008)

4.7		Rules of the Barclays Group Incentive Share Plan (incorporated by reference to the Barclays PLC Registration Statement on Form S-8 (File no. 333-153723) filed on September 29^th, 2008)

4.8		Rules of Barclays Bank PLC 1999 Directors Deferred Compensation Plan (amended and restated, effective January 1, 2008) (incorporated by reference to Barclays Bank PLC’s Registration Statement on Form S-8 (File no. 333-149301) filed on February 19, 2008)


EXHIBIT NUMBER		DESCRIPTION
4.9		Rules of Barclays Bank PLC Senior Management Deferred Compensation Plan (amended and restated, effective January 1, 2008) (incorporated by reference to Barclays Bank PLC’s Registration Statement on Form S-8 (File no. 333-149302) filed on February 19, 2008)

4.10		Service Contract – John Varley (incorporated by reference to the 2003 Form 20-F filed on March 26^th, 2004)

~~4.5~~		~~Service Contract – Naguib Kheraj (incorporated by reference to the 2003 Form 20-F filed on March 26~~^th~~, 2004)~~

~~4.6~~4.11		Service Contract and Subsequent Side Letter to Service Contract – Gary Hoffman (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.7~~4.12		Service Contract – Robert E. Diamond Jr (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.8~~4.13		Employment Contract and Assignment Agreement – Frederik Seegers (incorporated by reference to the 2006 Form 20-F filed on March 26^th, 2007)

4.14		Contract of Employment – Christopher Lucas (incorporated by reference to the 2006 Form 20-F filed on March 26^th, 2007)

4.15		Addendum to contract of employment between Barclays Bank plc and Gary Hoffman (incorporated by reference to the 2006 Form 20-F filed on March 26^th, 2007)

4.16		Addendum to contract of employment between Barclays Bank plc and John Varley (incorporated by reference to the 2006 Form 20-F filed on March 26^th, 2007)

4.17		Appointment Letter and Subsequent Amendment to appoint as Senior Independent Director – Sir Richard Broadbent (incorporated by reference to the 2004 Form 20-F filed on March 24^th, 2005)

~~4.9~~4.18		Appointment Letter – Professor Dame Sandra Dawson (incorporated by reference to the 2004 Form 20-F filed on March 24^th, 2005)

~~4.10~~4.19		Appointment Letter and Subsequent Amendment to appoint as Deputy Chairman – Sir Nigel Rudd (incorporated by reference to the 2004 Form 20-F filed on March 24^th, 2005)

~~4.11~~4.20		Appointment Letter – Stephen Russell (incorporated by reference to the 2004 Form 20-F filed on March 24^th, 2005)

~~4.12~~4.21		Appointment Letter – Leigh Clifford (incorporated by reference to the 2004 Form 20-F filed on March 24^th, 2005)



~~4.13~~4.22		Appointment Letter – Sir Andrew Likierman (incorporated by reference to the 2004 Form 20-F filed on March 24^th, 2005)


~~4.14~~ EXHIBIT NUMBER		DESCRIPTION
4.23		Appointment Letter – Dr Daniël Cronjé (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.15~~4.24		Appointment Letter – John Sunderland (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.16~~4.25		~~Indemnity~~Appointment Letter – ~~Matthew Barrett~~Marcus Agius (incorporated by reference to the ~~2005~~2006 Form 20-F filed on March 2926^th, ~~2006)~~2007)

~~4.17~~4.26		Appointment Letter – Fulvio Conti (incorporated by reference to the 2006 Form 20-F filed on March 26^th, 2007)

4.27		Appointment Letter – David Booth (incorporated by reference to the 2007 20-F filed on March 26^th, 2008)

4.28		Appointment Letter – Sir Michael Rake (incorporated by reference to the 2007 20-F filed on March 26^th, 2008)

4.29		Appointment Letter – Patience Wheatcroft (incorporated by reference to the 2007 20-F filed on March 26^th, 2008)

4.30		Appointment Letter – Simon Fraser

4.31		Indemnity Letter – John Varley (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.18~~		~~Indemnity Letter – Naguib Kheraj (incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~

~~4.19~~4.32		Indemnity Letter – Gary Hoffman (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.20~~		~~Indemnity Letter – David Roberts (incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~

~~4.21~~4.33		Indemnity Letter – Robert E. Diamond Jr (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.22~~4.34		Indemnity Letter – Sir Richard Broadbent (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.23~~4.35		Indemnity Letter – Professor Dame Sandra Dawson (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)


~~4.24~~ EXHIBIT NUMBER		DESCRIPTION
4.36		Indemnity Letter – Sir Nigel Rudd (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.25~~4.37		Indemnity Letter – Stephen Russell (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.26~~4.38		Indemnity Letter – Leigh Clifford (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.27~~4.39		Indemnity Letter – Sir Andrew Likierman (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.28~~4.40		Indemnity Letter – Dr Daniël Cronjé (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)



~~4.29~~		~~Indemnity Letter – Robert Steel (incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~

~~4.30~~4.41		Indemnity Letter – John Sunderland (incorporated by reference to the 2005 Form 20-F filed on March 29^th, 2006)

~~4.31~~		~~Indemnity Letter – Sir David Arculus (incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~

~~4.32~~		~~Employment Contract and Assignment Agreement – Frederik Seegers (incorporated by reference to the 2006 Form 20-F filed on March 26~~^th~~, 2007)~~

~~4.33~~		~~Appointment Letter – Marcus Agius (incorporated by reference to the 2006 Form 20-F filed on March 26~~^th~~, 2007)~~

~~4.34~~		~~Contract of Employment – Christopher Lucas (incorporated by reference to the 2006 Form 20-F filed on March 26~~^th~~, 2007)~~

~~4.35~~		~~Appointment Letter – Fulvio Conti (incorporated by reference to the 2006 Form 20-F filed on March 26~~^th~~, 2007)~~

~~4.36~~		~~Addendum to contract of employment between Barclays Bank plc and Gary Hoffman (incorporated by reference to the 2006 Form 20-F filed on March 26~~^th~~, 2007)~~

~~4.37~~		~~Addendum to contract of employment between Barclays Bank plc and John Varley (incorporated by reference to the 2006 Form 20-F filed on March 26~~^th~~, 2007)~~

~~4.38~~		~~Appointment Letter – David Booth~~

~~4.39~~		~~Appointment Letter – Sir Michael Rake~~

~~4.40~~		~~Appointment Letter – Patience Wheatcroft~~

~~4.41~~		~~Rules of the Barclays PLC Executive Share Award Scheme~~

4.42		~~Rules of~~Term sheet for Barclays ~~Bank~~ PLC 1999 Directors Deferred Compensation Plan (amended and restated, effective January 1, 2008) (incorporated by reference to Barclays Bank PLC’s Registration Statement on Form S-8 (File no. 333-149301) filed on February 19, 2008)Warrants

4.43		~~Rules of~~Term Sheet for Barclays Bank PLC Senior Management Deferred Compensation Plan (amended and restated, effective January 1, 2008) (incorporated by reference to Barclays Bank PLC’s Registration Statement on Form S-8 (File no. 333-149302) filed on February 19, 2008)£4.05 billion Mandatory Convertible Notes (MCNs)

7.1		Ratios of earnings under IFRS to fixed charges

7.2		Ratios of earnings under IFRS to combined fixed charges, preference share dividends and similar appropriations

8.1		List of subsidiaries

11.1		Code of Ethics (incorporated by reference to the 2003 Form 20-F filed on March 26^th, 2004)



12.1		Certifications filed pursuant to 17 CFR 240. 13(a)-14(a)

13.1		Certifications filed pursuant to 17 CFR 240. 13(a) and 18 U.S.C 1350(a) and 1350(b)

15.1		Consent of PricewaterhouseCoopers LLP for incorporation by reference of reports in certain securities registration statements of Barclays PLC and Barclays Bank PLC.


Commission file ~~numbers:~~ numbers	Barclays PLC	1-09246
			Barclays Bank PLC	1-10257


	Title of ~~each class~~Each Class	Name of ~~each exchange on which registered~~Each Exchange On Which Registered
~~Barclays PLC~~25p ordinary shares	~~25p ordinary shares~~ New York Stock Exchange*
American ~~Depositary~~Depository Shares, each representing four 25p ordinary shares	New York Stock Exchange


Title of Each Class	New York Stock Exchange* ~~New York Stock~~Name of Each Exchange On Which Registered
~~Barclays Bank PLC~~	7.4% Subordinated Notes 2009	New York Stock Exchange
	Callable Floating Rate Notes 2035	New York Stock Exchange
	Non-Cumulative Callable Dollar
	Preference Shares, Series 2	New York Stock Exchange*
	American ~~Depositary~~Depository Shares, Series
	2, each representing one ~~Non-~~
	~~Cumulative~~Non-Cumulative Callable Dollar
	Preference Share, Series 2	New York Stock Exchange
	Non-Cumulative Callable Dollar
	Preference Shares, Series 3	New York Stock Exchange*
	American ~~Depositary~~Depository Shares, Series
	2, 3, each representing one ~~Non-~~
	~~Cumulative~~Non-Cumulative Callable Dollar
	Preference Share, Series 3	New York Stock Exchange
	Non-Cumulative Callable Dollar
	Preference Shares, Series 4	New York Stock Exchange*
	American ~~Depositary~~Depository Shares, Series
	2, 4, each representing one ~~Non-~~
	~~Cumulative~~Non-Cumulative Callable Dollar
	Preference Share, Series 4	New York Stock Exchange
Non-Cumulative Callable Dollar Preference Shares, Series 5	~~iPath~~^SM ~~CBOE S&P 500 BuyWrite~~New York Stock Exchange*
American Depository Shares, Series 5, each representing one Non-Cumulative Callable Dollar Preference Share, Series 5
	~~Index~~^SM	~~American~~New York Stock Exchange
	iPath^® Dow Jones – AIG Grains ~~Total~~
	total Return Sub-Index^SM ETN	NYSE Arca
	iPath^® Dow Jones – AIG Livestock
	Total Return Sub-Index^SM ETN	NYSE Arca
	iPath^® Dow Jones – AIG Nickel ~~Total~~
	~~Return Sub-Index~~^SM ~~ETN~~	~~NYSE Arca~~
	~~iPath~~^® ~~Dow Jones – AIG Copper Total~~
	~~Return Sub-Index~~^SM ~~ETN~~	~~NYSE Arca~~
	~~iPath~~^® ~~Dow Jones – AIG Energy Total~~
	~~Return Sub-Index~~^SM ~~ETN~~	~~NYSE Arca~~
	~~iPath~~^® ~~Dow Jones – AIG Agriculture~~
	~~Total Return Sub-lndex~~^SM ~~ETN~~	~~NYSE Arca~~
	~~iPath~~^® ~~Dow Jones – AIG Natural Gas~~
	Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones – AIG Copper Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones – AIG Energy Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones – AIG Agriculture Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones – AIG Natural Gas total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones – AIG Industrial
	Metals Total Return Sub-Index^SM
	ETN	NYSE Arca
	iPath^® ~~GBP/USD Exchange Rate~~Dow Jones-AIG Softs Total Return Sub-Index
	^SMETN	NYSE Arca
iPath^® Dow Jones-AIG Tin Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones-AIG Coffee Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones-AIG Cotton Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones-AIG Sugar Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones-AIG Precious Metals Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones-AIG Platinum Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones-AIG Cocoa Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones-AIG Lead Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Dow Jones-AIG Aluminum Total Return Sub-Index^SM ETN	NYSE Arca
iPath^® Global Carbon ETN	NYSE Arca
iPath^® Dow Jones – AIG Commodity
	Index Total Return^SM ETN	NYSE Arca
	iPath^® ~~EUR/USD Exchange Rate~~S&P GSCI
	^TM Crude Oil Total Return Index ETN	NYSE Arca
	iPath^® S&P ~~GSCI™~~GSCI^TM Total Return
	Index ETN	NYSE Arca
	iPath^® MSCI India Index^SM ETN	NYSE Arca
	iPath^® ~~S&P GSCI™ Crude Oil Total~~EUR/USD Exchange Rate ETN
	~~Return Index ETN~~	NYSE Arca
iPath^® GBP/USD Exchange Rate ETN	NYSE Arca
iPath^® JPY/USD Exchange Rate ETN	NYSE Arca
iPath^® S&P500 VIX Short-Term Futures^TM ETN	NYSE Arca
iPath^® S&P 500 VIX Mid-Term Futures^TM ETN	NYSE Arca
iPath^® CBOE S&P 500 BuyWrite Index^SM ETN	NYSE Arca
iPath^® Optimized Currency Carry ETN	NYSE Arca
Barclays GEMS Index^TM ETN	NYSE Arca
Barclays GEMS Asia 8 ETN	NYSE Arca
Barclays Asian and Gulf Currency Revaluation ETN	NYSE Arca
Barclays GEMS Index^TM ETN	American Stock Exchange


Barclays PLC	25p ordinary shares	~~6,534,698,021~~
	~~£1 staff shares~~	~~875,000~~8,371,830,617
Barclays Bank PLC	£1 ordinary shares	~~2,337,161,000~~2,338,170,515
	£1 preference shares	1,000
	£100 preference shares	75,000
	€100 preference shares	240,000
	$0.25 preference shares	~~131,000,000~~237,000,000
	$100 preference shares	100,000


Form 20-F item number		Page ~~reference~~ and caption references in this documentdocument
1	Identity of Directors, Senior Management and Advisers
	Not applicable
2	Offer Statistics and Expected Timetable
	Not applicable
3	Key Information
	~~Risk factors~~A. Selected financial data	63 2, 12, 304
	~~Currency of presentation~~B. Capitalization and indebtedness	~~265~~ Not applicable
	~~Financial data~~C. Reason for the offer and use of proceeds	6Not applicable
	~~Dividends~~D. Risk factors	~~267~~ 57-61
4	Information on the Company
	~~Presentation~~A. History and development of ~~information~~the company	~~146~~176, 234(Note 38)-239(Note 42), 244(Events after balance sheet date), 305
	~~Glossary~~B. Business overview	~~266~~ 30, 135-136, 202-204(Note 14), 232(Note 36), 279-284 (Note 53)
	~~Business description~~C. Organizational structure	8
	~~Acquisitions~~	~~158~~
	~~Financial review~~	3
	~~Recent developments~~	~~159~~
	~~Supervision~~238(Notes 40 and ~~regulation~~	~~110~~
	41), 239(Note ~~23 Property, plant and equipment~~	~~181~~
	~~Note 34 Contingent liabilities and commitments~~	~~200~~
	~~Note 40 Principal subsidiaries~~	~~206~~ 42)
	~~Note 51 Segmental reporting~~D. Property, plants and equipment	~~247~~ 210(Note 23), 233-224(Note 37)
4A	Unresolved staff comments
	Not applicable
5	Operating and Financial Review and Prospects
	~~Financial review~~A. Operating results	2-52, 135-136, 202-204(Note 14), 232(Note 36), 267(Note 48)
	B. Liquidity and capital resources	17, 91-92, 111-116, 193, 202-204(Note 14), 214-218(Note 27), 219(Note 29), 226-228(Note 31), 230-231(Note 34), 268-272(Note 49), 278(Note 52)
	C. Research and development, patents and licenses, etc.	3Not applicable
	~~Capital adequacy~~D. Trend information	70 11
	~~Liquidity management~~E. Off-balance sheet arrangements	91 25-26
	~~Note 14 Derivative Financial Instruments~~F. Tabular disclosure of contractual obligations	~~172~~
	~~Note 46 Market Risk~~	~~218~~
	~~Note 48 Liquidity Risk~~	~~240~~19
	~~Note 50 Capital Management~~G. Safe harbor	~~246~~Inside front cover (Forward-looking statements)
6	Directors, Senior Management and Employees
	~~Board~~A. Directors and ~~Executive Committee~~ senior management	~~112~~ 138-139
	~~Directors’ report~~B. Compensation	~~114~~ 157-172, 220-226(Note 30), 240-243(Note 43)
	~~Corporate governance report~~C. Board practices	~~117~~ 138-139, 141-156, 165-166
	~~Remuneration report~~D. Employees	~~128~~
	~~Accountability and Audit~~	~~143~~
	~~Note 8 Staff costs~~	~~168~~
	~~Note 30 Retirement benefit obligations~~	~~190~~ 9-10, 55
	~~Note 42 Related party transactions and Directors’ remuneration~~E. Share ownership	~~208~~ 157-172, 243(Note 43)
7	Major Shareholders and Related Party Transactions
	~~Presentation of information~~A. Major shareholders	~~146~~ 141, 176
	~~Directors’ report~~B. Related party transactions	~~114~~
	240-243(Note ~~42 Related party transactions and Director’s remuneration~~	~~208~~ 43)
	~~Trading market for ordinary shares~~C. Interests of ~~Barclays PLC~~experts and counsel	~~267~~ Not applicable
8	Financial Information
	~~Financial~~A. Consolidated statements and other financial information	~~145~~
	~~Note 1 Dividends per share –Barclays PLC~~	~~166~~
	~~Note 35 Legal proceedings~~	~~201~~
	~~Note 43 Events after the balance sheet date~~	~~212~~ 11, 140, 177-298, 305-306
	~~Dividends – Barclays PLC~~B. Significant changes	~~267~~ 11, 189, 244(Note 44)
9	The Offer and Listing
	~~Trading market for ordinary shares of Barclays PLC~~A. Offer and listing details	~~267~~ 303

	B. Plan of distribution		Not applicable
~~Form 20-F~~ ~~item number~~	C. Markets		302
	D. Selling shareholders		Not applicable
	E. Dilution		Not applicable
	F. Expenses of the issue	Page reference in this document*	Not applicable
10	Additional Information
	A. Share capital		Not applicable
	B. Memorandum and Articles of Association		~~269~~ 305-307
	~~Taxation~~C. Material contracts		~~271~~ 142, 165-166, 227-228(Note 31)
	D. Exchange controls ~~and other~~		~~273~~ 239(Note 42), 309
	~~limitations affecting security holders~~E. Taxation		307-309
	F. Dividends and paying agents		Not applicable
	G. Statement by experts		Not applicable
	H. Documents on display		309
	~~Documents on display~~I. Subsidiary information		~~273~~ 238(Note 40)
11	Quantitative and ~~qualitative disclosure~~Qualitative Disclosures about ~~market risk~~Market Risk
	~~Risk management Introduction~~		65
	~~Credit risk management~~		74
	~~Monitoring of Loans and advances~~		80
	~~Allowances for impairment and other credit provisions~~		84
	~~Potential credit risk loans~~		82
	~~Loans and advances in non-local currencies~~		~~101~~
	~~Market risk management~~		86
	~~Derivatives~~		89
	~~Capital adequacy~~		70
	~~Liquidity management~~		91
	56-134, 250(Note ~~14 Derivative financial instruments~~		~~172~~ 46)-272(Note 49)
12	Description of Securities Other than Equity Securities
	Not applicable
13	Defaults, ~~Dividends~~Dividend 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		~~144~~ 174
	B. Management’s annual report on internal control over financial reporting		~~143~~ 173
	~~Independent~~C. Attestation report of the registered public accounting ~~firm’s report~~firm		~~147~~ 177-178
	D. Changes in internal control over financial reporting		~~144~~ 174
15T	Controls and Procedures		173-174, 177
16A	Audit Committee Financial Expert		~~122~~ 149
16B	Code of Ethics		~~Exhibit 11.1~~ 155
16C	Principal Accountant Fees and Services		~~122,169~~ 142, 151(Non-Audit Services Policy), 198-199(Note 9)
16D	Exemptions from the Listing Standards for Audit Committees
	Not applicable
16E	~~Share Repurchase~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers		227(Share repurchase)
~~197~~16F	Change in Registrant’s Certifying Accountant		Not applicable
16G	Corporate Governance		143, 155
17	Financial Statements
	Not applicable
18	Financial Statements
	~~Independent registered public accounting firm’s report for Barclays PLC~~		~~147~~
	~~Independent registered public accounting firm report for Barlays Bank PLC~~		~~148~~
	~~Accounting policies~~		~~149~~
	~~Consolidated accounts Barclays PLC~~		~~149~~
	~~Notes to accounts of Barclays PLC~~		~~166~~
	~~Barclays Bank PLC data~~		~~250~~
	~~Notes to consolidated accounts of Barclays Bank PLC~~		~~254~~ 175-300
19	Exhibits
	~~Included in documents as filed with the SEC~~		Exhibit Index


~~Contents~~

~~Section 1~~ Business review		31

Financial review		31

Corporate sustainability		5853

Our people		55

Risk management		6156

~~Section 2~~ Governance		~~111~~137

Board and Executive Committee		~~112~~138

Directors’ report		~~114~~140

Corporate governance report		~~117~~143

Remuneration report		~~128~~157

Accountability and audit		~~143~~173

~~Section 3~~ Financial statements		~~145~~175

Presentation of information		~~146~~176

Independent Auditors’ report/Independent Registered Public Accounting Firm’s report ~~– Barclays PLC~~		~~147~~

~~Independent Registered~~ ~~Public Accounting Firm’s report – Barclays Bank PLC~~		~~148~~177

Consolidated accounts Barclays PLC		~~149~~179

~~Consolidated accounts~~ Barclays Bank PLC data		~~250~~285

~~Section 4~~ Shareholder information		~~267~~


Income statement commentary	3

Consolidated balance sheet		~~Financial~~ ~~review~~	12

Balance sheet commentary	13

		~~Group performance~~Capital management	417

Additional financial disclosure	18

		~~Financial data~~Deposits and short-term borrowings	618

Commitments and contractual obligations	19

Securities	20

Average balance sheet	21

Off-balance sheet arrangements	25

Critical accounting estimates	27

Business description	830

		Analysis of results by business	10

		~~Results by nature of income and expense~~	33

		~~Total assets and risk weighted assets~~	40

		~~Capital management~~	42

		~~Capital resources and deposits~~	44

		~~Deposits and short-term borrowings~~	45

		~~Commitments and contractual obligations~~	46

		~~Securities~~	47

		~~Critical accounting estimates~~	48

		~~Off-balance sheet arrangements~~	51

		~~Barclays Capital credit market positions~~	53

		~~Average balance sheet~~	54

		~~Corporate sustainability~~	5831


For the year ended 31st December
	2007 £m		2006 £m			2005 £m		2004 £m^a		2008 £m		2007 £m		2006 £m		2005 £m		2004 £m^a
Net interest income	9,610		9,143			8,075		6,833		11,469		9,610		9,143		8,075		6,833
Net fee and commission income	7,708		7,177			5,705		4,847		8,407		7,708		7,177		5,705		4,847
Principal transactions	4,975		4,576			3,179		2,514		2,009		4,975		4,576		3,179		2,514
Net premiums from insurance contracts	1,011		1,060			872		1,042		1,090		1,011		1,060		872		1,042
Other income	188		214			147		131		377		188		214		147		131
Total income	23,492		22,170			17,978		15,367		23,352		23,492		22,170		17,978		15,367
Net claims and benefits incurred on insurance contracts	(492	)	(575	)		(645	)	(1,259	)	(237	)	(492	)	(575	)	(645	)	(1,259	)
Total income net of insurance claims	23,000		21,595			17,333		14,108		23,115		23,000		21,595		17,333		14,108
Impairment charges and other credit provisions	(2,795	)	(2,154	)		(1,571	)	(1,093	)	(5,419	)	(2,795	)	(2,154	)	(1,571	)	(1,093	)
Net income	20,205		19,441		��	15,762		13,015		17,696		20,205		19,441		15,762		13,015
Operating expenses	(13,199	)	(12,674	)		(10,527	)	(8,536	)	(14,366	)	(13,199	)	(12,674	)	(10,527	)	(8,536	)
Share of post-tax results of associates and joint ventures	42		46			45		56		14		42		46		45		56
Profit before business disposals	7,048		6,813			5,280		4,535
Profit before business acquisitions and disposals										3,344		7,048		6,813		5,280		4,535
Profit on disposal of subsidiaries, associates and joint ventures	28		323			–		45		327		28		323		–		45
Gains on acquisitions										2,406		–		–		–		–
Profit before tax	7,076		7,136			5,280		4,580		6,077		7,076		7,136		5,280		4,580
Tax	(1,981	)	(1,941	)		(1,439	)	(1,279	)	(790	)	(1,981	)	(1,941	)	(1,439	)	(1,279	)
Profit after tax	5,095		5,195			3,841		3,301		5,287		5,095		5,195		3,841		3,301
Profit attributable to minority interests	678		624			394		47		905		678		624		394		47
Profit attributable to equity holders of the parent	4,417		4,571			3,447		3,254		4,382		4,417		4,571		3,447		3,254
	5,095		5,195			3,841		3,301
										5,287		5,095		5,195		3,841		3,301

Selected financial statistics
Basic earnings per share	68.9p		71.9p			54.4p		51.0p		59.3p		68.9p		71.9p		54.4p		51.0p
Diluted earnings per share	66.7p		69.8p			52.6p		49.8p		57.5p		66.7p		69.8p		52.6p		49.8p
Dividends per ordinary share	34.0p		31.0p			26.6p		24.0p		11.5p		34.0p		31.0p		26.6p		24.0p
Dividend payout ratio	49.3%		43.1%			48.9%		47.1%		19.4%		49.3%		43.1%		48.9%		47.1%
Profit attributable to the equity holders of the parent as a percentage of:
average shareholders’ equity	20.3%		24.7%			21.1%		21.7%		16.5%		20.3%		24.7%		21.1%		21.7%
average total assets	0.3%		0.4%			0.4%		0.5%		0.2%		0.3%		0.4%		0.4%		0.5%

Selected statistical measures
Cost:income ratio^b	57%		59%			61%		61%
Cost: income ratio										62%		57%		59%		61%		61%
Average United States Dollar exchange rate used in preparing the accounts	2.00		1.84			1.82		1.83		1.86		2.00		1.84		1.82		1.83
Average Euro exchange rate used in preparing the accounts	1.46		1.47			1.46		1.47		1.26		1.46		1.47		1.46		1.47
Average Rand exchange rate used in preparing the accounts	14.11		12.47			11.57		11.83		15.17		14.11		12.47		11.57		11.83


Staff numbers
	2008	2007	2006
UK Retail Banking	30,400	30,700	34,500
Barclays Commercial Bank	9,800	9,200	8,100
Barclaycard	9,600	8,900	9,100
GRCB – Western Europe	10,900	8,800	6,600
GRCB – Emerging Markets	22,700	13,900	7,600
GRCB – Absa	36,800	35,800	33,000
Barclays Capital	23,100	16,200	13,200
Barclays Global Investors	3,700	3,400	2,700
Barclays Wealth	7,900	6,900	6,600
Head office functions and other operations	1,400	1,100	1,200
Total Group permanent and fixed-term contract staff worldwide	156,300	134,900	122,600


	2008^b	2007^b	2007	2006
	Basel II	Basel II	Basel I	Basel I
	£m	£m	£m	£m
UK Retail Banking	30,491	31,463	46,059	43,020
Barclays Commercial
Bank	63,081	57,040	54,325	50,302
Barclaycard	27,316	20,199	19,690	16,873
GRCB
– Western Europe	36,480	24,971	24,462	17,567
GRCB
– Emerging Markets	15,080	10,484	6,050	3,255
GRCB – Absa	18,846	17,829	22,448	19,809
Barclays Capital	227,448	178,206	169,124	137,635
Barclays Global Investors	3,910	4,369	1,994	1,375
Barclays Wealth	10,300	8,216	7,692	6,077
Head office functions and other operations	350	1,101	1,632	1,920
Total risk weighted assets	433,302	353,878	353,476	297,833


Adjusted gross leverage

	2008 £m		2007 £m
Total assets	2,052,980		1,227,361
Counterparty net/ collateralised derivatives	(917,074	)	(215,485	)
Financial assets designated at fair value and associated cash balances – held in respect of linked liabilities to customers under investment contracts	(69,183	)	(92,639	)
Net settlement balances	(29,786	)	(22,459	)
Goodwill and intangible assets	(10,402	)	(8,296	)
Adjusted total tangible assets	1,026,535		888,482
Total qualifying Tier 1 capital	37,250		26,743
Adjusted gross leverage	28		33


	Average: year ended 31st December
	2008 £m	2007 £m	2006 £m
Deposits from banks
Customers in the United Kingdom	14,003	15,321	12,832
Customers outside the
United Kingdom:
Other European Union	38,210	33,162	30,116
United States	15,925	6,656	7,352
Africa	3,110	4,452	4,140
Rest of the World	36,599	36,626	35,013
Total deposits from banks	107,847	96,217	89,453
Customer accounts
Customers in the United Kingdom	206,020	187,249	173,767
Customers outside the
United Kingdom:
Other European Union	30,909	23,696	22,448
United States	31,719	21,908	17,661
Africa	35,692	29,855	23,560
Rest of the World	27,653	23,032	19,992
Customer accounts	331,993	285,740	257,428


	2008 Amount of commitment expiration per period
	Less than one year £m	Between one to three years £m	Between three to five years £m	After five years £m	Total amounts committed £m
Acceptances and endorsements	576	6	3	–	585
Guarantees and letters of credit pledged as collateral security	7,272	2,529	1,781	4,070	15,652
Securities lending arrangements	38,290	–	–	–	38,290
Other contingent liabilities	7,989	1,604	372	1,818	11,783
Documentary credits and other short-term trade related transactions	770	88	1	–	859
Forward asset purchases and forward deposits placed	50	241	–	–	291
Standby facilities, credit lines and other	195,035	29,666	26,150	8,815	259,666

	2007 Amount of commitment expiration per period
	Less than one year £m	Between one to three years £m	Between three to five years £m	After five years £m	Total amounts committed £m
Acceptances and endorsements	365	–	–	–	365
Guarantees and letters of credit pledged as collateral security	6,417	2,711	1,971	1,874	12,973
Securities lending arrangements	22,719	–	–	–	22,719
Other contingent liabilities	6,594	1,556	416	1,151	9,717
Documentary credits and other short-term trade related transactions	401	121	–	–	522
Forward asset purchases and forward deposits placed	283	–	–	–	283
Standby facilities, credit lines and other	136,457	17,039	28,127	10,211	191,834
Contractual obligations include debt securities, operating lease and purchase obligations. Contractual obligations
	2008 Payments due by period
	Less than one year £m	Between one to three years £m	Between three to five years £m	After five years £m	Total £m
Long-term debt	108,172	24,701	10,855	22,008	165,736
Operating lease obligations	280	690	785	2,745	4,500
Purchase obligations	214	225	61	20	520
Total	108,666	25,616	11,701	24,773	170,756

	2007 Payments due by period
	Less than one year £m	Between one to three years £m	Between three to five years £m	After five years £m	Total £m
Long-term debt	90,201	13,558	8,630	19,358	131,747
Operating lease obligations	197	755	610	2,225	3,787
Purchase obligations	141	186	27	6	360
Total	90,539	14,499	9,267	21,589	135,894


	Maturing within one year		Maturing after one but within five years			Maturing after five but within ten years		Maturing after ten years		Total
	Amount £m	Yield %	Amount £m		Yield %	Amount £m	Yield %	Amount £m	Yield %	Amount £m	Yield %
Government	3,096	6.0	5,410		5.1	1,694	1.1	2,493	0.9	12,693	4.0
Other public bodies	832	1.9	1,526		0.9	1	–	14	4.7	2,373	1.3
Other issuers	21,749	4.3	9,692	��	3.8	7,702	4.4	4,622	5.7	43,765	4.3
Total book value	25,677	4.4	16,628		3.9	9,397	3.8	7,129	4.0	58,831	4.1


	2008/2007 Change due to increase/ (decrease) in:						2007/2006 Change due to increase/ (decrease) in:						2006/2005 Change due to increase/ (decrease) in:
	Total change £m		Volume £m		Rate £m		Total change £m		Volume £m		Rate £m		Total change £m		Volume £m		Rate £m
Interest receivable
Loans and advances to banks:
– in offices in the UK	379		354		25		427		402		25		193		121		72
– in offices outside the UK	(360	)	117		(477	)	291		(1	)	292		85		46		39
	19		471		(452	)	718		401		317		278		167		111
Loans and advances to customers:
– in offices in the UK	687		2,525		(1,838	)	1,780		1,337		443		1,018		726		292
– in offices outside the UK	2,475		2,214		261		1,802		728		1,074		1,956		1,695		261
	3,162		4,739		(1,577	)	3,582		2,065		1,517		2,974		2,421		553
Lease receivables:
– in offices in the UK	(2	)	–		(2	)	(17	)	(26	)	9		(48	)	(70	)	22
– in offices outside the UK	61		79		(18	)	96		(30	)	126		478		413		65
	59		79		(20	)	79		(56	)	135		430		343		87
Financial investments:
– in offices in the UK	(385	)	(102	)	(283	)	103		(165	)	268		181		(85	)	266
– in offices outside the UK	245		(163	)	408		(378	)	32		(410	)	363		202		161
	(140	)	(265	)	125		(275	)	(133	)	(142	)	544		117		427
Reverse repurchase agreements and cash collateral on securities borrowed:
– in offices in the UK	(876	)	(188	)	(688	)	3,508		1,865		1,643		1,519		324		1,195
– in offices outside the UK	(1,004	)	855		(1,859	)	414		430		(16	)	2,316		254		2,062
	(1,880	)	667		(2,547	)	3,922		2,295		1,627		3,835		578		3,257
Trading portfolio assets:
– in offices in the UK	(978	)	(616	)	(362	)	1,760		621		1,139		1,456		907		549
– in offices outside the UK	2,088		3,303		(1,215	)	881		(172	)	1,053		492		151		341
	1,110		2,687		(1,577	)	2,641		449		2,192		1,948		1,058		890
Total interest receivable:
– in offices in the UK	(1,175	)	1,973		(3,148	)	7,561		4,034		3,527		4,319		1,923		2,396
– in offices outside the UK	3,505		6,405		(2,900	)	3,106		987		2,119		5,690		2,761		2,929
	2,330		8,378		(6,048	)	10,667		5,021		5,646		10,009		4,684		5,325


Analysis of results by business For the year ended 31st December 2007
	UK Banking £m		Barclaycard £m		International Retail and Commercial Banking £m		Barclays Capital £m		Barclays Global Investors £m		Barclays Wealth £m		Head office functions and other operations £m		Group £m

Net interest income	4,596		1,394		1,890		1,179		(8	)	431		128		9,610
Net fee and commission income	1,932		1,080		1,210		1,235		1,936		739		(424	)	7,708
Principal transactions^a	56		11		248		4,692		(4	)	55		(83	)	4,975
Net premiums from insurance contracts	252		40		372		–		–		195		152		1,011
Other income	58		(26	)	87		13		2		19		35		188

Total income	6,894		2,499		3,807		7,119		1,926		1,439		(192	)	23,492
Net claims and benefits incurred on insurance contracts	(43	)	(13	)	(284	)	–		–		(152	)	–		(492	)

Total income, net of insurance claims	6,851		2,486		3,523		7,119		1,926		1,287		(192	)	23,000
Impairment charges	(849	)	(838	)	(252	)	(846	)	–		(7	)	(3	)	(2,795	)

Net income	6,002		1,648		3,271		6,273		1,926		1,280		(195	)	20,205
Operating expenses	(3,370	)	(1,101	)	(2,356	)	(3,973	)	(1,192	)	(973	)	(234	)	(13,199	)
Share of post-tax results of associates and joint ventures	7		(7	)	7		35		–		–		–		42
Profit before business disposals	2,639		540		922		2,335		734		307		(429	)	7,048
Profit on disposal of subsidiaries, associates and joint ventures	14		–		13		–		–		–		1		28

Profit before tax	2,653		540		935		2,335		734		307		(428	)	7,076

As at 31st December 2007

Total assets	161,777		22,164		89,457		839,662		89,224		18,024		7,053		1,227,361

Total liabilities	166,988		1,559		48,809		811,516		87,101		43,988		34,924		1,194,885


Analysis of results by business For the year ended 31st December 2008

	Barclays Capital £m		Barclays Global Investors £m		Barclays Wealth £m

Net interest income	1,724		(38	)	486
Net fee and commission income	1,429		1,917		720
Principal transactions	2,065		(43	)	(344	)
Net premiums from insurance contracts	–		–		136
Other income	13		8		26
Total income	5,231		1,844		1,024
Net claims and benefits incurred on insurance contracts	–		–		300
Total income, net of insurance claims	5,231		1,844		1,324
Impairment charges and other credit provisions	(2,423	)	–		(44	)
Net income	2,808		1,844		1,280
Operating expenses	(3,774	)	(1,249	)	(935	)
Share of post-tax results of associates and joint ventures	6		–		–
Profit on disposal of subsidiaries	–		–		326
Gain on acquisition	2,262		–		–
Profit before tax	1,302		595		671

As at 31st December 2008
Total assets	1,629,117		71,340		13,263
Total liabilities	1,603,093		68,372		45,846


Key facts
	2008		2007		2006
Personal Customers
Number of UK current accounts^a		11.7m		11.3m		11.5m
Number of UK savings accounts		12.0m		11.1m		11.0m
Total UK mortgage balances	£	82.3bn	£	69.8bn	£	61.7bn
Local Business
Number of Local Business customers		660,000		643,000		630,000


Key facts
League table rankings	2008	2007	2006
Rankings:
Global All Bonds	1	2	1
US Investment Grade	3	10	7
US Government Securities Survey	1	1	8
Foreign Exchange Survey	3	5	4
US M&A	4	–	–


	Amount of commitment expiration per period
	Less than one year £m	Between one to three years £m	Between three to five years £m	After five years £m	Total amounts committed £m

Acceptances and endorsements	365	–	–	–	365
Guarantees and letters of credit pledged as collateral security	29,136	2,711	1,971	1,874	35,692
Other contingent liabilities	6,594	1,556	416	1,151	9,717
Documentary credits and other short-term trade related transactions	401	121	–	–	522
Forward asset purchases and forward deposits placed	283	–	–	–	283
Standby facilities, credit lines and other	136,457	17,039	28,127	10,211	191,834


	Payments due by period
	Less than one year £m	Between one to three years £m	Between three to five years £m	After five years £m	Total £m

Long-term debt	90,201	13,558	8,630	19,358	131,747
Operating lease obligations	197	755	610	2,225	3,787
Purchase obligations	141	186	27	6	360

Total	90,539	14,499	9,267	21,589	135,894


	Maturing within one year:		Maturing after one but within five years:		Maturing after five but within ten years:		Maturing after ten years:		Total:
	Amount £m	Yield %	Amount £m	Yield %	Amount £m	Yield %	Amount £m	Yield %	Amount £m	Yield %
Government	1,354	5.8	3,997	4.0	788	1.6	1,322	1.1	7,461	3.5
Other public bodies	546	8.6	78	1.3	–	–	10	5.2	634	7.7
Other issuers	11,849	5.2	12,542	4.9	4,343	5.6	1,844	7.0	30,578	5.2
Total book value	13,749	5.4	16,617	4.6	5,131	5.0	3,176	4.5	38,673	5.0


	Unobservable inputs £m	Total £m
Assets stated at fair value
Trading portfolio assets	4,457	193,691
Financial assets designated at fair value:
– held on own account	16,819	56,629
– held in respect of linked liabilities to customers under investment contracts	–	90,851
Derivative financial instruments	2,707	248,088
Available for sale financial investments	810	43,072
Total	24,793	632,331

	Unobservable inputs £m	Total £m
Liabilities stated at fair value
Trading portfolio liabilities	42	65,402
Financial liabilities designated at fair value	6,172	74,489
Liabilities to customers under investment contracts	–	92,639
Derivative financial instruments	4,382	248,288
Total	10,596	480,818


	As at
	31st December 2007 £m		30th June 2007 £m
ABS CDO Super Senior
High Grade	4,869		6,151
Mezzanine	1,149		1,629
Exposure before hedging	6,018		7,780
Hedges	(1,347	)	(348	)
Net ABS CDO Super Senior	4,671		7,432

Other US sub-prime
Whole loans	3,205		2,900
Other direct and indirect exposures	1,832		3,146
Other US sub-prime	5,037		6,046
Alt-A	4,916		3,760
Monoline insurers	1,335		140
Commercial mortgages	12,399		8,282
SIV-lite liquidity facilities	152		692
Structured investment vehicles	590		925


	2007/2006 Change due to increase/(decrease) in:						2006/2005 Change due to increase/(decrease) in:					2005/2004^aChange due to increase/(decrease) in:
	Total change £m		Volume £m		Rate £m		Total change £m		Volume £m		Rate £m	Total change £m	Volume £m		Rate £m
Interest receivable
Treasury bills and other eligible bills:
– in offices in the UK	n/a		n/a		n/a		n/a		n/a		n/a	(68)	(68	)	n/a
– in offices outside the UK	n/a		n/a		n/a		n/a		n/a		n/a	(63)	(63	)	n/a
	n/a		n/a		n/a		n/a		n/a		n/a	(131)	(131	)	n/a
Loans and advances to banks:
– in offices in the UK	427		402		25		193		121		72	(237)	(115	)	(122	)
– in offices outside the UK	291		(1	)	292		85		46		39	132	45		87
	718		401		317		278		167		111	(105)	(70	)	(35	)
Loans and advances to customers:
– in offices in the UK	1,780		1,337		443		1,018		726		292	1,419	1,681		(262	)
– in offices outside the UK	1,802		728		1,074		1,956		1,695		261	1,705	787		918
	3,582		2,065		1,517		2,974		2,421		553	3,124	2,468		656
Lease receivables:
– in offices in the UK	(17	)	(26	)	9		(48	)	(70	)	22	128	78		50
– in offices outside the UK	96		(30	)	126		478		413		65	96	91		5
	79		(56	)	135		430		343		87	224	169		55
Debt securities:
– in offices in the UK	n/a		n/a		n/a		n/a		n/a		n/a	(2,129)	(2,129	)	n/a
– in offices outside the UK	n/a		n/a		n/a		n/a		n/a		n/a	(338)	(338	)	n/a
	n/a		n/a		n/a		n/a		n/a		n/a	(2,467)	(2,467	)	n/a
Financial investments:
– in offices in the UK	103		(165	)	268		181		(85	)	266	1,755	1,755		n/a
– in offices outside the UK	(378	)	32		(410	)	363		202		161	467	467		n/a
	(275	)	(133	)	(142	)	544		117		427	2,222	2,222		n/a
External trading assets:
– in offices in the UK and	n/a		n/a		n/a		n/a		n/a		n/a	(4,971)	(4,971	)	n/a
– outside the UK	n/a		n/a		n/a		n/a		n/a		n/a	(2,224)	(2,224	)	n/a
	n/a		n/a		n/a		n/a		n/a		n/a	(7,195)	(7,195	)	n/a
Reverse repurchase agreements and cash collateral on securities borrowed:
– in offices in the UK	3,508		1,865		1,643		1,519		324		1,195	4,617	4,617		n/a
– in offices outside the UK	414		430		(16	)	2,316		254		2,062	2,724	2,724		n/a
	3,922		2,295		1,627		3,835		578		3,257	7,341	7,341		n/a
Trading portfolio assets:
– in offices in the UK	1,760		621		1,139		1,456		907		549	2,710	2,710		n/a
– in offices outside the UK	881		(172	)	1,053		492		151		341	2,116	2,116		n/a
	2,641		449		2,192		1,948		1,058		890	4,826	4,826		n/a
Total interest receivable:
– in offices in the UK	7,561		4,034		3,527		4,319		1,923		2,396	3,224	3,558		(334	)
– in offices outside the UK	3,106		987		2,119		5,690		2,761		2,929	4,615	3,605		1,010
	10,667		5,021		5,646		10,009		4,684		5,325	7,839	7,163		676


Category	A Higher Risk	B Medium Risk	C Lower Risk	Total 2007	Total 2006
Number of project finance deals	7	18	29	54	36
Deals completed or pending	4	12	29	45	30
– of which, number where sustainability related changes were made.	4	12	29	45	30
Deals considered, but not participated in	3	6	0	9	6
Projects referred from EU	5	9	24	38	25
Projects referred from Africa	2	1	4	7	5
Projects referred from Asia Pacific	0	4	1	5	3
Projects referred from North America	0	4	0	4	3


Project finance deals by sector	Project finance ^a deals	Non project finance deals referred to E and S Risk Team
Agriculture and Fisheries	0	4
Forestry and Logging	0	16
Manufacturing	3	30
Chemicals, pharmaceuticals manufacturing and bulk storage	1	6
Mining and Metals	6	91
Power generation^b	16	118
Oil and gas	4	41
Utilities and Waste Management	5	7
Infrastructure (including dams, pipelines)	9	26
Service Industry	10	7
Totals	54	346


~~Barclays~~ ~~Annual Report 2007~~i)	59 Winning together	–	Doing what’s right for Barclays, our teams and our colleagues, to achieve collective and individual success.

ii)	Best people	–	Developing and upgrading talented colleagues and differentiating rewards
		–	Doing what’s needed to ensure a leading position in the global financial services industry.

iii)	Customer and client focus	–	Understanding what our customers and client focus clients want and need
		–	And then serving them brilliantly.

iv)	Pioneering	–	Driving new ideas, especially those that make us profitable and improve control
		–	Improving operational excellence
		–	Adding diverse skills to stimulate new perspectives and bold steps

v)	Trusted	–	Being trusted is the bedrock of a successful bank
		–	Acting with the highest levels of integrity to retain the trust of our customers, external stakeholders and our colleagues
		–	Taking full responsibility for our decisions and actions.


	2007		2006
FTE by world region
UK	61,900		62,400
Africa & Middle East	51,748		44,326
Continental Europe	9,750		8,100
Americas	6,413		4,905
Asia Pacific	5,089		2,869
Total	134,900		122,600
Global employment statistics
FTE	134,900		122,600
Total employee headcount	141,885		133,529
Percentage of female employees	56.3	%	60.6	%
Percentage of female senior executives	13.7	%	12.2	%
Percentage of female senior managers	20.6	%	20.8	%
Percentage working part time	12.4	%	13.6	%
Turnover rate	18.3	%	16.9	%
Resignation rate	12.3	%	10.9	%
Sickness absence rate	3.0	%	3.6	%

Barclays UK employees
	2007^a		2006^b
UK employment statistics
Total employee headcount	61,900		62,400
Average length of service (years)	9.7		9.8
Percentage working part time	16.8	%	21.8	%
Sickness absence rate	3.0	%	4.0	%
Turnover rate	16.6	%	19.0	%
Resignation rate	11.1	%	12.0	%
Women in Barclays
Percentage of all employees	58.0	%	61.0	%
Percentage of management grades	28.4	%	33.0	%
Percentage of senior executives	13.0	%	12.9	%
Ethnic minorities in Barclays
Percentage of all employees	12.3	%	12.7	%
Percentage of management grades	10.0	%	8.1	%
Percentage of senior executives	6.6	%	6.1	%
Disabled employees in Barclays
Percentage of all employees	3.4	%	5.0	%
Age profile
Employees aged under 25	16.5	%	17.4	%
Employees aged 25-29	17.0	%	15.9	%
Employees aged 30-49	54.2	%	56.0	%
Employees aged 50+	10.3	%	10.7	%
Pensions

Barclays Bank UK Retirement Fund active members	53,473		55,558
Current pensioners	48,607		43,754


An international picture
	2008	2007^a
FTE by world region
UK	60,700	61,900
Africa and Middle East	55,700	51,748
Continental Europe	13,400	9,750
Americas	15,700	6,413
Asia Pacific	10,800	5,089
Total	156,300	134,900
FTE by business unit
UK Retail Banking	30,400	30,700
Barclays Commercial Bank	9,800	9,200
Barclaycard	9,600	8,900
GRCB – Western Europe	10,900	8,800
GRCB – Emerging Markets	22,700	13,900
GRCB – Absa	36,800	35,800
Barclays Capital	23,100	16,200
Barclays Global Investors	3,700	3,400
Barclays Wealth	7,900	6,900
Head office and other operations	1,400	1,100
Total	156,300	134,900
Global employment statistics
FTE	156,300	134,900
Total employee headcount	161,000	141,885
Percentage of female employees	53.1%	56.3%
Percentage of female senior executives	15.2%	13.7%
Percentage of female senior managers	24.6%	20.6%
Percentage working part time	8.5%	12.4%
Turnover rate	20.9%	18.3%
Resignation rate	12.1%	12.3%
Sickness absence rate^b	2.3%	3.0%


Risk management

Risk factors	57

Barclays approach to risk management	62

Organisation and structure	63

			~~Introduction~~Key elements	65

		Credit risk management	~~Barclays approach to risk management~~67	67

			Organisation and structure	68

			~~Material risks and control framework~~	70

			~~Capital adequacy~~	70

			~~Model governance~~	73

			~~Credit risk management~~	74

			~~Organisation and structure~~	74

			Measurement, reporting and internal ratings	7569

			Credit risk mitigation	7873

Analysis of total assets and credit risk exposures	75

			~~Monitoring of loans~~Loans and advances	8076

Debt securities and other bills	90

Derivatives	91

Barclays Capital credit market exposures	93

Market risk management	86106

			Organisation and structure	86106

			Traded market risk	87107

			~~Interest rate~~Non-traded market risk ~~in the banking book~~	88109

			~~Other market risks~~	88

			~~Derivatives~~	89

			Disclosures about certain trading activities	90110

			Liquidity risk management	91111

Organisation and structure	111

Key elements	112

Capital risk management	114

Organisation and structure	114

Key elements	115

Operational risk management	93117

			Organisation and structure	93117

			Measurement and capital modelling	93118

			Operational risk events	94119

			Financial crime risk management	95120

			Anti-money laundering and sanctions risk	95120

Fraud risk	121

			~~Fraud~~Security risk	96121

			~~Security~~	96

			Statistical information	97122


	~~Page~~
~~Name~~	~~Risk~~ ~~Management~~Supervision and regulation	~~Financial~~ ~~Risk Notes~~135
~~Group Risk Structure~~	68
~~Governance Structure at Group Level~~	69
~~Principal Risks and Other Level 1 Risks~~	70
~~Risk Appetite Concepts~~	71
~~Risk Tendency by Business~~	78
~~Loans and Advances by Retail and Wholesale Portfolios~~	80
~~Loans and Advances to Customers by Industry~~	80
~~Geographical Analysis of Loans and Advances to Customers~~	80
~~Analysis of LTV Ratios of Mortgages in UK Home Loan Portfolio (at most recent sanction)~~	80
~~Loans and Advances, Balances and Limits to Wholesale Customers by Internal Risk Rating (%)~~	81
~~Credit Exposure to Sub-Investment Grade Countries~~	81
~~Maturity Analysis of Loans and Advances to Customers (%)~~	81
~~PPL Balances by Geography~~	82
~~CRL Balances by Geography~~	82
~~PPL/Loans and Advances Ratio (%)~~	82
~~CRL/Loans and Advances Ratio (%)~~	82
~~Impairment/Provisions coverage of CRLs (%)~~	83
~~Impairment/Provisions coverage of PCRLs (%)~~	83
~~Impairment Charges for Bad and Doubtful Debts~~	84
~~Impairment/Provisions Charges Over Five Years~~	84
~~Total Write-offs of Impaired Financial Assets~~	85
~~Market Risk – Business Control Structure~~	87
~~Barclays Capital’s Trading Revenue~~	88
~~Movement in Fair Value of Commodity Derivative Positions~~	90
~~Maturity Analysis of Commodity Derivative Fair Value~~	90
~~Operational Risk Events > £10k~~	94
~~Operational Risk Events by Risk Category~~	94
~~Risk Tendency by Business~~	97
~~Loans and Advances~~	97
~~Maturity Analysis of Loans and Advances to Banks~~	98
~~Interest Rate Sensitivity of Loans and Advances~~	98
~~Loans and Advances to Customers by Industry~~	98
~~Loans and Advances to Customers in the UK~~	99
~~Loans and Advances to Customers in Other EU Countries~~	99
~~Loans and Advances to Customers in the US~~	~~100~~
~~Loans and Advances to Customers in Africa~~	~~100~~
~~Loans and Advances to Customers in the Rest of the World~~	~~100~~
~~Maturity Analysis of Loans and Advances to Customers~~	~~101~~
~~Loans and Advances to Borrowers in Currencies Other Than the Local Currency of the Borrower for Countries where this exceeds 1% of the Total Group Assets~~	~~101~~
~~Off balance sheet and other Credit Exposure~~	~~102~~
~~Notional Principal Amounts of Credit Derivatives~~	~~102~~


	~~Page~~
~~Name~~	~~Risk~~ ~~Management~~	~~Financial~~ ~~Risk Notes~~
~~Credit Risk Loans Summary~~	~~102~~
~~Potential Problem Loans Summary~~	~~104~~
~~Interest Foregone on Credit Risk Loans~~	~~104~~
~~Analysis of Impairment/Provision Charges~~	~~104~~
~~Impairment/Provision Charges Loan Loss Ratios~~	~~105~~
~~Analysis of Allowance for Impairment/Provision For Bad and Doubtful Debts~~	~~105~~
~~Allowance for Impairment/Provision Balances Ratios~~	~~105~~
~~Movements in Allowance for Impairment/Provision Charge for Bad and Doubtful Debts~~	~~106~~
~~Amounts Written Off~~	~~106~~
~~Recoveries~~	~~106~~
~~Impairment Allowance/Provisions Charged Against Profit~~	~~107~~
~~Total Impairment/Specific Provision charges for Bad and Doubtful Debts by Industry~~	~~107~~
~~Allowance for Impairment/Specific Provision Charges for Bad and Doubtful Debts by Industry~~	~~108~~
~~Analysis of Amounts Written Off and Recovered by Industry~~	~~108~~
~~Total Impairment Allowance/Provision Coverage of Credit Risk Loans~~	~~109~~
~~Total Impairment Allowance/Provision Coverage of Potential Credit Risk Loans~~	~~109~~
~~Barclays Capital DVaR Summary Table~~		~~219~~
~~Sensitivity Analysis – Impact on Net Interest Income~~		~~220~~
~~Sensitivity Analysis – Impact on Equity~~		~~220~~
~~Concentrations of Interest Rate Risk~~		~~221~~
~~Effective Interest Rate~~		~~223~~
~~Carrying Value of Foreign Currency Net Investment, Borrowing and Derivatives used to hedge them~~		~~224~~
~~Listed and Unlisted Debt Securities and Market Counterparties where external ratings are available~~		~~227~~
~~Wholesale Lending: Default Grades~~		~~227~~
~~Retail Lending: Barclays Retail Grades~~		~~227~~
~~Maximum Exposure to Credit Risk~~		~~229~~
~~Nature of Collateral Obtained or Other Credit Risk Mitigation~~		~~230~~
~~Credit Risk Concentrations by Geographical Sector~~		~~231~~
~~Credit Risk Concentrations by Industrial Sector~~		~~232~~
~~Financial Assets that are Neither Past Due nor Individually Impaired~~		~~235~~
~~Financial Assets that are Past Due but not Individually Impaired~~		~~237~~
~~Impaired Financial Assets~~		~~238~~
~~Impairment Allowance~~		~~238~~
~~Collateral and Other Credit Enhancements Held~~		~~239~~
~~Collateral and Other Credit Enhancements Obtained~~		~~239~~
~~Contractual Maturity of Financial Assets And Liabilities~~		~~241~~
~~Contractual Maturity of Financial Assets on an Undiscounted Basis~~		~~243~~


Process	~~Strategy~~Activity
Direct	– Understand the principal risks to achieving Group strategy.
		– Establish Risk Appetite.
		– Establish and communicate the risk management framework including responsibilities, authorities and key controls.



Assess	– Establish the process for identifying and analysing business-level risks.
		– Agree and implement measurement and reporting standards and methodologies.


Control	– Establish key control processes and practices, including limit structures, impairment allowance criteria and reporting requirements.
		– Monitor the operation of the controls and adherence to risk direction and limits.
		– Provide early warning of control or appetite breaches.
		– Ensure that risk management practices and conditions are appropriate for the business environment.




Report	– Interpret and report on risk exposures, concentrations and risk-taking outcomes.
			– Interpret and report on sensitivities and Key Risk Indicators.
			– Communicate with external parties.




Manage and Challenge ~~Challenge~~	– Review and challenge all aspects of the Group’s risk profile.
		– Assess new risk-return opportunities.
			– Advise on optimising the Group’s risk profile.
			– Review and challenge risk management practices.

Table 14: Notional principal amounts of credit derivatives as at 31st December

Credit derivatives held or issued for trading purposes^a