*(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

~~Securities registered or to be registered pursuant to Section 12(g) of the Act: None~~

~~Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None~~

~~Indicate the number of outstanding shares of each of the issuers’ classes of capital or common stock as of the close of the period covered by the annual report.~~

~~Indicate by check mark if each registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.~~

~~If this report is an annual or transition report, indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934.~~

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrants: (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Web sites, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).*

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

~~International Financial Reporting Standards as issued by the International Accounting Standards Board~~ þ

~~If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).~~

~~(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS.)~~

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

In this document certain non-IFRS (International Financial Reporting Standards) measures are reported. Barclays management believes that these non-IFRS measures provide valuable information to readers of its financial statements because they enable the reader to focus more directly on the underlying day-to-day performance of its businesses and provide more detail concerning the elements of performance which the managers of these businesses are most directly able to influence. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by Barclays management. However, any non-IFRS measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well. Among other non-IFRS information, certain information and related discussion are provided in pages 2 to 50 relating to the Group’s total results rather than separating out discontinued operations, representing the Barclays Global Investors (BGI) business sold on 1^st December 2009. These non-IFRS measures are provided because management considers that including BGI as part of Group operations and separately identifying the gain on this disposal provides useful information about the performance of the Group as a whole and reflects how the operations were managed until the disposal of BGI. The consolidated summary income statement on page 2 provides a reconciliation between continuing and Group results, and the discussion of Group results from page 4 to 10 describe the Group’s results on a continuing operations basis, followed by a discussion of the Group’s discontinued operations.

This document contains information, including statistical data, about certain of Barclays markets and its competitive position. Except as otherwise indicated, this information is taken or derived from Datastream and other external sources. Barclays cannot guarantee the accuracy of information taken from external sources, or that, in respect of internal estimates, a third party using different methods would obtain the same estimates as Barclays.

This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to certain Group’s plans and its current goals and expectations relating to its future financial conditions and performance. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate to only to historic or current facts. Forward-looking statements sometimes use words such as “may”, “will”, “seek”, “continue”, “aim”, “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe” or other words of similar meaning. Examples of forward-looking statements include, among others, statements regarding Group’s future financial position, income growth, assets, impairments, charges, business strategy, capital ratios, leverage, payment of dividends, projected levels of growth in the banking and finance markets, projected costs, estimates of capital expenditure, and plans and objectives for future operations and other statements that are not historical by fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, UK domestic and global economic and business conditions, the effect of continued volatility in credit market exposures, changes in valuation of issue notes, the policies and actions of governmental and regulatory authorities, changes in legislation, the further development of standards and interpretations under International Financial Reporting Standards (IFRS) applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, the outcome of pending and future litigation, the success of future acquisitions and other strategic transactions and the impact of completion – a number of such factors being beyond the Group’s control. As a result, the Group’s actual results may differ materially from plans, goals, and expectations set forth in the Group’s forward-looking statement.

Any forward-looking statements made herein speak only as of the date they are made. Expect as required by the U.K. Financial Services Authority (FSA), the London Stock Exchange or applicable laws, Barlcays expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this report to reflect any change in Barclay’s expectations with regard thereto or any change in events, conditions or circumstance on which any such statement is based. The reader should, however, consult any additional disclosures that Barclays has made or may make in documents it has filed or may file with the U.S. Securities and Exchange Commission.

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’, ‘Parent Company’ or ‘Parent’ 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 ‘GRCB – Absa’ is used to the 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.~~

The consolidated summary income statement above sets out the Group’s results analysed between continuing and discontinued operations for each income statement line for ease of comparability. The line items from “Net interest income” to “Profit before tax and disposal of discontinued operations” shown above under “Discontinued operations” for 2009 represent the results for the 11 month period to 30 November 2009 of the BGI discontinued operations that were sold on 1^st December 2009. In addition, the figures included in the “Total” columns in 2009, 2008 and 2007 in respect of the line items from “Net interest income” to “Profit before tax and disposal of discontinued operations” are non-IFRS measures; see “Certain non-IFRS measures” on page i for more information with respect to including BGI results within such Group totals. The income statement on page 178 and the five year summary included on page 11 shows the income statement on a continuing basis with profit after tax from discontinued operations shown as a single line under profit after tax from continuing operations, in accordance with IFRS.

~~The financial information above is extracted from the published accounts. This information should be read together with the information included in the accompanying financial statements.~~

Barclays Africa provides retail, corporate and ~~Commercial Banking – Emerging Markets~~

~~GRCB – Emerging Markets serves retail~~credit card services across Africa and ~~commercial~~the Indian Ocean. It provides tailored banking ~~customers in Botswana, Egypt, Ghana, India, Kenya, Mauritius, Pakistan, Seychelles, Tanzania, Uganda, the UAE, Zambia, Indonesia~~(including mobile banking and ~~Zimbabwe. Through a network of more than 683 distribution points and 1,023 ATMs, we provide 3.7 million~~Sharia-compliant products) to over 2.7m customers and ~~clients with~~has a top 3 position in 8 of the 10 countries in which we operate.

Absa provides a full range of ~~products~~retail banking services and ~~services. This includes current accounts, savings, investments, mortgages and secured and unsecured lending.~~

GRCB – Absa represents Barclays consolidation of Absa, excluding Absa Capital and Absa Card and Absa Wealth which is included as part of Barclays Capital, Barclaycard and Barclays Wealth 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 customersinsurance products 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.~~channels. It also offers customised business solutions for commercial and large corporate customers. It is part of one of South Africa’s largest financial services organisations.

Barclays Capital is the investment banking division of ~~Barclays that~~Barclays. It 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.

The majority of the BGI business, which was previously reported as a separate business segment, was sold on 1st December 2009 to BlackRock, Inc. and represents the Group’s discontinued operations. The continuing operations of BGI disclosed in the segmental analysis represent residual obligations under the cash support arrangements and associated liquidity support charges and, from 1st December 2009, include the Group’s 19.9% ongoing economic interest in BlackRock, Inc. This investment is accounted for as an available for sale equity investment, with no dividends being received during 2009.

~~Barclays Wealth focuses on private and intermediary clients worldwide providing international and private banking, fiduciary services, investment management, and brokerage.~~

~~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 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.~~

GRB focuses on mass consumers, mass affluent consumers and small business customers. We have significantly changed the footprint here over the past three years, and we intend to push that forward, increasing, through time, the ratio of non-UK to UK business whilst strengthening our UK franchises. We will place particular emphasis on creating appropriate scale in the markets in which we have a presence. As we do that, our objectives will be four-fold: profit growth; an improved loan-to-deposit ratio; further international diversification through deepening existing presences; and the generation of net equity.

Barclays Corporate, as part of CIB, focuses on the high end of what we used to call Barclays Commercial, particularly financial institutions, public sector entries and corporate clients. We brought this business alongside Barclays Capital within CIB because we see significant synergy in sharing relationship management and sector expertise across the two. Realisation of the synergy is enabled by the increasing fungibility of client requirements between traditional corporate banking and investment banking product needs within our client base. This is a global opportunity with significant income growth potential for CIB in the years ahead. Our early work has only reinforced that strongly held belief.

In the area of wealth management, the competitive landscape in the global industry has gone through a sea change over the course of the last three years. That creates opportunity, and we intend to seize that by investing to change the scale of this business over the next five years.

~~For management reporting purposes these changes have taken effect from 1~~^st ~~January 2010 and therefore have not been reflected in the analysis provided in this document.~~


54

~~Risk management~~

~~Risk factors~~

Barclays has clear risk management objectives and a well-established strategy to deliver them, through core risk management processes.

The following information sets forth the risk factors which the Group believes could cause its future results to differ materially from expected results. However, other factors could also adversely affect the Group’s results and so the factors discussed in this report should not be considered to be a complete set of all potential risks and uncertainties.

The Group’s approach to identifying, assessing, managing and reporting risks is formalised in its Principal Risk framework, and definitions of the 13 Principal Risks are given below. A description of the Principal Risk framework is provided on page 62.

This summary of risk factors also includes a discussion of the impact of business conditions and the general economy, which are not Principal Risks but can impact risk factors such as credit and market risk and so influence the Group’s results.

~~Business conditions and general economy~~

The Group’s stress testing framework helps it understand the impact of changes in business conditions and the general economy, as well as the sensitivity of its business goals to such changes and the scope of management actions to mitigate their impact.

As the current downturn has shown, higher unemployment in the UK, US, Spain and South Africa has led to increased arrears in our credit card portfolios, while falls in GDP have reduced the credit quality of the Group’s corporate portfolios. In both cases, there is an increased risk that a higher proportion of the Group’s customers and counterparties may be unable to meet their obligations. In addition, declines in residential and commercial property prices have reduced the value of collateral and caused mark to market losses in some of the Group’s trading portfolios.

~~The business conditions facing the Group in 2010 are subject to significant uncertainties, most notably:~~

–

~~the extent and sustainability of economic recovery and asset prices in the UK, US, Spain and South Africa as governments consider how and when to withdraw stimulus packages;~~

–

~~the dynamics of unemployment in those markets and the impact on delinquency and charge-off rates;~~

–

~~the speed and extent of possible rises in interest rates in the UK, US and eurozone;~~

–

~~the possibility of further falls in residential property prices in the UK, South Africa and Spain;~~

–

~~the potential for single name risk and for idiosyncratic losses in different sectors and geographies where credit positions are sensitive to economic downturn;~~

–

~~possible additional deterioration in our remaining credit market exposures, including commercial real estate and leveraged finance;~~

–

~~the potential impact of deteriorating sovereign credit quality;~~

–

~~changes in the value of Sterling relative to other currencies, which could increase risk weighted assets and therefore raise the capital requirements of the Group; and~~

–

~~the liquidity and volatility of capital markets and investors’ appetite for risk, which could lead to a decline in the income that the Group receives from fees and commissions.~~

~~Principal Risk Factors~~

~~Retail and Wholesale 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. The credit risk that the Group faces arises mainly from wholesale and retail loans and advances. However, credit risk may also arise where the downgrading of an entity’s credit rating causes a fall in the fair value of the Group’s investment in that entity’s financial instruments.

~~In a recessionary environment, such as that recently seen in the United Kingdom, the United States and other economies, credit risk increases.~~

Credit risk may also be 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 assets, or where the counterparty may be the country itself.

Another form of credit risk is settlement risk, which is the possibility that the Group may pay funds away to a counterparty but fail to receive the corresponding settlement in return. The Group is exposed to many different industries and counterparties in the normal course of its business, but its exposure to counterparties in the financial services industry is particularly significant. This exposure can arise through trading, lending, deposit-taking, clearance and settlement and many other activities and relationships. These counterparties include broker dealers, commercial banks, investment banks, mutual and hedge funds and other institutional clients. Many of these


				55

relationships expose the Group to credit risk in the event of default of a counterparty and to systemic risk affecting its counterparties. Where the Group holds collateral against counterparty exposures, it may not be able to realise it or liquidate it at prices sufficient to cover the full exposures. Many of the hedging and other risk management strategies utilised by the Group also involve transactions with financial services counterparties. The failure of these counterparties to settle, or the perceived weakness of these counterparties, may impair the effectiveness of the Group’s hedging and other risk management strategies.

The Group’s credit risk governance structure, management and measurement methodologies, together with an analysis of exposures to credit risk is detailed in the ‘Credit risk management’ section on page 66 and Note 47 to the financial statements on page 243.

~~An analysis of Barclays Capital’s credit market exposures is detailed on pages 81 to 89.~~

~~Market risk~~

~~The majority of market risk exposure resides in Barclays Capital. Barclays is also exposed to market risk through non-traded interest rate risk and the pension fund.~~

The Group’s future earnings could be affected by depressed asset valuations resulting from deterioration in market conditions. Financial markets are sometimes subject to stress conditions where steep falls in asset values can occur, as demonstrated by events in 2007 and 2008 affecting asset backed CDOs and the US sub-prime residential mortgage market and which may occur in other asset classes during an economic downturn. Severe market events are difficult to predict and, if they continue to occur, could result in the Group incurring additional losses.

From the second half of 2007, the Group recorded material net losses on certain credit market exposures, including ABS CDO Super Senior exposures. As market conditions change, the fair value of these exposures could fall further and result in additional losses or impairment charges, which could have a material adverse effect on the Group’s earnings. Such losses or impairment charges could derive from: a decline in the value of exposures; a decline in the ability of counterparties, including monoline insurers, to meet their obligations as they fall due; or the ineffectiveness of hedging and other risk management strategies in circumstances of severe stress.

The Group’s market risk governance structure, management and measurement methodologies, together with an analysis of exposures to both traded and non-traded market risk is detailed in the ‘Market risk management’ section on page 94 and Note 48 to the financial statements on page 257. Further details relating to the Group’s pension risk is included in Note 30 on page 210.

~~Capital risk~~

~~Capital risk is the risk that the Group has insufficient capital resources to:~~

–

meet minimum regulatory requirements in the UK and in other jurisdictions such as the United States and South Africa where regulated activities are undertaken. The Group’s authority to operate as a bank is dependent upon the maintenance of adequate capital resources;

–

~~support its credit rating. A weaker credit rating would increase the Group’s cost of funds; and~~

–

~~support its growth and strategic options.~~

Regulators assess the Group’s capital position and target levels of capital resources on an ongoing basis. Targets may increase in the future, and rules dictating the measurement of capital may be adversely changed, which would constrain the Group’s planned activities and contribute to adverse impacts on the Group’s earnings. During periods of market dislocation, increasing the Group’s capital resources in order to meet targets may prove more difficult or costly.

In December 2009 the Basel Committee on Banking Supervision issued a consultative document that outlined proposed changes to the definition of regulatory capital. These proposals are going through a period of consultation and are expected to be introduced by the beginning of 2013, with substantial transitional arrangements. While the proposals may significantly impact the capital resources and requirements of the Group, the Group maintains sufficient Balance Sheet flexibility to adapt accordingly.

~~Liquidity risk~~

Liquidity risk is the risk that the Group is unable to meet its obligations as they fall due as a result of a sudden, and potentially protracted, increase in net cash outflows. 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 fulfil lending commitments. This risk is inherent in all banking operations and can be affected by a range of institution-specific and market-wide events.


56

~~Risk management~~

~~Risk factors~~

~~continued~~

During periods of market dislocation the Group’s ability to manage liquidity requirements may be impacted by a reduction in the availability of wholesale term funding as well as an increase in the cost of raising wholesale funds. Asset sales, balance sheet reductions and the increasing costs of raising funding may have a material effect on the earnings of the Group.

In illiquid markets, the Group may decide to hold assets rather than securitising, syndicating or disposing of them. This could affect the Group’s ability to originate new loans or support other customer transactions as both capital and liquidity are consumed by existing or legacy assets.

The FSA issued its policy document on ‘strengthening liquidity standards’ on 5th October 2009 detailing the requirements for liquidity governance to be in place by 1st December 2009, and the quantitative requirements for liquidity buffers, which will be in place from 1st June 2010, although with an extended transition period of several years to meet the expected standards.

In addition, the Basel Committee on Banking Supervision released a consultative document ‘International framework for liquidity risk measurement, standards and monitoring’ in December 2009. This included two new key liquidity metrics. A liquidity coverage ratio aimed at ensuring banks have sufficient unencumbered high quality assets to meet cash outflows in an acute short-term stress and a net stable funding ratio to promote longer-term structural funding of bank’s balance sheet and capital market activities.

The Group’s liquidity risk management and measurement methodologies are detailed in the ‘Liquidity Risk Management’ section on page 102 and the ‘Liquidity Risk’ note to the financial statements on page 261.

~~Operations risk~~

Operations risk is the risk of losses from inadequate or failed internal processes and systems, caused by human error or external events. Operations risk has a broad scope and for that reason, the Group’s Risk Control Frameworks are defined at a more granular level within the overall Operations Principal Risk. These risks are transaction operations, new product development, premises, external suppliers, payments process and the management of information, data quality and records.

~~Financial crime risk~~

~~Financial crime risk is the risk that the Group suffers losses as a result of internal and external fraud or intentional damage, loss or harm to people, premises or moveable assets.~~

~~Technology risk~~

Technology is a key business enabler and requires an appropriate level of control to ensure that the most significant technology risks are effectively managed. Such risks include the non-availability of IT systems, inadequate design and testing of new and changed IT solutions and inadequate IT system security. Data privacy issues are covered under Regulatory Risk and external supplier issues relating to technology are covered under Operations Risk.

~~People risk~~

~~Regulatory risk~~

In addition, the Group’s businesses and earnings can be affected by the fiscal or other policies and other actions of various governmental and regulatory authorities in the United Kingdom, the European Union (‘EU’), the United States, South Africa and elsewhere. All these are subject to change, particularly in an environment where recent developments in the global markets have led to an increase in the involvement of various governmental and regulatory authorities in the financial sector and in the operations of financial institutions. In particular, governmental and regulatory authorities in the United Kingdom, the United States and elsewhere are implementing measures to increase regulatory control in their respective banking sectors, including by imposing enhanced capital and liquidity requirements. Any future regulatory changes may potentially restrict the Group’s operations, mandate certain lending activity and impose other compliance costs.

~~Areas where changes could have an impact include:~~

–

~~the monetary, interest rate and other policies of central banks and regulatory authorities;~~

–

~~general changes in government or regulatory policy that may significantly influence investor decisions, in particular markets in which the Group operates;~~

–

general changes in regulatory requirements, for example, prudential rules relating to the capital adequacy framework and rules designed to promote financial stability and increase depositor protection;

–

~~changes in competition and pricing environments;~~

–

~~further developments in the financial reporting environment;~~

–

~~differentiation amongst financial institutions by governments with respect to the extension of guarantees to customer deposits and the terms attaching to those guarantees; and~~

–

~~implementation of, or costs related to, local customer or depositor compensation or reimbursement schemes.~~

~~Further details of specific matters that impact the Group are included in the Supervision and Regulation section on page 117 and Note 36 to the financial statements on page 222.~~


				57

~~Financial reporting risk~~

Financial reporting risk arises from a failure or inability to comply fully with the laws, regulations or codes in relation to the disclosure of financial information. Non-compliance could lead to fines, public reprimands, damage to reputation, enforced suspension of operations or, in extreme cases, withdrawal of authorisations to operate. Further details of the Group’s internal controls over financial reporting are included in the Accountability and Audit Section on page 162.

~~Legal risk~~

The Group is subject to a comprehensive range of legal obligations in all countries in which it operates. As a result, the Group is exposed to many forms of legal risk, which may arise in a number of ways. Primarily:

–

~~the Group’s business may not be conducted in accordance with applicable laws around the world;~~

–

~~contractual obligations may either not be enforceable as intended or may be enforced against the Group in an adverse way;~~

–

~~the intellectual property of the Group (such as its trade names) may not be adequately protected; and~~

–

~~the Group may be liable for damages to third parties harmed by the conduct of its business.~~

Defending legal proceedings can be expensive and time-consuming and there is no guarantee that all costs incurred will be recovered even if the Group is successful. Although the Group has processes and controls to manage legal risks, failure to manage these risks could impact the Group adversely, both financially and by reputation.

~~Further details of the Group’s legal proceedings are included in Note 35 to the financial statements on page 221.~~

~~Taxation risk~~

The Group is subject to the tax laws in all countries in which it operates, including tax laws adopted at an EU level. A number of double taxation agreements entered between two countries also impact on the taxation of the Group. Tax risk is the risk associated with changes in tax law or in the interpretation of tax law. It also includes the risk of changes in tax rates and the risk of failure to comply with procedures required by tax authorities. Failure to manage tax risks could lead to an additional tax charge. It could also lead to a financial penalty for failure to comply with required tax procedures or other aspects of tax law. If, as a result of a particular tax risk materialising, the tax costs associated with particular transactions are greater than anticipated, it could affect the profitability of those transactions.

~~The Group takes a responsible and transparent approach to the management and control of its tax affairs and related tax risk, specifically:~~

–

~~tax risks are assessed as part of the Group’s formal governance processes and are reviewed by the Executive Committee, Group Finance Director and the Board Risk Committee;~~

–

~~the tax charge is also reviewed by the Board Audit Committee;~~

–

~~the tax risks of proposed transactions or new areas of business are fully considered before proceeding;~~

–

~~the Group takes appropriate advice from reputable professional firms;~~

–

~~the Group employs high-quality tax professionals and provides ongoing technical training;~~

–

~~the tax professionals understand and work closely with the different areas of the business;~~

–

~~the Group uses effective, well-documented and controlled processes to ensure compliance with tax disclosure and filing obligations; and~~

–

where disputes arise with tax authorities with regard to the interpretation and application of tax law, the Group is committed to addressing the matter promptly and resolving the matter with the tax authority in an open and constructive manner.


58

~~Risk management~~

~~Risk factors~~

~~continued~~

~~Other Risk Factors~~

In addition to the 13 Principal Risks, the Group’s high-level risk classification includes four other ‘Level 1’ risks. These risks are in general less amenable to formal quantification than the Principal Risks in terms of risk measurement or setting risk appetite. However, they retain the potential to impact the Group’s performance.

~~Strategic Risk~~

The Group devotes substantial management and planning resources to the development of strategic plans for organic growth and identification of possible acquisitions, supported by substantial expenditure to generate growth in customer business. If these strategic plans are not delivered as anticipated, the Group’s earnings could grow more slowly or decline. In addition, the Group’s strategy could be impacted by revenue volatility due to factors such as macroeconomic conditions, inflexible cost structures, uncompetitive products or pricing and structural inefficiencies.

~~Change risk~~

Change risk arises when the Group needs to make extensive changes to its operations. The cost of implementation projects may overrun, or they may fail to achieve their objectives. Examples of situations in which change risk arises include the integration of acquired businesses, significant business unit restructuring, changes in target operating models, the roll-out of new and potentially disruptive technologies, the introduction of a single currency such as the euro, and Group-wide projects to implement significant new regulation such as Basel II.

~~Corporate sustainability risk~~

Corporate sustainability risk arises from the failure to identify and manage the impact of business decisions and activities on the community and the environment, covering the following themes: customers and clients, inclusive banking, the environment, diversity and responsible global citizenship. For more information, see page 52.

~~Brand management risk~~

Barclays defines brand risk as the failure to manage the visual identity of Barclays brands in an effective manner. This is distinct from reputational impact (damage to the general brand/reputation of Barclays), which is a potential by-product of financial, strategic or operational risks.


				59

~~Risk management~~

~~Barclays risk management strategy~~

~~Barclays has clear risk management objectives and a well-established strategy to deliver them, through core risk management processes.~~

At a strategic level, our risk management objectives are:

–

To identify the Group’s ~~material~~significant risks.

–

To formulate the Group’s Risk Appetite and ensure that business profile and plans are consistent with it.

–

To optimise risk/return decisions by taking them as closely as possible to the business, while establishing strong and independent review and challenge structures.

–

To ensure that business growth plans are properly supported by effective risk infrastructure.

–

To manage risk profile to ensure that specific financial deliverables remain possible under a range of adverse business conditions.

–

To help executives improve the control and co-ordination of risk taking across the business.

The Group’s approach is to provide direction on: understanding the principal risks to achieving Group strategy; establishing Risk Appetite; and establishing and communicating the risk management framework. The process is then broken down into five steps: identify, assess, control, report, and manage/challenge. Each of these steps is broken down further, to establish end to end activities within the risk management process and the infrastructure needed to support it (see panel below). The Group’s risk management strategy is broadly unchanged from 2009.

Assigning responsibilities

Responsibility for risk management resides at all levels within the Group, from the Board and the Executive Committee down through the organisation to each business manager and risk specialist. Barclays distributes these responsibilities so that risk/return decisions are taken at the most appropriate level; as close as possible to the business, and subject to robust and effective review and challenge. The responsibilities for effective review and challenges reside with senior managers, risk oversight committees, Barclays Internal Audit, the independent Group Risk function, the Board Risk Committee and, ultimately, the Board.

TheBoard is responsible for approving Risk Appetite (see page 45), which is the level of risk the Group chooses to take in pursuit of its business objectives. The Chief Risk Officer regularly presents a report to the Board summarising developments in the risk environment and performance trends in the key portfolios. The Board is also responsible for the Internal Control and Assurance Framework (Group Control Framework). It oversees the management of the most significant risks through the regular review of risk exposures and related key controls. Executive management responsibilities relating to this are set via the Group’s Principal Risks Policy.

TheBoard Risk Committee (BRC) monitors the Group’s risk profile against the agreed appetite. Where actual performance differs from expectations, the actions being taken by management are reviewed to ensure that the BRC is comfortable with them. After each meeting, the Chair of the BRC prepares a report for the next meeting of the Board. Barclays first established a separate Board Risk Committee in 1999 and all members are non-executive directors. The Finance Director and the Chief Risk Officer attend each meeting as a matter of course and the Chief Risk Officer has a dotted reporting line to the Chair. The BRC receives regular and comprehensive reports on risk methodologies and the Group’s risk profile including the key issues affecting each business portfolio and forward risk trends. The Committee also commissions in-depth analyses of significant risk topics, which are presented by the Chief Risk Officer or senior risk managers in the businesses. The Chair of the Committee prepares a statement each year on its activities (see pages 144 and 145).

The Group’s strategy is to break down risk management into five discrete processes: direct, assess, control, report, and manage/challenge. Each of these processes is broken down further, to establish end to end activities within the risk management process and the infrastructure needed to support it (see panel below).


Steps	Activity

Identify	–	Establish the process for identifying and understanding business-level risks.

Assess	–	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	–	Review and challenge all aspects of the Group’s risk profile.
Challenge	–	Assess new risk-return opportunities.
	–	Advise on optimising the Group’s risk profile.
	–	Review and challenge risk management practices.

~~Assigning responsibilities~~

~~The~~~~Board~~is responsible for approving Risk Appetite, which is the level of risk the Group chooses to take in pursuit of its business objectives. At most of the Board’s scheduled meetings, the Chief Risk Officer presents a report summarising developments in the risk environment and performance trends in the key portfolios. The Board is also responsible for the Internal Control and Assurance Framework. It oversees the management of the most significant risks through the regular review of risk exposures and related key controls. Executive Management responsibilities relating to this are set via the Group’s Principal Risks Policy.

~~The~~~~Board Risk Committee (BRC)~~monitors the Group’s risk profile against the agreed appetite. Where actual performance differs from expectations, the actions being taken by management are reviewed to ensure that the BRC is comfortable with them. After each meeting, the Chair of the BRC prepares a report for the next meeting of the Board. Barclays first established a separate Board Risk Committee in 1999 and all members are non-executive directors. The Finance Director and the Chief Risk Officer attend each meeting as a matter of course and the Chief Risk Officer has a dotted reporting line to the Chair. The BRC receives regular and comprehensive reports on the Group’s risk profile, the key issues affecting each business portfolio, risk measurement methodologies and forward risk trends. The Committee also commissions in-depth analyses of significant risk topics, which are presented by the Chief Risk Officer or senior risk managers in the businesses. The Chair of the Committee prepares a statement each year on its activities (see page 141).


60				43

~~Risk management~~

~~Barclays risk management strategy~~

~~continued~~

TheBoard Audit Committeereceives quarterly reports on control issues of significance and a half-yearly review of the adequacy of impairment allowances, which it reviews relative to the risk inherent in the portfolios, the business environment, the Group’s policies and methodologies and the performance trends of peer banks. The Chair of the Board Audit Committee also sits on the Board Risk Committee. See ~~page 136~~pages 141 to 143 for additional details on the membership and activities of the Board Audit Committee.

TheBoard ~~HR and~~ Remuneration Committeereceives advice from the Board Risk Committee on the management of remuneration risk, including advice on the setting of performance objectives in the context of incentive packages.

Summaries of the relevant business, professional and risk management experience of the Directors of the Board are given on pages ~~119 and 121.~~120 to 122. The terms of reference for each of the principal Board Committees are available from the Corporate Governance section at:www.aboutbarclays.com.

The Chief Risk Officer is a member of theExecutive Committeeand has overall day to day accountability for risk management under delegated authority from the Finance Director. The Finance Director must consult the Chairman of the Board Risk Committee in respect of the Chief Risk Officer’s performance appraisal and compensation as well as all appointments to or departures from the role.

LOGO

~~Note~~

~~The~~

~~governance structure will not change following the restructure of the Group announced in November 2009.~~


44					61

Risk management
Barclays risk management strategy continued

The Chief Risk Officer manages the independent Group Risk function and chairs theGroup Risk Oversight Committee, which monitors the Group’s risk profile relative to established risk appetite. Reporting to the Chief Risk Officer, and working in the Group Risk function, are risk-type heads for: retail credit risk, wholesale credit risk, market risk, operational risk, financial crime risk and capital ~~analytics.~~demand. Along with their teams, the risk-type heads are responsible for establishing a ~~Group-wide~~Group wide framework for risk control framework and oversight. These risk-type teams liaise with each business as part of the monitoring and management processes.

In addition, each business unit has an embedded risk management function, headed by a business risk director. Business risk directors and their teams are responsible for assisting business heads in the

identification and management of their business risk profiles and for implementing appropriate controls. These teams also assist Group Risk in the formulation of Group policies and their implementation across the businesses. The business risk directors report jointly to their respective business heads and to the Chief Risk Officer.

The risk type heads within the central Group Risk function and the business risk directors within the business units report to the Chief Risk Officer and are members of the Group Risk Oversight Committee.

For further details on the management of each of the principal risks see pages 50 to 57.

LOGO

Note

a	Reporting lines effective from January 2011, previously reported to the Group Finance Director.


62					45

~~Risk management~~

~~Barclays risk management strategy~~

~~continued~~

Internal Auditis responsible for the independent review of risk management and the control environment. Its objective is to provide reliable, valued and timely assurance to the Board and Executive Management over the effectiveness of controls, mitigating current and evolving high risks and in so doing enhancing the controls culture within the Group. The Board Audit Committee reviews and approves Internal Audit’s plans and resources, and evaluates the effectiveness of Internal Audit.

An assessment by external advisers is also carried out periodically. In addition to the Committees shown in the chart, there is a Brand and Reputation Committee reviewing emerging issues with potentially significant reputational impact.

Risk management responsibilities are laid out in thePrincipal Risks Policy, which covers the categories of risk in which the Group has its most significant actual or potential risk exposures.

The Principal Risks Framework:

–

creates clear ownership and accountability;

–

ensures the Group’s most significant risk exposures are understood and managed in accordance with agreed risk appetite (for financial risks) and risk tolerances (for non-financial risks); and

–

ensures regular reporting of both risk exposures and the operating effectiveness of controls.

Each of the Principal ~~Risk~~Risks, which are set out on pages 50 to 57, is owned by a senior individual within Barclays, known as the Group Principal Risk Owner ~~(PRO) who~~(GPRO). The GPRO is required to document, communicate and maintain a risk control framework which makes clear the mandated control requirements in managing exposures to that Principal Risk, for every business across the firm.

These control requirements are given further specification, according to the business unit or risk type, to provide a complete and appropriate system of internal control.

Business unit and Group centre function heads are responsible for obtaining ongoing assurance that the controls they have put in place to manage the risks to their business objectives are operating effectively. Six-monthly reviews support the regulatory requirement for the Group to make a statement about its system of internal controls (the ‘Turnbull’ statement), in the Annual Report and Accounts.

~~PROs~~GPROs report their assessments of the risk exposure and control effectiveness to Group-level oversight committees. Their assessments form the basis of the reports that go to the Board Risk Committee.

~~Setting and using~~ Risk Appetite

Risk Appetite is defined as the level of risk ~~the Group chooses~~that Barclays is prepared to sustain whilst pursuing its business strategy, recognising a range of possible outcomes as business plans are implemented. Barclays framework combines a top-down view of its capacity to take ~~in pursuit of its business objectives.~~

~~As part~~risk with a bottom-up view of the ~~yearly planning process, we add up our estimated bad debts charges~~business risk profile associated with each business area’s medium term plans. The appetite is ultimately approved by the Board.

The Risk Appetite framework consists of two elements: ‘Financial Volatility’ and ~~ask ourselves if that potential~~‘Mandate & Scale’.

Taken as a whole, the Risk Appetite framework provides a basis for the allocation of risk capacity across Barclays Group.

Financial Volatility

Financial Volatility is defined as the level of ~~credit loss~~potential deviation from expected financial performance that Barclays is ~~consistent with our strategy, with our business position, and with our capital.~~prepared to sustain at relevant points on the risk profile.

The ~~starting point~~Board sets the Group’s financial volatility risk appetite in terms of broad financial objectives (ie ‘top down’) on through the cycle, 1 in 7 and 1 in 25 severity levels. The Group’s risk profile is ~~the total expected credit loss, assuming the base case economic forecast. To gain~~assessed via a ~~more rounded understanding~~‘bottom-up’ analysis of the Group’s business plans to establish the financial volatility. If the projections entail too high a level of risk (i.e breach the ~~Group~~top-down financial objectives at the through the cycle, 1 in 7 or 1 in 25 level), management will challenge each area to rebalance the risk profile to bring the bottom-up risk appetite back within top-down appetite. Performance against Risk Appetite usage is measured and reported to the Executive Committee and the Board regularly throughout the year.

To measure the risk entailed by the business plans, management estimates ~~credit losses based on~~ the ~~kind of stressed conditions that can be expected to occur approximately once every seven years (moderate stress) and once every 25 years (severe stress).~~ potential earnings volatility from different businesses under various scenarios, represented by severity levels:

–	expected loss: the average losses based on measurements over many years

–	1 in 7 (moderate) loss: the worst level of losses out of a random sample of 7 years

–	1 in 25 (severe) loss: the worst level of losses out of a random sample of 25 years

LOGO


46

Risk management

Barclays risk management strategy continued

These potentially larger but increasingly less likely levels of loss are illustrated in the Risk Appetite concepts chart ~~below.~~


				63

~~Risk Appetite is prepared for~~above. Since the Board, as part of the formal planning process. The Board requires credible plans that show the Executive is aware of risk sensitivities and potential downside cases, and is investing capital into sustainable businesses over an economic cycle. The Chief Risk Officer leads the discussion at the Executive and Board levels. If the projections entail too high a level of loss at any given probability is dependent on the portfolio of exposures in each business, the statistical measurement for each key risk ~~management will challenge each area to find new ways to rebalance~~category gives the ~~business mix to incur less overall risk. Performance against Risk Appetite is measured~~Group clearer sight and ~~reported to the Executive and Board regularly~~better control of risk-taking throughout the ~~year.~~

~~As well as credit risk, the Risk Appetite~~enterprise. Specifically, Barclays believes that this framework ~~also considers market and operational risks.~~

~~Barclays uses Risk Appetite~~enables it to:

–

~~improve~~Improve management confidence and debate regarding ~~our~~the Group’s risk ~~profile;~~

profile

–

~~give executives greater control and co-ordination of risk-taking across businesses;~~

–

~~re-balance~~Re-balance the risk profile of the medium-term plan ~~to achieve~~where breaches are indicated, thereby achieving a superior risk-return ~~profile; and~~

profile

–

~~identify~~Identify unused risk ~~capacity.~~capacity, and thus highlight the need to identify further profitable opportunities

–	Improve executive management control and co-ordination of risk-taking across businesses

~~There is a~~Mandate & Scale

The second element to ~~Risk Appetite~~the setting of risk appetite in ~~Barclays: the~~Barclays is an extensive system ofMandate ~~and~~& Scalelimits, which is a risk management approach that seeks to formally review and control business activities to ensure that they are within Barclays mandate (i.e. aligned to the expectations of external stakeholders), and are of an appropriate scale (relative to the risk and reward of the underlying activities). Barclays achieves this by using limits and triggers to avoid concentrations which would be out of line with external expectations, and which may lead to unexpected losses of a scale that would be detrimental to the stability of the relevant business line or of the Group. These limits are set by the independent ~~Group~~ Risk function, formally monitored each month and subject to Board-level oversight.

~~The framework operates through limits and triggers, which work in tandem with clearly defined lending criteria for specific sectors, industries and products, in order to maintain asset quality.~~

For example, in the UK mortgage business a series of explicit mandate and scale limits have kept the average loan to value of the portfolio at conservative levels, set an upper boundary on the proportion of buy-to-let customers, and set at ‘zero’ our appetite to offer self-certified mortgages.

In our commercial property finance portfolios, a comprehensive series of limits are in place to control exposure within each business and geographic ~~market.~~sector. To ensure that limits are aligned to the underlying risk characteristics, the Mandate ~~and~~& Scale limits differentiate between types of exposure. There are, for example, individual limits for property investment and property development and for senior and subordinated lending. Since the onset of the global economic downturn, these limits have been reduced significantly and the frequency of review has been increased. The Group’s exposure to Ireland has been restricted through the recent reduction in Mandate & Scale limits.

Barclays uses the Mandate ~~and~~& Scale framework to:

–

~~limit~~Limit concentration ~~risk;~~

risk

–

~~keep~~Keep business activities within Group and individual business ~~mandate;~~

mandate

–

~~ensure~~Ensure activities remain of an appropriate scale relative to the underlying risk and ~~reward; and~~

reward

–

~~ensure~~Ensure risk-taking is supported by appropriate expertise and ~~capabilities.~~

capabilities

As well as Group-level Mandate & Scale limits, further limits are set by risk managers within each business unit, covering particular portfolios.

–

As well as Group-level Mandate and Scale limits, further limits are set by risk managers within each business unit, covering particular portfolios. Taken as a whole, the Risk Appetite framework provides a basis for the allocation of risk capacity across the Barclays Group.

Risk Appetite and Stress Testing

Stress testing occurs throughout the Bank and it helps to ensure that our medium term plan has sufficient flexibility to remain appropriate over a multi-year time horizon during times of stress.

Stress testing allows us to analyse a specific potential economic scenario or event using defined macro and market based parameters. The results of a stress test, whether at a Group or business level, will produce an output which could be compared to a point in the curve of our Financial Volatility based statistical outcomes, although stress tests are scenario based and as such are not calibrated to a specific confidence level.

Given that the stress testing, Risk Appetite, and medium term planning timelines are all aligned, the outputs of stresses are used by risk functions throughout the Group to inform Risk Appetite (particularly at a business level). The outputs of stresses also feed into the setting of Mandate & Scale limits. For example, via the use of primary and secondary stresses in Market Risk, we identify and limit the scale of risks that DVaR would not automatically capture.

Reverse stress testing also supports our Risk Appetite framework. Reverse stress testing starts with defining a worst case set of metrics and deduces a scenario that could theoretically cause that situation to occur. This will help to ensure that we understand the tail risks across our books and explain what would have to happen to generate a change in strategy. Group reverse stress testing also identifies risks that in one business alone would not have been sufficient to be a critical event, thereby complementing the Financial Volatility and Mandate & Scale processes.

For further information on stress testing see page 48.


64					47

~~Risk management~~

~~Barclays risk management strategy~~

~~continued~~

Modelling of risk

Barclays makes extensive use of quantitative estimates of the risks it takes in the course of its business. Risk ~~taking on any meaningful scale requires quantification. Barclays uses risk~~ models are used in ~~an extensive~~a wide range of decisions, from credit grading, pricing and approval to portfolio management, risk appetite setting, economic capital allocation and regulatory capital calculations.

The ~~key inputs into the~~types of risks that are covered by such models ~~used to quantify~~include credit, ~~risk are:~~

–

~~Probability of default (PD).~~

–

~~Exposure at default (EAD).~~

–

~~Loss given default (LGD).~~

These models are used in a range of applications that measure credit risk across the Group. For example, Barclays can assign an expected loss over the next 12 months to each customer by multiplying these three factors. We calculate~~probability of default(PD) by assessing the credit quality of borrowers~~market and ~~other counterparties. For the sake of illustration, suppose a customer has a 0.5% probability of defaulting over a 12-month period. The~~~~exposure at default~~(EAD) is our estimate of what the outstanding balance will be, if the customer does default. Supposing the current balance is £1,000, our models might predict a rise to £1,200 by then. Should customers default, some part of the exposure is usually recovered. The part that is not recovered, together with the economic costs associated with the recovery process, comprise the~~loss given default(LGD), which is expressed as a percentage of EAD. Supposing the LGD in this case is estimated to be 30%, the expected loss for this customer is: 0.5% x £1,200 x 30% or £1.80.~~operational risks.

The Group has ~~an extensive~~a wide range of models in use, covering estimations of ~~PD, EAD, LGD~~Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default, (LGD) as well as many other types of risk besides credit risk. The models are developed and owned by each business ~~unit and used to measure risk in their portfolios.~~unit. To minimise the risk of loss through model failure, the Group Model Risk Policy (GMRP) was developed. It is managed by the independent Group Risk function and ~~was~~is reviewed ~~and expanded during 2009.~~annually.

The GMRP helps reduce the potential for model failure by setting ~~Group-wide~~Group wide minimum standards for the model development and implementation process. The GMRP also sets the ~~Group~~ governance processes for ~~all~~ models across the Group, which allows model performance and risk to be monitored, and seeks to identify and escalate any potential problems at an early stage.

To ensure that the governance process is effective, and that management time is focused on the more material models, each model is provided with a materiality rating. The GMRP defines the materiality ranges for all model types, based on an assessment of the impact to the Group in the event of a model error. The final level of model sign-off is based on materiality, with all of a business unit’s models initially being approved in business unit committees. The more material models are also approved at the ~~Group-level~~Group Material Models Technical Committee, and the most material models require further approval by the Executive Models Committee, a ~~sub-committee~~subcommittee of Group Executive Committee.

This process ensures that the most significant models are subject to the most rigorous review, and that senior management ~~have~~has a good understanding of the most material models in the Group. Although the final level of model sign-off will vary, depending on model materiality, the standards required by the GMRP do not change with the materiality level.

The GMRP also sets detailed standards that a model must meet during development and subsequent use. For new models, documentation must be sufficiently detailed to allow an expert to understand all aspects of model development such that they could reproduce the model. It must include a description of the data used for model development, the methodology used (and the rationale for choosing such a methodology), a description of any assumptions made, ~~as well as~~and details of the strengths and weaknesses of the model.

All new models are subject to validation and independent review before they can be signed off for implementation. The model validation exercise must demonstrate that the model is fit for purpose and provides accurate estimates. The independent review ensures that the model development has followed a robust process and that the standards of the GMRP have been met, as well as ensuring that the model satisfies business and regulatory requirements. In addition, the most material models are subject to independent review by Group Risk. Once implemented, all models are subject to post-implementation review. This confirms that the model has been implemented correctly and behaves as predicted.

The GMRP also sets the requirements for ongoing performance monitoring and the annual review process. Once implemented, all models within the Group are subject to ongoing performance monitoring to ensure that any deficiencies are identified early, and that remedial action can be taken before the decision-making process is affected. As part of this process,


				65

model owners set performance triggers and define appropriate actions for their models in the event that a trigger level is breached.

In addition to regular monitoring, models are subject to an annual validation process to ensure that they will continue to perform as expected, and that assumptions used in model development are still appropriate. In line with initial sign-off requirements, annual validations are also formally reviewed at the appropriate technical committee.

Within Barclays Capital, where models are used to value positions within the trading book, the positions are subject to regular independent price testing which covers all trading positions. Prices are compared with direct external market data where possible. When this is not possible, more analytic techniques are used, such as industry consensus pricing services.

LOGO


48

Risk management

Barclays risk management strategy continued

These services enable peer banks to compare structured products and ~~model-input~~model input parameters on an anonymous basis. The conclusions and any exceptions to this exercise are communicated to senior levels of business management.

Externally developed models are subject to the same governance standards as internal models, and must be approved for use following the validation and independent review process. External models are also subject to the same standards for ongoing monitoring and annual validation requirements.

Stress testing

A fundamental duty of risk management is to ensure that organisations do not neglect to prepare for the worst event as they plan for success. Stress testing helps Barclays to understand how its portfolios would react if business conditions became significantly more challenging. We generate specific forward-looking scenarios and analyse how well our profitability would ~~hold up,~~be maintained, whether our levels of capital would be adequate and what managers could do ~~ahead of time~~in advance to mitigate the risk.

Barclays uses stress testing techniques at Group, portfolio and product level and across a range of risk types. For example, portfolio management in the US cards business employs stressed assumptions of unemployment to determine profitability hurdles for new accounts. In the UK mortgage business, affordability thresholds incorporate stressed estimates of interest rates.

In the Investment Banking division, global scenario testing is used to gauge potential losses that could arise in conditions of extreme market stress. Stress testing is also conducted on positions in particular asset classes, including interest rates, commodities, equities, credit and foreign exchange.

At the Group level, stress tests capture a wide range of macroeconomic variables that are relevant to the current environment, such as:

–

GDP;

–

unemployment;

–

asset prices; and

–

interest rates.

Note

a	On 7th February 2011 CEBS was renamed the European Banking Authority

The Board Risk Committee agrees the range of scenarios to be tested and the independent Group Risk function co-ordinates the process, using bottom-up analysis performed by the businesses. The results of the stress tests are presented to the Executive Committee, the Board Risk Committee, the ~~Strategy~~ Board and the UK Financial Services Authority (FSA).

In ~~2009,~~2010, the range of stress scenarios included the stress test set out by the FSA as part of its assessment of the Group’s resilience to stressed credit risk, market risk and economic conditions over a five-year period. This stress scenario analysis took into account a wide range of factors, including:

–

~~the~~The Group’s revenue generation potential given stressed macroeconomic variables such as GDP and interest ~~rates assumptions;~~

rates;

–

The effect of the scenario on the probability of default and possible losses given default within its loan book; and

–

~~possible~~Possible declines in the market value of assets held in the trading ~~books.~~

books caused by the stress.

Following this work and discussion with the FSA, the Group was able to confirm that its capital ~~position and~~ resources, after exposure to the stress, were expected to continue to meet the FSA’s capital requirements.

In addition, Barclays, ~~uses~~along with 90 other banks, was included in the Committee of European Banking Supervisors’ (CEBS)^a stress test performed in July 2010. The stress test was designed to assess the resilience of the EU banking sector and each of the selected banks’ ability to absorb possible shocks on credit and market risks, including sovereign risks. Under the scenario considered, results indicated that Barclays would be well-placed to withstand the stress.

In 2010, Barclays integrated ‘reverse’ stress testing ~~techniques at~~into the Group ~~portfolio and product level and across a range of risk types. For example, portfolio management~~wide stress testing process. Reverse stress testing aims to identify the conditions that would result in the ~~US cards~~ business employs stressed assumptions of unemployment to determine profitability hurdles for new accounts. And in the UK mortgage business, affordability thresholds incorporate stressed estimates of interest rates.

~~In the Investment Banking division, global scenario testing~~model no longer being viable, such as extreme macroeconomic downturn scenarios or specific idiosyncratic events. This is being used to ~~gauge potential losses that could arise~~help support the on-going risk management of the Group, for example reverse stress testing has been integrated into the Risk Appetite framework. This also supports the Group in ~~conditions of extreme market stress. Stress testing is also conducted~~meeting new regulatory requirements in regards to reverse stress testing.

Information on ~~our positions in particular asset classes, including interest rates, commodities, equities, credit and foreign exchange.~~

~~Further details of~~ the Group’s stress testing specifically relating to liquidity risk is set out on page ~~102.~~107.


					49

Risk management

Risk factors

Risk Factors

The following information describes the risk factors which the Group believes could cause its future results to differ materially from expectations. However, other factors could also adversely affect the Group’s results and so the factors discussed in this report should not be considered to be a complete set of all potential risks and uncertainties.

The Group’s approach to identifying, assessing, managing and reporting risks is formalised in its Principal Risks framework and supporting processes. A description of the Principal Risks framework is provided on page 45 and definitions of the 13 Principal Risks are provided in the table below. The risk categories relevant to operational risk disclosed on pages 113 and 114 are : People, Legal, Regulatory, Operations, Financial Crime, Technology, Financial Reporting and Taxation. This summary also includes discussions of the impact of business conditions and the general economy and regulatory changes which can impact risk factors and so influence the Group’s results. The Principal Risks described below can potentially impact the Group’s reputation and brand.

Business conditions and the general economy

The Group’s stress testing framework helps it to understand the impact of changes in business conditions and the general economy, as well as the sensitivity of its business goals to such changes and the scope of management actions to mitigate their impact.

The general recovery in the global economy resulted in an improvement in credit conditions in our main markets during 2010. In the UK, the economy recovered slightly during 2010 reflecting the lower than expected growth in unemployment rates, the sustained low interest rate environment and moderate GDP growth. However a slowdown in growth was evident in the fourth quarter which is likely to lead to uncertainty in the near term. In addition, persistent unemployment and inflation, fiscal tightening, the possibility of weakening house prices, and possible rising oil prices may have an adverse impact on the strength of the recovery which could increase the risk that a higher proportion of the Group’s customers and counterparties may be unable to meet their obligations. Economic credit conditions have also continued to show signs of improvement in many other key geographies, although in Spain the housing sector remains depressed which led to significantly increased impairment in our Spain wholesale portfolios in 2010. Unemployment rates remain high in the US.

The business conditions facing the Group in 2011 are subject to significant uncertainties, most notably:

–	the extent and sustainability of economic recovery particularly in the UK, US, Spain and South Africa;

–	the dynamics of unemployment particularly in the UK, US, Spain and South Africa and the impact on delinquency and charge-off rates;

–	the speed and extent of possible rises in interest rates in the UK, US, South Africa and the Eurozone;

–	the possibility of any further falls in residential property prices in the UK, South Africa and Western Europe;

–	the impact of potentially deteriorating sovereign credit quality;

–	the potential for single name losses in different sectors and geographies where credit positions are sensitive to economic downturn;

–	the potential impact of increasing inflation on economic growth and corporate profitability;

–	possible deterioration in our remaining credit market exposures, including commercial real estate, leveraged finance and a loan to Protium Finance LP (Protium);

–	changes in the value of Sterling relative to other currencies, which could increase risk weighted assets and therefore raise the capital requirements of the Group;

–	continued turmoil in the Middle East and North Africa region could result in loss of business in the affected countries, increased oil prices, increased volatility and risk aversion to this region; and

–	the liquidity and volatility of capital markets and investors’ appetite for risk, which could lead to a decline in the income that the Group receives from fees and commissions.

Regulatory changes

As noted in the section on Supervision and Regulation (pages 115 to 119), 2010 has seen significant regulatory change. This has been, and remains, the subject of close management attention. Where regulatory change has strategic implications this will tend to affect more than one Principal Risk factor. Such issues are dealt with on a Group wide basis by cross-disciplinary teams working under an accountable executive reporting to senior management. Issues dealt with in this manner in 2010 included:

–

The Independent Commission on Banking (ICB): The ICB has been charged by the UK Government with reviewing the UK banking system. Its findings are expected by September 2011. Although the ICB has yet to make recommendations, and it is not possible to predict what the Government’s response to any recommendations that are made will be, there is a possibility that the ICB could recommend change to the structure of UK banks which may require Barclays to make major changes to its structure and business.

–

Recovery and Resolution Plans: there has been a strong regulatory focus on resolvability in 2010, both from UK and international regulators. TheGroup has been engaged, and continues to be engaged, with the authorities on taking forward recovery planning and identifying information that would be required in the event of a resolution.

–

The Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA): the DFA will have an impact on the Group and its business. The full scale of this impact remains unclear as many of the provisions of the Act require rules to be made to give them effect and this process is still under way. Barclays has taken a centralised approach to monitoring this process and to ensuring compliance with the rules that are developed as a result.

Risk management

Risk factors continued

A summary of the Group’s 13 principal risks is as follows


66 Principal Risk Factor	Principal Risk Management	Key Specific Risks and Mitigation
1. Wholesale Credit Risk and 2. Retail Credit Risk
Credit Risk is the risk of the Group suffering financial loss if any of its customers, clients or market counterparties fails to fulfil their contractual obligations to the Group. This can also arise when an entity’s credit rating is downgraded, leading to a fall in the value of Barclays investment in its issued financial instruments.	The Board and management have established a number of key committees to review credit risk management, approve overall Group credit policy and resolve all significant credit policy issues. These comprise: the Board Risk Committee, the Risk Oversight Committee, the Wholesale Credit Risk Management Committee and the Retail Credit Risk Management Committee. Barclays constantly reviews its concentration in a number of areas including, for example, portfolio segments, geography, maturity, industry and investment grade. Diversification is achieved through setting maximum exposure guidelines to individual counterparties sectors and countries, with excesses reported to the Risk Oversight Committee and the Board Risk Committee. For further information see pages 64 to 70.	Specific areas and scenarios where credit risk could lead to higher impairment charges in future years include: Credit Market Exposures Barclays Capital holds certain exposures to credit markets that became illiquid during 2007. These exposures primarily relate to commercial real estate, leveraged finance and a loan to Protium. The Group actively managed down some of these exposures in 2010. For further information see pages 88 to 92. Sovereign Risk EU deficits approached very high levels during 2010, leading to a loss of market confidence in certain countries to which the Group is exposed. The Group has put certain countries on watch list status with detailed monthly reporting to the Wholesale Credit Risk Management Committee. For further information see page 93. Economic Uncertainty Conditions have continued to show signs of improvement in many key markets, although the UK has experienced a slowdown in growth in the fourth quarter, US unemployment rates remain high and the Spanish housing sector continues to be depressed, impacting our wholesale and retail credit risk exposures. In particular, in Spain, the Group has experienced elevated impairment across its operations, following a marked reduction in construction activity and shrinking consumer spending. The Group has reduced its credit risk appetite to the most severely affected segments of the economy. In particular, new lending to the property and construction sector ceased and workout team resources have been increased significantly. For further information see pages 75 to 80.


					51


Principal Risk Factor	Principal Risk Management	Key Specific Risks and Mitigation
3. Market Risk
Market Risk is the risk that the Group’s 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 Group is exposed to market risk through traded market risk, non-traded interest rate risk and the pension fund.	The Board approves market risk appetite for trading and non-trading activities, with limits set within this context by the Group Market Risk Director. The head of each business market risk team is responsible for implementing the Barclays Market Risk Control Framework which sets out how market risk should be identified, measured, controlled, reported and reviewed. Oversight and challenge is provided by business committees, Group committees and the central Group market risk team. Non-traded interest rate risk is hedged with the external market by a business treasury operation or Group Treasury. For further information see pages 94 to 101.	Traded Market Risk Exposures While the Group is exposed to continued market volatility, Barclays Capital’s trading activities are principally a consequence of supporting customer activity. Primary stress testing applies stress moves to each of the major asset classes. Most asset class stress limits were, at some point during 2010, near to their limit. There was one instance of an excess to limit in relation to equity risk in March 2010. This was appropriately escalated and remediated promptly. Barclays Capital’s 2010 market risk exposure, as measured by average total DVaR decreased to £53m (2009: £77m). For further information see pages 95 and 96.
		Non-traded Interest Rate Risk
		The Group is exposed to three main types of non-traded interest rate risk:

		–	fixed rate loans and deposits that are not hedged or matched;

		–	structural risk due to variability of earnings on structural product and equity balances which have no contractual maturity and an interest rate which does not move in line with the base rate; and

		–	margin compression.

		Fixed rate loan risk is mitigated by hedging the risk with the external market either via Group Treasury, or a business treasury operation. Structural risk and margin compression are hedged by equity and structural hedges managed by Group Treasury. The maturities of these hedges were extended during 2010. Due to economic concerns in the third quarter, gilts purchased as part of the equity structural hedge extension were sold. The duration extension process was resumed towards the end of 2010 and is expected to be completed by the end of 2011. For further information see pages 97 to 99. Pension Fund Risk Barclays could be required or might choose to make extra contributions to the pension fund. Financial details of the pension fund are in Note 28.

Risk management

Risk factors continued


Principal Risk Factor	Principal Risk Management	Key Specific Risks and Mitigation
4. Capital Risk
Capital Risk is the risk that the Group has insufficient capital resources to: ensure the financial holding company is well capitalised relative to the minimum regulatory capital requirements set out by the UK FSA and US Federal Reserve; ensure locally regulated subsidiaries can meet their minimum regulatory requirements; support the Group’s Risk Appetite and economic capital requirements; and support the Group’s credit rating.	Primary responsibility for managing Capital Risk rests with the Group Treasury Committee, which has defined and implemented a Capital Risk governance framework. The Committee monitors the Group’s actual and forecast capital positions on both a pre and post stress basis. Stress testing considers the impact to capital resources and requirements as a result of macroeconomic stresses. The Committee also considers major risks to the capital forecast such as changes to the regulatory requirements. The Group has a number of regulated legal entities within the UK and overseas. Local management has primary responsibility for ensuring these entities comply with their local capital requirements. Where necessary, injections of capital may be made. Such injections are approved by Group Treasury Committee. For further information see pages 102 to 106.	Increasing Capital Requirements There have been a number of recent developments in regulatory capital requirements which are likely to have a significant impact on the Group. Most significantly, during 2010, the Capital Requirement Directives 2 and 3 and the guidelines from the Basel Committee for strengthening capital requirements (Basel III) have been finalised. Aligned to this, markets and credit rating agencies now expect equity capital levels significantly in excess of the current regulatory minimum. As a result, and in anticipation of the future regulatory changes, the Group continues to build its capital base and actively manage its risk weighted assets. As at 31st December 2010, the Group’s Core Tier 1 Capital ratio was 10.8% (2009: 10.0%). For further information see pages 103, 104 and 118.

5. Liquidity Risk
Liquidity Risk is the risk that the Group is unable to meet its obligations as they fall due resulting in: an inability to support normal business activity; failing to meet liquidity regulatory requirements; or rating agency concerns.	The Group maintains a substantial liquidity buffer comprised of deposits with central banks and investments in highly liquid securities or deposits. Stress reporting for a number of liquidity scenarios is run on a daily basis. These tests measure the survival periods under Barclays defined stress scenarios. Similar stresses are run for key entities within the Group as well as at the Group level. Since June 2010, the Group has also reported its liquidity position against backstop Individual Liquidity Guidance provided by the FSA. Calibration of the Group’s liquidity framework anticipated final FSA rules and is therefore broadly consistent with current FSA standards. Daily reporting monitors a number of indicators of stress as well as daily cash activity.	Inability To Meet Obligations As They Fall Due, At Reasonable Cost As a result of sudden, large and potentially protracted increases in cash outflows, the cash resources of the Group could be severely depleted. These outflows could be principally through customer withdrawals, wholesale counterparties removing financing, ratings downgrades or loan drawdowns. This could result in:
		–	limited ability to support client lending, trading activities and investments;
		–	forced reduction in balance sheet and sales of assets;
		–	inability to fulfil lending obligations; and
		–	regulatory breaches under the liquidity standards introduced by the FSA on 1st December 2009.
		These outflows could be the result of general market dislocations or specific concerns about Barclays. For further information see pages 107 to 112.


					53


Principal Risk Factor	Principal Risk Management	Key Specific Risks and Mitigation
6. People Risk
People risk arises from failures of the Group to manage its key risks as an employer, including lack of appropriate people resource, failure to manage performance and reward, unauthorised or inappropriate employee activity and failure to comply with employment related requirements.	People Risk is mitigated through the operation of the People Risk Framework (PRF). The PRF consists of Group wide policies which mandate the minimum controls that all businesses globally need to operate to mitigate their people risks and covers the following areas: – Recruitment – Pre-employment screening – Employment agreements – Performance management – Reward – Discipline, Capability and Grievance – Health and Safety – Exit management – Employee feedback – Hiring former employees of the statutory auditor Conformance with the policies is monitored by the HR Risk Committee through regular conformance reviews and quarterly key indicators. Further oversight of the management of People Risk is provided by the Board Remuneration Committee and the Group Operating Committee. For further information see pages 147 to 163.	Compensation and People Retention Risk During 2010, external regulatory developments in relation to remuneration continued to impact the People Principal Risk. On 17th December 2010, the FSA published its final Remuneration code following the July 2010 Consultation Paper. The code was updated in order to implement the remuneration rules required by the Capital Requirements Directive (CRD 3) and the Financial Service Act 2010. The code applies to remuneration paid from 1st January 2011, including remuneration in respect of 2010 performance. Barclays remuneration approach has been reviewed in detail and enhancements made as appropriate to ensure continued compliance with the FSA Code. During 2010, Barclays developed a Group wide policy formalising the role of risk functions in remuneration activities and ensuring regulatory requirements are fulfilled. An independent review of Barclays approach was conducted on behalf of the Board Risk Committee by a third party. The review concluded Barclays approach is market leading and satisfies regulatory requirements.

7. Legal Risk
The Group is subject to a comprehensive range of legal obligations in all countries in which it operates. As a result, the Group is exposed to many forms of legal risk, which may arise in a number of ways: – Business may not be conducted in accordance with applicable laws around the world. – Contractual obligations may either not be enforceable as intended or may be enforced in an adverse way. – Intellectual property may not be adequately protected. – Liability for damages may be incurred to third parties harmed by the conduct of its business.	Legal Risk is owned and managed by the Legal Function both at a Group level and by the business unit legal teams. The General Counsel for each business unit is responsible for management and reporting of Legal Risk. The adequacy and effectiveness of the controls operated in the business units is overseen by the Group Legal Executive Committee. Specific risks relating to Legal Risk are reported on a quarterly basis to the Executive Committee and the Board.	Key Legal Risks to which the Group was exposed during 2010 have included: – Litigation in relation to Lehman Brothers Holdings Inc. – Litigation in relation to American Depositary Shares – Developments in relation to Payment Protection Insurance (see Regulatory Risk) – Compliance with US economic sanctions (see Regulatory Risk) Further details of these matters and other Legal Risks are set out in the Legal Proceedings Note (see page 226) and the Competition and Regulatory Matters Note (see page 227).


54

Risk management

Risk factors continued


Principal Risk Factor	Principal Risk Management	Key Specific Risks and Mitigation
8. Regulatory Risk
Regulatory Risk arises from a failure or inability to comply fully with the laws, regulations or codes applicable specifically to the financial services industry. Non-compliance could lead to fines, public reprimands, damage to reputation, increased prudential requirements, enforced suspension of operations or, in extreme cases, withdrawal of authorisations to operate.	Regulatory Risk is owned and managed by the Compliance Function. Business Unit compliance functions monitor and control compliance risks, applying a range of Compliance policies under the co-ordination and oversight of Group Compliance. The primary focus is on adherence to the regulatory framework currently in place. Specific reports on regulatory compliance are prepared on a regular basis for the Group Operating Committee, the Group Governance and Control Committee and the Board Audit Committee. Compliance risk and control issues are also included in quarterly reporting by the Legal and Compliance functions to the Executive Committee and the Board. Not all risks that might be considered to be regulatory in origin fall under the Regulatory Principal Risk. Most notably, prudential regulatory risks are managed and mitigated in the manner outlined in the sections on Wholesale and Retail Credit Risk, Market Risk, Operations Risk, Capital Risk and Liquidity Risk.	Regulatory Change The regulatory response to the financial crisis has led to very substantial regulatory change in the UK, EU and US and in the other countries in which the Group operates. It has also led to a change in the style of supervision in a number of territories, with a more assertive approach being demonstrated by the authorities. Anti-bribery and Corruption Among other things, the Bribery Act 2010, which applies to UK companies worldwide, has created an offence of failure by a commercial organisation to prevent a bribe being paid on its behalf. However, it will be a defence if the organisation has adequate procedures in place to prevent bribery. In anticipation of the entry into force of the Bribery Act later in 2011, the Group has been enhancing its framework of controls to comply with the provisions of the Act. Payment Protection Insurance (PPI) PPI has been under scrutiny by the UK competition authorities and financial services regulators. The UK Competition Commission (CC) has undertaken an in-depth enquiry into the PPI market which has resulted in the CC introducing a number of remedies including a prohibition on sale of PPI at the point of sale. In addition a judicial review has been launched regarding the treatment of PPI complaints by the FSA and Financial Ombudsman Services. US Economic Sanctions As announced on 18th August 2010, Barclays reached settlements with US Authorities in relation to the investigation by those agencies into compliance with US sanctions and US dollar payment practices. In addition, an Order to Cease and Desist has been issued upon consent by the Federal Reserve Bank of New York and the New York State Banking Department. Barclays has taken significant steps to enhance further its compliance programmes including: the further development and implementation of its Sanctions Policy; substantial investment in advanced payment and customer screening technology; and the delivery of mandatory sanctions training for more than 100,000 staff around the world. For further information, see pages 115 to 119 and 227.


9. Operations Risk

Operations Risk has a broad scope and, for that reason, it is defined at a more granular level. The risks are: – Transaction operations – New product development – Premises and security – External suppliers – Payments process – Information, data quality and records management	These risks are managed by Business Units in accordance with control requirements articulated via mandated Group Policies and/or Risk Control Frameworks. The adequacy and effectiveness of the controls operated in the Business Units is overseen by the Group Principal Risk Owner teams in the Group Centre via regular management information, conformance reviews and quarterly Risk Review for meetings (attended by Business Unit representatives). The Group Operating Committee is responsible for oversight of these risks.	During 2010 there were enhancements to the management of external suppliers and transaction operations risks.


					55


Principal Risk Factor	Principal Risk Management	Key Specific Risks and Mitigation
10. Financial Crime Risk

Financial Crime Risk is the risk that the Group suffers losses as a result of internal and external fraud or intentional damage, loss or harm to people, premises or moveable assets.	The Group Financial Crime Team, Fraud Oversight Committee and Security Risk Management Committee provide oversight of the implementation of the Fraud Risk Control Framework and the Group Security Risk Control Framework. Oversight is achieved via conformance reviews and other review activity undertaken by Group Financial Crime and within business units.	As a major financial institution, Barclays is a target for financial crime. The Group has frameworks and systems in place to enable it to respond to threats to both the organisation and its customers as they emerge.
	Monthly reports on fraud losses across the Group are produced for the Fraud Oversight Committee which monitors these events and considers the actions to be taken on a case by case basis. Where relevant, the Fraud Oversight Committee takes actions to drive remediation of the root cause of such events.

	Quarterly Financial Crime reports are submitted to the Group Risk Oversight Committee and Board Risk Committee.
11. Technology Risk

Technology Risk includes the non-availability of IT systems, inadequate design and testing of new and changed IT solutions and inadequate IT system security. Data privacy issues are covered under Regulatory Risk and external supplier issues relating to technology are covered under Operations Risk.	Technology is a key business enabler and requires an appropriate level of control to ensure that the most significant technology risks are effectively managed. Technology Risk is managed through a formal risk governance framework. A set of Key Risk Indicators (KRIs), consistent across Business Units, is periodically collated and reviewed by management. Each KRI has a specific target state, defining the Group’s attitude to risk. Any areas falling short of this standard are highlighted to management for action.	Similar to many large organisations, Barclays is exposed to the risk that systems may not be continually available. This risk is monitored closely and enhancements to certain key systems are being undertaken.
	Regular technology risk reporting is provided to the Group Operating Committee, the Governance and Control Committee and the Board Audit Committee.


56

Risk management

Risk factors continued


Principal Risk Factor	Principal Risk Management	Key Specific Risks and Mitigation

12. Financial Reporting Risk

Financial Reporting Risk arises from a failure or inability to comply fully with the laws, regulations or codes in relation to the disclosure of financial information. Non-compliance could lead to fines, public reprimands, damage to reputation, enforced suspension of operations or, in extreme cases, withdrawal of authorisations to operate.	Group wide requirements and any material external requirements are set out in the Financial Reporting Risk Control Framework. During 2010 a review of the Financial Reporting Risk was undertaken, resulting in a broadening of its scope. The Group monitoring process was also strengthened to provide the Group Financial Controller with a more effective oversight. All business units and Group centre functions are required to comply with the Risk Control Framework requirements and retain evidence to support this accordingly. Compliance with the Financial Reporting Risk policies is reported at Group level through core key indicators on at least a quarterly basis. Group oversight is undertaken via conformance review, other ongoing monitoring activities and quarterly review meetings are held between the Group Financial Controller and business unit Finance Directors to review and challenge the business unit Financial Reporting Risk status and assessment. Quarterly Financial Reporting Risk reports are submitted to the Group Operating Committee for oversight and monitoring. Additionally, specific reports are submitted to the Group Governance & Control Committee and to the Board Audit Committee around the Group compliance with Sarbanes Oxley requirements.	Changes in accounting standards As set out in Future Accounting Developments on page 204, the International Accounting Standards Board is undertaking a significant programme of revision to IFRS which it aims to complete by 30th June 2011. The final form of IFRS requirements, the time period over which new requirements will need to be applied and the impact on the results and financial position is not yet known. The Group is taking steps to ensure that it is able to appropriately respond to the changes as they emerge, however, the situation is evolving rapidly. Increased scrutiny Following the financial crisis, the financial reporting of banks has been subject to greater scrutiny by regulators. This has included consideration of accounting policies, accounting for particular transactions and financial statement disclosures. For Barclays, this has included the accounting treatment of Protium Finance LP. Further details are provided on pages 91 and 92. The Group continues to maintain an effective system of internal control over financial reporting and to enhance its disclosures in response to feedback received and the British Bankers Association (BBA) Disclosure Code. Further details on internal control over financial reporting can be found on page 128 and on the BBA code and improvements to Annual Report disclosures on page 184.


					57


Principal Risk Factor	Principal Risk Management	Key Specific Risks and Mitigation
13. Taxation Risk

Tax Risk is the risk that the Group suffers losses associated with changes in tax law or in the interpretation of tax law. It also includes the risk of failure to comply with procedures required by tax authorities. Failure to manage tax risks could lead to an additional tax charge. It could also lead to reputational damage or a financial penalty for failure to comply with required tax procedures or other aspects of tax law.	The Group’s strategy is to maximise returns for shareholders whilst complying with relevant tax laws, disclosure requirements and regulations under an appropriate risk control framework. The Group takes a responsible and transparent approach to the management and control of its tax affairs and related tax risk, specifically tax risks are assessed as part of the Group’s formal governance processes and are reviewed by the Executive Committee, Group Finance Director and the Board Risk Committee. The tax charge is reviewed by the Board Audit Committee. Barclays has adopted the Code of Practice for Taxation of Banks (The Code) and has confirmed to HMRC that it will have regard to the spirit of the law and the intent of Parliament in managing its tax affairs. The Group employs high-quality tax professionals and takes appropriate advice from reputable professional firms. Effective, well-documented and controlled processes are in place to ensure compliance with tax disclosure and filing obligations. Where disputes arise with tax authorities with regard to the interpretation and application of tax law, the Group is committed to addressing the matter promptly and resolving the matter with the tax authority in an open and constructive manner.	During 2010 the Group settled open issues in a number of jurisdictions, principally the UK and South Africa, including agreement of the UK bank payroll tax liability with HMRC. Governance and controls have been put in place to ensure compliance with the UK government’s Code of Practice for Taxation of Banks. The profit forecasts that support the Group’s deferred tax assets, principally in the UK, US and Spain, have been subject to close scrutiny by management. The Group continues to monitor the potential impact of proposed taxes aimed at banks such as the UK bank levy (see also page 206).


58

Risk management

Credit risk management

All disclosures in this section (pages 58-93) are unaudited unless otherwise stated

Overview of Barclays Group Credit Risk Exposures

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.

The credit risk that the Group faces arises mainly from wholesale and retail loans and advances, together with the counterparty credit risk arising from derivative contracts entered into with clients. Other sources of credit risk arise from trading activities, including debt securities, settlement balances with market counterparties, available for sale assets and reverse repurchase agreements.

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.

Analysis of the Group’s maximum exposure to credit risk before collateral held or other credit enhancements

The following tables present the maximum exposure at 31st December 2010 and 2009 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 the trading portfolio or as available for sale assets, as well as non-financial assets. The nominal value of off-balance sheet credit related instruments is also shown, where appropriate.

Financial assets designated at fair value 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.

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.


					59

Maximum exposure to credit risk (audited)

Asset class

As at 31st December 2010

Loans and
advances^a
£m

Debt
securities
and other
bills^b

£m

Derivatives^c
£m

Reverse
repurchase

agreements^d
£m

Other

£m

Total

assets

£m

On-balance sheet:

Cash and balances at central banks

–

97,630

Items in the course of collection from other banks

–

1,384

Trading portfolio assets:

Debt securities

–

139,240

–

139,240

Traded loans

2,170

–

2,170

Total trading portfolio assets

2,170

139,240

–

141,410

Financial assets designated at fair value:

Loans and advances

22,352

–

22,352

Debt securities

–

1,918

–

1,918

Other financial assets

–

7,559

2,542

10,101

Total financial assets designated at fair value

22,352

1,918

–

7,559

2,542

34,371

Derivative financial instruments

–

420,319

–

420,319

Loans and advances to banks

37,799

–

37,799

Loans and advances to customers:

Home loans

168,055

–

168,055

Credit card receivables

22,658

–

22,658

Other personal lending

26,608

–

26,608

Wholesale and corporate

200,618

–

200,618

Finance lease receivables

10,003

–

10,003

Total loans and advances to customers

427,942

–

427,942

Reverse repurchase agreements and other similar secured lending

–

205,772

–

205,772

Available for sale debt securities

–

59,629

–

59,629

Other assets

–

2,824

Total on-balance sheet

490,263

200,787

420,319

213,331

104,380

1,429,080

Off-balance sheet:

Securities lending arrangements

27,672

Guarantees and letters of credit pledged as collateral security

13,783

Acceptances and endorsements

331

Documentary credits and other short-term trade related transactions

1,194

Standby facilities, credit lines and other commitments

222,963

Total off-balance sheet

265,943

Total maximum exposure to credit risk

1,695,023

Notes

a	Further analysis of loans and advances is on pages 71 to 84.

b	Further analysis of debt securities and other bills is on page 85.

c	Further analysis of derivatives is on page 86.

d	Further analysis of reverse repurchase agreements is on page 87.


60

Risk management

Credit risk management continued

Maximum exposure to credit risk (audited)

Asset class

As at 31st December 2009

Loans and
advances
£m

Debt
securities
and other
bills

£m

Derivatives
£m

Reverse
repurchase
agreements
£m

Other
£m

Total

assets

£m

On-balance sheet:

Cash and balances at central banks

–

81,483

Items in the course of collection from other banks

–

1,593

Trading portfolio assets:

Debt securities

–

126,520

–

126,520

Traded loans

2,962

–

2,962

Total trading portfolio assets

2,962

126,520

–

129,482

Financial assets designated at fair value:

Loans and advances

22,390

–

22,390

Debt securities

–

4,007

–

4,007

Other financial assets

557

–

7,757

344

8,658

Total financial assets designated at fair value

22,947

4,007

–

7,757

344

35,055

Derivative financial instruments

–

416,815

–

416,815

Loans and advances to banks

41,135

–

41,135

Loans and advances to customers:

Home loans

149,099

–

149,099

Credit card receivables

21,889

–

21,889

Other personal lending

25,435

–

25,435

Wholesale and corporate

212,928

–

212,928

Finance lease receivables

10,873

–

10,873

Total loans and advances to customers

420,224

–

420,224

Reverse repurchase agreements and other similar secured lending

–

143,431

–

143,431

Available for sale debt securities

–

49,807

–

49,807

Other assets

–

3,476

Total on-balance sheet

487,268

180,334

416,815

151,188

86,896

1,322,501

Off-balance sheet:

Securities lending arrangements

27,406

Guarantees and letters of credit pledged as collateral security

15,406

Acceptances and endorsements

375

Documentary credits and other short-term trade related transactions

762

Standby facilities, credit lines and other commitments

206,513

Total off-balance sheet

250,462

Total maximum exposure to credit risk

1,572,963


					61

Concentrations of Credit Risk

A concentration of credit risk exists when a number of counterparties are located in a geographical region, or 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 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.

Credit risk concentrations by geographical sector (audited)


	United Kingdom £m		Other European Union £m		United States £m		Africa £m		Rest of the World £m		Total £m
As at 31st December 2010
On-balance sheet:
Cash and balances at central banks		18,535		13,558		41,288		2,293		21,956		97,630
Items in the course of collection from other banks		1,169		114		–		100		1		1,384
Trading portfolio assets		16,063		30,066		66,148		1,516		27,617		141,410
Financial assets designated at fair value		14,800		3,613		9,001		2,918		4,039		34,371
Derivative financial instruments		129,183		129,497		110,467		4,234		46,938		420,319
Loans and advances to banks		5,233		10,375		12,559		1,475		8,157		37,799
Loans and advances to customers		209,995		83,269		53,297		52,938		28,443		427,942
Reverse repurchase agreements and other similar secured lending		50,044		45,265		77,430		23		33,010		205,772
Available for sale financial investments		25,466		14,839		6,399		7,281		5,644		59,629
Other assets		1,612		235		314		537		126		2,824
Total on-balance sheet		472,100		330,831		376,903		73,315		175,931		1,429,080

Off-balance sheet:
Securities lending arrangements		–		–		27,672		–		–		27,672
Guarantees and letters of credit pledged as collateral security		3,803		2,273		4,266		2,179		1,262		13,783
Acceptances and endorsements		125		4		6		29		167		331
Documentary credits and other short-term trade related transactions		476		156		143		183		236		1,194
Standby facilities, credit lines and other commitments		94,676		29,985		64,812		24,522		8,968		222,963
Total off-balance sheet		99,080		32,418		96,899		26,913		10,633		265,943
Total		571,180		363,249		473,802		100,228		186,564		1,695,023

As at 31st December 2009
On-balance sheet:
Cash and balances at central banks		37,697		5,584		32,279		1,742		4,181		81,483
Items in the course of collection from other banks		1,340		56		–		196		1		1,593
Trading portfolio assets		12,232		35,088		52,229		1,414		28,519		129,482
Financial assets designated at fair value		13,945		3,986		10,800		2,352		3,972		35,055
Derivative financial instruments		133,713		128,881		111,269		2,511		40,441		416,815
Loans and advances to banks		5,117		12,697		13,137		2,388		7,796		41,135
Loans and advances to customers		203,582		84,343		58,355		47,495		26,449		420,224
Reverse repurchase agreements and other similar secured lending		22,222		44,014		60,759		527		15,909		143,431
Available for sale financial investments		16,752		14,028		7,175		4,993		6,859		49,807
Other assets		1,565		417		651		661		182		3,476
Total on-balance sheet		448,165		329,094		346,654		64,279		134,309		1,322,501

Off-balance sheet:
Securities lending arrangements		–		–		27,406		–		–		27,406
Guarantees and letters of credit pledged as collateral security		3,337		2,783		5,443		1,795		2,048		15,406
Acceptances and endorsements		134		5		–		26		210		375
Documentary credits and other short-term trade related transactions		357		94		–		174		137		762
Standby facilities, credit lines and other commitments		94,763		26,250		57,598		19,306		8,596		206,513
Total off-balance sheet		98,591		29,132		90,447		21,301		10,991		250,462
Total		546,756		358,226		437,101		85,580		145,300		1,572,963


62

Risk management

Credit risk management continued

Credit Risk concentrations by industrial sector (audited)


	Financial insti- tutions £m		Manu- facturing £m		Const- ruction and property £m		Govern- ment £m		Energy and water £m		Wholesale and retail distribution and leisure £m		Business and other services £m		Home loans £m		Cards, unsecured loans and other personal lending £m		Other £m		Total £m
As at 31st December 2010
On-balance sheet:
Cash and balances at central banks		–		–		–		97,630		–		–		–		–		–		–		97,630
Items in the course of collection from other banks		1,378		–		–		6		–		–		–		–		–		–		1,384
Trading portfolio assets		51,337		2,222		986		79,055		3,408		873		2,209		–		17		1,303		141,410
Financial assets designated at fair value		11,507		71		11,746		5,328		1,389		683		2,944		–		109		594		34,371
Derivative financial instruments		382,038		4,810		2,953		7,637		11,265		3,193		2,622		–		61		5,740		420,319
Loans and advances to banks		36,606		–		–		1,193		–		–		–		–		–		–		37,799
Loans and advances to customers		87,405		14,766		28,670		5,108		9,231		17,357		26,228		168,055		46,668		24,454		427,942
Reverse repurchase agreements and other similar secured lending		197,808		50		7		7,247		–		279		339		–		–		42		205,772
Available for sale financial investments		23,585		154		336		33,402		37		117		1,359		410		72		157		59,629
Other assets		1,267		4		47		436		9		9		383		4		615		50		2,824
Total on-balance sheet		792,931		22,077		44,745		237,042		25,339		22,511		36,084		168,469		47,542		32,340		1,429,080
Off-balance sheet:
Securities lending arrangements		27,672		–		–		–		–		–		–		–		–		–		27,672
Guarantees and letters of credit pledged as collateral security		5,213		1,445		752		358		1,256		686		2,196		439		477		961		13,783
Acceptances and endorsements		28		111		38		–		4		48		92		–		8		2		331
Documentary credits and other short-term trade related transactions		396		35		103		–		3		124		477		–		56		–		1,194
Standby facilities, credit lines and other commitments		47,784		20,999		9,860		2,307		15,671		9,220		10,664		16,789		79,341		10,328		222,963
Total off-balance sheet		81,093		22,590		10,753		2,665		16,934		10,078		13,429		17,228		79,882		11,291		265,943
Total		874,024		44,667		55,498		239,707		42,273		32,589		49,513		185,697		127,424		43,631		1,695,023
As at 31st December 2009
On-balance sheet:
Cash and balances at central banks		–		–		–		81,483		–		–		–		–		–		–		81,483
Items in the course of collection from other banks		1,586		–		–		7		–		–		–		–		–		–		1,593
Trading portfolio assets		41,482		3,899		1,063		76,454		3,136		608		1,569		–		–		1,271		129,482
Financial assets designated at fair value		13,366		78		11,929		5,435		330		775		2,569		150		4		419		35,055
Derivative financial instruments		379,901		4,230		2,416		6,119		12,081		3,472		5,627		–		69		2,900		416,815
Loans and advances to banks		36,710		–		–		4,425		–		–		–		–		–		–		41,135
Loans and advances to customers		93,113		18,197		29,175		4,801		10,723		19,156		29,603		149,099		40,575		25,782		420,224
Reverse repurchase agreements and other similar secured lending		136,184		87		926		5,347		–		279		608		–		–		–		143,431
Available for sale financial investments		30,398		285		269		16,320		57		82		1,896		416		–		84		49,807
Other assets		1,588		23		60		414		13		38		478		106		682		74		3,476
Total on-balance sheet		734,328		26,799		45,838		200,805		26,340		24,410		42,350		149,771		41,330		30,530		1,322,501
Off-balance sheet:
Securities lending arrangements		27,406		–		–		–		–		–		–		–		–		–		27,406
Guarantees and letters of credit pledged as collateral security		5,711		1,266		715		–		2,872		955		2,164		584		411		728		15,406
Acceptances and endorsements		85		108		2		–		33		45		8		–		5		89		375
Documentary credits and other short-term trade related transactions		242		33		80		–		–		171		233		–		3		–		762
Standby facilities, credit lines and other commitments		39,564		19,530		10,567		1,687		13,502		7,949		9,243		15,356		79,052		10,063		206,513
Total off-balance sheet		73,008		20,937		11,364		1,687		16,407		9,120		11,648		15,940		79,471		10,880		250,462
Total		807,336		47,736		57,202		202,492		42,747		33,530		53,998		165,711		120,801		41,410		1,572,963

An analysis of geographical and industry concentration of Group loans and advances held at amortised cost is presented on page 72.


					63

Impairment Charges (audited)

Impairment charges on loans and advances fell 24% to £5,625m (2009: £7,358m), reflecting improving credit conditions in the main sectors and geographies in which Barclays lends, which led to lower charges across the majority of businesses. The largest reduction was in the wholesale portfolios, due to lower charges against credit market exposures and fewer large single name charges. This reduction was partially offset by the impact of deteriorating credit conditions in the Spanish property and construction sectors, which resulted in an increase of £630m in impairment against the Barclays Corporate loan book in Spain, and £532m impairment relating to the Protium loan in Barclays Capital. In the retail portfolios, impairment performance improved as delinquency rates fell across Barclays businesses, most notably the UK, US, Spanish, Indian, and African portfolios.

As a result of this fall in impairment and the 1% rise in loans and advances, the loan loss rate decreased to 118bps (2009: 156bps).

The impairment charges against available for sale assets and reverse repurchase agreements fell by 93% to £47m (2009: £713m), principally driven by lower impairment against credit market exposures.


Impairment charges by business (audited)
	Loans and advances^a £m		Available for sale £m			Reverse repos £m			Total £m
Year ended 31st December 2010
UK Retail Banking		819		–			–			819
Barclaycard		1,688		–			–			1,688
Western Europe Retail Banking		314		–			–			314
Barclays Africa		82		–			–			82
Absa		480		–			–			480
Barclays Capital^b		642		(95	)		(4	)		543
Barclays Corporate		1,551		145			–			1,696
Barclays Wealth		48		–			–			48
Head Office Functions and Other Operations		1		1			–			2
Total impairment charges		5,625		51			(4	)		5,672

Year ended 31st December 2009
UK Retail Banking		1,031		–			–			1,031
Barclaycard		1,798		–			–			1,798
Western Europe Retail Banking		334		4			–			338
Barclays Africa		121		–			–			121
Absa		567		–			–			567
Barclays Capital^b		1,898		650			43			2,591
Barclays Corporate		1,544		14			–			1,558
Barclays Wealth		51		–			–			51
Head Office Functions and Other Operations		14		2			–			16
Total impairment charges		7,358		670			43			8,071

Year ended 31st December 2008
UK Retail Banking		642		–			–			642
Barclaycard		1,097		–			–			1,097
Western Europe Retail Banking		172		–			–			172
Barclays Africa		71		–			–			71
Absa		347		–			–			347
Barclays Capital^b		1,936		363			124			2,423
Barclays Corporate		593		–			–			593
Barclays Wealth		44		–			–			44
Head Office Functions and Other Operations		11		19			–			30
Total impairment charges		4,913		382			124			5,419

Notes

a	Includes charges of £76m (2009: £28m; 2008: £329m) in respect of undrawn facilities

and guarantees.

b	Credit market related impairment charges within Barclays Capital comprised £660m

(2009: £1,205m; 2008: £1,517m) against loans and advances, a write back of £39m

(2009: £464m charge; 2008: £192m charge) against available for sale assets and

a charge against reverse repurchase agreements of £nil (2009: £nil; 2008: £54m).


64

Risk management

Credit risk management continued

Credit Risk Management Overview

A. Overview (audited)

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.

The granting of credit is one of the Group’s major sources of income and, as the most significant risk, the Group dedicates considerable resources to ~~controlling it.~~its control.

The credit risk that the Group faces arises mainly from wholesale and retail loans and advances together with the counterparty credit risk arising from derivative contracts entered into with our clients.

~~Barclays is also exposed to other~~ Other sources of credit ~~risks arising~~risk arise from ~~its~~ trading activities, including debt securities, settlement balances with market counterparties, available for sale assets and reverse repurchase loans.

~~In managing credit risk, the Group applies the five-step risk management process.~~ Credit risk management objectives ~~are:~~are to:

–

To establish a framework of controls to ensure credit risk-taking is based on sound credit risk management ~~principles.~~

principles;

–

To identify, assess and measure credit risk clearly and accurately across the Group and within each separate business, from the level of individual facilities up to the total ~~portfolio.~~

portfolio;

–

To control and plan credit risk-taking in line with external stakeholder expectations and avoiding undesirable ~~concentrations.~~

concentrations;

–

To monitor credit risk and adherence to agreed ~~controls.~~

controls; and

–

To ensure that risk-reward objectives are met.

In the review of Barclays credit risk management that follows, we ~~first~~ explain how the Group meets its credit risk management objectives through its organisation, structure and governance, mitigation techniques, measurement ~~reporting~~ and ~~system of internal ratings.~~

We then provide a summary of the Group’s total assets, including the asset types which give rise to credit risk and counterparty credit risk, namely: loans and advances, debt securities and derivatives.

On pages 68 to 79, we set out a detailed analysis of the Group’s loans and advances across a number of asset classes and businesses referencing significant portfolios and including summary measures of asset quality.

We provide disclosures and analyses of the credit risk profiles of these asset categories, beginning with Barclays Capital’s credit market exposures by asset class, covering current exposures, losses during 2009, sales and paydowns, foreign exchange movements and, where appropriate, details of collateral held, geographic spread, vintage and credit quality. These are given on pages 81 to 90.

~~Finally, additional analysis of debt securities and derivatives is provided on pages 91 to 93.~~reporting.

B. Organisation and structure

Barclays has structured the responsibilities of credit risk management so that decisions are taken as close as possible to the business, whilst ensuring robust review and challenge of performance, risk infrastructure and strategic plans.

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 Chief Risk Officer.

The role of the Group Risk function is to provide ~~Group-wide~~Group wide direction, oversight and challenge of credit risk-taking. Group Risk sets the Credit Risk Control Framework, which provides a structure within which credit risk is managed together with supporting Group Credit Risk Policies. Group Risk also provides technical support, review and validation of credit risk measurement models across the Group.

Group Credit Risk Policies currently in force include:

–

Maximum Exposure Guidelines to limit the exposures to an individual customer or counterparty;

–

Country risk policies to specify Risk Appetite by country and avoid excessive concentration of credit risk in individual countries;

–

Aggregation policy to set out the circumstances in which counterparties should be grouped together for credit risk purposes;

–

Expected loss policies to set out the ~~Group~~ approaches for the calculation of the Group’s expected loss, i.e. ~~Group~~ measure of anticipated loss for exposures;

–

Repayment plans policy for setting the standards for repayment plans and restructures within retail portfolios; and

–

Impairment and provisioning policies to ensure that measurement of impairment accurately reflects incurred losses and that clear governance procedures are in place for the calculation and approval of impairment allowances.

The largest credit exposures are approved at the ~~Group~~ Credit Committee which is managed by Group Risk. Group Risk also manages and approves the Mandate and Scale limits and triggers which mitigate concentration risk and define appetite in risk sensitive areas of the portfolio such as commercial property ~~finance (see page 63).~~

~~Group Risk also provides technical support, review and validation of credit risk measurement models across the Group.~~finance.

The principal ~~Committees~~committees that review credit risk management, approve overall Group credit policy and resolve all significant credit policy issues are the Board Risk Committee, the Group Risk Oversight Committee, the Wholesale Credit Risk Management Committee and the Retail Credit Risk Management Committee. Senior Group and business risk management are represented on the Group Risk Oversight Committee, the Wholesale Credit Risk Management Committee and the Retail Credit Risk Management Committee.

On a semi-annual basis, the Credit Risk Impairment Committee (CRIC) obtains assurance on behalf of the Group that all businesses are recognising impairment in their portfolios accurately, promptly and in accordance with policy, accounting standards and established governance.

CRIC is chaired by the Credit Risk Director and reviews the movements toin impairment, ~~in the businesses,~~ including those already agreed at Credit Committee, as well as potential credit risk loans, loan loss rates, asset quality metrics and impairment coverage ratios.

CRIC makes twice-yearly recommendations to the Board Audit

Committee on the adequacy of Group impairment allowances. Impairment allowances are reviewed relative to the risk in the portfolio, business and economic trends, current policies and methodologies, and ~~our~~the Group’s position relative to peer banks.


				67	65

C. Credit risk mitigation

Barclays employs a range of techniques and strategies to actively mitigate credit risks to which it is exposed. These can broadly be divided into three types:

–	netting and set-off;

–	collateral; and

–	risk transfer.

In many jurisdictions in which Barclays operates, credit risk exposures can be reduced by applying netting and set off which uses Barclays obligations to a counterparty to produce a lower, net, credit exposure. This technique is commonly used in derivative transactions.

Barclays will often seek to take a security interest in a tangible or financial asset to provide an alternative source of repayment in the event that customers, clients or counterparties are unable to meet their obligations. Assets taken as collateral include cash, financial assets (subject to an appropriate margin or ‘haircut’ to reflect their price volatility) and physical assets, particularly property but also vehicles, aircraft, ships and physical commodities amongst many others. Assets other than cash are subject to regular revaluation to ensure they continue to achieve appropriate mitigation of risk. Customer agreements often include requirements for provision of additional collateral should valuations decline or credit exposure increase (for example due to market moves impacting a derivative exposure).

Finally, a range of instruments including guarantees, credit insurance, credit derivatives and securitisation can be used to transfer credit risk from one counterparty to another. This mitigates credit risk in two main ways:

–	firstly, if the risk is transferred to a counterparty which is more creditworthy than the original counterparty, then overall credit risk will be reduced; and

–	secondly, where recourse to the first counterparty remains, a default of both counterparties is required before a loss materialises. This will be less likely than the default of either counterparty individually so credit risk is reduced.

Risk transfer can also be used to reduce risk concentrations within portfolios, lowering the impact of stress events.

D. Measurement and internal ratings

The principal objective of credit risk measurement is to produce the most accurate possible quantitative assessment of the credit risk to which the Group is exposed, from the level of individual facilities up to the total portfolio. Integral to this is the calculation of internal ratings, which are used in numerous aspects of credit risk management and in the calculation of regulatory and economic capital. The key building blocks of this process are:

–

Probability of default (PD).

;

–

Exposure at default (EAD).

; and

–

Loss given default (LGD).

ToFor example, Barclays can assign an expected loss over the next 12 months to each customer by multiplying these three factors. We calculateprobability of default (PD) by assessing the credit quality of borrowers and other counterparties. For the sake of illustration, suppose a customer has a 2% probability of defaulting over a 12-month period.

The exposure at default (EAD) is our estimate of what the outstanding balance will be if the customer does default. Supposing the current balance is £150,000, our models might predict a rise to £200,000 by then. Should customers default, some part of the exposure is usually recovered. The part that is not recovered, together with the economic costs associated with the recovery process, comprise the loss given default (LGD), which is expressed as a percentage of EAD. Supposing the LGD in this case is estimated to be 50%, the expected loss for this customer is: 2% x £200,000 x 50% or £2,000.

To calculate probability of default (PD), Barclays assesses the credit quality of borrowers and other counterparties and assigns them an internal risk rating. Multiple rating methodologies may be used to inform the overall rating decision on individual large credits, such as internal and external models, rating agency ratings and ~~for wholesale assets,~~other market ~~information such as credit spreads.~~information. For smaller credits, a single source may suffice such as the result from an internal rating model. Barclays recognises the need for two different expressions of PD depending on the purpose for which it is used. For the purposes of calculating regulatory and economic capital, long-run average through-the-cycle (TTC) PDs are required. However, for the purposes of pricing and existing customer management, PDs should represent the best estimate of probability of default given the current position in the credit cycle. Hence, point-in-time (PIT) PDs are also required.


Barclays PD Masterscale
Default Probability


Default grade
TTC Band	>=Min	Mid	<Max
1	0.00%	0.01%	0.02%
2	0.02%	0.03%	0.03%
3	0.03%	0.04%	0.05%
4	0.05%	0.08%	0.10%
5	0.10%	0.13%	0.15%
6	0.15%	0.18%	0.20%
7	0.20%	0.23%	0.25%
8	0.25%	0.28%	0.30%
9	0.30%	0.35%	0.40%
10	0.40%	0.45%	0.50%
11	0.50%	0.55%	0.60%
12	0.60%	0.90%	1.20%
13	1.20%	1.38%	1.55%
14	1.55%	1.85%	2.15%
15	2.15%	2.60%	3.05%
16	3.05%	3.75%	4.45%
17	4.45%	5.40%	6.35%
18	6.35%	7.50%	8.65%
19	8.65%	10.00%	11.35%
20	11.35%	15.00%	18.65%
21	18.65%	30.00%	100.00%


66

Risk management

Credit risk management continued

Each PD model outputs an estimate of default probability that is PIT, TTC or a hybrid (e.g. a 50:50 blend). Bespoke conversion techniques, appropriate to the portfolio in question, are then applied to convert the model output to pure PIT and TTC PD estimates. In deriving the appropriate conversion, industry and location of the counterparty and an understanding of the current and long-term credit conditions are considered. Both PIT and ~~the~~ TTC PD estimates are recorded for each client.

Within Barclays, the calculation of internal ratings differs between wholesale and retail customers. For wholesale portfolios, the rating system is constructed to ensure that a client receives the same rating regardless of the part of the business with which it is dealing. To achieve this, a model hierarchy is adopted which requires users to adopt a specific approach to rating each counterparty depending upon the nature of the business and its location. A range of methods are utilised for estimating wholesale counterparty PDs. These include bespoke grading models developed within the Group (internal models), vendor models such as MKMV Credit Edge and RiskCalc, and a conversion of external alphabet ratings from either S&P, Moody’s or Fitch. Retail models, especially those used for capital purposes, are almost exclusively built internally using Barclays data. In many cases bureau data is used to complement internal ~~data and in rare cases models developed by the credit bureau themselves are used in conjunction with internal models.~~data. In addition, in some low data/low default environments, external developments may also be utilised.

A key element of the Barclays wholesale framework is the PD Masterscale (see below). This scale has been developed to distinguish meaningful differences in the probability of default risk throughout the risk range. In contrast to wholesale businesses, retail areas rarely bucket exposures into generic grades for account management purposes (although they may be used for reporting purposes). Instead, accounts are managed at a more granular and bespoke level.

Exposure at default (EAD) represents the expected level of usage of the credit facility should default occur. At the point of default, the customer exposure can vary from the current position due to the combined effects of additional drawings, repayment of principal and interest and fees. EAD parameters are all derived from internal estimates and are determined from internal historical behaviour. The lower bound of EAD for regulatory

capital purposes is the current balance at calculation of EAD. For derivative instruments, exposure in the event of default is the estimated cost of replacing contracts ~~with a positive value should~~where counterparties ~~fail~~have incurred obligations which they have failed to ~~perform their obligations.~~satisfy.

Should a customer default, some part of the exposure is usually recovered. The part that is not recovered, the actual loss, together with the economic costs associated with the recovery process, comprise theloss given default (LGD), which is expressed as a percentage of EAD. The Group estimates an average LGD ~~for each type of exposure~~ using historical information. The level of LGD depends principally on: the type of collateral (if any); the seniority or subordination of the exposure; the industry in which the customer operates (if a business); the length of time taken for the recovery process and the timing of all associated cash flows; and the ~~jurisdiction applicable and~~ work-out ~~expenses.~~expense. The outcome is also dependent on economic conditions that may determine, for example, the prices that can be realised for assets, whether a business can readily be refinanced or the availability of a repayment source for personal customers. For the purposes of regulatory capital an adjustment is made to the modelled LGD to account for the increased losses experienced under downturn conditions, giving a ‘downturn LGD’.

Barclays PD Masterscale

Default grade/
TTC Band
   Default Probability
   >=Min    Mid    <Max
1
   0.00%    0.010%    0.02%
2
   0.02%    0.025%    0.03%
3
   0.03%    0.040%    0.05%
4
   0.05%    0.075%    0.10%
5
   0.10%    0.125%    0.15%
6
   0.15%    0.175%    0.20%
7
   0.20%    0.225%    0.25%
8
   0.25%    0.275%    0.30%
9
   0.30%    0.350%    0.40%
10
   0.40%    0.450%    0.50%
11
   0.50%    0.550%    0.60%
12
   0.60%    0.900%    1.20%
13
   1.20%    1.375%    1.55%
14
   1.55%    1.850%    2.15%
15
   2.15%    2.600%    3.05%
16
   3.05%    3.750%    4.45%
17
   4.45%    5.400%    6.35%
18
   6.35%    7.500%    8.65%
19
   8.65%    10.000%    11.35%
20
   11.35%    15.000%    18.65%
21
   18.65%    30.000%    100.00%


68

~~Risk management~~

~~Credit risk management~~

~~continued~~

E. Reporting

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 summarised in five broad stages:

–

measuring exposures and concentrations;

–

monitoring weaknesses in portfolios;

–

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

–

raising allowances for impaired loans; and

–

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

LOGO


					67

F. 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, for example, loans to banks, loan commitments and debt securities.

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 timely data.

One area of particular review is concentration risk. 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 and other conditions.

As a result, Barclays constantly reviews its concentration in a number of areas including, for example, geography, maturity and industry ~~and investment grade~~ (see ~~below)~~previous page).

Diversification is achieved through setting maximum exposure guidelines to individual counterparties. Excesses are reported to the Group Risk Oversight Committee and the Board Risk Committee. Mandate ~~and~~& Scale limits are used to limit the stock of current exposures in a loan portfolio and the flow of new exposures into a loan portfolio. Limits are typically based on the nature of the lending and the amount of the portfolio meeting certain standards of underwriting criteria.

~~Note~~

a	~~Total comprises all limits to cross-border counterparties (non-UK) where limits are greater than £10m.~~


				69

G. Monitoring weaknesses in portfolios

Whilst the basic principles for monitoring weaknesses in wholesale and retail exposures are broadly similar, they will reflect the differing nature of the assets.

As a matter of policy all facilities granted to corporate or wholesale customers are subject to a review on, at least, an annual basis, even when they are performing satisfactorily.

Corporate accounts that are deemed to contain heightened levels of risk are recorded on graded early warning lists or watchlists comprising three categories graded in line with the perceived severity of the risk attached

to the lending, and its probability of default. These are updated monthly and circulated to the relevant risk control points. Once an account has been placed on watchlist (WL) or early warning list (EWL), the exposure is carefully monitored and, where appropriate, exposure reductions are effected.

Should an account become impaired, it will normally have passed through each of the three categories, which reflect the need for increasing caution and control. Where an obligor’s financial health gives grounds for concern, it is immediately placed into the appropriate category. While 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.

Specialist recovery functions deal with clients in default, collection or insolvency. Their mandate is to maximise shareholder value via the orderly and timely recovery of impaired debts. Accounts can stay in Recoveries for up to two years unless a longer-term strategy has been agreed.

Within theretailportfolios, which tend to comprise homogeneous assets, statistical techniques more readily allow potential weaknesses to be monitored on a portfolio basis. The approach is consistent with the Group’s policy of raising a collective impairment allowance as soon as objective evidence of impairment is identified.

Retail accounts can be classified according to specified categories of arrears status (or cycle), which reflects the level of contractual payments which are overdue on a loan.

The probability of default increases with the number of contractual payments missed, thus raising the associated impairment requirement.

Once a loan has passed through all six cycles it will enter recovery status, having been charged off. In most cases, charge-off will result in the account moving to a legal recovery function or debt sale. This will typically occur after an account has been treated by a collections function. However, in certain cases, an account may be charged off directly from a performing (up to date) status, such as in the case of insolvency or death.

LOGO


68

Risk management

Credit risk management continued

As a general principle, charge-off marks the point at which it becomes more economically efficient to treat an account through a recovery function or debt sale rather than a collections function. Economic efficiency includes the (discounted) expected amount recovered and operational and legal costs. Whilst charge-off is considered an irreversible state, in certain cases, it may be acceptable for mortgage and vehicle finance accounts to move back from charge-off to performing or delinquent states. This is only considered acceptable where local legislation requirements are in place, or where it is deemed that the customer has a renewed willingness to pay and there is a


70

~~Risk management~~

~~Credit risk management~~

~~continued~~

strong chance that they will be able to meet their contractual obligations in the foreseeable future.

For the majority of products, the standard period for charging off accounts is 180 days past due of contractual obligation. However, in the case of customer bankruptcy or insolvency, the associated accounts will be charged off within 60 days.

Within UKRB 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 to 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.

In the retail portfolios, forbearance programmes assist personal customers in financial difficulty through agreements to accept less than contractual amounts due where financial distress would otherwise prevent satisfactory repayment within the original terms and conditions of the contract. These agreements may be initiated by the customer, Barclays or a third party and include approved debt counselling plans, minimum due reductions, interest rate concessions and switches from capital and interest repayments to interest-only payments.

In the wholesale portfolios, Barclays will on occasion participate in debt for equity swaps, debt for asset swaps, debt standstills and debt restructuring agreements as part of the business support process. Debt restructuring agreements may include actions to improve security; such as changing an overdraft to a factoring or invoice discounting facility or moving debt to asset owning companies. Consideration is also given to the waiving or relaxing of covenants where this is the optimum strategy for the survival of our client’s businesses and therefore Barclays loans and advances.

Loans in forbearance programmes are still subject to impairment in line with normal impairment policy.

For personal customers, the Group Retail Impairment Policy outlines the methodology for impairment of assets that are categorised as under forbearance. Identified impairment is raised for such accounts, recognising the agreement between the bank and customer to pay less than the original contractual payment and is measured using a future discounted cash flow approach comparing the debt outstanding to the expected repayment on the debt. This results in appropriately higher provisions being held than for fully performing assets.

For wholesale customers, impairment is raised for any portion of restructured debt that Barclays does not expect to recover. Sufficient identified impairment will be raised to cover the difference between the loan and the present value of future cash flow discounted at the contractual interest rate.

H. Identifying potential credit risk loans

In line with disclosure requirements from the Securities Exchange Commission (SEC) in the US, the Group reports potentially and actually impaired loans as Potential Credit Risk Loans (PCRLs). PCRLs comprise two categories of loans: Potential Problem Loans (PPLs) and Credit Risk Loans (CRLs).

PPLs are loans that are currently complying with repayment terms but where serious doubt exists as to the ability of the borrower to continue to comply with such terms in the near future. If the credit quality of a loan on an early warning or watch list deteriorates to the highest category (wholesale) or deteriorates to delinquency cycle 2 (retail), consideration is given to including it within the PPL category.

Should further evidence of deterioration be observed, a loan may move to theCRLcategory. Events that would trigger the transfer of a loan from the PPL to the CRL category 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.

– The category ‘accruing past due 90 days or more’ comprises loans that are 90 days or more past due with respect to principal or interest. An impairment allowance will be raised against these loans if the expected cash flows discounted at the effective interest rate are 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 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.

–

‘Impaired loans’ comprise loans where an 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. This category includes all retail loans that have been charged off to legal recovery. The impaired loan category may include loans, which, while impaired, are still performing.

–	The category ‘accruing past due 90 days or more’ comprises loans that are 90 days or more past due with respect to principal or interest. An impairment allowance will be raised against these loans if the expected cash flows discounted at the effective interest rate are 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 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.

I. 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 allowances are 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 principal trigger point for impairment is ~~formal classification~~the missing of a contractual payment which is evidence that an account asis exhibiting serious financial problems, and where any further


					69

deterioration is likely to lead to failure. Details of other trigger points can be found on page 197. Two key inputs to the cash flow calculation are the valuation of all security and collateral, as well as the timing of all asset realisations, after allowing for all attendant costs. This method applies mainly in the corporate portfolios.

For collective assessment, the principal trigger point for impairment is the missing of a contractual ~~payment. While~~payment which is the ~~impairment allowance is calculated per individual account, the~~policy consistently adopted across all credit cards, unsecured loans, mortgages and most other retail lending. Details of other trigger points can be found on page 197. The calculation methodology relies on the historical experience of pools of similar assets; hence the impairment allowance is collective. The impairment calculation is based on a roll-rate approach, where the percentage of assets that move from the initial delinquency to default ~~are~~is derived from statistical probabilities based on historical experience. Recovery amounts and contractual interest rates are calculated using a weighted average for the relevant portfolio. This method applies mainly to the Group’s retail portfolios and is consistent with Barclays policy of raising an allowance as soon as impairment is identified.

The impairment allowance in the retail portfolios is mainly assessed on a collective basis and is based on the drawn balances adjusted to take into account the likelihood of the customer defaulting (PD_pit) and the amount estimated as not recoverable (LGD). The basic calculation is:

Impairment allowance = Total outstandings x Probability of Default (PD_pit) x Loss Given Default (LGD)

The PDpit increases with the number of contractual payments missed thus raising the associated impairment requirement.

Impairment in the wholesale portfolios is generally calculated by valuing each impaired asset on a case by case basis, i.e. on an individual assessment basis. A relatively small amount of wholesale impairment relates to unidentified or collective impairment; in such cases impairment is calculated using modelled PD x LGD x EAD adjusted for an emergence period.

Unidentified impairment allowances 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 captures the loss incurred at the correct balance sheet date.

These impairment allowances are reviewed and adjusted at least

~~Note~~

~~Loan loss rate for the years prior to 2005 does not reflect the application of IAS 32, IAS 39 and IFRS 4.~~


				71

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 (see Modelling of Risk on page ~~64)~~47).

As one of the controls to ensure that adequate impairment allowances are held, movements in impairment allowances to individual names with total impairment of more than £10m are presented to the Credit Committee for agreement.

Monitoring the loan loss rate (LLR) provides Barclays with one way of measuring the trends in the quality of the loan portfolio at the Group, business and product levels. At Barclays, the LLR represents the annualised impairment charges on loans and advances to customers and banks and other credit provisions as a percentage of the total, period-end loans and advances to customers and banks, gross of impairment allowances.

The impairment allowance is the aggregate of the identified and unidentified impairment balances. Impairment allowance coverage, or the coverage ratio, is reported at two levels:

–

Credit risk loans coverage ratio ~~(Impairment~~(impairment allowances as a percentage of CRL balances).

; and

–

Potential credit risk loans coverage ratio ~~(Impairment~~(impairment allowances as a percentage of total CRL &and PPL balances).

LOGO

Note

a Loan loss rate for the years prior to 2005 does not reflect the application of IAS 32, IAS 39 and IFRS 4.


70

Risk management

Credit risk management continued

Appropriate coverage ratios will vary according to the type of product but can be broadly bracketed under three categories: secured ~~retail home loans; unsecured and other~~ retail home loans; credit cards, unsecured and other personal lending products; and corporate facilities. Analysis and experience has indicated that, in general, the severity rates for these types of products are typically within the following ranges:

–

Secured retail ~~home~~Home loans: 5%-20%.;

–

~~Unsecured~~ Credit cards, unsecured and other ~~retail~~personal lending products: 65%-75%.; and

–

Corporate facilities: 30%-50%.

~~CRL coverage ratios would therefore be expected to be at or around these levels over a defined period of time. In principal,~~

CRL coverage ratios would therefore be expected to be at or around these levels over a defined period of time. In principle, a number of factors may affect the Group’s coverage ratios, including:

–

The mix of products within total CRL balances. Coverage ratios will tend to be lower when there is a high proportion of secured retail and corporate balances within total CRLs. This is due to the fact that the recovery outlook on these types of exposures is typically higher than retail unsecured products with the result that they will have lower impairment requirements.

–

The stage in the economic cycle. Coverage ratios will tend to be lower in the earlier stages of deterioration in credit conditions. At this stage, retail delinquent balances will be predominantly in the early delinquency cycles and corporate names will have only recently moved to CRL categories. As such balances attract a lower impairment requirement, the CRL coverage ratio will be lower.

–

The balance of PPLs to CRLs. The impairment requirements for PPLs are lower than for CRLs, so the greater the proportion of PPLs, the lower the PCRL coverage ratio.

–

~~Write-off~~ Write off policies. The speed with which defaulted assets are written off will affect coverage ratios. The more quickly assets are written off, the lower the ratios will be, since stock with 100% coverage will tend to roll out of PCRL categories more quickly.

J. 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. In 2010 total write offs of impaired financial assets increased by £930m to £4,310m (2009: £3,380m).

~~Writing-off of assets~~

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. In 2009 total write-offs of impaired financial assets increased by £461m to £3,380m (2008: £2,919m). LOGO


72

~~Risk management~~

~~Credit risk management~~

~~continued~~

~~Total assets and Barclays Capital credit market assets~~

Analysis of Total Assets Accounting basis Analysis of total assets Sub analysis
Assets as at 31.12.09 Total
assets
£m Fair
value
£m Cost
based
measure
£m Derivatives
£m Loans and
advances^a
£m Debt
securities and
other bills^b
£m Reverse
repurchase
agreements ^c
£m Equity
securities^d
£m Other
£m Credit
market
assets^e
£m
Cash and balances at central banks
81,483 81,483 81,483
Items in the course of collection from other banks
1,593 1,593 1,593
Treasury and other eligible bills
9,926 9,926 9,926
Debt securities
116,594 116,594 116,594 1,186
Equity securities
19,602 19,602 19,602
Traded loans
2,962 2,962 2,962
Commodities^f
2,260 2,260 2,260
Trading portfolio assets
151,344 151,344 2,962 126,520 19,602 2,260 1,186
Financial assets designated at fair value

Loans and advances
22,390 22,390 22,390 6,941
Debt securities
4,007 4,007 4,007
Equity securities
6,256 6,256 6,256
Other financial assets^g
8,658 8,658 557 7,757 344
Held for own account
41,311 41,311 22,947 4,007 7,757 6,256 344 6,941
Held in respect of linked liabilities to customers under investment contracts^h
1,257 1,257 1,257
Derivative financial instruments
416,815 416,815 416,815 2,304
Loans and advances to banks
41,135 41,135 41,135
Loans and advances to customers
420,224 420,224 420,224 15,186
Debt securities
43,888 43,888 43,888 535
Equity securities
6,676 6,676 6,676
Treasury and other eligible bills
5,919 5,919 5,919
Available for sale financial instruments
56,483 56,483 49,807 6,676 535
Reverse repurchase agreements and cash collateral on securities borrowed
143,431 143,431 143,431
Other assets
23,853 1,207 22,646 23,853 1,200
Total assets as at 31.12.09
1,378,929 668,417 710,512 416,815 487,268 180,334 151,188 32,534 110,790 27,352
Total assets as at 31.12.08
2,052,980 1,356,614 696,366 984,802 542,118 224,692 137,637 39,173 124,558 41,208

~~Notes~~

a	~~Further analysis of loans and advances is on pages 68 to 79.~~

b	~~Further analysis of debt securities and other bills is on page 91.~~

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

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

Further analysis of Barclays Capital credit market exposures is on pages 81 to 90. Undrawn commitments of £257m (2008: £531m) are off-balance sheet and therefore not included in the table above. This is a change in presentation from 31st December 2008, which reflected certain loan facilities originated post 1st July 2007.

f	~~Commodities primarily consists of physical inventory positions.~~

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

h	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.


				73	71

Loans and ~~advances~~Advances to ~~customers~~Customers and ~~banks~~Banks

Total gross loans and advances to customers and banks ~~net of impairment allowance fell 10%~~increased 1% to ~~£487,268m (31st December 2008: £542,118m)~~£502,695m (2009: £498,064m). Loans and advances at amortised cost were ~~£461,359m (31st December 2008: £509,522m)~~£478,173m (2009: £472,155m) and loans and advances at fair value were ~~£25,909m (31st December 2008: £32,596m)~~£24,522m (2009: £25,909m).

~~Total~~Loans and Advances at Amortised Cost

Gross loans and advances to customers and banks ~~gross of impairment allowances fell by £43,941m (9%)~~at amortised cost increased 1% (£6,018m) to ~~£472,155m (31st December 2008: £516,096m) due to an 18% reduction~~£478,173m (2009: £472,155m) with a 10% rise in the ~~wholesale~~retail portfolios ~~principally~~offset by a 6% fall in wholesale. Included in this balance are settlement balances of £27,112m (2009: £25,825m) and cash collateral balances of £29,374m (2009: £29,847m). The principal drivers for this increase were:

–

UK Retail Banking where loans and advances increased 12% to £117,689m (2009: £105,066m), due to increased lending in Home Finance and the acquisition of Standard Life Bank at the beginning of 2010;

–

Western Europe Retail Banking where loans and advances increased 6% to £44,500m, which primarily reflected growth in Italian mortgages partially offset by the depreciation in the value of the Euro against Sterling;

–

Absa where loans and advances increased 14% to £42,725m (2009: £37,365m), reflecting appreciation in the value of the Rand against Sterling; and

–

Barclays Wealth where loans and advances increased 22% to £16,468m (2009: £13,467m) primarily due to growth in High Net Worth lending.

These increases were partially offset by decreases in:

–

Barclays Capital where loans and advances decreased 8% to £152,711m (2009: £165,624m) due to a ~~decrease in the cash collateral held against derivative trades, a~~ reduction in ~~non-UK lending and~~borrowings partially offset by a ~~decrease~~net depreciation in the value of ~~other currencies~~Sterling relative to ~~Sterling. This was partially offset by increases in lending due to restructuring of credit market assets and a reclassification of previously held for trading assets to loans and advances;~~other currencies; and

–

Barclays ~~Commercial Bank,~~Corporate where loans and advances decreased by 6% to £68,632m (2009: £73,007m), principally due to ~~reduced~~lower customer ~~demand.~~demand in the UK & Ireland business.


Analysis of loans and advances
	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 charges £m			Loan loss rates bps
As at 31st December 2010
Wholesale - customers (excluding loan to Protium)		197,431		4,969		192,462		11,716		5.9%		1,815			92
Wholesale - banks		37,847		48		37,799		35		0.1%		(18	)		(5	)
Total wholesale (excluding loan to Protium)		235,278		5,017		230,261		11,751		5.0%		1,797			76
Loan to Protium		7,560		532		7,028		7,560		100.0%		532			704
Total wholesale		242,838		5,549		237,289		19,311		8.0%		2,329			96
Retail - customers		235,335		6,883		228,452		12,571		5.3%		3,296			140
Total retail		235,335		6,883		228,452		12,571		5.3%		3,296			140
Loans and advances at amortised cost (excluding loan to Protium)		470,613		11,900		458,713		24,322		5.2%		5,093			108
Loans and advances at amortised cost		478,173		12,432		465,741		31,882		6.7%		5,625			118
Loans and advances held at fair value		24,522		n/a		24,522
Total loans and advances		502,695		12,432		490,263

As at 31st December 2009
Wholesale - customers		217,470		4,616		212,854		10,982		5.0%		3,428			158
Wholesale - banks		41,196		61		41,135		57		0.1%		11			3
Total wholesale		258,666		4,677		253,989		11,039		4.3%		3,439			133
Retail - customers		213,489		6,119		207,370		11,503		5.4%		3,919			184
Total retail		213,489		6,119		207,370		11,503		5.4%		3,919			184
Loans and advances at amortised cost		472,155		10,796		461,359		22,542		4.8%		7,358			156
Loans and advances held at fair value		25,909		n/a		25,909
Total loans and advances		498,064		10,796		487,268


72

~~This was partially offset by a rise in loans and advances to customers across the majority of retail business units, notably in UK Retail Bank due to growth in the UK Home Finance portfolio.~~
Risk management
Credit risk management continued


Loans and advances at amortised cost net of impairment allowances, by industry sector and geography
	United Kingdom £m		Other European Union £m		United States £m		Africa £m		Rest of the World £m		Total £m
As at 31st December 2010
Financial institutions		23,184		25,173		53,191		3,786		18,677		124,011
Manufacturing		6,591		4,160		704		1,193		2,118		14,766
Construction		3,607		1,258		5		739		254		5,863
Property		13,356		2,895		493		4,706		1,357		22,807
Government		533		1,159		324		2,217		2,068		6,301
Energy and water		2,181		3,090		2,092		136		1,732		9,231
Wholesale and retail distribution and leisure		11,441		2,444		509		1,646		1,317		17,357
Business and other services		15,185		4,358		979		2,841		2,865		26,228
Home loans		104,872		36,979		28		24,911		1,265		168,055
Cards, unsecured loans and other personal lending		26,255		7,499		6,765		3,755		2,394		46,668
Other		8,023		4,629		766		8,483		2,553		24,454
Net loans and advances to customers and banks		215,228		93,644		65,856		54,413		36,600		465,741

As at 31st December 2009
Financial institutions		26,194		26,815		57,442		4,295		15,077		129,823
Manufacturing		8,407		5,327		773		1,398		2,292		18,197
Construction		3,503		1,380		7		850		192		5,932
Property		13,424		4,129		412		4,154		1,124		23,243
Government		913		770		360		3,072		4,111		9,226
Energy and water		2,447		3,878		2,333		156		1,909		10,723
Wholesale and retail distribution and leisure		12,610		2,362		720		1,690		1,774		19,156
Business and other services		16,359		4,774		1,708		3,997		2,765		29,603
Home loans		90,840		35,644		19		21,596		1,000		149,099
Cards, unsecured loans and other personal lending		24,999		6,737		6,672		813		1,354		40,575
Other		9,003		5,224		1,046		7,862		2,647		25,782
Net loans and advances to customers and banks		208,699		97,040		71,492		49,883		34,245		461,359

~~Loans~~Group wholesale loans and advances held at fair value by industry sector

Total loans and advances held at fair value were £24,522m (2009: £25,909m), principally relating to Barclays Corporate and Barclays Capital. Barclays Corporate loans and advances held at fair value, which comprise lending to property, government and business and other services, were £14,401m (2009: £13,074m). Movements in the fair value of these loans are substantially offset by fair value movements on hedging instruments. Barclays Capital loans and advances held at fair value were ~~£12,835m (31st December 2008: £19,630m)~~£9,987m (2009: £12,835m). Included within this balance is ~~£6,941m~~£4,712m relating to credit market exposures, the majority of which ~~are~~is made up of commercial real estate ~~loans. The balance of £5,894m~~loans, £5,275m primarily ~~comprises~~comprising loans to financial institutions and ~~manufacturing loans.~~

~~Barclays Commercial Bank loans and advances held at fair value split between property,~~ business and ~~services and Government sectors, were £13,074m (31st December 2008: £12,966m). The fair value of these loans and any movements are matched by offsetting fair value movements on hedging instruments.~~

other services.

~~Loans and advances at amortised cost~~

As at 31st December 2009    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
   218,110    4,604    213,506    10,990    5.0    3,430    157
Wholesale – banks
   41,196    61    41,135    57    0.1    11    3
Total wholesale
   259,306    4,665    254,641    11,047    4.3    3,441    133
Retail – customers
   212,849    6,131    206,718    11,341    5.3    3,917    184
Total retail
   212,849    6,131    206,718    11,341    5.3    3,917    184
Total
   472,155    10,796    461,359    22,388    4.7    7,358    156
As at 31st December 2008

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

Loans and advances held at fair value    As at
31.12.09
£m
As at ^a
31.12.08
£m
Government
   5,024    5,143
Financial Institutions
   3,543    7,354
Transport
   177    218
Postal and Communications
   179    37
Business and other services
   2,793    2,882
Manufacturing
   1,561    238
Wholesale and retail distribution and leisure
   664    1,110
Construction
   237    412
Property
   11,490    14,944
Energy and Water
   241    258
Total
   25,909    32,596

~~Note~~

a	~~2008 loans and advances held at fair value have been reanalysed to reflect changes in classification of assets.~~


Loans and advances held at fair value by industry sector As at 31st December	2010 £m		2009 £m
Financial institutions		2,125		3,543
Manufacturing		347		1,561
Construction		249		237
Property		11,934		11,490
Government		5,088		5,024
Energy and water		370		241
Wholesale and retail distribution and leisure		800		664
Business and other services		3,246		2,793
Other		363		356
Total		24,522		25,909


74

~~Risk management~~

~~Credit risk management~~

~~continued~~

~~Impairment Charges~~

Impairment charges on loans and advances increased 50% (£2,445m) to £7,358m (2008: £4,913m). The increase was primarily due to economic deterioration and portfolio maturation, currency movements and methodology enhancements, partially offset by a contraction in loan balances. As a result of this increase in impairment and the fall in loans and advances, the impairment charges as a percentage of period end Group total loans and advances (loan loss rate) increased to 156bps (31st December 2008: 95bps). When measured against constant 2008 year-end loans and advances balances and impairment at average 2008 foreign exchange rates, the loan loss rate for the period was 135bps.

The impairment charge in Global Retail and Commercial Banking increased by 85% (£2,473m) to £5,395m (2008: £2,922m) as charges rose in all portfolios, reflecting deteriorating credit conditions across all regions. The loan loss rate for 2009 was 185bps (2008: 99bps).

~~In Investment Banking and Investment Management, impairment was broadly unchanged at £1,949m (2008: £1,980m). The loan loss rate for 2009 was 109bps (2008: 90bps).~~

~~The impairment charge against available for sale assets and reverse repurchase agreements increased by 41% (£207m) to £713m (2008: £506m), driven by impairment against credit market exposures.~~

Impairment Charges and Other Credit Provisions
   Year Ended
31.12.09
£m

Year Ended
31.12.08
£m
Impairment charges on loans and advances
   7,330    4,584
Charges in respect of undrawn facilities and guarantees
   28    329
Impairment charges on loans and advances
   7,358    4,913
Impairment charges on reverse repurchase agreements
   43    124
Impairment charges on available for sale assets
   670    382
Impairment charges and other credit provisions
   8,071    5,419

Impairment Charges by Business
   Loans and
advances
£m    Available for
sale assets
£m

Reverse
repurchase
agreements
£m
   Total
£m
Year Ended 31.12.2009
Global Retail and Commercial Banking
   5,395    18    –    5,413
UK Retail Banking
   936    –    –    936
Barclays Commercial Bank
   960    14    –    974
Barclaycard
   1,798    –    –    1,798
GRCB – Western Europe
   663    4    –    667
GRCB – Emerging Markets
   471    –    –    471
GRCB – Absa
   567    –    –    567
Investment Banking and Investment Management
   1,949    650    43    2,642
Barclays Capital^a
   1,898    650    43    2,591
Barclays Wealth
   51    –    –    51
Head Office Functions and Other Operations
   14    2    –    16
Total Impairment charges
   7,358    670    43    8,071
Year Ended 31.12.2008

Global Retail and Commercial Banking
   2,922    –    –    2,922
UK Retail Banking
   602    –    –    602
Barclays Commercial Bank
   414    –    –    414
Barclaycard
   1,097    –    –    1,097
GRCB – Western Europe
   297    –    –    297
GRCB – Emerging Markets
   165    –    –    165
GRCB – Absa
   347    –    –    347
Investment Banking and Investment Management
   1,980    363    124    2,467
Barclays Capital^a
   1,936    363    124    2,423
Barclays Wealth
   44    –    –    44
Head Office Functions and Other Operations
   11    19    –    30
Total Impairment charges
   4,913    382    124    5,419

~~Note~~

a	Credit market related impairment charges within Barclays Capital comprised £1,205m (2008: £1,517m) against loans and advances, £464m (2008: £192m) against available for sale assets and £nil (2008: £54m) against reverse repurchase agreements.


				75	73

Impairment allowances

Impairment allowances increased £1,636m to £12,432m (2009: £10,796m), reflecting increased impairment charges against delinquent assets across the majority of retail businesses as they flowed into later cycles, higher impairment charges against the Spanish property sectors, reflected in Barclays Corporate – Continental Europe, and a charge relating to the Protium loan in Barclays Capital. Amounts written off increased £930m to £4,310m (2009: £3,380m) with higher write offs across the majority of businesses.


Movements in allowance for impairment by asset class (audited)
	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
2010
Loans and advances to banks		61		–			–			(1	)		(11	)		17		(18	)		48
Loans and advances to customers:
Home loans		639		18			(54	)		63			(134	)		6		316			854
Credit card receivables		2,309		74			(100	)		50			(1,374	)		77		1,405			2,441
Other personal lending		2,908		–			(47	)		45			(1,059	)		37		1,243			3,127
Wholesale and corporate		4,558		(14	)		(6	)		148			(1,547	)		40		2,432			5,611
Finance lease receivables		321		–			(6	)		26			(185	)		24		171			351
Total loans and advances to customers		10,735		78			(213	)		332			(4,299	)		184		5,567			12,384
Total impairment allowance		10,796		78			(213	)		331			(4,310	)		201		5,549			12,432

2009
Loans and advances to banks		51		–			–			(11	)		–			10		11			61
Loans and advances to customers:
Home loans		321		19			(59	)		46			(82	)		3		391			639
Credit card receivables		1,445		415			(79	)		(28	)		(1,009	)		78		1,487			2,309
Other personal lending		1,869		–			(26	)		(89	)		(633	)		21		1,766			2,908
Wholesale and corporate		2,699		–			(15	)		(48	)		(1,538	)		28		3,432			4,558
Finance lease receivables		189		–			(6	)		3			(118	)		10		243			321
Total loans and advances to customers		6,523		434			(185	)		(116	)		(3,380	)		140		7,319			10,735
Total impairment allowance		6,574		434			(185	)		(127	)		(3,380	)		150		7,330			10,796


74

Risk management
Credit risk management continued

Potential Credit Risk Loans

Protium

As at 31st December 2010, wholesale gross loans and advances included a £7,560m loan to Protium. Principal and interest payments have been received in accordance with contractual terms. However, following a reassessment of the expected realisation period, the loan is carried at an amount equivalent to the fair value of the underlying collateral, resulting in an impairment of £532m. Further details are provided on page 90.

Including the loan to Protium of £7,560m, the Credit Risk Loans (CRL) balance rose by 41% to £31,882m (2009: £22,542m) reflecting increases across the majority of businesses. In contrast the Group’s Potential Problem Loans (PPLs) balance fell by 24% to £2,695m (2009: £3,523m) primarily reflecting lower balances in the wholesale sector. As a consequence of the increase in CRLs and fall in PPLs, the Group Potential Credit Risk Loan (PCRL) balances increased by 33% to £34,577m (2009: £26,065m). Impairment allowances, including an allowance of £532m held against Protium, rose by 15% to £12,432m (2009: £10,796m) reflecting increases in most businesses. As a result, both the CRL and PCRL coverage ratios fell in 2010, to 39.0% (2009: 47.9%) and 36.0% (2009: 41.4%), respectively. However, these falls reflected the inclusion of the relatively lowly covered (7%) Protium loan in 2010 as, excluding Protium, coverage ratios rose in both the retail and wholesale sectors.

In light of the effect of the Protium loan and related impairment allowance on CRLs and coverage ratios, the commentary below excludes the impact of the Protium loan to allow for a more meaningful analysis of other exposures and to facilitate comparison with prior years. The tables below show figures and ratios both including and excluding the effect of Protium.

Credit Risk Loans

The Group’s Credit Risk Loans (CRLs) rose ~~43%~~8% to ~~£22,388m (31st December 2008: £15,700m)~~£24,322m (2009: £22,542m) reflecting increases in ~~2009. Balances were higher across Retail Home Loans, Retail Unsecured~~both the retail and ~~Other and Corporate and~~wholesale sectors.

CRLs in the Wholesale ~~exposures~~portfolios increased 6% to £11,751m (2009: £11,039m) primarily due to a rise in Continental Europe reflecting the deterioration in ~~credit conditions~~the Spanish property sector. This was partially offset by lower balances in ~~the past year across~~ Barclays ~~areas of operations. The most notable increases were in the international businesses in Global Retail and Commercial Banking, with GRCB – Western Europe increasing the most~~Capital as credit conditions ~~deteriorated~~led to improvements across default grades and an improvement in ~~Spain, Italy and Portugal. However, the rate of increase to the Group numbers has fallen during each quarter of 2009 from 17% in Q1 09 to 5% in Q4 09.~~

CRLs in Retail Home Loans increased by £1,076m (43%) to £3,604m (31st December 2008: £2,528m) and in Retail Unsecured and Other portfolios by £2,757m (55%) to £7,737m (31st December 2008: £4,980m) as credit conditions deteriorated and arrears balances rose in a number of regions, notably in: Absa Home Finance and Cards, GRCB – Western Europe, particularly in Spain and Italy; Barclaycard US cards; and in UK Retail Banking unsecured lending. CRLs also increased in GRCB – Western Europe following the purchase of the Citigroup cards portfolio in Portugal in December 2009.market exposures.

CRLs in the ~~Corporate and Wholesale~~Retail portfolios rose ~~35%~~9% to ~~£11,047m (31st December 2008: £8,192m). CRL~~£12,571m (2009: £11,503m) reflecting increases in Home Loans of 14% to £4,294m (2009: £3,758m) primarily due to an increase in the Sterling value of recovery balances ~~were~~in the Absa Home Loans portfolio as well as the acquisition of Standard Life Bank. Credit Cards, Unsecured and Other Retail Lending increased 7% to £8,277m (2009: £7,745m) reflecting higher recovery balances as accounts rolled through to later cycles in ~~all~~most businesses ~~as economic conditions led to deterioration across default grades~~ and a ~~rise in impairment in most wholesale portfolios. The largest increases were in GRCB – Western Europe, Barclays Capital and Barclays Commercial Bank.~~weak debt sale sector.

Potential Problem Loans

~~Balances within the~~The Group’s Potential Problem Loans (PPLs) ~~category rose~~balance fell by ~~37%~~24% to ~~£3,368m (31st December 2008: £2,456m)~~£2,695m (2009: £3,523m). ~~The principal movements were~~

PPL balances fell 26% in ~~the Corporate and~~ Wholesale portfolios ~~where~~to £1,970m (2009: £2,674m) mainly reflecting a decrease in Barclays Capital as a small number of counterparties moved out of the category and some balances reduced, and decreases in Continental Europe, mainly Spain, and Absa as accounts flowed in to CRL categories.

In the Retail portfolios, PPLs ~~rose £715m~~fell 15% to ~~£2,674m (31st December 2008: £1,959m). PPL balances increased~~£725m (2009: £849m) primarily due to a fall of £94m in ~~the retail portfolios to £694m (31st December 2008: £497m) as balances increased in the Retail~~Credit Cards, Unsecured and Other ~~portfolios. This was partially offset~~Retail Lending portfolios, driven by ~~a fall in PPL~~lower balances in Barclaycard, primarily UK Secured Loans and US Cards and Western Europe Retail ~~Home Loans.~~Bank, primarily Spain.

Potential Credit Risk Loans

~~As a result of the increases in CRLs and PPLs,~~ Group Potential Credit Risk Loan (PCRL) balances ~~rose 42%~~increased 4% to ~~£25,756m (31st December 2008: £18,156m).~~

~~PCRL balances rose~~£27,017m (2009: £26,065m), reflecting an increase in ~~Retail Home Loans~~CRLs partially offset by ~~34% to £3,739m (31st December 2008: £2,795m) and~~a decrease in ~~Retail Unsecured and Other portfolios by 59% to £8,296m (31st December 2008: £5,210m) as delinquency rates rose across a number of portfolios, particularly in the UK, US, Spain and South Africa.~~PPLs.

Total PCRL balances in the ~~Corporate and~~ Wholesale portfolios remained broadly unchanged at £13,721m (2009: £13,713m).

PCRL balances rose in Home Loans by 13% to £4,554m (2009: £4,048m) while PCRLs in Credit Cards, Unsecured and Other Retail Lending portfolios increased ~~by 35%~~5% to £13,721m (31st December 2008: £10,151m) after a number of customers migrated into the CRL and PPL categories, reflecting higher default probabilities in the deteriorating global wholesale environment.£8,742m (2009: £8,304m).

~~Impairment Allowances and~~ Coverage Ratios

~~Impairment allowances increased 64% to £10,796m (31st December 2008: £6,574m), reflecting increases across~~In the ~~majority of businesses as credit conditions deteriorated during~~Wholesale portfolios, the ~~year.~~

~~Retail impairment allowances rose by 99% in Retail Home Loans to £639m (31st December 2008: £321m) and by 61% in Retail Unsecured and Other portfolios to £5,492m (31st December 2008: £3,418m). The~~ CRL coverage ratio ~~in Retail Home Loans~~ increased to ~~17.7% (31st December 2008: 12.7%~~42.7% (2009: 42.4%), and the PCRL coverage ratio increased to ~~17.1% (31st December 2008: 11.5%~~36.6% (2009: 34.1%).

The CRL coverage ratio in Home Loans increased to 19.9% (2009: 17.0%), and the PCRL coverage ratio increased to 18.8% (2009: 15.8%). The CRL coverage ratio in ~~Retail~~Credit Cards, Unsecured and ~~Others~~Other portfolios increased to ~~71.0% (31st December 2008: 68.6%). The~~72.8% (2009: 70.8 %) and the PCRL coverage ratio increased to ~~66.2% (31st December 2008: 65.6%).~~

In the Corporate and Wholesale portfolios, impairment allowances increased 65% to £4,665m (31st December 2008: £2,835m). The CRL coverage ratio rose to 42.2% (31st December 2008: 34.6%), and the PCRL coverage ratio rose to 34.0% (31st December 2008: 27.9%69.0% (2009: 66.0%).

The CRL coverage ratios in ~~Retail~~ Home Loans, ~~Retail~~Credit Cards, Unsecured and Other ~~and Corporate~~ and Wholesale portfolios remain within ~~the ranges which are the~~ typical severity ~~rates~~rate ranges for these types of products. ~~As a result of the movements across these three portfolios, the~~The Group’s CRL coverage ratio increased to ~~48.2% (31st December 2008: 41.9%~~48.9% (2009: 47.9%)~~, and its~~. The PCRL coverage ratio also increased to ~~41.9% (31st December 2008: 36.2%~~44.0% (2009: 41.4%).

Potential Credit Risk Loans and Coverage Ratios


CRLs

PPLs

PCRLs
      31.12.09
£m    31.12.08
£m    31.12.09
£m    31.12.08
£m    31.12.09
£m    31.12.08
£m
Home Loans
   3,604    2,528    135    267    3,739    2,795
Unsecured and other
   7,737    4,980    559    230    8,296    5,210
Retail
   11,341    7,508    694    497    12,035    8,005
Corporate/Wholesale
   11,047    8,192    2,674    1,959    13,721    10,151
Group
   22,388    15,700    3,368    2,456    25,756    18,156
      Impairment allowance    CRL coverage    PCRL coverage
      31.12.09
£m    31.12.08
£m    31.12.09
%    31.12.08
%    31.12.09
%    31.12.08
%
Home Loans
   639    321    17.7    12.7    17.1    11.5
Unsecured and other
   5,492    3,418    71.0    68.6    66.2    65.6
Retail
   6,131    3,739    54.1    49.8    50.9    46.7
Corporate/Wholesale
   4,665    2,835    42.2    34.6    34.0    27.9
Group
   10,796    6,574    48.2    41.9    41.9    36.2


Potential credit risk loans and coverage ratios	CRLs				PPLs				PCRLs
	2010		2009		2010		2009		2010		2009
As at 31st December	£m		£m		£m		£m		£m		£m
Home loans^a		4,294		3,758		260		290		4,554		4,048
Credit cards, unsecured and other retail lending		8,277		7,745		465		559		8,742		8,304
Retail		12,571		11,503		725		849		13,296		12,352
Wholesale (excluding loan to Protium)		11,751		11,039		1,970		2,674		13,721		13,713
Loan to Protium^b		7,560		–		–		–		7,560		–
Wholesale		19,311		11,039		1,970		2,674		21,281		13,713
Group (excluding loan to Protium)		24,322		22,542		2,695		3,523		27,017		26,065
Group		31,882		22,542		2,695		3,523		34,577		26,065


	Impairment allowance				CRL coverage				PCRL coverage
	2010		2009		2010		2009		2010		2009
As at 31st December	£m		£m		%		%		%		%
Home loans^a		854		639		19.9		17.0		18.8		15.8
Credit cards, unsecured and other retail lending		6,029		5,480		72.8		70.8		69.0		66.0
Retail		6,883		6,119		54.8		53.2		51.8		49.5
Wholesale (excluding loan to Protium)		5,017		4,677		42.7		42.4		36.6		34.1
Loan to Protium^b		532		–		7.0		–		7.0		–
Wholesale		5,549		4,677		28.7		42.4		26.1		34.1
Group (excluding loan to Protium)		11,900		10,796		48.9		47.9		44.0		41.4
Group		12,432		10,796		39.0		47.9		36.0		41.4

Notes

a	Comparative figures for Home Loans have been restated to align with externally disclosed arrears definitions.

b	Refer to page 90 for further information on Protium.


76

~~Risk management~~

~~Credit risk management~~

~~continued~~

~~Wholesale Credit Risk~~

Loans and Advances to customers and banks in the wholesale portfolios decreased by £55,202m (18%) to £259,306m, primarily as a result of a £42,972m (21%) fall in Barclays Capital to £165,624m, due to a decrease in the cash collateral held against derivative trades, a reduction in non-UK lending and a decrease in the value of Sterling relative to other currencies. This was partially offset by increases in lending due to restructuring of credit market assets and a reclassification of previously held for trading assets to loans and advances.

The corporate and government lending portfolio declined 30% to £53,305m (31st December 2008: £76,556m) primarily due to reductions in non-UK lending, a decrease in the value of other currencies relative to Sterling and the repayment of leveraged finance loans.

Included within corporate and government lending and other wholesale lending portfolios are £5,646m (31st December 2008: £7,674m) of loans backed by retail mortgage collateral classified within financial institutions.

Loans and advances fell in Barclays Commercial Bank by £8,064m (12%) to £60,840m, due to reduced customer demand. Balances fell in both GRCB – Western Europe and GRCB – Emerging Markets, which was due, in part, to the depreciation of various currencies across the regions against Sterling. The increase of £1,429m (17%) of balances in GRCB –Absa was due to the appreciation of the Rand against Sterling during 2009. In Rand terms, balances were stable.

~~In the wholesale portfolios, the impairment charge against loans and advances rose by £861m (33%) to £3,441m (2008: £2,580m) mainly due to increases in:~~

–

~~Barclays Commercial Bank, reflecting rising default rates and lower asset values;~~

Wholesale loans and advances at amortised cost


As at 31.12.09    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 loans
%    Impairment
charge
£m    Loan rates
loss
bps
BCB
   60,840    679    60,161    1,837 3.0    960    158
Barclaycard
   322    4    318    10 3.1    17    528
GRCB WE
   12,690    466    12,224    1,435 11.3    328    258
GRCB EM
   5,228    227    5,001    358 6.8    140    268
GRCB Absa
   10,077    195    9,882    690 6.8    67    66
Barclays Capital
   165,624    3,025    162,599    6,411 3.9    1,898    115
BGI
   5    –    5    – –    –    –
Barclays Wealth
   3,495    43    3,452    179 5.1    17    49
Head office
   1,025    26    999    127 12.4    14    137
Total
   259,306    4,665    254,641    11,047 4.3    3,441    133
As at 31.12.08
BCB    68,904    504    68,400    1,181 1.7    414    60
Barclaycard    301    2    299    20 6.6    11    365
GRCB WE    15,750    232    15,518    579 3.7    125    79
GRCB EM    7,233    122    7,111    190 2.6    36    50
GRCB Absa    8,648    140    8,508    304 3.5    19    22
Barclays Capital    208,596    1,796    206,800    5,743 2.8    1,936    93
BGI    834    –    834    – –    –    –
Barclays Wealth    3,282    28    3,254    174 5.3    28    85
Head office    960    11    949    1 0.1    11    115
Total    314,508    2,835    311,673    8,192 2.6    2,580    82

Analysis of wholesale loans and advances at amortised cost net of impairment allowances


   Corporate    Government    Settlement
balances & cash
collateral    Other wholesale    Total wholesale
Wholesale    31.12.09
£m    31.12.08
£m    31.12.09
£m    31.12.08
£m    31.12.09
£m    31.12.08
£m    31.12.09
£m    31.12.08
£m    31.12.09
£m    31.12.08
£m
BCB
   59,979    67,741    182    659    –    –    –    –    60,161    68,400
Barclaycard
   318    299    –    –    –    –    –    –    318    299
GRCB WE
   12,184    15,226    14    32    –    –    26    260    12,224    15,518
GRCB EM
   4,044    5,074    170    1,709    –    –    787    328    5,001    7,111
GRCB Absa
   8,695    8,480    263    28    –    –    924    –    9,882    8,508
Barclays Capital
   49,849    72,796    3,456    3,760    55,672    79,418    53,622    50,826    162,599    206,800
BGI
   5    834    –    –    –    –    –    –    5    834
Barclays Wealth^a
   2,818    2,691    162    105    –    –    472    458    3,452    3,254
Head office
   999    949    –    –    –    –    –    –    999    949
Total
   138,891    174,090    4,247    6,293    55,672    79,418    55,831    51,872    254,641    311,673

~~Note~~

a	~~2008 Barclays Wealth analysis of Wholesale loans and advances has been reanalysed to reflect changes in the reclassification of assets.~~


				77	75

–

GRCB – Western Europe, reflecting the economic deterioration in Spain which has impacted the commercial, construction and SME portfolios in particular, together with the appreciation of the average value of the Euro against Sterling; and

Wholesale Credit Risk

–

GRCB – Emerging Markets as credit conditions continued to deteriorate resulting in a small number of higher value single name charges and the appreciation of the average value of a number of currencies against Sterling.

~~Impairment~~Loans and advances to customers and banks in the wholesale portfolios decreased 6% to £242,838m (2009: £258,666m), including a fall of 8% in Barclays Capital to £152,711m (2009: £165,624m) due to a reduction in borrowings offset by a net depreciation in the value of ~~£1,898m (2008: £1,936m)~~Sterling relative to other currencies. Loans and advances in Barclays Corporate fell 6% to £66,961m (2009: £71,125m), due to reduced customer demand in UK & Ireland. The 21% increase in balances to £12,188m at Absa was ~~broadly~~due to the appreciation in ~~line with 2008, as a fall~~the value of the Rand against Sterling during 2010.

Impairment allowances increased 19% to £5,549m (2009: £4,677m) principally reflecting the increase in Barclays Corporate – Continental Europe and impairment of £532m relating to the Protium loan in Barclays Capital. Excluding the impact of the Protium loan, the credit risk loans (CRL) coverage ratio increased to 42.7% (2009: 42.4%) and the potential credit risk loans (PCRL) coverage ratio increased to 36.6% (2009: 34.1%).

In the wholesale portfolios, the impairment charge against loans and advances fell 32% to £2,329m (2009: £3,439m) mainly due to lower charges against credit market exposures in Barclays Capital. In addition there was a release in the non-credit market related loan book. This was partially offset by ~~a rise~~an increase in the Barclays Corporate impairment charge ~~against non-credit market exposures.~~as deteriorating credit conditions in the Spanish property and construction sector led to significantly higher charges in Continental Europe, although this was partially mitigated by lower default rates and fewer single name charges in UK & Ireland and New Markets. In addition, wholesale impairment reflected £532m relating to the Protium loan in Barclays Capital.

Wholesale loans and advances net of impairment decreased 7% to £237,289m (2009: £253,989m). This is mainly made up of Barclays Capital which decreased 8% to £149,675m (2009: £162,599m) and Barclays Corporate which decreased 7% to £64,975m (2009: £69,921m).

The loan loss rate across the Group’s wholesale portfolios for ~~2009~~2010 was ~~133bps (2008: 82bps)~~96bps (full year 2009: 133bps), reflecting the ~~rise~~fall in ~~impairment and~~impairment. The wholesale CRL coverage ratio was 28.7% (2009: 42.4%). Excluding Protium, the ~~18% reduction in~~ wholesale ~~loans and advances.~~CRL coverage ratio was 42.7% (2009: 42.4%).

~~As we enter 2010, the~~The principal uncertainties relating to the performance of the wholesale portfolios ~~are:~~in 2011 include the:

–

~~the~~ extent and sustainability of economic recovery ~~and asset prices~~particularly in the UK, US, Spain and South ~~Africa as governments consider how and when to withdraw stimulus packages;~~

Africa;

–

~~the~~ potential for large single name ~~risk~~losses and ~~for idiosyncratic losses~~deterioration in ~~different~~specific sectors and ~~geographies where credit positions are sensitive to economic downturn;~~

geographies;

–

possible ~~additional~~ deterioration in ~~our~~ remaining credit market exposures, including commercial real estate and leveraged finance; ~~and~~

–	impact of potentially deteriorating sovereign credit quality; and

–	~~the~~ potential impact of ~~deteriorating sovereign credit quality.~~ increasing inflation on economic growth and corporate profitability.

Analysis of Barclays capital wholesale loans and advances at amortised cost

As at 31.12.09    Gross
loans and
advances
£m    Impairment
allowance
£m    Loans and
advances net
of impairment
£m    Credit risk
Loans
£m    CRLs % of
gross loans
and advance
%    Impairment
Charge
£m    Loan loss
rates
basis points
Loans and advances to banks

Cash collateral and settlement balances
   15,893    –    15,893    –    –    –    –
Interbank lending
   21,722    61    21,661    57    0.3    14    6
Loans and advances to customers

Corporate and Government lending
   54,342    1,037    53,305    2,198    4.0    1,115    205
ABS CDO Super Senior
   3,541    1,610    1,931    3,541    100.0    714    2,016
Other wholesale lending
   30,347    317    30,030    615    2.0    55    18
Cash collateral and settlement balances
   39,779    –    39,779    –    –    –    –
Total
   165,624    3,025    162,599    6,411    3.9    1,898    115
As at 31.12.08

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 and Government 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


Wholesale loans and advances at amortised cost
	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 charges £m		Loans loss rates bps
As at 31st December 2010
UK Retail Banking		3,889		77		3,812		345		8.9%		80		206
Barclaycard^b		338		5		333		7		2.1%		20		592
Barclays Africa		2,456		123		2,333		242		9.9%		28		114
Absa		12,188		239		11,949		912		7.5%		95		78
Barclays Capital (excluding loan to Protium)		145,151		2,504		142,647		5,370		3.7%		110		8
Loan to Protium		7,560		532		7,028		7,560		100.0%		532		704
Barclays Capital		152,711		3,036		149,675		12,930		8.5%		642		42
Barclays Corporate		66,961		1,986		64,975		4,591		6.9%		1,436		214
Barclays Wealth		2,884		66		2,818		218		7.6%		27		94
Head office		1,411		17		1,394		66		4.7%		1		7
Total (excluding loan to Protium)		235,278		5,017		230,261		11,751		5.0%		1,797		76
Total		242,838		5,549		237,289		19,311		8.0%		2,329		96

As at 31st December 2009
UK Retail Banking		4,002		56		3,946		247		6.2%		95		238
Barclaycard^b		322		4		318		10		3.1%		17		528
Barclays Africa		2,991		124		2,867		227		7.6%		33		110
Absa		10,077		195		9,882		690		6.8%		67		66
Barclays Capital		165,624		3,025		162,599		6,411		3.9%		1,898		115
Barclays Corporate		71,125		1,204		69,921		3,148		4.4%		1,298		182
Barclays Wealth		3,495		43		3,452		179		5.1%		17		49
Head office		1,030		26		1,004		127		12.4%		14		137
Total		258,666		4,677		253,989		11,039		4.3%		3,439		133

Notes

a	Loans and advances to business customers in Western Europe Retail Banking are included in the Retail Loans and Advances to customers at amortised cost table on page 77.

b	Barclaycard represents corporate credit and charge cards.


7876

Risk ~~management~~

~~Credit risk~~ management

Credit risk management continued

~~Retail Credit Risk~~

(i) Analysis of Barclays Capital Wholesale Loans and advances to customers in the retail portfolios increased by £11,261m (6%) to £212,849m. Balances grew in most businesses with the largest increase in UK Retail Banking, which increased by £4,981m (5%) to £101,064m primarily in the UK Home Finance portfolio. There was modest growth in balances to local businesses but a moderate decline in balances relating to unsecuredAdvances at Amortised Cost

Barclays Capital wholesale loans and ~~overdrafts. GRCB – Western Europe increased~~advances net of impairment decreased 8% to £149,675m (2009: £162,599m). This was driven by ~~£2,517m (6%),~~a reduction in corporate lending which declined 18% to £41,093m (2009: £49,849m) primarily ~~reflected growth~~due to a reduction in ~~Italy and Portugal following the expansion of the franchise, principally across mortgages and cards. This growth was~~borrowings by customers partially offset by the ~~appreciation~~net depreciation in the value of ~~the Euro against Sterling. The increase~~Sterling relative to other currencies.

Included within corporate lending and other wholesale lending portfolios are £3,787m (2009: £5,646m) of ~~£2,611m (11%)~~loans backed by retail mortgage collateral classified within financial institutions.


Barclays Capital wholesale loans and advances at amortised cost
	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 charges £m			Loan loss rates bps
As at 31st December 2010
Loans and advances to banks
Cash collateral and settlement balances		14,058		–		14,058		–		0.0%		–			–
Interbank lending		21,547		48		21,499		35		0.2%		(18	)		(8	)
Loans and advances to customers
Government lending		2,940		–		2,940		–		0.0%		–			–
ABS CDO Super Senior		3,537		1,545		1,992		3,537		100.0%		(137	)		(387	)
Corporate lending		41,891		798		41,093		1,483		3.5%		285			68
Other wholesale lending (excluding loan to Protium)		18,750		113		18,637		315		1.7%		(20	)		(11	)
Loan to Protium		7,560		532		7,028		7,560		100.0%		532			704
Other wholesale lending		26,310		645		25,665		7,875		29.9%		512			195
Cash collateral and settlement balances		42,428		–		42,428		–		0.0%		–			–
Total (excluding loan to Protium)		145,151		2,504		142,647		5,370		3.7%		110			8
Total		152,711		3,036		149,675		12,930		8.5%		642			42

As at 31st December 2009
Loans and advances to banks
Cash collateral and settlement balances		15,893		–		15,893		–		0.0%		–			–
Interbank lending		21,722		61		21,661		57		0.3%		14			6
Loans and advances to customers
Government lending		3,456		–		3,456		–		0.0%		–			–
ABS CDO Super Senior		3,541		1,610		1,931		3,541		100.0%		714			2,016
Corporate lending		50,886		1,037		49,849		2,198		4.3%		1,115			219
Other wholesale lending		30,347		317		30,030		615		2.0%		55			18
Cash collateral and settlement balances		39,779		–		39,779		–		0.0%		–			–
Total		165,624		3,025		162,599		6,411		3.9%		1,898			115

(ii) Analysis of balances in GRCB – Absa was due to the appreciation of the Rand against Sterling during 2009. In Rand terms, balances fell by 3%. Balances in GRCB –Emerging Markets were £483m (12%) lower, in part reflecting movements in Sterling against local currencies.Barclays Corporate Wholesale Loans and Advances at Amortised Cost

Total home loans to retail customers rose by £9,254m (7%) to £149,099m (31st December 2008: £139,845m). The UK Home Finance portfolios within UK Retail Banking grew 7% to £87,943m (31st December 2008: £82,303m).

~~Unsecured retail credit (credit card and unsecured loans) portfolios fell 7% to £37,733m (31st December 2008: £40,437m).~~

~~In the retail portfolios, the impairment charge against~~Barclays Corporate wholesale loans and advances ~~rose~~net of impairment decreased 7% to £64,975m (2009: £69,921m). This was driven primarily by ~~£1,584m (68%) to £3,917m (2008: £2,333m) as economic~~

~~conditions, particularly unemployment, deteriorated~~a reduction in borrowings across all ~~regions. Policy and methodology enhancements, currency movements and portfolio maturation also had~~three of the business’ main segments, alongside an ~~impact.~~ increase in impairment allowances in Spain.

The ~~largest increase was in Barclaycard, which increased by £695m (64%)~~UK & Ireland portfolios declined 6% to £1,781m, mainly driven by higher delinquencies and deteriorating economic conditions in the United Kingdom and the United States as well as portfolio maturation. The increase of £334m (55%) to £936m in UK Retail Banking was£52,659m (2009: £56,215m), primarily due to lower ~~recoveries~~overdraft balances and ~~policy and methodology enhancements. Impairment charges in GRCB – Western~~asset based loans, reflecting depressed demand as UK businesses de-leverage. The Continental Europe ~~and GRCB – Emerging Markets were impacted~~portfolios declined 11% to £10,162m (2009: £11,453m) driven by increased ~~delinquency rates as credit conditions deteriorated particularly~~impairment allowances in Spain, as well as lower revolving credit lines, term lending and India. Impairment increased in GRCB – Absa as a result of high delinquency levels due to consumer indebtedness and increased debt counselling balances following the enactment of the 2007 National Credit Act.

~~The loan loss rate across the Group’s retail portfolios for 2009 was 184bps (2008: 116bps).~~

~~As we enter 2010, the principal uncertainties relating to the performance of the Group’s retail portfolios are:~~mortgage loans.

–

~~the extent and sustainability of economic recovery in the UK, US, Spain and South Africa as governments consider how and when to withdraw stimulus packages;~~


Barclays Corporate wholesale loans and advances at amortised cost
	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 charges £m		Loan loss rates bps
As at 31st December 2010
UK & Ireland		53,308		649		52,659		1,699		3.2%		503		94
Continental Europe		11,385		1,223		10,162		2,739		24.1%		884		776
New Markets		2,268		114		2,154		153		6.7%		49		216
Total		66,961		1,986		64,975		4,591		6.9%		1,436		214

As at 31st December 2009
UK & Ireland		56,838		623		56,215		1,588		2.8%		864		152
Continental Europe		11,912		459		11,453		1,396		11.7%		309		259
New Markets		2,375		122		2,253		164		6.9%		125		526
Total		71,125		1,204		69,921		3,148		4.4%		1,298		182

–

~~the dynamics of unemployment in those markets and the impact on delinquency and charge-off rates;~~

Retail loans and advances to customers at amortised cost

As at 31.12.09    Gross
loans &
advances
£m    Impairment
allowance
£m    Loans &
advances net
of impairment
£m    Credit risk
loans
£m    CRLs % of
gross loans
& advances
%    Impairment
charge
£m    Loan loss
rates
bp
UKRB
   101,064    1,587    99,477    3,108    3.1    936    93
Barclaycard
   29,460    2,670    26,790    3,392    11.5    1,781    605
GRCB WE
   41,514    689    40,825    1,411    3.4    335    81
GRCB EM
   3,521    474    3,047    551    15.6    331    940
GRCB Absa
   27,288    655    26,633    2,573    9.4    500    183
Barclays Wealth
   10,002    56    9,946    306    3.1    34    34
Total
   212,849    6,131    206,718    11,341    5.3    3,917    184
As at 31.12.08
UKRB    96,083    1,134    94,949    2,403    2.5    602    63
Barclaycard    29,390    1,677    27,713    2,566    8.7    1,086    370
GRCB WE    38,997    306    38,691    798    2.0    172    44
GRCB EM    4,004    187    3,817    175    4.4    129    322
GRCB Absa    24,677    411    24,266    1,518    6.2    328    133
Barclays Wealth    8,437    24    8,413    48    0.6    16    19
Total    201,588    3,739    197,849    7,508    3.7    2,333    116

   Home loans    Cards and unsecured loans    Other retail    Total retail

31.12.09
£m

31.12.08
£m

31.12.09
£m

31.12.08
£m

31.12.09
£m

31.12.08
£m

31.12.09
£m

31.12.08
£m
UK Retail Banking
   87,943    82,303    7,329    8,294    4,205    4,352    99,477    94,949
Barclaycard
   –    –    21,564    23,224    5,226    4,489    26,790    27,713
GRCB – Western Europe
   34,592    33,807    3,513    4,423    2,720    461    40,825    38,691
GRCB – Emerging Markets
   452    556    2,502    2,872    93    389    3,047    3,817
GRCB – Absa
   20,492    18,411    1,003    43    5,138    5,812    26,633    24,266
Barclays Wealth^a
   5,620    4,768    1,822    1,581    2,504    2,064    9,946    8,413
Total
   149,099    139,845    37,733    40,437    19,886    17,567    206,718    197,849

~~Note~~

a	~~2008 Barclays Wealth analysis of retail loans and advances to customers has been reanalysed to reflect changes in the classification of assets.~~


				79	77

Retail Credit Risk

Gross loans and advances to customers in the retail portfolios increased 10% to £235,335m (2009: £213,489m). In UK Retail Banking, the increase of 13% to £113,800m (2009: £101,064m) primarily reflected increased lending in the UK Home Finance portfolio and the acquisition of Standard Life Bank at the start of 2010. Barclays Wealth loans and advances increased 36% to £13,584m (2009: £9,972m) primarily due to growth in High Net Worth lending. Western Europe Retail Banking loans and advances to customers increased 6%, which primarily reflected growth in Italian mortgages and the acquisition of Citigroup’s credit card business in Italy, partially offset by the depreciation in the value of the Euro against Sterling. Absa balances increased 12% due to the appreciation in the value of the Rand against Sterling during 2010.

Retail impairment allowances rose 12% to £6,883m (2009: £6,119m) comprising growth of 34% in Home Loans to £854m (2009: £639m) and 10% (£549m) in Credit Cards, Unsecured and Other Retail Lending to £6,029m (2009: £5,480m) as impairment stock increased against delinquent assets flowing into later cycles.

Total retail loans and advances net of impairment were £228,452m on 31st December 2010 (2009: £207,370m), of which Home Loans were

£168,055m (2009: £149,099m), Credit Cards and Unsecured loans were £39,171m (2009: £39,012m), and Other Retail Lending were £21,226m (2009: £19,259m).

Total Home Loans net of impairment to retail customers rose by 13% to £168,055m (2009: £149,099m) principally due to an increase in the UK Home Loan portfolios within UK Retail Banking which grew 15% to £101,210m (2009: £87,943m). Home Loans represented 74% of total retail loans and advances to customers on 31st December 2010 (2009: 72%).

Credit Risk Loans

CRLs in the Retail portfolios rose 9% to £12,571m (2009: £11,503m) reflecting increases in Home Loans of 14% to £4,294m (2009: £3,758m) primarily due to an increase in recovery balances in the Sterling value of Absa Home Loans portfolio and the acquisition of Standard Life Bank. Credit Cards, Unsecured and Other Retail Lending increased 7% to £8,277m (2009: £7,745m) reflecting higher recovery balances as accounts rolled through to later delinquency cycles in most businesses and a weak debt sale market.

The CRL coverage ratios were higher at 31st December 2010 in Retail Home Loans at 19.9% (2009: 17.0%) and in Retail Credit Cards Unsecured and Other Retail Lending at 72.8%, (2009: 70.8%) but remained within typical severity rate ranges for these types of products.


Retail loans and advances at amortised cost
			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 charges £m		Loan loss rates bps
As at 31st December 2010
UK Retail Banking				113,800		1,737		112,063		3,166		2.8%		739		65
Barclaycard				29,281		2,981		26,300		3,678		12.6%		1,668		570
WE Retail Banking^a				44,500		833		43,667		1,729		3.9%		314		71
Barclays Africa				1,962		160		1,802		177		9.0%		54		275
Absa				30,537		842		29,695		3,190		10.4%		385		126
Barclays Corporate^b				1,671		255		1,416		301		18.0%		115		688
Barclays Wealth				13,584		75		13,509		330		2.4%		21		15
Total				235,335		6,883		228,452		12,571		5.3%		3,296		140

As at 31st December 2009
UK Retail Banking				101,064		1,587		99,477		3,262		3.2%		936		93
Barclaycard				29,460		2,670		26,790		3,392		11.5%		1,781		605
WE Retail Banking^a				42,012		673		41,339		1,410		3.4%		334		80
Barclays Africa				1,811		138		1,673		163		9.0%		88		486
Absa				27,288		655		26,633		2,573		9.4%		500		183
Barclays Corporate^b				1,882		340		1,542		397		21.1%		246		1,307
Barclays Wealth				9,972		56		9,916		306		3.1%		34		34
Total				213,489		6,119		207,370		11,503		5.4%		3,919		184

Analysis of retail loans and advances to customers at amortised cost net of impairment allowances
	Home loans				Credit cards and unsecured loans				Other retail lending				Total retail
As at 31st December		2010 £m		2009 £m		2010 £m		2009 £m		2010 £m		2009 £m		2010 £m		2009 £m
UK Retail Banking		101,210		87,943		6,500		7,329		4,353		4,205		112,063		99,477
Barclaycard		–		–		20,991		21,564		5,309		5,226		26,300		26,790
WE Retail Banking		36,395		34,506		4,756		3,511		2,516		3,322		43,667		41,339
Barclays Africa		203		142		1,598		1,520		1		11		1,802		1,673
Absa		23,988		20,492		2,447		2,282		3,260		3,859		29,695		26,633
Barclays Corporate		377		396		783		984		256		162		1,416		1,542
Barclays Wealth		5,882		5,620		2,096		1,822		5,531		2,474		13,509		9,916
Total		168,055		149,099		39,171		39,012		21,226		19,259		228,452		207,370

Notes

a	Western Europe Retail Banking includes loans and advances to business customers at amortised cost.

b	Barclays Corporate primarily includes retail portfolios in India, UAE and Russia.


78

Risk management

Credit risk management continued

Retail Impairment

In Retail portfolios, the impairment charge against loans and advances fell 16% to £3,296m (2009: £3,919m) as a result of lower charges across all businesses. This reflected the improving economic conditions compared to 2009, particularly in the labour and housing sectors, the continuing low interest rate environment, credit actions taken and an improved collections performance. This improvement was partially offset by the impact of a fall in house prices in Spain. The largest improvement was in UK Retail Banking which decreased 21% to £739m principally due to lower charges-offs and flows into collections in unsecured loans and overdrafts. The decrease of 6% to £1,668m in Barclaycard reflected positive underlying delinquency and bankruptcy trends, most notably in the US Cards and Absa Cards portfolios.

In Barclays Corporate, the impairment of retail portfolios decreased 53% to £115m, reflecting improving delinquency performance in the Indian and UAE portfolios. In Absa, impairment fell 23% to £385m mainly as a result of improvement in the retail mortgage portfolio partially offset by the appreciation in the value of the Rand against Sterling. Impairment charges were also lower in Western Europe Retail Banking, primarily due to an improved performance in collections and lower delinquency rates in the majority of the Spanish portfolios. Impairment charges reduced in Barclays Africa as a result of an improved collections performance.

The loan loss rate across the Group’s Retail portfolios for 2010 was 140bps (2009: 184bps).

The principal uncertainties relating to the performance of the Group’s retail portfolios in 2011 include the:

–

~~the speed~~increase in unemployment due to fiscal-tightening and ~~extent of possible rises in interest rates in the UK, US and eurozone; and~~

other measures;

–	sustainability of economic recovery particularly in the UK, US, Spain and South Africa;

–	impact of rising inflation and the speed and extent of interest rate rises on affordability; and

–	the possibility of any further falls in residential property prices in the UK, South Africa and ~~Spain.~~ Western Europe.

Home Loans

The Group’s principal ~~home loans~~Home Loan portfolios ~~continued largely to be in the~~consisted of UK Retail Banking ~~Home Finance business (59%~~(60% of the ~~Group’s~~Group total), ~~GRCB –~~ Western Europe ~~(23%) primarily~~Retail Banking (primarily Spain and ~~Italy,~~Italy) (22%) and South Africa (14%). These portfolios account for 96% of the Group’s Home Loan portfolios.


Home loans principal portfolios^a	Three month arrears^b %		Gross charge-off rates^c %		Recoveries proportion of outstanding balances %		Recoveries impairment coverage ratio^d %
As at 31st December 2010
UK		0.3		0.5		0.7		8.6
South Africa		3.9		3.5		6.7		31.7
Spain		0.4		0.7		1.6		32.0
Italy		0.8		0.6		1.2		29.0

As at 31st December 2009
UK		0.3		0.9		0.8		4.8
South Africa		4.1		4.0		5.6		30.1
Spain		0.6		1.3		1.5		10.3
Italy		1.0		0.5		0.9		32.9

Home loans principal portfolios^a	Average LTV on new mortgages %		New mortgages proportion above 85% LTV %		Portfolio marked to market LTV^e %		Portfolio proportion above 85% LTV^e %
As at 31st December 2010
UK		52		<1		43		10
South Africa		61		30		45		27
Spain^f		61		1		58		12
Italy		59		<1		45		2

As at 31st December 2009
UK		48		1		43		14
South Africa		56		25		47		36
Spain^f		58		<1		54		10
Italy		51		1		45		2

Notes

a	Comprising: UK: UK Retail Banking residential and buy to let mortgage portfolios; South Africa: Absa retail home loans portfolio; Spain and Italy: Retail mortgage portfolios.

b	Defined as balances greater than 90 days delinquent but not charged off to recoveries, expressed as a percentage of outstanding balances excluding balances in recoveries. UK three month arrears rates for 2009 have been re-stated from 1.04% to exclude balances in recoveries.

c	Defined as balances that were charged off to recoveries in the reporting period, expressed as a percentage of average outstanding balances excluding balances in recoveries.

d	Defined as impairment allowance held against recoveries balances expressed as a percentage of balance in recoveries.

e	Portfolio mark-to-market based on current valuations including recoveries balances.

f	Spain mark-to-market methodology based on balance weighted approach as per Bank of Spain requirements.


					79

In 2010 Barclays increased lending to meet customer demand, most notably in the UK, whilst maintaining a broadly stable risk appetite. Total Home Loans net of impairment to retail customers rose 13% to £168,055m (2009: £149,099m) principally due to an increase in the Home Loans portfolios within UK Retail Banking which grew 15% to £101,210m (2009: £87,943m). Home Loans represented 74% of total retail loans and advances to customers net of impairment on 31st December 2010 (2009: 72%).

Home Loans was a principal driver of retail asset growth in 2010. The ~~credit~~growth was mainly in the UK Home Loans portfolio driven by the acquisition of Standard Life Bank and increased lending. The gross new lending in Home Loans in 2010 was £16,875m in the UK (2009: £14,180m), £1,898m in South Africa (2009: £1,583m), £1,963m in Spain (2009: £2,352m), £3,561m in Italy (2009: £2,860m).

Improvements in arrears rates during 2010 were driven by balance growth and increased customer affordability supported by the low base rate environment. The improvement in arrears rates drove lower gross charge-off rates in the majority of portfolios.

Three month arrears rates within the South African portfolio improved as debt counselling balances held in late stage delinquency cycles moved to recoveries. Recoveries as a proportion of outstanding balances increased throughout 2010 as accounts remained in recoveries for an extended period as a result of a longer time taken to realise securities due to increased debt counselling balances moving into recoveries.

The asset quality of Barclays principal Home Loan portfolios has continued to be within expectations in the ~~principal home loan portfolios reflected low LTV lending. Using~~ current ~~valuations,~~economic conditions, as a result of the moderate average LTV of the existing portfolio and the range of LTVs of new mortgage lending.

Barclays has broadly maintained its risk appetite in 2010. There has been an increase across all portfolios ~~as at 31st~~in the average LTV on new mortgages, offset by redemptions resulting in year end marked to market LTVs broadly remaining unchanged compared to December ~~2009 was 43% for UK Home Finance (31st December 2008: 40%), 51% for Spain (31st December 2008: 48%) and 42% for South Africa (31st December 2008: 41%).~~ 2009.

The increase of average LTV for new mortgage business ~~during 2009 at origination~~in the UK and Spain was ~~48% for UK Home Finance (31st December 2008: 47%), 55% for Spain (31st December 2008: 63%) and 53% for~~driven by an increased proportion of new mortgages from house purchase as the remortgage sector contracted significantly. In South Africa, ~~(31st December 2008: 58%). The percentage of balances~~the increase was driven by targeted acquisition criteria for higher LTV lending to better quality customers with an ~~LTV of over 85% based on current values was 14% for UK Home Finance (31st December 2008: 10%), 7% for Spain (31st December 2008: 5%) and 27% for South Africa (31st December 2008: 25%).~~ existing banking relationship with Absa.

In the UK, ~~buy-to-let~~buy to let mortgages comprised 6% of the total stock as at 31st December ~~2009.~~2010.

~~Impairment charges rose across the home loans portfolios, reflecting the impact of lower house prices as well as some increases in arrears rates.~~

Three-month arrears as at 31st December 2009 were 1.04% for UK mortgages (31st December 2008: 0.91%), 0.63% for Spain (31st December 2008: 0.51%), as credit conditions deteriorated and 4.07% for South Africa (31st December 2008: 2.11%), due to consumer indebtedness and increased debt counselling balances following the enactment of the 2007 National Credit Act.

~~Repossessions~~

The number of properties in repossession in UK Home Loans remained very low during 2009. At the end of 2009 there were 196 properties in repossession, 40 higher than the previous year (31st December 2008: 156).

Credit Cards and Unsecured Loans

The Group’s ~~largest card~~principal Credit Cards and ~~unsecured loan~~Unsecured Loans portfolios are primarily comprised of UK Cards (28% of Group’s total Credit Cards and Unsecured Loans), UK Loans (14%) and US Cards (17%). These account for 59% of the Group’s Credit Cards and Unsecured Loans.

Gross new lending in 2010 for UK Cards was £2,298m (2009: £1,414m), for UK Loans was £2,212m (2009: £2,339m), and for US Cards was £4,126m (2009: £4,837m), representing the three main Credit Cards and Unsecured Loans retail portfolios in the ~~UK (56% Group total). The US cards portfolio accounts for 20%~~Group. Loans and advances to customers net of ~~the total exposure, where Barclaycard’s portfolio is largely prime credit quality (FICO score~~impairment allowances remained broadly flat in 2010 at £39,171m (2009: £39,012m).

Three month arrears rates improved across all of ~~660 or more).~~

~~Arrears rates~~Group’s largest unsecured portfolios in ~~the~~2010. UK Cards ~~portfolio rose during the year~~arrears rates fell to ~~1.79% (31st December 2008: 1.57%~~1.5% (2009: 1.8%), reflecting the impact of ~~the~~improving economic ~~downturn. Repayment Plan balances grew to support government initiatives to supply relief to customers experiencing financial difficulty. As a percentage of the portfolio, three-month~~conditions during 2010, while UK Loans arrears rates ~~rose during 2009~~fell to ~~2.74% for UK Loans (31st December 2008: 2.28%~~2.6% (2009: 3.8%) and ~~3.31% for~~ US Cards ~~(31st December 2008: 2.32%~~arrears rates fell to 2.5% (2009: 3.3%).

~~Number of Repossessions in UK Home Finance~~

      As at
31.12.09    As at
31.12.08
Residential and buy-to-let mortgage portfolios
   196    156

~~Home loans – distribution of balances by loan to value (current valuations)~~^a

UK Spain^b South Africa^c
31.12.09
% 31.12.08
% 31.12.09
% 31.12.08
% 31.12.09
% 31.12.08
%
<= 75%
74.5 78.3 83.2 86.7 57.8 60.5
> 75% and <= 80%
6.3 6.1 5.6 4.8 7.1 7.5
> 80% and <= 85%
5.4 5.5 4.4 3.7 7.7 7.2
> 85% and <= 90%
4.6 4.5 3.2 1.6 7.6 7.6
> 90% and <= 95%
3.4 2.5 1.7 1.3 7.8 6.7
> 95%
5.8 3.1 1.9 1.9 12.0 10.5
Mark to market LTV %
43 40 51 48 42 41
Average LTV on new mortgages
48 47 55 63 53 58

Home loans – 3 month arrears^d

      As at
31.12.09
%    As at
31.12.08
%
UK
   1.04    0.91
Spain
   0.63    0.51
South Africa
   4.07    2.11

Unsecured lending 3 month arrears^e


      As at
31.12.09
%    As at
31.12.08
%
UK Cards^f
   1.79    1.57
UK Loans^g
   2.74    2.28
US Cards^h
   3.31    2.32


Credit cards and unsecured loans principal portfolios	One month arrears^a %		Three month arrears^a %		Gross charge-off rates^b %		Recoveries proportion of outstanding balances %		Recoveries impairment coverage ratio^c %
As at 31st December 2010
UK Cards		3.4		1.5		8.4		9.1		83.9
UK Loans		4.7		2.6		7.9		18.5		82.5
US Cards		4.6		2.5		12.2		8.1		93.8

As at 31st December 2009
UK Cards		4.2		1.8		7.4		8.5		81.3
UK Loans^d		6.1		3.8		8.2		16.8		80.7
US Cards		6.1		3.3		12.2		6.4		91.7

Notes

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

b	~~Spain mark to market methodology as per Bank of Spain requirements.~~

c	~~South Africa mark to market methodology will be revised in 2010 to incorporate additional granularity.~~

d	Defined as ~~total~~balances greater than 30 or 90 ~~day +~~days delinquent ~~balances~~but not charged off to recoveries, expressed as a percentage of ~~outstandings.~~outstanding balances excluding balances in recovery. Percentages include accounts in forbearance programmes.

eb	Defined as ~~total 90 day + delinquent~~ balances that charged-off to recoveries in the reporting period, expressed as a percentage of ~~outstandings. Includes accounts on repayment plans but excludes the~~average outstanding balances excluding balances in ~~the legal book.~~recoveries.

fc	~~UK Cards includes Branded Cards and Goldfish.~~Defined as impairment allowance held against recoveries balances, expressed as a percentage of balances in recoveries.

gd	UK Loans ~~based on Barclayloans and Personal Loans~~three month arrears rates for 2009 have been restated from ~~Barclaycard.~~

h	~~Excludes Business Card; December 2009 includes US Airways.~~2.74% to align with new arrears definitions as per Group policy.


80

Risk management

Credit risk management continued

~~Risk management~~

~~Credit risk management~~

~~continued~~

~~Expected loss~~

Basel II, introduced in 2008, includes, for those aspects of an entity’s exposures that are on an Internal Ratings Based (IRB) approach, a statistical measure of credit losses known as Expected Loss (EL). EL is an estimate of the average loss amount from:

~~– defaulted and past due items at the reported date (i.e. incurred losses); and~~

~~– modelled default events over a 12-month forward period for performing exposures.~~

~~On the performing portfolios, EL is calculated as the product of Probability of Default (PD), Exposure at Default (EAD) and Loss Given Default (LGD).~~

~~– EL is assessed against both the performing and non-performing parts of the Group’s portfolios.~~

~~– EL considers average credit conditions, generally uses a ‘through-the-cycle’ PD and incorporates an adjustment to LGD which represents economic conditions in a downturn.~~

The ~~aspect of an entity’s exposures that are not on an IRB approach will continue to be measured on the standardised approach, against which Basel II does not assess EL. For this purpose, the regulatory~~recoveries impairment ~~allowance on IRB and standardised portfolios gives an indication of credit losses on the standardised book.~~

EL is reflected in the calculation of capital supply, such that, for IRB portfolios, 50% of the excess of EL over total impairment allowances and valuation adjustments is deducted from each of Tier 1 and Tier 2 capital. If total impairment allowances and valuation adjustments exceed EL, then this excess can be added to Tier 2 capital. Ascoverage ratios as at 31st December ~~2009, EL exceeded total~~2010 were 83.9% for UK Cards (2009: 81.3%), 82.5% for UK Loans (2009: 80.7%), and 93.8% for US Cards (2009: 91.7%).

Recoveries impairment coverage ratio against UK Cards, UK Loans and US Cards improved during 2010.

Retail Forbearance Programmes

Barclays forbearance programmes with the largest impairment allowances ~~and valuation adjustments by £50m (2008: £317m).~~

~~There are several differences~~were in the ~~calculation of~~Credit Cards and Unsecured Loans portfolios. Forbearance programme balances and impairment coverage ratios within the ~~regulatory impairment allowance~~Group’s principal Credit Cards and ~~EL, with these measures representing different views of losses and,~~Unsecured Loans portfolios as ~~such, they are not directly comparable. These differences include the fact that regulatory impairment allowance reflects defaulted and past due items~~ at ~~the reporting date (i.e. incurred losses), whereas EL includes both the best estimate of~~

losses in the non-performing portfolio and the expected losses over the coming 12 months in the performing portfolio. EL for the performing portfolio is also based on Exposure at Default (EAD) and downturn LGD. For these reasons, EL will generally exceed regulatory impairment allowance. As noted above, this excess is deducted from capital.

In addition, whilst the regulatory impairment allowance is based on the impairment allowance for loans and advances, there are differences between these amounts in two main respects. Firstly, the regulatory impairment allowance includes valuation adjustments on available for sale exposures and exposures designated at fair value. Secondly, it excludes impairment held against securitisation exposures.

~~The principal drivers of the increase in EL during the year ended~~ 31st December ~~2009 are as follows:~~2010 were:

–

UK ~~Retail Banking EL increased £445m due to a deteriorating economic environment coupled with methodology enhancements.~~

Cards: Balances £875m, Impairment Coverage 35.1%

(2009: £942m, 28.1%);

–

~~Barclays Commercial Bank EL decreased by £43m, driven by the change in treatment of defaulted assets partially offset by an increase in the non-performing book.~~

UK Loans: Balances £215m, Impairment Coverage 31.7%

(2009: £202m, 18.8%); and

–

~~Barclaycard EL increase of £351m was driven by the combination of an additional roll-out of IRB during the period and increased levels of retained non-performing assets during the recovery period.~~

US Cards: Balances £150m, Impairment Coverage 18.4%

(2009: £198m, 20.5%).

–

~~GRCB – Western Europe EL increased to £243m following the migration of Spanish card portfolio and Italian and Portuguese mortgage portfolios onto the IRB approach.~~

The impairment coverage of UK Cards and Loans Forbearance Programmes improved during 2010.

–

~~GRCB – Absa EL increased by £466m, mostly due to exchange rate movements, higher delinquency levels and a deterioration in credit quality of the performing book.~~

The impairment coverage of US Cards Forbearance Programmes decreased as a result of an improvement in portfolio mix to lower delinquency cycles, which are impaired at lower rates.

–

~~Barclays Capital EL increase of £910m was primarily driven by defaulted counterparties and an increase in IRB coverage, partially offset by a reduction in exposures due to foreign exchange movements.~~

~~Further exposures will be moved onto~~In addition, the ~~IRB approach during 2010. Additional information~~Group has forbearance programmes on secured portfolios, principally Home Loans in the UK and South Africa, against which appropriate impairment allowances are held in line with ~~respect~~the Group’s impairment policy. Due to ~~Expected Loss will be provided as part~~the value of the security held against these loans, impairment allowances held against our ~~Pillar 3 disclosures, available at the end of March 2010.~~UK and South African Home Loan balances in forbearance are less significant than those held against Credit Cards and Unsecured Loans in forbearance.

Total EL on IRB portfolios
      As at
31.12.09
£m    As at
31.12.08
£m
UK Retail Banking
   1,703    1,258
Barclays Commercial Bank
   776    819
Barclaycard
   1,261    910
GRCB – Western Europe
   243    –
GRCB – Emerging Markets^a
   –    –
GRCB – Absa
   1,158    692
Barclays Capital
   2,467    1,557
Barclays Wealth
   23    –
Head Office Functions & Other Operations
   11    1
Total EL on IRB portfolios
   7,642    5,237
Total regulatory impairment allowance on IRB portfolios
   7,592    4,672
Total regulatory impairment allowance on standardised portfolios
   4,693    2,560

~~Note~~Other Retail Lending

Other Retail Lending net of impairment was £21,226m (2009: £19,259m). This balance primarily consisted of the Local Business portfolio in UK Retail Banking (20%), the Barclays Partner Finance (9%) and FirstPlus (16%) portfolios in Barclaycard, Absa Vehicle and Asset Finance (15%) and other secured lending portfolios in Barclays Wealth (26%).

a	~~Not currently on the IRB approach.~~

Impairment charges on these portfolios decreased 10% to £453m (2009: £506m). Impairment charges on the Barclays Partner Finance portfolio decreased 5% to £106m (2009: £111m) and on the UK Secured Lending portfolio (FirstPlus) 31% to £112m (2009: £163m) driven by improved economic conditions, previous credit risk actions and, in the case of FirstPlus, the run-off of the portfolio. Impairment charges on the Absa Vehicle and Asset Finance portfolio decreased 12% to £73m (2009: £83m) reflecting the impact of exchange rate movements. Impairment charges on the other secured lending in Barclays Wealth reduced by 54% to £6m (2009: £13m) due to impairment in Spain in 2009 not recurring. Impairment charges on the Local Business portfolio in UK Retail Banking increased 15% to £156m (2009: £136m).


					81

~~Barclays Capital credit market exposures~~Credit Quality of Loans and Advances (audited)

Barclays Capital’s credit market exposures as at 31st December 2009 primarily relate to commercial real estate and leveraged finance. These include positions subject to fair value movements in the income statement and positions that are classified asAll loans and advances ~~and~~are categorised as ~~available for sale.~~

~~The balances at and gross writedowns to 31st December 2009 are set out below:~~

During the year ended 31st December 2009, these positions have been reduced by £14,130m to £27,609m (31st December 2008: £41,739m), including net sales and paydowns of £6,590m, gross writedowns of £6,086m

and a decrease of £4,226m due to currency and other movements. In addition, on 16th September 2009, £5,087m credit market assets and £2,367m other assets were sold to Protium Finance LP, funded by a £7,669m loan extended by Barclays. The loan balance at 31st December 2009 of £7,859m includes accrued interest.

In the year ended 31st December 2009, gross writedowns comprised £4,417m (2008: £6,290m) of fair value losses through income and £1,669m (2008: £1,763m) of impairment charges. Gross writedowns included £2,082m (2008: £5,584m) against US residential mortgage positions, £3,007m (2008: £1,488m) against commercial mortgage positions, and £997m (2008: £981m) against other credit market positions.

Barclays Capital credit market exposures^a          As at 31st December    Year ended 31.12.09
US Residential Mortgages    Notes    2009
$m    2008
$m    2009
£m    2008
£m    Fair value
losses
£m    Impairment
charge
£m    Gross
losses
£m
ABS CDO Super Senior
   A1    3,127    4,526    1,931    3,104    –    714    714
Other US sub-prime & Alt-A
   A2    2,254    11,269    1,392    7,729    531    555    1,086
Monoline wrapped US RMBS
   A3    9    2,389    6    1,639    282    –    282
Commercial Mortgages

Commercial real estate loans and properties
   B1    12,525    16,882    7,734    11,578    2,466    –    2,466
Commercial mortgage-backed securities
   B1    762    1,072    471    735    44    –    44
Monoline wrapped CMBS
   B2    49    2,703    30    1,854    497    –    497
Other Credit Market

Leveraged Finance^b
   C1    8,919    13,193    5,507    9,048    –    396    396
SIVs, SIV-Lites and CDPCs
   C2    896    1,622    553    1,113    69    4    73
Monoline wrapped CLO and other
   C3    3,443    7,202    2,126    4,939    528    –    528
Total exposures
      31,984    60,858    19,750    41,739
Total gross writedowns
                  4,417    1,669    6,086
Loan to Protium
   D    12,727    –    7,859    –

~~Notes~~either:

a–	~~As the majority of positions are denominated in US Dollars, the positions above are shown in both US Dollars and Sterling.~~neither past due nor individually impaired;

b–	~~Includes undrawn commitments of £257m (2008: £531m).~~past due but not individually impaired; or

–	individually impaired, which includes restructured loans.

For the purposes of the disclosures:

–	A loan is considered past due when the borrower has failed to make a payment when due under the terms of the loan contract.

–	The impairment allowance includes allowances against financial assets that have been individually impaired and those subject to collective impairment. Loans subject to collective impairment allowances are included in either Neither past due but not impaired or Past due but not impaired.

–	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.


Credit quality of loans and advances (audited)	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^c £m		Coverage ratio %
As at 31st December 2010
Trading portfolio:
Traded loans		2,170		–		–		2,170		–			2,170		–		–
Financial assets designated at fair value:
Loans and advances		22,273		79		–		22,352		–			22,352		–		–
Other financial assets		–		–		–		–		–			–		–		–
Loans and advances to banks		37,149		663		35		37,847		(48	)		37,799		35		100.0
Loans and advances to customers:
Home loans		156,908		9,488		2,513		168,909		(854	)		168,055		4,294		19.9
Credit card receivables		20,734		1,253		3,112		25,099		(2,441	)		22,658		3,642		67.0
Other personal lending		24,363		1,975		3,397		29,735		(3,127	)		26,608		3,886		80.5
Wholesale and corporate		181,473		6,746		18,010		206,229		(5,611	)		200,618		19,331		29.0
Finance lease receivables		9,338		589		427		10,354		(351	)		10,003		694		50.6
Total		454,408		20,793		27,494		502,695		(12,432	)		490,263		31,882		39.0

As at 31st December 2009
Trading portfolio:
Traded loans		2,962		–		–		2,962		–			2,962		–		–
Financial assets designated at fair value:
Loans and advances		22,210		180		–		22,390		–			22,390		–		–
Other financial assets		557		–		–		557		–			557		–		–
Loans and advances to banks		38,859		2,280		57		41,196		(61	)		41,135		57		100.0
Loans and advances to customers:
Home loans^d		139,045		8,839		1,854		149,738		(639	)		149,099		3,758		17.0
Credit card receivables		20,195		1,544		2,459		24,198		(2,309	)		21,889		3,068		75.3
Other personal lending		23,796		2,175		2,372		28,343		(2,908	)		25,435		3,466		83.9
Wholesale and corporate		199,800		7,598		10,088		217,486		(4,558	)		212,928		11,497		39.6
Finance lease receivables		10,128		664		402		11,194		(321	)		10,873		696		46.1
Total		457,552		23,280		17,232		498,064		(10,796	)		487,268		22,542		47.9

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.

c Credit risk loans include the loan to Protium of £7,560m against which an impairment of £532m is held.

d Comparative figures for Home loans have been restated to align with externally disclosed arrears definitions.


82

Risk management

Credit risk management continued


Credit quality of loans and advances neither past due nor individually impaired (audited)
		2010								2009
As at 31st December	Strong £m		Satisfactory £m		Higher risk £m		Total £m		Strong £m		Satisfactory £m		Higher risk £m		Total £m
Trading portfolio:
Traded loans		352		1,203		615		2,170		1,366		1,290		306		2,962
Financial assets designated at fair value:
Loans and advances		17,496		2,100		2,677		22,273		15,909		3,809		2,492		22,210
Other financial assets		–		–		–		–		261		–		296		557
Loans and advances to banks		35,666		1,360		123		37,149		35,825		2,492		542		38,859
Loans and advances to customers:
Home loans		85,351		69,784		1,773		156,908		66,831		69,890		2,324		139,045
Credit card receivables		–		20,538		196		20,734		–		20,038		157		20,195
Other personal lending		5,555		16,130		2,678		24,363		3,417		18,108		2,271		23,796
Wholesale and corporate		115,783		59,921		5,769		181,473		119,764		70,132		9,904		199,800
Finance lease receivables		3,684		5,228		426		9,338		2,664		7,082		382		10,128
Total loans and advances		263,887		176,264		14,257		454,408		246,037		192,841		18,674		457,552

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	Probability of default	Probability of default		Default grade
Strong	0.0-0.60%		0.0-0.05%		1-3
			0.05-0.15%		4-5
			0.15-0.30%		6-8
			0.30-0.60%		9-11
Satisfactory	0.60-10.00%		0.60-2.15%		12-14
			2.15-11.35%		15-19
Higher risk	10.00%+		11.35%+		20-21

~~Risk management~~Financial statement descriptions can be summarised as follows:

~~Credit~~Strong – there is a very high likelihood of the asset being recovered in full.

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 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.

Higher risk ~~management~~– 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 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.

~~continued~~

Analysis of Barclays Capital credit market assets by asset class

      Trading
portfolio
assets – debt
securities
£m    Financial
assets
designated at
fair value –
loans and
advances
£m    Derivative
financial
instruments
£m Loans and
advances to
customers
£m    Available
for sale
– debt
securities
£m    Other
assets
£m    Total
as at
31.12.09
£m    Total
as at
31.12.08
£m
ABS CDO Super Senior
         1,931          1,931    3,104
Other US sub-prime
   3    52    244    24    209       532    3,441
Alt-A
   323       211       326       860    4,288
RMBS monoline wrapped US RMBS
         6             6    1,639
Commercial real estate loans
      6,534             6,534    11,578
Commercial real estate properties
               1,200    1,200    –
Commercial mortgage backed securities
   860       (389 )          471    735
Monoline wrapped CMBS
         30             30    1,854
Leveraged finance^a
         5,250          5,250    8,517
SIVs and SIV-lites
      355    53    122          530    963
CDPCs
         23             23    150
Monoline wrapped CLO and other
         2,126             2,126    4,939
Loan to Protium
         7,859          7,859    –
Total
   1,186    6,941    2,304    15,186    535    1,200    27,352    41,208

~~Note~~

Further analysis of Barclays Capital credit market exposures is on pages 81 and 82. Undrawn commitments of £257m (2008: £531m) are off-balance sheet and therefore not included in the table above. This is a change in presentation from 31st December 2008, which reflected certain loan facilities originated post 1st July 2007.


					83

~~A. US Residential Mortgages~~Loans and advances that are past due but not individually impaired

~~A1. ABS CDO Super Senior~~

      As at
31.12.09
Total
£m As at
31.12.08
Total
£ m As at
31.12.09
Marks^a
%    As at
31.12.08
Marks^a
%
2005 and earlier
   1,048    1,226    77    90
2006
   422    471    7    37
2007 and 2008
   22    25    34    69
Sub-prime
   1,492    1,722    57    75
2005 and earlier
   761    891    43    77
2006
   230    269    59    75
2007 and 2008
   55    62    14    37
Alt-A
   1,046    1,222    45    74
Prime
   421    520    83    100
RMBS CDO
   351    402    6    –
Sub-prime second lien
   110    127    –    –
Total US RMBS
   3,420    3,993    49    68
CMBS
   37    44    89    100
Non-RMBS CDO
   400    453    35    56
CLOs
   32    35    100    100
Other ABS
   37    51    100    100
Total Other ABS
   506    583    48    66
Total notional collateral
   3,926    4,576
Subordination
   (385 ) (459 )
Gross exposure pre-impairment
   3,541    4,117
Impairment allowances
   (1,610 ) (1,013 )
Total
   1,931    3,104    49    68

~~ABS CDO Super Senior positions at 31st December 2009 comprised five high grade liquidity facilities which were fully drawn and classified within~~An age analysis of loans and ~~receivables (31st December 2008: five facilities).~~advances that are past due but not individually impaired is set out below.

~~During~~For the ~~year, ABS CDO Super Senior positions reduced by £1,173m~~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 ~~£1,931m (31st December 2008: £3,104m). Positions are stated after writedowns and charges of £714m incurred in 2009 (2008: £1,461m). There was~~

customers may come under this category because the impairment allowance on such loans is calculated on a ~~decline of £290m resulting from depreciation in~~collective – not individual – basis. This reflects the ~~value~~homogenous nature of the ~~US Dollar against Sterling~~assets, which allows statistical techniques to be used, rather than individual assessment. In contrast, some loans to Wholesale customers and ~~amortisation~~banks may come under this category because of ~~£169m in the year.~~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.

~~Note~~


Loans and advances past due but not individually impaired (audited)
	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
As at 31st December 2010
Financial assets designated at fair value:
Loans and advances		–		–		70		1		8		79		–
Loans and advances to banks		663		–		–		–		–		663		–
Loans and advances to customers:
Home loans		4,915		1,875		917		1,381		400		9,488		1,781
Credit card receivables		214		156		353		441		89		1,253		530
Other personal lending		422		672		392		362		127		1,975		489
Wholesale and corporate		4,104		788		533		620		701		6,746		1,321
Finance lease receivables		175		80		67		266		1		589		267
Total loans and advances to customers		9,830		3,571		2,262		3,070		1,318		20,051		4,388
Total financial assets past due but not individually impaired		10,493		3,571		2,332		3,071		1,326		20,793		4,388

As at 31st December 2009
Financial assets designated at fair value:
Loans and advances		170		–		1		–		9		180		–
Loans and advances to banks		2,280		–		–		–		–		2,280		–
Loans and advances to customers:
Home loans		4,849		1,453		633		1,403		501		8,839		1,904
Credit card receivables		501		214		220		459		150		1,544		609
Other personal lending		369		295		417		413		681		2,175		1,094
Wholesale and corporate		5,403		292		494		866		543		7,598		1,409
Finance lease receivables		186		86		98		282		12		664		294
Total loans and advances to customers		11,308		2,340		1,862		3,423		1,887		20,820		5,310
Total financial assets past due but not individually impaired		13,758		2,340		1,863		3,423		1,896		23,280		5,310


Loans and advances individually assessed as impaired (audited)	2010							2009
As at 31st December	Original carrying amount £m		Impairment allowance £m			Revised carrying amount £m		Original carrying amount £m		Impairment allowance £m			Revised carrying amount £m
Total loans and advances to banks individually impaired		35		(31	)		4		57		(49	)		8
Loans and advances to customers:
Home loans		2,513		(627	)		1,886		1,854		(317	)		1,537
Credit card receivables		3,112		(2,025	)		1,087		2,459		(1,690	)		769
Other personal lending		3,397		(2,075	)		1,322		2,372		(1,531	)		841
Wholesale and corporate		18,010		(4,986	)		13,024		10,088		(3,837	)		6,251
Finance lease receivables		427		(265	)		162		402		(233	)		169
Total loans and advances individually impaired		27,494		(10,009	)		17,485		17,232		(7,657	)		9,575
Collective impairment allowance				(2,423	)						(3,139	)
Total impairment allowance				(12,432	)						(10,796	)

a	~~Marks above reflect the gross positions after impairment and subordination.~~
84

Risk management

Credit risk management continued

~~Risk management~~

~~Credit risk management~~

~~continued~~

Renegotiated loans and advances (audited)

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.

~~A2. Other US Sub-Prime~~Collateral and ~~Alt-A~~other credit enhancements held (audited)

Other US Sub-prime    As at
31.12.09
£m    As at
31.12.08
£m    Marks at
31.12.09
%    Marks at
31.12.08
%
Whole loans
   –    1,565    –    72
Sub-prime securities (net of hedges)
   212    929    38    25
Other positions with underlying sub-prime collateral:

– Derivatives
   244    643    96    87
– Loans
   76    195    22    70
– Real Estate
   –    109    –    46
Total Other US Sub-Prime
   532    3,441
Alt-A

Whole Loans
   –    776    –    67
Alt-A Securities
   649    3,112    40    16
Residuals
   –    2    –    6
Derivative positions with underlying Alt-A collateral
   211    398    99    100
Total
   860    4,288
Total Other US Sub-Prime and Alt-A
   1,392    7,729

~~The majority~~Financial assets that are past due or individually assessed as impaired may be partially or fully collateralised or subject to other forms of ~~Other US sub-prime~~credit enhancement.

Assets in these categories subject to collateralisation are mainly corporate loans, Home Loans and ~~Alt-A positions~~finance lease receivables. Credit card receivables and other personal lending are ~~measured~~generally unsecured (although in some instances a charge over the borrower’s property or other assets may be sought).

Corporate loans (audited)

Security is usually taken in the form of a fixed charge over the borrower’s property or a floating charge over the assets of the borrower. Loan covenants may be put in place to safeguard the Group’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. 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 through profit and loss. The balance reduced by £6,337m to £1,392m (31st December 2008: £7,729m), driven by the Protium sale of £2,319m, other net sales, paydowns and other movements of £2,398m and gross losses of £1,086m. Depreciation of the ~~US Dollar against Sterling resulted in~~collateral held.

Home loans (audited)

Home loans are secured by a ~~decline~~fixed charge over residential property. The estimated fair value of ~~£534m.~~

~~Counterparty derivative positions relating to vehicles which hold sub-prime~~ collateral ~~was £455m (31st December 2008: £1,041m). These positions largely comprise the most senior obligation of the vehicles.~~

~~A3. US Residential Mortgage Backed Securities Wrapped by Monoline Insurers~~

~~The table below shows RMBS assets where Barclays Capital~~ held ~~protection from monoline insurers~~as at 31st December ~~2009. These~~2010 in respect of Home Loans that are ~~measured at~~past due or individually assessed as impaired was £10,057m (2009: £9,628m).

Collateral held 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.

Finance lease receivables (audited)

The net investment in the lease is secured through ~~profit or loss.~~retention of legal title to the leased assets.

Collateral and other credit enhancements obtained (audited)

The carrying value of assets held by the Group as at 31st December 2010 as a result of the enforcement of collateral was as follows:

By rating of the monoline
      As at 31.12.09
      Notional
£m    Fair Value
of Underlying
Asset
£m    Fair Value
Exposure
£m    Credit
Valuation
Adjustment
£m Net
Exposure
£m

Non-investment grade
   56    6    50    (44 ) 6
Total
   56    6    50    (44 ) 6
      As at 31.12.08
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


Assets received (audited)	2010		2009
As at 31st December	Carrying amount £m		Carrying amount £m
Residential property		71		71
Commercial and industrial property		14		66
Other credit enhancements		210		248
Total		295		385

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.

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.


					85

~~A3. US Residential Mortgage Backed~~Debt Securities ~~Wrapped by Monoline Insurers continued~~

Credit Quality of Debt Securities (audited)

Trading portfolio assets, financial assets designated at fair value and available for sale assets are measured on a fair value basis. The ~~balance reduced~~fair value will reflect, among other things, the credit risk of the issuer.

Most listed and some unlisted securities are rated by ~~£1,633m to £6m (31st~~external rating agencies. The Group mainly uses external credit ratings provided by Standard & Poor’s or Moody’s. Where such ratings are not available or are not current, the Group will use its own internal ratings for the securities.

Included in the table below are impaired available for sale debt securities with a carrying value at 31st December ~~2008: £1,639m)~~2010 of £358m (2009: £265m), ~~reflecting~~after a write down of £583m (2009: £692m). Collateral is not generally obtained directly from the ~~Protium sale~~issuers of ~~£1,164m, a credit valuation adjustment of £282m, and currency and other movements of £187m.~~

~~Barclays~~debt securities. Certain debt securities may be collateralised by specifically identified assets that would ~~review claims~~be obtainable in the event of ~~default~~default.

Debt securities and other bills increased by £20.5bn, with the most significant increases relating to investment grade government securities. Securities rated as sub-investment grade increased by £2.1bn, reflecting the receivable arising as part of the ~~underlying assets. There have been no claims under the monoline insurance contracts as none~~acquisition of the ~~underlying assets defaulted~~North American business of Lehman Brothers, moving from loans and advances to available for sale assets.

Securities rated as investment grade amounted to 93.0% of the portfolio (2009: 91.8%). An analysis of the credit quality of the Group’s debt securities is set out below:


Debt securities (audited)	2010								2009
As at 31st December	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		130,744		6,663		1,833		139,240		119,138		5,346		2,036		126,520
Financial assets designated at fair value		942		644		332		1,918		2,200		1,791		16		4,007
Available for sale financial investments		55,107		2,022		2,500		59,629		44,233		5,055		519		49,807
Total debt securities		186,793		9,329		4,665		200,787		165,571		12,192		2,571		180,334
% of total		93.0%		4.7%		2.3%		100.0%		91.8%		6.8%		1.4%		100.0%

Debt securities										2010				2009
As at 31st December									£m		%		£m		%
Of which issued by:
Governments and other public bodies										107,922		53.7%		88,083		48.8%
US agency										30,048		15.0%		23,924		13.3%
Mortgage and asset-backed securities										13,993		7.0%		17,826		9.9%
Corporate and other issuers										47,321		23.6%		41,641		23.1%
Bank and building society certificates of deposit										1,503		0.7%		8,860		4.9%
Total										200,787		100.0%		180,334		100.0%

Debt securities include government securities held as part of the Group’s treasury management portfolio for asset and liability, liquidity and regulatory purposes and are for use on a continuing basis in the ~~year.~~

~~The notional value~~activities of the ~~assets split by~~Group. The Group held the ~~rating~~following government securities which exceeded 10% of shareholders’ equity in any of the ~~underlying asset is shown below.~~

      As at 31.12.09    As at 31.12.08
By rating of underlying asset    A/BBB
£m    Non-
investment
Grade
£ m    Total
£m    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
   –    56    56    31    330    338    699
CDO²– 2005 and earlier
   –    –    –    –    –    49    49
US RMBS
   –    56    56    174    330    2,137    2,641

~~B. Commercial Mortgages~~

~~B1. Commercial Real Estate and Mortgage-Backed Securities~~

~~Commercial mortgages~~last three years. These securities are held at fair value include commercial real estate loans of £6,534m (31st December 2008: £11,578m), commercial real estate properties of £1,200m (31st December 2008: £nil), and commercial mortgage-backed securities of £471m (31st December 2008: £735m).

~~Commercial Real Estate Loans and Properties~~

In the year ended 31st December 2009, the commercial real estate loans and properties balance reduced by £3,844m to £7,734m (31st December 2008: £11,578m). There were gross losses of £2,466m, of which £1,541m related to the US, £843m to UK and Europe, and £82m to Asia. There were gross sales and paydowns of £661m comprising £345m in the UK and Europe, £307m in the US, and £9m in Asia, and currency and other movements of £717m.

~~The commercial real estate loan balances comprised 51% UK and Europe, 44% US and 5% Asia.~~

One large transaction comprises 25% of the total US commercial real estate loan balance. The remaining 75% of the US balance comprises 64 transactions. The remaining weighted average number of years to initial maturity of the US portfolio is 1.2 years (31st December 2008: 1.4 years).

The UK and Europe portfolio is well diversified with 56 transactions at 31st December 2009. In Europe protection is provided by loan covenants and periodic LTV retests, which cover 83% of the portfolio. 50% of the German balance relates to one transaction secured on residential assets.value.

Commercial Real Estate Loans by Region    As at
31.12.09
£m    As at
31.12.08
£m    Marks at
31.12.09
%    Marks at
31.12.08
%
US
   2,852    6,329    62    88
Germany
   1,959    2,467    84    95
Sweden
   201    265    81    96
France
   189    270    70    94
Switzerland
   141    176    85    97
Spain
   72    106    56    92
Other Europe
   370    677    57    90
UK
   429    831    61    89
Asia
   321    457    77    97
Total
   6,534    11,578


Government securities	2010		2009		2008
As at 31st December	Book value £m		Book value £m		Book value £m
United States		25,553		17,356		17,165
United Kingdom		21,999		6,892		8,193
Japan		7,210		7,609		9,092
Spain		6,573		4,948		3,647
Italy		6,443		6,297		6,091
Germany		3,008		9,698		5,832


86


86

Risk ~~management~~

~~Credit risk~~ management

Credit risk management continued

~~B1. Commercial Real Estate and Mortgage-Backed Securities continued~~

Commercial Real Estate Loans by Industry
As at 31.12.09
   As at
31.12.08
      US
£m    Germany
£m    Other
Europe
£m    UK
£m    Asia
£m    Total
£m    Total
£m
Residential
   1,132    1,053    –    152    102    2,439    3,582
Office
   372    251    557    79    79    1,338    3,656
Hotels
   614    –    223    8    1    846    1,633
Retail
   54    507    73    30    73    737    957
Industrial
   383    105    103    20    11    622    887
Leisure
   –    –    –    140    –    140    233
Land
   128    –    –    –    –    128    232
Mixed/Others
   169    43    17    –    55    284    398
Total
   2,852    1,959    973    429    321    6,534    11,578
Commercial Real Estate Properties by Industry                                  As at
31.12.09
£m    As at
31.12.08
£m
Residential
                  56    –
Office
                  927    –
Hotels
                  126    –
Industrial
                  25    –
Leisure
                  33    –
Land
                  31    –
Mixed/Others
                  2    –
Total
                  1,200    –

Included within the commercial real estate properties balance are properties held by Crescent Real Estate Holdings LLC (Crescent) with a carrying value of £1,001m. On 19th November 2009, Barclays Capital assumed ownership of Crescent following the completion of a debt restructuring transaction.

Commercial Mortgage Backed Securities    As at
31.12.09
£m    As at
31.12.08
£m    Marks
at^a
31.12.09
%    Marks
at^a
31.12.08
%
Commercial Mortgage Backed Securities (Net of Hedges)
   471    735    20    21

~~Note~~

a	~~Marks are based on gross collateral.~~


				87

~~B2. CMBS Wrapped by Monoline Insurers~~Derivatives (audited)

The table below shows commercial mortgage backed security assets where Barclays Capital held protection from monoline insurers at 31st December 2009. These are measured at fair value through profit and loss.

By rating of the monoline    As at 31.12.09
      Notional
£m    Fair value
of underlying
asset
£m    Fair value
exposure
£m    Credit
valuation
adjustment
£m Net
exposure
£m
AAA/AA
   54    21    33    (3 ) 30
Non-investment grade
   383    160    223    (223 ) –
Total
   437    181    256    (226 ) 30
   As at 31.12.08
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

~~The balance reduced by £1,824m to £30m (31st December 2008: £1,854m), reflecting the Protium sale~~Group’s use of ~~£1,208m, a credit valuation adjustment of £497m, and currency and other movements of £119m.~~

~~Claims would become due in the event of default of the underlying assets. There have been no claims under the monoline insurance~~derivative contracts ~~as none of the underlying assets defaulted in the year.~~is outlined on page 212.

The ~~notional value~~Group is exposed to credit risk on derivative contracts, which arises as a result of ~~the assets split by the current rating of the underlying asset is shown below.~~

By rating of the underlying asset    As at 31.12.09    As at 31.12.08
      AAA/AA
£m    A/BBB
£m    Total
£m    AAA/
AA
£m    Total
£m
2005 and earlier
   –    –    –    437    437
2006
   54    –    54    613    613
2007 and 2008
   –    383    383    2,702    2,702
CMBS
   54    383    437    3,752    3,752


88

~~Risk management~~

~~Credit~~counterparty credit risk ~~management~~

~~continued~~

~~C. Other Credit Market~~

~~C1. Leveraged Finance~~

Leveraged Finance Loans by Region
      As at
31.12.09
£m As at
31.12.08
£m
UK
   4,530    4,519
Europe
   1,051    1,291
Asia
   165    140
US
   35    3,213
Total lending and commitments
   5,781    9,163
Impairment
   (274 ) (115 )
Net lending and commitments at period end^a
   5,507    9,048

~~Leveraged finance loans are classified within loans~~ and ~~advances and are stated at amortised cost less impairment. The table above includes certain loan facilities originated prior to 1st July 2007, the start of the dislocation in the credit market~~^b.

At 31st December 2009, net lending and commitments reduced £3,541m to £5,507m (31st December 2008: £9,048m), following a repayment of £3,056m at par in January 2009, impairment of £396m, and other movements ~~of £89m.~~

The overall credit performance of the assets remained satisfactory with the majority of the portfolio performing to plan or in line with original stress tolerances. There were a small number of deteriorating positions on which higher impairment was charged.

~~C2. SIVs, SIV-Lites and CDPCs~~

SIV and SIV-lite positions comprise liquidity facilities and derivatives. At 31st December 2009 SIVs and SIV-Lites positions reduced by £433m to £530m (31st December 2008: £963m) with a reduced number of counterparties. There were £72m of gross writedowns in the year.

~~Credit Derivative Product Companies (CDPCs) positions at 31st December 2009 reduced by £127m to £23m (31st December 2008: £150m).~~

~~C3. CLO and Other Assets 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 2009.~~

By Rating of the Monoline
      As at 31.12.09
      Notional
£m    Fair value
of underlying
asset
£m    Fair value
exposure
£m    Credit
valuation
adjustment
£m Net
exposure
£m
AAA/AA
   7,336    5,731    1,605    (91 ) 1,514
A/BBB
   –    –    –    –    –
Non-investment grade:

– Fair value through profit and loss
   1,052    824    228    (175 ) 53
– Loans and receivables
   9,116    7,994    1,122    (563 ) 559
Total
   17,504    14,549    2,955    (829 ) 2,126
      As at 31.12.08
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

~~The balance reduced by £2,813m to £2,126m (31st December 2008: £4,939m), reflecting increases~~ in the fair value of ~~the underlying assets of £1,321m, credit valuation adjustments of £528m, the Protium sale of £396m, and currency and other movements of £568m.~~

~~Claims would become due in the event of default of the underlying assets. There have been no claims under the monoline insurance contracts as none of the underlying assets defaulted in the year.~~

On 25th November 2009, £8,027m of the CLO assets wrapped by non-investment grade rated monolines were reclassified to loans and receivables (as discussed in Note 51). At 31st December 2009, the fair value of the transferred assets was £7,994m and the net exposure to monoline insurers was £559m. The remaining non-investment grade exposure continues to be measured at fair value through profit and loss.

~~Notes~~

a	~~Includes undrawn commitments of £257m (2008: £531m).~~

b	~~This is a change of presentation from 31st December 2008, which reflected certain loan facilities originated post 1st July 2007.~~


				89

~~The notional value of the assets split by the current rating of the underlying asset is shown below.~~

By rating of underlying asset    As at 31.12.09    As at 31.12.08
   AAA/AA    A/BBB    Non-
investment
grade
fair value
£m    Total
£m    AAA/AA
Fair
value
£m    A/BBB
Fair
value
£m    Total
£m
      Fair
value
£m    Loans and
receivables
£m    Fair
value
£m    Loans and
receivables
£m
2005 and earlier
   1,518    2,209    294    815    –    4,836    6,037    –    6,037
2006
   1,972    2,952    –    458    –    5,382    5,894    –    5,894
2007 and 2008
   2,452    2,199    548    483    –    5,682    6,295    –    6,295
CLOs
   5,942    7,360    842    1,756    –    15,900    18,226    –    18,226
2005 and earlier
   –    –    55    –    55    110    862    –    862
2006
   118    –    90    –    125    333    535    –    535
2007 and 2008
   441    –    –    –    720    1,161    785    467    1,252
Other
   559    –    145    –    900    1,604    2,182    467    2,649
Total
   6,501    7,360    987    1,756    900    17,504    20,408    467    20,875

~~D. Protium~~

On 16th September 2009, Barclays Capital sold assets of £7,454m, including £5,087m in credit market assets, to Protium Finance LP (Protium), a newly established fund. The impact of the sale on each class of credit market asset is detailed in each relevant category in sections A to C.

~~As part of the transaction, Barclays extended a £7,669m 10-year loan to Protium, which will be repaid during the term from cash generated by the fund. The principal terms of the loan are as follows:~~

~~– The loan has a final maturity of ten years, with a rate of return fixed at USD LIBOR plus 2.75%.~~

~~– Protium is obliged to pay principal and interest equal to the amount of available cash generated by the fund after payment of fund expenses and certain payments to the fund’s partners.~~

~~– The loan is secured by a charge over the assets of Protium.~~

The loan is classified as loans and receivables. The difference between the size of the loan and assets sold relates to cash and US Treasuries held by Protium. The increase in the loan balance between 16th September 2009 and 31st December 2009 reflects accrued interest which was received from Protium in January 2010.

~~The fair value of assets sold to Protium is set out below. The balances at 31st December 2009 include cash realised from subsequent sales and paydowns.~~

Protium assets    As at
31.12.09
$m    As at
16.09.09
$m    As at
30.06.09
$m    As at
31.12.09
£m    As at
16.09.09
£m    As at
30.06.09
£m
US Residential Mortgages

Other US sub-prime whole loans and real estate
   1,038    1,124    1,256    641    682    764
Other US sub-prime securities
   578    513    508    357    311    309
Total other US sub-prime
   1,616    1,637    1,764    998    993    1,073
Alt-A
   2,112    2,185    2,342    1,304    1,326    1,424
Monoline wrapped US RMBS
   1,447    1,919    2,081    893    1,164    1,266
Commercial Mortgages

Monoline wrapped CMBS
   1,378    1,991    2,450    851    1,208    1,490
Other Credit market

Monoline wrapped CLO and other
   475    652    752    294    396    457
Credit market related exposure
   7,028    8,384    9,389    4,340    5,087    5,710
Fair value of underlying assets wrapped by monoline insurers
   4,095    3,592    2,728    2,529    2,179    1,659
Other assets
   1,230    309    285    759    188    173
Total
   12,353    12,285    12,402    7,628    7,454    7,542
Loan to Protium
   12,727    12,641    –    7,859    7,669    –


90

~~Risk management~~

~~Credit risk management~~

~~continued~~

DBRS Inc. (DBRS), a nationally recognised statistical rating organisation, was engaged to provide a private, point-in-time rating reflecting the specific terms and conditions of the Protium loan as a whole. In addition point-in-time ratings with respect to gross cumulative cash flows due to Barclays under the loan to Protium, considered in sequential instalments, were also sought (Tranched Ratings).

On the transaction date, the loan fair value was assessed as equal to its notional amount. Subsequently, the obtained ratings were incorporated into an updated transaction date valuation. This valuation discounted the cash flows at appropriate discount rates determined by Barclays based on the Tranched Ratings. The calculation produced a value of £7,651m ($12,611m). The difference to the original valuation was £18m ($30m), which has been recorded as a loss on sale in the period. The Tranched Ratings and loan valuation are summarised in the table below:

Tranched Rating    Cash
flows
£m    Weighted
average life
(years)    Spread to
LIBOR
(bps)    Net present
value
£m
AAA
   2,092    3.8    52    2,015
AA+
   1,464    4.3    80    1,385
AA/AA-
   354    4.3    108/128    330
A
   642    2.6    169    606
BBB/BBB-
   1,098    4.7    260/355    955
BB+/BB
   1,021    2.1    451/546    915
B/B-/CCC
   1,886    3.4    700/785/870    1,445
Total
   8,557       282    7,651

The loan valuation was performed by Barclays and, of the information disclosed above, only the Tranched Ratings were provided by DBRS. The Tranched Ratings are as of 15th September 2009 and are based on a scenario in which the portfolio of assets sold to Protium is static, with no subsequent sales or additional purchases.

A single rating of CCC (low), being the Tranched Rating for the lowest rated cash flows, has been assigned to the loan as a whole by DBRS. This rating addresses the ultimate payment of cumulative principal and interest under the terms and conditions of the Protium loan and it being advanced as a single loan, as opposed to being structurally tranched. The single rating of CCC (low) is also as of 15th September 2009 and is based on a scenario in which the portfolio of assets sold to Protium is static, with no subsequent sales or additional purchases.

~~The loan to Protium was assessed for impairment by the Group as at 31st December 2009 in line with its impairment policy. This analysis found that there was no impairment as at 31st December 2009.~~


				91

~~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 91.8% of the portfolio (2008: 91.6%).

As at 31.12.09

Treasury
and other
eligible bills
£m
   Debt
securities
£m    Total
£m    %
AAA to BBB- (investment grade)
   13,950    151,621    165,571    91.8
BB+ to B
   1,895    10,297    12,192    6.8
B- or lower
   –    2,571    2,571    1.4
Total
   15,845    164,489    180,334    100.0
Of which issued by:

– governments and other public bodies
   15,845    72,238    88,083    48.8
– US agency
   –    23,924    23,924    13.3
– mortgage and asset-backed securities
   –    17,826    17,826    9.9
– corporate and other issuers
   –    41,641    41,641    23.1
– bank and building society certificates of deposit
   –    8,860    8,860    4.9
Total
   15,845    164,489    180,334    100.0
Of which classified as:

– trading portfolio assets
   9,926    116,594    126,520    70.2
– financial instruments designated at fair value
   –    4,007    4,007    2.2
– available for sale securities
   5,919    43,888    49,807    27.6
Total
   15,845    164,489    180,334    100.0
As at 31.12.08
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    15.2
– 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    8.0
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


92

~~Risk management~~

~~Credit risk management~~

~~continued~~

~~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~~Group’s exposure to counterparty risk ~~management are outlined in~~is affected by the ~~market risk management section on pages 94 to 101.~~

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 amountsnature of the ~~contracts~~trades, the credit worthiness of the counterparty, and netting and collateral arrangements. Details of credit derivatives are ~~not recorded~~disclosed on ~~the balance sheet.~~

~~The Group participates both in exchange traded and over the counter derivatives markets.~~page 212.

~~Exchange traded derivatives~~Nature of derivative trades

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~~Counterparty credit quality

The credit quality of the Group’s ~~principal exchange rate related contracts~~derivative assets according to the credit quality of the counterparty at 31st December 2010 and 2009 was as follows:


Credit quality (audited)	2010								2009
As at 31st December	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
Derivatives		401,242		15,598		3,479		420,319		399,534		15,565		1,716		416,815
		95.5%		3.7%		0.8%		100.0%		95.9%		3.7%		0.4%		100.0%

Netting and collateral arrangements

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 ~~forward foreign exchange contracts,~~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 predetermined 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 ~~swaps~~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 ~~currency options. Forward foreign exchange contracts~~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.

Under IFRS, netting is permitted only if both of the following criteria are ~~agreements~~satisfied:

– the entity has a legally enforceable right to ~~buy or sell a specified quantity of foreign currency, usually~~set off the recognised amounts; and

– the entity intends either to settle on a ~~specified future date at an agreed rate. A currency swap generally involves~~net basis, or to realise the ~~exchange, or notional exchange,~~asset and settle the liability simultaneously.

This results in Gross derivative assets of ~~equivalent amounts~~£420bn (2009: £417bn).

Under US GAAP, netting is also permitted, regardless of ~~two currencies and a commitment~~the intention to ~~exchange interest periodically until the principal amounts are re-exchanged~~settle on a ~~future date.~~

~~Currency options provide the buyer with the right, but not the obligation, either to purchase or sell~~net basis, where there is 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~~counterparty master agreement 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 definedwould be enforceable in the ~~contract. Certain agreements combine interest rate and foreign currency swap transactions, which may or may not include the exchange~~event 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.bankruptcy.


				93	87

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	Gross assets £m	Counterparty netting £m	Net exposure £m	Gross assets £m		Counterparty netting £m		Net exposure £m
As at 31.12.09
As at 31st December 2010
Foreign exchange	51,775	45,391	6,384		60,494		49,405		11,089
Interest rate	261,211	213,446	47,765		272,386		224,124		48,262
Credit derivatives	56,295	48,774	7,521		47,017		39,786		7,231
Equity and stock index	17,784	13,330	4,454		14,586		10,523		4,063
Commodity derivatives	29,750	21,687	8,063		25,836		16,629		9,207
	416,815	342,628	74,187		420,319		340,467		79,852
Total collateral held			31,471						37,289
Net exposure less collateral			42,716						42,563

As at 31.12.08
As at 31st December 2009
Foreign exchange	107,730	91,572	16,158		51,775		45,391		6,384
Interest rate	615,321	558,985	56,336		261,211		213,446		47,765
Credit derivatives	184,072	155,599	28,473		56,295		48,774		7,521
Equity and stock index	28,684	20,110	8,574		17,784		13,330		4,454
Commodity derivatives	48,995	35,903	13,092		29,750		21,687		8,063
	984,802	862,169	122,633		416,815		342,628		74,187
Total collateral held			54,905						31,471
Net exposure less collateral			67,728						42,716

~~Gross derivative assets of £417bn (2008: £985bn) cannot be netted down under IFRS.~~ Derivative ~~assets~~asset exposures would be ~~£374bn (2008: £917bn)~~£378bn (2009: £374bn) lower than reported under IFRS if ~~counterparty or collateral~~ netting were ~~allowed.~~permitted for assets and liabilities subject to enforceable counterparty netting arrangements or for which we hold cash collateral. Derivative liabilities would be £362bn (2009: £363bn) lower reflecting counterparty netting and collateral placed.

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).

Reverse Repurchase Agreements and Other Financial Assets (audited)


Credit quality (audited)	2010								2009
As at 31st December	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 – Other financial assets		7,285		271		3		7,559		4,749		1,955		1,053		7,757
Reverse repurchase agreements		179,625		24,801		1,346		205,772		136,366		6,674		391		143,431
Total reverse repurchase agreements		186,910		25,072		1,349		213,331		141,115		8,629		1,444		151,188
		87.6%		11.8%		0.6%		100.0%		93.3%		5.7%		1.0%		100.0%

No reverse repurchase agreements held by the Group at 31st December 2010 or 2009 were individually impaired, however during the year, the Group wrote back £4m of impairment on reverse repurchase agreements (2009: £43m charge).

Other Credit Risk Assets (audited)

Cash and balances at central banks

Cash and balances at central banks were £97,630m (2009: £81,483m). There is a reduced level of credit risk in relation to balances at central banks.

Items in the course of collection from other banks

Items in the course of collection from other banks were £1,384m (2009: £1,593m) on which there is a reduced credit risk in light of the banking industry clearing system.

Other financial assets

Other financial assets comprise £2,824m (2009: £3,476m) of other assets and £2,542m (2009: £344m) 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 commitments 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.


88

Risk management

Credit risk management continued

Risk Features in the Portfolio

Risk features in the portfolio are asset classes that are considered to be higher risk than the Group’s normal activities and are subject to a higher level of scrutiny in our management of credit risk. The main exposures at 31st December 2010 to which significant management attention is given are:

–	Barclays Capital credit market exposures; and

–	Exposures to selected Eurozone and other countries.

These are described in more detail below.

Barclays Capital Credit Market Exposures

Barclays Capital’s credit market exposures primarily relate to commercial real estate, leveraged finance and a loan to Protium Finance LP. These include positions subject to fair value movements in the income statement and positions that are classified as loans and advances and as available for sale.

The balances and write downs presented below represent credit market exposures held at the time of the market dislocation in mid-2007. Similar assets acquired subsequent to the market dislocation are actively traded in secondary markets and are therefore excluded from this disclosure.

The balances and write downs to 31st December 2010 are set out by asset class below:


Barclays Capital Credit Market Exposures^a (audited)	As at 31st December								Year ended 31st December 2010
	2010 $m		2009 $m		2010 £m		2009 £m		Fair value (losses)/ gains £m			Impairment (charge)/ release £m			Total (losses)/ gains £m
US Residential Mortgages
ABS CDO Super Senior		3,085		3,127		1,992		1,931		–			137			137
Other US sub-prime and Alt-A^b		1,025		1,447		662		894		(43	)		(11	)		(54	)
Monoline protection on US RMBS		–		9		–		6		(1	)		–			(1	)

Commercial Mortgages
Commercial real estate loans and properties owned		11,006		12,525		7,106		7,734		(110	)		–			(110	)
Commercial mortgage-backed securities^b		184		352		119		218		(5	)		–			(5	)
Monoline protection on CMBS		18		49		12		30		40			–			40

Other Credit Market
Leveraged Finance^c		7,636		8,919		4,930		5,507		–			(242	)		(242	)
SIVs, SIV-Lites and CDPCs		618		896		399		553		50			27			77
Monoline protection on CLO and other		2,541		3,443		1,641		2,126		(55	)		–			(55	)

Loan to Protium		10,884		12,727		7,028		7,859		–			(532	)		(532	)
Total		36,997		43,494		23,889		26,858		(124	)		(621	)		(745	)

During the year ended 31st December 2010, these credit market exposures decreased £2,969m to £23,889m (2009: £26,858m). The decrease reflected net sales and paydowns and other movements of £3,000m and total write downs of £745m, offset by foreign exchange rate movements of £776m, primarily relating to the appreciation of the US Dollar against Sterling.

In the year ended 31st December 2010, write downs comprised £621m (2009: £1,669m) of impairment charges and £124m (2009: £4,417m) of net fair value losses through income. Total write downs included an impairment charge of £532m (2009: £nil) relating to the Protium loan, losses of £75m (2009: £3,007m) against commercial mortgage positions and losses of £220m (2009: £997m) against other credit market positions, partially offset by a gain of £82m (2009: loss of £2,082m) against US residential mortgage positions.

A. US Residential Mortgages

A1. ABS CDO Super Senior

ABS CDO Super Senior positions at 31st December 2010 comprised five high grade liquidity facilities which were fully drawn and classified within loans and receivables. The positions increased £61m to £1,992m (2009: £1,931m). Net exposures are stated after impairment charges, of which £137m was written back in the current year (2009: charge of £714m). There was also an increase of £87m resulting from appreciation in the value of the US Dollar against Sterling, offset by amortisation of £163m in the year. These balances equated to a 50% mark after impairment and subordination (2009: 49%).

A2. Other US Sub-Prime and Alt-A

Other US sub-prime and Alt-A positions at 31st December 2010 were £662m (2009: £894m). The decrease reflects net sales and paydowns and other movement of £214m and total write downs of £54m, partially offset by appreciation of the US Dollar against Sterling of £36m.

Notes

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

b	31st December 2009 comparatives have been adjusted to exclude actively traded positions relating to other US sub-prime and Alt-A of £498m and commercial mortgage-backed securities of £253m.

c	Includes undrawn commitments of £264m (2009: £257m).


					89

B. Commercial Mortgages

B1. Commercial Real Estate and Mortgage-Backed Securities

Commercial mortgages include commercial real estate loans of £5,455m (2009: £6,534m), commercial real estate properties owned of £1,651m (2009: £1,200m) and commercial mortgage-backed securities of £119m (2009: £218m).

Commercial Real Estate Loans and Properties Owned

In the year ended 31st December 2010, commercial real estate loans and properties owned decreased by £628m to £7,106m (2009: £7,734m). The decrease was driven by net sales, paydowns and restructuring of £374m in the US, £320m in the UK and Europe, and £18m in Asia, as well as losses of £110m (2009: £2,466m), of which £47m related to the US, £13m to UK and Europe, and £50m to Asia. This was offset by the appreciation in value of other currencies against Sterling of £194m.

The geographic distribution of commercial real estate loans comprised 50% UK and Europe, 45% US and 5% Asia. One large position comprised 35% of the total US commercial real estate loan balance. The remaining 65% of the US portfolio comprised 51 positions. The UK and Europe portfolio comprised 45 positions at 31st December 2010. In Europe, protection is provided by loan covenants and periodic LTV retests, which cover 77% of the portfolio. 53% of the German portfolio related to one position secured on residential assets.


Commercial real estate loans, by region								2010				2009
As at 31st December							Amount £m		Marks %		Amount £m		Marks %
US								2,454		60		2,852		62
Germany								1,729		85		1,959		84
Sweden								210		78		201		81
France								198		75		189		70
Switzerland								162		86		141		85
Spain								70		67		72		56
Other Europe								86		66		370		57
UK								285		65		429		61
Asia								261		56		321		77
Total								5,455				6,534

Commercial real estate loans, by industry	2010												2009
As at 31st December	US £m		Germany £m		Other Europe £m		UK £m		Asia £m		Total £m		Total £m
Residential		1,139		978		–		121		111		2,349		2,439
Office		271		235		532		51		86		1,175		1,338
Hotels		534		–		5		8		–		547		846
Retail		2		376		80		–		4		462		737
Industrial		374		100		109		22		9		614		622
Leisure		–		–		–		83		–		83		140
Land		134		–		–		–		–		134		128
Mixed/others		–		40		–		–		51		91		284
Total		2,454		1,729		726		285		261		5,455		6,534

Commercial real estate properties owned, by industry											2010		2009
As at 31st December											£m		£m
Residential												82		56
Office												1,051		927
Hotels												227		126
Retail												157		–
Industrial												45		25
Leisure												36		33
Land												53		31
Mixed/others												–		2
Total												1,651		1,200

Commercial Mortgage-Backed Securities

In the year ended 31st December 2010, commercial mortgage backed securities positions decreased £99m to £119m (2009: £218m), primarily due to net sales and paydowns of £120m.


90

Risk management

Credit risk management continued

C. Other Credit Market

C1. Leveraged Finance


Leveraged finance loans, by region
As at 31st December	2010 £m			2009 £m
UK		4,238			4,530
Europe		789			1,051
Asia		172			165
US		6			35
Total lending and commitments		5,205			5,781
Impairment		(275	)		(274	)
Net lending and commitments as at 31st December		4,930			5,507

At 31st December 2010, the net exposure relating to leveraged finance loans reduced £577m to £4,930m (2009: £5,507m) reflecting net paydowns and other movements of £302m, impairment charges of £242m (2009: £396m) and the depreciation of the Euro against Sterling driving currency decreases of £33m.

C2. SIVs, SIV-Lites and CDPCs

SIV and SIV-lite positions comprise liquidity facilities and derivatives. At 31st December 2010 exposures decreased by £139m to £391m (2009: £530m).

Credit Derivative Product Companies (CDPCs) positions at 31st December 2010 reduced by £15m to £8m (2009: £23m).

C3. Monoline Protection on CLO and Other

The table below shows Collateralised Loan Obligations (CLOs) and other assets where Barclays held protection from monoline insurers as at 31st December 2010.


By rating of the monoline	Notional £m		Fair value of underlying asset £m		Fair value exposure £m		Credit valuation adjustment £m			Net exposure £m
As at 31st December 2010
AAA/AA		7,324		6,004		1,320		(88	)		1,232
Non-investment grade:
– Fair value through profit and loss		742		581		161		(105	)		56
– Loans and receivables		6,578		5,873		705		(352	)		353
Total		14,644		12,458		2,186		(545	)		1,641

As at 31st December 2009		£m		£m		£m		£m			£m
AAA/AA		7,336		5,731		1,605		(91	)		1,514
Non-investment grade:
– Fair value through profit and loss		1,052		824		228		(175	)		53
– Loans and receivables		9,116		7,994		1,122		(563	)		559
Total		17,504		14,549		2,955		(829	)		2,126

The movement in net exposure of £485m was driven by a decrease in the fair value exposure to monoline insurers of £527m and credit valuation adjustments of £55m (2009: £528m), offset by currency appreciation of £97m.

CLO assets wrapped by non-investment grade rated monolines and classified as loans and receivables declined to a fair value of £5,873m (2009: £7,994m), following the unwinding of certain protection during the year with a notional of £2,745m. As a result, there were CLO assets with a fair value of £1,969m at 31st December 2010 (2009: £nil) no longer protected by a monoline insurer. The remaining assets continue to be measured at fair value through profit and loss.

D. Loan to Protium

On 16th September 2009, Barclays Capital sold assets of £7,454m ($12,285m), including £5,087m ($8,384m) in credit market assets, to Protium Finance LP (Protium), a newly established fund. As part of the transaction Barclays extended a $12,641m 10 year loan to Protium.

The table below includes all assets held by Protium as collateral for the loan. At 31st December 2010, there were assets wrapped by a monoline insurer with a fair value of $4,806m (2009: $4,095m). Following the commutation of contracts with one monoline insurer in January 2011, there are no longer any assets wrapped by monoline insurers. Cash and cash equivalents at 31st December 2010 were $1,364m (2009: $688m) including cash realised from sales and paydowns and funds available to purchase third party assets. Other assets at 31st December 2010 were $811m (2009: $567m) including residential mortgage-backed securities purchased by Protium post inception and other asset-backed securities.

Principal and interest payments have been received in accordance with contractual terms. However, following a reassessment of the expected realisation period, the loan is carried at an amount equivalent to the fair value of the underlying collateral. This has resulted in an impairment charge of $824m (£532m).


					91

The loan decreased in local currency between 31st December 2009 and 31st December 2010 primarily due to principal repayments of $993m, the impairment charge of $824m and accrued interest decreases of $26m. Interest payments of $407m were received during the year.


Protium assets	As at 31.12.10 $m		As at 31.12.09 $m		As at 16.09.09 $m		As at 31.12.10 £m		As at 31.12.09 £m		As at 16.09.09 £m
Other US sub-prime whole loans and real estate		817		1,038		1,124		528		641		682
Other US sub-prime securities		631		578		513		407		357		311
Total other US sub-prime		1,448		1,616		1,637		935		998		993

Alt-A		2,230		2,112		2,185		1,440		1,304		1,326
Monoline protection		225		3,300		4,562		145		2,038		2,768
Credit market related assets		3,903		7,028		8,384		2,520		4,340		5,087

Fair value of underlying US RMBS		519		723		655		335		447		397
Fair value of underlying CMBS		3,257		2,350		1,897		2,103		1,451		1,151
Fair value of underlying CLO and other		1,030		1,022		1,040		665		631		631
Fair value of underlying assets wrapped by monoline insurers		4,806		4,095		3,592		3,103		2,529		2,179

Cash and cash equivalents		1,364		688		250		881		425		152
Other assets		811		567		309		524		350		187

Total assets		10,884		12,378		12,535		7,028		7,644		7,605

Loan to Protium		10,884		12,727		12,641		7,028		7,859		7,669

Protium Assets

The ongoing review of Barclays financial statements by regulators includes consideration of the non-consolidation of Protium. Barclays continues to conclude that it is appropriate not to consolidate Protium within the Group financial statements. It should be noted that the Group’s results would not be materially different if Protium were to be consolidated.

Fair value disclosures equivalent to those made for Barclays own financial assets have been provided below in respect of Protium’s financial assets totalling £7,028m (2009: £7,644m), which are used to collateralise the loan from Barclays. The analysis below excludes cash and cash equivalents of £881m (2009: £425m) that are also used to collateralise the loan. The valuation techniques that would be used to measure these assets are described on pages 255 to 259. The valuations have been subject to Barclays valuation control framework, which is described on page 262.

The following table shows Protium’s financial assets measured at fair value disaggregated by valuation technique within the fair value hierarchy and by product type.


Financial assets measured at fair value	2010								2009
As at 31st December	Quoted market prices (Level 1) £m		Observable inputs (Level 2) £m		Significant unobservable inputs (Level 3) £m		Total £m		Quoted market prices (Level 1) £m		Observable inputs (Level 2) £m		Significant unobservable inputs (Level 3) £m		Total £m
Trading portfolio assets
Other US sub-prime whole loans and real estate		–		–		528		528		–		–		641		641
Other US sub-prime securities		–		35		372		407		–		51		306		357
Alt-A		–		41		1,399		1,440		–		70		1,234		1,304
Other trading portfolio assets		106		110		308		524		8		220		122		350
Fair value of underlying assets wrapped by monoline insurers		–		323		2,780		3,103		–		316		2,213		2,529
Derivative financial assets
Monoline protection		–		145		–		145		–		–		2,038		2,038
Total		106		654		5,387		6,147		8		657		6,554		7,219


92

Risk management

Credit risk management continued

The following table shows movements in the Level 3 balances during the year.


Analysis of movements in Level 3 financial assets	Trading portfolio assets £m			Derivative financial instruments £m			Total £m
As at 1st January 2010		4,516			2,038			6,554
Purchases		–			–			–
Sales		(14	)		–			(14)
Settlements		(415	)		(87	)		(502)
Total gains and losses in the period recognised in the income statement		1,225			(1,805	)		(580)
Transfers in/(transfers out)		75			(146	)		(71)
As at 31st December 2010		5,387			–			5,387

The significant movements in the Level 3 positions during the year ended 31st December 2010 are explained below:

– Settlements represent assets that were paid in full, amortisation of principal, and payments from monoline insurers.

– Total gains and losses represent changes in the fair value of the assets, and losses due to commutation of contracts with monoline insurers.


Sensitivity analysis of valuations using unobservable inputs	2010						2009
As at 31st December	Total assets £m		Favourable changes £m		Unfavourable changes £m		Total assets £m		Favourable changes £m		Unfavourable changes £m
Trading portfolio assets
Other US sub-prime whole loans and real estate		528		75		(43)		641		112		(92)
Other US sub-prime securities		372		53		(31)		306		54		(44)
Alt-A		1,399		198		(115)		1,234		216		(178)
Other trading portfolio assets		308		5		(4)		122		6		(3)
Fair value of underlying assets wrapped by monoline insurers		2,780		166		(162)		2,213		227		(446)
Derivative financial assets
Monoline protection		–		–		–		2,038		209		(411)
Total		5,387		497		(355)		6,554		824		(1,174)

The effect of stressing the unobservable assumptions to a range of reasonably possible alternatives would be to increase the fair values by up to £0.5bn (2009: £0.8bn) or to decrease the fair values by up to £0.4bn (2009: £1.2bn) with all the potential effect impacting profit and loss.

The stresses applied take account of the nature of valuation techniques used, as well as the availability and reliability of observable proxy and historic data.

In all cases, an assessment is made to determine the suitability of available data. The sensitivity methodologies that are used to assess the Protium assets are described on pages 260 to 262 and are consistent with that of Barclays valuation control framework.

E. Barclays Capital Credit Market Exposures by asset class

Analysis of Barclays Capital Credit Market Exposures by asset class

As at 31st December

Trading

portfolio

assets –

debt

securities

£m

Financial

assets

designated

at fair

value –

equity

securities

£m

Financial

assets

designated

at fair

value –

debt

securities

£m

Financial

assets

designated

at fair

value – L&A

£m

Derivative

financial

instruments

£m

L&A to

customers

£m

Available

for sale

debt

securities

£m

Other

assets

£m

2010

Total

£m

2009

Total

£m

ABS CDO Super Senior

–

1,992

–

1,992

1,931

Other US Sub-prime and Alt-A

–

250

407

–

662

894

Monoline Protection on US RMBS

–

Commercial Real Estate Loans and Property

–

743

–

4,712

–

1,651

7,106

7,734

CMBS

154

–

(35

)

–

119

218

Monoline Protection on CMBS

–

Leveraged Finance^a

–

4,666

–

4,666

5,250

SIVs, SIV-lites and CDPCs

–

345

–

399

553

Monoline Protection on CLO and Other

–

1,641

–

1,641

2,126

Loan to Protium Finance LP

–

7,028

–

7,028

7,859

Total exposures

154

743

345

4,712

1,922

13,691

407

1,651

23,625

26,601

Note

a Undrawn commitments of £264m (2009: £257m) are off-balance sheet and therefore not included in the table above.


					93

Exposures to Selected Eurozone and Other Countries

The tables below show the Group’s exposures to selected countries (Spain, Italy, Portugal and Ireland), representing Eurozone countries that have a credit rating of AA or below from Standard and Poor’s and where the Group has an exposure of over £0.5bn.

The Group’s exposure to Greece, which has a sovereign credit rating of BB+, was below £0.5bn. The Group’s balance sheet exposure to Egypt was approximately £2bn, a significant proportion of which represented available for sale assets held in Treasury bills with a maturity less than one year. In addition, contingent liabilities and commitments included less than £1bn relating to Barclays Africa trade finance business in Egypt.

The balances included in the tables below represent the Group’s exposure to retail customers and wholesale customers (comprising corporates and sovereigns) in each of the respective countries.

Assets are stated gross of any trading liability positions and before any risk mitigation but net of impairment allowances and of derivative counterparty netting and collateral held.


Retail exposures	As at 31st December 2010				As at 30th June 2010
	Loans and advances at amortised cost		Contingent liabilities and commitments		Loans and advances at amortised cost		Contingent liabilities and commitments
	£m		£m		£m		£m
Spain		19,053		1,306		18,124		1,805
Italy		16,324		1,004		14,239		945
Portugal		5,813		1,384		4,978		1,162
Ireland		77		9		142		19

Retail exposures mainly related to our domestic lending in Spain, Italy and Portugal, principally residential mortgages. The credit quality of our mortgage lending in Spain and Italy reflects low LTV lending, with average mark to market LTVs at 31st December 2010 in Spain of 58% and in Italy of 45%. Credit risk loan balances in Spain and Italy increased by 22% to £832m and 15% to £553m, respectively.


Wholesale exposures	Loans and advances at amortised cost				Assets held at fair value
	Total £m		Of which Government £m		Total £m		Of which Government £m		Contingent liabilities and commitments £m
As at 31st December 2010
Spain		6,574		86		8,625		6,665		2,550
Italy		3,180		–		9,258		7,382		2,622
Portugal		2,706		7		2,495		1,207		1,739
Ireland		3,069		–		3,320		452		1,422

As at 30th June 2010
Spain		7,167		133		8,731		6,403		3,182
Italy		3,159		–		10,466		8,606		1,546
Portugal		2,405		19		2,408		1,177		1,543
Ireland		3,324		–		3,160		328		1,482

Wholesale exposures relating to Barclays Capital and Barclays Corporate activities in Spain, Italy, Portugal and Ireland cover a broad range of SME, corporate and investment banking activities, as well as Western Europe treasury operations’ holdings of sovereign and corporate bonds in those countries. Loans and advances include exposures at 31st December 2010 to the property and construction industry in Spain of £2,951m, in Portugal of £937m, in Ireland of £195m and in Italy of £71m.

Assets held at fair value primarily comprise trading portfolio assets, which are highly liquid in nature, available for sale positions in investment grade debt securities, and derivatives.


94

Risk management

Market risk management

All disclosures in this section (pages 94 to 105) are unaudited unless otherwise stated

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.

Overview (audited)

The ~~majority~~main sources of risk are traded market risk, ~~exposure resides in Barclays Capital. Barclays is also exposed to market risk through~~ non-traded interest rate risk, translational foreign exchange risk and pension risk. Traded risk resides primarily in Barclays Capital while non-traded market risk resides mainly in Global Retail Banking, Barclays Corporate, Barclays Wealth and Group Treasury. Translational foreign exchange risk is managed by Group Treasury. Pension risk is managed centrally with the ~~pension fund.~~cost borne by respective businesses.

Barclays market risk objectives are to:

–

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

limits;

–

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

framework;

–

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

Capital; and

–

~~Minimise~~minimise non-traded market risk.

Organisation and structure

The Board approves market risk appetite for trading and non-trading activities. The Group Market Risk Director is responsible for the Barclays Market Risk Control Framework and, under delegated authority from the Chief Risk Officer, 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 Chief Risk Officer, the Group Market Risk Director, the Group 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 Group Market

~~Risk team. The~~ Market Risk Committee ~~reviews,~~ approves, and makes recommendations concerning the market risk profile across Barclays. This includes approving Barclays ~~including~~Market Risk Control Framework and Group Policies; reviewing current and forward issues, limits and utilisation; and proposing risk appetite ~~limits and utilisation.~~levels for the Board. The Committee ~~meets monthly and~~ is chaired by the Group Market Risk ~~Director. Attendees~~Director and attendees include the Chief Risk Officer, respective business risk managers and senior managers from Group Market Risk.

~~In Barclays Capital,~~The head of each business, assisted by the ~~Head~~business market risk management team, is accountable for all market risks associated with its activities. The head of ~~Market Risk~~each business market risk team 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. Oversight is provided by Group Market Risk.~~

Daily market risk reports are produced for Barclays Capital as a whole as well as for the main business areas. These are sent to Group Market Risk for review and inclusion in the daily market risk report. 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 senior trading and risk managers from Barclays Capital and Group Market Risk.

In each of the six main Global Retail and Commercial Banking businesses (UK Retail Banking, Barclays Commercial Bank, Barclaycard, Western Europe, Emerging Markets and Absa), Group Treasury and Wealth, there is a dedicated market risk department. The head of each department is responsible for implementing the Market Risk Control Framework ~~with~~which sets out how market risk should be identified, measured, controlled, reported and reviewed. The Framework also outlines and references Group market risk policies.

Market risk oversight and challenge is provided by business committees, Group ~~Market Risk. A combination of daily and monthly risk reports are sent to Group Market Risk for review and inclusion in the daily market risk report. A risk summary is also presented at~~Committees including Market Risk Committee and the ~~respective Asset and Liability Committees.~~Group Market Risk team.

The chart below gives an overview of the business control structure.

LOGO


					95

Traded market risk (audited)

~~Barclays policy~~Traded market risk is predominantly the result of client facilitation in wholesale markets. This involves market making, offering hedge solutions, pre-hedging and assisting clients 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,~~execute large trades. Not all client ~~and~~trades are hedged completely, giving rise to market ~~activities are managed together.~~risk. In Barclays Capital, trading risk is measured for the trading book, as defined for regulatory purposes, and certain banking books. Barclays policy is to concentrate trading activities in Barclays Capital.

Risk ~~Measurement and Control~~measurement

~~The measurement techniques used~~Barclays uses a range of complementary technical approaches to measure and control traded market risk ~~include~~including: Daily Value at Risk (DVaR), Expected Shortfall, ~~average of the three worst hypothetical losses from the DVaR simulation (3W), Global Asset Class~~3W, Primary and Secondary risk factor stress testing and ~~Global Scenario~~Combined scenario stress 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 methodology with a two-year ~~unweighted~~equally weighted historical period, at the 95% confidence level.

The historical simulation methodology 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.~~

moves;

–

Sum all hypothetical profits or losses for day one across all positions, giving one total profit or loss. Repeat for all other days in the two-year ~~history.~~

history; and

–

DVaR is the 95th percentile selected from the two-year history of daily hypothetical total profit or loss.

Market volatility ~~decreased from~~in 2010 was impacted by concerns over future economic growth and the ~~extreme~~sovereign debt crisis, but remained below the high levels observed in 2008. During 2010, the ~~second half~~high volatility observations of 2008 ~~but remained above pre-crisis 2007 levels. As a consequence~~rolled out of the ~~unweighted~~two year DVaR historical ~~simulation methodology,~~data set and were replaced in the ~~extreme 2008 volatility will continue to impact DVaR until late 2010.~~data time series by less volatile 2010 observations.

~~The~~Barclays Capital's DVaR model has been approved by the FSA to calculate regulatory capital for ~~the~~certain trading ~~book.~~book portfolios. 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,~~For internal management purposes DVaR is also calculated for ~~the~~certain banking books as well as all trading book ~~and certain 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 as back-testing which counts the number of days when a loss (as defined by the FSA) exceeds the corresponding DVaR estimate, measured at the 99% confidence level.portfolios.

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. Back-testing counts the number of days when a loss (as defined by the FSA) exceeds the corresponding DVaR estimate, measured at the 99% confidence level. For Barclays ~~Capital’s trading book,~~Capital's DVaR model, green model status was maintained for ~~2009~~2010 and ~~2008.~~2009.

The DVaR model is regularly assessed and reviewed internally by the Group Executive Models Committee and the Barclays Capital Model Committee.

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

–	Historical simulation uses the most recent two years of past data 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;

–	DVaR is based on positions as at close of business and consequently intra-day risk, the risk from a position bought and sold on the same day, is not captured; and

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

In part due to the points above, and in part due to the desire to measure risk beyond DVaR, Barclays uses additional metrics. These include Expected Shortfall, 3W, Primary risk factor stress testing, Secondary risk factor stress testing and Combined scenario stress testing.

Both Expected Shortfall and 3W metrics use the same two-year historical simulation data set as used to calculate DVaR. Expected Shortfall is the average of all one day hypothetical losses ~~from~~beyond the ~~historical simulation beyond DVaR. To improve~~95% confidence level DVaR while 3W is the ~~control framework, formal monitoring of 3W (average~~average of the three ~~worst observations from the DVaR historical simulation) was started in the first half of 2009.~~largest one day estimated losses.


96

~~Risk management~~

~~Market risk management~~

~~continued~~

Stress testing provides an ~~indication~~estimate of potential significant future losses that might arise from extreme market moves or scenarios. Primary stress testing applies stress moves to key liquid risk factors for each of the ~~potential size of losses that could arise in extreme conditions. Global Asset Class stress testing has been designed to cover~~ major trading asset classes including interest rate, credit spread, commodity, equity and foreign ~~exchange rates. They are based on past~~exchange. Secondary stress testing applies stress moves ~~in respective asset class prices and rates. Global Scenario~~to less liquid risks such as option volatility skew. Combined scenario stress testing applies simultaneous shocks to several risk factors, reflecting a defined extraordinary, but plausible scenario e.g. what is ~~based~~the estimated impact on ~~hypothetical events which could lead~~profits of a fixed exchange rate becoming floating. This is assessed by applying respective changes on foreign exchange rates, interest rates, credit spreads and equities to ~~extreme yet plausible stress type moves, under which profitability is seriously challenged.~~the portfolio.

Risk control

Market Risk is controlled through the use of limits, where appropriate, on the above risk measures. Limits are set at the total Barclays Capital level, risk factor level e.g. interest rate risk, and business line level e.g. Emerging Markets. ~~Book~~Stress limits and many book limits, such as foreign exchange and interest rate sensitivity limits, are also in place.

The total DVaR limit, risk factor DVaR limits, and 3W limit are approved by the Board Risk ~~exposures~~Committee. Primary stress limits are approved by the Chief Risk Officer and are tabled for noting by the Board Risk Committee. Compliance with limits is monitored by Barclays ~~Capital’s risk managers~~Capital's Market Risk team with oversight provided by Group Market Risk. ~~The total DVaR limit is approved by~~

In 2010, to further improve the ~~Board. Risk Factor DVaR limits and Global Asset Class stress testing limits are approved by~~application of the market risk control framework, Group Market Risk ~~Committee.~~initiated an ongoing programme of conformance visits to Barclays Capital business areas. These visits review both the current market risk profile and potential market risk developments, as well as verifying conformance with Barclays Market Risk Control Framework.

The oversight and governance of Barclays Capital's market risk models was also improved in 2010. This included making the model committee more granular by having two distinct committees, one specifically for model methodology and the other specifically for data integrity and infrastructure. Group Market Risk is a member of both these committees.

Risk reporting

Barclays Capital Market Risk team produce a number of detailed and summary market risk reports daily, weekly, fortnightly and monthly. These include, new for 2010, the Executive Key Risk Report (daily) and the Senior Management Significant Risk Pack (monthly). These reports summarise the positions, risks and top stresses covering interest rate, credit spread, commodity, equity and foreign exchange. Barclays Capital market risk reports are sent to Group Market Risk for review and inclusion in the Group Daily Market Risk Report.


96

Risk management

Market risk management continued

Analysis of traded market risk exposures (audited)

The trading environment in 2010 was characterised by weak underlying economic growth as well as unclear market direction resulting in lower client activity. In this environment, Barclays ~~Capital’s~~Capital's market risk exposure, as measured by average total DVaR, ~~increased~~decreased by ~~45%~~31% to ~~£77m (2008: £53m)~~£53m (2009: £77m). The ~~rise~~reduction was ~~mainly~~ due to ~~volatility considerations,~~a fall in exposures reflecting the lower client activity, increased ~~interest rate~~diversification, and the rolling off of the 2008 highly volatile historical data points.

The two main risk factors with material DVaR were credit spread ~~exposure,~~ and ~~the Lehman Brothers North American businesses acquisition. Volatility impacted~~interest rate. The average DVaR ~~because 2008’s extreme~~

~~volatility impacted~~for each of these decreased by £10m (17%) and £11m (25%) respectively. Total DVaR ~~throughout 2009 but only impacted 2008 DVaR in the last four months of 2008. More commentary is given under the total DVaR graph below.~~as at 31st December 2010 was £48m (2009: £55m).

Expected Shortfall and 3W in 2010 averaged ~~£121m~~£78m and ~~£209m~~£144m respectively representing ~~increases~~decreases of ~~£51m (73%~~£43m (36%) and ~~£93m (80%~~£65m (31%) compared to ~~2008.~~2009.

As we enter ~~2010,~~2011, the principal uncertainties which may impact Barclays market risk relate to volatility in interest rates, commodities, credit spreads, equity prices and foreign exchange rates. ~~While these markets exhibit improved liquidity and reduced volatility following Central Bank support, price~~Price instability and higher volatility may ~~still~~ arise as government policy ~~seeks to target~~targets future economic growth ~~while controlling inflation risk.~~against a background of fiscal pressures, accommodatory monetary policy and exogenous economic events.

Analysis of trading revenue (audited)

The histogram below shows the distribution of daily trading revenue for Barclays Capital in ~~2009~~2010 and ~~2008.~~

2009. Trading revenue reflects top-line income^gj, excluding income from Private Equity and Principal Investments.

The average daily trading revenue in ~~2009~~2010 was ~~£71m, 87% more~~£52m. This is £19m (27%) less than recorded for ~~2008~~2009 (£~~38m)~~71m). There were ~~247~~236 positive days, 515 negative days and ~~one~~two flat ~~day (2008: 206~~days in 2010 (2009: 247 positive, 475 negative, one flat).

~~The daily average, maximum and minimum values of DVaR, Expected Shortfall and 3W were calculated as below:~~


The daily average, maximum and minimum values of DVaR,
Expected Shortfall and 3W (audited)									Year ended 31st December 2010							Year ended 31st December 2009
DVaR (95%)									Average £m			Highⁱ£m		Lowⁱ £m		Average £m			Highⁱ £m		Lowⁱ £m
	Year ended 31st December 2009				Year ended 31st December 2008
	Average £m		High £m	Low £m	Average £m		High £m	Low £m
Interest rate risk	44		83	23	29		48	15		33			50		21		44			83		23
Credit Spread risk	58		102	35	31		72	15		48			62		30		58			102		35
Commodity risk	14		20	11	18		25	13		16			25		9		14			20		11
Equity risk	13		27	5	9		21	5		14			29		6		13			27		5
Foreign exchange risk	8		15	3	6		13	2		6			15		2		8			15		3
Diversification effect	(60	)			(40	)				(64	)		n/a		n/a		(60	)		n/a		n/a
Total DVaR	77		119	50	53		95	36		53			75		36		77			119		50
Expected Shortfall	121		188	88	70		146	41		78			147		47		121			188		88
3W	209		301	148	116		282	61		144			311		72		209			301		148

LOGO

~~Notes~~ LOGO

Notes

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

b	DVaR increases significantly due to the extreme market volatility impacting the DVaR calculation. Several financial institutions fail and there is a material deterioration in the global economic outlook.

c	Total DVaR peaked at £119m in March 2009.

db	Before trending down ~~mainly~~ due to a decrease in credit spread exposure and interest rate exposure, reaching £58m in August 2009.

ec	DVaR subsequently increased as markets began to recover and new traded credit positions were added to facilitate client trades.

fd	DVaR decreased towards ~~year end~~2009 year-end, driven by a reduction in equity exposure and an increase in diversification. Total DVaR as at 31st December 2009 was ~~£55m (31st~~£55m.

e	DVaR reduced to £38m, due to a reduction in credit and equity exposure assisted by an increase in diversification.

f	DVaR reached the 2010 peak (£75m) as market sentiment improved. There were increased exposures for Credit Spread, Equity and Commodities.

g	Total DVaR increased in August 2010 reaching £73m with increased exposure in Interest Rates, Credit Spread and Equity.

h	DVaR increased towards the end of the year, mainly due to an increase in equity. Total as at 31st December ~~2008: £87m).~~2010 was £48m.

~~Defined~~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.

Top-line income is a non-IFRS measure that represents income before own credit gain/losses and credit market losses/income. This measure has been presented as it provides a consistent basis for comparing the business’ performance between financial periods. Credit market losses included within income at Barclays Capital for the year ended 31st December 2010 amounted to £124m (2009: £4,417m), and own credit gain for the year ended 31st December 2010 amounted to £391m (2009: loss of £1,820m). Total income at Barclays Capital for the year ended 31st December 2010 was £13,600m (2009: £11,625m). For a reconciliation of top-line income to total income for Barclays Capital, see the “Analysis of Total income” table on page ~~319.~~32. For more information on credit market losses see page 88 and for more information on own credit gains / losses see Note 4 to the financial statements.


					97

Non-traded interest rate risk (audited)

Non-traded interest rate risk arises from the provision of retail and wholesale (non-traded) banking products and services, when the interest rate repricing date for loans (assets) is different to the repricing date for deposits (liabilities). This includes current accounts and equity balances which do not have a defined maturity date and an interest rate that does not move in line with the base rate. The risk resides mainly in Global Retail ~~and Commercial~~ Banking, Barclays Corporate, Barclays Wealth and Group Treasury.

Barclays objective is to minimise non-traded ~~risk. This~~interest rate risk and this is achieved by transferring interest rate 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. ~~Trading activity is not permitted outside Barclays Capital.~~

Risk measurement ~~and control~~

The risk in each business is measured and controlled using both an income metric (Annual Earnings at Risk) and a present value metric ~~(Daily~~(Economic Value of Equity, Economic Capital, Daily Value at Risk, orrisk factor stress testing, scenario stress testing). ~~In addition, scenario stress analysis is carried out by the business and reviewed by senior management and business-level asset and liability committees, when required.~~

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, subject to a minimum interest rate of 0%.

The main model assumptions are:

–	The balance sheet is kept at the current level i.e. no growth is assumed

–	Balances are adjusted for an assumed behavioural profile. This includes the treatment of fixed rate loans including mortgages

Economic Value of Equity (EVE) calculates the change in the present value of the banking book for a 100 basis point upward and downward rate

shock. This calculation is equivalent to that of AEaR except Economic Value of Equity is a present value sensitivity while AEaR is an income sensitivity.

Economic Capital (EC) consistent models are ~~adjusted for an assumed behavioural profiles. This includes~~used to measure: recruitment risk, the ~~treatment~~risk from customers not taking up their fixed rate loan offer; and prepayment risk, the risk of ~~non-maturity deposits.~~a customer deciding not to carry on with their fixed rate loan. Behavioural profiles are also used when modelling the balance sheet.

Daily Value at Risk (DVaR) and risk factor stress testing methodologies are consistent with those used by Barclays Capital. DVaR and stress ~~testing~~are used by Treasuries that operate within liquid currencies such as Sterling, US Dollar and Euros while for Treasuries that operate in less liquid currencies, stress risk is ~~calculated using~~the only present value metric used.

Risk control

Market Risk is controlled through the use of limits on the above risk measures. Limits are set at the total business level and then cascaded down. The total business level limits for AEaR, EVE, EC, DVaR and stress are agreed by Market Risk Committee. In 2010, a ~~Barclays Capital consistent approach. Both these metrics are calculated~~range of formal present value limits was extended to include stress and EVE limits. Compliance with limits is monitored by ~~each~~the respective business ~~area~~market risk team with oversight provided by Group Market Risk.

~~Risk exposures are monitored by respective business risk managers with oversight provided by Group Market Risk. The main business limits are approved by~~ Market Risk ~~Committee. Book limits such as foreign exchange and interest rate sensitivity limits are~~is also ~~in place where appropriate.~~

~~To further improve the market risk control framework, Group Market Risk initiated~~controlled through an ongoing programme of conformance visits ~~to non-traded Treasury operations.~~by both the business market risk departments and Group Market Risk. These visits review both the current market risk profile and potential market risk developments, as well as verifying conformance with Barclays policies and standards as detailed in the Barclays Market Risk Control Framework.

The interest rate risk for balances with no defined maturity date and an interest rate that is not linked to the base rate is managed by Group Treasury. A series of continuous equity and product structural hedges is used to mitigate the interest rate risk, as described below.


Net Interest Income Sensitivity (AEaR) by currency (audited)	31st December 2010						31st December 2009
	+100 basis points £m			-100 basis points £m			+100 basis points £m			-100 basis points £m
GBP		297			(377	)		30			(360	)
USD		(12	)		(8	)		(43	)		14
EUR		(16	)		12			(34	)		–
ZAR		13			(10	)		29			(27	)
Others		–			–			(1	)		4
Total		282			(383	)		(19	)		(369	)
As percentage of net interest income		2.25%			(3.06%	)		(0.16%	)		(3.10%	)


Analysis of equity sensitivity (audited)	31st December 2010						31st December 2009
	+100 basis points £m			-100 basis points £m			+100 basis points £m			-100 basis points £m
Net Interest Income		282			(383	)		(19	)		(369	)
Taxation effects on the above		(71	)		96			4			86
Effect on profit for the year		211			(287	)		(15	)		(283	)
As percentage of net profit after tax		4.64%			(6.31%	)		(0.15%	)		(2.75%	)
Effect on profit for the year (per above)		211			(287	)		(15	)		(283	)
Available for sale reserve		(2,051	)		2,051			(527	)		527
Cash flow hedge reserve		(1,298	)		1,288			(929	)		957
Taxation effects on the above		837			(835	)		341			(347	)
Effect on equity		(2,301	)		2,217			(1,130	)		854
As percentage of equity		(3.70%	)		3.56%			(1.93%	)		1.46%


98

Risk management

Market risk management continued

Risk reporting (audited)

Each business area is responsible for their respective market risk reports. A combination of daily and monthly risk reports are produced and used by the business. These are also sent to Group Market Risk for review and inclusion in the Group Daily Market Risk Report. A risk summary is also presented at Market Risk Committee and respective Asset and Liability Committees.

Analysis of Net Interest Income sensitivity

The table ~~below~~above shows the pre-tax net interest income ~~sensitivity~~ for the non-trading financial assets and financial liabilities held at 31st December ~~2009~~2010 and 31st December ~~2008.~~2009. The sensitivity has been measured using the AEaR methodology as described above. The benchmark interest rate for each currency is set as at 31st December ~~2009.~~2010. The figures include the effect of hedging instruments but exclude banking book exposures held or issued by Barclays Capital as these are measured and managed using DVaR.

Net interest income sensitivity (AEaR) by currency
   31st December 2009    31st December 2008

+100
basis
points
£m
-100
basis
points
£m +100
basis
points
£m -100
basis
points
£m
GBP
   30    (360 ) 3    (273 )
USD
   (43 ) 14    (25 ) 7
EUR
   (34 ) –    (34 ) 30
ZAR
   29    (27 ) 13    (13 )
Others
   (1 ) 4    –    (8 )
Total
   (19 ) (369 ) (43 ) (257 )
As percentage of totalnet interest income
   (0.16 %) (3.10 %) (0.37 %) (2.24 %)

Non-traded interest rate risk, as measured by AEaR, was ~~£369m~~£383m as at 31st December ~~2009,~~2010, an increase of ~~£112m~~£14m compared to 31st December ~~2008.~~2009. The ~~increase mainly reflects~~2010 and 2009 AEaR estimates both reflect the reduced spread generated on retail and commercial banking liabilities ~~in the lower~~associated with a low interest rate environment. If the interest rate hedges had not been in place then the AEaR for ~~2009~~2010 would have been ~~£704m (2008: £670m)~~£601m (2009: £704m).

DVaR is also used to control market risk in ~~Global~~Western Europe Retail ~~and Commercial~~ Banking ~~– Western Europe~~ and in Group Treasury. The indicative average ~~2009~~2010 DVaRs ~~for 2009 are £1.4m (2008: £1.3m)~~were £1.6m (2009: £1.4m) for Western Europe and ~~£1.0m (2008: £0.6m)~~£0.7m (2009: £1.0m) for Group Treasury.

Margins


Analysis of net interest income For year ended 31 st December	2010 £m		2009 £m			2008 £m
Net interest income pre product structural hedge		9,038		8,654			8,845
Net interest income from product structural hedge^a		1,403		1,364			44
Share of benefit of interest income on Group equity (including equity structural hedge)		932		799			712
Total Global Retail Banking, Absa, Barclays Corporate and Barclays Wealth		11,373		10,817			9,601
Barclays Capital net interest income^b		1,121		1,598			1,724
Other net interest income/ (expense)		29		(497	)		144
Group net interest income from continuing operations^c		12,523		11,918			11,469

The current low interest rate environment substantially reduces the spread generated on retail and commercial banking assets, liabilities and the Group's equity. This impact is reduced, to an extent, by the Group's structural interest rate hedges, which are designed to minimise net interest margin volatility. Product structural hedges generated a gain of £1,403m (2009: gain £1,364m) converting short term interest margin volatility on product balances (such as non-interest bearing current accounts and managed rate deposits) into a more stable medium term rate. Hedges are built on a monthly basis to achieve a targeted maturity profile, referencing term rates, which protect against margin compression where short term interest rates are lower than historical averages.

Notes

a	UK Retail Banking and Barclays Corporate were allocated £878m (2009: £837m) and £265m (2009: £266m) of this amount respectively.

b	Including share of the interest income on Group equity which includes the equity structural hedge benefit.

c	Total GRB net interest income was £7,191m (2009: £6,931m) and the GRB net interest margin was 2.27% (2009: 2.42%).

During the first half of 2010, Barclays began to extend the maturity profile of its liability product structural hedges. This increased expected revenue contribution for the year and reduced future earnings volatility. Based on the market curve as at the end of December 2010 and the on-going hedging strategy, fixed rate returns on liability structural hedges are expected to remain broadly similar over the next 2 years. Therefore, to the extent that the current low floating rates persist, the net contribution from these hedges will remain broadly stable. Any increases in short term interest rates will reduce the benefit of the hedges, although it is expected that this would be offset by enhanced product margins. The net contribution from these hedges is included in the net interest income of individual businesses.

Additionally, equity structural hedges are in place to manage the volatility in earnings on the Group's equity with the impact allocated to the businesses as part of the share of the interest income benefit on Group equity through net interest income. Equity structural hedges generated a gain of £1,788m in 2010 (2009: gain £1,162m), including net gains on disposal of gilts of approximately £500m. Due to concerns surrounding economic conditions and outlook, gilts purchased as part of the equity hedge duration extension were sold in Q3 and Q4. The duration extension process was resumed towards the end of Q4 2010 and, to date, the hedge position has been substantially rebuilt. Re-building at higher rates has limited the loss of future hedging income from the sales to approximately £140m, which will be realised over 10 years. The sale and rebuild is therefore not expected to materially impact fixed rate returns over the next 2 years.

Within the analysis of net interest income, the amount described as Other relates to the cost of subordinated debt and net funding on non- customer assets and liabilities, together with the residual benefit of interest income on Group equity, held within Head Office Functions and Other Operations. In 2009 there were additional costs of central funding activity, relating to money market dislocations, which did not reoccur in 2010.


					99

On 1st October 2009, the Group implemented a revised internal funds pricing mechanism, which prices intra-group funding and liquidity. The effect of the mechanism is to appropriately give credit to businesses with net surplus liquidity and to charge those businesses in need of wholesale funding at Barclays internal funding rate, which is driven by prevailing market rates and includes a term premium. The objective is to price internal funding for assets and liabilities in line with the cost of alternative sources of funding, which ensures there is consistency between retail and wholesale sources. The impact of the change in mechanism on net interest margins in 2010 for GRB, Absa, Barclays Corporate and Barclays Wealth, in aggregate, was not significant, with Barclays Wealth benefiting as a result of surplus term liquidity, broadly offsetting the term asset liquidity requirement of Barclaycard.

The change in the internal funds pricing mechanism has impacted the asset and liability margins of the businesses affected. In particular, the liability margins of UK Retail Banking, Western Europe Retail Banking, Barclays Corporate and Barclays Wealth (the main deposit gathering businesses affected) have benefited from the change in approach. Conversely the asset margins of those businesses and, to a more limited extent Barclaycard, have been negatively impacted by the mechanism.

Margins are also affected by hedging activity, which is executed to minimise the net interest margin volatility. As such, the hedges provide a more constant revenue stream on liabilities generated and a more constant cost of funding for fixed rate assets generated.


100

Risk management

Market risk management continued

Foreign exchange risk (audited)

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 2010 or 2009. 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 2010 or 2009.

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, non-controlling interests, deductions from capital and debt capital instruments) and risk weighted assets (RWAs) being denominated in foreign currencies. Changes in foreign exchange rates result in changes in the Sterling equivalent value of foreign currency 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 capital ratio hedge strategy is to minimise the volatility of the capital ratios caused by foreign exchange rate movements. To achieve this, the Group aims to maintain the ratio of foreign currency Core Tier 1, Tier 1 and Total Capital resources to foreign currency RWAs the same as the Group’s capital ratios.

The Group’s investments in foreign currency subsidiaries and branches create capital resources denominated in foreign currencies. Changes in the Sterling value of the investments due to foreign currency movements are captured in the currency translation reserve, resulting in a movement in Core Tier 1 capital.

During 2010, structural currency exposures net of hedging instruments increased from £12.5bn to £15.3bn as a result of hedging decisions taken in accordance with the Group’s capital ratio management strategy for foreign exchange rate movements.

To create foreign currency Tier 1 and Total Capital resources additional to the Core Tier 1 capital resources, the Group issues, where possible, debt capital in non-Sterling currencies. This is primarily achieved by the issuance of debt capital from Barclays Bank PLC, but can also be achieved by subsidiaries issuing capital in local currencies.

The economic hedges primarily 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. During the year€850m Reserves Capital Instruments were redeemed.

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.


Functional currency of operations (audited)
	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
As at 31st December 2010
US Dollar		22,646		7,406		–		15,240			6,330		8,910
Euro		7,327		3,072		1,294		2,961			2,069		892
Rand		4,826		–		1,626		3,200			–		3,200
Japanese Yen		5,304		3,603		1,683		18			–		18
Swiss Franc		152		–		157		(5	)		–		(5	)
Other		3,139		–		824		2,315			–		2,315
Total		43,394		14,081		5,584		23,729			8,399		15,330

As at 31st December 2009
US Dollar		16,677		3,205		–		13,472			6,056		7,416
Euro		6,772		3,418		–		3,354			2,902		452
Rand		4,055		–		1,542		2,513			189		2,324
Japanese Yen		4,436		3,484		940		12			–		12
Swiss Franc		2,840		2,734		92		14			–		14
Other		2,983		–		677		2,306			–		2,306
Total		37,763		12,841		3,251		21,671			9,147		12,524


					101

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.

~~During 2009 a risk reducing programme was conducted. This entailed increasing the holding of index-linked gilts to better match the liabilities and reducing the net exposure to equities.~~ 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. 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 transactional~~~~foreign exchange risk~~exposure arises outside Barclays Capital to support and facilitate client activity. This is minimised in accordance with modest risk limits and was not material as at 31st December 2009. Other non-Barclays capital foreign exchange exposure is covered in Note 48.28.

Asset management structural 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. Asset management structural risk mainly resides in Barclays Wealth. It is Barclays policy that businesses monitor and report this risk against a defined risk appetite and regularly assess potential hedging strategies.


98

~~Risk management~~

~~Market risk management~~

~~continued~~

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 gas, oil and related products. Physical commodity positions are held at fair value and reported ~~under the Trading Portfolio~~ in Note ~~12 on page 191.~~12.

~~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 ~~50 on page 267.~~

~~Credit risk~~41.

Credit risk exposures relating to commodity contracts are actively managed by the Group. Refer to ~~Note 47 on page 243~~the Credit Risk section 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 contractual maturity. As at 31st December ~~2009~~2010 the fair value of the commodity derivative contracts reflects a gross positive fair value of ~~£27,134m (2008: £44,881m)~~£22,521m (2009: £27,134m) and a gross negative value of ~~£26,227m (2008: £45,817m)~~£22,884m (2009: £26,227m).

Movement in fair value of commodity derivative
positions

2009
£m

2008
£m

Fair value of contracts outstanding at the beginning of the period
   (936 ) 812
Contracts realised or otherwise settled during the period
   1,521    241
Fair value of new contracts entered into during the period
   (181 ) (1,245 )
Other changes in fair values
   503    (744 )
Fair value of contracts outstanding at the end of the period
   907    (936 )


Movement in fair value of commodity derivative positions	2010 £m			2009 £m
Fair value of contracts outstanding as at 1st January		907			(936	)
Contracts realised or otherwise settled during the period		(3,124	)		1,521
Fair value of new contracts entered into during the period		(1,068	)		(181	)
Other changes in fair values		2,922			503
Fair value of contracts outstanding as at 31st December		(363	)		907

Maturity analysis of commodity derivative fair value

2009
£m

2008
£m

Not more than one year
   (75 ) (2,022 )
Over one year but not more than five years
   620    999
Over five years
   362    87
Total
   907    (936 )


Maturity analysis of commodity derivative fair value	2010 £m			2009 £m
Not more than one year		(1,859	)		(75	)
Over one year but not more than five years		977			620
Over five years		519			362
Total		(363	)		907

102

Risk management

Capital risk management

All disclosures in this section (pages 102 to 106) are unaudited unless otherwise stated

~~Risk management~~

~~Capital risk management~~

Capital risk is the risk that the Group has insufficient capital resources to:

–

Meet minimum regulatory requirements in the UK and in other jurisdictions such as the United States and South Africa where regulated activities are undertaken. The Group’s authority to operate as a bank is dependent upon the maintenance of adequate capital resources.

–

Support its credit rating. A weaker credit rating would increase the Group’s cost of funds.

–

Support its growth and strategic options.

Organisation and structure (audited)

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:

–

~~maintain sufficient capital resources~~ensure the financial holding company is well capitalised relative to ~~meet~~ the minimum regulatory capital requirements set by the UK FSA and the US Federal ~~Reserve Bank’s requirements that a financial holding company be ‘well capitalised’;~~

Reserve;

–

~~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 regulatory capital requirements; ~~and~~

–

~~allocate capital to~~ support the Group’s ~~strategic objectives including optimising returns on economic~~Risk Appetite and ~~regulatory capital.~~

Economic Capital requirements; and

–	support the Group’s credit rating.

Capital is allocated to businesses to support the Group’s strategic objectives, including optimising returns on regulatory and economic capital.

The Group 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:~~are to:

–

establishment of internal targets for capital demand and ratios;

–

~~managing~~manage capital ratio sensitivity to foreign exchange movement;

and

–

~~ensuring~~manage local entity regulatory capital ~~adequacy;~~

–

~~allocating capital in the Group’s strategic medium-term plan; and~~

–

~~economic Capital management.~~

adequacy.

In addition to the processes above, the Group Risk Oversight Committee and the Board Risk Committee annually review ~~and set~~ risk appetite ~~(see page 242)~~ and analyse the impacts of stress scenarios on the Group capital forecast (see ~~page 65)~~pages 144 and 145) in order to understand and manage the Group’s projected capital adequacy.

Internal targets

To support its capital management objectives, the Group sets internal targets for its key capital ratios. Internal targets are reviewed regularly by Group 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 possible impact of stress scenarios including:

–

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; and

–

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 and risk weighted assets denominated in foreign currencies. Changes in foreign exchange rates result in changes in the ~~sterling~~Sterling equivalent value of foreign currency denominated capital resources and risk weighted assets. As a result, the Group’s regulatory capital ratios are sensitive to foreign currency movements.

The Group’s foreign currency capital resources include investments in subsidiaries and branches, intangible assets, non-controlling interest, deductions from capital and debt capital instruments.

The Group’s investments in foreign currency subsidiaries and branches create Core Tier 1 capital resources denominated in foreign currencies. Changes in the ~~sterling~~Sterling value of the investments due to foreign currency movements are captured in the currency translation reserve, resulting in a movement in Core Tier 1 capital.

To create foreign currency Tier 1 and Total Capital resources additional to the Core Tier 1 capital resources, the Group issues, where possible, debt capital in ~~non-sterling~~non-Sterling currencies. This is primarily achieved by the issuance of debt capital from Barclays Bank PLC, but can also be achieved by subsidiaries issuing capital in local currencies.

In some circumstances, investments in foreign currency subsidiaries and branches are hedged. In these circumstances, foreign currency capital resources are not created. Hedging decisions take into account the impact on capital ratios, the strategic nature of the investment, the cost of hedging, the availability of a suitable foreign exchange market and prevailing foreign exchange rates. Depending on the value of foreign currency net investments, it is not always possible to maintain the ratio of Core Tier 1 capital to RWAs consistent with the Group’s Core Tier 1 ratio in all currencies, leaving some capital ratio sensitivity to foreign currency movements.

The investment of proceeds from the issuance of equity accounted foreign currency preference shares also contributes to foreign currency capital resources. If a preference share issuance is redeemed, the cumulative movement from the date of issuance in the currency translation reserve will be offset by an equal and opposite movement in reserves reflecting the revaluation of the preference shares to prevailing foreign exchange rates. Issuance of a replacement Tier 1 instrument in the same currency will maintain the hedge of the Tier 1 ratio.

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 by reporting to local Asset and Liability Committees with oversight by The Treasury Committee, as required.

Injections of capital resources into Group entities are centrally controlled by ~~The~~the Group Treasury Committee, under authorities delegated from the Group Executive Committee. The Group’s policy is for surplus capital held in Group entities to be repatriated to Barclays Bank PLC in 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.


~~100~~					103

~~Risk management~~

~~Capital risk management~~

~~continued~~

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 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.

The Treasury Committee reviews the limits on capital demand on a monthly basis taking into account actual performance.

Capital resources

Core Tier 1 capital increased by £4.4bn during 2010. £3.6bn of this increase was a result of attributable profit. In addition £1.5bn of equity was issued following the exercise of warrants and £0.7bn additional Core Tier 1 was reflected in the currency translation reserve. These were offset by net losses on available for sale equity positions, of which BlackRock, Inc. was £0.9bn, and dividends paid of £0.5bn.

Total qualifying Tier 1 Capital increased by £3.9bn during 2010 as the increase in Core Tier 1 capital was offset by the redemption of Reserve Capital Instruments of £0.7bn.


Total net capital resources	Basel II						Basel II						Basel II
	2010						2009						2008
	Barclays PLC Group £m			Barclay Bank PLC Group £m			Barclays PLC Group £m			Barclay Bank PLC Group £m			Barclays PLC Group £m			Barclay Bank PLC Group £m
Ordinary shareholders’ funds		50,858			59,174			47,277			55,925			36,618			41,202
Regulatory adjustments:		-			-			-			-			-			-
MCNs not yet converted		-			-			-			-			(3,652	)		-
Available for sale reserve - debt		340			340			83			83			372			372
Available for sale reserve - equity		-			-			(309	)		(335	)		(122	)		(63	)
Cash flow hedging reserve		(152	)		(152	)		(252	)		(252	)		(132	)		(132	)
Defined benefit pension scheme		99			99			431			431			849			849
Adjustments for scope of regulatory consolidation		99			99			196			196			847			847

Foreign exchange on RCIs and upper Tier 2 loan stock		209			209			25			25			(231	)		(231	)
Adjustment for own credit		(621	)		(621	)		(340	)		(340	)		(1,650	)		(1,650	)
Other adjustments		(40	)		(40	)		144			144			305			304
Equity non-controlling interests		2,923			2,923			2,351			2,351			1,981			1,981
Less: Intangible assets		(8,326	)		(8,326	)		(8,345	)		(8,345	)		(9,964	)		(9,964	)

Less: Net excess of expected loss over impairment at 50%		(168	)		(168	)		(25	)		(25	)		(159	)		(159	)
Less: Securitisation positions at 50%		(2,360	)		(2,360	)		(2,799	)		(2,799	)		(704	)		(704	)

Less: Non Core Tier 1 capital issues included in shareholders’ funds		-			(7,937	)		-			(8,427	)		-			(8,421	)
Core Tier 1 Capital		42,861			43,240			38,437			38,632			24,358			24,231

Preference shares		6,317			6,317			6,256			6,256			6,191			6,191
Reserve Capital Instruments		6,098			6,098			6,724			6,724			5,743			5,721
Tier One Notes^a		1,046			1,046			1,017			1,017			1,086			1,086
Tax on the net excess of expected loss over impairment		(100	)		(100	)		8			8			46			46
Less: Material holdings in financial companies at 50%		(2,676	)		(2,872	)		(2,805	)		(2,915	)		(174	)		(174	)
Total qualifying Tier 1 capital		53,546			53,729			49,637			49,722			37,250			37,101

Revaluation reserves		29			29			26			26			26			26
Available for sale reserve - equity		-			-			309			335			122			122
Collectively assessed impairment allowances		2,409			2,409			2,443			2,443			1,654			1,654
Tier 2 non-controlling interests		572			572			547			547			607			607
Qualifying subordinated liabilities		-			-			-			-			-			-
Undated loan capital		1,648			1,648			1,350			1,350			6,745			6,768
Dated loan capital		16,565			16,565			15,657			15,658			14,215			14,215

Less: Net excess of expected loss over impairment at 50%		(168	)		(168	)		(25	)		(25	)		(158	)		(158	)

Less: Securitisation positions at 50%		(2,360	)		(2,360	)		(2,799	)		(2,799	)		(704	)		(704	)
Less: Material holdings in financial companies at 50%		(2,676	)		(2,872	)		(2,805	)		(2,915	)		(174	)		(174	)
Total qualifying Tier 2 capital		16,019			15,823			14,703			14,620			22,333			22,356

Less: Other regulatory deductions		(2,250	)		(2,250	)		(880	)		(880	)		(856	)		(964	)
Total net capital resources		67,315			67,302			63,460			63,462			58,727			58,493

Capital Ratios		%			%			%			%			%			%
Core Tier 1 ratio		10.8%			10.9%			10.0%			10.1%			5.6%			5.6%
Tier 1 ratio		13.5%			13.5%			13.0%			13.0%			8.6%			8.6%
Risk asset ratio		16.9%			16.9%			16.6%			16.6%			13.6%			13.5%

a	Tier 1 Notes are included in the balance sheet under subordinated liabilities.


104

Risk management

Capital risk management continued

Total net capital resources increased by £3.9bn during 2010 reflecting the growth in Tier 1 capital and an increase in total qualifying Tier 2 capital, primarily due to the net issuance of additional subordinated debt of £0.9bn. This was offset by an increase in other regulatory deductions for investments in non-consolidated subsidiaries and associates of £1,4bn.

As at 31st December 2010, on a Basel II basis, the Group’s Core Tier 1 ratio was 10.8% (2009:10.0%) and the Tier 1 capital ratio was 13.5% (2009:13.0%).

Risk weighted assets

Risk weighted assets increased 4% to £398bn in 2010. Year on year, there was a £22bn reduction in underlying risk weighted assets (predominantly in Barclays Capital) as a result of capital management efficiencies and reduced levels of risk and inventory. This was offset in part by both methodology and model changes, which increased risk weighted assets by approximately £28bn. Foreign exchange and other movements accounted for a further increase of £9bn.

Adjusted gross leverage

Adjusted gross leverage is a non-IFRS measure representing the multiple of adjusted total tangible assets over total qualifying Tier 1 capital. Adjusted total tangible assets are total assets adjusted to allow for derivative counterparty netting where the Group has a legally enforceable master netting agreement, assets under management on the balance sheet, settlement balances and cash collateral on derivative liabilities, goodwill and intangible assets. This measure has been presented as it provides for a metric used by management in assessing balance sheet leverage. Barclays management believes that this measure provides useful information to readers of Barclays financial statements as a key measure of stability, which is consistent with the views of regulators and investors. However, this measure is not a substitute for IFRS measures and readers should consider IFRS measures as well, such as the ratio of total assets to total shareholders equity as disclosed below.

The adjusted gross leverage was 20x as at 31st December 2010 (2009: 20x) principally as a result of a £3.9bn increase in Tier 1 Capital to £53.5bn offset by the impact of a £84.6bn increase in adjusted total tangible assets. At month ends during 2010 the ratio moved in a range from 20x to 24x, with fluctuations arising as a result of normal trading activities, primarily due to increases in reverse repurchase trading and changes in holdings of trading portfolio assets. Significant fluctuations on a monthly basis comprised:

–	an increase from 20x at December 2009 to 22x at January 2010 driven by an increase in reverse repurchase trading, holdings of trading portfolio assets, the acquisition of Standard Life Bank, and increased cash balances;

–	a step up from 21x to 23x in April resulting from an increase in reverse repurchase trading, holdings of trading portfolio assets, and a decrease in Tier 1 capital;

–	a decrease in June from 24x to 20x driven by a reduction in reverse repurchase trading and holdings of trading portfolio assets;

–	a step up in July from 20x to 23x arising from an increase in reverse repurchase trading;

–	a fall in September from 24x to 21x driven by an increase in Tier 1 capital and a reduction in reverse repurchase trading;

–	an increase from 21x to 23x in October as a result of increases in reverse repurchase trading and holdings of trading portfolio assets; and

–	a steady decrease during November and December from 23x to 20x resulting from decreases in reverse repurchase trading and holdings of trading portfolio assets and an increase in Tier 1 capital, principally reflecting the impact of increases in available for sale reserves.

The ratio of total assets to total shareholders equity was 24x as at 31st December 2010 (2009: 24x). The ratio moved within a month end range of 24x to 29x, driven by the fluctuations noted above, as well as changes in gross interest rate derivatives and settlement balances. Significant drivers of fluctuations other than those noted above comprised:

–	the increase from 24x at December 2009 to 27x at January 2010 was also affected by increases in settlement balances;

–	a step up in August from 27x to 29x arose from an increase in gross derivatives balances; and

–	the decrease in December from 27x to 24x was affected by a decrease in gross derivatives and settlement balances in addition to those movements noted above.

Group Treasury agrees adjusted tangible asset targets at a segment level to manage the Barclays balance sheet and leverage ratio. Barclays Capital’s adjusted tangible assets are managed and reviewed monthly by the Barclays Capital Balance Sheet Steering Committee which includes members of Treasury, Finance and the businesses. The Steering Committee agrees limits with each business across Barclays Capital and monitors balance sheet usage against those limits. Businesses were required to manage the balance sheet to defined limits and were not permitted to exceed them without prior approval by nominated Steering Committee members. Barclays continues to operate within limits and targets for balance sheet usage as part of its balance sheet management activities.

The Basel Committee of Banking Supervisors (BCBS) issued final guidelines for ‘Basel III: a global regulatory framework for more resilient banks and banking systems’ in December 2010. The guidelines include a proposed leverage metric, to be implemented by national supervisors in parallel run from 1st January 2013 (migrating to a Pillar 1 measure by 2018). The metric is the ratio of exposure to Tier 1 capital calculated on a Basel III basis, with exposure representing total assets and certain off balance sheet items, the potential future exposure on derivative contracts, less netting permitted under applicable UK regulatory rules and those assets deducted from Tier 1 capital. The final implementation of Basel III may result in the future calculation of this ratio being on a different basis. Based on our interpretation of the current BCBS proposals the Group’s Basel III leverage ratio as at 31st December 2010 would be within the proposed limit of 33x.


Regulatory capital summary (audited)	Basel II
	2010 £m			2009 £m			2008 £m
Total qualifying Tier 1 Capital		53,546			49,637			37,250
Total qualifying Tier 2 Capital		16,019			14,703			22,333
Total Deductions		(2,250	)		(880	)		(856	)
Total net Capital resources		67,315			63,460			58,727


Risk weighted assets by risk	2010 £m			2009 £m
Credit risk		260,998			252,054
Counterparty risk		43,863			45,450
Market risk
– Modelled – VaR		9,209			10,623
– Modelled – IDRC^a and Non-VaR		3,769			5,378
– Standardised		48,073			38,525
Operational risk		32,119			30,623
Total risk weighted assets		398,031			382,653

Adjusted gross leverage	2010 £m			2009 £m
Total assets		1,489,645			1,378,929
Counterparty net/collateralised derivatives⁵		(377,756	)		(374,099	)
Assets held in respect of linked liabilities to customers under investment contracts		(1,947	)		(1,679	)
Net settlement balances and cash collateral		(48,108	)		(25,825	)
Goodwill and intangible assets		(8,697	)		(8,795	)
Adjusted total tangible assets		1,053,137			968,531
Total qualifying Tier 1 capital		53,546			49,637
Adjusted gross leverage⁰		20			20
Ratio of total assets to shareholders’ equity		24			24

Notes

a	IDRC - Incremental Default Risk Charge.

b	Comprising counterparty netting of £340,467m (2009: £342,628m) and collateral held of £37,289m (2009: £31,471m) as disclosed on page 87.


Risk weighted assets by business	2010 £m		2009 £m
UK Retail Banking		35,274		35,876
Barclaycard		31,913		30,566
Western Europe Retail Banking		17,269		16,811
Barclays Africa		8,003		7,649
Barclays Capital		191,275		181,117
Barclays Corporate		70,796		76,928
Barclays Wealth		12,398		11,353
Investment Management		74		73
Absa		30,398		21,410
Head Office Functions and Other Operations		631		870
Total risk weighted assets		398,031		382,653

c	As at 31st December 2010 the Group has amended the calculation of adjusted gross leverage to reflect the deduction of £20,996m cash collateral on derivative liability contracts. Applying this approach to 2009 would result in an adjusted gross leverage of 19x.


					105

Economic capital demand

Economic capital is an internal measure of the ~~minimum~~risk profile of the bank expressed as the estimated stress loss at a 99.98% confidence level. The total amount of equity and preference capital ~~required for~~held by the Group takes into account Economic Capital Demand and is set at an appropriate level to ~~maintain its~~ensure that the Group maintains it credit rating based upon its risk profile.

Barclays assesses capital requirements by measuring the Group’s risk profile using both internally and externally developed models. The Group assigns economic capital primarily within the following risk categories: credit risk, market risk, operational risk, private equity and pension risk.

The Group regularly reviews its economic capital methodology and benchmarks outputs to external reference points. The framework uses default probabilities during average credit conditions, rather than those prevailing at the balance sheet date, thus seeking to remove cyclicality from the economic capital calculation. The economic capital framework takes into consideration 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.

The total average economic capital required by the Group is compared with the supply of economic capital to evaluate economic capital utilisation. The supply of economic capital is based on the available shareholders’ equity adjusted for certain items (e.g. retirement benefit liability, cash flow hedging reserve) and including preference shares.

Economic capital forms the basis of the Group’s submission for the Basel II Internal Capital Adequacy Assessment Process (ICAAP).

LOGO

~~Economic Capital Demand~~^a

UK Retail Banking economic capital allocation decreased £200m to £3,750m (2008: £3,950m) mainly reflecting a revised measurement of economic capital for business risk. In addition, small reductions were seen in the economic capital allocation for overdrafts and local businesses that were offset by growth in mortgages and consumer lending.

Barclays Commercial Bank economic capital allocation decreased £50m to £3,450m (2008: £3,500m) driven primarily by a reduction in exposure offset by an increase in non-performing loans due to economic conditions.

~~Barclaycard economic capital allocation increased £650m to £3,350m (2008: £2,700m), reflecting asset growth and appreciation of US Dollar against Sterling in 2008 and modest asset growth in 2009.~~

GRCB – Western Europe economic capital allocation increased £600m to £2,500m (2008: £1,900m), due to deteriorating wholesale credit conditions, acquisition activity, additional fixed assets as a result of branch expansion and exchange rate movements.

~~GRCB – Emerging Markets economic capital allocation increased £100m to £1,200m (2008: £1,100m). This reflects asset growth in 2008 versus a relatively slower contraction in 2009.~~

~~GRCB – Absa economic capital allocation increased £100m to £1,200m (2008: £1,100m), driven primarily by exchange rate movements offset by a reduction in exposure.~~

Barclays Capital average economic capital allocation increased £2,500m to £10,750m (2008: £8,250m). This primarily reflects deterioration in credit quality that resulted in growth in the economic capital allocation towards the end of 2008 and a further modest increase in 2009.

Barclays Global Investors investment economic capital allocation of £1,000m (2008: £400m) includes BGI assets up to disposal on 1st December 2009, and BGI related exposures post-disposal, mainly the BlackRock, Inc equity investment.

~~Barclays Wealth economic capital allocation increased £50m to £550m (2008: £500m), reflecting growth in loans and advances and increased measure of economic capital for other risk types.~~ LOGO

Average economic capital

Average year
ended
31.12.09
£m

Average year
ended
31.12.08
£m
UK Retail Banking
   3,750    3,950
Barclays Commercial Bank
   3,450    3,500
Barclaycard
   3,350    2,700
GRCB – Western Europe
   2,500    1,900
GRCB – Emerging Markets
   1,200    1,100
GRCB – Absa
   1,200    1,100
Barclays Capital
   10,750    8,250
Barclays Global Investors
   1,000    400
Barclays Wealth
   550    500
Head Office Functions and Other Operations
   100    50
Economic capital requirement

(excluding goodwill)
   27,850    23,450
Average historic goodwill and intangible assets^b
   11,000    9,450
Total economic capital requirement^c
   38,850    32,900

Notes

a	Calculated using an adjusted average over the year and rounded to the nearest £50m for presentation ~~purposes. Economic capital demand excludes the economic capital calculated for pension risk.~~purposes,

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

c	Total period end economic capital requirement as at 31st December ~~2009~~2010 stood at ~~£40,750m (31st December 2008: £39,200m)~~£41,550m (2009: £40,750m).


				~~101~~

   2009
£m
   2008
£m

The average supply of capital to support the economic capital framework^a
Shareholders’ equity excluding non-controlling interests less goodwill^b
   28,000    17,650
Retirement benefits liability
   800    1,050
Cash flow hedging reserve
   (300 ) 100
Available for sale reserve
   600    400
Cumulative gains on own credit
   (1,150 ) (1,250 )
Preference shares
   5,850    5,500
Available funds for economic capital excluding goodwill
   33,800    23,450
Average historic goodwill and intangible assets^b
   11,000    9,450
Available funds for economic capital including goodwill^c
   44,800    32,900

~~Notes~~

a	~~Averages for the period will not correspond to period-end balances disclosed on 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 2009 stood at £40,650m (2008:£39,200m).~~

d	Average EC charts exclude the EC calculated for pension risk (average pension risk for ~~2009~~2010 is ~~£2,500m~~£3,750m compared with ~~£650m~~£2,500m in ~~2008)~~2009).

ed	Includes Transition Businesses and capital for central function risks.

fe	Includes credit risk loans.

gf	Includes investments in associates, private equity risk, insurance risk, residual value and business risk. Also includes BGI related exposures post-disposal, mainly the Group’s investment in BlackRock, ~~equity.~~Inc.


~~102~~106

Risk management

~~Liquidity~~Capital risk management continued

Economic capital supply

The capital resources to support economic capital comprise adjusted shareholders’ equity including preference shares but excluding other non-controlling interests. Shareholders’ equity is adjusted for:

–	Net retirement benefits liability – representing a non-cash reduction in shareholders equity;

–	Cash flow hedging reserve – representing amounts that will be offset against the gains or losses on the hedged item when it is recognised in the income statement;

–	Available for sale reserve – representing unrealised gains and losses on available for sale securities;

–	Cumulative gains on own credit – representing cumulative gains arising on the fair value of changes in own credit; and

–	Preference shares – are included in funds to support economic capital as preference shares have been issued to optimise the long term capital base of the group.


The average supply of capital to support the economic capital framework^a	Average 2010 £m			Average 2009 £m
Shareholders’ equity excluding non-controlling interests less goodwill^b		41,400			28,000
Retirement benefits liability		450			800
Cash flow hedging reserve		(700	)		(300	)
Available for sale reserve		150			600
Cumulative gains on own credit		(450	)		(1,150	)
Average shareholders’ equity for economic purposes excluding goodwill		40,850			27,950
Average historical goodwill and intangible assets’		10,200			11,000
Average shareholders’ equity for economic purposes including goodwill		51,050			38,950
Preference shares		5,850			5,850
Available funds for economic capital^c		56,900			44,800

Notes

a	Calculated using an adjusted average over the year and rounded to the nearest £50m for presentation purposes.

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

c	Available funds for economic capital as at 31st December stood at £58,950m (2009: £54,600m).


					107

Risk management

Liquidity risk management

All disclosures in this section (pages 107 to 112) are unaudited unless otherwise stated

Liquidity risk is the risk that the Group is unable to meet its obligations when they fall due as a result of a sudden, and potentially protracted, increase in net cash outflows. Such outflows would deplete available cash resources for client lending, trading activities, investments and deposits. In extreme circumstances lack of liquidity could result in reductions in balance sheet and sales of assets, or potentially an inability to fulfil lending commitments. The risk that it will be unable to do so is inherent in all banking operations and can be affected by a range of institution-specific and market-wide events.

Organisation and structure (audited)

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 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.

Liquidity risk framework (audited)

Barclays has a comprehensive Liquidity Risk Management Framework (the Liquidity Framework) for managing the Group’s liquidity risk. The objective of the Liquidity Framework is for the Group to have sufficient liquidity to continue to operate for at least the minimum period specified by the FSA in the event that the wholesale funding markets are neither open to Barclays nor to the market as a whole. ~~Many of the stress~~Stress tests ~~currently~~ applied under the Liquidity Framework ~~will also be applied under the FSA’s new regime, although the precise calibration may differ in Barclays final Individual Liquidity Guidance to be set by the FSA. The Framework considers~~consider a range of possible wholesale and retail factors leading to loss of financing including:

–

~~maturing~~Maturing of wholesale liabilities;

–

~~loss~~Loss of secured financing and widened haircuts on remaining book;

–

~~retail~~Retail and commercial outflows from savings and deposit accounts;

–

~~drawdown~~Drawdown of loans and commitments;

–

~~potential~~Potential impact of a ~~two-notch~~2 notch ratings downgrade; and

–

~~withdrawal~~Withdrawal of initial margin amounts by counterparties.

These stressed scenarios are used to assess the appropriate level for the Group’s liquidity pool, which comprises unencumbered assets and ~~cash.~~central bank deposits. Barclays regularly uses these assets to access secured funding markets, thereby testing the liquidity assumptions underlying pool composition. The Group does not presume the availability of central bank borrowing facilities to monetise the liquidity pool in any of the stress scenarios under the Liquidity Framework.

Liquidity ~~Pool~~pool (audited)

The Group liquidity pool as at 31st December ~~2009~~2010 was ~~£127bn~~£154bn gross ~~(31st December 2008: £43bn)~~(2009: £127bn) and comprised the following cash and unencumbered ~~assets.~~

assets (of which £140bn are FSA eligible). The Group maintains additional liquid assets to support ongoing business requirements such as payment services. The cost of ~~maintaining~~ the Group liquidity pool ~~is a function~~for 2010 has been allocated on the basis of the ~~source of funding for the buffer and the reinvestment spread. The cost of funding the liquidity pool is estimated to have been approximately £650m for 2009.~~projected stress outflows arising in each relevant business.

Composition of the Group liquidity pool

Cash and
deposits
with central
banks
£bn

Government
guaranteed
bonds
£bn

Government
and
supranational
bonds
£bn

Other
available
liquidity
£bn

Total
£bn
As at 31st December 2009^a
   81    3    31    12    127
As at 31st December 2008^a
   30    –    2    11    43


Composition of the Group liquidity pool (audited)	Cash and deposits with central banks £bn		Governments guaranteed bonds £bn		Governments and supranational bonds £bn		Other available liquidity £bn		Total £bn
As at 31st December 2010		96		1		46		11		154
As at 31st December 2009		81		3		31		12		127


108					~~103~~

Risk management

Liquidity risk management continued

~~Term Financing~~Liquidity regulation

~~Raising~~Since June 2010, the Group has reported its liquidity position against backstop Individual Liquidity Guidance (ILG) provided by the FSA. Calibration of the Group’s Liquidity Framework anticipated final FSA rules and is therefore broadly consistent with current FSA standards.

The Basel Committee of Banking Supervisors (BCBS) issued its final guidelines for liquidity risk management, standards and monitoring in December 2010. These guidelines include a short term liquidity stress metric (the Liquidity Coverage Ratio (LCR)) and a longer term liquidity metric (the Net Stable Funding Ratio (NSFR)). The BCBS guidelines have yet to be implemented into European and UK law and therefore remain subject to refinement and change.

However, the Group monitors compliance against these BCBS metrics and the FSA is expected to bring its ILG metrics into line with the Basel LCR over time. Applying the expected BCBS guidelines to the Group’s liquidity position as at 31st December 2010, the relevant ratios were estimated at 80% of the LCR requirement and 94% of the NSFR requirement.

Term financing (audited)

The Group continues to attract deposits in unsecured money markets and to raise additional secured and unsecured term funding in a variety of markets. As at 31st December 2009, the Group had £15bn of publicly issued term debt maturing during 2010. The corresponding figure for 2011 is ~~important in meeting~~£25bn. During 2010, the ~~risk appetite~~Group issued approximately £35bn of ~~the Barclays Liquidity Framework. Barclays has continued to increase the~~ term ~~of issued liabilities during 2009 by issuing:~~funding, comprising:

–

£~~15bn~~8bn equivalent of public senior term funding;

–

£~~1.8bn~~4bn equivalent of public covered ~~bonds; and~~

bonds/ABS;

–	£2bn equivalent of public subordinated debt; and

–	£21bn equivalent of structured notes.

~~The Group has £4bn~~This £35bn of ~~publicly issued debt~~term funding refinanced the 2010 requirement, both maturities and ~~£11bn~~early repayments, as well as pre-financed some of ~~structured notes maturing~~the 2011 and 2012 maturities. Additional term funding raised in ~~2010.~~

~~Intraday~~2011 will support balance sheet growth, further extension of liability maturities and strengthening of our liquidity

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

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 therepool is sufficient ~~collateral~~ to ~~make payments. In practice, the Group maintains a significant buffer~~cover more than one year 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 through limits on~~ wholesale borrowings, secured borrowings and funding mismatches. These ensure that on any day and over any period there is a limited amount of refinancing requirement. These requirements include replenishment of funds as they mature or are borrowed by customers.

maturities.

In addition to cash flow management, Treasury also monitors 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.

~~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 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.

Funding ~~Structure~~structure (audited)

Global Retail ~~and Commercial~~ Banking, Barclays Corporate, Barclays Wealth and Head Office Functions are structured to be self-funded through customer deposits, ~~and~~ Barclays equity and other ~~long-term capital. The~~long term funding. Barclays Capital and, in part, Absa ~~businesses~~ are funded through the wholesale secured and unsecured funding markets.

The ~~ratio of customer loans~~loan to ~~customer deposits~~deposit and ~~long-term~~long term funding ~~has~~ratio improved to ~~81%~~77% at 31st December ~~2009, from 93%~~2010 (2009: 81%). The loan to deposit ratio also improved to 124% at 31st December ~~2008.~~2010 (2009:130%).

Global Retail ~~and Commercial~~ Banking, Barclays Corporate, Barclays Wealth

and Head Office ~~Functions~~functions (audited)

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, contractually, current accounts are repayable on demand and savings accounts at short notice, the Group’s broad base of customers ~~–numerically~~– 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.

Wholesale depositor split by counterparty type – Barclays Capital
      Banks
%    Corporates
%    Governments
%    Other
central
banks
%    Other
financial
institutions
%    Total
%
As at 31st December 2009
   36    15    2    16    31    100
As at 31st December 2008
   32    15    11    9    33    100

Wholesale depositor split by geography – Barclays Capital
      US
%    UK
%    Other EU
%    Japan
%    Africa
%    Rest of
World
%    Total
%
As at 31st December 2009
   9    25    23    3    16    24    100
As at 31st December 2008
   13    22    16    9    17    23    100

GRCB, Barclays Wealth and Head Office^a
Behavioural maturity profile of assets and liabilities
   Cash inflow/(outflow)
      Funding
surplus
£bn    Not
more than
1 year
£bn Over
1 year
but not
more than
2 years
£bn    Over
2 years
but not
more than
3 years
£bn    Over
3 years
but not
more than
4 years
£bn    Over
4 years
but not
more than
5 years
£bn    Over
5 years
£bn
As at 31st December 2009
   94.5    (10.2 ) 17.8    21.2    7.8    1.8    (132.9 )

~~Note~~

a	~~Prior year figures have not been provided as these measures have not previously been reported on a comparable basis.~~


~~104~~

~~Risk management~~

~~Liquidity risk management~~

~~continued~~

~~Group policy is to ensure that the assets of the retail, wealth and corporate bank,~~The Global Retail Banking, Barclays Corporate, Barclays Wealth businesses, together with Head Office functions, ~~on a global basis,~~ do not ~~exceed~~rely on short term wholesale funding. Rather, these businesses are funded through a combination of customer deposits and subordinated funding so that these businesses place no reliance on wholesale markets. The exception to this policy is Absa, which has a large portion of wholesale funding due to the structure of the South African financial sector.long term debt and equity.

In order to assess ~~liquidity risk,~~the funding requirement for these businesses, the balance sheet is modelled to reflect behavioural experience in both assets and ~~liabilities and is managed to maintain a cash surplus.~~liabilities. The maturity profile, excluding Absa, resulting from this behavioural modelling is set out ~~above. This shows~~below. As at 31st December 2010, behavioural modelling showed that ~~there is a funding surplus of £94.5bn, and that there are expected outflows of £10.2bn within one year from asset repayments being less than liability attrition. For subsequent years the~~ expected repayments on assets are larger than the roll off of liabilities resulting in cash ~~inflows.~~inflows for each of the first five years. Maturities of net liabilities are, therefore, behaviourally expected to occur after ~~five~~5 years.

Included within the ‘Not More Than 1 yr’ time bucket in the below analysis are £18.9bn of Group liquidity pool assets. These assets have a contractual maturity of greater than 1 year. However, they could be used to generate short-term cash flows, either through the sale or secured funding and so the balance has been classified as generating cash flow inflows within 1 year.


					109

Barclays Capital (audited)

Barclays Capital manages its liquidity to be primarily funded through wholesale ~~sources, managing access to~~markets, generating sufficient liquidity to ensure that potential cash outflows in a stressed environment are covered.

~~73%~~ Much of the ~~inventory is funded on a secured basis (31st December 2008: 50%). Additionally, much of the short-term~~short term funding is invested in highly liquid assets and central bank cash and therefore contributes towards the Group liquidity pool.

Barclays Capital undertakes secured funding in the repo markets based on liquidity characteristics. 66% (2009: 73%) of the inventory is funded on a secured basis. Limits are in place for each security asset class reflecting liquidity in the cash and financing markets for these assets. The percentage of secured funding using each asset class as collateral is set out below.

Unsecured wholesale funding for the Group (excluding Absa) is managed by Barclays Capital within specific term limits. Excluding ~~short-term~~short term deposits that are ~~included~~placed within the ~~Group’s~~Group liquidity pool, the term of unsecured liabilities has been extended, with average life improving from at least ~~14 months~~^a~~at 31st December 2008 to at least~~ 26 months at 31st December ~~2009.~~

~~The extension of the term of the wholesale financing has meant that, as~~2009 to at least 30 months at 31st December ~~2009, 81% of net~~2010.

Absa (audited)

Absa operates in a market with structural dependence on wholesale funding ~~had remaining maturity~~sources. This dependence is a function of ~~greater~~customer behaviours in relation to savings in South Africa as a whole, where there is a higher concentration of cash in investment funds than ~~one year~~in bank savings. This structural shortfall relating to bank savings is transparent and ~~as at the same date, there was no net wholesale unsecured re-financing required within six months.~~

~~Regulatory Changes in 2009~~

The FSA issued its policy document on ‘strengthening liquidity standards’ on 5th October detailing the requirements for liquidity governance to be in place by 1st December 2009, and the quantitative requirements for liquidity buffers, which will be in place from 1st June 2010, although with an extended transition period of several years to meet the expected standards.

This is the most comprehensive liquidity regime imposed by any regulator globally, requiring increased quantitative reporting from June 2010 and additional evidential reporting to demonstrate adherence to new qualitative requirements. In addition, the Basel Committee on Banking Supervision released a consultative document ‘International framework for liquidity risk measurement, standards and monitoring’ in December 2009. This included two new key liquidity metrics. A liquidity coverage ratio aimed at ensuring banks have sufficient unencumbered high quality assets to meet cash outflows in an acute short-term stress and a Net Stable Funding Ratio to promote longer-term structural funding of the Bank’s balance sheet and capital market activities.carefully monitored.


Behavioural maturity profile of assets and liabilities (audited)	Cash inflow/(outflow)
	Funding surplus £bn		Not more than 1yr^a £bn			Over 1yr but not more than 2yrs £bn		Over 2yrs but not more than 3yrs £bn		Over 3yrs but not more than 4yrs £bn		Over 4yrs but not more than 5yrs £bn		Over 5yrs £bn
As at 31st December 2010		89.9		4.7			17.7		30.1		10.4		2.2		(155.0	)
As at 31st December 2009		94.5		(10.2	)		17.8		21.2		7.8		1.8		(132.9	)

Secured funding by asset class (audited)	Govt %		Agency %			MBS %		ABS %		Corporate %		Equity %		Other %
As at 31st December 2010		64		7			9		3		7		7		3
As at 31st December 2009		59		7			7		6		10		8		3

Secured funding by asset class    Government    Agency    MBS    ABS    Corporate    Equity    Other
   %    %    %    %    %    %    %
As at 31st December 2009
   59    7    7    6    10    8    3
As at 31st December 2008
   49    9    11    9    15    4    3

Contractual maturity of unsecured liabilities^b
(Net of assets available from the Group Liquidity
    pool)          Not more
than 1
month    Not more
than
2 months    Not more
than
3 months    Not more
than 6
months    Not more
than 1
year    Over
1 year
      %    %    %    %    %    %
As at 31st December 2009
      –    –    –    –    19    81

~~Notes~~Note

a	Includes £18.9bn of Group liquidity pool assets that have a contractual maturity of greater than one year but can be used to generate short-term cash flows either through sale or secured lending.


110

Risk management

Liquidity risk management continued

a	~~The 31st December 2008 average unsecured liability term has been restated to at least 14 months to reflect refinements in the underlying calculation.~~

b	~~Prior years’ figures have not been provided as these measures have not previously been reported on a comparable basis.~~

Contractual maturity of financial assets and liabilities (audited)

Details of contractual maturities for assets and liabilities form an important source of information for the management of liquidity risk. Such information is used (amongst other things) as the basis for modelling a behavioural balance sheet, for input into the liquidity framework, as discussed above.

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 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.


Contractual maturity of financial assets and liabilities (audited)
At 31st December 2010	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 centralbanks		96,842		788			–			–			–			–			–			–		97,630
Items in the course of collection from other banks		1,168		216			–			–			–			–			–			–		1,384
Trading portfolio assets		168,867		–			–			–			–			–			–			–		168,867
Financial assets designated at fair value		789		5,678			1,110			2,773			7,411			3,745			2,461			16,089		40,056
Derivative financial instruments		418,587		114			20			96			488			444			396			174		420,319
Loans and advances to banks		5,698		26,462			1,858			946			2,260			5			111			459		37,799
Loans and advances to customers		48,222		60,908			9,553			16,079			53,374			44,324			65,809			129,673		427,942
Reverse repurchase agreements and other similar secured lending		114		192,423			7,366			5,089			390			124			238			28		205,772
Available for sale financial investments		297		7,589			2,979			5,851			15,053			9,677			12,127			11,537		65,110
Other financial assets		–		2,040			–			–			784			–			–			–		2,824
Total financial assets		740,584		296,218			22,886			30,834			79,760			58,319			81,142			157,960		1,467,703
Other assets																								21,942
Total assets																								1,489,645
Liabilities
Deposits from banks		5,754		65,755			2,161			2,247			739			790			249			280		77,975
Items in the course of collection due to other banks		1,312		9			–			–			–			–			–			–		1,321
Customer accounts		230,880		77,607			13,959			11,423			5,211			3,539			2,263			906		345,788
Repurchase agreements and other similar secured borrowing		907		216,454			4,358			2,755			739			256			59			6		225,534
Trading portfolio liabilities		72,693		–			–			–			–			–			–			–		72,693
Financial liabilities designated at fair value		1,237		17,866			6,191			6,963			21,453			18,446			13,553			10,073		95,782
Derivative financial instruments		403,163		303			72			101			390			927			286			274		405,516
Debt securities in issue		17		50,735			17,982			33,172			23,130			13,032			12,028			6,527		156,623
Subordinated liabilities		–		835			–			218			2,094			475			9,499			15,378		28,499
Other financial liabilities		–		4,295			–			–			990			–			–			–		5,285
Total financial liabilities		715,963		433,859			44,723			56,879			54,746			37,465			37,937			33,444		1,415,016
Other liabilities																								12,367
Total liabilities																								1,427,383
Cumulative liquidity gap		24,621		(113,020	)		(134,857	)		(160,902	)		(135,888	)		(115,034	)		(71,829	)		52,687		62,262


				~~105~~	111


Contractual maturity of financial assets and liabilities (audited)
At 31st December 2009	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		80,592		891			–			–			–			–			–			–		81,483
Items in the course of collection from other banks		1,243		350			–			–			–			–			–			–		1,593
Trading portfolio assets		151,344		–			–			–			–			–			–			–		151,344
Financial assets designated at fair value		679		10,795			1,679			2,456			5,514			3,998			2,293			13,897		41,311
Derivative financial instruments		415,638		216			115			89			236			101			334			86		416,815
Loans and advances to banks		5,114		30,385			314			1,787			2,396			544			98			497		41,135
Loans and advances to customers		44,826		68,876			8,987			17,848			51,886			38,357			63,180			126,264		420,224
Reverse repurchase agreements and other similar secured lending		248		129,095			3,558			5,604			4,680			31			210			5		143,431
Available for sale financial investments		1,157		6,999			8,356			3,434			20,530			5,871			6,802			3,334		56,483
Other financial assets		–		2,816			–			–			660			–			–			–		3,476
Total financial assets		700,841		250,423			23,009			31,218			85,902			48,902			72,917			144,083		1,357,295
Other assets																								21,634
Total assets																								1,378,929
Liabilities
Deposits from banks		3,861		50,020			4,850			15,558			1,325			200			420			212		76,446
Items in the course of collection due to other banks		1,373		93			–			–			–			–			–			–		1,466
Customer accounts		205,868		86,481			8,226			11,940			2,954			3,049			2,864			1,047		322,429
Repurchase agreements and other similar secured borrowing		502		189,843			5,446			2,525			326			108			29			2		198,781
Trading portfolio liabilities		51,252		–			–			–			–			–			–			–		51,252
Financial liabilities designated at fair value		1,219		17,599			5,755			7,145			18,780			14,701			14,647			6,356		86,202
Derivative financial instruments		402,019		186			68			37			111			433			394			168		403,416
Debt securities in issue		64		43,390	��		17,761			19,408			29,904			11,607			7,838			5,930		135,902
Subordinated liabilities		–		173			1			27			1,234			1,375			9,871			13,135		25,816
Other financial liabilities		–		4,959			–			–			1,135			–			–			–		6,094
Total financial liabilities		666,158		392,744			42,107			56,640			55,769			31,473			36,063			26,850		1,307,804
Other liabilities																								12,647
Total liabilities																								1,320,451
Cumulative liquidity gap		34,683		(107,638	)		(126,736	)		(152,158	)		(122,025	)		(104,596	)		(67,742	)		49,491		58,478

Expected maturity dates do not differ significantly from the contract dates, except for:

–

trading portfolio assets and liabilities and derivative financial instruments, which may not be held to maturity as part of the Group’s trading strategies. For these instruments, which are mostly held by Barclays Capital, liquidity and repricing risk is managed through the Daily Value at Risk (DVaR) methodology;

–

retail deposits, which are included within customer accounts, are repayable on demand or at short notice on a contractual basis. In practice, these instruments form a stable base for the Group’s operations and liquidity needs because of the broad base of customers – both numerically and by depositor type; and

– financial assets designated at fair value held in respect of linked liabilities, which are managed with the associated liabilities.


112

Risk management

Liquidity risk management continued

Contractual maturity of financial liabilities on an undiscounted basis (audited)

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.

The balances in the below table do 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.

Derivative financial instruments held for trading and trading portfolio liabilities are included in the on demand column at their fair value.

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.


Contractual maturity of financial liabilities – undiscounted (audited)	On demand £m		Within one year £m		Over one but not more than five years £m		Over five years £m		Total £m
At 31st December 2010
Deposits from banks		5,754		70,197		1,636		613		78,200
Items in the course of collection due to other banks		1,312		9		–		–		1,321
Customer accounts		230,880		103,119		9,169		3,446		346,614
Repurchase agreements and other similar secured borrowing		907		223,589		1,099		71		225,666
Trading portfolio liabilities		72,693		–		–		–		72,693
Financial liabilities designated at fair value		1,237		32,408		45,573		34,745		113,963
Derivative financial instruments		403,163		509		1,478		1,131		406,281
Debt securities in issue		17		103,437		39,519		26,304		169,277
Subordinated liabilities		–		1,934		5,645		26,785		34,364
Other financial liabilities		–		4,295		990		–		5,285
Total financial liabilities		715,963		539,497		105,109		93,095		1,453,664
Off-balance sheet items
Loan commitments		188,958		17,755		5,912		10,416		223,041
Other commitments		227		806		183		–		1,216
Total off-balance sheet items		189,185		18,561		6,095		10,416		224,257
Total financial liabilities and off-balance sheet items		905,148		558,058		111,204		103,511		1,677,921

At 31st December 2009
Deposits from banks		3,861		70,645		1,607		773		76,886
Items in the course of collection due to other banks		1,373		93		–		–		1,466
Customer accounts		205,868		106,991		6,898		5,488		325,245
Repurchase agreements and other similar secured borrowing		502		197,864		450		37		198,853
Trading portfolio liabilities		51,252		–		–		–		51,252
Financial liabilities designated at fair value		1,219		31,030		35,733		34,206		102,188
Derivative financial instruments		402,019		311		627		998		403,955
Debt securities in issue		64		82,215		46,055		22,243		150,577
Subordinated liabilities		–		2,101		6,295		26,842		35,238
Other financial liabilities		–		4,959		1,135		–		6,094
Total financial liabilities		666,158		496,209		98,800		90,587		1,351,754
Off-balance sheet items
Loan commitments		127,540		74,111		4,181		861		206,693
Other commitments		386		384		19		–		789
Total off-balance sheet items		127,926		74,495		4,200		861		207,482
Total financial liabilities and off-balance sheet items		794,084		570,704		103,000		91,448		1,559,236


					113

Risk management

Operational risk management

All disclosures in this section (pages 137 and 138) are unaudited

Operational ~~risk~~Risk is defined as the risk of direct or indirect ~~losses~~impacts resulting from human factors, ~~external events, and~~ inadequate or failed internal processes and ~~systems.~~systems or external events. Operational risks are inherent in the Group’s ~~operations~~business activities 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.~~

–

~~Manage residual exposures using insurance.~~

~~Organisation and structure~~

~~Barclays works to benchmark our internal operation risk practices with peer banks and to drive the development of advanced 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~~Losses from operational risks of small significance are expected to occur and are accepted as part of the normal course of ~~business; events~~business. Those of material significance are rare and the Group seeks to reduce the ~~risk from~~likelihood of these in accordance with its ~~agreed~~ Risk Appetite.

Overview

The management of Operational Risk has two key objectives:

–	To minimise the impact of losses suffered in the normal course of business (expected losses) and to avoid or reduce the likelihood of suffering a large extreme (or unexpected) loss.

–	To improve the effective management of the Barclays Group and strengthen its brand and external reputation.

Barclays ~~has~~is committed to the management and measurement of operational risk and was granted a waiver to operate an Advanced Measurement Approach (AMA) for Operational Risk under Basel II, which commenced in January 2008. The majority of the Group calculates regulatory capital using AMA, however in specific areas we apply the Standardised approach or Basic Indicator approach. In certain joint ventures and associates, Barclays may not be able to apply the AMA.

Areas where the roll-out of AMA is still continuing and the Standardised approach is currently applied are Barclays Bank Mozambique, National Bank of Commerce (Tanzania), and the portfolio of assets purchased from Woolworths Financial Services in South Africa, Citi Cards and Standard Life Bank, while these are integrated into our infrastructure.

Areas where the Group is working towards the rollout of AMA and the Basic Indicator approach is applied are Barclays Bank PLC Pakistan, Barclays Bank LLC Russia, Barclays Investment and Loans India Limited, the ABSA Africa businesses and the ‘new-to-bank’ business activities acquired from Lehman Brothers.

Barclays works to benchmark its internal operational risk practices with peer banks and to drive the development of advanced operational risk techniques across the industry.

Structure and governance

The Operational Risk framework comprises a number of elements which allow Barclays to manage and measure its Operational Risk profile and to calculate the amount of Operational Risk capital that Barclays needs to hold to absorb potential losses. The minimum, mandatory requirements for each of these elements are set out in the Group Operational Risk policies. This framework is implemented: vertically, through the organisational structure with all Business Units required to implement and operate an operational risk framework that meets, as a minimum, the requirements detailed in these operational risk policies; and laterally, with Group Principal Risk Owners required to ensure that the Group Operational Risk policies are reflected in the Control Framework ~~which is consistent with~~for their Principal Risk.

Barclays operates within a robust system of internal control that enables business to be transacted and ~~part of~~risk taken without exposure to unacceptable potential losses or reputational damage. To this end, Barclays has implemented the Group Internal Control and Assurance ~~Framework. Minimum control requirements have been established for all key areas~~Framework (GICAF) which is aligned with the internationally recognised Committee of identified risk by ‘Principal Risk’ owners (see page 54). The risk categories relevant to operational risks are Financial Crime, Financial Reporting, Taxation, Legal, Operations, People, Regulatory and Technology. In addition,Sponsoring Organisations of the following risk categories are used for business risk: Brand Management, Corporate Responsibility, Strategic and Major Change. Responsibility for implementing and overseeing these policies is positioned with Group Principal Risk Owners. Treadway Commission Framework (COSO).

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. Front line risk managers are widely distributed throughout the ~~Group in business units.~~Group. They service and support these areas, assisting line managers in managing ~~these~~their risks.

The Operational Risk Director (or equivalent) for each Business ~~Risk Directors in each business are~~Unit is responsible for ~~overseeing~~ensuring the implementation of and compliance with Group Operational Risk policies.

The Group Operational Risk Director is responsible for establishing, owning and maintaining an appropriate Group wide Operational Risk Framework and for overseeing the portfolio of Operational Risk across the Group.

The Group Operational Risk Executive Committee (GOREC) assists with the oversight of Operational Risk. GOREC is a sub-committee of the Group Risk Oversight Committee (GROC), which presents to the Board Risk Committee (BRC).

In addition, Governance and Control Committees (G&CCs) in each business monitor control effectiveness. The Group ~~Governance and Control Committee~~G&CC receives reports from ~~the~~these committees ~~in the businesses~~ and considers Group-significant control issues and their remediation. InThe Group G&CC presents to the 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. Board Audit Committee (BAC).

Business units are required to report their Operational Risks on both a regular and an event-driven basis. The reports include a profile of the material risks to their business objectives and the effectiveness of key controls, control issues of Group-level significance, ~~and~~ operational risk ~~events.~~events and a review of scenarios and capital. Specific reports are prepared on a regular basis for ~~the Group Risk Oversight Committee, the Board Risk Committee~~GOREC, GROC, BRC and ~~the Board Audit Committee.~~ BAC.

The Internal Audit function provides further ~~assurance for~~independent review and challenge of the Group’s operational risk ~~control across the organisation~~management controls, processes and systems and reports to the Board and senior management.


114

Risk management

Operational risk management continued

~~Measurement~~Operational risk management

The Barclays Operational Risk Framework is a key component of GICAF and ~~capital modelling~~has been designed to meet a number of external governance requirements, including Basel II and Turnbull. It also supports the Sarbanes-Oxley requirements.

The Operational Risk framework includes the following elements.

Risk Assessments

Barclays ~~applies a consistent approach~~identifies and assesses all material risks within each business unit and evaluates the key controls in place to ~~the identification and assessment of key risks and controls across all business units.~~ mitigate those risks.

Managers in the ~~businesses~~business units use self-assessment techniques to identify risks, evaluate ~~control~~the effectiveness of controls in place and ~~monitor performance. Business management determines~~assess whether ~~particular~~the risks are effectively managed to within business risk appetite. The businesses are then able to make decisions on what, if any, action is required to reduce the level of risk to Barclays. These risk assessments are monitored on a regular basis to ensure that each business continually understands the risks it faces.

Risk ~~Appetite and otherwise takes remedial action.~~Events

An operational risk event is any circumstance where, through the lack or failure of a control, Barclays has actually, or could have, made a loss. The ~~risk assessment process is consistent with the principles~~definition includes situations in ~~the integrated framework published by the Committee of Sponsoring Organisations of the Treadway Commission (COSO).~~which Barclays could have made a loss, but in fact made a gain, as well as incidents resulting in reputational damage or regulatory impact only.

A standard ~~process~~threshold is used ~~Group-wide~~across the Group for ~~the recognition, capture, assessment,~~reporting risk events and as part of our analysis ~~and reporting of risk events. This process is used~~we seek to ~~help~~ identify where ~~process and control requirements~~improvements are needed to processes or controls, to reduce the recurrence and/or magnitude of risk events. ~~Risk events are captured in a central database and reported monthly to the Group Operational Risk Executive Committee.~~

Barclays also uses a database of external ~~public~~ risk events which are publicly available and is a member of the Operational Risk ~~Data Exchange~~data exchange (ORX), ana not-for-profit association of international banks ~~that~~formed to share ~~anonymised~~anonymous loss data information. Barclays uses this external loss information to ~~assist in~~support and inform risk identification, assessment and ~~modelling.~~

measurement.


~~106~~

Key indicators

Key Indicators (KIs) are metrics which allow Barclays to monitor its operational risk profile. KIs include measurable thresholds that reflect the risk appetite of the business. KIs are monitored to alert management when risk levels exceed acceptable ranges or risk appetite levels and drive timely decision making and actions.

Key Risk ~~management~~Scenarios

~~Operational risk management~~

~~continued~~

By combining ~~internal~~ data ~~including internal loss experience,~~from risk events, risk assessments and ~~control assessments,~~ key indicators ~~and~~with that from audit findings, ~~with external loss data and~~ expert management judgement and other internal data sources, Barclays is able to generate Key Risk Scenarios (KRSs)~~, which~~. These scenarios identify the most significant operational risks

LOGO

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. These~~risk the business faces.

Insurance

As part of its risk management approach, the Group also uses insurance to mitigate the impact of some operational risks.

Reporting

The ongoing monitoring and reporting of Operational Risk is a key component of an effective Operational Risk Framework. Reports are used by the Operational Risk function and by business management to understand, monitor, manage and control operational risks and losses.

Operational risk measurement

The Operational Risk capital model uses the outputs of the risk management tools to measure Barclays operational risk exposure. KRSs are the main input to ~~our capital model. Distributions of~~ the ~~potential~~model, which also uses the frequency and severity of operational risk losses ~~are calculated and aggregated~~ to provide a distribution of potential losses over a year for Barclays as a whole. ~~The aggregation~~This process takes into account ~~potential~~the possibility of correlations ~~between risk events.~~i.e. the likelihood of two key risks occurring within the same year. The model generates a regulatory capital requirement, which is determined to a ~~soundness standard~~level of 99.9% confidence. ~~Operational risk~~Once the overall level of regulatory capital for the Group has been established it is allocated, on a risk sensitive basis, to business ~~units, providing~~units. This provides an incentive for the business to manage ~~these~~its risks within appetite levels.

Operational risk ~~events~~profile

A high proportion of Barclays operational risk events have a low associated financial cost ~~associated with them~~ and a very small proportion of operational risk events have a material impact. In ~~2009, 73.3%~~2010, 75.0% of ~~reported~~ operational losses had a value of £50,000 or less ~~(2008: 72.8%~~(2009: 73.3%) but accounted for ~~3.4%~~3.7% of the overall impact ~~(2008: 7.8%~~(2009: 3.4%). In contrast, 4%2.5% of the operational risk events had a value of ~~£1m~~£1 m or greater ~~(2008: 2%~~(2009: 3.9%) but accounted for ~~87%~~86.5% of the overall impact ~~(2008: 66%~~(2009: 87.1%).

The Group monitors trends in operational ~~losses~~risk events by size, business unit and internal risk categories (including Principal Risk). For comparative purposes, the analysis below presents Barclays operational risk events by Basel II category. In ~~2009,~~2010, the highest frequency of events occurred in External Fraud (42.7%) and Execution, Delivery and Process Management ~~(45.3%~~(39.2%). Clients, Products and ~~External Fraud (35.8%). These two areas also~~Business Practices accounted for the ~~majority~~highest proportion of losses by value, with 67.9% (2009: 8.5%). The growth in impact for this category was driven by the settlement reached with US authorities as a result of their investigation into compliance with US sanctions and US dollar payment practices. The impact of Execution, Delivery and Process Management ~~comprising 50.5% of total operational risk losses~~(21.6%) and External Fraud ~~making up a further 38.1%.~~(6.1%) reduced this year, due to one off events occurring in 2009 which were not repeated in 2010. The ~~growth in~~ impact of ~~external~~External Fraud also reduced due to improvements made to fraud ~~year on year was caused by stressed market conditions which have brought to light fraudulent activity by a number of clients.~~controls.

LOGO


				~~107~~	115

Risk management

~~Statistical information~~Supervision and regulation

~~Statistical and other risk information~~

~~This~~All disclosures in 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~~(pages 115 to ~~the preceding text (pages 66 to 93).~~119) are unaudited

~~Credit risk management~~

Table 1: Maturity analysis of loans and advances to banks
At 31st December 2009    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
   403    3,234    64    625    405    –    –    398    5,129
Other European Union
   1,262    10,803    44    394    184    8    2    –    12,697
United States
   1,257    10,926    77    619    157    –    38    63    13,137
Africa
   565    465    221    98    974    6    41    18    2,388
Rest of the World
   1,275    5,111    88    98    708    530    17    18    7,845
   4,762    30,539    494    1,834    2,428    544    98    497    41,196
At 31st December 2008

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
Loans and advances to banks
   4,883    35,699    506    1,921    1,898    1,854    52    945    47,758

Table 2: Interest rate sensitivity of loans and advances
      2009    2008
At 31st December
Fixed
rate
£m

Variable
rate
£m

Total
£m

Fixed
rate
£m

Variable
rate
£m

Total
£m
Banks
   15,898    25,298    41,196    12,101    35,657    47,758
Customers
   94,470    336,489    430,959    98,404    369,934    468,338


~~108~~

~~Risk management~~

~~Statistical information~~

~~continued~~

Table 3: Loans and advances to customers by industry

At 31st December


2009
£m

2008
£m

2007
£m

2006
£m

2005
£m
Financial services
   95,839    114,069    71,160    45,954    43,102
Agriculture, forestry and fishing
   4,321    3,281    3,319    3,997    3,785
Manufacturing
   18,855    26,374    16,974    15,451    13,779
Construction
   6,303    8,239    5,423    4,056    5,020
Property
   23,468    22,155    17,018    16,528    16,325
Government
   4,801    5,301    2,036    2,426    1,718
Energy and water
   10,735    14,101    8,632    6,810    6,891
Wholesale and retail, distribution and leisure
   19,746    20,208    18,216    15,490    17,760
Transport
   7,284    8,612    6,258    5,586    5,960
Postal and communication
   3,427    7,268    5,404    2,180    1,313
Business and other services
   30,277    37,373    30,363    26,999    22,529
Home loans
   149,738    140,166    106,751    92,477    85,206
Other personal
   44,971    48,305    46,423    37,535    39,866
Finance lease receivables
   11,194    12,886    11,190    10,142    9,088
Loans and advances to customers
   430,959    468,338    349,167    285,631    272,342

Table 4: Loans and advances to customers in the UK

At 31st December


2009
£m

2008
£m

2007
£m

2006
£m

2005
£m
Financial services
   21,975    26,091    21,131    14,011    11,958
Agriculture, forestry and fishing
   2,192    2,245    2,220    2,307    2,409
Manufacturing
   8,549    11,340    9,388    9,047    8,469
Construction
   3,544    4,278    3,542    2,761    3,090
Property
   13,514    12,091    10,203    10,010    10,547
Government
   496    20    201    6    6
Energy and water
   2,447    3,040    2,203    2,360    2,701
Wholesale and retail distribution and leisure
   12,792    14,421    13,800    12,951    12,747
Transport
   2,784    3,467    3,185    2,745    2,797
Postal and communication
   1,098    1,491    1,416    899    455
Business and other services
   16,577    19,589    20,485    19,260    15,397
Home loans
   90,903    85,672    69,874    62,621    57,382
Other personal
   27,687    28,362    28,691    27,617    30,598
Finance lease receivables
   3,021    3,911    4,008    3,923    5,203
Loans and advances to customers in the UK
   207,579    216,018    190,347    170,518    163,759

~~Loans and advances included in the above table for the year 2008 have been reanalysed between Home loans and Other personal to reflect changes in classification of assets.~~

The industry classifications in Tables 3-7 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.


				~~109~~

Table 5: Loans and advances to customers in other European Union countries

At 31st December

   2009
£m    2008
£m    2007
£m    2006
£m    2005
£m
Financial services
   14,475    14,218    7,585    5,629    3,982
Agriculture, forestry and fishing
   187    216    141    786    155
Manufacturing
   5,754    8,700    4,175    3,147    2,254
Construction
   1,610    1,786    1,159    639    803
Property
   4,224    4,814    2,510    2,162    3,299
Government
   575    1,089    –    6    –
Energy and water
   3,882    5,313    2,425    2,050    1,490
Wholesale and retail distribution and leisure
   2,428    2,653    1,719    776    952
Transport
   1,905    2,603    1,933    1,465    1,695
Postal and communication
   649    962    662    580    432
Business and other services
   4,878    5,490    3,801    2,343    3,594
Home loans
   35,752    34,451    21,405    18,202    16,114
Other personal
   7,403    6,440    6,615    4,086    2,283
Finance lease receivables
   2,636    3,328    2,403    1,559    1,870
Loans and advances to customers in other European Union countries
   86,358    92,063    56,533    43,430    38,923

Table 6: Loans and advances to customers in the United States

At 31st December

   2009
£m    2008
£m    2007
£m    2006
£m    2005
£m
Financial services
   46,132    56,006    29,342    17,516    16,229
Agriculture, forestry and fishing
   1    –    2    2    1
Manufacturing
   797    2,171    818    519    937
Construction
   7    21    18    13    32
Property
   428    549    568    1,714    329
Government
   303    336    221    153    300
Energy and water
   2,336    3,085    1,279    1,078    1,261
Wholesale and retail distribution and leisure
   720    1,165    846    403    794
Transport
   383    415    137    128    148
Postal and communication
   355    3,343    2,446    36    236
Business and other services
   1,721    2,279    1,053    1,432    885
Home loans
   19    28    10    349    2
Other personal
   7,410    7,691    3,256    2,022    1,443
Finance lease receivables
   318    298    304    312    328
Loans and advances to customers in the United States
   60,930    77,387    40,300    25,677    22,925

Table 7: Loans and advances to customers in Africa

At 31st December

   2009
£m    2008
£m    2007
£m    2006
£m    2005
£m
Financial services
   3,600    1,956    3,472    2,821    4,350
Agriculture, forestry and fishing
   1,936    817    956    889    1,193
Manufacturing
   1,419    1,082    1,351    1,747    1,501
Construction
   903    2,053    637    591    1,068
Property
   4,154    3,485    2,433    1,987    1,673
Government
   1,449    1,741    967    785    625
Energy and water
   158    118    356    156    193
Wholesale and retail distribution and leisure
   1,789    1,012    1,326    1,050    2,774
Transport
   368    739    116    354    394
Postal and communication
   715    293    231    241    27
Business and other services
   4,319    4,699    1,285    2,631    1,258
Home loans
   22,057    19,036    15,393    11,223    11,630
Other personal
   964    3,069    6,287    2,976    4,955
Finance lease receivables
   5,018    5,130    4,357    4,240    1,580
Loans and advances to customers in Africa
   48,849    45,230    39,167    31,691    33,221


~~110~~

~~Risk management~~

~~Statistical information~~

~~continued~~

Table 8: Loans and advances to customers in the Rest of the World

At 31st December

   2009
£m    2008
£m    2007
£m    2006
£m    2005
£m
Loans and advances
   27,042    37,421    22,702    14,207    13,407
Finance lease receivables
   201    219    118    108    107
Loans and advances to customers in the Rest of the World
   27,243    37,640    22,820    14,315    13,514

Table 9: Maturity analysis of loans and advances to customers
At 31st December 2009    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
   21,369    14,941    1,568    2,856    13,057    10,071    9,759    14,626    88,247
Other lending to customers in the United Kingdom
   5,862    3,802    2,092    3,809    15,201    10,404    23,302    54,860    119,332
Total United Kingdom
   27,231    18,743    3,660    6,665    28,258    20,475    33,061    69,486    207,579
Other European Union
   4,094    16,113    1,976    3,278    11,088    9,247    10,137    30,425    86,358
United States
   4,887    25,296    2,265    3,637    4,876    1,251    11,485    7,233    60,930
Africa
   11,248    2,457    1,052    1,322    4,307    3,091    6,162    19,210    48,849
Rest of the World
   1,967    6,616    1,189    3,758    4,367    4,485    3,154    1,707    27,243
Total
   49,427    69,225    10,142    18,660    52,896    38,549    63,999    128,061    430,959
At 31st December 2008

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

Table 10: Foreign outstandings in currencies other than the local currency
of the borrower for countries where this exceeds 1% of total Group assets
At 31st December 2009    As % of
assets    Total
£m    Banks
and other
financial
institutions
£m    Governments
and official
institutions
£m
Commercial
industrial
and other
private
sectors
£m

United States
   1.2    16,907    4,622    –    12,285
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 2009, 2008 and 2007, there were no countries where Barclays had cross-currency loans to borrowers between 0.75% and 1% of total Group assets.~~


				~~111~~

Table 11: Off-balance sheet and other credit exposures as at 31st December
2009
£m

2008
£m

2007
£m
Off-balance sheet exposures

Contingent liabilities
   52,774    66,310    45,774
Commitments
   207,275    260,816    192,639
On-balance sheet exposures

Trading portfolio assets
   151,344    185,637    193,691
Financial assets designated at fair value held on own account
   41,311    54,542    56,629
Derivative financial instruments
   416,815    984,802    248,088
Available for sale financial investments
   56,483    64,976    43,072

Table 12: Notional principal amounts of credit derivatives as at 31st December
2009
£m

2008
£m

2007
£m
Credit derivatives held or issued for trading purposes^a
   2,016,796    4,129,244    2,472,249

Table 13: Credit risk loans summary
At 31st December
   2009
£m    2008
£m    2007
£m    2006
£m    2005
£m
Impaired loans
   16,240    12,264    8,574    4,444    4,550
Accruing loans which are contractually overdue 90 days or more as to principal or interest
   5,317    2,953    794    598    609
Impaired and restructured loans
   831    483    273    46    51
Credit risk loans
   22,388    15,700    9,641    5,088    5,210

Table 14: Credit risk loans
At 31st December
   2009
£m    2008
£m    2007
£m    2006
£m    2005
£m
Impaired loans:

United Kingdom
   4,519    3,793    3,605    3,340    2,965
Other European Union
   4,004    1,713    472    410    345
United States
   4,612    4,397    3,703    129    230
Africa
   2,170    1,996    757    535    831
Rest of the World
   935    365    37    30    179
Total
   16,240    12,264    8,574    4,444    4,550
Accruing loans which are contractually overdue 90 days or more as to principal or interest:

United Kingdom
   2,312    1,656    676    516    539
Other European Union
   951    562    79    58    53
United States
   232    433    10    3    –
Africa
   1,739    172    29    21    17
Rest of the World
   83    130    –    –    –
Total
   5,317    2,953    794    598    609
Impaired and restructured loans:

United Kingdom
   582    367    179    –    5
Other European Union
   41    29    14    10    7
United States
   180    82    38    22    16
Africa
   22    –    42    14    23
Rest of the World
   6    5    –    –    –
Total
   831    483    273    46    51
Total credit risk loans:

United Kingdom
   7,413    5,816    4,460    3,856    3,509
Other European Union
   4,996    2,304    565    478    405
United States
   5,024    4,912    3,751    154    246
Africa
   3,931    2,168    828    570    871
Rest of the World
   1,024    500    37    30    179
Credit risk loans
   22,388    15,700    9,641    5,088    5,210

~~Note~~

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


~~112~~

~~Risk management~~

~~Statistical information~~

~~continued~~

Table 15: Potential problem loans
At 31st December    2009
£m    2008
£m    2007
£m    2006
£m    2005
£m
United Kingdom
   858    883    419    465    640
Other European Union
   790    963    59    32    26
United States
   553    431    964    21    12
Africa
   488    140    355    240    248
Rest of the World
   679    39    –    3    3
Potential problem loans
   3,368    2,456    1,797    761    929

Table 16: Interest foregone on credit risk loans

2009
£m

2008
£m

2007
£m
Interest income that would have been recognised under the original contractual terms

United Kingdom
   392    244    340
Rest of the World
   736    235    91
Total
   1,128    479    431

Interest income of approximately £413m (2008: £195m, 2007: £48m) from such loans was included in profit, of which £137m (2008: £72m, 2007: £26m) related to domestic lending and the remainder related to foreign lending.

In addition, a further £185m (2008: £135m, 2007: £113m) 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. £52m (2008: £42m, 2007: £93m) of this related to domestic impaired loans and the remainder related to foreign impaired loans.

Table 17: Analysis of impairment/provision charges
At 31st December    2009
£m    2008
£m    2007
£m    2006
£m 2005
£m
Impairment charge/net specific provisions charge

United Kingdom
   2,744    1,817    1,593    1,880    1,382
Other European Union
   1,408    587    123    92    75
United States
   1,525    1,519    374    12    76
Africa
   814    454    214    143    37
Rest of the World
   839    207    2    (53 ) 4
Impairment on loans and advances
   7,330    4,584    2,306    2,074    1,574
Impairment on available for sale assets
   670    382    13    86    4
Impairment on reverse repurchase agreements
   43    124    –    –    –
Impairment charge
   8,043    5,090    2,319    2,160    1,578
Other credit provisions charge/(release)
   28    329    476    (6 ) (7 )
Impairment/provision charges
   8,071    5,419    2,795    2,154    1,571

Table 18: Impairment/provisions charges ratios (‘Loan loss ratios’)

2009
%

2008
%

2007
%

2006
%

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

Impairment charge
   1.64    1.01    0.64    0.66    0.58
Total
   1.64    1.01    0.64    0.66    0.58
Amounts written off (net of recoveries)
   0.72    0.61    0.49    0.61    0.50


				~~113~~

Table 19: Analysis of allowance for impairment/provision for bad and doubtful debts    2009    2008    2007    2006    2005
   £m    £m    £m    £m    £m
Impairment allowance/specific provisions

United Kingdom
   4,083    2,947    2,526    2,477    2,266
Other European Union
   2,014    963    344    311    284
United States
   2,518    1,561    356    100    130
Africa
   1,349    857    514    417    647
Rest of the World
   832    246    32    30    123
Allowance for impairment provision balances
   10,796    6,574    3,772    3,335    3,450
Average loans and advances for the year
   447,569    453,413    357,853    313,614    271,421

Table 20: Allowance for impairment/provision balance ratios    2009    2008    2007    2006    2005
   %    %    %    %    %
Allowance for impairment/provision balance at end of year as a percentage of loans and advances at end of year:

Impairment balance
   2.29    1.27    0.97    1.05    1.14
Total
   2.29    1.27    0.97    1.05    1.14

Table 21: Movements in allowance for impairment/provisions charge
for bad and doubtful debts^a
   2009 2008 2007 2006 2005
   £m £m £m £m £m
Allowance for impairment/provision balance at beginning of year
   6,574    3,772    3,335    3,450    2,637
Acquisitions and disposals
   434    307    (73 ) (23 ) 555
Unwind of discount
   (185 ) (135 ) (113 ) (98 ) (76 )
Exchange and other adjustments
   (127 ) 791    53    (153 ) 125
Amounts written off
   (3,380 ) (2,919 ) (1,963 ) (2,174 ) (1,587 )
Recoveries
   150    174    227    259    222
Impairment/provision charged against profit
   7,330    4,584    2,306    2,074    1,574
Allowance for impairment/provision balance at end of year
   10,796    6,574    3,772    3,335    3,450

Table 22: Amounts written off    2009 2008 2007 2006 2005
   £m £m £m £m £m
United Kingdom
   (1,569 ) (1,514 ) (1,530 ) (1,746 ) (1,302 )
Other European Union
   (453 ) (162 ) (143 ) (74 ) (56 )
United States
   (669 ) (1,044 ) (145 ) (46 ) (143 )
Africa
   (438 ) (187 ) (145 ) (264 ) (81 )
Rest of the World
   (251 ) (12 ) –    (44 ) (5 )
Amounts written off
   (3,380 ) (2,919 ) (1,963 ) (2,174 ) (1,587 )


~~114~~

~~Risk management~~

~~Statistical information~~

~~continued~~

Table 23: Recoveries    2009
£m 2008
£m 2007
£m 2006
£m 2005
£m
United Kingdom
   48    131    154    178    160
Other European Union
   12    4    32    18    13
United States
   6    1    7    22    15
Africa
   80    36    34    33    16
Rest of the World
   4    2    –    8    18
Recoveries
   150    174    227    259    222

Table 24: Impairment allowances/provision charged against profit^a    2009
£m 2008
£m 2007
£m 2006
£m 2005
£m
New and increased impairment allowance/specific provision charge:

United Kingdom
   3,123    2,160    1,960    2,253    1,763
Other European Union
   1,625    659    192    182    113
United States
   1,535    1,529    431    60    105
Africa
   932    526    268    209    109
Rest of the World
   896    242    20    18    39
   8,111    5,116    2,871    2,722    2,129
Reversals of impairment allowance/specific provision charge:

United Kingdom
   (331 ) (212 ) (213 ) (195 ) (221 )
Other European Union
   (205 ) (68 ) (37 ) (72 ) (25 )
United States
   (4 ) (9 ) (50 ) (26 ) (14 )
Africa
   (38 ) (36 ) (20 ) (33 ) (56 )
Rest of the World
   (53 ) (33 ) (18 ) (63 ) (17 )
   (631 ) (358 ) (338 ) (389 ) (333 )
Recoveries
   (150 ) (174 ) (227 ) (259 ) (222 )
Net charge to profit
   7,330    4,584    2,306    2,074    1,574

Table 25: Total impairment/specific provision charges
for bad and doubtful debts by industry
   2009
£m 2008
£m 2007
£m 2006
£m 2005
£m
United Kingdom:

Financial services
   485    76    32    64    22
Agriculture, forestry and fishing
   2    4    –    5    9
Manufacturing
   112    118    72    1    120
Construction
   54    15    14    17    14
Property
   113    80    36    15    18
Energy and water
   –    1    1    (7 ) 1
Wholesale and retail distribution and leisure
   314    59    118    88    39
Transport
   13    3    3    19    (27 )
Postal and communication
   17    –    15    15    3
Business and other services
   175    234    81    133    45
Home loans
   33    28    1    4    (7 )
Other personal
   1,376    1,178    1,187    1,526    1,142
Finance lease receivables
   50    21    33    –    3
   2,744    1,817    1,593    1,880    1,382
Overseas
   4,586    2,767    713    194    192
Impairment/specific provision charges
   7,330    4,584    2,306    2,074    1,574

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

The industry classifications in Tables 25, 26 and 27 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.

~~Note~~

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


				~~115~~

Table 26: Allowance for impairment/specific provision for bad and doubtful debts by industry
2009 2008 2007 2006 2005
£m % £m % £m % £m % £m %
United Kingdom:

Financial services
493 4.6 81 1.2 103 2.7 67 2.0 26 0.8
Agriculture, forestry and fishing
– – 1 0.0 5 0.1 17 0.5 12 0.3
Manufacturing
142 1.3 185 2.8 65 1.7 85 2.5 181 5.2
Construction
41 0.4 18 0.3 16 0.4 16 0.5 13 0.4
Property
90 0.8 114 1.7 54 1.4 26 0.8 24 0.7
Energy and water
– – 1 0.0 1 – – – 18 0.5
Wholesale and retail distribution and leisure
182 1.7 43 0.7 102 2.7 81 2.4 99 2.9
Transport
– 0.0 – 0.0 11 0.3 24 0.7 32 0.9
Postal and communication
27 0.3 33 0.5 25 0.7 12 0.4 2 0.1
Business and other services
218 2.0 236 3.6 158 4.2 186 5.6 102 3.0
Home loans
63 0.6 46 0.7 15 0.4 10 0.3 50 1.4
Other personal
2,762 25.5 2,160 32.9 1,915 50.8 1,953 58.6 1,696 49.2
Finance lease receivables
65 0.6 29 0.4 56 1.5 – – 11 0.3
4,083 37.8 2,947 44.8 2,526 67.0 2,477 74.3 2,266 65.7
Overseas
6,713 62.2 3,627 55.2 1,246 33.0 858 25.7 1,184 34.3
Total
10,796 100 6,574 100.0 3,772 100.0 3,335 100.0 3,450 100.0

Table 27: Analysis of amounts written off and recovered by industry

Amounts written off for the year

Recoveries of amounts previously
written off
   2009
£m 2008
£m 2007
£m 2006
£m 2005
£m 2009
£m 2008
£m 2007
£m 2006
£m 2005
£m
United Kingdom:

Financial services
72 88 6 13 2 3 4 1 – 1
Agriculture, forestry and fishing
2 6 5 8 3 – – 2 1 –
Manufacturing
162 53 83 73 47 4 8 7 21 11
Construction
34 19 23 17 15 3 2 3 2 1
Property
141 27 16 23 4 3 2 10 6 1
Energy and water
2 1 – 1 22 4 – – 2 –
Wholesale and retail distribution and leisure
182 137 109 120 85 8 7 12 14 25
Transport
14 10 13 11 29 1 1 1 10
Postal and communication
23 3 3 5 15 – – – – –
Business and other services
197 153 83 124 83 5 10 22 17 14
Home loans
16 4 1 – 2 – 1 1 7 4
Other personal
705 960 1,164 1,351 992 13 88 96 107 92
Finance lease receivables
19 53 24 – 3 4 8 – – 1
1,569 1,514 1,530 1,746 1,302 48 131 154 178 160
Overseas
1,811 1,405 433 428 285 102 43 73 81 62
Total
3,380 2,919 1,963 2,174 1,587 150 174 227 259 222


~~116~~

~~Risk management~~

~~Statistical information~~

~~continued~~

Table 28: Total impairment allowance/(provision) coverage of credit risk loans
      2009
%    2008
%    2007
%    2006
%    2005
%
United Kingdom
   55.1    50.7    56.6    64.2    64.6
Other European Union
   40.3    41.8    60.9    65.1    70.1
United States
   50.1    31.8    9.5    64.9    52.8
Africa
   34.3    39.5    62.1    73.2    74.3
Rest of the World
   81.3    49.2    86.5    100.0    68.7
Total coverage of credit risk loans
   48.2    41.9    39.1    65.6    66.2

Table 29: Total impairment allowance/(provision) coverage of
potential credit risk lending (CRLs and PPLs)
      2009
%    2008
%    2007
%    2006
%    2005
%
United Kingdom
   49.4    44.0    51.8    57.3    54.6
Other European Union
   34.8    29.5    55.1    61.0    65.9
United States
   45.1    29.2    7.6    57.1    50.4
Africa
   30.5    37.1    43.4    51.5    57.8
Rest of the World
   48.9    45.5    86.5    91.0    67.6
Total coverage of potential credit risk lending
   41.9    36.2    33.0    57.0    56.2


				~~117~~

~~Risk management~~

~~Supervision and regulation~~

The Group’s operations, including its overseas offices, subsidiaries and associates, are subject to a significant body of rules and regulations that are a condition for authorisation to conduct banking and financial services business, constrain business operations and affect financial returns. These include reserve and reporting requirements and conduct of business regulations. These requirements are imposed by the relevant central banks and regulatory 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 Financial Services Authority (FSA) isremains, pending the reorganisation of the UK regulatory regime (see below), the independent body responsible for the regulation and supervision of deposit taking, life insurance, home mortgages, general insurance and investment business. Barclays Bank PLC is authorised by the FSA under the Financial Services and Markets Act 2000 to carry on a range of regulated activities within the UK and is subject to consolidated supervision by the FSA. In its role as supervisor, the FSA seeks to maintain the safety and soundness of financial institutions with the aim of strengthening, but not guaranteeing, the protection of customers and the financial system. The FSA’s continuing supervision of financial institutions 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. This is supplemented with a rolling programme of continuous engagement on prudential and conduct matters with high impact firms, such as Barclays. 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.

The Banking Act 2009 (the Banking Act) provides a permanent regime to allow the FSA, the UK Treasury and the Bank of England to resolve failing banks in the UK. Under the Banking Act, these authorities are given powers, including (a) the power to issue share transfer orders pursuant to which all or some of the securities issued by a bank may be transferred to a commercial purchaser or Bank of England ~~entity~~entity; 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. A 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 shares and bonds. The Banking Act powers apply regardless of any contractual restrictions and compensation may be payable in the context of both share transfer orders and property appropriation.

The Banking Act also gives the Bank of England the power to override, vary or impose contractual obligations between a UK bank or its holding company and its former group undertakings 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 (excluding provisions made by or under the Banking Act) for the purpose of enabling it to use the regime powers effectively, potentially with retrospective effect. In addition, the Banking Act gives the Bank of England statutory responsibility for financial stability in the UK and for the oversight of payment systems.

The Financial Services Act 2010, among other things, requires the FSA to make rules about remuneration and to require regulated firms to have a remuneration policy that is consistent with both effective risk management and the standards issued by the Financial Stability Board. The FSA is mandated to make rules that require authorised firms (or a sub-set of authorised firms) to draw up recovery and resolution plans and to consult with the Treasury and the Bank of England on the adequacy of firms’ plans. This Act also allows the FSA to make rules requiring firms to operate a collective consumer redress scheme to deal with cases of widespread failure by regulated firms to meet regulatory requirements that may have created consumer detriment.

Banks, insurance companies and other financial institutions in the UK are subject to a single financial services compensation scheme (the Financial Services Compensation ~~Scheme—~~Scheme – FSCS) where an authorised firm is unable or is likely to be unable to meet claims made against it because of its financial circumstances. 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) are covered by the FSCS. Most claims made in respect of 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 FSCS is funded by levies on authorised UK firms such as Barclays Bank PLC. In the event that the FSCS raises ~~funds, raises~~ those funds more frequently or significantly increases the levies to be paid by firms, the associated costs to the Group may have a material impact on the Group’s ~~results and financial condition.~~results. Further details can be found in ~~the “Competition~~Note 25 (Contingent liabilities and ~~Regulatory Matters” note to the financial statements~~commitments) on page ~~222.~~225.


116

Risk management

Supervision and regulation continued

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 (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 (SEC)).

~~In Europe, the~~The UK regulatory agenda is considerably shaped and influenced by the directives emanating from the EU. 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 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 Barclays US banking subsidiaries are subject to a comprehensive regulatory structure involving numerous statutes, rules and regulations. Barclays 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 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 branches and also exercises umbrella regulatory authority over Barclays other US operations. The regulation of Barclays and its US banking subsidiaries imposes restrictions on the activities of Barclays, including its US banking subsidiaries and Barclays Bank PLC’s US branches and ~~agencies,~~agency, as well as prudential restrictions, such as limits on extensions of credit by ~~the~~ Barclays Bank PLC’s US branches and ~~agencies~~agency 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 and Barclays Bank PLC ~~and Barclays Group US Inc.~~ are bank holding companies registered with the FRB. ~~Each has~~Following the transfer of ownership of Barclays Bank Delaware from Barclays Group US Inc. to Barclays Delaware Holdings, LLC, a wholly-owned subsidiary of Barclays Bank PLC, Barclays Group US Inc. is no longer a bank holding company. Barclays PLC and Barclays Bank PLC have each elected to be treated as a financial holding company under the BHC Act. Financial holding companies may engage in a broader range of financial and related activities than are permitted to registered bank holding companies 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”~~‘well managed’ , and Barclays Bank Delaware must ~~also~~ meet certain capital requirements, be deemed to be ~~“well managed”~~‘well managed’ and must have at least a ~~“satisfactory”~~‘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 Barclays Bank Delaware if it becomes 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


					117

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 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 Note 3627 to the financial statements for further discussion of ~~competition and~~ regulatory matters.

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

~~– Sales Methods~~

~~– Trade~~including sales methods, trade practices among broker-dealers,

~~– Use~~ use and safekeeping of customers’ funds and securities,

~~– Capital~~ capital structure,

~~– Record-keeping~~

~~– The~~ record-keeping, the financing of customers’ purchases,

~~– Procedures~~ procedures for compliance with US securities law,

~~– The~~ and the conduct of directors, officers and ~~employees~~employees.


~~118~~

~~Risk management~~

~~Supervision and regulation~~

~~continued~~

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 SEC and the Financial Industry Regulatory Authority (FINRA). Depending upon the specific nature of a broker-dealer’s business, it may also be regulated by some or all of the New York Stock Exchange (NYSE), the Municipal Securities Rulemaking Board, the US Department of the Treasury, the Commodity 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 Bank PLC and Barclays Capital Energy, Inc. are authorised by the U.S. Federal Energy Regulatory Commission (FERC) to sell wholesale physical power at market-based rates. As FERC authorised power marketers and as buyers and sellers of natural gas, Barclays Bank PLC and Barclays Capital Energy, Inc. are subject to regulation under ~~The~~the U.S. Federal Power Act, ~~The~~the U.S. Natural Gas Act and ~~The~~the U.S. Energy Policy Act of 2005 and applicable FERC orders, rules and regulations thereunder.

~~Barclays subsidiaries~~The credit card-related activities of the Group in the US are ~~also~~ subject to ~~regulation~~the Credit Card Accountability, Responsibility and Disclosure Act of 2009 (Credit CARD Act) which was enacted by ~~applicable federal~~Congress in May 2009 to prohibit certain credit card pricing and ~~state regulators of their activities~~marketing practices for consumer credit card accounts. Among the numerous provisions, which came into effect at various times through August 2010, are those that prohibit increasing rates on existing balances and over limit fees in most instances, restrict increasing fees and rates prospectively, restrict what penalty fees can be assessed, regulate how payments are to be allocated to different balances and how the ~~mortgage servicing business.~~billing process is to work, and revises all communications to cardholders.

Regulatory Developments

In the wake of the financial crisis there ~~will be~~has been regulatory change that, when fully implemented, will have a substantial impact on all financial institutions, including the Group. ~~The~~Regulatory change is being pursued at a number of levels, globally notably through the G20, Financial Stability Board (FSB) and Basel Committee on Banking Supervision, regionally through the European Union and nationally, especially in the UK and US. It is of importance to the Group and to the banking industry generally that the various bodies work harmoniously and that a globally consistent approach is taken to banking regulation.

Global

While some of the uncertainty surrounding the nature of the future regulation of banks has been resolved, the full extent of ~~this~~the impact ~~and its timing~~of regulatory change is not yet fully ~~clear, with~~clear. Nevertheless, the programme of reform ~~programmes being developed at global, EU and national level. A programme to reform~~of the global regulatory framework that was agreed by G20 Heads of Government in April 2009 ~~building~~has advanced substantially during 2010, notably through the issue of final guidelines on an agreement that had been reached by the G20 in November 2008. The EU is following a similar programme of reform following the May 2008 ‘roadmap’ and implementing G20 requirements. There is a substantial degree of commonality to these programmes covering issues ofBasel III capital and liquidity ~~regulation, risk management~~standards in December 2010. The requirements of Basel III will be applicable from 1st January 2013 with a number of transitional provisions that run to the end of 2018. An initial assessment of the likely impact of the Basel III capital and ~~accounting standards.~~liquidity requirements can be found on page 108 and of the leverage requirements on page 104.

The ~~Financial Stability Board (FSB)~~FSB has been designated by the G20 as the body responsible for co-ordinating the delivery of the global reform programme. It ~~has initiated~~is continuing to work on developing additional regulation as well as guidelines for the supervision of systemically significant institutions. ItA key element of the global reform programme is that systemic institutions, including globally systemic financial institutions (G-SIFIs) should be capable of being resolved without recourse to taxpayer support. The details of the future regime for systemic banks remains one of the areas of uncertainty, although the FSB has made it clear that systemically significant institutions will be required to ~~present its~~maintain loss absorbency that is greater than the standards that are implied by Basel III. This additional loss absorbency may take the form of some combination of capital surcharge, requirements to hold contingent capital instruments and bail-in debt. Systemically significant banks will be subject to enhanced supervision and a comprehensive crisis management framework within supervisory colleges. The concept of bail-in debt may, if pursued, affect the rights of senior unsecured creditors subject to any bail-in in the event of a resolution of a failing bank. Further proposals including the identification of G-SIFIs will be developed during the first half of 2011. Barclays is likely to ~~the November 2010 meeting of G20 Heads of Government.~~ be considered a systemically significant institution.

The FSB is also working on approaches to the resolution of systemically significant institutions that will include the preparation of Recovery and Resolution Plans, sometimes called ‘living wills’. Further detail is awaited from the FSB and


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Risk management

Supervision and regulation continued

from national regulatory bodies including the FSA, although the FSA has ~~initiated~~undertaken a pilot project with a group of large UK ~~banks.~~banks including Barclays.

~~In execution of the mandate given by the G20 and the FSB,~~While the Basel Committee on Banking Supervision has ~~agreed on increased~~largely completed the process of setting new standards for capital and liquidity, a number of workstreams remain active that will affect the Group. These include a fundamental review of the trading book in addition to the enhanced capital requirements for trading book ~~activities to be introduced from the end of 2010. In December 2009, the Basel Committee issued proposals for consultation~~exposures that were implemented on enhanced capital and liquidity requirements. These proposals would refine the definition of regulatory capital to have a greater focus on core equity, would enhance capital requirements in respect of counterparty risk, introduce measures to make capital requirements less procyclical, establish a leverage ratio and require banks to hold greater buffers of high quality liquid instruments.1st January 2011. The Basel Committee ~~will conduct~~is also understood to be examining a quantitative impact study on its proposals in the course of the first half of 2010, with a view to finalising its requirements by the end of the year and with the aim of commencing the transition to the new capital and liquidity regime ~~from the end of 2012.~~for large exposures.

European Union

The Basel Committee’s ~~trading book~~ proposals ~~are being~~will be implemented in the EU by amendment to the Capital Requirements Directive (CRD). ~~The CRD has also been amended~~Formal proposals to ~~tighten the definition of hybrid capital and the operation of the large exposures regime in relation to interbank transactions. The EU has indicated that it will further~~ amend the CRD ~~to implement revised global standards on capital adequacy and on liquidity that~~ are ~~being consulted on by~~expected in the ~~Basel Committee. The EU~~summer of 2011 which will ~~also conduct a Europe-focused quantitative impact study.~~help address some of the remaining uncertainties. In addition, other amendments are being made to the EU framework of directives, including to the Directive ~~and to the Directive~~ on Deposit Guarantee Schemes. This may affect the amounts to which the Group may be liable to fund the compensation of depositors of failed banks. The proposal also envisages that national schemes should be pre-funded. This would be a significant change for UK banks where levies are currently raised as needed after failure. The financial impact on the Group is not yet clear.

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~~EU. On 1st January 2011, a number of new bodies came into being, including a ~~high-level Commission group published in February 2009. Among other things, it is proposed by~~European Systemic Risk Board to monitor the ~~end of 2010 to create~~financial system and advise on macroprudential actions and a European Banking Authority charged with the development of a single rulebook for banks in the EU and with enhancing co-operation between national supervisory authorities, especially in the context of the supervision of banks that operate across borders within the EU. The European Banking Authority will have the power to mediate between and override national authorities under certain circumstances. National authorities, ~~will~~however, remain responsible for the day-to-day supervision of financial institutions.

InOther EU developments include consideration of European arrangements in respect of crisis management and the ~~UK, the Treasury~~resolution of financial institutions. The European Commission issued a ~~White Paper ‘Reforming~~discussion paper in January 2011, and proposals for legislation are expected in 2011. These are likely to have an impact on the rights of shareholders and creditors of failing institutions. Proposals are also expected in relation to corporate governance, and to amend the Markets in Financial ~~Markets’ in July 2009 that foreshadowed the introduction of a Financial Services Bill in November. The Financial Services Bill~~Instruments Directive which will ~~among other things create a Council for Financial Stability to co-ordinate the activities~~affect many of the ~~UK tripartite authorities (HM Treasury,~~investment markets in which the Group operates and the instruments in which it trades.

United Kingdom

The Government is reforming the structure of regulation to replace the FSA and the ~~Bank of~~

~~England) to deal with issues related to financial stability and systemic risk. It will~~tripartite system that also place a duty on the FSA to make rules requiring financial institutions to create and maintain Recovery and Resolution plans, require the FSA to make general rules about remuneration policies of regulated firms, give the FSA a wider authority to prohibit short selling and permit collective court actions as a means by which redress can be sought in cases where there has been a mass failure of practice that has affected significant numbers of consumers. The Financial Services Bill is currently going through the Parliamentary process and its likely final shape remains uncertain. In response to the Introduction of the Financial Services Bill, the Conservative Party indicated in July 2009 that, were it to have a majority following the General Election that must take place by early June 2010, it would transfer responsibility for prudential supervision toinvolved the Bank of England and ~~create~~HM Treasury. It proposes that a ~~Consumer Protection Agency~~Financial Policy Committee should be established in the Bank of England with responsibility for the monitoring and control of systemic risk, including the deployment of macro-prudential tools of supervision. Responsibility for prudential regulation will pass to ~~focus on~~a Prudential Regulation Authority to be established as a subsidiary of the Bank of England, while a Financial Conduct Authority (FCA) will be responsible for issues of business ~~conduct.~~and market conduct and market regulation. The FCA will also be the UK listing authority. These reforms will require primary legislation to be passed by Parliament. This process is not expected to be complete before late 2012. In anticipation of the new regulatory structure, an interim Financial Policy Committee has been created and the FSA will reorganise itself into separate Prudential and Consumer and Markets business units on 4th April 2011. The Government is also considering the creation of an Economic Crime Agency to deal with serious financial crime.

~~The~~On 16th June 2010, the Chancellor of the Exchequer ~~commissioned two major reviews~~announced the creation of the ~~regulation of banks that reported in 2009. Lord Turner, the Chairman of the FSA was requested to undertake a review of banking regulation, while Sir David Walker was~~Independent Commission on Banking (ICB). The ICB has been asked to ~~review~~consider structural and related non-structural reforms to the ~~corporate governance~~UK banking sector to promote financial stability and competition, and to make recommendations to the Government by the end of ~~financial institutions.~~September 2011. The ~~Turner Review, published~~ICB intends to publish an interim report in ~~March 2009, sets out~~April, to be followed by a ~~comprehensive~~further round of consultation. Although the ICB has yet to make recommendations, and it is not possible to predict what the Government’s disposition to any recommendations that are made will be, there is a possibility that the Commission could recommend change to the structure of UK banks.

The FSA continues to develop its more intrusive and assertive approach to ~~reform the regulation~~supervision and its policy of ~~banks, and for higher standards of capital, liquidity and risk management. It also sets out a more intensive and intrusive approach~~credible deterrence in relation to ~~supervision. This was already in development as part of the FSA’s Supervisory Enhancement Programme~~enforcement that has seen ~~an increase~~significant growth in the ~~resources devoted to supervision, the intensity~~size of ~~supervision and the penalties that may be applied in any enforcement action. Pending~~regulatory fines. In anticipation of international agreement, the FSA has ~~unilaterally set minimum~~established and implemented capital and liquidity requirements that are ~~very~~ substantially increased from pre-crisis levels. ~~Similarly,~~The Retail Distribution Review and the Mortgage Market Review will affect the economics of investment advice and home finance provision respectively. The FSA ~~is introducing~~has also launched a ~~regulatory liquidity regime in advance of international agreement~~consultation on ~~the Basel proposals. The Walker Review, published in November 2009, sets out proposals for reforms~~its intention to adopt a more interventionist approach to the ~~corporate governance~~design of financial ~~institutions.~~products and to the governance processes around the design of new products. The ~~Financial Services Bill referred to above~~Government has stated that these increasingly interventionist regulatory and supervisory policies will ~~give~~be carried through into the ~~FSA enabling powers to implement some of these.~~FCA when it is established.

~~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 insures the entire amount of non-interest bearing transaction account deposits of eligible institutions until June 30^th~~, 2010 and certain senior unsecured debt of eligible institutions issued before June 30~~^th~~, 2009 (later extended to October 31~~^st, 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, were not eligible to participate in the TLGP.

In addition, in the United States, as elsewhere, recent market disruptions and economic conditions have led to numerous proposals for changes to and significant increases in the regulation of the financial services industry. These proposals include: possible limitations on the activities of banking institutions such as prohibitions on engaging in proprietary trading operations that are not related to serving customers; proposals that would subject large and systemically important banks and financial institutions to enhanced regulatory requirements; and financial market and trading reforms such as theThe Dodd-Frank Wall Street Reform and Consumer Protection Act ~~2009, which~~(DFA) was ~~passed by~~signed into law in July 2010. The Act provides for a new Financial Stability Oversight Council (FSOC), governmental resolution authority for failing non-depository financial institutions (including bank holding companies) under the US House of Representatives in December 2009 and which would, if enacted, among other things, increase regulation of over-the-counter derivatives by imposing clearing and execution requirements on swap dealers and major swap market participants. However, these and other proposals are still under consideration and there is uncertainty as to whether and in what forms such proposals ultimately may be enacted or adopted and therefore what impact they will have on the Group and its businesses in the United States. The Obama Administration has also proposed the levying of a Financial Crisis Responsibility Fee (FCRF). The Administration has said that the FCRF will apply to the US subsidiaries of a foreign bank or financial company if the consolidated assetsaegis of the ~~US subsidiaries exceed £50bn. As legislation implementing the FCRF has not yet been proposed, the impact~~Federal Deposit Insurance Corporation, reorganisation of several of the ~~FCRF on the Group cannot yet be determined.~~

~~The credit card-related activities of the Group in the US will be significantly affected by the Credit Card Accountability, Responsibility~~bank supervisory agencies, a new Consumer Financial Protection Bureau (CPFB) and ~~Disclosure Act of 2009 (Credit CARD Act) which was passed by Congress. The Credit CARD Act will have the effect of restricting many credit card pricing~~a federal Insurance Office. It also imposes harsher capital, liquidity and marketing practices. Among the numerous provisions, which come into effect at various times through August 2010, are those that prohibit increasing rates on existing balances and over limit fees in most instances, restrict increasing fees and rates prospectively, restrict what penalty fees can be assessed, regulate how payments are to be allocated to different balances and how the billing process is to work, and revises all communications to cardholders.leverage requirements, as well as


					119

~~Board and executive committee~~

~~Marcus’ extensive background in banking began at Lazard where he worked from 1972 to 2006, latterly as Chairman of Lazard in London~~wide-ranging new requirements including for derivatives, hedge funds, private equity funds, credit rating agencies, debit card interchange fees and ~~Deputy Chairman of Lazard LLC. He was Chairman of BAA plc until 2006 and is currently Senior Independent Director~~corporate governance. The full scale of the ~~British Broadcasting Corporation (BBC) and Chairman~~DFA’s impact on the Group remains unclear because the rules required to implement many of the ~~Trustees~~provisions of ~~The Royal Botanic Gardens.~~

~~Term of office:~~ ~~Marcus joined~~DFA have, in most cases, not been implemented and, in several important areas, have yet to be proposed by the ~~Board in September 2006 as a non-executive Director and was appointed Chairman on 1st January 2007. Marcus was last re-elected by shareholders at the AGM in 2009.~~

~~Independent:On appointment~~

~~External appointments:~~ ~~Senior Independent Director~~responsible agencies. Nonetheless, certain provisions of the ~~BBC since 2006. Chairman~~DFA are particularly likely to have an effect on the Group. These include:

— The ability of the ~~Trustees~~FSOC to make recommendations to the Federal Reserve regarding the establishment of heightened supervisory requirements and prudential standards applicable to “systematically important” entities and activities and work with all primary financial regulatory agencies to establish regulations, as necessary, to address financial stability concerns. It is not yet clear what regard the FSOC or the other agencies will have to the home country prudential regulators of non-US organisations such as the FSA, in the case of the ~~Royal Botanic Gardens, Kew. Chairman~~Group;

— The so-called “Volcker Rule,” which will, once effective, significantly restrict the ability of US bank holding companies and their affiliates, and the US branches of foreign banks, to conduct proprietary trading in securities and derivatives as well as certain activities related to hedge funds and private equity funds. The ~~Foundation and Friends~~Volcker Rule is likely to have a significant impact on some of the ~~Royal Botanic Gardens, Kew. Chairman of Lazard~~Group’s US operations. The DFA states that the Rule does not affect activities conducted “solely” outside the United States by non-US organisations, but the Federal Reserve has not indicated how it intends to interpret this exclusion 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 since January 2007. Member of the Board HR and Remuneration Committee since January 2007.~~

practice;

~~Sir Richard has experience~~— Significant changes to the trading and regulation of ~~both the private~~derivatives and public sector having worked in high-level banking roles and the Civil Service. He was the Executive Chairman of HM Customs and Excise from 2000 to 2003. 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. Appointed Senior Independent Director on 1st September 2004 and Deputy Chairman on 16th July 2009. Sir Richard was last re-elected by shareholders at the AGM in 2009.

~~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:~~Member of the Board Risk Committee since April 2004 (Chairman January 2006 to December 2009). Chairman of the Board HR and Remuneration Committee since January 2007 (member since April 2004). Member of the Board Corporate Governance and Nominations Committee since September 2004.

David 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 key positions there, including Head of Government Bond Trading, Head of Mortgage Trading, Sales and Finance and Head of Global Operations and Technology.

~~Term of office:David joined the Board in May 2007. David was last re-elected by shareholders at the AGM in 2009.~~

~~Independent:Yes~~

~~External appointments:~~ ~~Director of East Ferry Investors, Inc. Trustee of the Brooklyn Botanic Garden. Various positions at Morgan Stanley & Co. until 1997. Director of the Discount Corporation of New York until 1993.~~

~~Committee membership:Chairman of the Board Risk Committee since January 2010 (member since January 2008). Member of Board Corporate Governance and Nominations Committee since January 2010.~~

Leigh is Chairman of Qantas Airways Limited, a Director of Bechtel Group Inc, Chairman of Bechtel Australia Pty Ltd and Senior Adviser to Kohlberg, Kravis, Roberts and Co. Leigh joined the Rio Tinto Group in 1970 and 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 2007.

~~Term of office:Leigh joined the Board in October 2004. Leigh was last re-elected by shareholders at the AGM in 2009.~~

~~Independent:Yes~~

~~External appointments:~~Chairman of Qantas Airways Limited since November 2007. Chairman of Bechtel Australia Pty Ltd since July 2009. Director of Bechtel Group Inc since July 2009. Senior Adviser to Kohlberg Kravis Roberts & Co since January 2009. Chairman of the Murdoch Childrens Research Institute since December 2009. Board Member of the National Gallery of Victoria Foundation. Chief Executive of Rio Tinto from 2000 until 2007. Director of Freeport-McMoran Copper & Gold Inc. until 2004.

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

Fulvio is currently Chief Executive Officer and General Manager of Enel SpA, the Italian energy group, where he was previously Chief Financial Officer from 1999-2005. Fulvio has held a number of high-level financial roles, including Chief Financial Officer and General Manager of Telecom Italia and General Manager and Chief Financial Officer of Ferrovie dello Stato. He was also head of the accounting, finance, and control department of Montecatini and was in charge of finance at Montedison-Compart. He has 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 2009.~~

~~Independent:Yes~~

~~External appointments:Chief Executive of Enel SpA since 2005. Director of ENDESA SA since June 2009. Director of AON Corporation~~

~~since January 2008. 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 since September 2006.~~

Simon has extensive experience of the institutional fund management industry, having worked at Fidelity International from 1981 to 2008, latterly as President of the Investment Solutions Group and President of the Retirement Institute. Simon held a number of positions during his career at Fidelity International, including President, European & UK Institutional Business, Global Chief Investment Officer, Chief Investment Officer for Asia Pacific and Chief Investment Officer of the European Investment Group. Simon remains a Director of Fidelity European Values PLC and Fidelity Japanese Values PLC.

~~Term of office:Simon Fraser joined the Board in March 2009. Simon was last reelected by shareholders at the AGM in 2009.~~

~~Independent:Yes~~

~~External appointments:~~Director of Fidelity European Values PLC since July 2002. Director of Fidelity Japanese Values PLC since May 2000. Director of The Merchants Trust PLC since August 2009. Director and Chairman Designate of Foreign & Colonial Investment Trust PLC since September 2009.

~~Committee membership:Member of the Board Audit Committee since May 2009. Member of the Board HR and Remuneration Committee since May 2009.~~

~~Reuben is a Senior Adviser at the Center for Strategic & International Studies in Washington, D.C. and previously served~~participants in the ~~US government as Under Secretary~~derivatives markets. Among the changes mandated by the DFA are that many types of ~~State for Economic, Energy~~derivatives now traded in the over-the-counter markets be traded on an exchange or swap execution facility and ~~Agricultural Affairs (2007-2009). Prior~~centrally cleared. In addition, many participants in these markets will be required to ~~joining~~register with the ~~Department of State, Reuben was the Chairman of the~~US Commodity Futures Trading Commission ~~(2005-2007)~~(CFTC) as “swap dealers” or “major swap participants” and/or with the US SEC as “securities swap dealers or ”major securities swap dealers” and ~~before that held a number~~be subject to CFTC and SEC regulation and oversight. Barclays Bank PLC and one or more of ~~positions in~~its US ~~government service (2002-2005). He spent 18 years at Goldman, Sachs & Co. between 1983-2001, where he was managing partner of Goldman Sachs in Paris and~~subsidiaries may be subjected to these requirements;

— In addition to the ability of the ~~firm’s European Financial Institutions Group in London.~~FSOC to recommend heightened prudential standards for specific institutions the DFA, separate and apart from Basel III, also imposes higher capital, liquidity and leverage requirements on US banks and bank holding companies generally; and

~~Term of office:Reuben Jeffery joined the Board in July 2009.~~

~~Independent:Yes~~

~~External appointments:Senior Adviser at the Center for Strategic & International Studies, Washington D.C.~~

~~Committee membership:Member of Board Risk Committee since January 2010.~~

~~Sir Andrew is Chairman~~— The ability of the ~~National Audit Office, having held a number~~CPFB to regulate the credit card industry, including the terms of ~~public roles~~credit card agreements with consumers, disclosures, and fees. Actions by the CPFB in this area are likely to impact the financial services sector, including Managing Director, Financial Management, Reporting and Audit and Head of the Government Accountancy Service at HM Treasury and non-executive Director of the Bank of England. Sir Andrew is also Dean of the London Business School. 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 reelected by shareholders at the AGM in 2009.~~

~~Independent:Yes~~

~~External appointments:Dean of the London Business School since January 2009.~~

~~Chairman of the National Audit Office since December 2008. Trustee 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 Chairman of the MORI Group until 2005.

~~Committee membership:Member of the Board Audit Committee since September 2004. Member of the Board Risk Committee since September 2004.~~Group’s US credit card business.


120

Board and executive committee

~~continued~~

Sir Michael is currently Chairman of BT Group PLC, Chairman of the UK Commission for Employment and Skills and Chairman of easyJet plc. Sir Michael previously worked at KPMG from 1974-2007 where he spent a number of years in Continental Europe and the Middle East. He 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 reelected by shareholders at the AGM in 2009.~~

~~Independent:Yes~~

~~External appointments:~~Chairman of BT Group PLC since 2007. Chairman of easyJet plc since January 2010 (Deputy Chairman June 2009-December 2009). Director of the Financial Reporting 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 until 2007.

~~Committee membership:~~Chairman of the Board Audit Committee since March 2009 (member since January 2008). Member of the Board Risk Committee since May 2009. Member of Board Corporate Governance and Nominations Committee since May 2009.

Sir John is Chairman of Merlin Entertainments Limited. Until July 2008 he was Chairman of Cadbury Schweppes PLC, having worked at Cadbury’s in various roles, including that of Chief Executive, since 1968. He 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 2009.~~

~~Independent:Yes~~

~~External appointments:~~Chairman of Merlin Entertainments Limited since December 2009. Deputy President of the Chartered Management Institute 2008-2009 (President 2007-2008). Director of the Financial Reporting Council since 2004. Adviser to CVC Capital Partners. Chairman of Cadbury Schweppes PLC until July 2008. Deputy President of the CBI until June 2008 (former member and President). Non-executive Director of the Rank Group PLC until 2006.

~~Committee membership:Member of the Board Corporate Governance and Nominations Committee since September 2006. Member of the Board HR and Remuneration Committee since July 2005.~~



	Marcus Agius (64) Group Chairman	Bob Diamond (59) Chief Executive, Executive Director	Sir Richard Broadbent (57) Deputy Chairman and Senior Independent Director	David Booth (56) Non-executive Director
Biography	Marcus’ extensive background in banking began at Lazard where he worked from 1972 to 2006, latterly as Chairman of Lazard in London and Deputy Chairman of Lazard LLC. He is currently Chairman of the British Bankers’ Association, Senior Independent Director of the British Broadcasting Corporation (BBC) and Chairman of the Trustees of The Royal Botanic Gardens. Marcus is also a Business Ambassador for UK Trade and Investment, a member of the Advisory Council of TheCityUK, and a member of the Takeover Panel. He was formerly Chairman of BAA plc, a position he held from 2002 until 2006.	Bob became Chief Executive on 1st January 2011. Previously, he was President of Barclays PLC and Chief Executive of Corporate & Investment Banking and Wealth Management, comprising Barclays Capital, Barclays Corporate and Barclays Wealth. Before joining Barclays, Bob was Vice Chairman and Head of Global Fixed Income and Foreign Exchange at CS First Boston, where he was also a member of the Executive Board and Operating Committee. Prior to this, he was Managing Director and Head of Fixed Income Trading at Morgan Stanley International, spending 13 years with the firm. Bob is a non-executive Director of BlackRock, Inc.	Sir Richard has experience of both the private and public sector having worked in high-level banking roles and the Civil Service. He was the Executive Chairman of HM Customs and Excise from 2000 to 2003. Formerly he was a member of the Group Executive Committee of Schroders PLC and a non-executive Director of the Securities Institute. He was Chairman of Arriva PLC until August 2010.	David 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 where he held various key positions, including Head of Government Bond Trading, Head of Mortgage Trading, Sales and Finance and Head of Global Operations and Technology.
Term of office	Marcus joined the Board in September 2006 as a non-executive Director and was appointed Chairman on 1st January 2007. Marcus was last re-elected by shareholders at the AGM in 2010.	Bob was appointed President 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 2009.	Sir Richard joined the Board in September 2003. Appointed Senior Independent Director on 1st September 2004 and Deputy Chairman on 16 July 2009. Sir Richard was last re-elected by shareholders at the AGM in 2010.	David joined the Board in May 2007. David was last re-elected by shareholders at the AGM in 2010.
Independent ^a	On appointment	No	Yes	Yes
External appointments	Chairman of the British Bankers’ Association since 2010. Senior Independent Director of the BBC since 2006. Member of the Executive Committee of the Institut International D’Etudes Bancaires. Business Ambassador for UK Trade and Investment. Member of the Advisory Council of TheCityUK. Member of the Takeover Panel. Chairman of the Trustees of the Royal Botanic Gardens, Kew. Chairman of The Foundation and Friends of the Royal Botanic Gardens, Kew. Chairman of Lazard in London and Deputy Chairman of Lazard LLC until 2006. Chairman of BAA plc until 2006.	Non-executive Director of BlackRock, Inc. Chairman, Board of Trustees of Colby College, Waterville, Maine. Chairman, Old Vic Productions,Plc. Trustee, The Mayor’s Fund for London. Member of the Advisory Board, Judge Business School at Cambridge University. Board Member, The Diamond Family Foundation. Member of International Advisory Board, British-American Business Council. Life Member of The Council on Foreign Relations. Member of The International Advisory Board, The Atlantic Council.	Chairman of Arriva PLC until 2010. Trustee of Relate since 2011. 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.	Director of East Ferry Investors, Inc. Various positions at Morgan Stanley & Co. until 1997. Director of the Discount Corporation of New York until 1993.
Committee membership	Chairman of the Board Corporate Governance and Nominations Committee since January 2007. Member of the Board Remuneration Committee since January 2007.		Chairman of the Board Remuneration Committee since January 2007 (member since April 2004). Member of the Board Corporate Governance and Nominations Committee since September 2004. Former member of the Board Risk Committee (April 2004 until September 2010), which he chaired between January 2006 and December 2009.	Chairman of the Board Risk Committee since January 2010 (member since January 2008). Member of the Board Corporate Governance and Nominations Committee since January 2010.

Note

John was appointed 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. He was Chief Executive of Retail Financial Services from 1998 to 2000 and Chairman of the Asset Management Division from 1995 to 1998. Following the sale of BGI, John is a non-executive Director of BlackRock, Inc. John is also a non-executive Director of AstraZeneca PLC. He is 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 joined the Executive Committee in September 1996 and was appointed to the Board in June 1998. John was last re-elected at the AGM in 2009.~~

~~External appointments:~~Non-executive Director of BlackRock, Inc since December 2009. Non-executive Director of AstraZeneca 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.

a For a description of how the Board determines independence, see page 135

Robert E Diamond Jr is responsible for the Corporate and Investment Banking and Wealth Management businesses of the Barclays Group, comprising Barclays Capital, Barclays Corporate and Barclays Wealth. Bob was formerly Vice Chairman and Head of Global Fixed Income and Foreign Exchange at CS First Boston and he was a member of the Executive Board and Operating Committee of CS First Boston. Following the sale of BGI, Bob is a non-executive Director of BlackRock, Inc.

~~Term of office:~~Bob was appointed President 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 2009.

~~External appointments:~~Non-executive Director of BlackRock, Inc. Chairman, Board of Trustees of Colby College, Waterville, Maine. Chairman, Old Vic Productions Plc. Trustee, The Mayor’s Fund for London. Member of the Advisory Board, Judge Business School. Member of International Advisory Board, British-American Business Council. Life Member of The Council on Foreign Relations. Member of The International Advisory Board, The Atlantic Council.

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 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 financial years and subsequently held similar roles for other global financial services organisations.

~~Term of office:Chris 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 2009.~~

~~External appointments:UK Head of Financial Services and Global Head of Banking and Capital Markets of PricewaterhouseCoopers LLP until 2006.~~


					121

Board and executive committee continued




	Alison Carnwath(58) Non-executive Director	Fulvio Conti(63) Non-executive Director	Simon Fraser(51) Non-executive Director	Reuben Jeffery III(57) Non-executive Director
Biography	Alison worked in investment banking and corporate finance for 20 years from 1980 to 2000, before pursuing a portfolio career. During her career, Alison became a director of J. Henry Schroder Wagg & Co, where she worked for 10 years. Alison also held the positions of a senior partner of Phoenix Securities and Managing Director, New York at Donaldson, Lufkin & Jenrette. Alison has wide board level experience and is currently non-executive Chairman of Land Securities Group PLC, Senior Independent Director at Man Group plc, non-executive Director of Paccar Inc, and non-executive Chairman of ISIS EP LLP.	Fulvio is currently Chief Executive Officer and General Manager of Enel SpA, the Italian energy group, where he was previously Chief Financial Officer from 1999-2005. Fulvio has held a number of high-level financial roles, including Chief Financial Officer and General Manager of Telecom Italia and General Manager and Chief Financial Officer of Ferrovie dello Stato. He was also head of the accounting, finance, and control department of Montecatini and was in charge of finance at Montedison-Compart. He has held positions in finance and operations in various affiliates of Mobil Oil Corporation in Italy and Europe.	Simon has extensive experience of the institutional fund management industry, having worked at Fidelity International from 1981 to 2008, latterly as President of the Investment Solutions Group and President of the Retirement Institute. Simon held a number of positions during his career at Fidelity International, including President, European & UK Institutional Business, Global Chief Investment Officer, Chief Investment Officer for Asia Pacific and Chief Investment Officer of the European Investment Group. Simon remains a director of Fidelity European Values PLC and Fidelity Japanese Values PLC. He was appointed as the Chairman of Foreign & Colonial Investment Trust PLC and Chairman of The Merchants Trust in May 2010.	Reuben is currently the Chief Executive Officer of Rockefeller & Co., Inc., a member of the Advisory Board of TASC Inc and of TowerBrook Capital Partners LP and Senior Adviser at the Center for Strategic & International Studies in Washington, D.C.. He previously served in the US government as Under Secretary of State for Economic, Energy and Agricultural Affairs (2007-2009). Prior to joining the Department of State, Reuben was the Chairman of the Commodity Futures Trading Commission. He spent eighteen years at Goldman, Sachs & Co. between 1983-2001 where he was managing partner of Goldman Sachs in Paris and led the firm’s European Financial Institutions Group in London.
Term of office	Alison joined the Board on 1st August 2010.	Fulvio joined the Board in April 2006. Fulvio was last re-elected by shareholders at the AGM in 2009.	Simon joined the Board in March 2009. Simon was last re-elected by shareholders at the AGM in 2009.	Reuben joined the Board in July 2009. Reuben was last re-elected by shareholders at the AGM in 2010.

Independent	Yes	Yes	Yes	Yes
External appointments	Non-executive Director of CforC Ltd. Non-executive Chairman of Land Securities Group PLC since November 2008. Senior Independent Director at Man Group plc. Non-executive Director of Paccar Inc. Non-executive Chairman of ISIS EP LLP.	Chief Executive of Enel SpA since 2005. Director of ENDESA SA since June 2009. Director of AON Corporation since January 2008. Chief Financial Officer and General Manager of Telecom Italia until 1999. General Manager and Chief Financial Officer of Ferrovie dello Stato until 1998.	Director of Fidelity European Values PLC since July 2002. Director of Fidelity Japanese Values PLC since May 2000. Chairman of The Merchants Trust PLC since May 2010. Chairman of Foreign & Colonial Investment Trust PLC since May 2010.	Chief Executive Officer of Rockefeller & Co., Inc. since September 2010. Senior Adviser at the Center for Strategic & International Studies, Washington D.C.. Member of the Advisory Board of TASC Inc. Member of the Advisory Board of TowerBrook Capital Partners LP. Director of Transatlantic Holdings Inc since May 2010.


Committee membership	Member of the Board Audit Committee since October 2010. Member of the Board Remuneration Committee since October 2010.	Member of the Board Audit Committee since September 2006.	Member of the Board Audit Committee since May 2009. Member of the Board Remuneration Committee since May 2009.	Member of Board Risk Committee since January 2010.


122



Sir Andrew Likierman(67) Non-executive Director	Chris Lucas (50) Group Finance Director, Executive Director	Dambisa Moyo(42) Non-executive Director	Sir Michael Rake(63) Non-executive Director	Sir John Sunderland(65) Non-executive Director
Sir Andrew is the Chairman of the 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 and non-executive Director of the Bank of England. Sir Andrew is also Dean of the London Business School. He has been at the London Business School from 1974-1976, 1979-1993 and since 2004.	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 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 financial years and subsequently held similar roles for other global financial services organisations.	Dambisa is an international economist who writes on the macroeconomy and global affairs. Dambisa worked for the World Bank from 1993 to 1995. After completing a PhD in Economics, she worked for Goldman Sachs for eight years until November 2008 in the debt capital markets, hedge funds coverage and global macroeconomics teams. Dambisa currently serves as a non-executive Director on the Boards of SABMiller plc and Lundin Petroleum AB (publ).	Sir Michael is currently Chairman of BT Group PLC and Chairman of easyJet plc. Sir Michael previously worked at KPMG from 1974-2007 where he spent a number of years in Continental Europe and the Middle East. He was Senior Partner of the UK firm from 1998-2000 and Chairman of KPMG International from 2002-2007.	Sir John is Chairman of Merlin Entertainments Group. Until July 2008 he was Chairman of Cadbury Schweppes PLC, having worked at Cadbury’s in various roles, including that of Chief Executive and then Chairman, since 1968. He 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.
Sir Andrew joined the Board in September 2004. Sir Andrew was last re-elected by shareholders at the AGM in 2010.	Chris 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 2010.	Dambisa joined the Board on 1st May 2010.	Sir Michael joined the Board in January 2008. Sir Michael was last re-elected by shareholders at the AGM in 2010.	Sir John joined the Board in June 2005. Sir John was last re-elected by shareholders at the AGM in 2009.
Yes	No	Yes	Yes	Yes
Dean of the London Business School since January 2009. Chairman of the National Audit Office since December 2008. Trustee 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 Chairman of the MORI Group until 2005.	UK Head of Financial Services and Global Head of Banking and Capital Markets of PricewaterhouseCoopers LLP until 2006.	Non-executive Director of SABMiller plc since 2009. Non-executive Director of Lundin Petroleum AB (publ) since 2009.	Chairman of BT Group PLC since 2007. Chairman of easyJet Plc since January 2010 (Deputy Chairman June 2009 – December 2009). Director of the Financial Reporting Council since 2007. Director of the McGraw-Hill Companies since 2007. Chairman of the UK Commission for Employment and Skills until 2010. Chairman of KPMG International until 2007. Chairman of Business in the Community from 2004 until 2007.	Chairman of Merlin Entertainments Group since December 2009. Director of the Financial Reporting Council since 2004. Adviser to CVC Capital Partners. Deputy President of the Chartered Management Institute until 2009 (President 2007-2008). Chairman of Cadbury Schweppes PLC until July 2008. Deputy President of the CBI until June 2008 (former member and President). Non-executive Director of the Rank Group PLC until 2006.
Member of the Board Audit Committee since September 2004. Member of the Board Risk Committee since September 2004.		Member of the Board Risk Committee since October 2010.	Chairman of the Board Audit Committee since March 2009 (member since January 2008). Member of the Board Risk Committee since May 2009. Member of Board Corporate Governance and Nominations Committee since May 2009.	Member of the Board Corporate Governance and Nominations Committee since September 2006. Member of the Board Remuneration Committee since July 2005.


					123

Board and executive committee



Bob Diamond(59) Chief Executive, Executive Director	Robert Le Blanc Chief Risk Officer	Mark Harding Group General Counsel	Antony Jenkins Chief Executive of Global Retail Banking	Thomas L Kalaris Chief Executive of Barclays Wealth

Chris Lucas (50) Group Finance Director, Executive Director See pages 120 and 122 for full biographies.	Robert has been the Chief Risk Officer for Barclays Group since 2004. He first joined Barclays in 2002 as Head of Risk Management at Barclays Capital. Robert is a non-executive Director of Absa, which is majority owned by Barclays. Before joining Barclays, Robert spent most of his career at JP Morgan in the capital markets, fixed income, emerging market and credit areas in New York and London.	Mark joined Barclays as Group General Counsel in 2003. Included within his area of responsibility are legal and regulatory compliance issues throughout the bank. He chairs the Group Operating Committee and Group Governance and Control Committee. Previously, Mark was a partner in the international law firm, Clifford Chance, where his practice spanned bank finance, capital markets and financial services regulation. He spent four years at UBS as General Counsel of its investment bank. Mark is past Chairman of the General Counsel 100 Group and of the Board of the International Swaps and Derivatives Association (ISDA). He is a Governor of the College of Law.	Antony was appointed Chief Executive of Global Retail Banking and joined the Barclays Executive Committee in November 2009. Prior to that he had been Chief Executive of Barclaycard since January 2006. Antony is a Barclays appointed non-executive Director of Absa, which is majority owned by Barclays. Since October 2008, Antony has been on the Board of Visa Europe Ltd.	Tom joined Barclays in September 1996 after 18 years at JP Morgan where he held a number of roles, including Head of Fixed Income Sales, Trading and Research, and was responsible for all activities with investors in the United States. He has served on the US Treasury Borrowing Advisory Committee and is a former Chair of the US Bond Market Association, a predecessor organisation to SIFMA (Securities Industry and Financial Markets Association).



Jerry del Missier Co-Chief Executive of Barclays Capital and Co-Chief Executive of Corporate and Investment Banking	Maria Ramos Group Chief Executive of Absa	Rich Ricci Co-Chief Executive of Barclays Capital and Co-Chief Executive of Corporate and Investment Banking	Cathy Turner Barclays Human Resources Director
Jerry joined Barclays Capital in June 1997 from Bankers Trust in London where he had been a Senior Managing Director of Derivatives Products, responsible for the European business. Prior to this, he was based in Toronto, Canada, where he was responsible for the Canadian Dollar interest rate derivatives business. Before Bankers Trust, he worked for the Bank of Nova Scotia. Jerry currently serves on the Boards of Room to Read, the Securities Industry and Financial Markets Association (SIFMA), the Global Financial Markets Association (GFMA), the Markets Management Group (MMG) of the International Institute of Finance (IIF), and the Advisory Board of the Queen’s University School of Business in Kingston, Ontario.	Maria is the Group Chief Executive of Absa Group Ltd, which is majority owned by Barclays. Prior to joining Absa on 1st March 2009, she was the Group Chief Executive of Transnet Limited, the state-owned South African freight transport and logistics service provider. This was after a successful term as Director- General of the National Treasury (formerly the Department of Finance). She currently serves on the executive committees of the International Business Council, the World Bank Chief Economist Advisory Panel, Business Leadership South Africa and the Banking Association of South Africa.	Rich joined Barclays Capital in 1994 and assumed responsibility for several of its support areas. He became Chief Operating Officer (COO) of Barclays Global Investors (BGI) and a member of the BGI Executive Committee in December 2002. In January 2005, Rich was appointed COO of Barclays Investment Banking and Investment Management businesses comprising Barclays Capital, Barclays Wealth and BGI. Prior to joining Barclays Capital, Rich held senior front-office, finance and technology positions at the Bank of Boston and the Bank of New England.	Cathy was appointed as Group Human Resources Director in April 2005 prior to which she held the position as Investor Relations Director for four years. In July 2008 her remit was extended to include Strategy, Corporate Affairs and Brand and Marketing. Prior to Barclays, Cathy was a Practice Leader at Ernst and Young and has previously held roles at Deloitte, Watson Wyatt, Percom and Volex Plc. Cathy is a Council Member of the Royal College of Art and a Board Member of the IFS School of Finance. Cathy has announced her departure from Barclays and will be leaving on 31st March 2011.

~~See page 120 for full biography~~

Jerry is responsible for the firm’s Global Markets businesses, encompassing the Trading, Sales and Research functions globally. He joined Barclays Capital in June 1997 from Bankers Trust in London where he had been a Senior Managing Director of Derivatives Products, responsible for the European business. Prior to this, he was based in Toronto, Canada, where he was responsible for the Canadian Dollar interest rate derivatives business. Before Bankers Trust, he worked for the Bank of Nova Scotia. Jerry currently serves on the Boards of SIFMA (Securities Industry and Financial Markets Association), Room to Read and Queen’s University.

Mark joined Barclays as Group General Counsel in 2003. Included within his area of responsibility are legal and regulatory compliance issues throughout the bank. He chairs the Group Operating Committee and Group Governance and Control Committee. Previously, Mark was a partner in the international law firm, Clifford Chance, where his practice spanned bank finance, capital markets and financial services regulation. He spent four years at UBS as General Counsel of its investment bank. Mark is past Chairman of the General Counsel 100 Group and of the Board of the International Swaps and Derivatives Association (ISDA). He is a Governor of the College of Law.

Antony was appointed Chief Executive of Global Retail Banking and joined the Barclays Executive Committee in November 2009. Prior to that he had been Chief Executive of Barclaycard since January 2006. Antony is a Barclays appointed non-executive Director of Absa, which is majority owned by Barclays. Since October 2008, Antony has been on the Board of Visa Europe Ltd.

Tom joined Barclays in September 1996 after 18 years at JP Morgan where he held a number of roles, including Head of Fixed Income Sales, Trading and Research, and was responsible for all activities with investors in the United States. He has served on the US Treasury Borrowing Advisory Committee and is a former Chair of the US Bond Market Association, a predecessor organisation to SIFMA (Securities Industry and Financial Markets Association).

Robert has been the Chief Risk Officer for Barclays Group since 2004. He first joined Barclays in 2002 as Head of Risk Management at Barclays Capital. Robert is a non-executive Director of Absa, which is majority owned by Barclays. Before joining Barclays, Robert spent most of his career at JP Morgan in the capital markets, fixed income, emerging market and credit areas in New York and London.

Maria is the Group Chief Executive of Absa Group Ltd, which is majority owned by Barclays. Prior to joining Absa on 1st March 2009, she was Group Chief Executive of Transnet Limited, the state-owned South African freight transport and logistics service provider. This was after a successful term as Director-General of the National Treasury (formerly the Department of Finance). Maria is an accomplished academic, who has previously taught at various institutions. She currently serves on the executive committees of the International Business Council, the World Bank Chief Economist Advisory Panel, Business Trust (South Africa), Business Leadership South Africa and the Banking Association of South Africa.

Rich joined Barclays Capital in 1994 and assumed responsibility for several of its support areas. He became Chief Operating Officer (COO) of Barclays Global Investors (BGI) and a member of the BGI Executive Committee in December 2002. In January 2005, Rich was appointed COO of Barclays Investment Banking and Investment Management businesses comprising Barclays Capital, Barclays Wealth and BGI. Prior to joining Barclays Capital, Rich held senior front-office, finance and technology positions at the Bank of Boston and the Bank of New England.

Cathy was appointed as Group Human Resources Director in April 2005 prior to which she held the position as Investor Relations Director for four years. In July 2008 her remit was extended to include Strategy, Corporate Affairs and Brand and Marketing. Prior to Barclays, Cathy was a Practice Leader at Ernst and Young and has previously held roles at Deloitte, Watson Wyatt, Percom and Volex Plc. Cathy is a Council Member of the Royal College of Art and a Board Member of the IFS School of Finance.


~~122~~124

Directors’ report

Profit Attributable

The profit attributable to equity shareholders of Barclays PLC for the year amounted to ~~£9,393m,~~£3,564m, compared with ~~£4,382m~~£2,628m from continuing operations and £6,765m from discontinued operations in ~~2008.~~2009.

Dividends

The final dividend for the year ended 31st December ~~2009~~2010 of ~~1.5p~~2.5p per ordinary share of 25p each has been agreed by the Directors. The final dividend was announced on ~~16th~~15th February ~~2010~~2011 for payment on ~~19th~~18th March ~~2010~~2011 in respect of the ordinary shares registered at the close of business on ~~26th~~25th February ~~2010.~~2011. With the interim ~~dividend of 1.0p~~dividends totalling 3.0p per ordinary share, ~~that was~~ paid ~~on 11th~~in June, September and December ~~2009,~~2010, the total distribution for ~~2009~~2010 is ~~2.5p (2008: 11.5p)~~5.5p (2009: 2.5p) per ordinary share. The interim and final ~~dividend~~dividends for ~~2009~~2010 amounted to ~~£289m (2008: £906m)~~£653m (2009: £289m).

Share Capital

~~At the 2008 Annual General Meeting, shareholders approved the creation~~The Company has ordinary shares in issue. The Company’s Articles of Association provide for Sterling, Dollar, Euro and Yen preference shares (preference shares) ~~in order to provide the Group with more flexibility in managing its capital resources. As~~. No preference shares have been issued as at ~~5th~~4th March ~~2010~~2011 (the latest practicable date for inclusion in this report) ~~no preference shares have been issued.~~.

The Company did not repurchase any ordinary shares of 25p each during ~~2009 (2008: 36,150,000 at a total cost of £171,923,243)~~2010 (2009: None).

As at ~~5th~~4th March ~~2010,~~2011, the Company had an unexpired authority to repurchase ordinary shares up to a maximum of ~~837,620,130~~1,203,988,028 ordinary shares. ~~The authorised ordinary share capital was increased by 7,000 million ordinary shares at the Annual General Meeting held on 23rd April 2009.~~

The issued ordinary share capital was increased by ~~3,040~~770 million ordinary shares during ~~2009.~~2010. In addition to those issued ~~as a result of~~in connection with the Sharepurchase, Sharesave and executive share option schemes during the year, 627 million ordinary shares were issued on 17th February 2010 and 131 million ordinary shares were issued on 11th October 2010 following the exercise of ~~options under the Sharesave and Executive Share Option Schemes during the year, the following share issues took place:~~warrants to subscribe for ordinary shares.

–

~~During the period 7th January to 30th June 2009, 2,642 million ordinary shares were issued following the conversion of Mandatorily Convertible Notes.~~

–

~~On 28th October 2009, 379 million ordinary shares were issued following the exercise of warrants to subscribe for ordinary shares.~~

AtAs at 31st December ~~2009,~~2010, the issued ordinary share capital totalled ~~11,411,577,230~~12,181,940,871 shares. Ordinary shares represent 100% of the total issued share capital as at 31st December ~~2009.~~2010. Since 31st December ~~2009 628.3~~2010 1.49 million ordinary shares have been issued ~~of which 626.8 million were issued on exercise of Warrants on 17th February 2010.~~in connection with the Sharepurchase, Sharesave and executive share option schemes. As at ~~5th~~4th March ~~2010,~~2011, issued ordinary share capital was ~~12,039,880,284.~~12,183,435,348.

The Company’s Articles of Association, a summary of which can be found in the Shareholder Information section on pages ~~306~~290 to ~~311,~~292, 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.~~

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.~~

securities;

–

Restrictions on voting ~~rights.~~

rights;

–

The powers of the Directors, including in relation to issuing or buying back shares in accordance with the Companies Act 2006. It will be proposed at the ~~2010~~2011 AGM that the Directors be granted new authorities to allot and buy-back shares under the Companies Act ~~2006.~~

2006; and

–

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. The trustees of the EBTs have informed the Company that their normal policy is to abstain from voting in respect of the Barclays shares held in trust. The trustees of the Global and UK Sharepurchase ~~EBT~~EBTs may vote in respect of Barclays shares held in the Sharepurchase EBT, but only ~~at the discretion~~as instructed in those Plans in respect of ~~the participants.~~their Partnership shares and (when vested) Matching and Dividend shares. 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; existing institutional shareholders; and other institutional investors. If not converted at the holders’ option beforehand, these instruments mandatorily converted to ordinary shares of Barclays PLC on 30th June 2009. The conversion price was £1.53276 and, after taking into account MCNs that were converted on or before 31st December 2008, resulted in the issue of 2,642 million new ordinary shares.


				~~123~~	125

Directors’ report

continued

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~~As at 31st December 2010 there were unexercised warrants to subscribe for 379.2 million ordinary shares. These warrants may be exercised at any time up to close of business on 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 occurrence of certain dilutive events including, amongst others, extraordinary dividends, bonus issues, alterations to the nominal value of ordinary shares and rights issues.

~~As at 5th March 2010, a total of 1,006.1 million ordinary shares have been issued on exercise of warrants to subscribe for ordinary shares.~~

Substantial Shareholdings

Substantial shareholders do not have different voting rights from those of other shareholders. As at ~~5th~~4th March 2011, 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:

2010


Holder	Number of Barclays Shares		% of total voting rights attaching to issued share capital		Number of warrants		% of total voting rights attaching to issued share capital ^a
BlackRock, Inc. ^b		805,969,166		7.06		–		–
Qatar Holding LLC		813,964,552		6.76		379,218,809		3.15
Nexus Capital Investing Ltd		758,437,618		6.30		–		–
Legal & General Group Plc		480,805,132		3.99		–		–

As at 5^th March 2010, 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:

2009


Holder	Number of Barclays Shares	% of total voting rights attaching to issued share capital	Number of warrants	% of total voting rights attaching to issued share capital^a	Number of Barclays Shares		% of total voting rights attaching to issued share capital		Number of warrants		% of total voting rights attaching to issued share capital ^a
BlackRock, Inc.^b	805,969,166	7.06	–	–		805,969,166		7.06		–		–
Qatar Holding LLC	813,964,552	6.76	379,218,809	3.15		813,964,552		6.76		379,218,809		3.15
Nexus Capital Investing Ltd	626,835,443	5.49	131,602,175	1.15		626,835,443		5.49		131,602,175		1.15
Legal & General Group Plc	483,625,057	4.01	–	–		483,625,057		4.01		–		–
Appleby Trust (Jersey) Limited^c	353,373,992	3.10	–	–		353,373,992		3.1		–		–

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 ~~119~~120 to 122. Dambisa Moyo and ~~121. Simon Fraser and Reuben Jeffery~~Alison Carnwath were appointed as non-executive Directors with effect from ~~10th March 2009~~1st May 2010 and ~~16th July 2009~~1st August 2010 respectively. ~~The following Directors~~Leigh Clifford and John Varley left the Board ~~during 2009:~~on 30th September 2010 and 31st December 2010 respectively.

–

~~Professor Dame Sandra Dawson on 23rd April 2009.~~

Notes

–a

~~Sir Nigel Rudd on 23rd April 2009.~~

The percentages of voting rights detailed above have been calculated without including the new shares to be issued when the warrants are exercised. This results in the percentage figures being artificially high.

–b

~~Patience Wheatcroft on 16th June 2009.~~

The number of Barclays shares includes 8,003,236 contracts for difference to which voting rights are attached.

–c

~~Stephen Russell on 31st October 2009.~~

The number of Barclays shares includes 192,860,970 Total Return Swap shares to which voting rights are attached.

–

~~Frits Seegers on 3rd November 2009.~~

Retirement and Re-election of Directors

In accordance with its Articles of Association, one-third (rounded down) of the 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 stand for re-election. In addition, the UK ~~Combined Code on~~ Corporate Governance Code (the Code), recommends that ~~every Director~~all Directors of FTSE 350 companies should ~~seek re-election by shareholders at least every three years.~~be subject to annual re-election.

~~All members of~~At the ~~Board exceptionally offered themselves for reelection at the Barclays Annual General Meeting held in April 2009. Going forward,~~2010 AGM, the Group Chairman, Deputy Chairman and Chairmen of each principal Board Committee ~~will stand~~stood for re-election, ~~on an annual basis. One-third~~together with those Directors required to retire by rotation. Going forward, all members of the ~~remaining Directors (excluding Directors appointed since the last AGM)~~Board will ~~retire by rotation annually. The Directors offering~~offer themselves for annual re-election, in ~~such~~accordance with the Code, unless the Board determines that there may be a ~~manner at~~conflict of interest between the ~~2010 AGM are Marcus Agius, David Booth, Sir Richard Broadbent~~long-term interests of Barclays and ~~Sir Michael Rake. The Directors retiring by rotation at~~ the 2010 AGM and offering themselves for re-election are Sir Andrew Likierman and Chris Lucas. In addition, Reuben Jeffery, who was appointed as a Director since the last AGM, will be offering himself for re-election at the 2010 AGM.short-term uncertainty of voting.

Directors’ Interests

Directors’ interests in the shares of the Group on 31st December ~~2009~~2010 are shown on ~~page 153.~~pages 157 and 158.

Directors’ Emoluments

Information on emoluments of Directors of Barclays PLC, in accordance with the Companies Act 2006 and the Listing Rules of the United Kingdom Listing Authority, is given in the Remuneration report on pages ~~145~~147 to ~~161~~163 and in Note 4240 to the ~~financial statements.~~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 ~~2009~~2010 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 and likely Future Developments

The Group is a major global financial services provider engaged in retail banking, credit cards, corporate and investment banking and wealth management. The Group operates through branches, offices and subsidiaries in the UK and overseas.


126

Community Involvement

Barclays has an extensive community investment programme covering many countries around the world. The Group provides funding and support to over ~~7,000~~8,000 charities and voluntary organisations, ranging from small, local charities like The Passage, ~~(UK),~~supporting homeless people in London, to international organisations like Unicef. We also have a very successful employee programme which in ~~2009~~2010 saw more than ~~58,000~~62,000 employees and pensioners worldwide taking part in Barclays-supported volunteering, giving and fundraising activities.

Further information on our community involvement is given on pages 39 to 41. The total commitment for ~~2009~~2010 was ~~£54.9m (2008: £52.2m)~~£55.3m (2009: £54.9m). The Group committed ~~£27.4m~~£28.6m in support of the community in the UK ~~(2008: £27.7m)~~(2009: £27.4m) and ~~£27.5m~~£26.7m was committed in international support ~~(2008: £24.5m)~~(2009: £27.5m). The UK commitment includes ~~£19.3m~~£22.9m of charitable donations ~~(2008: £19.6m)~~(2009: £19.3m).

~~Notes~~

a	The percentages of voting rights detailed above have been calculated without including the new shares to be issued when the warrants are exercised. This results in the percentage figures being artificially high.

b	~~The number of Barclays shares includes 8,003,236 contracts for difference to which voting rights are attached.~~

c	~~The number of Barclays shares includes 192,860,970 Total Return Swap shares to which voting rights are attached.~~


~~124~~

~~Directors’ report~~

~~continued~~

Political Donations

The Group did not give any money for political purposes in the UK or the rest of the EU nor did it make any political donations to political parties or other political organisations, or to any independent election candidates, or incur any political expenditure during the year. Absa Group Limited, in which the Group acquired a majority stake in 2005, made donations totalling ~~£213,982~~£123,295 in ~~2009 (2008: £186,589)~~2010 (2009: £213,982) 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 parties with more than three seats in the National Parliament as confirmed by the Independent Electoral Commission. Support for the deepening of democracy in South Africa remains paramount for the government. The Group made no other political donations in ~~2009.~~2010.

At the AGM in ~~2009,~~2010, shareholders gave a limited authority for Barclays 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 Companies Act 2006. This was similar to an authority given by shareholders in ~~2008.~~2009. This authority, which has not been used, expires at the conclusion of the AGM held this year, or, if earlier, 30th June ~~2010.~~2011. 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 ~~2010~~2011 AGM.

Employee Involvement

Barclays is committed to ensuring that employees share in the success of the Group. Staff 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~~business unit 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. ~~Annual~~ Employee Opinion Surveys are undertaken periodically across the Group with results being reported to the Board, ~~and Board HR and Remuneration Committee,~~ all employees and to our European Works Council, Africa Forum, Unite (Amicus section), our recognised union in the UK and other recognised unions worldwide. Roadshows and employee forums also take place. In addition, Barclays undertakes regular and formal consultations with our recognised trade unions and work councils internationally.

Diversity and Inclusion

UK, Barclays is committed to providing additional support to employees with disabilities and making it easier for them to inform us of their specific requirements, including the introduction of a dedicated intranet site and disability helpline. Through our UK 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.


					127

Directors’ report

continued

Health and Safety

We are 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 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 Group~~Barclays Human ~~Resource~~Resources Director. In ~~2009,~~2010, a Health and Safety Steering Committee was established to ensure decisions are taken relating to the Health and Safety Global Standard and to oversee the operation of a coordinated Health and Safety control framework. The Committee meets on a quarterly basis and produces a quarterly report for the HR Risk Committee. 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. Barclays policy follows the Department for Business, Innovation & Skills’ Prompt Payment Code, copies of which can be obtained from the Prompt Payment Code website at www.promptpaymentcode.org.uk. Part 5 of Schedule 7 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 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 IFRS.


				~~125~~

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 item E.4 (trade creditors) in format I of Schedule 1 of these Regulations applied, the trade creditor payment days for Barclays Bank PLC for ~~2009~~2010 were 27 days ~~(2008: 24~~(2009: 27 days). This is an arithmetical calculation based on the Companies Act regulations and does not necessarily reflect our practice, which is described above, nor the experience of any individual creditor.

Group Chairman

~~Essential Business Contracts~~Bob Diamond (59)

~~There are no persons with whom the Group has contractual or other arrangements that are considered essential~~Chief Executive,

Executive Director

Sir Richard Broadbent (57)

Deputy Chairman and

Senior Independent Director

David Booth (56)

Non-executive Director

Biography

Marcus’ extensive background in banking began at Lazard where he worked from 1972 to ~~the business~~2006, latterly as Chairman of Lazard in London and Deputy Chairman of Lazard LLC. He is currently Chairman of the ~~Group.~~British Bankers’ Association, Senior Independent Director of the British Broadcasting Corporation (BBC) and Chairman of the Trustees of The Royal Botanic Gardens. Marcus is also a Business Ambassador for UK Trade and Investment, a member of the Advisory Council of TheCityUK, and a member of the Takeover Panel. He was formerly Chairman of BAA plc, a position he held from 2002 until 2006.

~~Contracts~~Bob became Chief Executive on 1st January 2011. Previously, he was President of ~~Significance~~

~~Under the terms of a stock purchase agreement dated 16th June 2009 which was entered into by and among Barclays Bank PLC,~~ Barclays PLC and Chief Executive of Corporate & Investment Banking and Wealth Management, comprising Barclays Capital, Barclays Corporate and Barclays Wealth. Before joining Barclays, Bob was Vice Chairman and Head of Global Fixed Income and Foreign Exchange at CS First Boston, where he was also a member of the Executive Board and Operating Committee. Prior to this, he was Managing Director and Head of Fixed Income Trading at Morgan Stanley International, spending 13 years with the firm. Bob is a non-executive Director of BlackRock, Inc.

Sir Richard has experience of both the private and public sector having worked in high-level banking roles and the Civil Service. He was the Executive Chairman of HM Customs and Excise from 2000 to 2003. Formerly he was a member of the Group Executive Committee of Schroders PLC and a non-executive Director of the Securities Institute. He was Chairman of Arriva PLC until August 2010.

David 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 where he held various key positions, including Head of Government Bond Trading, Head of Mortgage Trading, Sales and Finance and Head of Global Operations and Technology.

Term of office

Marcus joined the Board in September 2006 as a non-executive Director and was appointed Chairman on 1st January 2007. Marcus was last re-elected by shareholders at the AGM in 2010.

Bob was appointed President 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 2009.

Sir Richard joined the Board in September 2003. Appointed Senior Independent Director on 1st September 2004 and Deputy Chairman on 16 July 2009. Sir Richard was last re-elected by shareholders at the AGM in 2010.

David joined the Board in May 2007. David was last re-elected by shareholders at the AGM in 2010.

Independent ^a

On appointment

Yes

External

appointments

Chairman of the British Bankers’ Association since 2010. Senior Independent Director of the BBC since 2006. Member of the Executive Committee of the Institut International D’Etudes Bancaires. Business Ambassador for UK Trade and Investment. Member of the Advisory Council of TheCityUK. Member of the Takeover Panel. Chairman of the Trustees of the Royal Botanic Gardens, Kew. Chairman of The Foundation and Friends of the Royal Botanic Gardens, Kew. Chairman of Lazard in London and Deputy Chairman of Lazard LLC until 2006. Chairman of BAA plc until 2006.

Non-executive Director of BlackRock, Inc. ~~(BlackRock), Barclays agreed to sell BGI to BlackRock.~~Chairman, Board of Trustees of Colby College, Waterville, Maine. Chairman, Old Vic Productions,Plc. Trustee, The sale completed on 1st December 2009 following the receipt of all necessary shareholder and regulatory approvals and satisfaction of other closing conditions. The consideration at completion was US$15.2bn (£9.5bn), including 37.567 million new BlackRock shares, giving Barclays an economic interest of 19.9%Mayor’s Fund for London. Member of the ~~enlarged BlackRock group. Barclays has provided BlackRock with customary warranties~~Advisory Board, Judge Business School at Cambridge University. Board Member, The Diamond Family Foundation. Member of International Advisory Board, British-American Business Council. Life Member of The Council on Foreign Relations. Member of The International Advisory Board, The Atlantic Council.

Chairman of Arriva PLC until 2010. Trustee of Relate since 2011. Executive Chairman of HM Customs and ~~indemnities in connection with~~Excise until 2003. Former Group Executive Committee member of Schroders PLC. Non-executive Director of the ~~sale. Barclays Bank will also continue to provide support in respect~~Securities Institute until 1995.

Director of ~~certain BGI cash funds~~East Ferry Investors, Inc. Various positions at Morgan Stanley & Co. until ~~December 2013~~1997. Director of the Discount Corporation of New York until 1993.

Committee

membership

Chairman of the Board Corporate Governance and ~~indemnities in respect~~Nominations Committee since January 2007. Member of ~~certain~~the Board Remuneration Committee since January 2007.

Chairman of ~~BGI’s fully collateralised securities lending activities~~the Board Remuneration Committee since January 2007 (member since April 2004). Member of the Board Corporate Governance and Nominations Committee since September 2004. Former member of the Board Risk Committee (April 2004 until ~~30th November 2012.~~

~~Research~~September 2010), which he chaired between January 2006 and ~~development~~

~~In the ordinary course of business the Group 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 on pages 94 to 104 under the headings, ‘Barclays risk management strategy’, ‘Credit risk management’, ‘Market risk management’, ‘Liquidity risk management’ and ‘Derivatives’ and in Note 14 and Notes 47 to 49 to the accounts.

~~Events after the Balance Sheet Date~~

On 1st January 2010, the Group acquired 100% ownership of Standard Life Bank Plc for a consideration of £227m in cash. The assets acquired include a savings book of approximately £5.8bn, and a mortgage book with outstanding balances of approximately £7.5bn.

As announced on 3rd November 2009, the Group has made changes to its business structure, which will be reflected in the Group’s external financial reporting for periods commencing 1st January 2010. The segmental information presented in this Annual Report represents the business segments and other operations used for management and reporting purposes during the year ended 31st December 2009.

~~On 17th February 2010, 626.8 million~~

Chairman of the ~~758.4 million warrants~~Board Risk Committee since January 2010 (member since January 2008). Member of the Board Corporate Governance and Nominations Committee since January 2010.

Note


a For a description of how the Board determines independence, see page 135


					121

Board and executive committee continued




	Alison Carnwath(58) Non-executive Director	Fulvio Conti(63) Non-executive Director	Simon Fraser(51) Non-executive Director	Reuben Jeffery III(57) Non-executive Director
Biography	Alison worked in investment banking and corporate finance for 20 years from 1980 to 2000, before pursuing a portfolio career. During her career, Alison became a director of J. Henry Schroder Wagg & Co, where she worked for 10 years. Alison also held ~~by PCP Gulf Invest 3 Limited (a subsidiary~~the positions of ~~Nexus~~a senior partner of Phoenix Securities and Managing Director, New York at Donaldson, Lufkin & Jenrette. Alison has wide board level experience and is currently non-executive Chairman of Land Securities Group PLC, Senior Independent Director at Man Group plc, non-executive Director of Paccar Inc, and non-executive Chairman of ISIS EP LLP.	Fulvio is currently Chief Executive Officer and General Manager of Enel SpA, the Italian energy group, where he was previously Chief Financial Officer from 1999-2005. Fulvio has held a number of high-level financial roles, including Chief Financial Officer and General Manager of Telecom Italia and General Manager and Chief Financial Officer of Ferrovie dello Stato. He was also head of the accounting, finance, and control department of Montecatini and was in charge of finance at Montedison-Compart. He has held positions in finance and operations in various affiliates of Mobil Oil Corporation in Italy and Europe.	Simon has extensive experience of the institutional fund management industry, having worked at Fidelity International from 1981 to 2008, latterly as President of the Investment Solutions Group and President of the Retirement Institute. Simon held a number of positions during his career at Fidelity International, including President, European & UK Institutional Business, Global Chief Investment Officer, Chief Investment Officer for Asia Pacific and Chief Investment Officer of the European Investment Group. Simon remains a director of Fidelity European Values PLC and Fidelity Japanese Values PLC. He was appointed as the Chairman of Foreign & Colonial Investment Trust PLC and Chairman of The Merchants Trust in May 2010.	Reuben is currently the Chief Executive Officer of Rockefeller & Co., Inc., a member of the Advisory Board of TASC Inc and of TowerBrook Capital ~~Investing Limited) were exercised~~Partners LP and Senior Adviser at the Center for ~~an aggregate exercise price of approximately £1,240m. As a result 626.8 million new ordinary shares were issued representing a 5.2% ownership~~Strategic & International Studies in Washington, D.C.. He previously served in the ~~Group’s enlarged share capital.~~US government as Under Secretary of State for Economic, Energy and Agricultural Affairs (2007-2009). Prior to joining the Department of State, Reuben was the Chairman of the Commodity Futures Trading Commission. He spent eighteen years at Goldman, Sachs & Co. between 1983-2001 where he was managing partner of Goldman Sachs in Paris and led the firm’s European Financial Institutions Group in London.
Term of office	Alison joined the Board on 1st August 2010.	Fulvio joined the Board in April 2006. Fulvio was last re-elected by shareholders at the AGM in 2009.	Simon joined the Board in March 2009. Simon was last re-elected by shareholders at the AGM in 2009.	Reuben joined the Board in July 2009. Reuben was last re-elected by shareholders at the AGM in 2010.

Independent	Yes	Yes	Yes	Yes
External appointments	Non-executive Director of CforC Ltd. Non-executive Chairman of Land Securities Group PLC since November 2008. Senior Independent Director at Man Group plc. Non-executive Director of Paccar Inc. Non-executive Chairman of ISIS EP LLP.	Chief Executive of Enel SpA since 2005. Director of ENDESA SA since June 2009. Director of AON Corporation since January 2008. Chief Financial Officer and General Manager of Telecom Italia until 1999. General Manager and Chief Financial Officer of Ferrovie dello Stato until 1998.	Director of Fidelity European Values PLC since July 2002. Director of Fidelity Japanese Values PLC since May 2000. Chairman of The ~~Auditors~~Merchants Trust PLC since May 2010. Chairman of Foreign & Colonial Investment Trust PLC since May 2010.	~~The~~Chief Executive Officer of Rockefeller & Co., Inc. since September 2010. Senior Adviser at the Center for Strategic & International Studies, Washington D.C.. Member of the Advisory Board of TASC Inc. Member of the Advisory Board of TowerBrook Capital Partners LP. Director of Transatlantic Holdings Inc since May 2010.


Committee membership	Member of the Board Audit Committee ~~reviews the appointment~~since October 2010. Member of the ~~external auditors, as well as their relationship with the Group, including monitoring the Group’s use~~Board Remuneration Committee since October 2010.	Member of the ~~auditors~~Board Audit Committee since September 2006.	Member of the Board Audit Committee since May 2009. Member of the Board Remuneration Committee since May 2009.	Member of Board Risk Committee since January 2010.


122

LOGO

Sir Andrew Likierman(67)

Non-executive Director

Chris Lucas (50)

Group Finance Director, Executive Director

Dambisa Moyo(42)

Non-executive Director

Sir Michael Rake(63)

Non-executive Director

Sir John Sunderland(65)

Non-executive Director

Sir Andrew is the Chairman of the 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 and non-executive Director of the Bank of England. Sir Andrew is also Dean of the London Business School. He has been at the London Business School from 1974-1976, 1979-1993 and since 2004.

Chris has worked across financial services for ~~non-audit services and~~most of his career, including three years in New York as Head of the ~~balance~~US Banking Audit Practice of ~~audit and non-audit fees paid to the auditors. More details on this can be found on page 137 and Note 9 to the accounts.~~PricewaterhouseCoopers LLP. Chris joined Barclays from PricewaterhouseCoopers LLP, ~~have been the Company’s auditors~~where he was UK Head of Financial Services and Global Head of Banking and Capital Markets. He was Global Relationship Partner for ~~many years. Having reviewed the independence and effectiveness of the external auditors, the Committee has not considered it necessary to date~~

~~to require them to tender~~Barclays for the ~~audit work. The external auditors are required to rotate~~1999–2004 financial years and subsequently held similar roles for other global financial services organisations.

Dambisa is an international economist who writes on the ~~audit partners responsible~~macroeconomy and global affairs. Dambisa worked for the ~~Group~~World Bank from 1993 to 1995. After completing a PhD in Economics, she worked for Goldman Sachs for eight years until November 2008 in the debt capital markets, hedge funds coverage and subsidiary audits every five years. The current lead audit partner, who has now been in place for five years, will be replaced for the 2010 year-end. There are no contractual obligations restricting the Company’s choice of external auditor. 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 2010 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 ought to have takenglobal macroeconomics teams. Dambisa currently serves as a non-executive Director ~~in order to make himself aware~~on the Boards of ~~any relevant audit information~~SABMiller plc 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~~

The Barclays PLC AGM will be held at the Royal Festival Hall on Friday 30th April 2010. The Notice of Meeting is included in a separate document sent to shareholders with this report. A summary of the resolutions being proposed at the 2010 AGM is set out below.

~~Ordinary Resolutions~~Lundin Petroleum AB (publ).

–

~~To receive the Directors’ and Auditors’ Reports and the audited accounts for the year ended 31st December 2009.~~

–

~~To approve the Directors’ Remuneration Report for the year ended 31st December 2009.~~

–

~~To re-elect the following Directors:~~

~~Reuben Jeffery III~~

~~Marcus Agius~~

~~David Booth~~

~~Sir Richard Broadbent~~

Sir Michael ~~Rake~~is currently Chairman of BT Group PLC and Chairman of easyJet plc. Sir Michael previously worked at KPMG from 1974-2007 where he spent a number of years in Continental Europe and the Middle East. He was Senior Partner of the UK firm from 1998-2000 and Chairman of KPMG International from 2002-2007.

Sir John is Chairman of Merlin Entertainments Group. Until July 2008 he was Chairman of Cadbury Schweppes PLC, having worked at Cadbury’s in various roles, including that of Chief Executive and then Chairman, since 1968. He 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.

Sir Andrew ~~Likierman~~joined the Board in September 2004. Sir Andrew was last re-elected by shareholders at the AGM in 2010.

Chris ~~Lucas~~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 2010.

–

~~To reappoint PricewaterhouseCoopers LLP as auditors of the Company.~~

Dambisa joined the Board on 1st May 2010.

Sir Michael joined the Board in January 2008. Sir Michael was last re-elected by shareholders at the AGM in 2010.

Sir John joined the Board in June 2005. Sir John was last re-elected by shareholders at the AGM in 2009.

–

~~To authorise the Directors to set the remuneration of the auditors.~~

–

~~To authorise Barclays PLC and its subsidiaries to make political donations and incur political expenditure.~~

–

~~To renew the authority given to Directors to allot securities.~~

–

~~To approve and adopt the rules of the Barclays Group SAYE Share Option Scheme.~~

~~Special Resolutions~~Yes

–

~~To renew the authority given to the Directors to allot securities for cash other than on a pro-rata basis to shareholders and to sell treasury shares.~~

Yes

–

~~To renew the Company’s authority to purchase its own shares.~~

–

~~To permit General Meetings to continue to be called on 14 clear days’ notice.~~

–

~~To adopt new Articles of Association.~~

~~This is only a summary~~Dean of the ~~business~~London Business School since January 2009. Chairman of the National Audit Office since December 2008. Trustee 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 Chairman of the MORI Group until 2005.

UK Head of Financial Services and Global Head of Banking and Capital Markets of PricewaterhouseCoopers LLP until 2006.

Non-executive Director of SABMiller plc since 2009. Non-executive Director of Lundin Petroleum AB (publ) since 2009.

Chairman of BT Group PLC since 2007. Chairman of easyJet Plc since January 2010 (Deputy Chairman June 2009 – December 2009). Director of the Financial Reporting Council since 2007. Director of the McGraw-Hill Companies since 2007. Chairman of the UK Commission for Employment and Skills until 2010. Chairman of KPMG International until 2007. Chairman of Business in the Community from 2004 until 2007.

Chairman of Merlin Entertainments Group since December 2009. Director of the Financial Reporting Council since 2004. Adviser to ~~be transacted at~~CVC Capital Partners. Deputy President of the ~~meetings~~Chartered Management Institute until 2009 (President 2007-2008). Chairman of Cadbury Schweppes PLC until July 2008. Deputy President of the CBI until June 2008 (former member and ~~you should refer to~~President). Non-executive Director of the ~~Notice of Meeting for full details.~~Rank Group PLC until 2006.

~~By order~~

Member of the Board Audit Committee since September 2004. Member of the Board Risk Committee since September 2004.

~~Lawrence Dickinson~~Member of the Board Risk Committee since October 2010.

~~Company Secretary~~

~~9th~~Chairman of the Board Audit Committee since March ~~2010~~2009 (member since January 2008). Member of the Board Risk Committee since May 2009. Member of Board Corporate Governance and Nominations Committee since May 2009.

Member of the Board Corporate Governance and Nominations Committee since September 2006. Member of the Board Remuneration Committee since July 2005.


					123

Board and executive committee



Bob Diamond(59) Chief Executive, Executive Director	Robert Le Blanc Chief Risk Officer	Mark Harding Group General Counsel	Antony Jenkins Chief Executive of Global Retail Banking	Thomas L Kalaris Chief Executive of Barclays Wealth

Chris Lucas (50) Group Finance Director, Executive Director See pages 120 and 122 for full biographies.	Robert has been the Chief Risk Officer for Barclays Group since 2004. He first joined Barclays in 2002 as Head of Risk Management at Barclays Capital. Robert is a non-executive Director of Absa, which is majority owned by Barclays. Before joining Barclays, Robert spent most of his career at JP Morgan in the capital markets, fixed income, emerging market and credit areas in New York and London.	Mark joined Barclays as Group General Counsel in 2003. Included within his area of responsibility are legal and regulatory compliance issues throughout the bank. He chairs the Group Operating Committee and Group Governance and Control Committee. Previously, Mark was a partner in the international law firm, Clifford Chance, where his practice spanned bank finance, capital markets and financial services regulation. He spent four years at UBS as General Counsel of its investment bank. Mark is past Chairman of the General Counsel 100 Group and of the Board of the International Swaps and Derivatives Association (ISDA). He is a Governor of the College of Law.	Antony was appointed Chief Executive of Global Retail Banking and joined the Barclays Executive Committee in November 2009. Prior to that he had been Chief Executive of Barclaycard since January 2006. Antony is a Barclays appointed non-executive Director of Absa, which is majority owned by Barclays. Since October 2008, Antony has been on the Board of Visa Europe Ltd.	Tom joined Barclays in September 1996 after 18 years at JP Morgan where he held a number of roles, including Head of Fixed Income Sales, Trading and Research, and was responsible for all activities with investors in the United States. He has served on the US Treasury Borrowing Advisory Committee and is a former Chair of the US Bond Market Association, a predecessor organisation to SIFMA (Securities Industry and Financial Markets Association).

~~126~~

~~Corporate governance~~Jerry del Missier

Co-Chief Executive of Barclays Capital and Co-Chief Executive of Corporate ~~governance report~~and Investment Banking

Maria Ramos

Group Chief Executive of Absa

~~Group Chairman’s Introduction~~Rich Ricci

Co-Chief Executive of Barclays Capital and Co-Chief Executive of Corporate and Investment Banking

Cathy Turner

Barclays ~~performed strongly~~Human Resources Director

Jerry joined Barclays Capital in ~~2009, despite it being another challenging year~~June 1997 from Bankers Trust in London where he had been a Senior Managing Director of Derivatives Products, responsible for the ~~financial services industry. Once again, a number~~European business. Prior to this, he was based in Toronto, Canada, where he was responsible for the Canadian Dollar interest rate derivatives business. Before Bankers Trust, he worked for the Bank of ~~difficult decisions had~~Nova Scotia. Jerry currently serves on the Boards of Room to ~~be taken as~~Read, the ~~Board sought to act in~~Securities Industry and Financial Markets Association (SIFMA), the ~~best interests~~Global Financial Markets Association (GFMA), the Markets Management Group (MMG) of ~~shareholders.~~

~~Review~~the International Institute of ~~2009~~

~~The year started with confidence in the banking sector as a whole at an extremely low ebb. The market was unsure as to the strength of banks’ balance sheets~~Finance (IIF), and the ~~extent~~Advisory Board of ~~further losses from both credit market exposures and~~ the ~~global economic downturn. In Barclays case, the share price was extremely weak during January and the Board took its first key decision~~Queen’s University School of Business in ~~deciding to issue an open letter from~~Kingston, Ontario.

Maria is the Group Chief Executive ~~and myself~~of Absa Group Ltd, which is majority owned by Barclays. Prior to joining Absa on 26th January 2009 to address the principal causes for concern. We felt that it was important to make this announcement, in what were exceptional circumstances, to reassure our stakeholders that we were well funded and profitable.

In1st March 2009, ~~we announced that~~she was the ~~Board did not believe it~~Group Chief Executive of Transnet Limited, the state-owned South African freight transport and logistics service provider. This was ~~in the interests of investors, depositors or clients to participate in HM Treasury’s Asset Protection Scheme. This decision was taken~~ after ~~careful consideration~~a successful term as Director- General of the ~~economics~~National Treasury (formerly the Department of ~~participation and detailed stress testing of our capital position and resources,~~Finance). She currently serves on the ~~results of which were confirmed by the FSA.~~

In March 2009, we explored the potential sale of our iShares business with a number of interested parties and announced, in April 2009, the sale of that business to a limited partnership established by CVC Capital Partners Group. Following a superior offer from BlackRock, Inc. for the saleexecutive committees of the ~~whole~~International Business Council, the World Bank Chief Economist Advisory Panel, Business Leadership South Africa and the Banking Association of ~~the~~South Africa.

Rich joined Barclays Capital in 1994 and assumed responsibility for several of its support areas. He became Chief Operating Officer (COO) of Barclays Global Investors ~~business~~ (BGI), and a member of the BGI Executive Committee in December 2002. In January 2005, Rich was appointed COO of Barclays Investment Banking and Investment Management businesses comprising Barclays Capital, Barclays Wealth and BGI. Prior to joining Barclays Capital, Rich held senior front-office, finance and technology positions at the Bank of Boston and the Bank of New England.


124

Directors’ report

Profit Attributable

The profit attributable to equity shareholders of Barclays PLC for the year amounted to £3,564m, compared with £2,628m from continuing operations and £6,765m from discontinued operations in 2009.

Dividends

The final dividend for the year ended 31st December 2010 of 2.5p per ordinary share of 25p each has been agreed by the Directors. The final dividend was announced on 15th February 2011 for payment on 18th March 2011 in respect of the ordinary shares registered at the close of business on 25th February 2011. With the interim dividends totalling 3.0p per ordinary share, paid in June, September and December 2010, the total distribution for 2010 is 5.5p (2009: 2.5p) per ordinary share. The interim and final dividends for 2010 amounted to £653m (2009: £289m).

Share Capital

The Company has ordinary shares in issue. The Company’s Articles of Association provide for Sterling, Dollar, Euro and Yen preference shares (preference shares). No preference shares have been issued as at 4th March 2011 (the latest practicable date for inclusion in this report).

The Company did not repurchase any ordinary shares of 25p each during 2010 (2009: None). As at 4th March 2011, the Company had an unexpired authority to repurchase ordinary shares up to a maximum of 1,203,988,028 ordinary shares.

The issued ordinary share capital was increased by 770 million ordinary shares during 2010. In addition to those issued in connection with the Sharepurchase, Sharesave and executive share option schemes during the year, 627 million ordinary shares were issued on 17th February 2010 and 131 million ordinary shares were issued on 11th October 2010 following the exercise of warrants to subscribe for ordinary shares.

As at 31st December 2010, the issued ordinary share capital totalled 12,181,940,871 shares. Ordinary shares represent 100% of the total issued share capital as at 31st December 2010. Since 31st December 2010 1.49 million ordinary shares have been issued in connection with the Sharepurchase, Sharesave and executive share option schemes. As at 4th March 2011, issued ordinary share capital was 12,183,435,348.

The Company’s Articles of Association, a summary of which can be found in the Shareholder Information section on pages 290 to 292, 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 ~~best interests~~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 2006. It will be proposed at the 2011 AGM that the Directors be granted new authorities to allot and buy-back shares under the Companies Act 2006; and

–	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. The trustees of the EBTs have informed the Company that their normal policy is to abstain from voting in respect of the Barclays shares held in trust. The trustees of the Global and UK Sharepurchase EBTs may vote in respect of Barclays shares held in the Sharepurchase EBT, but only as instructed in those Plans in respect of their Partnership shares and (when vested) Matching and Dividend shares. The trustees will not otherwise vote in respect of shares held in the Sharepurchase EBT.


					125

Directors’ report

continued

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. As at 31st December 2010 there were unexercised warrants to subscribe for 379.2 million ordinary shares. These warrants may be exercised at any time up to close of business on 31st October 2013.

Substantial Shareholdings

Substantial shareholders do not have different voting rights from those of other shareholders. As at 4th March 2011, 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:

2010


Holder	Number of Barclays Shares		% of total voting rights attaching to issued share capital		Number of warrants		% of total voting rights attaching to issued share capital ^a
BlackRock, Inc. ^b		805,969,166		7.06		–		–
Qatar Holding LLC		813,964,552		6.76		379,218,809		3.15
Nexus Capital Investing Ltd		758,437,618		6.30		–		–
Legal & General Group Plc		480,805,132		3.99		–		–

As at 5^th March 2010, 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:

2009


Holder	Number of Barclays Shares		% of total voting rights attaching to issued share capital		Number of warrants		% of total voting rights attaching to issued share capital ^a
BlackRock, Inc.^b		805,969,166		7.06		–		–
Qatar Holding LLC		813,964,552		6.76		379,218,809		3.15
Nexus Capital Investing Ltd		626,835,443		5.49		131,602,175		1.15
Legal & General Group Plc		483,625,057		4.01		–		–
Appleby Trust (Jersey) Limited ^c		353,373,992		3.1		–		–

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 120 to 122. Dambisa Moyo and Alison Carnwath were appointed as non-executive Directors with effect from 1st May 2010 and 1st August 2010 respectively. Leigh Clifford and John Varley left the Board on 30th September 2010 and 31st December 2010 respectively.

Notes

a	The percentages of voting rights detailed above have been calculated without including the new shares to be issued when the warrants are exercised. This results in the percentage figures being artificially high.

b	The number of Barclays shares includes 8,003,236 contracts for difference to which voting rights are attached.

c	The number of Barclays shares includes 192,860,970 Total Return Swap shares to which voting rights are attached.

Retirement and Re-election of Directors

In accordance with its Articles of Association, one-third (rounded down) of the 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 stand for re-election. In addition, the UK Corporate Governance Code (the Code), recommends that all Directors of FTSE 350 companies should be subject to annual re-election.

At the 2010 AGM, the Group Chairman, Deputy Chairman and Chairmen of each principal Board Committee stood for re-election, together with those Directors required to retire by rotation. Going forward, all members of the Board will offer themselves for annual re-election, in accordance with the Code, unless the Board determines that there may be a conflict of interest between the long-term interests of Barclays and the short-term uncertainty of voting.

Directors’ Interests

Directors’ interests in the shares of the Group on 31st December 2010 are shown on pages 157 and 158.

Directors’ Emoluments

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 2010 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 and likely Future Developments


126

Community Involvement

Barclays has an extensive community investment programme covering many countries around the world. The Group provides funding and support to over 8,000 charities and voluntary organisations, ranging from small, local charities like The Passage, supporting homeless people in London, to international organisations like Unicef. We also have a very successful employee programme which in 2010 saw more than 62,000 employees and pensioners worldwide taking part in Barclays-supported volunteering, giving and fundraising activities. Further information on our community involvement is given on pages 39 to 41. The total commitment for 2010 was £55.3m (2009: £54.9m). The Group committed £28.6m in support of the community in the UK (2009: £27.4m) and £26.7m was committed in international support (2009: £27.5m). The UK commitment includes £22.9m of charitable donations (2009: £19.3m).

Political Donations

The Group did not give any money for political purposes in the UK or the rest of the EU nor did it make any political donations to political parties or other political organisations, or to any independent election candidates, or incur any political expenditure during the year. Absa Group Limited, in which the Group acquired a majority stake in 2005, made donations totalling £123,295 in 2010 (2009: £213,982) 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 parties with more than three seats in the National Parliament as confirmed by the Independent Electoral Commission. Support for the deepening of democracy in South Africa remains paramount for the government. The Group made no other political donations in 2010.

At the AGM in 2010, shareholders gave a limited authority for Barclays 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 Companies Act 2006. This was similar to an authority given by shareholders in 2009. This authority, which has not been used, expires at the conclusion of the AGM held this year, or, if earlier, 30th June 2011. 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 2011 AGM.

Employee Involvement

Barclays is committed to ensuring that employees share in the success of the Group. Staff 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 business unit 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. Employee Opinion Surveys are undertaken periodically across the Group with results being reported to the Board, all employees and to our European Works Council, Africa Forum, Unite (Amicus section), our recognised union in the UK and other recognised unions worldwide. Roadshows and employee forums also take place. In addition, Barclays undertakes regular and formal consultations with our recognised trade unions and work 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. In the UK, Barclays is committed to providing additional support to employees with disabilities and making it easier for them to inform us of their specific requirements, including the introduction of a dedicated intranet site and disability helpline. Through our UK Reasonable Adjustments Scheme, appropriate assistance can be given, including 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.


					127

Directors’ report

continued

Health and Safety

–	demonstrate personal leadership that is consistent with this commitment;

–	provide the appropriate resources to fulfil this commitment;

–	carry out risk assessments and ~~for~~take appropriate actions to mitigate the ~~benefit of shareholders~~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 ~~accept that offer. The resolution for the sale of BGI was put to shareholders at a General Meeting on 6th August 2009~~provide specialist advice; and ~~99.9% of votes cast were in favour of the transaction.~~

During the second half of 2009, the Board took the decision to restructure the Group’s credit market exposures. We announced in September 2009 that we were restructuring a significant tranche of such exposures in order to secure more stable risk-adjusted returns for shareholders over time. And, while we did not pay a final dividend for 2008, we were able to resume dividend payments in the second half of 2009
– review Barclays Health and ~~it is our intention to pay quarterly dividends going forward.~~
~~It was essential to keep the Board fully informed during the discussions on all these matters~~Safety Group Process and the ~~Directors were updated regularly~~Statement of Commitment, at Board meetings and through ad hoc circulation of information. A significant number of additional Board and Board Committee meetings were held, often at short notice, to discuss and take those decisions – a total of 27 Board meetings were held during the year and each of our Board Committees held additional meetings. It was also important to keep our shareholders informed and, in addition to regulatory announcements, meetings were held with our institutional shareholders and other investor groups to discuss the financial crisis and how we have responded. Briefings on these meetings were reported to the Board to ensure that all Directors were aware of any concerns raised by our shareholders.
~~Corporate Governance in Barclays~~
As Chairman, a key part of my role is to ensure that the composition of the Board is appropriate; that appropriate behaviours are demonstrated in the Boardroom and that there is an environment in which challenge is expected and achieved. In April, we reviewed the lessons learnt from the
financial crisis and considered any enhancements that could be made. Governance processes were reviewed and a number of changes were made. These included revisions to the Board Risk Committee Terms of Reference to make explicit its role in reviewing risks following the Group’s entry into new businesses or geographies. The changes also set out the Committee’s role in reviewing the specific risk adjustments to be applied to performance objectives. The frequency of risk, capital and liquidity reporting to the Board, Board Audit Committee and Board Risk Committee has been increased and additional time has been allocated to strategy discussions.
Barclays has emerged from the crisis in a relatively strong position compared to many of our peers. The profits of the Group were strong in 2009 and good progress was made on key measures of financial strength, such as capital and liquidity. However, we remain conscious of the significant reduction in shareholder value suffered by our shareholders. Whilst we have made changes to some of our Corporate Governance processes and practices, we believe that these were fundamentally sound. The review of Corporate Governance in the banking sector by Sir David Walker (the Walker Review), to which we contributed, made a number of recommendations for improvements in governance in the banking sector. Many of the practices put forward in the Walker Review recommendations are in line with practices we already have in place, but where we can enhance processes and practices, we are doing so.
However, the real key to effective Corporate Governance is to ensure that behaviours around the Board table are appropriate. It is an essential part of my role to ensure that firstly, appropriate and timely information is available to the Board in a readily understandable format, and secondly, that there is an environment in the Boardroom which promotes and supports constructive and effective challenge. This requires the right Board composition and I believe Barclays has been well served by both its executive and non-executive Directors in this respect. Our Directors understand the importance of appropriate Board behaviour, which is set out in our ‘Charter of Expectations’ at~~www.barclays.com/corporategovernance~~. The Charter of Expectations is given to all new Directors and reviewed on an annual basis to ensure it sets out the expectations of each Director in their role on the Board, including expected competencies, behaviours and time commitment.
~~Board size and composition~~
During 2009, we made a conscious effort to reduce the size of the Board from its peak of 17 and, although this number will fluctuate as we seek to ensure the Board has the right level of skills and experience, we will aim to keep it between 12 to 15 Directors. Going forward, it is our intention to maintain a majority of independent non-executive Directors, with approximately 50% of those non-executive Directors, including the Group Chairman and the Chairmen of the principal Board Committees, having banking or financial experience. We do believe, however, that to be fully effective, the Board should have a balance of Directors with both banking or financial experience and broader experience.
We have carefully considered, in the light of both the Walker Review and the Review of the Combined Code, whether all Directors should stand for re-election each year. I do believe it is important that the Chairman should stand for re-election annually and, having discussed the issue at both the Board Corporate Governance and Nominations Committee and the Board, we decided that the Deputy Chairman and Committee Chairmen should also stand for annual re-election.
The report that follows sets out how we have complied with the UK Combined Code on Corporate Governance (the Code) and also gives further details of any enhancements made during the year and in particular, in response to the recommendations of the Walker Review.
~~Marcus Agius~~regular intervals.

Barclays monitors its health and safety performance using a variety of measurements on a monthly basis and the Board Remuneration Committee receives annual reports on health and safety performance from Barclays Human Resources Director. In 2010, a Health and Safety Steering Committee was established to ensure decisions are taken relating to the Health and Safety Global Standard and to oversee the operation of a coordinated Health and Safety control framework. The Committee meets on a quarterly basis and produces a quarterly report for the HR Risk Committee. As part of its Partnership Agreement with Unite (Amicus section), Barclays currently funds full time Health and Safety Representatives.

Creditors’ Payment Policy

The trade creditor payment days for Barclays Bank PLC for 2010 were 27 days (2009: 27 days). This is an arithmetical calculation based on the Companies Act regulations and does not necessarily reflect our practice, which is described above, nor the experience of any individual creditor.

Group Chairman

~~9th March 2010~~


				~~127~~

Bob Diamond (59)

Chief Executive,

Executive Director

Sir Richard Broadbent (57)

Deputy Chairman and

Senior Independent Director

David Booth (56)

Non-executive Director

Biography

Marcus’ extensive background in banking began at Lazard where he worked from 1972 to 2006, latterly as Chairman of Lazard in London and Deputy Chairman of Lazard LLC. He is currently Chairman of the British Bankers’ Association, Senior Independent Director of the British Broadcasting Corporation (BBC) and Chairman of the Trustees of The Royal Botanic Gardens. Marcus is also a Business Ambassador for UK Trade and Investment, a member of the Advisory Council of TheCityUK, and a member of the Takeover Panel. He was formerly Chairman of BAA plc, a position he held from 2002 until 2006.

Bob became Chief Executive on 1st January 2011. Previously, he was President of Barclays PLC and Chief Executive of Corporate & Investment Banking and Wealth Management, comprising Barclays Capital, Barclays Corporate and Barclays Wealth. Before joining Barclays, Bob was Vice Chairman and Head of Global Fixed Income and Foreign Exchange at CS First Boston, where he was also a member of the Executive Board and Operating Committee. Prior to this, he was Managing Director and Head of Fixed Income Trading at Morgan Stanley International, spending 13 years with the firm. Bob is a non-executive Director of BlackRock, Inc.

~~Statements~~

Sir Richard has experience of ~~Compliance~~

~~UK Combined Code on Corporate Governance~~

~~As Barclays is listed on~~both the ~~London Stock Exchange, we comply with~~private and public sector having worked in high-level banking roles and the ~~UK Combined Code on Corporate Governance (the Code). For~~Civil Service. He was the ~~year ended 31st December 2009, we have complied with the relevant provisions set out in section 1~~Executive Chairman of HM Customs and Excise from 2000 to 2003. Formerly he was a member of the ~~Code~~Group Executive Committee of Schroders PLC and ~~applied the principles~~a non-executive Director of the ~~Code as described~~Securities Institute. He was Chairman of Arriva PLC until August 2010.

David manages his own venture capital investments, having retired from the Management Committee of Morgan Stanley in ~~this report.~~

~~NYSE Corporate Governance Rules~~

~~Barclays has American Depositary Receipts listed on the New York Stock Exchange (NYSE),~~1997. David was employed by Morgan Stanley from 1982 to 1992, and ~~is also subject~~again from 1995 to the NYSE’s Corporate Governance rules (NYSE Rules). We are exempt from most of the NYSE Rules, which domestic US companies must 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 disclose any significant differences between our corporate governance practices 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 are set out later in this Report.

~~Role and constitution of Board~~

~~Corporate governance framework~~

Good corporate governance practices are not just a matter for the Board but are at the heart of everything that we do within the Group. The Group operates within a comprehensive governance framework, which is outlined in the diagram below and set out in the report that follows. The Group’s risk management framework is described in the Risk Management section on pages 59 to 65.

~~The Board~~

~~The Board is responsible to the shareholders for creating and delivering sustainable shareholder value through the management of the Group’s businesses. Each Director must act in a way that~~1997 where he or she considers promotes the long-term success of the Company for the benefit of shareholders. The Board also ensures that management achieves an appropriate balance between promoting long-term growth and delivering short-term objectives.

~~Board meetings~~

The Board has eight Board meetings scheduled each year. Strategy is reviewed regularly at these meetings with updates at each meeting from at least one business unit on the execution of their agreed strategy. One Board meeting each year, scheduled over a day and a half, considers and approves the Group’s future strategy. A different approach was taken to strategy formulation in 2009 following feedback received as part of the 2008 Board Effectiveness Review. During the summer of 2009, the non-executive Directors took part in interviews with theheld various key positions, including Head of ~~Strategy~~Government Bond Trading, Head of Mortgage Trading, Sales and ~~Company Secretary to discuss strategic areas~~Finance and Head of ~~focus. These areas~~Global Operations and Technology.

Term of ~~focus were debated by~~office

Marcus joined the Board in September ~~with discussions~~2006 as a non-executive Director and was appointed Chairman on 1st January 2007. Marcus was last re-elected by shareholders at the AGM in 2010.

Bob was appointed President and became an executive Director in June 2005. He has been a member of ~~various themes facilitated~~the Barclays Executive Committee since September 1997. Bob was last re-elected by ~~non-executive Directors. Management then developed strategy proposals, which were fully debated by~~shareholders at the ~~whole~~AGM in 2009.

Sir Richard joined the Board in ~~November.~~September 2003. Appointed Senior Independent Director on 1st September 2004 and Deputy Chairman on 16 July 2009. Sir Richard was last re-elected by shareholders at the AGM in 2010.

~~In addition~~David joined the Board in May 2007. David was last re-elected by shareholders at the AGM in 2010.

Independent ^a

On appointment

Yes

External

appointments

Non-executive Director of BlackRock, Inc. Chairman, Board of Trustees of Colby College, Waterville, Maine. Chairman, Old Vic Productions,Plc. Trustee, The Mayor’s Fund for London. Member of the Advisory Board, Judge Business School at Cambridge University. Board Member, The Diamond Family Foundation. Member of International Advisory Board, British-American Business Council. Life Member of The Council on Foreign Relations. Member of The International Advisory Board, The Atlantic Council.

Chairman of Arriva PLC until 2010. Trustee of Relate since 2011. 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.

Director of East Ferry Investors, Inc. Various positions at Morgan Stanley & Co. until 1997. Director of the Discount Corporation of New York until 1993.

Committee

membership

Chairman of the Board Corporate Governance and Nominations Committee since January 2007. Member of the Board Remuneration Committee since January 2007.

Chairman of the Board Remuneration Committee since January 2007 (member since April 2004). Member of the Board Corporate Governance and Nominations Committee since September 2004. Former member of the Board Risk Committee (April 2004 until September 2010), which he chaired between January 2006 and December 2009.

Chairman of the Board Risk Committee since January 2010 (member since January 2008). Member of the Board Corporate Governance and Nominations Committee since January 2010.

Note


a For a description of how the Board determines independence, see page 135


					121

Board and executive committee continued




	Alison Carnwath(58) Non-executive Director	Fulvio Conti(63) Non-executive Director	Simon Fraser(51) Non-executive Director	Reuben Jeffery III(57) Non-executive Director
Biography	Alison worked in investment banking and corporate finance for 20 years from 1980 to 2000, before pursuing a portfolio career. During her career, Alison became a director of J. Henry Schroder Wagg & Co, where she worked for 10 years. Alison also held the positions of a senior partner of Phoenix Securities and Managing Director, New York at Donaldson, Lufkin & Jenrette. Alison has wide board level experience and is currently non-executive Chairman of Land Securities Group PLC, Senior Independent Director at Man Group plc, non-executive Director of Paccar Inc, and non-executive Chairman of ISIS EP LLP.	Fulvio is currently Chief Executive Officer and General Manager of Enel SpA, the Italian energy group, where he was previously Chief Financial Officer from 1999-2005. Fulvio has held a number of high-level financial roles, including Chief Financial Officer and General Manager of Telecom Italia and General Manager and Chief Financial Officer of Ferrovie dello Stato. He was also head of the accounting, finance, and control department of Montecatini and was in charge of finance at Montedison-Compart. He has held positions in finance and operations in various affiliates of Mobil Oil Corporation in Italy and Europe.	Simon has extensive experience of the institutional fund management industry, having worked at Fidelity International from 1981 to 2008, latterly as President of the Investment Solutions Group and President of the Retirement Institute. Simon held a number of positions during his career at Fidelity International, including President, European & UK Institutional Business, Global Chief Investment Officer, Chief Investment Officer for Asia Pacific and Chief Investment Officer of the European Investment Group. Simon remains a director of Fidelity European Values PLC and Fidelity Japanese Values PLC. He was appointed as the Chairman of Foreign & Colonial Investment Trust PLC and Chairman of The Merchants Trust in May 2010.	Reuben is currently the Chief Executive Officer of Rockefeller & Co., Inc., a member of the Advisory Board of TASC Inc and of TowerBrook Capital Partners LP and Senior Adviser at the Center for Strategic & International Studies in Washington, D.C.. He previously served in the US government as Under Secretary of State for Economic, Energy and Agricultural Affairs (2007-2009). Prior to joining the Department of State, Reuben was the Chairman of the Commodity Futures Trading Commission. He spent eighteen years at Goldman, Sachs & Co. between 1983-2001 where he was managing partner of Goldman Sachs in Paris and led the firm’s European Financial Institutions Group in London.
Term of office	Alison joined the Board on 1st August 2010.	Fulvio joined the Board in April 2006. Fulvio was last re-elected by shareholders at the AGM in 2009.	Simon joined the Board in March 2009. Simon was last re-elected by shareholders at the AGM in 2009.	Reuben joined the Board in July 2009. Reuben was last re-elected by shareholders at the AGM in 2010.

Independent	Yes	Yes	Yes	Yes
External appointments	Non-executive Director of CforC Ltd. Non-executive Chairman of Land Securities Group PLC since November 2008. Senior Independent Director at Man Group plc. Non-executive Director of Paccar Inc. Non-executive Chairman of ISIS EP LLP.	Chief Executive of Enel SpA since 2005. Director of ENDESA SA since June 2009. Director of AON Corporation since January 2008. Chief Financial Officer and General Manager of Telecom Italia until 1999. General Manager and Chief Financial Officer of Ferrovie dello Stato until 1998.	Director of Fidelity European Values PLC since July 2002. Director of Fidelity Japanese Values PLC since May 2000. Chairman of The Merchants Trust PLC since May 2010. Chairman of Foreign & Colonial Investment Trust PLC since May 2010.	Chief Executive Officer of Rockefeller & Co., Inc. since September 2010. Senior Adviser at the Center for Strategic & International Studies, Washington D.C.. Member of the Advisory Board of TASC Inc. Member of the Advisory Board of TowerBrook Capital Partners LP. Director of Transatlantic Holdings Inc since May 2010.


Committee membership	Member of the Board Audit Committee since October 2010. Member of the Board Remuneration Committee since October 2010.	Member of the Board Audit Committee since September 2006.	Member of the Board Audit Committee since May 2009. Member of the Board Remuneration Committee since May 2009.	Member of Board Risk Committee since January 2010.


122



Sir Andrew Likierman(67) Non-executive Director	Chris Lucas (50) Group Finance Director, Executive Director	Dambisa Moyo(42) Non-executive Director	Sir Michael Rake(63) Non-executive Director	Sir John Sunderland(65) Non-executive Director
Sir Andrew is the Chairman of the 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 and non-executive Director of the Bank of England. Sir Andrew is also Dean of the London Business School. He has been at the London Business School from 1974-1976, 1979-1993 and since 2004.	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 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 financial years and subsequently held similar roles for other global financial services organisations.	Dambisa is an international economist who writes on the macroeconomy and global affairs. Dambisa worked for the World Bank from 1993 to 1995. After completing a PhD in Economics, she worked for Goldman Sachs for eight ~~scheduled meetings~~years until November 2008 in ~~2009, there were 13 additional Board meetings held to consider~~the debt capital markets, hedge funds coverage and ~~approve~~global macroeconomics teams. Dambisa currently serves as a non-executive Director on the ~~iShares~~Boards of SABMiller plc and ~~BGI transactions~~Lundin Petroleum AB (publ).	Sir Michael is currently Chairman of BT Group PLC and Chairman of easyJet plc. Sir Michael previously worked at KPMG from 1974-2007 where he spent a number of years in Continental Europe and the ~~restructuring~~Middle East. He was Senior Partner of ~~our~~the UK firm from 1998-2000 and Chairman of KPMG International from 2002-2007.	Sir John is Chairman of Merlin Entertainments Group. Until July 2008 he was Chairman of Cadbury Schweppes PLC, having worked at Cadbury’s in various roles, including that of Chief Executive and then Chairman, since 1968. He 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.
Sir Andrew joined the Board in September 2004. Sir Andrew was last re-elected by shareholders at the AGM in 2010.	Chris 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 2010.	Dambisa joined the Board on 1st May 2010.	Sir Michael joined the Board in January 2008. Sir Michael was last re-elected by shareholders at the AGM in 2010.	Sir John joined the Board in June 2005. Sir John was last re-elected by shareholders at the AGM in 2009.
Yes	No	Yes	Yes	Yes
Dean of the London Business School since January 2009. Chairman of the National Audit Office since December 2008. Trustee 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 Chairman of the MORI Group until 2005.	UK Head of Financial Services and Global Head of Banking and Capital Markets of PricewaterhouseCoopers LLP until 2006.	Non-executive Director of SABMiller plc since 2009. Non-executive Director of Lundin Petroleum AB (publ) since 2009.	Chairman of BT Group PLC since 2007. Chairman of easyJet Plc since January 2010 (Deputy Chairman June 2009 – December 2009). Director of the Financial Reporting Council since 2007. Director of the McGraw-Hill Companies since 2007. Chairman of the UK Commission for Employment and Skills until 2010. Chairman of KPMG International until 2007. Chairman of Business in the Community from 2004 until 2007.	Chairman of Merlin Entertainments Group since December 2009. Director of the Financial Reporting Council since 2004. Adviser to CVC Capital Partners. Deputy President of the Chartered Management Institute until 2009 (President 2007-2008). Chairman of Cadbury Schweppes PLC until July 2008. Deputy President of the CBI until June 2008 (former member and President). Non-executive Director of the Rank Group PLC until 2006.
Member of the Board Audit Committee since September 2004. Member of the Board Risk Committee since September 2004.		Member of the Board Risk Committee since October 2010.	Chairman of the Board Audit Committee since March 2009 (member since January 2008). Member of the Board Risk Committee since May 2009. Member of Board Corporate Governance and Nominations Committee since May 2009.	Member of the Board Corporate Governance and Nominations Committee since September 2006. Member of the Board Remuneration Committee since July 2005.


					123

Board and executive committee

LOGO

Bob Diamond(59)

Chief Executive,

Executive Director

Robert Le Blanc

Chief Risk Officer

Mark Harding

Group General Counsel

Antony Jenkins

Chief Executive of

Global Retail Banking

Thomas L Kalaris

Chief Executive of Barclays Wealth

Chris Lucas (50)

Group Finance Director,

Executive Director

See pages 120 and 122 for full biographies.

Mark joined Barclays as Group General Counsel in 2003. Included within his area of responsibility are legal and regulatory compliance issues throughout the bank. He chairs the Group Operating Committee and Group Governance and Control Committee. Previously, Mark was a partner in the international law firm, Clifford Chance, where his practice spanned bank finance, capital markets and financial services regulation. He spent four years at UBS as General Counsel of its investment bank. Mark is past Chairman of the General Counsel 100 Group and of the Board ~~meetings were held during~~of the ~~year on other issues, including share price performance. The additional Board meetings,~~International Swaps and Derivatives Association (ISDA). He is a Governor of the College of Law.

Antony was appointed Chief Executive of Global Retail Banking and joined the Barclays Executive Committee in November 2009. Prior to that he had been Chief Executive of Barclaycard since January 2006. Antony is a Barclays appointed non-executive Director of Absa, which ~~were often called at short notice, had attendance of 88%. Any Director who was unable to attend a meeting was briefed separately~~is majority owned by Barclays. Since October 2008, Antony has been on the ~~discussions~~Board of Visa Europe Ltd.

United States. He has served on the US Treasury Borrowing Advisory Committee and is a former Chair of the US Bond Market Association, a predecessor organisation to SIFMA (Securities Industry and Financial Markets Association).


~~128~~

Jerry del Missier Co-Chief Executive of Barclays Capital and Co-Chief Executive of Corporate and Investment Banking	Maria Ramos Group Chief Executive of Absa	Rich Ricci Co-Chief Executive of Barclays Capital and Co-Chief Executive of Corporate and Investment Banking	Cathy Turner Barclays Human Resources Director
Jerry joined Barclays Capital in June 1997 from Bankers Trust in London where he had been a Senior Managing Director of Derivatives Products, responsible for the European business. Prior to this, he was based in Toronto, Canada, where he was responsible for the Canadian Dollar interest rate derivatives business. Before Bankers Trust, he worked for the Bank of Nova Scotia. Jerry currently serves on the Boards of Room to Read, the Securities Industry and Financial Markets Association (SIFMA), the Global Financial Markets Association (GFMA), the Markets Management Group (MMG) of the International Institute of Finance (IIF), and the Advisory Board of the Queen’s University School of Business in Kingston, Ontario.	Maria is the Group Chief Executive of Absa Group Ltd, which is majority owned by Barclays. Prior to joining Absa on 1st March 2009, she was the Group Chief Executive of Transnet Limited, the state-owned South African freight transport and logistics service provider. This was after a successful term as Director- General of the National Treasury (formerly the Department of Finance). She currently serves on the executive committees of the International Business Council, the World Bank Chief Economist Advisory Panel, Business Leadership South Africa and the Banking Association of South Africa.	Rich joined Barclays Capital in 1994 and assumed responsibility for several of its support areas. He became Chief Operating Officer (COO) of Barclays Global Investors (BGI) and a member of the BGI Executive Committee in December 2002. In January 2005, Rich was appointed COO of Barclays Investment Banking and Investment Management businesses comprising Barclays Capital, Barclays Wealth and BGI. Prior to joining Barclays Capital, Rich held senior front-office, finance and technology positions at the Bank of Boston and the Bank of New England.	Cathy was appointed as Group Human Resources Director in April 2005 prior to which she held the position as Investor Relations Director for four years. In July 2008 her remit was extended to include Strategy, Corporate Affairs and Brand and Marketing. Prior to Barclays, Cathy was a Practice Leader at Ernst and Young and has previously held roles at Deloitte, Watson Wyatt, Percom and Volex Plc. Cathy is a Council Member of the Royal College of Art and a Board Member of the IFS School of Finance. Cathy has announced her departure from Barclays and will be leaving on 31st March 2011.


124

Directors’ report

Profit Attributable

The profit attributable to equity shareholders of Barclays PLC for the year amounted to £3,564m, compared with £2,628m from continuing operations and £6,765m from discontinued operations in 2009.

Dividends

Share Capital

–	The structure of the Company’s capital, including the rights and obligations attaching to each class of shares;

~~Corporate governance~~
– 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;

~~Corporate governance~~
– Restrictions on voting rights;

–	The powers of the Directors, including in relation to issuing or buying back shares in accordance with the Companies Act 2006. It will be proposed at the 2011 AGM that the Directors be granted new authorities to allot and buy-back shares under the Companies Act 2006; and

–	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. The trustees of the EBTs have informed the Company that their normal policy is to abstain from voting in respect of the Barclays shares held in trust. The trustees of the Global and UK Sharepurchase EBTs may vote in respect of Barclays shares held in the Sharepurchase EBT, but only as instructed in those Plans in respect of their Partnership shares and (when vested) Matching and Dividend shares. The trustees will not otherwise vote in respect of shares held in the Sharepurchase EBT.


					125

Directors’ report

continued

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. As at 31st December 2010 there were unexercised warrants to subscribe for 379.2 million ordinary shares. These warrants may be exercised at any time up to close of business on 31st October 2013.

Substantial Shareholdings

2010


Holder	Number of Barclays Shares		% of total voting rights attaching to issued share capital		Number of warrants		% of total voting rights attaching to issued share capital ^a
BlackRock, Inc. ^b		805,969,166		7.06		–		–
Qatar Holding LLC		813,964,552		6.76		379,218,809		3.15
Nexus Capital Investing Ltd		758,437,618		6.30		–		–
Legal & General Group Plc		480,805,132		3.99		–		–

As at 5^th March 2010, 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:

2009


Holder	Number of Barclays Shares		% of total voting rights attaching to issued share capital		Number of warrants		% of total voting rights attaching to issued share capital ^a
BlackRock, Inc.^b		805,969,166		7.06		–		–
Qatar Holding LLC		813,964,552		6.76		379,218,809		3.15
Nexus Capital Investing Ltd		626,835,443		5.49		131,602,175		1.15
Legal & General Group Plc		483,625,057		4.01		–		–
Appleby Trust (Jersey) Limited ^c		353,373,992		3.1		–		–

Board Membership

Notes

a	The percentages of voting rights detailed above have been calculated without including the new shares to be issued when the warrants are exercised. This results in the percentage figures being artificially high.

b	The number of Barclays shares includes 8,003,236 contracts for difference to which voting rights are attached.

c	The number of Barclays shares includes 192,860,970 Total Return Swap shares to which voting rights are attached.

Retirement and Re-election of Directors

In accordance with its Articles of Association, one-third (rounded down) of the 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 stand for re-election. In addition, the UK Corporate Governance Code (the Code), recommends that all Directors of FTSE 350 companies should be subject to annual re-election.

Directors’ Interests

Directors’ interests in the shares of the Group on 31st December 2010 are shown on pages 157 and 158.

Directors’ Emoluments

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 2010 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 and likely Future Developments


126

Community Involvement

Political Donations

The Group did not give any money for political purposes in the UK or the rest of the EU nor did it make any political donations to political parties or other political organisations, or to any independent election candidates, or incur any political expenditure during the year. Absa Group Limited, in which the Group acquired a majority stake in 2005, made donations totalling £123,295 in 2010 (2009: £213,982) 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 parties with more than three seats in the National Parliament as confirmed by the Independent Electoral Commission. Support for the deepening of democracy in South Africa remains paramount for the government. The Group made no other political donations in 2010.

Employee Involvement

Barclays is committed to ensuring that employees share in the success of the Group. Staff 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 business unit 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. Employee Opinion Surveys are undertaken periodically across the Group with results being reported to the Board, all employees and to our European Works Council, Africa Forum, Unite (Amicus section), our recognised union in the UK and other recognised unions worldwide. Roadshows and employee forums also take place. In addition, Barclays undertakes regular and formal consultations with our recognised trade unions and work councils internationally.

Diversity and Inclusion


					127

Directors’ report

continued

Health and Safety

–	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 ~~views were sought~~health and ~~considered. There were also 12 meetings~~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.

Creditors’ Payment Policy

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.

Contracts of Significance

Under the terms of a stock purchase agreement dated 16th June 2009 which was entered into by and among Barclays Bank PLC, Barclays PLC and BlackRock, Inc. (BlackRock), Barclays agreed to sell Barclays Global Investors (BGI) to BlackRock. The sale completed on 1st December 2009 following the receipt of all necessary shareholder and regulatory approvals and satisfaction of other closing conditions. The consideration at completion was US$15.2bn (£9.5bn), including 37.567 million new BlackRock shares, giving Barclays an economic interest of 19.9% of the enlarged BlackRock group. Barclays has provided BlackRock with customary warranties and indemnities in connection with the sale. Barclays will also continue to provide support in respect of certain BGI cash funds until December 2013 and indemnities in respect of certain of BGI’s fully collateralised securities lending activities until 30th November 2012.

Research and development

In the ordinary course of business the Group 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 on pages 42 to 112 under the headings, ‘Barclays risk management strategy’, ‘Credit risk management’, ‘Market risk management’ and ‘Liquidity risk management’.

Events after the Balance Sheet Date

Events after the balance sheet date are noted on page 269.

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 page 207.

PricewaterhouseCoopers LLP have been the Company’s auditors for many years. Having reviewed the independence and effectiveness of the external auditors, the Committee has not considered it necessary to date to require them to tender for the audit work but will keep this issue under review. The external auditors are required to rotate the audit partners responsible for the Group and subsidiary audits every five years. Our previous lead audit partner, who had been in place for five years, was replaced for the 2010 year end. There are no contractual obligations restricting the Company’s choice of external auditor. 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 2011 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


128

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

The Barclays PLC AGM will be held at the Royal Festival Hall on Wednesday 27th April 2011. The Notice of Annual General Meeting is included in a separate document sent to shareholders with this report. A summary of the resolutions being proposed at the 2011 AGM is set out below.

Ordinary Resolutions

–	To receive the Directors’ and Auditors’ Reports and the audited accounts for the year ended 31st December 2010;

–	To approve the Directors’ Remuneration Report for the year ended 31st December 2010;

–	To re-elect each of the ~~Board Finance Committee,~~Directors of the Company;

–	To reappoint PricewaterhouseCoopers LLP as auditors of the Company;

–	To authorise the Directors to set the remuneration of the auditors;

–	To authorise Barclays PLC and its subsidiaries to make political donations and incur political expenditure;

–	To renew the authority given to Directors to allot securities;

–	To approve and adopt the rules of the new Barclays Long Term Incentive Plan; and

–	To approve and adopt the rules of the Barclays Share Value Plan.

Special Resolutions

–	To renew the authority given to the Directors to allot 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; and

–	To permit General Meetings to continue to be called on 14 clear days’ notice.

This is only a summary of the business to be transacted at the meeting and you should refer to the Notice of Annual General Meeting for full details.

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 2010, 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 finance, 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 Chief Executive by the Group Governance and Control Committee.

Regular risk reports are made to the Board covering risks of Group significance including credit risk, market risk, operational risk and legal risk. Reports covering credit, market and operational risk, key risks, risk measurement methodologies 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 42 to 119.

Management’s report on internal control over financial reporting

Management is 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 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).


					129

Director’s report

continued

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 Directors; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of assets that could have a material affect on the 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 internal control over financial reporting as of 31st December 2010. 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 was effective as of 31st December 2010.

Our independent registered public accounting firm has issued a report on Barclays PLC internal control over financial reporting which is set out on page 185.

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 115 to 119.

Changes in internal control over financial reporting

There have been no changes in the Group’s internal control over financial reporting that occurred during the period covered by this report which have materially affected or are reasonably likely to materially affect internal control over financial reporting.

Statement of Directors’ responsibilities for accounts

The following statement, which should be read in conjunction with the report of the independent registered public accounting firm report set out on page 185, 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 2006 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 IFRS as adopted by the European Union. The accounts are required by law and IFRS to present fairly the financial position of the Company and the Group and the performance for that period. The Companies Act 2006 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 186 to 269, 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 2006.

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 Chief Executive, Bob Diamond, 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 2010, 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 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, which is incorporated into the Directors’ Report on pages 124 to 129, 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 ~~delegated authority~~

LOGO

Marcus Agius

Group Chairman

10th March 2011

Registered in England. Company No. 48839


130

Corporate governance

Corporate governance report

LOGO

The corporate governance report is my opportunity, as Group Chairman, to explain how our Company has been managed during the year; how the Board has performed and how our systems of governance and control have operated.

What shaped the Board’s agenda in 2010? First, as the world economy started to recover from the most significant shock it has experienced in generations, the focus of the Board has perceptibly shifted from dealing with the immediacy of events to formulating and developing a long-term strategy for the post-crisis world and, also, to identifying how we will meet the challenges brought about by the new regulatory landscape. Under the former, the critical issue is to improve the return on equity of the Group and much work is being carried out in this regard. Under the latter, Board discussions this year have been dominated by the regulatory environment: how that regulatory environment is changing or is likely to change in the future and the implications for our strategy and business model. Tying these two themes together, discussions have focussed on how the Group should respond to the uncertain regulatory environment and, in the light of the substantial increase in the level of capital being held, how the Group could improve its return on equity and, in particular, achieve returns above the cost of equity. This focus will continue into 2011. The myriad of different regulatory developments which have occurred in the UK, in Europe and in the USA in recent years have generated a substantial volume of work for Barclays and, to an extent, for its Board. We recognise and support the need for a better system of regulation to emerge from this process although shareholders should recognise the strain which is imposed on Barclays, in common with other financial institutions, as the multi-faceted, international debate takes place.

Second, the Board this year had the important job of identifying and appointing a new Chief Executive to succeed John Varley, a task that resulted in the appointment of Bob Diamond. The succession process, which was led by me with the full involvement and support of both the Board Corporate Governance & Nominations Committee and all the non-executive Directors, was critical in ensuring that we have the right leadership in place to deliver our strategy in the new regulatory environment. I report in more detail on page 140 on how we managed this succession process in 2010.

Away from the boardroom, corporate governance regimes themselves were subject to much scrutiny in 2010 and we made a significant contribution to the debate by ensuring that we responded to relevant consultations during the year. It is important, in our view, that corporate governance frameworks are structured in such a way that recognises that there is no ‘one size fits all’ solution and that there is a degree of flexibility, within broadly agreed principles, that allows boards to operate in a way that suits the particular needs and challenges faced by their Company. During the year, we contributed to the Financial Reporting Council’s review of the Combined Code, which culminated in the new UK Corporate Governance Code, and the associated review of the Higgs Guidance. We also made a submission in response to the EU’s Green Paper on Corporate Governance in Financial Institutions and contributed our views on the Basel Committee’s Corporate Governance Guidelines.

There has been much debate this year on the subject of board diversity, notably on the subject of gender and the representation of women on the boards of companies. We were pleased to sponsor this year’s Cranfield FTSE Female Report and we support the recommendation in the new UK Corporate Governance Code that boards should consider the benefits of diversity, including gender, when making board appointments. For us, however, diversity is much more than the issue of gender: it is about ensuring that there is an appropriate range and balance of skills, experience and background on the Board. Achieving this balance is a key determinant of any new Board appointments we make. In 2010 we were fortunate to be joined on the Board by Dambisa Moyo and Alison Carnwath, who were appointed with effect from 1st May 2010 and 1st August 2010 respectively. They both bring relevant, financial and other experience to the Board and these appointments have widened the range of perspectives brought to our Board deliberations.

2010 again saw us hold a number of additional Board and Board Committee meetings over and above our regular, scheduled meetings. Non-executive Directors have continued to make themselves available, often at short notice, and each of them has been unstinting in the time they are prepared to commit to Barclays. The work of our principal Board Committees continued to provide valuable oversight of key issues affecting the Group: 2010 saw significant debate and regulatory action with respect to remuneration in the banking sector and Sir Richard Broadbent, Chairman of the Board Remuneration Committee, reports to you on page 147 on the work of the Committee in 2010. Furthermore, capital and liquidity and, in particular, the ability and capacity of banks to withstand systemic shocks or stresses, were again in focus in 2010. Sir Michael Rake, Chairman of the Board Audit Committee and David Booth, Chairman of the Board Risk Committee, describe in more detail later in this report on the work of those Committees in 2010 in this regard.

We are committed to reporting on our corporate governance framework in an open and transparent way. We were pleased, therefore, that our 2009 report was nominated in the ICSA-Hermes Transparency in Governance Awards in the categories of ‘Best Board Disclosure’ and Best Audit Disclosure’, where we won the award for the latter. I trust that we are maintaining that standard with the report that follows.


					131

Corporate governance

Corporate governance report continued

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). For the year ended 31st December 2010, 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. In May 2010, the Financial Reporting Council issued a new edition of the Code, which is now called The UK Corporate Governance Code and applies to Barclays with effect from 1st January 2011. We intend to comply with The UK Corporate Governance Code.

NYSE Corporate Governance Rules

As our main listing is on the London Stock Exchange, we follow the Code. However, Barclays has American Depositary Receipts listed on the New York Stock Exchange (NYSE), and is also subject to the NYSE’s Corporate Governance rules (NYSE Rules). We are exempt from most of the NYSE Rules, which domestic US companies must 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 disclose any significant differences between our corporate governance practices and those followed by domestic US companies listed on the NYSE. Key differences between the Code and NYSE Rules are set out later in this report.

(1) Leadership

The Board

The Board’s principal duty is to create and deliver sustainable shareholder value through setting Group strategy and overseeing its implementation by Management. In doing so, we pay due regard to matters that will affect the future of Barclays, such as the effect the Board’s decisions may have on our employees, the environment, our community and relationships with suppliers, as well as the need to act fairly between shareholders. The Board also ensures that Management achieves the right balance between promoting long-term growth and delivering short-term objectives.

We are also responsible for maintaining an effective system of internal control that provides assurance of efficient operations and for ensuring that Management maintain an effective risk management and oversight process across the Group.

In order to ensure that we meet our responsibilities, we have reserved specific key decisions for approval by the Board. I have set out a summary of these on the opposite page. More information on the role of the Board can be found in ‘Corporate Governance in Barclays’, which is available on our website:www.barclays.com/corporategovernance. Certain responsibilities are delegated to Board Committees, which assist the Board in carrying out its functions and ensure that there is independent oversight of internal control and risk management. The Chairman of each Board Committee reports to the Board on the matters discussed at Committee meetings.

Directors

Under UK company law, Directors must promote the success of the Company by exercising independent judgement with reasonable care, skill and diligence, while having regard to the long term consequences of their decisions.

The executive Directors, Bob Diamond, Chief Executive, and Chris Lucas, Group Finance Director, are full time employees of the Group and form part of the senior management of Barclays. They are responsible for the day to day management of our businesses, supported by the Group Executive Committee, which Bob chairs. The non-executive Directors are independent from Management. They are primarily responsible for constructively challenging Management and monitoring the success of Management in delivering the agreed strategy within the Risk Appetite approved by the Board.

The role profiles and key competencies and behaviours we expect of our Directors, together with the key indicators of high performance, can be found in our ‘Charter of Expectations’, which is available on our website atwww.barclays.com/corporategovernance. Their primary roles are summarised on the opposite page.

LOGO


132

Summary of Matters Reserved to ~~review and approve certain aspects~~the Board

Strategy

– Approval of the ~~iShares, BGI~~Group’s strategy Medium-Term and ~~credit market exposure transactions. The~~ Short-Term Plans

– Monitoring delivery of the strategy and performance against plan

– Major acquisitions, mergers or disposals

– Major capital investments and projects

Risk Appetite, Capital & Liquidity

– Changes relating to capital structure or status as a PLC

– Approval of annual Capital Plan

– Approval of Risk Appetite and Liquidity Risk Appetite

Financial Results and Dividends

– Approval of interim and final financial statements, dividends and any significant change in accounting policies or practices

– Any share dividend alternative

Board ~~Finance Committee, whose purpose is to authorise certain transactions to which the Group is party, subject to the relevant authority being delegated to the Committee by~~Membership

– Board appointments and removals

– Succession planning for key positions on the Board ~~(as set out~~

– Role profiles of key positions on the Board

Remuneration

– �� 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 ~~the Board Finance Committee’s~~employee share schemes

Governance

– Authorisation for Directors’ conflicts or possible conflicts of interest

– Remuneration of auditors and recommendations for appointment or removal of auditors

– Approval of all circulars, prospectuses and significant press releases

– Principal regulatory filings with stock exchanges

– Approval of allotment of shares

– Rules and procedures for dealing in Barclays securities

– Terms of ~~Reference), comprises~~reference and membership of Board Committees

– 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 ~~Group~~and Chief Executive

– Appointment (or removal) of Company Secretary and ~~at least two independent non-executive Directors. Board Finance Committee attendance was 100%.~~Chief Risk Officer

~~Scheduled Board and Committee meetings are arranged at least one year in advance and~~

Primary role of Directors:

Common to all Directors are expected to attend each meeting. All Directors are provided with the meeting papers and relevant information in advance of each meeting and, 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 any matters they wish to raise with the Chairman

Provide entrepreneurial leadership of the ~~meeting. This ensures~~Company, within a framework of prudent and effective controls enabling risk to be assessed and managed.

Approve the Company’s strategic aims, ensuring that ~~their views~~the necessary financial and human resources are ~~given due consideration. The attendance at~~in place for the Company to meet its objectives and review management performance.

Set the Company’s values and standards and ensure that its obligations to its shareholders and other stakeholders are understood and met.

Executive Director

Non-executive Director

Effectively lead Barclays towards the achievement of its strategic objectives and implement the strategic decisions taken by the Board ~~meetings held in 2009 is set out on page 130. In 2009, all~~

Provide constructive challenge to the executive Directors ~~committed an appropriate amount of time~~and senior management

Help ensure that the Board receives relevant, accurate, clear and timely information and presentations necessary for it to fulfil ~~their~~its duties

Help develop proposals on strategy and ~~responsibilities~~then fully empower and support the executive Directors to implement the strategy

Report on the ~~Board. Any instances~~performance of ~~non-attendance at~~the Group and its individual businesses

Scrutinise the performance of Management in meeting agreed goals and objectives and monitor the reporting of performance, ensuring that individual business decisions conform to agreed strategies and policies

Use their specialist knowledge and experience, both of their own business and financial services generally, to assist the Board ~~meetings~~in consideration of strategic issues and to ensure that decisions taken are ~~generally related~~in the Group’s best interests

Apply their judgement to prior business or personal commitments or illness. The additional meetings in 2009 were often arranged at short notice or rearranged as market conditions changed and it was not always possible for all Directors to attend these meetings particularly because of time zone differences.

~~Non-executive Director Board briefings~~

~~The Group Chairman usually meets with the non-executive Directors ahead of each scheduled Board meeting to brief them on~~ the business of the meeting. These meetings are held without any executive Directors or senior management present. The non-executive Directors use these meetings as an opportunity to advise the Group Chairman if they have any specific questions they would like to raise aboutBoard, leveraging on their knowledge of the business and bringing to bear a different range of ~~the meeting. The Group Chairman, Group Chief Executive~~knowledge, experience and ~~Company Secretary are always available for the Directors to discuss any issues concerning Board meetings or~~insight from other ~~matters.~~

~~Role of the Board~~

UK company law requires Directors to act in a way they consider, in good faith, would promote the success of the Company for the benefit of shareholders as a whole. In doing so, the Directors must have regard (amongst other matters) to:industries

–

~~the likely consequences of any decision in the long-term;~~

–

Put the interests ~~of Barclays employees;~~

–

~~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.~~

~~In addition to their statutory duties, the Directors must ensure that the Board focuses effectively on all its accountabilities. The Board determines the strategic objectives and policies~~ of the Group ~~to deliver long-term value, providing overall strategic direction within~~before those of their specific area of responsibility and manage any conflicts of interest between their role as a Board member and as an ~~appropriate framework of rewards, incentives and controls. The Board is collectively responsible for the success of the Group: the~~ executive Directors are directly responsible for running the business operations and the non-executive Directors are responsible for bringing independent judgment and scrutiny to decisions taken by the Board. The non-executive Directors must satisfy

Satisfy themselves on the integrity of financial information and that financial controls and systems of risk management are ~~robust. Following presentation by executive management~~robust and a disciplined process of review and challenge by the Board, clear decisions on the policy or strategy are adopted, and the executive management are fully empowered to implement those decisions. The role and responsibilities of the Barclays Board are set out in ‘Corporate Governance in Barclays’, which is available on our website at~~www.barclays.com/corporategovernance~~.defensible

~~Role~~Determine appropriate levels of remuneration of executive Directors and senior management, take the ~~Group Chairman~~prime role in appointing and removing executive Directors and plan for succession of executive Directors

~~The role~~


					133

Corporate governance

Corporate governance report continued

The Board usually meets eight times each year, but we meet more frequently should we need to. During 2010, three additional meetings were held, which were arranged at short notice. Directors are expected to attend all meetings unless circumstances prevent them from doing so, such as illness or prior commitments. Each Director makes every effort to attend each meeting, whether it is in person, by telephone or by video conference. I can confirm that each Director committed an appropriate amount of time to their Barclays duties in 2010. Details of Board meeting attendance in 2010 can be found in the table below.

Group Chairman

My role as Group Chairman is to provide leadership to the Board, ensuring that it satisfies its legal and regulatory responsibilities. I set the annual Board agenda in advance in consultation with the Chief Executive and Company Secretary, ensuring that adequate time is available for discussion of all agenda items, including strategy. This forward agenda is a living document that is updated periodically to take account of changing priorities and internal and external developments. After each Board meeting, I meet with the Company Secretary to discuss how the meeting went and to agree any follow up actions or changes required to the Board’s conduct and forward agenda.

I hold meetings with the non-executive Directors before each of the eight scheduled Board meetings, providing them with an opportunity to discuss any specific issues they would like to raise about the business of the meeting. This enables me to ensure that any particular points are brought up in the meetings as appropriate. Constructive challenge is actively encouraged within the Boardroom and, where appropriate, informal meetings are arranged to enable thorough preparation for Board discussions, for example, the evening before Board meetings. Along with Lawrence Dickinson, our Company Secretary, I am available to the

non-executive Directors outside of formal Board situations should they have any questions or concerns. I make a point of holding one-to-one meetings with each non-executive Director at least twice a year. Directors may on request also take independent professional advice at the Company’s expense.

I chair the Board Corporate Governance and Nominations Committee in addition to the Board and I am a member of the Board Remuneration Committee. I attend other Board Committee meetings on an ad hoc basis: during 2010 I attended two Board Audit Committee meetings and three Board Risk Committee meetings. I am also Chairman of the Group’s Brand & Reputation Committee.

My responsibilities also include ensuring effective communication with shareholders, particularly in making sure that the Board is aware of any significant matters raised by shareholders. I discuss this in more detail in the section on Relations with Shareholders on page 146. I also act as an ambassador for the Group, meeting clients, customers and other stakeholders, undertaking a programme of visits to the Group’s operations worldwide.

I was independent on appointment and I spend whatever time is necessary to fulfil my duties, which in a normal year is expected to be a minimum of 60% of a full time position, although in practice over the last few years my time commitment has been significantly greater. Details of my experience and my other commitments can be found in my biography on page 120.

While I am responsible for the smooth operation of the Board, the Chief Executive is responsible for running our businesses. The table opposite highlights our respective key responsibilities:

Board Attendance


	Independent		Scheduled Meetings eligible to attend		Scheduled Meetings attended		Additional Meetings eligible to attended		Additional meetings attended
Group Chairman
Marcus Agius		OA		8		8		3		3
Executive Directors
Robert E Diamond^a		ED		8		8		3		2
Chris Lucas^a		ED		8		8		3		2
John Varley^a (to 31st December 2010)		ED		8		8		3		2
Non-executive Directors
David Booth		I		8		8		3		2
Sir Richard Broadbent		I		8		7		3		3
Alison Carnwath (from 1st August 2010)		I		4		3		2		2
Leigh Clifford (to 30th September 2010)		I		6		4		2		1
Fulvio Conti		I		8		7		3		2
Simon Fraser		I		8		8		3		3
Reuben Jeffery		I		8		8		3		3
Sir Andrew Likierman		I		8		8		3		3
Dambisa Moyo (from 1st May 2010)		I		5		5		2		1
Sir Michael Rake		I		8		8		3		3
Sir John Sunderland		I		8		8		3		3

Secretary
Lawrence Dickinson

Key

OA on appointment

ED executive Director

I independent non-executive Director

Note

a Although eligible to lead and manage the Board to ensure it discharges its legal and regulatory responsibilities fully and effectively. The time commitment of the Group Chairman is set out in our Charter of Expectations and is in line with the Walker Review recommendation that a Chairman commits two-thirds of his/her time to the role. The Group Chairman must also ensure the Board is effective in delivering all its objectives, and so sets the Board agenda and allocates sufficient time for the Board to engage in meaningful discussions on strategic issues. He facilitates and encourages challenge from all Directors where decisions are needed on matters of risk and strategy. The Group Chairman also ensures that the Directors are kept well-informed, particularly the non-executive Directors, so that Board discussions are effective and there is good communication between the executive and non-executive Directors. The Group Chairman, Group Chief Executive and the Company Secretary work together to ensure that the Directors receive relevant information for them to discharge their duties and that such information is accurate, timely and clear. The communication of information applies to all scheduled Board meetings, but is particularly important in exceptional circumstances where the Board needs to respond to changing market conditions. We provide all our Directors with secure access to electronic copies of meeting papers and other key documents via a dedicated Directors’ intranet. The documents available include past and current Board and Committee papers, reports, minutes, press coverage, analyst reports and material from briefing sessions.

~~Role of the Chief Executive~~

The roles of the Group Chairman and Group Chief Executive are separate. The role of the Group Chief Executive is to manage the day-to-day running of the Group. The Board has delegated this responsibility to the Group Chief Executive and he then leadsattend, the executive Directors did not attend the additional meeting held to consider and ~~Executive Committee in making and executing operational decisions. The Group~~approve the appointment of a new Chief ~~Executive is also responsible for recommending strategy to the Board.~~Executive.


134

Senior Independent Director and Deputy Chairman

Sir Richard Broadbent is our Senior Independent Director and Deputy Chairman. As Senior Independent Director, Sir Richard’s role includes maintaining contact with large shareholders to understand their issues and concerns, as well as making himself available to individual shareholders, if necessary, where they have concerns they cannot resolve elsewhere. Sir Richard also acts as a sounding board for me and is available to the other non-executive Directors, if needed. He led the Board’s evaluation of my performance for 2010, meeting with the non-executive Directors in January 2011 to review and discuss my performance for the year. As Deputy Chairman, Sir Richard’s key area of focus is to act as an ambassador for Barclays. He also assists me in managing the business of the Board and ensuring it operates effectively in driving forward the Group’s strategic objectives. In order to fulfil these roles and his Board Committee commitments, Sir Richard is required to commit over 50 days per annum, although in practice spends significantly more time on his Barclays duties.

Company Secretary

The Company Secretary, Lawrence Dickinson, supports me and ~~his team provide dedicated support~~the Board Committee Chairmen in all stages of managing our meetings, from setting the annual meeting agenda through to ensuring that agreed actions are completed. Lawrence also assists me in ensuring that there are timely and appropriate information flows within and to the ~~Board. Their services are available to all Directors, particularly~~Board, the Board Committees and between the non-executive Directors ~~who may need additional~~and senior management. He provides support to ~~ensure they receive timely~~me in designing and ~~accurate information to fulfil their duties.~~facilitating induction programmes for new non-executive Directors ~~may~~and in putting together the development programme for Directors. He is also ~~take independent professional advice on request at the Company’s expense.~~our principal corporate governance adviser.

(2) Effectiveness

~~Effective internal control~~Board Size, Composition and Qualification

One of the Board’s key responsibilities is 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. The Board ~~considers the materiality~~is currently comprised of ~~financial~~13 members: Group Chairman, two executive Directors and ~~other risks to the Group’s business and reputation, ensures that appropriate controls are in place and considers the relative costs and benefits of implementing specific controls.~~

ten independent non-executive Directors. The ~~powers~~balance of the Board ~~are set out~~is illustrated below. Board size has reduced from a peak of 18 Directors in ~~a formal schedule of matters reserved~~2007. We believe that the optimum Board size for Barclays is 12-15 members, which provides for the ~~Board’s decision. These matters are significant~~broad range of skills and experience required to ~~the Group as~~effectively govern a ~~whole because of their strategic, financial or reputational implications.~~

~~The Schedule of Matters Reserved~~global banking business, while being small enough to ~~the Board is reviewed~~enable constructive group discussion and ~~updated regularly~~opportunity for full participation by all Directors. It also enables us to ensure ~~it remains appropriate and a summary of these matters is set out on page 129.~~

~~Board Activities in 2009~~

At each meeting in 2009, the Group Chief Executive and Group Finance Director reported to the Board and one or two of the main businesses or functions also presented an update on the implementation of their agreed strategy. Scheduled Board meetings also received reports from each ofthat the principal Board Committees ~~and reports from the Company Secretary~~are appropriately resourced without placing an undue burden on relevant corporate governance matters, including updates on the Walker Review and the Review of the Combined Code and the potential implications for the Group. The Board also received reports on the new regulatory frameworks in respect of compensation, particularly in respect of the FSA Remuneration Code and the proposals of the Financial Stability Board.any individual non-executive Director.

LOGO

Key responsibilities


Group Chairman		Chief Executive

Lead the Board and manage the business of the Board through setting its agenda and taking full account of the issues and concerns of Board members		Lead the development of short, medium and long term business strategy for approval by the Board and oversee successful delivery of the Group strategy

Ensure that Board members receive accurate, timely and clear information, in particular about the Group’s performance, to enable the Board to take sound decisions, monitor effectively and provide advice to promote the success of the Company		Lead the executive Directors and Group Executive Committee in making and implementing operational decisions and running the Group’s business on a day to day basis

Keep under review, with the Board, the general progress and long-term development of the Group		Ensure the Board is provided with accurate, concise and timely information

Ensure effective communication with shareholders and ensure that members of the Board develop and maintain an understanding of the views of major investors and other key stakeholders		Chair the Group Executive Committee

Chair the Board Corporate Governance and Nominations Committee		Assist the Board Corporate Governance and Nominations Committee in executive succession planning

Establish a close relationship with the Chief Executive, providing support and advice while respecting his executive responsibilities		Establish a close relationship with the Group Chairman, providing support hile respecting his governance responsibilities


				~~129~~

~~Summary of Matters Reserved for the Board~~

–

~~Approval of the Group’s strategy, Medium-Term and Short-Term Plans~~

–

~~Approval of Risk Appetite and Liquidity 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~~

–

~~Authorisation for Directors’ conflicts or possible conflicts of interest~~

–

~~Appointment (or removal) of Company Secretary and Chief Risk Officer~~

–

~~Any share dividend alternative~~

–

~~Remuneration of auditors and recommendations for appointment or removal of 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 allotment of shares~~

–

~~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 Chairman and Group Chief Executive~~

–

~~Rules and procedures for dealing in Barclays securities~~

~~The Board allocated its time at scheduled Board meetings during 2009 to the following:~~

~~Strategy~~

–

~~discussion of and approval of Group Strategy, including risk strategy and remuneration strategy;~~

–

reports from the Group Chief Executive on key strategic issues and progress, matters considered by the Executive Committee and competitor activity. The reports also included progress on Group-wide key objectives, a half yearly review of TSR performance and an update on talent management;

–

reports from the following businesses on progress against strategy: Western Europe, Barclays Global Investors, Barclays Wealth, Barclays Commercial Bank, Barclays Capital (including an update on the integration of the Lehman Brothers North American business), Barclaycard, UK Retail Bank and Absa;

–

~~reports on the following key issues: Brand and Marketing, Corporate Sustainability, Franchise Health (including customer and employee satisfaction measures); and~~

–

~~presentations on shareholder sentiment (including institutional perceptions) and reputation.~~

~~Finance (including capital and liquidity)~~

–

~~reports from the Group Finance Director on the financial position of the Group, which included capital management and liquidity updates throughout the year;~~

–

~~regular reports from the Chairman of the Board Audit Committee on matters discussed at that Committee;~~

–

~~approval of the full year and half-year results for the Group;~~

–

~~reports on peer group comparison of results following the release of preliminary and half-year results;~~

–

~~approval of the dividend policy;~~

–

~~approval of the Group’s cost of equity and capital plan for 2010; and~~

–

~~approval of the medium-term plan (including the financial framework) and short-term plan.~~

~~Risk~~

–

~~regular reports from the Chief Risk Officer on risk management and impairment and from the Group General Counsel on legal risk issues;~~

–

~~regular reports from the Chairman of the Board Risk Committee on matters discussed at that Committee; and~~

–

~~approval of Risk Appetite and Liquidity Risk Appetite for the Group for 2010.~~

~~Note~~

a	~~Capital management was reported separately for 2008. It is included within Finance (including capital and liquidity) for 2009.~~


~~130~~			135

Corporate governance

Corporate governance report

continued

~~Corporate Finance~~

–
~~consideration and approval of the proposed iShares sale and subsequent sale of Barclays Global Investors; and~~

–

~~consideration and approval of the restructuring of our credit market exposures.~~

~~Corporate Governance~~

–

reports on governance issues and updates on the changes in company law, including approval of non-executive Director appointments, updates on the Walker Review consultation and the Financial Reporting Council’s Review of the Combined Code;

–

~~a report on the effectiveness of the Board following the effectiveness review;~~

–

~~approval of the non-executive Directors’ fees following a benchmarking comparison against our peer group; and~~

–

~~reports from each of the Board Committees.~~

~~Compensation~~

–

~~reports on remuneration strategy;~~

–

~~reports on regulatory frameworks, including FSA Remuneration Code and the proposals from the Financial Stability Board;~~

–

~~regular reports from the Chairman of the Board HR and Remuneration Committee on matters discussed at that Committee; and~~

–

~~consideration of the proposals for the closure of the UK Retirement Fund.~~

~~Regulatory issues~~

–

~~a review of the FSA’s stress-test results;~~

–

~~regular reports from the Group Chief Executive on contact with regulators worldwide and in particular discussions with the tripartite authorities in the UK;~~

–

~~consideration of the Government’s Asset Protection Scheme; and updates on the global and UK economic and regulatory environment.~~

–

~~Figure 1 on page 129 illustrates how the Board spent its time at scheduled Board meetings in 2009.~~

~~Board size, composition and qualification~~

~~Board size and composition~~

There are currently 13 Directors on the Board, comprised of the Group Chairman, three executive Directors and nine non-executive Directors. The size and composition of the Board is regularly reviewed by the Board and, in particular, the Board Corporate Governance and Nominations Committee, to ensure there is an appropriate and diverse mix of skills and experience. The Board aims to appoint non-executive Directors who have the skills and experience needed for a comprehensive understanding of the Group’s activities and the risk associated with them. This is particularly important for Barclays as a financial services business and it is our intention that 50% of our non-executive Directors, including the Group Chairman and the Chairmen of the principal Board Committees, should have banking or financial experience. However, a broader range of skills and experience is

~~Board and Committee Attendance~~

      Independent    Scheduled
Board
Additional
Board^a
   Board
Audit
Committee    Board HR &
Remuneration
Committee    Board
Corporate
Governance &
Nominations
Committee    Board
Risk
Committee    AGM
Number of meetings held
      8    19    11    14    4    5    1
Group Chairman

Marcus Agius
   OA    8    19    –    14    4    –    1
Executive Directors

John Varley (Group Chief Executive)
   ED    8    19    –    –    –    –    1
Bob Diamond
   ED    8    17    –    –    –    –    1
Chris Lucas
   ED    8    19    –    –    –    –    1
Frits Seegers (to 3rd November)
   ED    6    19    –    –    –    –    1
Non-executive Directors

David Booth
   I    8    16    –    –    –    5    1
Sir Richard Broadbent

(Deputy Chairman & Senior Independent Director)
   I    8    18    –    14    4    5    1
Leigh Clifford
   I    8    7    –    11    –    –    1
Fulvio Conti
   I    8    15    10    –    –    –    1
Professor Dame Sandra Dawson (to 23rd April)
   I    3    11    5    –    –    –    1
Simon Fraser (from 10th March)^b
   I    7    15    5    7    –    –    –
Reuben Jeffery III (from 16th July)
   I    4    2    –    –    –    –    –
Sir Andrew Likierman
   I    8    17    11    –    –    5    1
Sir Michael Rake
   I    8    17    11    –    2    3    1
Sir Nigel Rudd (Deputy Chairman to 23rd April)
   I    3    11    –    –    1    –    1
Stephen Russell (to 31st October)
   I    6    12    7    –    2    3    1
Sir John Sunderland
   I    8    17    –    14    4    –    1
Patience Wheatcroft (to 16th June)
   I    3    14    –    –    –    –    1

~~Key~~

OA~~Independent on appointment.~~

ED~~Executive Director.~~

I~~Independent non-executive Director.~~

~~Notes~~

a	In the case of Leigh Clifford, who is based in Australia, the time difference meant that he was not always able to participate in additional Board meetings called at short notice, but he was fully briefed on the discussions by the Group Chairman or the Company Secretary.

b	~~Simon Fraser was appointed as a member of the Board Audit Committee and Board HR and Remuneration Committee with effect from 1st May 2009.~~


				~~131~~

~~Corporate governance~~

~~Corporate governance report~~

~~essential for the Board to be fully effective. Figure 2 demonstrates the diverse range of skills and experience on the Board.~~

We have a strong independent element on the Board and more than half the Directors are independent non-executive Directors, which is in line with the recommendations of the Code. The balance of the Board is illustrated by Figure 3.

Director Independence ~~of non-executive Directors~~

The Code sets out the circumstances that may be relevant to the Board in determining whether each non-executive Director is independent. In addition to these circumstances, Barclays ‘Charter of Expectations’ sets out specific criteria that the Board considers are essential behaviours in order to assess the independence of non-executive Directors. These criteria are as follows:

–

~~provides objective challenge to management;~~

–

~~is prepared to challenge others’ assumptions, beliefs or viewpoints as necessary for the good of the organisation;~~

–

~~questions intelligently, debates constructively, challenges rigorously and decides dispassionately;~~

–

~~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 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 evaluation. The Board Corporate Governance and Nominations Committee and the Board reviewed the independence of each non-executive Director in early ~~2010~~2011 and concluded that each of them continues to demonstrate ~~these essential behaviours.~~

~~Board qualification~~

~~The Board benefits from the diverse range of skills, knowledge and experience~~those behaviours that the ~~non-executive~~Board considers to be essential indicators of independence and ~~executive Directors have acquired as Directors~~which are set out in our ‘Charter of other companies or as business leaders in government or in academia. The Board also values the experience that our international Directors bring and aims to have diverse geographical experience on the Board, as illustrated by Figure 4. The effectiveness of the Board depends on ensuring the right balance of Directors with banking or financial experience and broader commercial experience.

~~External appointments~~

We recognise that there are significant advantages to individuals and to the Board as a whole of Barclays executive Directors serving on the Boards of other companies. In line with the Code recommendation, executive Directors may join the Board of one other listed company and all such appointments must be approved by the Board. Executive Directors must ensure that their external appointments do not involve excessive commitment or conflict of interest and their time commitment to Barclays must take precedence over any external appointment (other than those they undertake in connection with their duties at Barclays)Expectations’. ~~Executive~~

~~Note~~These criteria are:

a–	~~Individual directors may fall into one or more categories.~~


~~132~~				provides objective and constructive challenge to Management:

~~Corporate governance~~

~~Corporate governance report~~

~~continued~~

–	is prepared to challenge others’ assumptions, beliefs or viewpoints as necessary for the good of the organisation;

–	questions intelligently, debates constructively, challenges rigorously and decides dispassionately;

–	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 evaluate the information and responses provided by Management.

Director Re-election

In accordance with the new UK Corporate Governance Code, the Board has agreed that all Directors ~~may retain fees paid in connection with an external appointment and~~will submit themselves for re-election at the Company’s Annual General Meeting (AGM) to be held on 27th April 2011. Biographical details of ~~any fees received by executive~~each of the Directors may be found ~~in the Remuneration Report~~ on ~~page 145.~~pages 120 to 122.

~~Conflicts of Interest~~Succession Planning and Board Appointments

Under UK company law, all Directors must seek authorisation before taking up any position with another company that conflicts, or may possibly conflict, with the Barclays 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 duty under company law. 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. All existing external appointments for each Director have been authorised by the Board and 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~~both executive and ~~confirming~~non-executive Director succession planning and recommends new appointments to the ~~Board that, where relevant, conflicts are dealt with appropriately, and that~~Board. More detail on the process for dealing with them is operating effectively. The Board Corporate Governance and Nominations Committee reviewed the Conflicts Register in early 2010 and concluded that conflicts had been appropriately authorised and that the process for authorisation is operating effectively.

~~Role~~role of ~~the Board and Board Corporate Governance and Nominations Committee~~

~~In addition to reviewing the size and composition of the Board,~~ the Board Corporate Governance and Nominations Committee is ~~also responsible for reviewing the balance~~given on ~~the~~pages 139 and 140. When making Board ~~and its principal Committees and recommending the appointment~~appointments, we seek to ensure that we have a diverse range of ~~any new Directors to the Board. It is essential that the Board is refreshed regularly to maintain the appropriate~~ skills, background and experience, including industry and ~~the Committee~~geographical experience. We also ~~considers~~consider length of tenure: we recognise that continued tenure brings Company specific knowledge and understanding while new faces bring fresh ideas and perspective. The length of tenure of the current non-executive Directors and their geographical experience and industry background is illustrated below. We are comfortable that our Board includes sufficient diversity to optimise its performance.

Non-executive Director Terms of Appointment

Non-executive Directors each ~~non-executive~~have a letter of appointment that sets out the terms and conditions of their directorship, including the fees payable and the expected time commitment. Non-executive Director ~~which~~time commitment is set ~~out~~at a minimum of 20 days per annum, with additional time commitment required to fulfil their roles as Board Committee members and/or Board Committee chairmen, as applicable. The average time commitment of non-executive Directors is in ~~Figure 5. The biographies~~the range of 30-36 days per annum. Details of non-executive Directors’ remuneration can be found in the ~~current Directors, which set out~~Remuneration Report on page 147. In order to ensure alignment between non-executive Directors’ interests and those of our shareholders, the ~~details~~first £20,000 of their ~~skills and experience,~~basic fee is invested in Barclays shares, which are held on ~~pages 119 and 120.~~their behalf until such time as they leave the Board.

~~The~~Our Charter of Expectations ~~which forms part of ‘Corporate Governance in Barclays’~~ sets out the expectations that the Board of Barclays demands of its Directors. This includes a detailed role ~~profiles~~profile and key performance indicators for each of the key positions on the Board.

LOGO

Note

a	Individual Directors may fall into one or more categories.

LOGO


136

Directors' Conflicts of Interest

Directors have a duty under UK company law to avoid situations in which they have or may have interests that conflict with those of the Company, unless that conflict is first authorised by the Directors. Our articles of association allow the Board ~~positions, including~~to authorise such potential conflicts, taking into account all the circumstances. This includes potential conflicts that may arise when a Director takes up a position with another company. Where Directors wish to take up an external appointment, they are under an obligation to obtain authorisation before doing so. Each appointment is considered by the Board on its individual merits, taking into account the expected time commitment and any relationships with Barclays. Directors must also notify the Board if circumstances regarding external appointments change and I make myself available to all non-executive Directors should they wish to discuss any possible, actual or perceived conflicts.

Reuben Jeffery's appointment in 2010 as Chief Executive Officer of Rockefeller & Co., Inc., a privately-owned US investment and wealth management firm, was considered by the Board during the year. I discussed the potential conflict with Tom Kalaris, Chief Executive of Barclays Wealth, as well as John Varley, Bob Diamond and other key senior executives before the matter was discussed by the Board. Professional advice was also sought on the extent of the potential conflict. The Board is happy that the Barclays Wealth business overlap with Rockefeller & Co., Inc. is extremely small in a Group ~~Chairman, Deputy Chairman, Senior Independent Director~~context and ~~both non-executive and executive Directors. Before appointing~~that, as a ~~new Director,~~result, the likelihood of a conflict of interest arising in practice is remote. We have agreed, however, that if there is a potential conflict, Reuben Jeffery will excuse himself from specific Board discussions.

All potential conflicts approved by the Board are recorded in a Conflicts Register, which the Board Corporate Governance and Nominations Committee ~~will consider~~reviews annually to confirm that any potential conflicts have been dealt with appropriately. Having reviewed the ~~responsibilities general to all Directors~~Conflicts Register in early 2011, it was concluded that potential conflicts have been considered appropriately and ~~in addition,~~that the ~~specific responsibilities required for each role. Non-executive Directors have a responsibility to constructively challenge and develop proposals on strategy and assess the~~

performance of management in implementing the Group’s strategy. As Deputy Chairman and Senior Independent Director, Sir Richard Broadbent has further responsibilities, which are set out in our Charter of Expectations, including conducting the performance review of the Group Chairman and meeting institutional investors.

Sir Richard Broadbent met privately during the year 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 shared with the Group Chairman. During 2008 and in the first few months of 2009 leading up to the Annual General Meeting (AGM), Sir Richard conducted a series of meetings and consultations with institutional shareholders to discuss the capital raisings. Sir Richard also met with institutional shareholders to discuss Barclays remuneration strategy and the external reviews into this area.

~~Time Commitment~~authorisation process is operating effectively.

The ~~Charter of Expectations sets out~~decision to undertake external activities is a matter for individual Directors to decide, bearing in mind their responsibilities to Barclays, including the time commitment ~~expected from each~~we expect of them. We believe that Directors' external appointments benefit Barclays by providing them with a wider range of skills, experience and knowledge that will be relevant to their role at Barclays, although executive Directors may take up only one FTSE 100 non-executive directorship. Where an executive Director ~~with specific requirements for~~takes up such an appointment they may retain any fees they receive. Details of any such fees received by executive Directors can be found in the ~~Chairman, Deputy Chairman, Senior Independent Director~~Remuneration Report on page 147.

Board Induction and non-executive Directors. Additional time commitment expectations are set out for the Board Committee Chairmen and members. The expected time commitment, which is agreed with each individual, will not be less than a minimum of 20 days per annum. CertainProfessional Development

On joining Barclays all non-executive Directors ~~including the Deputy Chairman, Committee Chairmen and Committee members,~~ are ~~expected to commit additional time,~~provided with ~~the average time commitment for the non-executive Directors as~~ a whole being in the range of 30-36 days per year. Sir Richard Broadbent, as Deputy Chairman and Senior Independent Director, is expected to commit to at least one day per week in carrying out his Barclays duties, but in practice spends significantly more time on Barclays business. Committee Chairmen are expected to commit between 3 and 10 days per year in addition to between 6 and 8 days per year for Committee members. The time commitment of each non-executive Director is decided on an individual basis, with six of the non-executive Directors committing over 30 days per year. Taking into account both Board and Board Committee requirements, the balance commit at least 28 days per year.

~~Re-election of Directors~~

In line with the recommendations of the Code, all Directors usually seek re-election every three years and any Directors that were appointed during the year seek re-election at the next AGM. For the 2010 AGM the Group Chairman, Marcus Agius, will offer himself for re-election as recommended by the Walker Review. In addition, the Deputy Chairman, Sir Richard Broadbent, the Chairmen of each principal Board Committee, David Booth,


				~~133~~

~~Corporate governance~~

~~Corporate governance report~~

and Sir Michael Rake will also offer themselves for re-election. The Directors retiring by rotation, as required by our Articles, and offering themselves for re-election are Sir Andrew Likierman and Chris Lucas. Reuben Jeffery, who was appointed on 16th July 2009, is also offering himself for re-election.

~~Induction, business awareness and development~~

Each new Director receives an induction presentation, an information pack and a personalised induction programme. The induction presentation explains their responsibilities as a Director of a global, listed financial services company and sets out an overview of the Group and its businesses. The information pack gives details of the disclosures that Directors are required to make to comply with various laws and regulations. The personalbespoke induction programme, which is discussed with each new Director, is tailored to their needs so that they can gain a better understanding of the Group and its businesses. The induction programme typically involves two stages of meetings. The first involvesincludes sessions with each of the executive Directors, members of the Group Executive Committee and the heads of the main Group functions. These sessions include opportunities for the new Director to visit operational sites and meet with senior management and employees. The second stage includes additional sessionsmeetings with the ~~executive Directors and~~ senior ~~managers from~~executives responsible for each of ~~the Group’s main~~Barclays business ~~units to provide the new Director with in-depth information to develop a comprehensive understanding of those businesses. The~~areas and central functions: these sessions focus on the challenges, opportunities and risks that are faced by each ~~business unit. Simon Fraser and Reuben Jeffery undertook their Board induction programmes during 2009. Additional induction programmes~~business. Meetings are ~~put together for non-executive Directors who are joining any of~~also held with the ~~principal Board Committees and may include meetings with external advisers and the Group’s statutory auditor, where appropriate or relevant.~~

To ensure the Directors continue to further their understanding of the issues facing the Group we provide a comprehensive programme of business awareness training sessions and briefings on external technical matters. In early 2009, non-executive Directors were sent a questionnaire to seek their views on topics of interest, including business specific areas and technical issues. As a result, three in-depth briefing sessions on Basel II, Capital Management and Derivatives were arranged during 2009.

Attendees were sent pre-reading material for these sessions and interactive discussions were encouraged. Positive feedback was received from the non-executive Directors who attended these sessions and further sessions are planned for 2010.

During 2009, in response to the 2008 Board Effectiveness Review, a questionnaire was sent to non-executive Directors requesting feedback about the level of interaction with senior management below Board level. Following that feedback, and in addition to the regular presentations made to each Board meeting by senior managers, we aim to hold regular lunches for the non-executive Directors and senior management after Board meetings to encourage greater informal interaction between non-executive Directors and senior management.

~~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 2009 and Directors continue to receive relevant publications to keep them up to date with changing market opinion, including a weekly commentary on the Barclays share price and analyst comment. Directors are invited to attend results presentations to meet with analysts and investors to enhance their awareness of market sentiment.

~~Functioning~~Group's lead auditor. An outline of the Board ~~and evaluation of performance~~

~~Functioning of the Board~~

For the Board to function effectively, the non-executive Directors must contribute to Board discussions and challenge and test the proposals on strategy that are put forward by the executive Directors. The Board promotes an environment whereby challenge from the non-executive Directorsinduction programme is ~~welcomed and encouraged, combined with full support for and empowerment of the executive Directors in implementing decisions.~~

~~The Board Committees~~

~~Certain responsibilities of the Board are delegated to Board Committees to assist the Board in carrying~~set out its functions and to ensure independent oversight of internal control and risk management. The four principal Board Committees (the Board Audit Committee, the Board Corporate Governance and Nominations Committee, the Board HR and Remuneration Committee and the Board Risk Committee) play an essential role in supporting the Board in fulfilling its responsibilities and ensuring that the highest standards of corporate governance are maintained throughout the Group. Each Board Committee reports to the Board following each of its meetings and the minutes of each Board Committee meeting are circulated to the Board. This report sets out how the Board and its Committees work within the governance framework and corporate governance guidelines.

~~Current membership of the Board Committees~~below:

      Board
Audit
Committee    Board
Corporate
Governance &
Nominations
Committee    Board HR &
Remuneration
Committee    Board
Risk
Committee
Marcus Agius
   –    C    M    –
David Booth
   –    M    –    C
Sir Richard Broadbent
   –    M    C    M
Leigh Clifford
   –    –    M    –
Fulvio Conti
   M    –    –    –
Simon Fraser
   M    –    M    –
Reuben Jeffery III
   –    –    –    M
Sir Andrew Likierman
   M    –    –    M
Sir Michael Rake
   C    M    –    M
Sir John Sunderland
   –    M    M    –

~~Key~~
  Board Induction Programme
C  ~~Chairman~~
M  ~~Member~~
  Group Overview
  –  Duties and Responsibilities of Directors' of authorised institutions
  –  Group Overview
  –  CEO Introduction
  –  Group Finance Director Introduction
  Review of Businesses
  –  Corporate and Investment Banking and Wealth Management
  –  Global Retail Banking
  In depth Review of Businesses
  –  Absa
  –  Barclaycard
  –  Barclays Africa
  –  Barclays Capital
  –  Barclays Corporate
  –  Barclays Wealth
  –  UK Retail Banking
  –  Western Europe Retail Banking
  Group Functions
  –  Compliance
  –  Group Legal
  –  Group Strategy
  –  Human Resources
  –  Internal Audit
  –  Investor Relations
  –  Risk
  Other
  –  Brand & Marketing
  –  External Audit


~~134~~

~~Corporate governance~~

~~Corporate governance report~~

~~continued~~

All members of the principal Board Committees are independent non-executive Directors, although the Group Chairman is a member of the Board HR and Remuneration Committee, as permitted by the Code for a Chairman who was independent on appointment. The Group Chairman is also Chairman of the Board Corporate Governance and Nominations Committee.

Each Committee’s terms of reference set out the specific matters for which delegated authority has been given by the Board. These terms of reference are reviewed annually and are available on our website at:~~www.barclays.com/corporategovernance~~~~. A summary of the terms of reference is set out in the table below.~~

~~Board Audit Committee~~

~~Sir Michael Rake (Chairman from 31st March 2009)~~

~~Fulvio Conti~~

~~Simon Fraser (from 1st May 2009)~~

~~Sir Andrew Likierman~~

~~Stephen Russell (to 31st October 2009) (Chairman to 31st March 2009)~~

~~Secretary~~

~~Lawrence Dickinson~~

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, Chief Risk Officer, Group General Counsel and the lead external audit partner normally attend all scheduled Board Audit Committee meetings. The Board Audit Committee members usually meet before each meeting, without any executive Directors or senior management present, to raise any questions and discuss issues with the Chairman of the meeting. 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 succeeded Stephen Russell as Chairman of the Committee in March 2009.


				~~135~~	137

Corporate governance

Corporate governance report continued

We also provide non-executive Directors with a personalised induction when they join a Board ~~Audit~~Committee. Board Committee ~~Chairman’s Statement~~

~~I took over from Stephen Russell as Chairman~~induction programmes typically involve meeting with our Company Secretary for an overview of the Board ~~Audit Committee at the end of March. I would like to thank Stephen for his hard work~~Committee’s responsibilities and ~~diligence as Chairman of the Committee and for the support provided to me during the handover period.~~

~~Since becoming Chairman, I have focused the work of the Committee on the following~~activities before meeting with key ~~areas:~~

–

~~Capital;~~

–

~~Liquidity;~~

–

~~Impairment;~~

–

~~Credit Market Exposures and Mark to Market valuations; and~~

–

~~Key Control Issues.~~

In terms of capital and liquidity, the Committee receives quarterly reports setting out current and forecast capital ratios, the size of the buffer above minimum capital requirements and the potential impact on capital ratios of stress scenarios. The liquidity section of the report reviews the Group’s liquidity risk profile, including movements in retail and commercial deposits, the wholesale funding maturity profile and the potential impact on the Group’s liquidity position of stress scenarios. The Committee’s regular review of these reports is one of the key processes enabling it to recommendexecutives who present to the Board ~~on a bi-annual basis, the going concern statement in the published annual and interim financial statements.~~

~~The~~ Committee, receives regular reports on current and forecast impairment. The report reviews trends in both retail and wholesale credit risk, in each case by business unit. The report also reviews the level of potential credit risk loans and the level of impairment held against them. A specific report on impairment methodology was commissioned by the Committee to ensure that it was satisfied with the methodologies in use across the Group. The impairment charge included in the interim and preliminary results announcements is specifically reviewed to ensure that the Committee is satisfied that the charge is appropriate. In arriving at this decision, a variety of factors are considered including:

–

~~actual performance versus forecast;~~

–

~~underlying portfolio trends;~~

–

~~the business environment;~~

–

~~compliance with Group impairment policy;~~

–

~~any adjustments to impairment model outputs;~~

–

~~Barclays position relative to peer banks; and~~

–

~~input from the Group’s external auditor.~~

The Committee continues to review closely the fair value of the Barclays Capital credit market exposures (including asset backed securities, commercial property exposure and leveraged credit positions) and the form and content of disclosures of these exposures. The review of the credit market exposure valuations includes 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 receives 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 discusses the valuations with the Group Finance Director, the Chief Risk Officer and, importantly, the Group’s external auditors. Confirmation is sought from independent Group control functions such as Risk and Finance, and the external auditors, that the individual marks are appropriate. The Committee continues to be reassured that there were no significant variations between the prices at which assets were sold and the underlying marks.

A specific focus was the sale of US$12.3bn of credit market assets to Protium Finance LP in September. I discussed the accounting treatment relating to the asset sale with both the Group Finance Director and the Group’s external auditor to ensure I was satisfied that it was appropriate. The Committee also reviewed the reclassification of certain financial assets originally classified as held for trading, and now considered as loans and receivables, again to ensure the accounting treatment was appropriate.

The Committee receives a quarterly report on Control Issues of Group Level Significance. This report identifies control weaknesses which could have a significant financial or non-financial impact. The Committee satisfies itself that the remediation programmes are appropriate and, in particular, sufficiently timely. It also monitors the ongoing remediation programme through to satisfactory resolution. The Committee also reviews the key risks and controls in each of the Group’s major business units, focusing in particular on those areas where the Group’s business is expanding or is deemed to be higher risk. It also undertakes more in-depth reviews of specific areas which it believes warrant close attention, including in 2009:

–

~~Know Your Customer and Anti-Money Laundering Controls;~~

–

~~Sanctions Compliance;~~

–

~~the use of direct sales agents, particularly in the Emerging Markets business; and~~

–

~~the Lehman Brothers North American business integration programme.~~

In addition to the five areas of focus outlined above, the Committee has been anxious to ensure that the downward pressure on costs in the current environment does not weaken the control environment. We have particularly monitored staffing levels in Internal Audit to ensure that it has the necessary resources to fulfil the agreed Audit Plan.

The Committee reviews the performance of the internal and external auditors annually. During 2009, a comprehensive external assessment of Internal Audit was undertaken. The review compared their practices to relevant standards, including those published by the Institute of Internal Auditors as well as ~~regulatory standards and expectations in various jurisdictions and included peer group benchmarking. The review concluded that the Internal Audit function complies~~ with the ~~Institute of Internal Auditors’ Standards, is fit for purpose and provides independent assurance on which the~~ Board ~~may rely, with many examples of leading practice. Where suggestions for improvement were made, the~~ Committee ~~will monitor progress.~~

~~Feedback on the performance~~Chairman. An outline of the external auditors was again sought from key stakeholders in the Group via questionnaires with the results being presented to, and discussed by, the Committee. The Committee is fully satisfied with the performance of the Group’s external auditor and has recommended to the Board and to shareholders that the Group’s external auditor should be re-appointed as the Group’s auditors at the AGM on 30th April 2010. We are satisfied that the Group’s external auditor 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.

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. I have also liaised with the Chairmaninduction programme for new members of the Board Risk Committee is provided below by way of an example.

We believe that induction and professional development are critical to ensure ~~our agendas are co-ordinated where necessary~~that Directors can perform effectively and seek to ~~avoid any overlap/underlap in coverage. I am also a member~~make sure that all Directors have appropriate knowledge of the ~~Board Risk Committee, which helps~~Company and access to ~~ensure close co-ordination between the two committees.~~

Iits operations and staff. Accordingly, we arrange regular briefings for existing non-executive Directors on matters affecting Barclays and they also have ~~a programme of visiting key businesses overseas, including attending meetings of local governance and control committees and~~ the ~~audit committees of key subsidiaries.~~opportunity to attend management conferences held by our businesses. During 2010, the ~~year, I visited New York, Dubai and Johannesburg.~~non-executive Directors attended briefing sessions on:

– Treating Customers Fairly

– Barclays Capital

– Derivatives

– Risk based pricing

The ~~Committee can confirm that it received sufficient, reliable and timely information~~briefing sessions, which were interactive, were led by executives from ~~management to enable it to fulfil its responsibilities.~~

~~Sir Michael Rake~~

~~Chairman of the Board Audit Committee~~

~~9th March 2010~~


~~136~~

~~Corporate governance~~

~~Corporate governance report~~

~~continued~~

~~Board Audit Committee Activities in 2009~~

~~The Committee met 11 times in 2009 and Figure 6 illustrates how the Committee allocated its time at those meetings. The items covered under each heading in Figure 6 are as follows:~~

~~Control Issues~~

–

~~reviewed internal control and risk management systems;~~

–

~~considered the effectiveness of the Group’s internal controls over financial reporting;~~

–

~~reviewed impairment methodologies; and~~

–

~~considered the Fraud Risk Control Framework.~~

~~Financial Results~~

–

~~reviewed the full year results, including market understanding and perception of those results;~~

–

~~reviewed the Annual Report and Accounts, half-year Results and Interim Management Statements; and~~

–

~~reviewed the Group’s accounting policies and the valuation of derivatives and credit market exposures.~~

~~Internal Audit Matters~~

–

~~received reports from the internal auditors;~~

–

~~monitored the performance of the Internal Audit function and received an external assessment review of the Internal Audit function; and~~

–

~~reviewed the Global Internal Audit Plan.~~

~~External Audit Matters~~

–

~~reviewed the effectiveness and independence of the Group statutory auditor;~~

–

~~approved the re-appointment, remuneration and engagement letter of the Group statutory auditor;~~

–

~~approved the global audit plan for 2009;~~

–

~~considered the provision of non-audit services by the Group statutory auditor – more details can be found in the box on page 137; and~~

–

~~received reports from the external auditors.~~

~~Business Control Environment~~

–

received reports on Group Control Environment Key Trend Data and on the control environments in each of the following businesses or functions: UK Retail Banking, Barclays Commercial Bank, Barclays Wealth (Americas), Barclays Capital (including an update on the integration of the Lehman Brothers North American business), Barclaycard, Emerging Markets, Barclays Wealth, Western Europe, GRCB–Technology and Absa.

~~Governance and Compliance~~

–

considered the information it would require during the coming year to enable it to discharge its responsibilities given the significant changes in financial markets and economic conditions and the impact on the areas of focus for the Committee;

–

~~received reports on matters discussed at the Board Risk Committee, which included information on mark to market valuations, impairment, capital and liquidity;~~

–

~~received regular reports on ‘Raising Concerns’, including whistleblowing;~~

–

~~received updates on Sarbanes-Oxley Section 404 compliance;~~

–

~~received updates on ‘Know Your Customer’, Anti-Money Laundering and Sanctions Compliance audits;~~

–

~~reviewed the effectiveness of subsidiary audit committees;~~

–

~~reviewed the recommendations from the Walker Review; and~~

–

~~reviewed its Terms of Reference to satisfy itself that they enable the Committee to fulfil its responsibilities.~~

~~Other~~

–

~~received updates on business continuity management; and~~

–

~~reviewed the regulatory issues.~~


				~~137~~

~~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 £25,000 in the case of certain taxation services. Any assignment where the expected fee is above the relevant ~~threshold requires specific approval from~~business units, using material that was circulated in advance.

Directors were asked for feedback at the ~~Committee or a member~~end of their induction programmes and following each briefing session. Additionally, 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; and~~

–

~~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; and~~

–

~~translation services.~~

~~Board Corporate Governance and Nominations Committee~~

~~Marcus Agius (Chairman)~~

~~David Booth (from 1st January 2010)~~

~~Sir Richard Broadbent~~

~~Sir Michael Rake~~

~~Stephen Russell (to 31st October 2009)~~

~~Sir John Sunderland~~

~~Secretary~~

~~Lawrence Dickinson~~

~~The meetings are also attended by the Group Chief Executive.~~

Board Corporate Governance and Nominations Committee ~~Activities in 2009~~

~~The Committee met four times in 2009 and Figure 7 illustrates how the Committee allocated its time at those meetings. During 2009, the Committee:~~

–

~~regularly 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 2008 Board Effectiveness Review and oversaw the conduct of the 2009 Board Effectiveness Review including reviewing the process for the Board, Committee and individual Review Director evaluations for 2009;

–

~~reviewed the corporate governance disclosures for the 2008 Annual Report and considered the proposed disclosures for 2009;~~

–

~~reviewed issues raised at corporate governance meetings held with institutional investors and investor bodies in the lead up to the AGM;~~

–

~~recommended the appointment of the new non-executive Directors to the Board and changes to Committee membership;~~

–

~~reviewed succession plans for the Executive Committee and the position of Group Chief Executive; and~~

–

~~reviewed its Terms of Reference to satisfy itself that they enable the Committee to fulfil its responsibilities.~~

~~Note~~

a	~~Included in ‘Board and Committee Composition’ for 2008.~~


~~138~~

~~Corporate governance~~

~~Corporate governance report~~

~~continued~~

~~During 2009, the Committee reviewed the composition~~undertakes an annual review of the ~~Board~~induction and ~~its principal Committees at each~~development programmes to ensure that they are appropriate and fit for purpose. The feedback gathered is used to improve the structure and content of ~~its meetings. Following those deliberations,~~non-executive Director induction programmes and to tailor the Committee recommended to the Board that Simon Fraser and Reuben Jeffery, who were both identified with the assistance of external search consultants, be appointed as non-executive Directors in March and July 2009 respectively. The Committee also recommended to the Board the following changes to Committee membership:

–

Sir Michael Rake succeeded Stephen Russell as Chairman of the Board Audit Committee on 31st March 2009 and was appointed as a member of the Board Risk Committee and Board Corporate Governance and Nominations Committee with effect from 1st May 2009;

–

~~Simon Fraser was appointed as a member of the Board Audit Committee and Board HR and Remuneration Committee with effect from 1st May 2009;~~

–

~~Patience Wheatcroft was appointed as a member of the Board Risk Committee with effect from 1st May 2009;~~

–

David Booth succeeded Sir Richard Broadbent as Chairman of the Board Risk Committee and was appointed as a member of the Board Corporate Governance and Nominations Committee with effect from 1st January 2010; and

–

~~Reuben Jeffery was appointed as a member of the Board Risk Committee with effect from 1st January 2010.~~

~~The Committee oversees the Board Effectiveness Review and approves the Action Plan~~development programme for the year ahead. ~~Further details~~I discuss with each non-executive Director any specific development requirements as part of the ~~review and our evaluation statement are set out on page 140.~~annual Board Effectiveness Review.

Board ~~Risk Committee~~Activity

~~Information on~~As I mentioned above, our agenda in 2010 was driven largely by the ~~role and activities~~impact of ~~the Board Risk Committee and the Committee Chairman’s Statement can be found on pages 141 to 143 of this report under ‘Governance of Risk’.~~

~~Board HR and Remuneration Committee~~

~~Sir Richard Broadbent (Chairman)~~

~~Marcus Agius~~

~~Leigh Clifford~~

~~Simon Fraser (from 1st May 2009)~~

~~Sir John Sunderland~~

~~Secretary~~

~~Secretary: Patrick Gonsalves~~

~~Additional information on the role and activities of the Committee can be found~~potential changes in the ~~Remuneration Report~~regulatory environment, which is expected to remain uncertain until the Independent Commission on ~~pages 145 to 161. The Committee’s terms~~Banking produces its report. During the year, as part of ~~reference have been updated to reflect the changes to its role and the recent developments in Corporate Governance and regulation.~~

~~Board HR and Remuneration Committee Activities in 2009~~

~~The Committee met 14 times in 2009 and Figure 8 illustrates how the Committee allocated its time at those meetings. During 2009 the Committee:~~our overall review of Group strategy,

–

~~continued its review of the Group’s remuneration policies and practices to ensure that they remained appropriate and effective;~~

–

~~reviewed Executive and Executive Committee compensation;~~

–

~~reviewed various Pensions and Health and Safety matters;~~

–

~~monitored the implementation of the talent agenda;~~

–

~~considered incentive funding for each main business area for 2010;~~

–

~~considered the alignment of risk and compensation;~~

–

~~reviewed current and future, Group and business level long-term incentive arrangements;~~

–

~~obtained market data on remuneration levels in specified markets; and~~

–

~~reviewed regulatory developements in respect of compensation.~~

~~The Committee received valuable support and advice from its independent advisers, Towers Perrin MGMC (now Towers Watson), who attended four meetings in 2009.~~


				~~139~~

Board Risk Committee Induction

The induction programme begins with an overview of the Committee’s role and responsibilities with the Company Secretary and a meeting with the Committee Chairman. The Chief Risk Officer also provides an overview of risk management in Barclays. This is followed by a series of briefing sessions with senior executives in the Risk, Treasury and Taxation teams on the following topics:

– Capital and Liquidity

– Economic Capital and Stress Testing

– External Audit

– Market Risk

– Operational Risk

– Retail Credit Risk

– Tax Risk

– Wholesale Credit Risk

~~Management Committees~~

~~Executive Committee~~

~~John Varley, Group Chief Executive (Chairman)~~

~~Bob Diamond, Group President and Chief Executive, Corporate and Investment Banking and Wealth Management~~

~~Chris Lucas, Group Finance Director~~

~~Jerry del Missier, co-Chief Executive, Corporate and Investment Banking~~

~~Mark Harding, Group General Counsel~~

~~Antony Jenkins, Chief Executive, Global Retail Banking~~

~~Tom Kalaris, Chief Executive, Barclays Wealth~~

~~Robert Le Blanc, Chief Risk Officer~~

~~Maria Ramos, Chief Executive, Absa~~

~~Rich Ricci, co-Chief Executive, Corporate and Investment Banking~~

~~Cathy Turner, Group Human Resources Director~~

The Board delegates the responsibility for the day to day management of the Company to the Group Chief Executive and he is responsible for ensuring that the business is operating effectively. The Group Chief Executive chairs the Executive Committee, which supports him in this role. The Executive Committee is supported bywe had a number of ~~management committees, including~~discussions on the ~~Disclosure Committee, the Group Governance~~strategic challenges and ~~Control Committee, the Group Operating Committee, the Group Risk Oversight Committee~~opportunities presented by regulatory developments and the ~~Group Brand and Reputation Committee.~~potential impact for our business model, culminating in a review of the Group’s business portfolio at our strategy away-day in November. The ~~Executive Committee meets every fortnight~~purpose of this review was to ~~discuss~~assess which businesses are either producing returns on equity above the cost of capital in the new regulatory environment, or are capable of producing such returns in the future.

We received updates in 2010 from the majority of our principal businesses on the execution of their business strategy, ~~development and policies~~including an update on the overall strategy for the GRB businesses following the restructuring in late 2009. The Chief Executives of the businesses attended Board meetings to ~~recommend~~present to the Board.

~~Disclosure Committee~~

~~Chris Lucas, Group Finance Director,~~ One of our meetings in 2010 was held in Doha, where we received an update on our business operations in the Middle East. We also received updates on Brand & Marketing strategy, Investor Relations strategy, Sustainability and Franchise Health (covering customer and employee satisfaction measures). It is ~~Chairman~~important that we understand the views of our investors and in 2010 we held a specific discussion on analysts’ views of our current and future performance and our current market valuation. We continued to receive regular updates on capital and liquidity during the ~~Disclosure Committee and the members of the Committee are the Company Secretary, Group General Counsel, Director Investor Relations,~~year. The Chief Risk Officer ~~Barclays Corporate Affairs Director, Group Financial Controller~~reported to each meeting in 2010 and ~~Barclays Treasurer. The Committee:~~we also considered and approved Risk Appetite for 2011. We also considered the Group’s Individual Liquidity Adequacy Assessment, which is required by the FSA.

–

~~considers and reviews the preliminary and half-year results, Annual Report/Annual Report on Form 20-F and the Annual Review;~~

–

~~considers Interim Management Statements released to the Stock Exchange; and~~

–

~~considers the content, accuracy and tone of any other announcement that is proposed to be made in accordance with the FSA’s Disclosure and Transparency Rules.~~

~~The Committee reports to the Executive Committee and also reports~~Information flows to the Board ~~Audit Committee, documenting its conclusions about the effectiveness of the design~~were timely and ~~operation of the disclosure controls~~appropriate and ~~procedures. This, together with a joint report on internal controls from Barclays Internal Audit Director and the Chairman of the Group Governance and Control Committee, provides assurance~~we made some enhancements to the format of regular reports in 2010 to present more granular information on individual business performance.

The chart below illustrates how the Board ~~Audit Committee as required by the Turnbull Review of Internal Controls and as recommended by the Code.~~allocated its time during 2010.

Evaluation of Board Performance

~~The Code recommends that an evaluation of the effectiveness of~~Each year the Board ~~and~~undertakes an effectiveness review to assess its ~~Committees~~performance as a Board. Our Board Effectiveness Review is ~~conducted annually and the Walker Review further recommended~~a genuine, formal, rigorous process that ~~the process is~~has been externally facilitated ~~at least every second or third year. We have undertaken externally facilitated performance evaluations annually~~ since ~~2004 and an action plan has been agreed each year to progress any identified improvements.~~2004. The ~~evaluation in 2008 was independently facilitated by Egon Zehnder International and the following actions were agreed for 2009:~~

–

continued focus on the Board’s calendar of business to ensure that noncritical 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;~~

–

~~review of the overall size of the Board;~~

–

~~refinements to the process for evaluating the performance of individual Directors; and~~

–

~~additional reporting on capital and liquidity.~~

~~Further details of these actions are set out under Board Activities in 2009 on page 128, and~~ Board Corporate Governance and Nominations Committee ~~Activities~~is responsible for overseeing the process and annually benchmarks our approach against the practices of other companies in ~~2009 on page 137. The Action Plan for 2009 was completed. The~~the FTSE 20 to ensure that we remain at the forefront of best practice. My evaluation statement for ~~2009~~2010 is set out on ~~page 140.~~pages 138 and 139.

LOGO


~~140~~138

~~Corporate governance~~

~~Corporate governance report~~

~~continued~~

Evaluation Statement

In light of changes in Board composition and the significant events of 2009, we reviewed our Board evaluation process before starting the review for 2009. This included considering whether or not to use an external facilitator and reviewing and interviewing a number of alternative external facilitators.

The Board Corporate Governance and Nominations Committee decided to use an external facilitator again in 2009. It felt that in order to get the maximum benefit from an evaluation exercise, interviews with Directors must be conducted as these tend to be far more informative than questionnaires alone. The Committee also felt that it was appropriate to conduct such an external review given the question-marks that have been raised over corporate governance in the sector and following publication of the Walker Review.

The 2009 evaluation was again independently facilitated by Egon Zehnder International. The Committee felt that their proposal for a refreshed approach to evaluation, including an increased emphasis on Board relationships and a broader remit with input being sought from key executives below Board level, was the most appropriate process. The Board confirms that it does not believe there is a conflict of interest in the business relationship with Egon Zehnder International as executive search consultants and Board evaluation facilitators, particularly as the Group has relationships with other search firms.

The evaluation process is rigorous and took the form of questionnaires, which were shortened this year to focus on the elements that need to be monitored. These questionnaires were completed by Director and other key executives, who then had individual interviews with Egon Zehnder. The individual meetings with Egon Zehnder focused on overall Board composition, a review of key decisions taken by the Board, the quality of information flows, the quality of debate, the effectiveness of the Board Committees and Board dynamics, particularly with a view to assessing whether the interaction of the Board creates a whole that is greater than the sum of its parts. The process underpinning key decisions taken by the Board during the year was also reviewed. In addition, the evaluation exercise seeks Directors’ views on the appropriate size and composition of the Board, including identifying any gaps in skills and experience around the Board table. The evaluation covered the following areas:

–

Before I describe the 2010 evaluation process and its general outcomes, I provide below a summary of the Board’s progress against its 2009 action plan:

Key themes

~~Group performance;~~

–

~~Strategy and performance objectives, including non-executive Director involvement;~~

–

~~Reporting to shareholders and stakeholders;~~

–

~~Structure, people and succession planning;~~

–

~~Decision-making processes, including the culture for effective challenge;~~

–

~~Information flows and presentations;~~

–

~~Board structure and composition, including non-executive experience and knowledge;~~

–

~~Board roles and responsibilities;~~

–

~~Board and management relationships;~~

–

~~Board Meetings; and~~

–

~~Board Committees.~~

~~The results of the evaluation were presented to the Board in February 2010. The results focused on key themes rather than on direct feedback from the questionnaires.~~

~~The themes that will form the basis of the action plan for 2010 include:~~Actions

–
Board size and ~~diversity;~~diversity

–

~~holding~~The Board has reduced in size and is more diverse.

Holding additional Board meetings overseas, particularly given the increased size of our US operations ~~in the US;~~

–

~~increasing the~~The Board held one meeting overseas in 2010 and plans to hold two meetings overseas in 2011.

Increasing visibility of senior executives below Board and Group Executive Committee ~~level; and~~

–level		~~improving~~Directors have had more opportunities to interact with senior executives below Board level via briefing sessions, attendance at management conferences and post-Board meeting lunches. The remit of the Board Corporate Governance and Nominations Committee is being extended to cover succession planning at business unit level.

Improving the format of strategy presentations to the ~~Board.~~Board		The form and content of strategy presentations has been revised to include enhanced financial and risk information. In addition to the regular monthly management accounts, the Board receives more detailed financial information on a quarterly basis.

For the 2010 evaluation process, the Board Corporate Governance and Nominations Committee decided again that it was appropriate for the evaluation to be independently facilitated, given the significant strategic issues under consideration and the pending appointment of a new Chief Executive. Having reviewed the facilitators available in the market, Egon Zehnder International was re-engaged to facilitate the 2010 Board Effectiveness Review. Although we will continue to monitor the market, the Board is comfortable that Egon Zehnder International provides an impartial and objective service irrespective of its position as one of Barclays executive search consultants. The 2010 evaluation process again took the form of questionnaires completed by Directors and key executives, followed by structured interviews with representatives from Egon Zehnder International. We feel that the interviews, which provide colour and context to questionnaire responses, are an essential part of the process. All participants were asked to complete the Board evaluation questionnaire, with separate Board Committee questionnaires completed by Board Committee members. The Board evaluation questionnaire covered the following areas: – Group Performance; – Strategy and performance of objectives, including involvement of the non-executive Directors; – Reporting to shareholders and stakeholders; – Structure, people and succession planning; – Decision making processes, including the culture for effective challenge; – Information flows and presentations; – Board structure and composition, including the experience and knowledge of non-executive Directors; – Board roles and responsibilities; – Board and Management relationships, including the relationship between the Chairman and the Chief Executive; and – Board Meetings and Board Committees.		The results of the evaluation were presented to the Board in December 2010 and confirmed that Barclays Board continues to operate at a very high level of effectiveness. One of the advantages of undertaking an annual evaluation is that we can monitor trends in responses to questions, as shown below. The key themes arising from the 2010 evaluation and which will form the basis of the action plan for 2011 are: – Ensuring that Board dynamics remain effective following recent membership changes, including the appointment of the new Chief Executive; – Ensuring that a wide range of skills, experience, background and diversity on the Board is maintained; – Continuing the focus on strategic decision making in light of the evolving regulatory environment; and – Revising the format of Board meetings to allow the Board to devote more time to discussion of key strategic issues, including discussions the evening before Board meetings.

I held private meetings with the non-executive Directors in early 2010 so that individual and general results could be discussed. Bespoke development plans are then agreed with each non-executive Director in relation to their own performance.

As Chairman, I had regular meetings with shareholders and kept the Board fully informed of their views. Details of communications with shareholders are set out on page 143 in the section on Relations with Shareholders.

~~Marcus Agius~~

~~Group Chairman~~

~~9th March 2010~~

~~141~~

139

Corporate governance

Corporate governance report continued


Evaluation Statementcontinued
In addition to evaluating the performance of the Board and Board Committees, we also evaluate the performance of individual Directors. Evaluation reporting lines are summarised below:
Position		Evaluated by

Group Chairman		Senior Independent Director, who meets with non-executive Directors without the Group Chairman present in order to obtain their feedback

Chief Executive		Group Chairman

Senior Independent Director		Group Chairman

Executive Directors		Chief Executive

Non-executive Directors		Group Chairman, who holds private meetings with each non-executive Director
In respect of individual non-executive Director performance, in early 2011 I held private meetings with each non executive Director to talk through the evaluation results and agree individual development plans with each of them for the year ahead.

Board Corporate Governance and Nominations Committee Chairman’s Report

Member

Independent

Meetings

eligible to

attend

Meetings

attended

Marcus Agius (Chairman)

David Booth (from 1st January 2010)

Sir Richard Broadbent

Sir Michael Rake

Sir John Sunderland

Secretary

Lawrence Dickinson

Key

OA on appointment

I independent

What is our role?

The Committee is responsible for reviewing the composition of the Board and Board Committees and for recommending to the Board the appointment of new Directors. We also consider succession plans for the Group Chairman, Chief Executive and other key positions, such as roles on the Group Executive Committee. The Committee monitors corporate governance issues and the annual Board Effectiveness Review. The Committee's full terms of reference are available from the corporate governance section of our website at:www.barclays.com/ corporategovernance

Who are the Committee?

The membership of the Committee is set out above, together with attendance at meetings in 2010. Committee members include the Chairmen of each of the principal Board Committees. The Chief Executive also attends each meeting, although he is not involved in decisions relating to his own succession.

What did we do in 2010?

We met four times in 2010 and the chart on page 140 shows how we allocated our time at our meetings. We dealt with a number of significant issues in 2010, primarily the succession planning for the appointment of a new Chief Executive, the process for which I describe on page 140. Our role in the annual review of Board effectiveness is described in my evaluation statement, which is set out on pages 138 and 139.

During the year, we reviewed the composition of the Board and the principal Board Committees at each of our meetings, looking at the balance of skills and experience on the Board and planning ahead for any retirements. We recommended two new non-executive Director appointments to the Board during the year: Dambisa Moyo and Alison Carnwath. In seeking new non-executive Directors, we looked at the existing range of skills, experience, background and diversity on the Board in the context of the strategic direction of the Company, before putting together a specification for the type of candidate we sought. In particular, we wanted candidates with a background in investment banking and finance and also sought experience of emerging markets and economies. The selection process was carried out with the assistance of external search consultants, who provided us with a range of candidates for consideration. Dambisa and Alison both met with me, the Chief Executive and with at least two other members of the Committee before their appointments were recommended to the Board.

We also considered and recommended changes to Board Committee composition during the year. Following Leigh Clifford's retirement from the Board on 30th September 2010, we were keen to ensure that the Board Remuneration Committee remained properly resourced, given the increasingly heavy workload it faces in the new regulatory environment. We recommended the appointment of Alison Carnwath to this Committee, where her investment banking experience will be particularly helpful. Alison also joined the Board Audit Committee. Dambisa Moyo


140

Board Corporate Governance and Nominations Committee Chairman’s reportcontinued

joined the Board Risk Committee, where her background in financial services and as a global economist will bring a valuable insight to that Committee’s deliberations of macro-economic risks.

We made some minor changes to our terms of reference during the year to clarify that when considering new appointments we would look at an individual’s ability to meet the required time commitment. We also made clear our role in ensuring that induction and development programmes for non-executive Directors are appropriate and during the year we reviewed the programmes that had taken place in 2010, making some suggestions as to how they could be enhanced.

The results of the annual Committee effectiveness review undertaken in late 2010 demonstrated that the Committee felt it had operated effectively. However, during our discussions on succession planning, we agreed that the Board would benefit from having even greater visibility of the senior executives below Board and Group Executive Committee level, to increase the Board’s awareness of those senior executives within the Group who have the potential to become future leaders of the organisation. As a result, we have reviewed our terms of reference so that, from 2011, we will consider the overall succession planning process for key senior executive positions and, in particular, will look at the succession plans that are in place for the heads of our principal business units.

LOGO

Appointing a new Chief Executive

We began our search for a successor to John Varley by drawing up the role requirements for the Chief Executive position, covering both the general background/experience required and the desired attributes across a range of key competencies. Essential, of course, was that the next Chief Executive should have financial services experience and, given the size of our investment banking business following the Lehmans acquisition, we felt that knowledge and experience of investment banking would be essential. The attributes we sought included a proven track record in strategic thinking, in business leadership and execution of strategy, in leading and developing people and building capability. We also sought candidates who could lead and manage change, who could work with and influence multiple stakeholders and who had a strong awareness of and commitment to risk management, control and governance.

It was evident to us from an early stage that Bob Diamond was a strong internal candidate to succeed John. Nonetheless, it was important that we tested the market and we conducted a benchmarking exercise against potential external candidates, who were identified with the assistance of a search consultant, before coming to a recommendation. We also felt that, if possible, the exercise should be carried out discreetly in order to minimise any risk of disruption to the business. Having fully tested the market and assessed all candidates against the role requirements, we agreed to recommend to the Board the appointment of Bob Diamond as the next Chief Executive. The recommendation followed meetings between Bob and all the non-executive Directors in order that he could set out his vision and strategic priorities for the Group and respond to questions and challenge.

We announced on 7th September 2010 that Bob would succeed John on 1st April 2011 following a transition and handover period. I am pleased to say that the transition period went smoothly and we were able to bring forward the handover date to 1st January 2011, which we announced on 17th December 2010.


					141

Corporate governance

Corporate governance report continued

(3) Accountability

Sir Michael Rake, Chairman of the Board Audit Committee, now reports on the Board Audit Committee’s activities during 2010.

Board Audit Committee Chairman’s report

~~Governance~~ LOGO

Member

Independent

Meetings
eligible to
attend

Meetings
attended

Sir Michael Rake (Chairman)

Alison Carnwath

(from 1st October 2010)

Fulvio Conti

Simon Fraser

Sir Andrew Likierman

Secretary

Lawrence Dickinson

Key

OA on appointment

I independent

2010 was my first full year as Chairman of ~~Risk~~the Board Audit Committee and one which saw us appoint a new lead audit partner, Andrew Ratcliffe, who succeeded Phil Rivett. I am pleased to report that the handover to the new lead audit partner went smoothly and the transition was properly and effectively managed. My report on the Committee’s work during 2010 is set out below.

What is our role?

~~Board Risk Committee~~We are responsible for reviewing accounting policies and the contents of financial reports to ensure that we are satisfied with the integrity of the financial statements and particularly the key financial judgements within them. We also monitor the Group’s disclosure controls and procedures and the internal control environment. We consider the adequacy and scope of the external and internal audit and we oversee the relationship with our external auditors. The Committee’s full terms of reference are available from the corporate governance section of our website at:www.barclays.com/corporategovernance

~~David Booth (Chairman from 1st January 2010)~~

~~Sir Richard Broadbent (Chairman to 31st December 2009)~~

~~Reuben Jeffery III (from 1st January 2010)~~

~~Sir Andrew Likierman~~

~~Sir Michael Rake~~

~~Stephen Russell (to 31st October 2009)~~

~~Patience Wheatcroft (1st May-16th June 2009)~~

~~Secretary~~Who are the Committee?

~~Secretary: Lawrence Dickinson~~

~~In addition to the Members~~The membership of the Committee ~~all~~and attendance at meetings held in 2010 is set out above. The Board has determined that Sir Andrew Likierman and I are ~~usually attended~~the designated financial experts for the purposes of the US Sarbanes-Oxley Act of 2002. Sir Andrew Likierman has ‘recent and relevant financial experience’, as recommended by the Combined Code, as a result of his accountancy background, his career with HM Treasury and his appointment as Chairman of the National Audit Office.

I have an accountancy background, having worked at KPMG for over thirty years, latterly as Chairman of KPMG International. Sir Andrew Likierman and I also serve on the Board Risk Committee, ensuring there is appropriate overlap between the two committees.

The Group Finance Director, Chief Risk Officer, Group General Counsel and Chief Internal Auditor attend each Committee meeting, as does the lead audit partner from our external auditor. Before each Committee meeting, I hold a private session with Committee members to take soundings on the matters to be discussed at the meeting. Committee members also meet privately with the Chief Internal Auditor and the external auditor after the majority of our meetings, without Management present, to follow up on any particular matters.

Outside of our formal meetings I am in regular contact with Management, including the Group Finance Director, the Chief Risk Officer, the Chief Internal Auditor (who may raise with me any issues of concern) and the lead audit partner of our external auditors. During the year, I also visited the Group’s businesses in Spain, USA, Kenya and South Africa, attending meetings of the local Governance and Control or Subsidiary Audit Committees. I also held one-to-one meetings with management in London, New York and Dubai.

What did we do in 2010?

We met eleven times in 2010 and the chart on page 143 shows how we allocated our time at our meetings. The work of the Committee principally falls under three main areas: financial statements and accounting policies, internal control and oversight of internal and external audit.

Financial Statements and Accounting Policies

Reviewing the financial statements and accounting policies requires us to make certain judgements and I set out below some of the key issues we discussed in 2010 in conjunction with the external auditors.

–

We continued to review closely the fair value of our credit market exposures and the form and content of our disclosures. We reviewed marks by asset category, movements in exposures and the underlying collateral by vintage and rating. We received an update at both the half-year and full-year and also ahead of each Interim Management Statement and discussed the valuations with Management.

–

Impairment testing of the goodwill held on the Group’s balance sheet was conducted in 2010. We reviewed the results of the impairment testing and agreed with Management’s assessment that the goodwill associated with our businesses in Russia should be written off in full. We were content that other goodwill held on the balance sheet remains appropriate.

–

We received regular reports on current and forecast impairment, which set out the trends in both retail and wholesale credit risk by business unit and the level of potential credit risk loans and the level of impairment held against them. We specifically reviewed the impairment charge in the interim and preliminary results announcements and were satisfied that the charge was appropriate. In particular, we reviewed the accounting treatment and performance of the Protium loan. We agreed that it was appropriate to impair the loan in order to reduce the carrying value of the loan to the fair value of the underlying assets, given Management’s intention to restructure or seek earlier repayment of the loan. During 2010, a considerable amount of work was carried out to understand the impairment situation in Spain, where increased impairment in H1 2010 was driven largely by the deteriorating Spanish economy and further falls in property values.


142

Board Audit Committee Chairman’s reportcontinued

–

The Group’s investment in BlackRock, Inc declined in value during 2010. As it is held as an Available For Sale (AFS) investment, the decline in value is recorded in the AFS reserve and deducted from capital and is not recognised in the income statement. We discussed whether the decline in value should be recognised in the income statement. We concluded that the decline in value was not significant or prolonged in the light of the increase in share price through the second half of the year and the continuing price volatility. Our judgement, therefore, was that the decline in value did not need to be recognised in the income statement.

–

We reviewed outstanding litigation matters, including the litigation with the Lehman trustee in bankruptcy. The Committee discussed the court opinion in respect of the Lehman acquisition that was issued in February 2011. It concluded, having carefully considered the matter and reviewed independent advice, that the valuation of the asset remains appropriate.

In reviewing the financial statements, we receive input from the Disclosure Committee and PwC. The former is chaired by the Group Finance Director and considers the content, accuracy and tone of the financial statements and other public disclosures prior to their release and reports to us on its conclusions. PwC reported to the Committee on their review of the half-year interim results and on their audit of the year-end financial statements.

Internal Control

2010 saw some restructuring/re-segmentation of our businesses and our focus was on ensuring that there was no impact on controls during and after the reorganisation. In October, we held an additional meeting specifically to review the overall control environment and the trends in key control indicators. During the year, we reviewed the control environment in each of Absa, Barclays Capital, Barclays Corporate, Barclays Wealth, Barclays Africa, UK Retail Banking and Western Europe Retail Banking in detail, with the Chief ~~Risk Officer.~~Executives of those businesses presenting to the Committee.

The Committee also spent time this year reviewing the control environment at Barclays ~~Internal Audit Director,~~Capital, given the increased size of the business following the Lehman acquisition. In particular, we reviewed controls in the areas of product valuation, the trading businesses and client assets segregation. In terms of product valuation, a significant amount of activity has taken place to strengthen further the valuation framework and control and governance processes. A specific project was also initiated in 2010, at Management’s behest, to review Barclays Capital’s controls following the Lehman acquisition and taking into account the new regulatory environment to ensure they are best in class. We received reports on the progress of the project, its findings and the actions that are being taken.

Technology controls and governance was also an area of focus in 2010 and we received several reports on the control environment in this area, where we had previously identified the potential to enhance controls. Much progress has been made in improving the control environment and we will continue to monitor progress into 2011.

We received regular reports during 2010 on the Group’s arrangements whereby employees can raise concerns and details of any action being taken to follow up specific reports.

Looking ahead to 2011, a programme is under way to ensure the Group is in compliance with the UK Bribery Act which was due to become effective in April 2011, but which has been delayed. We will receive further progress reports in 2011. During 2011, we will also track the Group’s

compliance with the Deferred Prosecution Agreements entered into as part of the settlement reached with US authorities following an investigation into the Group’s compliance with US sanctions and US Dollar payment practices.

In reviewing internal controls, we are supported by the Group Governance and Control Committee, chaired by the Group General Counsel, which considers control environment reports in advance of their presentation to the Committee.

Further details of the Group Internal Control Framework, including the main features of our internal control and ~~Barclays~~risk management systems in relation to the financial reporting process, can be found in the Directors’ Report on pages 128 and 129.

Oversight of Internal Audit and External Audit

We are responsible for overseeing the work of the internal audit function and also for managing the relationship with the Group’s external auditors. We review the performance of the internal and external auditors annually to ensure that they are effective and recommend to the Board whether the external auditors should be reappointed.

Internal Audit

At each meeting we receive a report from the Chief Internal Auditor on the control environment and the key trends and indicators, including the key control environment areas identified for attention and monitoring. We also review and, if appropriate, approve any adjustments to be made to the audit plan.

We received the results of the internal audit function’s self-assessment of performance in late 2010, along with an update on the actions being taken following the external assessment carried out in 2009: the majority of those actions are complete and all will be closed out by June 2011. The internal audit function generally conforms to the standards set by the Institute of Internal Auditors.

We have again been particularly keen to ensure that the internal audit function is properly resourced to enable it to fulfil the audit plan. We closely monitored resources during the year. Furthermore, this year we have had greater visibility of the senior management in the internal audit function in addition to the Chief Internal Auditor.

External Audit

To safeguard the objectivity and independence of the external auditor, we have in place a policy that governs the type of services they may provide. I describe the policy in more detail below. We also have in place a policy that sets out guidelines for the employment of ex-employees of the external auditor and receive a report twice-yearly on any such appointments. In addition, we seek specific assurance from the external auditor on the arrangements they have in place to safeguard their independence.

We discussed and agreed with PwC the audit plan for 2010 to ensure that key areas of judgement in the Group’s financial statements were appropriately covered.

To evaluate the performance and effectiveness of the external auditor, we sought feedback from key stakeholders across the Group via a questionnaire. The responses were analysed and presented to the Committee for review and discussion in early 2011. The Committee is fully satisfied with the performance of PwC and has recommended to the Board and to shareholders that PwC should be re-appointed as ~~well~~the Group’s auditors at the AGM on 27th April 2011.


					143

Corporate governance

Corporate governance report continued

Board Audit Committee Chairman’s reportcontinued

External auditor objectivity and independence: Non-Audit Services

We take very seriously our responsibility to put in place safeguards to auditor objectivity and independence. The question of auditor objectivity and independence came under increasing scrutiny in 2010, and was subject to a consultation by the Auditing Practices Board, to which Barclays made a submission. While we believe that the policy and framework we have in place, as described below, is robust and effective, we asked management to ensure that all proposals to use the Group’s external auditor for non-audit services are robustly justified and, where appropriate, tendered. In my capacity as Chairman of the Committee, I closely review, and question where appropriate, any requests for such approval submitted to me. Furthermore, we keep the use of the auditor for any taxation-related services under close review and have approved very little in the way of tax advisory services and then only where there was a robust case for using the external auditor rather than another supplier. A breakdown of the fees paid to the auditor for non-audit work may be found in Note 8 on page 207.

Our policy on the provision of services by the Group’s external auditor sets out the circumstances in which the auditor may be permitted to undertake non-audit work for the Group. We oversee compliance with the policy and consider and, if appropriate, approve requests to use the auditor for non-audit work. Allowable services are pre approved up to £100,000 or £25,000 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. During the year, enhancements were made to the way in which requests for approval are reviewed and recorded, with all requests being submitted

via an online portal. This new system facilitates the production of management information and we receive a report at each meeting on the non-audit services provided by the auditor. We review the policy annually to ensure that it is fit for purpose and up to date.

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 Resources functions

– broker or dealer, investment advisor or investment banking services

– legal, expert and tax services involving advocacy

Allowable services that we 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

We conducted our annual review of our performance as ~~other senior executives, also attend~~part of the annual Board Effectiveness Review process and concluded that we continue to operate effectively. We will focus in 2011 on ensuring that there is sufficient time at meetings for challenge and debate given the Committee’s heavy agenda. Furthermore, while we receive timely and appropriate information from Management, we will continue to work at ensuring that papers presented to the Committee are concise and distil the key issues effectively.

LOGO

Sir Michael Rake

Chairman, Board Audit Committee


144

David Booth, who became Chairman of the Board Risk Committee on 1st January 2010, now reports on that Committee’s activities during 2010.

Board Risk Committee Chairman’s report

LOGO

Member

Independent

Meetings
eligible to
attend

Meetings
attended

David Booth (Chairman)

Sir Richard Broadbent

(to 30th September 2010)

Reuben Jeffery

(from 1st January 2010)

Sir Andrew Likierman

Dambisa Moyo

(from 1st October 2010)

Sir Michael Rake

Secretary

Lawrence Dickinson

Key

OA on appointment

I independent

I succeeded Sir Richard Broadbent as Chairman of the Board Risk Committee ~~where appropriate.~~

in January 2010. I am grateful to Sir Richard for his work in leading the Committee during the difficult period of the financial crisis and for his continuing support until he left the Committee at the end of September 2010. My report on the Committee’s work during 2010 is set out below.

~~Board Risk Committee Chairman’s Statement~~What is our role?

~~Context~~

As a bank, Barclays ~~has long recognised~~is in the ~~importance~~business of ~~ensuring that the Board and its Committees devote sufficient attention to risk, particularly as it is only by~~taking risk: taking appropriate levels of risk that Banks can make a profit. A Board level Risk Committee has been in existence since 1999 and a key role of the Committee is to analyse, understand and monitor the key risks taken by the business to generate profit and create shareholder value. The Committee focuses on risks taken deliberately and overtly, such as credit, market, capital and liquidity risk ~~rather than~~is how we generate profits. The Board Risk Committee is responsible for recommending to the Board the total level of risk the Group is prepared to take (risk appetite). We monitor risk appetite, setting limits for individual types of risk, e.g., credit risk and market risk, and we monitor the Group’s risk profile. We obtain assurance from management that principal risks have been properly identified and are being appropriately managed. Following the publication in late 2009 of ~~simply doing business, such as operational risk. The Committee,~~the Walker Report into Corporate Governance in ~~analysing~~Banks and ~~monitoring~~other Financial Institutions (the Walker Report), our remit has expanded to include ensuring that risk is ~~acting on behalf~~taken into account during the due diligence phase of any strategic transaction and we also provide input from a risk perspective into the deliberations of the Board Remuneration Committee. The Committee’s full terms of reference are available from the corporate governance section of our website at:www.barclays.com/corporategovernance. More information on risk management and the internal control framework can be found in the Risk management report on pages 42 to 119.

Who are the Committee?

The table above sets out the membership of the Committee and their attendance at meetings held in 2010. Both Sir Andrew Likierman and Sir Michael Rake also serve on the Board Audit Committee, which provides a useful insight into the work of that Committee to ensure there is no under- or overlap in the work of the respective committees. The Group Finance Director, Chief Risk Officer, Group General Counsel and Chief Internal Auditor attend each Committee meeting, as does the lead audit partner from our external auditor. Senior executives from each of our principal businesses attend meetings at our request and senior members of the Group Risk team attend frequently to present on specific matters.

What did we do in 2010?

We met seven times in 2010 and the chart on page 145 shows how we allocated our time at our meetings. Two of the meetings were arranged at short notice and it was ~~an essential part of my role~~not possible for all members to attend, although they had the opportunity to review the meeting papers and raise any points with the Group Risk team or with me as Chairman.

Since becoming Chairman, I have been keen to ensure that the Committee ~~alerts~~remains at the forefront of best practice. While the Committee has been in place since 1999, well before the recommendations of the Walker Report, the working practices of the Committee continue to evolve. In late 2009, we asked PwC to carry out a review of how the Committee had operated during the period of the financial crisis, to assess whether the Committee had operated effectively and whether there is anything it could do differently. The outputs of the review were shared with the full Board toin early 2010. The review concluded that there had been no major failings in the operation of the Committee and that it had identified the issues ~~of concern.~~

~~The~~on a timely basis. Some suggestions for improvements were put forward, including developing a more systematic process for agreeing what risks should be reviewed in greater detail by the Committee ~~itself is comprised solely of independent non-executive directors. However,~~and a more formal process for escalating issues raised at the ~~Group Finance Director and Chief Risk Officer attend each meeting as a matter of course and~~various management risk committees. Robert Le Blanc, the Chief Risk Officer, has a dotted reporting line to me as Chairman of the ~~Committee.~~Committee and I ~~have regular meetings~~met with Robert ~~Le Blanc,~~regularly during the ~~Chief Risk Officer,~~year to discuss matters to be considered at Committee meetings and to get his views on the issues on which the Committee should focus its time.

During the year we implemented a number of the recommendations arising from the Walker Report. Early in 2010, we appointed a panel of retained advisers, who ~~also has~~we can call on for an independent view of matters, should we feel it appropriate to do so. During the ~~right (and indeed responsibility)~~year, we used an external consultant to ~~elevate issues~~carry out an independent review of risk in remuneration, with a particular focus on the remuneration framework, the risk metrics used to ~~me where he considers it necessary. I am also consulted by~~assess financial performance and the role of the Group ~~Finance Director in respect of the performance appraisal and compensation of the Chief~~ Risk ~~Officer. His compensation is approved by the Board HR and Remuneration Committee and appointment to or departures from the role are a matter reserved to the Board.~~

~~The Committee is conscious, when undertaking its duties, that banks are~~Function in the ~~business~~remuneration process. The review demonstrated that we have a good, comprehensive set of ~~taking risk. The aim~~risk metrics, particularly quantitative metrics, and that the proposals for 2010 for risk adjustments to assess financial performance and the role of the risk function ~~within Barclays and the Board Risk Committee itself is therefore not to minimise risk but to optimise it. This requires us to ensure that risks being taken are:~~

–

~~properly identified and understood, both in their own right and relative to their interactions with other risks we~~in remuneration decisions are ~~taking;~~

–

~~appropriate, relative to the scale and type of our business;~~

–

~~affordable, particularly in relation to the capital base of the company;~~

–

~~properly controlled and managed; and~~

–

~~earning an appropriate return, i.e. , one commensurate with the risk taken.~~

~~How the Committee goes about its business.~~

It has been an essential feature of the operation of the Committee that the information flowing to the Committee is congruent with the information flow to Executive Committee. In the case of the Group Risk Profile Report (see below), the report is identical.

The Committee plans its forward programme and undertakes a number of key tasks throughout the course of the year in order to ensure it is satisfied with the way risk is being managed. A key role is to review in detail at the end of every year the proposed Risk Appetite for the forthcoming year, before recommending it to the Board.

~~The Committee monitors risk performance throughout the year to assess whether such performance is~~ in line with ~~expectations when the budget was set, adjusted~~regulatory requirements. Suggested areas for ~~any differences in the performance~~improvement included strengthening our qualitative risk metrics and increasing communication and awareness of the ~~economy. Where actual performance differs from expectations, the actions being taken by management are reviewed to ensure that the Committee is comfortable with them.~~

The Committee also reviews sectoral limits in both the wholesale and retail sectors and in market risk. The purpose of these limits, known internally as Mandate and Scale limits, is to ensure that concentrations in the risk profile do not result in unacceptable levels of losses.

~~The Committee, in conjunction with the risk function, also seeks to identify potential future areas~~role of risk metrics in order to undertake detailed analysis and review. A good example of this would be the Committee’s review of the US mortgage business, which was requested at the end of 2006. The Committee will also, as part of its calendar of business, review experience of past risk events and seek to identify any lessons learnt in order to ensure they are embedded into business practices. It also seeks to compare Barclays risk stance with those of others to understand the relative risk being taken.

~~The Committee also monitors the Group’s capital and liquidity position throughout the year to ensure they are within the agreed Risk Appetite parameters.~~

~~Finally, the Committee regularly reviews how risk is measured within the business in order to ensure it is satisfied with the risk measurement systems in place.~~remuneration.


~~142~~					145

Corporate governance

Corporate governance report

continued

~~Activities in 2009~~

~~During 2009, the Committee undertook the following activities:~~

~~Reviewed a full Group Risk Profile Report quarterly.~~

~~The Group Risk Profile Report incorporates:~~

–
~~an economic overview;~~

–
	~~an update on impairment charges and loan loss rates; – risk appetite utilisation; and~~ Board Risk Committee Chairman’s reportcontinued

–

~~sections on retail and wholesale credit risk (by business unit), market risk and operational risk.~~

~~Capital~~We continued our focus on capital and ~~Liquidity~~

~~The~~liquidity in 2010 and the Barclays Treasurer reported to the Committee ~~monitored movement in~~regularly on the Group’s capital and liquidity position, including the individual liquidity adequacy assessment, required by the FSA. We review economic and regulatory capital demand and supply and the level of losses that could be experienced before minimum regulatory capital ratios are breached. ~~The Committee~~We also reviewed ~~and recommended to~~ the ~~Board the~~Group’s liquidity ~~risk appetite of the Group~~profile to ensure that sufficient liquidity is held to cover both market-wide and Barclays specific stress scenarios.

~~Key risk issues~~

~~Each year, the Committee ensures it has a forward programme of issues to analyse in detail. During 2009, the Committee analysed the risk profiles and controls in the following businesses:~~

–

~~the Commodities business in Barclays Capital;~~

–

~~the Emerging Markets business in GRCB; and~~

–

~~the US equities business.~~

~~The Committee also received regular reports on the Group’s exposures to the asset backed securities (ABS) and leveraged credit market exposures and how these were being managed down.~~

Stress ~~Testing~~

~~The Committee reviewed and approved the scenarios to be used in the annual stress~~ testing, ~~and reviewed the results of the tests themselves~~which is an exercise carried out to ensure that the Group would remain adequately capitalised and liquid even under severe ~~stress.~~

~~Risk Appetite~~

~~Risk appetite is set~~stress, continued to receive our attention in 2010, as we considered various scenarios to be modelled. In addition to Barclays own annual stress testing exercise and the annual stress testing exercise conducted by ~~agreeing~~ the ~~level of credit risk impairment the Group is prepared to accept~~FSA, in the ~~base case economic forecast~~first quarter of 2010 a stress testing exercise was set for all European banks by the following year, together with impairment levels that would be incurred in economic scenarios that represent 1:7 and 1:25 events. A Daily Value at Risk limit and stress losses for market risk in 1:7 and 1:25 scenarios is also agreed, together with total loss limits from operational risk.

Committee of European Banking Supervisors. The ~~financial~~ results of that exercise were published in July 2010. Each of these stress tests showed that Barclays was adequately capitalised.

During the ~~Group are budgeted in~~year we received the ~~base case~~first of what we intend to be an annual presentation on macro prudential and ~~forecast in~~macro-economic risk and the ~~stress scenarios to ensure that they do not breach a series of parameters agreed by~~impact this may have on the Committee. These parameters include pre-tax profit, return on equity, loan loss rates, capital ratios, leverage ratios, dividend and credit rating. A key focus, given current conditions, was to ensure that the capital ratio parameters (in respect of Tier 1 and Core Tier 1) were met at all times.Group’s business going forward.

~~Follow up on risk issues~~

~~The Committee requested and received~~In 2009, we asked Management for a report ~~from the business~~ on the lessons learnt from the sub-prime ~~crisis. The losses~~crisis and in ~~sub-prime arose from a systemic market collapse which was not foreseen by our risk processes,~~2010, Management reported back on how the rating agencies or the broader market. Subsequent events have highlighted areas for improvement in certain of our processes, particularly around the need to improve the aggregation of risk positions across all businesses and to include the potential for discontinuous moves in key parameters when setting

~~sector limits. Risk models in use~~lessons learnt are being institutionalised in the business ~~must~~and what is being done differently in terms of controls and in the way we conduct our business. We were particularly interested in establishing what cultural change there has been as a result of the sub-prime experience and in understanding how that cultural change has been embedded.

LOGO

In view of the difficulties of some countries in the Eurozone, we spent some time in 2010 reviewing country and sovereign risk, in particular, in specific European countries (Spain, Portugal, Italy, Ireland and Greece) and in sub-investment grade countries. The review covered the extent of our exposures and the caps that are in place to limit concentrations. We also ~~include more subjectivity~~reviewed the Group’s position in the commercial property sector including risk appetite, exposures and ~~bespoke analysis when rating complex~~controls in our four key geographies: UK, US, Spain and South Africa. In late 2010, we received a report on the lessons learned from the impairment suffered by our Corporate business in Spain, which has been shared with the full Board. A series of actions have been identified and are being implemented, not just in relation to Spain but also in terms of how overall risk and returns across each business in the Group are analysed.

As usual, we considered risk appetite for 2011 although this year we also reviewed risk appetite methodology and enhancements that have been made to the process. A set of financial ~~structures. Action~~volatility parameters, such as Profit Before Tax and Loan Loss Rate are agreed. Based upon the Medium Term Plan, the Group’s performance in a 1 in 7 and 1 in 25 scenario is ~~underway~~then assessed. The performance of the agreed parameters in ~~all~~such scenarios is then assessed to identify any potential constraints, for example, we would not wish to see the Loan Loss Rate rise above certain pre-agreed levels in these ~~areas.~~scenarios. As a result of the review, we agreed to recommend the risk appetite to the Board.

~~Mandate~~We conducted our annual review of the Committee’s performance as part of the annual Board Effectiveness Review process and ~~Scale Limits~~concluded that we continue to operate effectively. We continue to receive appropriate and timely information from Management and have provided additional guidance to Management on what we expect their reports to cover and how they should present to the Committee to ensure that we make optimum use of our meetings. The majority of the reports we see are first considered by the Group Risk Oversight Committee or the Group Executive Committee, which greatly assists the Committee’s understanding of the issues faced by Management.

LOGO

David Booth

Chairman, Board Risk Committee


146

(4) Remuneration

Sir Richard Broadbent, Chairman of the Board Remuneration Committee, reports on the Board Remuneration Committee’s activities during 2010 in the Remuneration Report, which may be found on pages 147 to 163.

(5) Relations with Shareholders

We are supportive of the UK Stewardship Code’s aims of improving dialogue between investors and companies. Our interaction with shareholders falls into three main areas: institutional shareholders, private shareholders and the ACM.

Institutional Shareholders

We have a comprehensive investor relations programme, which facilitates regular access for investors and buy-side and sell-side analysts to senior management, so that they can interact directly on key topics. During 2010, over 400 separate meetings were held between Management and investors, with meetings held in London, Scotland, USA, Canada, Germany, Ireland, Italy, Scandinavia, the Netherlands and Spain, reflecting the international nature of our investor register. Senior management from across the business also hosted investor and analyst meetings during 2010. In addition to direct meetings, Barclays also participates in investor conferences intended to provide wider access to investors and analysts, for example, Barclays Capital hosts one such event each year in New York to support wider industry initiatives.

As Group Chairman, I have regular contact with institutional shareholders, as do the Chief Executive, Group Finance Director and Senior Independent Director. In particular, I meet with institutional shareholders ahead of the AGM and report back to the Board on any significant issues that are raised. Directors regularly receive copies of analysts’ reports and a monthly report from the Investor Relations team, which covers matters such as share price movement, analyst consensus, updates on market sentiment and shareholder movements by geographic region. The Board also receives a quarterly report on share register movements, which highlights the top buyers and sellers of Barclays shares.

Private Shareholders

The ~~Committee reviewed~~direct engagement model we follow for our interaction with institutional investors is impractical for large numbers of private shareholders, however, we seek to follow industry best practice in terms of disclosure. All documents produced for investor events are also provided on the ~~sectoral limits~~investor relations section of our website. We also maintain a specific shareholder enquiry line for private shareholders to request information.

We prefer to communicate electronically with our shareholders: this is beneficial for the environment and lowers costs for the Group. We also encourage private shareholders to hold their shares in ~~place~~Barclays Sharestore, where shares are held electronically in ~~both the Wholesale~~a cost-effective and ~~Retail Credit Risk Sectors. These limits include commercial property caps (by geography), leveraged finance limits, high yield underwriting caps, limits~~secure environment. Private shareholders can use our Barclays e-view service to ~~loans~~receive their shareholder documents electronically and to ~~lower grade names or credit scores~~get immediate access to information relating to their personal shareholding and ~~stress limits by different types of market risk (e.g. interest rate, foreign exchange, commodity).~~dividend history. Barclays e-view participants can also change their details and dividend mandates online and receive dividend tax vouchers electronically.

~~Governance~~AGM

The ~~Committee spent time discussing both~~2010 AGM was held on Friday 30th April 2010 at the ~~Turner Review~~Royal Festival Hall in London. In accordance with best practice, all resolutions were considered on a poll and the ~~draft~~results were made available on our website the same day. 62% of the shares in issue were voted and ~~final Walker Review~~all resolutions were approved. All Directors attended the AGM and were available to answer shareholder questions. The 2011 AGM will be held on Wednesday 27th April 2011 at the Royal Festival Hall in ~~particular, how~~London. The Notice of Annual General 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 Wednesday 27th April 2011.

(6) Statement on US Corporate Governance Standards

The statement we are required by the NYSE to make 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 different tests from the Code for determining whether a Director is independent.

We follow the Code’s recommendations ~~should be reflected~~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 ~~Committee’s~~Code and the criteria we have established for determining independence, which are described on page 135.

Board Committees

We have a Board Corporate Governance and Nominations Committee and a Board 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. The NYSE Rules state that both Committees must be composed entirely of independent Directors. As the Group Chairman was independent on appointment, the Code permits him to chair the Board Corporate Governance and ~~way~~Nominations Committee and be a member of ~~working. Some minor changes~~the Board Remuneration Committee. Except for these appointments, both Committees are composed solely of non-executive Directors, whom the Board has determined to be independent. We comply with the NYSE Rules requirement that we have ~~been made as~~ a ~~result.~~

~~Relationship with other Committees~~

~~The Committee must work closely with both the~~ Board Audit Committee ~~and~~comprised solely of independent non-executive Directors. However, we follow the ~~Board HR and Remuneration Committee. In respect~~Code recommendations, rather than the NYSE Rules, regarding the responsibilities of the Board Audit Committee, although both are broadly comparable. We also have a ~~schedule~~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 ~~agreed setting out~~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 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. However, the Board does not explicitly take into consideration the NYSE’s detailed definition of what are considered ‘material revisions’.’

LOGO

Marcus Agius

Group Chairman

10th March 2011


					147

Corporate governance

Remuneration report

Statement from the Chairman of the Board Remuneration Committee

The purpose of this report is to provide more detail on remuneration in aggregate and for senior management.

The Committee’s approach

The Committee aims to achieve a balance between delivering market competitive remuneration in order to retain talent, and optimising current and future shareholder returns, including growing the dividend, maintaining capital adequacy and effective risk management.

The Committee has established frameworks for remuneration in each of the businesses and for the Group as a whole. The frameworks are forward looking and are based on financial metrics to assist with the planning and management of remuneration in each of the key ~~roles of each committee in areas such as capital~~businesses. The frameworks incorporate key financial ratios achieved by Barclays and ~~liquidity~~its competitors and are used by the Committee to ~~ensure there is clarity of responsibility.~~inform its decision making process. The Committee ~~discussed papers from~~considers both relative and absolute performance when formulating its decisions.

The Committee takes a strong analytical approach to remuneration that includes comparative financial performance analysis, comparative compensation analysis and tracking trends in compensation ratios (in particular compensation to pre-compensation PBT, and compensation to net revenue). The Committee reviews sensitivity analyses that illustrate the impact of changes in the level of performance awards on the financial and compensation metrics.

The Committee’s remuneration decisions are based on a risk-adjusted view of Barclays financial performance. This is a continuous process, with the risk function ondeeply embedded into the ~~assessment~~process. The three key stages of ~~business~~the process for assessing performance on a risk-adjusted basis ~~and the proposals for~~are as follows:

Upfront risk ~~metrics to be used in the 2010 compensation cycle, in both cases prior to submission to the Board HR and Remuneration Committee as an input into compensation decisions.~~

~~In conclusion, the Committee seeks to ensure that it achieves a balance each year between:~~

assessment:

–	Before business is undertaken, detailed stress-testing and scenario analysis is performed to test the viability of plans on a risk-adjusted basis and to determine risk appetite

–	~~comparative analysis~~ As part of the risk appetite framework, the balance sheet including remuneration outcomes are modelled under 1 in 7 and 1 in 25 stresses to ensure we build our portfolios having considered their performance under stress

Performance monitoring:

–	Detailed monitoring of risk exposures against agreed limits ensures business is conducted within the planned appetite

–	~~reviewing our~~The Committee receives information on ongoing financial and risk ~~stance compared to that~~performance, market intelligence and regulatory changes

–	The Committee monitors forecast remuneration throughout the year in the context of ~~our competitors in defined areas;~~ business performance and with the assistance of the remuneration frameworks

Remuneration outcomes determined:

–

The Committee makes final judgments based on financial performance (on advice from the Group Finance Director), risk (on advice from the Board Risk Committee which includes a comprehensive analysis of risk embedded in financial statements and how that has changed over the year), industry context (on advice from the Committee’s independent advisor) and regulatory requirements

–

~~retrospective analysis~~

After awards have been made, the Committee has the discretion to reduce the vesting of deferred incentives and long term incentive awards (to nil if appropriate) if, in its sole opinion, the financial health of the Group has significantly deteriorated over the vesting period or, for current incentive plans, there has been a material failure of risk management

The Committee’s work in 2010

The Committee met 11 times in 2010. Outside of its formal meetings, Committee members also had informal discussions, consulted with the Committee’s independent advisor regularly and interacted frequently with management.

In addition to the normal cycle of business, in 2010 the Committee also spent a significant amount of its time on:

–

~~we undertake a retrospective review at least once a year~~Considering practice in light of ~~a selected area of risk;~~

new and emerging regulatory guidelines

–

~~trend analysis – we look once~~Reviewing performance award funding proposals. Given the higher levels of deferral now being implemented, the Committee developed its approach for 2010 to ensure it reviewed proposals both on a ~~year~~“value at ~~underlying risk trends;~~award” basis and

on an accounting charge basis

–	Reviewing the structure of 2010 performance awards and reviewing the new remuneration arrangements that are proposed for executive Directors: the Share Value Plan and the Barclays Long Term Incentive Plan

–

~~technical analysis – we review at least once~~Reviewing the 2010 remuneration decisions for executive Directors, Code Staff and other senior executives. Code Staff are the Group’s employees whose professional activities could have a ~~year one technical area related to~~material impact on the ~~measurement and management~~risk profile of ~~risk.~~

the Group

–	Reviewing the remuneration package for the new Chief Executive

The ~~quality of papers is vital to the work of the~~ Committee ~~with papers typically including:~~

–

~~quantified analysis, including both absolute and relative data;~~

~~– information on returns; and~~

~~– financial parameters, such as performance against budget and capital utilisation.~~

~~The Committee provides a full written report~~reports to the Board after every meeting ~~which I introduce~~ and ~~answer questions about.~~brings specific issues to it. In 2010 Board discussions on remuneration included remuneration strategy for the businesses, compensation ratios and executive Director remuneration, as well as reviewing the Committee’s decisions on performance awards.

Financial background to the Committee’s work

In making its decisions, the Committee considers Barclays financial performance. The Committee also tracks Barclays performance against a defined group of 12 key competitors’ financial performance and compensation ratios throughout the year, both on a Group wide and business basis.

Barclays overall financial performance in 2010 included:

–	Profit before tax of £6,065m (up 32% on 2009)

–	Total income of £31,440m (up 8%) and net income of £25,768m (up 22%)

–	Impairment of £5,672m (down 30%) giving a loan loss rate of 118bps (2009: 156bps)

–	Value of Group 2010 performance awards: £3.4bn, down 7% on 2009

–	Improved returns on average shareholders’ equity of 7.2% (2009: 6.7%)

–	Final dividend of 2.5p per share making 5.5p for the year (an increase of more than 100% over the 2009 dividend of 2.5p)

Key measures of the Group’s financial strength:

–	Core Tier 1 capital ratio of 10.8% (2009: 10.0%) and Tier 1 capital ratio of 13.5% (2009: 13.0%)

–	Group liquidity pool improved by 21% from £127bn in 2009 to £154bn in 2010

Key risk themes:

–	Barclays growth in 2010 was disciplined

–	Barclays impairment performance was favourable to plan

–	Barclays risk profile in 2010 stabilised and improved

–	Adherence to control frameworks has generally been good

At a business level:

–	Global Retail Banking profit before tax of £1,829m (2009: £1,821m)

–	Absa profit before tax of £616m, up 17% (2009: £528m)

–	Barclays Capital profit before tax of £4,780m (2009: £2,464m). Excluding own credit, profit before tax of £4,389m, up 2% (2009: £4,284m)

–	Barclays Corporate loss before tax of £631m (2009: profit of £157m)

–	Barclays Wealth profit before tax of £163m, up 14% (2009: £143m)

Wider background to the ~~beginning~~Committee’s decisions

Our decisions in 2010, as you would expect, are in accordance with regulations that govern financial services remuneration, including the FSA’s Remuneration Code and our commitments to the UK Government made under Project Merlin. Our decisions are also influenced by global regulatory factors including Basel, the European Banking Authority and the Financial Stability Board. Barclays is committed to regulatory compliance in every jurisdiction in which we operate but it has to be noted that uneven international implementation of remuneration regulation, which is now a fact in the UK relative to other jurisdictions, places global organizations such as ours at a competitive disadvantage.


148

The commitments that Barclays made to the UK Government under Project Merlin include commitments on remuneration. These are important and I set out here how we have met those commitments:

–	We committed to showing responsibility in pay in 2010 and beyond. Our decisions for 2010 reflect this, and our robust governance processes will ensure this continues for 2011 and beyond

–	We committed that aggregate UK bonuses for 2010 would be lower than 2009. We have confirmed to the FSA that this was the case

–	We committed to greater shareholder engagement regarding remuneration. We have consulted with our key shareholders and representative bodies during 2010, and we will continue this throughout 2011

–

We committed to disclosing the remuneration of the five highest paid senior executive officers (in addition to the executive Directors). These disclosures are shown on page 160. In addition to our commitment to disclosure through Project Merlin, in accordance with the FSA’s disclosure rules we have also disclosed in aggregate the 2010 remuneration of our Code Staff. This is also shown on page 160

–	The Committee reviewed the remuneration proposals for at least the ten highest paid staff in each of the Group’s principal businesses. In practice we review many more than this in each business

Key Committee decisions in 2010 ~~I handed~~- quantum

The Committee’s work in 2010 included reviewing and (except for Absa) approving the proposed 2010 performance awards for each of the Group’s businesses:

–	Barclays Group - 2010 performance awards down 7% on 2009, with profit before tax up 32%

–	Global Retail Banking – 2010 performance awards up 2% on 2009, which was in line with Global Retail Banking’s profit performance for 2010

–	Absa – 2010 performance awards up 12% on 2009, which was in line with Absa’s profit performance for 2010

–

Barclays Capital - 2010 performance awards down 12% on 2009, despite profit before tax increasing year on year. Performance awards were reduced for 2010 whilst in our view maintaining them at a level within acceptable commercial limits that permitted the business to reward outperformance appropriately

–

Barclays Corporate – 2010 performance awards up 36% on 2009. Performance awards reflected the improvement in profitability of the UK & Ireland business, and the need to maintain a minimum level of performance awards in Continental Europe and investment in senior hires. The Committee will monitor this closely in 2011

–	Barclays Wealth – 2010 performance awards up 11% on 2009, less than the increase in profits

Key Committee decisions in 2010 - structure

–

For executive Directors, 60% of annual performance incentives is deferred (72% for Bob Diamond). For Code Staff, up to 60% of annual performance incentives is deferred. For both executive Directors and Code Staff, 50% of non–deferred incentives for 2010 is delivered in Barclays shares subject to a six month holding period (100% of non–deferred incentives for Bob Diamond). Executive Directors and Code Staff are also subject to minimum Barclays shareholding guidelines. The 60% deferral rate was also applied to the annual performance incentives of a significant number of senior executives beyond those required by the FSA’s Remuneration Code

–

For executive Directors (subject to shareholder approval), Code Staff and senior management, deferred incentive awards for 2010 are made under the Share Value Plan (SVP) in the form of Barclays shares and under the Contingent Capital Plan (CCP) in the form of contingent capital awards. Vesting of contingent capital awards is linked to the Group’s core capital position at the time of vesting. Further details on the SVP and CCP are given in Tables 24 and 25

–

Deferred incentive awards and long term incentive awards include malus and prudent financial control provisions that are in accordance with the FSA’s Remuneration Code that may reduce the vesting level of awards (to nil if appropriate). Malus provisions may apply, for example, if the Committee determines there is evidence of serious employee misconduct or where a business has suffered a material failure of risk management. Prudent financial control provisions may apply if the financial health of the Group has significantly deteriorated over the vesting period

–

Executive Directors and other senior executives will also participate in a new long term incentive plan: the Barclays Long Term Incentive Plan (subject to shareholder approval). Vesting of the proposed 2011 awards is linked to a scorecard of metrics focused closely on the execution of Barclays strategy which gives primacy to return on equity. Further details of the proposed Barclays LTIP and its performance condition are given on pages 153 and 154 and in Table 25

Bob Diamond took over as Chief Executive from 1st January 2011. The Committee decides the ~~Chairmanship~~remuneration arrangements for all executive Directors. The Chief Executive role is benchmarked against other leading global banks and financial services organisations and other companies of a similar size in the FTSE100 index. Bob Diamond’s remuneration for 2010 was unaffected by the changes announced for 2011 and in 2010 he worked under his 2010 contractual and remuneration arrangements. Bob Diamond’s 2010 remuneration was considered carefully by the Committee as part of the annual remuneration review and his remuneration is disclosed, together with the remuneration of the other executive Directors, on pages 153 and 154.

The Committee will actively review remuneration throughout the year and will remain focused on internal and external perspectives, including regulatory developments. Remuneration regulation is expected to evolve further in 2011 and we will maintain a close dialogue with our key external stakeholders and our shareholders throughout 2011.

The Remuneration Report

The following report of the Committee provides further explanation of current remuneration governance and arrangements. It is divided into the following sections:

–	Committee remit, membership, advisors and activities in 2010

–	Remuneration policy, decisions, governance and regulation

–	Employees’ annual remuneration

–	Executive Directors’, non–executive Directors’ and former Directors’ remuneration

–	2010 remuneration of the five highest paid senior executive officers (excluding executive Directors) and aggregate Code Staff remuneration

–	Share plan and long term incentive plan descriptions

As required by Schedule 8 of the Large and Medium–sized Companies and Groups (Accounts and Reports) Regulations 2008, the Group’s auditors, PricewaterhouseCoopers LLP, have audited the information contained in Tables 5, 7, 9, 13, 14 and 17.

The Committee unanimously recommends that you vote at the 2011 AGM to ~~David Booth after four stimulating and challenging years.~~approve the Remuneration Report as all Directors will be doing with their own Barclays shares.

On behalf of the Board

LOGO

~~Sir Richard Broadbent~~Board Committees

We have a Board Corporate Governance and Nominations Committee and a Board 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. The NYSE Rules state that both Committees must be composed entirely of independent Directors. 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 Remuneration Committee. Except for these appointments, both Committees are composed solely of non-executive Directors, whom the Board has determined to be independent. We comply with the NYSE Rules requirement that we 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.

~~9th~~Corporate Governance Guidelines

Code of Ethics

Shareholder Approval of Equity-compensation Plans

LOGO

Marcus Agius

Group Chairman

10th March ~~2010~~2011


				~~143~~	147

Corporate governance

Remuneration report

Statement from the Chairman of the Board ~~Risk~~Remuneration Committee ~~(continued)~~

The purpose of this report is to provide more detail on remuneration in aggregate and for senior management.

The Committee’s approach

The Committee has established frameworks for remuneration in each of the businesses and for the Group as a whole. The frameworks are forward looking and are based on financial metrics to assist with the planning and management of remuneration in each of the key businesses. The frameworks incorporate key financial ratios achieved by Barclays and its competitors and are used by the Committee to inform its decision making process. The Committee considers both relative and absolute performance when formulating its decisions.

The Committee’s remuneration decisions are based on a risk-adjusted view of Barclays financial performance. This is a continuous process, with the risk function deeply embedded into the process. The three key stages of the process for assessing performance on a risk-adjusted basis are as follows:

Upfront risk assessment:

–	Before business is undertaken, detailed stress-testing and scenario analysis is performed to test the viability of plans on a risk-adjusted basis and to determine risk appetite

–	As part of the risk appetite framework, the balance sheet including remuneration outcomes are modelled under 1 in 7 and 1 in 25 stresses to ensure we build our portfolios having considered their performance under stress

Performance monitoring:

–	Detailed monitoring of risk exposures against agreed limits ensures business is conducted within the planned appetite

–	The Committee receives information on ongoing financial and risk performance, market intelligence and regulatory changes

–	The Committee monitors forecast remuneration throughout the year in the context of business performance and with the assistance of the remuneration frameworks

Remuneration outcomes determined:

–

The Committee’s work in 2010

The Committee met ~~five~~11 times in ~~2009~~2010. Outside of its formal meetings, Committee members also had informal discussions, consulted with the Committee’s independent advisor regularly and ~~Figure 9 shows how~~interacted frequently with management.

In addition to the normal cycle of business, in 2010 the Committee ~~allocated~~also spent a significant amount of its time ~~at those meetings. The items covered under each heading in Figure 9 are as follows:~~

~~Risk Profile/Risk Appetite~~

on:

–	Considering practice in light of new and emerging regulatory guidelines

–	~~Reviewed~~Reviewing performance award funding proposals. Given the higher levels of deferral now being implemented, the Committee developed its approach for 2010 to ensure it reviewed proposals both on a “value at award” basis and on an accounting charge basis

–	Reviewing the structure of 2010 performance awards and reviewing the new remuneration arrangements that are proposed for executive Directors: the Share Value Plan and the Barclays Long Term Incentive Plan

–	Reviewing the 2010 remuneration decisions for executive Directors, Code Staff and other senior executives. Code Staff are the Group’s employees whose professional activities could have a material impact on the risk profile of the Group ~~Risk Profile Report (including updates on~~

–	Reviewing the ~~Group’s capital position);~~ remuneration package for the new Chief Executive

The Committee reports to the Board after every meeting and brings specific issues to it. In 2010 Board discussions on remuneration included remuneration strategy for the businesses, compensation ratios and executive Director remuneration, as well as reviewing the Committee’s decisions on performance awards.

Financial background to the Committee’s work

Barclays overall financial performance in 2010 included:

–	Profit before tax of £6,065m (up 32% on 2009)

–	~~reviewed updates~~Total income of £31,440m (up 8%) and net income of £25,768m (up 22%)

–	Impairment of £5,672m (down 30%) giving a loan loss rate of 118bps (2009: 156bps)

–	Value of Group 2010 performance awards: £3.4bn, down 7% on ~~liquidity risk;~~ 2009

–	Improved returns on average shareholders’ equity of 7.2% (2009: 6.7%)

–	Final dividend of 2.5p per share making 5.5p for the year (an increase of more than 100% over the 2009 dividend of 2.5p)

Key measures of the Group’s financial strength:

–	Core Tier 1 capital ratio of 10.8% (2009: 10.0%) and Tier 1 capital ratio of 13.5% (2009: 13.0%)

–	~~reviewed~~Group liquidity pool improved by 21% from £127bn in ~~greater detail the process around setting annual Risk Appetite~~2009 to ~~establish the effectiveness of the process~~£154bn in ~~responding to significant changes in economic and market conditions;~~ 2010

Key risk themes:

–	Barclays growth in 2010 was disciplined

–	~~reviewed the Risk Appetite for the Group for~~Barclays impairment performance was favourable to plan

–	Barclays risk profile in 2010 stabilised and ~~made recommendations~~improved

–	Adherence to ~~the Board; and~~ control frameworks has generally been good

At a business level:

–

~~received regular Future Risk Trends reports, which set out the internal and external indicators that are showing signs~~Global Retail Banking profit before tax of ~~strain and a report on future risk issues.~~

£1,829m (2009: £1,821m)

~~Key Risk Issues~~

–

~~reviewed risk trends in~~Absa profit before tax ~~risk management;~~

of £616m, up 17% (2009: £528m)

–

~~received regular reports on ABS and leveraged~~Barclays Capital profit before tax of £4,780m (2009: £2,464m). Excluding own credit, ~~market exposures; and~~

profit before tax of £4,389m, up 2% (2009: £4,284m)

–

~~reviewed the Group’s stress testing proposals and outcomes.~~

Barclays Corporate loss before tax of £631m (2009: profit of £157m)

~~Internal Control/Risk Policies~~

–

~~reviewed the internal control and assurance framework;~~

Barclays Wealth profit before tax of £163m, up 14% (2009: £143m)

–

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 risk measurement methodologies; and~~

–

~~received updates on 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.~~

~~Regulatory Frameworks~~Wider background to the Committee’s decisions

–

~~reviewed the liquidity risk framework and underlying assumptions;~~

~~Other~~

–

revised its Terms of Reference, including its role in reviewing risks following the Group’s entry into new businesses or geographies; its role in reviewing capital ratios, liquidity risk and its input into remuneration decisions; the increased frequency of risk, capital and liquidity reporting and the setting up of an external advisers panel for the Committee; and

–

~~reviewed its Terms of Reference to satisfy itself that they enable the Committee to fulfil its responsibilities.~~

~~More information on risk management~~Our decisions in 2010, as you would expect, are in accordance with regulations that govern financial services remuneration, including the FSA’s Remuneration Code and our commitments to the UK Government made under Project Merlin. Our decisions are also influenced by global regulatory factors including Basel, the European Banking Authority and the ~~internal control framework can~~Financial Stability Board. Barclays is committed to regulatory compliance in every jurisdiction in which we operate but it has to be ~~found~~noted that uneven international implementation of remuneration regulation, which is now a fact in the ~~Risk management report on pages 54~~UK relative to ~~118.~~

~~Relations with Shareholders~~

~~Communicating with shareholders is~~other jurisdictions, places global organizations such as ours at a key priority for the Board and was particularly important during the continuing financial crisis in 2009. In the normal course of events, the Board aims to keep shareholders up to date and informed about how Barclays is performing and its strategy. During 2009, there was significant additional communication around the sudden fall in the share price in January 2009, the proposed sale of the iShares business and the subsequent sale of BGI, for which we held a General Meeting in August 2009.

~~Institutional shareholders~~

Engagement with our institutional shareholders is essential to ensure a greater understanding of and confidence in the medium and longer-term strategy of Barclays and in the Board’s ability to oversee its implementation.

The Group Chairman and Senior Independent Director are responsible for ensuring the Board is accessible to major shareholders and that channels for communication are open. They are also responsible for ensuring that the Board is aware of any concerns raised by major shareholders and that their views are taken on board. The Group Chairman, Senior Independent Director, Group Chief Executive and Group Finance Director regularly meet with our investors and the executive Directors and senior executives hold group and one to one meetings with major investors. The Group Chairman, Senior Independent Director and Company Secretary also conduct a series of meetings with the corporate governance representatives of our major institutional shareholders ahead of each AGM. The Investor Relations team organise roadshows, seminars, conferences, presentations and other activities that enable the Directors to engage with investors and some of these are highlighted below:

–

~~over 100 meetings with US institutions following the acquisition of the Lehman Brothers North American businesses;~~

–

~~over 200 one-to-one meetings with investors (the Group Chairman and Executive Committee members);~~

–

~~over 40 group meetings with investors; and~~

–

~~nine presentations at conferences.~~

~~In addition, the Investor Relations team also met nearly 150 investors in one to one and group meetings.~~competitive disadvantage.


~~144~~148

~~Corporate governance~~

~~Corporate governance report~~

~~continued~~

The commitments that Barclays made to the UK Government under Project Merlin include commitments on remuneration. These are important and I set out here how we have met those commitments:

–	We committed to showing responsibility in pay in 2010 and beyond. Our decisions for 2010 reflect this, and our robust governance processes will ensure this continues for 2011 and beyond

–	We committed that aggregate UK bonuses for 2010 would be lower than 2009. We have confirmed to the FSA that this was the case

–	We committed to greater shareholder engagement regarding remuneration. We have consulted with our key shareholders and representative bodies during 2010, and we will continue this throughout 2011

–

–	The Committee reviewed the remuneration proposals for at least the ten highest paid staff in each of the Group’s principal businesses. In practice we review many more than this in each business

~~Private shareholders~~Key Committee decisions in 2010 - quantum

~~Communication~~The Committee’s work in 2010 included reviewing and (except for Absa) approving the proposed 2010 performance awards for each of the Group’s businesses:

–	Barclays Group - 2010 performance awards down 7% on 2009, with profit before tax up 32%

–	Global Retail Banking – 2010 performance awards up 2% on 2009, which was in line with Global Retail Banking’s profit performance for 2010

–	Absa – 2010 performance awards up 12% on 2009, which was in line with Absa’s profit performance for 2010

–

–	Barclays Wealth – 2010 performance awards up 11% on 2009, less than the increase in profits

Key Committee decisions in 2010 - structure

–

Bob Diamond took over as Chief Executive from 1st January 2011. The Committee decides the remuneration arrangements for all executive Directors. The Chief Executive role is benchmarked against other leading global banks and financial services organisations and other companies of a similar size in the FTSE100 index. Bob Diamond’s remuneration for 2010 was unaffected by the changes announced for 2011 and in 2010 he worked under his 2010 contractual and remuneration arrangements. Bob Diamond’s 2010 remuneration was considered carefully by the Committee as part of the annual remuneration review and his remuneration is disclosed, together with the remuneration of the other executive Directors, on pages 153 and 154.

The Committee will actively review remuneration throughout the year and will remain focused on internal and external perspectives, including regulatory developments. Remuneration regulation is expected to evolve further in 2011 and we will maintain a close dialogue with our ~~private~~key external stakeholders and our shareholders ~~has also been important during 2009. Personalised information was sent to shareholders for~~throughout 2011.

The Remuneration Report

The following report of the ~~AGM in April~~Committee provides further explanation of current remuneration governance and arrangements. It is divided into the ~~General Meeting in August, which included~~following sections:

–	Committee remit, membership, advisors and activities in 2010

–	Remuneration policy, decisions, governance and regulation

–	Employees’ annual remuneration

–	Executive Directors’, non–executive Directors’ and former Directors’ remuneration

–	2010 remuneration of the five highest paid senior executive officers (excluding executive Directors) and aggregate Code Staff remuneration

–	Share plan and long term incentive plan descriptions

As required by Schedule 8 of the ~~Notice of Meeting, proxy form, Circular~~Large and ~~a question~~Medium–sized Companies and ~~answer booklet about the proposed sale of BGI. Further documents were available on~~Groups (Accounts and Reports) Regulations 2008, the Group’s ~~website~~auditors, PricewaterhouseCoopers LLP, have audited the information contained in Tables 5, 7, 9, 13, 14 and ~~sent to shareholders on request.~~

~~We recommenced paying a dividend in December 2009 and will pay the final dividend for 2009 in March 2010.~~17.

The ~~change in law~~Committee unanimously recommends 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 post the 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.

~~Annual General Meeting/General Meeting~~

~~The 2009 AGM was held on 23rd April 2009~~you vote 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. 53.1% of the shares in issue were voted and all resolutions were approved. All Directors are encouraged to attend the2011 AGM and are available to answer shareholder questions. All Directors attended the 2009 AGM, with the exception of Simon Fraser, who was appointed to the Board on 10th March 2009 and had a prior commitment on the day of the AGM.

~~A general meeting (GM) was held on 6th August 2009, at the Brewery, London, where shareholders were asked~~ to approve ~~a resolution in connection with~~ the proposed sale of the BGI business and ancillary arrangements. 61.6% of the shares in issue were voted on a poll and the resolution was approved. The results of the poll were made available on our website on the same day. The Group Chairman,Remuneration Report as all ~~of the Executive~~ Directors ~~and two non-executive Directors, including the Deputy Chairman, attended the GM.~~

~~The 2010 AGM~~ will be ~~held on Friday 30th April 2010 at the Royal Festival Hall in London. The resolutions will be considered on a poll and the results will be available on our website on 30th April 2010.~~doing with their own Barclays shares.

~~Statement on US Corporate Governance Standards~~

~~The statement required by NYSE is set out below.~~

~~Director independence~~

~~NYSE Rules require the majority~~On behalf 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.

LOGO

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 page 131.

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. The NYSE Rules state that both Committees must be composed entirely of independent Directors. 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~~requirement 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 2009,~~ 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

Code of Ethics

Shareholder ~~approval~~Approval of ~~equity-compensation plans~~Equity-compensation Plans

LOGO

Marcus Agius

Group Chairman

10th March 2011


				~~145~~	147

Corporate governance

Remuneration report

Statement from the Chairman of the Board ~~HR and~~

Remuneration Committee

The purpose of this report is to provide more detail on remuneration in aggregate and for senior management.

~~Context~~The Committee’s approach

The ~~Committee’s goal is~~Committee aims to achieve a balance between delivering market competitive remuneration in order to retain talent, and optimising current and future shareholder returns, including growing the ~~needs of sustaining a competitive business capable of creating future value~~dividend, maintaining capital adequacy and effective risk management.

The Committee has established frameworks for ~~shareholders with the crystallisation of current returns to build capital to finance business growth and to pay dividends to shareholders.~~

~~This is never an easy balance to strike and trading conditions~~remuneration in each of the ~~last two years, exceptional levels of political~~businesses and ~~social interest in remuneration, new fiscal measures~~for the Group as a whole. The frameworks are forward looking and new regulatory requirements that differed in their interpretation in different jurisdictions all complicated our task this year. This has also been a year of significant business growth in investment banking which has materially increased the scope of matters requiring our attention.

During 2009, we have been reviewing our remuneration practices to ensure that they remain appropriate and effective. The context of the review was to ensure that the important principle of pay for performance that underpins our business continues to be implemented in a way that is consistent with and supportive of:

–

~~appropriate management of risk~~

–

~~delivering returns to shareholders~~

–

~~strengthening the balance sheet to support current business activities such as lending to our customers, and future business growth~~

–

~~protecting the business franchise by maintaining our competitiveness in the labour market.~~

~~We have drawn directional conclusions from our work to date which will underpin our decisions about structure and quantum of compensation looking forward. These are:~~

–

~~a significantly greater proportion of incentives will be longer term and more will be deferred in order to contend with greater risk adjustment, industry cyclicality and market volatility~~

–

~~the use of equity for employee remuneration remains central to ensuring alignment of shareholder and employee interests~~

–

~~there will be greater emphasis on the detailed consideration of risk associated with individual performance~~

–

there is a role for greater exercise of discretion to avoid the perverse results that can arise particularly from long-term schemes being tied to over-precise performance projections. Discretion should be exercised within the context of a robust framework of performance and risk data, and be associated with appropriate levels of accountability.

~~How the Committee goes about its business~~

~~A critical element of our approach is a robust governance framework. The Committee approves forward-looking frameworks~~are based on financial metrics to ~~ensure leadership~~assist with the planning and ~~planning~~management of remuneration in each of the key businesses. ~~These~~The frameworks incorporate ~~metrics consistent with delivering the businesses’ business plans;~~key financial ratios achieved by Barclays and its competitors and are ~~assessed against market benchmarks~~used by the Committee to inform its decision making process. The Committee considers both relative and absolute performance when ~~approving aggregate~~formulating its decisions.

The Committee takes a strong analytical approach to remuneration ~~proposals~~that includes comparative financial performance analysis, comparative compensation analysis and tracking trends in compensation ratios (in particular compensation to pre-compensation PBT, and compensation to net revenue). The Committee reviews sensitivity analyses that illustrate the impact of changes in the level of performance awards on the financial and compensation metrics.

Upfront risk assessment:

–	Before business is undertaken, detailed stress-testing and scenario analysis is performed to test the viability of plans on a risk-adjusted basis and to determine risk appetite

–	As part of the risk appetite framework, the balance sheet including remuneration outcomes are modelled under 1 in 7 and 1 in 25 stresses to ensure we build our portfolios having considered their performance under stress

Performance monitoring:

–	Detailed monitoring of risk exposures against agreed limits ensures business is conducted within the planned appetite

–	The Committee receives information on ongoing financial and risk performance, market intelligence and regulatory changes

–	The Committee monitors forecast remuneration throughout the year in the context of business performance and with the assistance of the remuneration frameworks

Remuneration outcomes determined:

–

The Committee’s work in 2010

In addition to the normal cycle of business, in 2010 the Committee also spent a significant amount of its time on:

–	Considering practice in light of new and emerging regulatory guidelines

–	Reviewing performance award funding proposals. Given the higher levels of deferral now being implemented, the Committee developed its approach for 2010 to ensure it reviewed proposals both on a “value at award” basis and on an accounting charge basis

–	Reviewing the structure of 2010 performance awards and reviewing the new remuneration arrangements that are proposed for executive Directors: the Share Value Plan and the Barclays Long Term Incentive Plan

–	Reviewing the 2010 remuneration decisions for executive Directors, Code Staff and other senior executives. Code Staff are the Group’s employees whose professional activities could have a material impact on the risk profile of the Group

–	Reviewing the remuneration package for the new Chief Executive

Financial background to the Committee’s work

~~proposals~~In making its decisions, the Committee considers Barclays financial performance. The Committee also tracks Barclays performance against a defined group of ~~any employee above~~12 key competitors’ financial performance and compensation ratios throughout the year, both on a ~~specified threshold or falling within~~Group wide and business basis.

Barclays overall financial performance in 2010 included:

–	Profit before tax of £6,065m (up 32% on 2009)

–	Total income of £31,440m (up 8%) and net income of £25,768m (up 22%)

–	Impairment of £5,672m (down 30%) giving a loan loss rate of 118bps (2009: 156bps)

–	Value of Group 2010 performance awards: £3.4bn, down 7% on 2009

–	Improved returns on average shareholders’ equity of 7.2% (2009: 6.7%)

–	Final dividend of 2.5p per share making 5.5p for the year (an increase of more than 100% over the 2009 dividend of 2.5p)

Key measures of the ~~scope~~Group’s financial strength:

–	Core Tier 1 capital ratio of 10.8% (2009: 10.0%) and Tier 1 capital ratio of 13.5% (2009: 13.0%)

–	Group liquidity pool improved by 21% from £127bn in 2009 to £154bn in 2010

Key risk themes:

–	Barclays growth in 2010 was disciplined

–	Barclays impairment performance was favourable to plan

–	Barclays risk profile in 2010 stabilised and improved

–	Adherence to control frameworks has generally been good

At a business level:

–	Global Retail Banking profit before tax of £1,829m (2009: £1,821m)

–	Absa profit before tax of £616m, up 17% (2009: £528m)

–	Barclays Capital profit before tax of £4,780m (2009: £2,464m). Excluding own credit, profit before tax of £4,389m, up 2% (2009: £4,284m)

–	Barclays Corporate loss before tax of £631m (2009: profit of £157m)

–	Barclays Wealth profit before tax of £163m, up 14% (2009: £143m)

Wider background to the Committee’s decisions

Our decisions in 2010, as you would expect, are in accordance with regulations that govern financial services remuneration, including the FSA’s Remuneration ~~Code.~~

~~To reflect the Group’s stated goal of focus on returns over growth, the return we generate on risk-weighted assets was added in 2009~~Code and our commitments to the ~~key metrics of financial performance used in these frameworks.~~UK Government made under Project Merlin. Our ~~metrics include compensation as a percentage of pre-compensation PBT and of net revenues. We~~decisions are also ~~monitor absolute compensation per employee.~~

~~The Committee’s decision making is also informed~~influenced by ~~input from~~global regulatory factors including Basel, the ~~Group Finance Director and, more recently, the Chief Risk Officer directly to ensure that the level of risk within the business~~European Banking Authority and the ~~quality~~Financial Stability Board. Barclays is committed to regulatory compliance in every jurisdiction in which we operate but it has to be noted that uneven international implementation of ~~underlying profits have been considered. The Committee has also considered~~remuneration regulation, which is now a fact in the ~~impact on profits from a number of factors including use of Central Bank and government schemes, higher liquidity requirements and the shape of the yield curve.~~

The Committee also reviews the structure as well as the quantum of compensation, with particular attention on levels of deferral, the mix of annual and long-term incentives and the proportion of equityUK relative to ~~cash.~~

~~In reaching its final decisions, the Committee uses its discretion, informed by an assessment of performance and risk within the context of~~other jurisdictions, places global organizations such as ours at a strong, risk-adjusted culture, and underpinned by robust governance processes. Market benchmarking is an important but not the only input in supporting the Committee’s objective to pay the minimum amount consistent with maintaining competitiveness and long-term shareholder value creation.

~~Subsequent to each year, we look back and review the extent to which our decisions met our objectives and seek to learn lessons for the coming year.~~

~~The Committee retains independent advisers to support it in its work.~~

~~2009~~

The performance of Barclays during 2009 is described in detail in the Business Review included in this report. Barclays delivered profit before tax of £11.6bn, 92% up on 2008. In addition, excellent progress was made in the following areas:

–

~~Core Tier 1 ratio increased from 5.6% for 2008 to 10.0% for 2009~~

–

~~the balance sheet reduced by 33%~~

–

~~adjusted gross leverage decreased to 20x compared to 28x in 2008 and the Group liquidity pool increased to £127bn compared to £43bn in 2008~~

–

~~gross new lending to UK households and businesses totalled £35bn during 2009~~

–

~~the payment of dividends resumed with a final dividend of 1.5p per share, giving total declared dividends for 2009 of 2.5p per share.~~

Our decisions on discretionary pay in 2009 properly reflect this performance. The increase in incentive compensation in the investment banking business was materially less than the increase in total income (with the ratio of total compensation to total income falling from 44% in 2008 to 38% in 2009); and the cost to net income ratio was brought down even more sharply.competitive disadvantage.


~~146~~148

~~Corporate governance~~

~~Remuneration report~~

~~continued~~

~~In addition, there was a significant increase in~~

The commitments that Barclays made to the use of deferral, equity and long-term awards, particularly to senior executives. Around 5,000 employees will have a proportion of their remuneration delivered as long-term awards. All discretionary remuneration for members of the Group Executive Committee and all members of Barclays Capital Executive Committee will be delivered over a three-year period and subject to clawback.

Long-term awards take the form of equity or cash, paid over three years. 73% of the long-term awards from the 2009 pay review are in the form of equity. Two new plans have been introduced for the purpose of making long-term awards below the executive Director level, the Share Value Plan and Cash Value Plan.UK Government under Project Merlin include commitments on remuneration. These are ~~described in further detail in the following report.~~

~~We are compliant with the FSA Remuneration Code~~important and ~~the Financial Stability Board Implementation Standards endorsed by the G20 and~~I set out here how we have applied these to the decisions of the 2009 pay review. The overall quantum of remuneration is also consistent with the FSA’s minimum capital requirements. A direct and intended consequence of our 2009 pay decisions has been the further strengthening of our Core Tier 1 capital ratio.

The compensation pool has been managed in such a way that the UK Bank Payroll Tax cost broadly equates to a reduction in the size of the pool, with the reduction being borne by senior executives. The cost to the Group of the UK Bank Payroll Tax in respect of 2009 cash compensation is £190m, and £35m is being provided in respect of certain prior year awards which may fall within the proposed legislation.

~~The following approach has been taken on executive Directors’ remuneration:~~

met those commitments:

–	We committed to showing responsibility in pay in 2010 and beyond. Our decisions for 2010 reflect this, and our robust governance processes will ensure this continues for 2011 and beyond

–	~~appropriate consideration~~We committed that aggregate UK bonuses for 2010 would be lower than 2009. We have confirmed to the FSA that this was ~~given~~the case

–	We committed to ~~non-financial measures as well as risk considerations~~greater shareholder engagement regarding remuneration. We have consulted with our key shareholders and representative bodies during 2010, and we will continue this throughout 2011

–

We committed to disclosing the remuneration of the five highest paid senior executive officers (in addition to the executive Directors). These disclosures are shown on page 160. In addition to our commitment to disclosure through Project Merlin, in accordance with the ~~assessment~~FSA’s disclosure rules we have also disclosed in aggregate the 2010 remuneration of ~~executive Directors’ performance~~

our Code Staff. This is also shown on page 160

–	The Committee reviewed the remuneration proposals for at least the ten highest paid staff in each of the Group’s principal businesses. In practice we review many more than this in each business

Key Committee decisions in 2010 - quantum

The Committee’s work in 2010 included reviewing and (except for Absa) approving the proposed 2010 performance awards for each of the Group’s businesses:

–	Barclays Group - 2010 performance awards down 7% on 2009, with profit before tax up 32%

–	~~zero annual~~Global Retail Banking – 2010 performance ~~bonus~~awards up 2% on 2009, which was in line with Global Retail Banking’s profit performance for 2010

–	Absa – 2010 performance awards up 12% on 2009, which was in line with Absa’s profit performance for 2010

–

Barclays Corporate – 2010 performance awards up 36% on 2009. Performance awards reflected the improvement in profitability of the UK & Ireland business, and the ~~President. This is~~need to maintain a minimum level of performance awards in Continental Europe and investment in senior hires. The Committee will monitor this closely in 2011

–	Barclays Wealth – 2010 performance awards up 11% on 2009, less than the ~~second successive year that they have advised the Board that they wish to decline any annual bonus awards~~ increase in profits

Key Committee decisions in 2010 - structure

–

~~no long-term award~~For executive Directors, 60% of annual performance incentives is deferred (72% for Bob Diamond). For Code Staff, up to 60% of annual performance incentives is deferred. For both executive Directors and Code Staff, 50% of non–deferred incentives for 2010 is delivered in Barclays shares subject to a six month holding period (100% of non–deferred incentives for Bob Diamond). Executive Directors and Code Staff are also subject to minimum Barclays shareholding guidelines. The 60% deferral rate was also applied to the ~~Chief Executive. This is~~annual performance incentives of a significant number of senior executives beyond those required by the ~~second successive year that he has advised the Board that he wishes to decline any long-term award~~

FSA’s Remuneration Code

–

~~current~~For executive Directors ~~who have long-term performance~~(subject to shareholder approval), Code Staff and senior management, deferred incentive awards for 2010 are made under the Share Value Plan (SVP) in the form of Barclays shares ~~due~~and under the Contingent Capital Plan (CCP) in the form of contingent capital awards. Vesting of contingent capital awards is linked to ~~vest~~the Group’s core capital position at the time of vesting. Further details on the SVP and ~~be released~~CCP are given in ~~2010 intend to agree to voluntary clawback arrangements operating over a further two years.~~

Tables 24 and 25

These outcomes for executive Directors were carefully considered and seek to ensure an appropriate share of value between employees and shareholders, with full consideration also being given to the requirements of other stakeholders such as regulators and governments. They follow on from the unequivocal outcomes in respect of 2008: no salary increases or annual performance bonuses, long-term awards 64% lower than 2007 with no awards for the Chief Executive and President, and the vesting of long-term awards to executive Directors due to be released in 2009 being deferred for a further two years subject to additional financial performance over that period.

~~Activities in 2009~~

~~The Committee exercised effective governance in 2009, meeting 14 times to review remuneration practices, frameworks, regulatory developments and market data and advice from external consultants.~~

~~In addition to the wider review of remuneration arrangements, the key activities were as follows:~~

–

~~approval of annual remuneration packages including~~Deferred incentive awards and long term incentive awards include malus and prudent financial control provisions that are in accordance with the FSA’s Remuneration Code that may reduce the vesting level of awards (to nil if appropriate). Malus provisions may apply, for ~~executive~~example, if the Committee determines there is evidence of serious employee misconduct or where a business has suffered a material failure of risk management. Prudent financial control provisions may apply if the financial health of the Group has significantly deteriorated over the vesting period

–

Executive Directors and other senior executives ~~as part~~will also participate in a new long term incentive plan: the Barclays Long Term Incentive Plan (subject to shareholder approval). Vesting of the ~~2009 pay review~~

proposed 2011 awards is linked to a scorecard of metrics focused closely on the execution of Barclays strategy which gives primacy to return on equity. Further details of the proposed Barclays LTIP and its performance condition are given on pages 153 and 154 and in Table 25

–

~~approval of senior executive remuneration packages on appointment, promotion and termination~~

–

~~approval of aggregate incentive funding for each of the major businesses~~

–

~~assessment of performance against relative TSR, cumulative Economic Profit and other financial performance targets to determine the vesting level under performance share and other long-term awards~~

–

~~selection of performance metrics and calibration of targets for long-term awards~~

–

~~preparation, review and approval~~Bob Diamond took over as Chief Executive from 1st January 2011. The Committee decides the remuneration arrangements for all executive Directors. The Chief Executive role is benchmarked against other leading global banks and financial services organisations and other companies of a similar size in the FTSE100 index. Bob Diamond’s remuneration for 2010 was unaffected by the changes announced for 2011 and in 2010 he worked under his 2010 contractual and remuneration arrangements. Bob Diamond’s 2010 remuneration was considered carefully by the Committee as part of the annual remuneration review and his remuneration is disclosed, together with the remuneration of the other executive Directors, on pages 153 and 154.

The Remuneration ~~Report.~~

Report

The following report of the Committee provides further explanation of ~~the~~ current remuneration governance and ~~arrangements for executive Directors and~~arrangements. It is divided into the following sections:

–

Committee remit, ~~members~~membership, advisors and ~~advisers~~

activities in 2010

–

Remuneration policy, decisions, governance and ~~governance~~

regulation

–

~~Executive Directors’~~Employees’ annual remuneration

–

~~Non-executive~~Executive Directors’, non–executive Directors’ and former Directors’ remuneration

–

~~Former Directors’~~2010 remuneration

of the five highest paid senior executive officers (excluding executive Directors) and aggregate Code Staff remuneration

–

Share plan ~~descriptions.~~

and long term incentive plan descriptions

As required by Schedule 8 of the Large and ~~Medium-sized~~Medium–sized Companies and Groups (Accounts and Reports) Regulations 2008, the Group’s auditors, PricewaterhouseCoopers LLP, have audited the information contained in Tables ~~1b, 3,~~ 5, ~~10, 11,~~7, 9, 13, 14 ~~16, 17, 18~~ and ~~19 of the Committee’s report.~~17.

The Committee unanimously recommends that you vote at the ~~2010~~2011 AGM to approve the Remuneration Report as all Directors will be doing with their own Barclays ~~PLC~~ shares.

~~On behalf~~Group Chairman

While I am responsible for the smooth operation of the Board, the Chief Executive is responsible for running our businesses. The table opposite highlights our respective key responsibilities:

~~Sir Richard Broadbent~~Board Attendance

~~Chairman, Board HR and Remuneration Committee~~


	Independent		Scheduled Meetings eligible to attend		Scheduled Meetings attended		Additional Meetings eligible to attended		Additional meetings attended
Group Chairman
Marcus Agius		OA		8		8		3		3
Executive Directors
Robert E Diamond^a		ED		8		8		3		2
Chris Lucas^a		ED		8		8		3		2
John Varley^a (to 31st December 2010)		ED		8		8		3		2
Non-executive Directors
David Booth		I		8		8		3		2
Sir Richard Broadbent		I		8		7		3		3
Alison Carnwath (from 1st August 2010)		I		4		3		2		2
Leigh Clifford (to 30th September 2010)		I		6		4		2		1
Fulvio Conti		I		8		7		3		2
Simon Fraser		I		8		8		3		3
Reuben Jeffery		I		8		8		3		3
Sir Andrew Likierman		I		8		8		3		3
Dambisa Moyo (from 1st May 2010)		I		5		5		2		1
Sir Michael Rake		I		8		8		3		3
Sir John Sunderland		I		8		8		3		3

Secretary
Lawrence Dickinson

Key

~~9th March 2010~~

OA on appointment

ED executive Director

I independent non-executive Director

Note

a Although eligible to attend, the executive Directors did not attend the additional meeting held to consider and approve the appointment of a new Chief Executive.

~~147~~

~~Board HR and Remuneration Committee remit and membership~~

The Committee provides governance and strategic oversight of executive and all other employee remuneration, Barclays Human Resources activities and senior management development. The Committee’s terms of reference are available in the Corporate Governance section of the website~~http://www.aboutbarclays.com.~~ The terms of reference were revised in February 2010 in the light of best practice and to take account of regulatory and corporate governance developments. The Committee met formally 14 times during 2009. The Chairman of the Committee presented a report to the full Board on each meeting. A report on the Committee’s activities is set out on page 161 as part of the Corporate Governance Report.

The members of the Committee are Sir Richard Broadbent (Committee Chairman), Marcus Agius (Group Chairman), Leigh Clifford, Sir John Sunderland and Simon Fraser who was appointed to the Committee with effect from 1st May 2009.

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. Marcus Agius, the Group Chairman, is also a member and he was considered independent on appointment to the Board.

~~Advisers~~

The Committee’s work is supported by independent professional advice. The Committee reviews the appointment of advisers each year. Towers Perrin MGMC (now Towers Watson) were re-appointed by the Committee in 2009.

~~Any potential conflicts of interest the advisers may have are disclosed to the Committee. In addition to advising the Committee, Towers Watson provided remuneration benchmarking data to the Group.~~

The Group Chief Executive, the Human Resources Director, the Compensation and Benefits Director and, as necessary, members of the Executive Committee, also advise the Committee, supported by their teams. No Group employee is permitted to participate in discussions or decisions of the Committee relating to his or her own remuneration.

~~Executive Directors’ remuneration – alignment of interests with shareholders~~

Figure 1 shows the aggregate total direct remuneration of the current executive Directors for 2007, 2008 and 2009 compared to the indicative fair value movements on the current executive Directors’ aggregate share-based remuneration and beneficial interests in Barclays PLC shares from 1st January 2007 on a cumulative basis. The performance of Barclays share price is shown for context. The chart shows that the current executive Directors’ interests have decreased in value by £62m over 2007, 2008 and 2009 as a consequence of the movement in Barclays share price.

~~Remuneration Policy~~

~~The aims of the Barclays Remuneration Policy are 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.~~

~~Total Shareholder Return~~

Figure 2 shows the value, at 31st December 2009, of £100 invested in Barclays on 31st December 2004 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 2009, a hypothetical £100 invested in Barclays on 31st December 2004 would have generated a total loss of £40 compared with a gain of £35 if invested in the FTSE 100 Index.


~~148~~

~~Corporate governance~~

~~Remuneration report~~

~~continued~~

~~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.~~

~~v) 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.~~

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.

~~Remuneration decisions~~

~~Our Remuneration Policy provides a framework for the Committee in carrying out its work including remuneration decisions in relation to executive Directors.~~

One of the core elements of Barclays approach is to deliver compensation that is affordable and appropriate in terms of value allocated to shareholders and employees, with full consideration also being given to other relevant stakeholders such as customers, regulators and governments. When making compensation decisions, Barclays balances the views of these stakeholders with the need to be able to attract, retain and incentivise talent in a competitive market.

A particular focus during 2009 has been to ensure that our approach to discretionary pay awards for 2009 is compliant with both the Financial Services Authority Remuneration Code and the Financial Stability Board Implementation Standards, and that aggregate funding decisions balance a number of factors including the need to continue to strengthen capital ratios, to invest in the business, to recommence dividend payments and to protect the business franchise.

We are committed to the principle of pay for performance. A key element of ensuring the link between pay and performance on an individual basis is the robust performance assessment framework operated across the Group. Employee behaviours are considered in the context of the Guiding Principles set out above which are incorporated into our Remuneration Policy. The extent to which employee behaviour accords with these standards is assessed as part of the performance assessment framework, which includes an examination of the employee’s performance from both a financial and non-financial perspective. Performance against these areas helps to reinforce the right behaviours and so mitigate operational and reputational risks. The resulting performance ratings have a direct impact on all individual compensation decisions.

At an aggregate level, in order to ensure that a link is maintained between pay and performance, incentive funding decisions are made by reference to a number of quantitative and qualitative measures and are determined at the discretion of the Committee. During 2009, the role of Risk and other control functions in remuneration governance was enhanced and the process for setting the remuneration of control functions was formalised.

The exercise of informed discretion plays an important role in the assessment of performance in the context of all our remuneration decisions, rather than using a formulaic approach which could incentivise inappropriate behaviours.

Pay and employment conditions elsewhere in the Group are taken into account by the Committee in determining the remuneration packages for executive Directors. The general approach is the same across the Group, namely decisions are made on a total compensation basis (base salary, bonus and long-term awards) against the relevant market. We seek to provide market competitive retirement and other benefits and eligible employees have the opportunity to participate in share plans.

~~Remuneration Policy governance~~

To ensure appropriate operation of the Remuneration Policy, the Committee has established frameworks for the governance of remuneration in each of the major businesses and for the Group as a whole. These frameworks were 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. Going forward, compensation of employees within the scope of the FSA Remuneration Code’s particular remuneration structure requirements will also be individually approved by the Committee. The reporting of senior hires and leavers to the Committee has also been enhanced.

For individual remuneration decisions made by the Committee, including those for executive Directors and other key senior management, 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 a 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. In the second half of 2009, Barclays announced the closure of its UK final salary pension schemes to future accrual in order to reduce current and future UK pension liability risk and to ensure that our pension arrangements are sustainable and affordable over the long term. Details of the pension arrangements in place for executive Directors are set out on page 153 and for other employees on page210.


				~~149~~

~~Executive Directors’ remuneration~~

~~Table 1a explains the purpose of each element of remuneration and Table 1b shows executive Directors’ remuneration in respect of 2009 and 2008.~~

~~Base salaries~~

~~Table 2 shows the annual base salaries for the current executive Directors.~~

Table 2: Base salary
Base salary at
31st December 2009
£000 Base salary at
1st April 2010
£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
650 800 1st April 2008

~~Robert E Diamond Jr has, since 1st January 2009, received his base salary in US dollars converted from sterling into US dollars using an average sterling/US dollar exchange rate for 2008 of 1.86.~~

In respect of Chris Lucas, having regard to the levels of salary and total compensation in comparable organisations, the Committee approved the increase to base salary set out above, effective from 1st April 2010.

~~Annual cash bonus and deferred share awards~~

The maximum bonus opportunity for executive Directors is tailored to the relevant market; this is typically 250% of base salary. The annual bonus award is made by reference to a qualitative and quantitative assessment of performance with the latter assessment comprising the majority. For 2009, more emphasis was placed on non-financial measures as well as risk considerations.

ESAS is a deferred share award plan operated in conjunction with various Group bonus plans for executive Directors and certain other employees, subject to trustee discretion. For 2009, the use of ESAS was significantly scaled back as the new Share Value Plan and Cash Value Plan are being operated for deferrals across the Group. The future use of ESAS is under review. Further detail of these plans is included on pages 158 to 160.

The Board, through the Committee, formed the view that annual bonus awards for John Varley and Robert E Diamond Jr were merited based on both Group and personal performance. However, out of consideration of the continued impact of the economic downturn on many clients, customers and shareholders, combined with the fact that banks and bankers’ pay remain matters of intense public interest and concern, both advised the Board that they wish to decline any such awards for the second successive year.

~~For Chris Lucas, a recommendation will be made to the ESAS trustee that~~


~~Table 1a: Executive Directors’ annual remuneration~~
~~Element~~	~~Purpose~~	~~Delivery~~	~~Programme summary~~	~~When normally received/~~ ~~awarded~~

~~Base 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~~	~~– A proportion of annual performance bonus paid in cash~~ ~~– Non-pensionable~~	~~– Based on annual performance of the Group as a whole, business unit performance where relevant and individual performance~~	~~Normally paid in the following financial year~~

~~Total cash~~	~~Sub-total of the above~~134


~~Deferred share award (ESAS)~~	~~To align annual performance with shareholder value and increase retention~~	~~– A proportion of annual performance bonus recommended as a deferred share award under ESAS~~ ~~– Non-pensionable~~	~~– Discretionary award 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 award 2010-2012 (PSP)~~	~~To reward the creation of sustained growth in shareholder value~~	~~– Award of shares that vests 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~~ ~~– Dividends normally accumulated during deferral period~~	~~Normally awarded in the following financial year~~

~~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 Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008~~	~~Total of base salary, annual performance bonus (cash), pension cash allowance and other benefits~~


~~150~~

~~Corporate governance~~

~~Remuneration report~~

~~continued~~

~~100% of his annual bonus~~Senior Independent Director and Deputy Chairman

Sir Richard Broadbent is ~~delivered~~our Senior Independent Director and Deputy Chairman. As Senior Independent Director, Sir Richard’s role includes maintaining contact with large shareholders to understand their issues and concerns, as well as making himself available to individual shareholders, if necessary, where they have concerns they cannot resolve elsewhere. Sir Richard also acts as a ~~share award under ESAS which~~sounding board for me and is ~~deferred over a three-~~available to ~~five-year period. The ESAS amounts shown in Table 1b show~~ the ~~basic allocations, but do not include bonus shares. Including~~other non-executive Directors, if needed. He led the ~~maximum potential 30% bonus shares, the award in respect~~Board’s evaluation of ~~2009 will have an initial value of £1,950,000~~my performance for ~~Mr Lucas. Typically, 20% bonus shares become releasable after three years,~~2010, meeting with the ~~full 30% bonus shares only normally releasable five years~~non-executive Directors in January 2011 to review and discuss my performance for the year. As Deputy Chairman, Sir Richard’s key area of focus is to act as an ambassador for Barclays. He also assists me in managing the business of the Board and ensuring it operates effectively in driving forward the Group’s strategic objectives. In order to fulfil these roles and his Board Committee commitments, Sir Richard is required to commit over 50 days per annum, although in practice spends significantly more time on his Barclays duties.

Company Secretary

The Company Secretary, Lawrence Dickinson, supports me and the Board Committee Chairmen in all stages of managing our meetings, from setting the ~~date of award. Following consultation with the Committee~~annual meeting agenda through to ensuring that agreed actions are completed. Lawrence also assists me in ensuring that there are timely and ~~mindful of evolving best practice~~appropriate information flows within and ~~regulatory developments, Mr Lucas intends to write~~ to the ~~ESAS trustee~~Board, the Board Committees and between the non-executive Directors and senior management. He provides support to me in ~~respect of any awards made~~designing and facilitating induction programmes for new non-executive Directors and in ~~2010.~~putting together the development programme for Directors. He proposes that, in its absolute discretion, the trustee may take into account personal misconduct and/or any material misstatement of the 2009 financial results when considering whether to release any shares under these awards to him at the scheduled release dates.

~~PSP awards due to vest in 2010~~

For the PSP awards made in relation to the 2007-2009 cycle, the TSR condition was not met and the EP condition was met. As a result, awards that are scheduled to vest in March 2010 (at the absolute discretion of the PSP trustee) are due to vest at 1.5 times the initial award (maximum is ~~3 times). This represents a reduction in value of approximately 75% of the maximum value of the number of shares that could vest at the share price at award.~~

also our principal corporate governance adviser.

After consultation with the Committee, the current executive Directors intend to write to the Committee agreeing voluntary clawback arrangements to operate for a two-year period following vesting of their awards. By this voluntary agreement, the executive Directors will repay the value of the shares at the end of the two-year period (after deduction of taxes paid) should a performance condition, to be agreed(2) Effectiveness

Board Size, Composition and ~~assessed by the Committee, not be met.~~

~~Proposed awards in 2010~~Qualification

~~It is proposed that Bob Diamond and Chris Lucas are awarded a performance share plan award in 2010 which will be based upon performance over the three-year period 2010 to 2012.~~

The Board ~~through the Committee, formed the view that a performance share plan award for John Varley was merited, based on both~~is currently comprised of 13 members: Group Chairman, two executive Directors and ~~personal performance. However, John Varley advised~~ten independent non-executive Directors. The balance of the Board is illustrated below. Board size has reduced from a peak of 18 Directors in 2007. We believe that ~~he wishes~~the optimum Board size for Barclays is 12-15 members, which provides for the broad range of skills and experience required to ~~decline~~effectively govern a global banking business, while being small enough to enable constructive group discussion and opportunity for full participation by all Directors. It also enables us to ensure that the principal Board Committees are appropriately resourced without placing an undue burden on any ~~such award.~~individual non-executive Director.

~~The number of shares awarded to date and the performance conditions relating to each award are set out below.~~

~~The PSP awards are shown in Table 1b at the fair value of the recommended awards.~~

Table 1b: Executive Directors’ annual remuneration    John Varley    Robert E Diamond Jr    Chris Lucas

2009
£000

2008
£000

2009
£000

2008
£000
   2009
£000    2008
£000
Base salary
   1,100    1,075    250    250    650    638
Annual performance bonus (cash)
   0    0    0    0    0    0
Total cash
   1,100    1,075    250    250    650    638
Deferred share award

(ESAS)
   0    0    0    0    1,500    0
Long term incentive award 2010-2012 (PSP)
   0    0    6,000    0    1,000    800
Pension (or cash allowance)    Member of
pension
scheme
See page 153    Member of
pension
scheme
See page 153    Member of
pension
scheme
See page 153    Member of
pension
scheme
See page 153    163    159
Other benefits
   23    23    134    66    19    18
Sub-total in accordance with Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008
   1,123    1,098    384    316    832    815


				~~151~~

~~Share plans~~

Barclays operates a number of share plans to align the interests of employees with shareholders. The following tables summarise the interests of each current executive Director in each plan and the relevant three-year performance conditions for outstanding PSP cycles. The interests shown LOGO

~~are the maximum number of shares that may be received under each plan. Executive Directors do not pay for any share plan award.~~Key responsibilities

~~Summary descriptions of principal share plans operated by Barclays are shown on pages 158 to 161.~~

~~For PSP, at the end of each performance period, independent~~

Table 3: Long-term plans and deferred share plans
      Number of
shares under
award/option at
1st January 2009
(maximum)    Awarded in
year (maximum)    Market
price on
award date    Weighted
average
exercise price    Number
released/
exercised
John Varley

PSP 2006-2008
   473,604    –    £ 6.75    –    –
PSP 2007-2009
   504,294    –    £ 7.08    –    –
PSP 2008-2010
   812,412    –    £ 4.25    –    –
ISOP
   944,655    –    –    £ 4.29    –
Sharesave
   3,735    –    –    £ 4.70    –
ESAS
   469,467    –    –    –    (38,498 )
Robert E. Diamond Jr

PSP 2006-2008
   2,368,014    –    £ 6.75    –    –
PSP 2007-2009
   2,878,686    –    £ 7.08    –    –
PSP 2008-2010
   2,031,030    –    £ 4.25    –    –
ISOP
   575,008    –    –    £ 4.42    –
BGI EOP
   100,000    –    –    £ 20.11    (100,000 )
ESAS
   7,048,112    –    –    –    (3,682,230 )
Chris Lucas

PSP 2007-2009
   255,396    –    £ 7.08    –    –
PSP 2008-2010
   541,608    –    £ 4.25    –    –
PSP 2009-2011
   –    1,598,046    £ 2.34    –    –
Sharesave
   3,735    –    –    £ 4.70    –
ESAS
   79,477    –    –    –    (35,471 )

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 2009. 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. At the fifth anniversary of the provisional allocation the nil cost options normally lapse and the shares (including bonus shares) are released at the discretion of the ESAS trustee (further detail

is included on page 158). In 2009, nil cost options were granted to Mr Varley over 100,924 shares. Nil cost options (granted in 2007) lapsed during the year. Mr Varley held 146,282 nil cost options under ESAS as at 1st January 2009, and 206,934 as at 31st December 2009. The first and last exercise dates were 12th March 2008 and 21st March 2011 respectively. Mr Varley received 9,674 dividend shares and Mr Diamond and Mr Lucas received 578,308 and 6,211 dividend shares respectively from the ESAS released during the year (share price on release date was £2.10).


Group Chairman	Chief Executive

~~Table 4: Performance conditions attaching~~ Lead the Board and manage the business of the Board through setting its agenda and taking full account of the issues and concerns of Board members	Lead the development of short, medium and long term business strategy for approval by the Board and oversee successful delivery of the Group strategy

Ensure that Board members receive accurate, timely and clear information, in particular about the Group’s performance, to enable the ~~share plans in which~~Board to take sound decisions, monitor effectively and provide advice to promote the success of the Company	Lead the executive Directors ~~participate~~and Group Executive Committee in making and implementing operational decisions and running the Group’s business on a day to day basis
~~Scheme~~
Keep under review, with the Board, the general progress and long-term development of the Group	Ensure the Board is provided with accurate, concise and timely information

Ensure effective communication with shareholders and ensure that members of the Board develop and maintain an understanding of the views of major investors and other key stakeholders	Chair the Group Executive Committee

Chair the Board Corporate Governance and Nominations Committee	~~Performance~~Assist the Board Corporate Governance and Nominations Committee in executive succession planning ~~period~~	~~Performance measure~~	~~Target~~
~~PSP~~	~~2009 -2011~~	~~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% average RoRWA~~	~~17% of maximum award released for 0.83% scaled to a maximum award at 1.34%~~

~~2008-2010~~Establish a close relationship with the Chief Executive, providing support and advice while respecting his executive responsibilities	~~50% of award calibrated against TSR~~	~~As above~~
		~~50% of award calibrated against Cumulative EP over~~ Establish a close relationship with 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~~Group Chairman, providing support hile respecting his governance responsibilities


~~152~~

~~Corporate governance~~

~~Remuneration report~~

~~continued~~

~~confirmation is provided to the Committee of the extent to which each performance condition has been met.~~

~~Relative Total Shareholder Return (TSR) and Return on Risk-Weighted Assets (RoRWA) were selected in 2009 as performance measures to support the Group’s long-term goals.~~

~~All awards and releases are recommended by the Committee to the independent trustee and are subject to trustee discretion.~~

~~The trustee may also release to participants dividend shares which represent accumulated dividends (net of withholding) in respect of shares under award.~~

~~During 2009 Barclays highest share price was £3.84 and the lowest was £0.51. The share price at year end was £2.76.~~

Market price
on release/
exercise date
   Number lapsed
in 2009    Number of
shares under
award/option at
31st December
2009 (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
–    (240,749)    232,855    –    –    31/12/08    30/03/11
–    –    504,294    –    –    31/12/09    22/03/10
–    –    812,412    –    –    31/12/10    20/03/11
–    –    944,655    944,655    –    18/05/03    22/03/14
–    –    3,735    –    –    01/11/14    30/04/15
£2.08    –    430,969    –    £0.08m    12/03/08    20/03/13
–    (1,203,741)    1,164,273    –    –    31/12/08    30/03/11
–    –    2,878,686    –    –    31/12/09    22/03/10
–    –    2,031,030    –    –    31/12/10    20/03/11
–    –    575,008    575,008    –    12/03/04    22/03/14
£109.45    –    –    –    £8.93m    26/03/07    15/12/09
£2.08    –    3,365,882    –    £7.67m    07/03/10    20/03/13
–    –    255,396    –    –    31/12/09    22/03/10
–    –    541,608    –    –    31/12/10    20/03/11
–    –    1,598,046    –    –    31/12/11    27/04/12
–    –    3,735    –    –    01/11/14    30/04/15
£2.08    –    44,006    –    £0.07m    20/03/11    20/03/13

Following completion of the sale of BGI on 1st December 2009, the BGI EOP was terminated In accordance with the rules of the plan. As part of the EOP termination and in line with other participants, Robert E Diamond Jr exercised his EOP options and sold his BGI Holdings shares to Barclays Bank PLC. Robert E Diamond Jr’s EOP options were granted before he was appointed to the Board of Barclays.

In relation to the 2006-2008 PSP awards, after consultation with the Committee, the executive Directors wrote to the PSP trustee to request that it defer the exercise of its discretion to release shares to them until 2011 (subject to continued employment and further financial performance conditions relating to the underlying financial health of the Group). The maximum number of shares that may be released in 2011 was determined in 2009 and is fixed as set out in the table above. There will be no opportunity to receive shares in excess of this number (except for any dividend shares that may be awarded by the PSP trustee).


~~TSR peer group constituents~~
UK	~~Mainland Europe~~	US		~~Underpin~~	~~Actual~~ ~~performance~~
~~HSBC, Lloyds Banking Group, Royal Bank of Scotland~~	~~Banco Santander, BBVA, BNP Paribas, Deutsche Bank, UBS, Unicredit~~	~~Citigroup,~~ ~~JP Morgan Chase~~		~~Committee must be satisfied with the underlying financial health of the Group after considering Economic Profit (EP) and Profit Before Tax (PBT) on a cumulative basis over the three-year period~~	~~To be determined at vesting in~~ ~~March 2012~~

			135

Corporate governance

Corporate governance report continued

Director Independence

The Board considers non-executive Director independence on an annual basis, as part of each Director’s performance evaluation. The Board Corporate Governance and Nominations Committee and the Board reviewed the independence of each non-executive Director in early 2011 and concluded that each of them continues to demonstrate those behaviours that the Board considers to be essential indicators of independence and which are set out in our ‘Charter of Expectations’. These criteria are:

–	provides objective and constructive challenge to Management:

–	is prepared to challenge others’ assumptions, beliefs or viewpoints as necessary for the good of the organisation;

–	questions intelligently, debates constructively, challenges rigorously and decides dispassionately;

–	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 evaluate the information and responses provided by Management.

Director Re-election

In accordance with the new UK Corporate Governance Code, the Board has agreed that all Directors will submit themselves for re-election at the Company’s Annual General Meeting (AGM) to be held on 27th April 2011. Biographical details of each of the Directors may be found on pages 120 to 122.

Succession Planning and Board Appointments

The Board Corporate Governance and Nominations Committee is responsible for both executive and non-executive Director succession planning and recommends new appointments to the Board. More detail on the role of the Board Corporate Governance and Nominations Committee is given on pages 139 and 140. When making Board appointments, we seek to ensure that we have a diverse range of skills, background and experience, including industry and geographical experience. We also consider length of tenure: we recognise that continued tenure brings Company specific knowledge and understanding while new faces bring fresh ideas and perspective. The length of tenure of the current non-executive Directors and their geographical experience and industry background is illustrated below. We are comfortable that our Board includes sufficient diversity to optimise its performance.

Non-executive Director Terms of Appointment

Non-executive Directors each have a letter of appointment that sets out the terms and conditions of their directorship, including the fees payable and the expected time commitment. Non-executive Director time commitment is set at a minimum of 20 days per annum, with additional time commitment required to fulfil their roles as Board Committee members and/or Board Committee chairmen, as applicable. The average time commitment of non-executive Directors is in the range of 30-36 days per annum. Details of non-executive Directors’ remuneration can be found in the Remuneration Report on page 147. In order to ensure alignment between non-executive Directors’ interests and those of our shareholders, the first £20,000 of their basic fee is invested in Barclays shares, which are held on their behalf until such time as they leave the Board.

Our Charter of Expectations sets out the expectations that the Board of Barclays demands of its Directors. This includes a detailed role profile and key performance indicators for each of the key positions on the Board.

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Note

a	Individual Directors may fall into one or more categories.

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136
~~HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland~~		~~As above~~

Directors' Conflicts of Interest

Directors have a duty under UK company law to avoid situations in which they have or may have interests that conflict with those of the Company, unless that conflict is first authorised by the Directors. Our articles of association allow the Board to authorise such potential conflicts, taking into account all the circumstances. This includes potential conflicts that may arise when a Director takes up a position with another company. Where Directors wish to take up an external appointment, they are under an obligation to obtain authorisation before doing so. Each appointment is considered by the Board on its individual merits, taking into account the expected time commitment and any relationships with Barclays. Directors must also notify the Board if circumstances regarding external appointments change and I make myself available to all non-executive Directors should they wish to discuss any possible, actual or perceived conflicts.

Reuben Jeffery's appointment in 2010 as Chief Executive Officer of Rockefeller & Co., Inc., a privately-owned US investment and wealth management firm, was considered by the Board during the year. I discussed the potential conflict with Tom Kalaris, Chief Executive of Barclays Wealth, as well as John Varley, Bob Diamond and other key senior executives before the matter was discussed by the Board. Professional advice was also sought on the extent of the potential conflict. The Board is happy that the Barclays Wealth business overlap with Rockefeller & Co., Inc. is extremely small in a Group context and that, as a result, the likelihood of a conflict of interest arising in practice is remote. We have agreed, however, that if there is a potential conflict, Reuben Jeffery will excuse himself from specific Board discussions.

All potential conflicts approved by the Board are recorded in a Conflicts Register, which the Board Corporate Governance and Nominations Committee reviews annually to confirm that any potential conflicts have been dealt with appropriately. Having reviewed the Conflicts Register in early 2011, it was concluded that potential conflicts have been considered appropriately and that the authorisation process is operating effectively.

The decision to undertake external activities is a matter for individual Directors to decide, bearing in mind their responsibilities to Barclays, including the time commitment we expect of them. We believe that Directors' external appointments benefit Barclays by providing them with a wider range of skills, experience and knowledge that will be relevant to their role at Barclays, although executive Directors may take up only one FTSE 100 non-executive directorship. Where an executive Director takes up such an appointment they may retain any fees they receive. Details of any such fees received by executive Directors can be found in the Remuneration Report on page 147.

Board Induction and Professional Development

On joining Barclays all non-executive Directors are provided with a bespoke induction programme, which includes sessions with each of the executive Directors, members of the Group Executive Committee and meetings with the senior executives responsible for each of Barclays business areas and central functions: these sessions focus on the challenges, opportunities and risks that are faced by each business. Meetings are also held with the Group's lead auditor. An outline of the Board induction programme is set out below:

	~~As above~~	~~Cumulative EP over performance period must exceed cumulative EP over previous three years~~
~~To be determined at vesting in~~ ~~March 2011~~ Board Induction Programme
Group Overview – Duties and Responsibilities of Directors' of authorised institutions – Group Overview – CEO Introduction – Group Finance Director Introduction

Review of Businesses – Corporate and Investment Banking and Wealth Management – Global Retail Banking

In depth Review of Businesses – Absa – Barclaycard – Barclays Africa – Barclays Capital – Barclays Corporate – Barclays Wealth – UK Retail Banking – Western Europe Retail Banking

Group Functions – Compliance – Group Legal – Group Strategy – Human Resources – Internal Audit – Investor Relations – Risk

Other – Brand & Marketing – External Audit


					137

Corporate governance

Corporate governance report continued

We also provide non-executive Directors with a personalised induction when they join a Board Committee. Board Committee induction programmes typically involve meeting with our Company Secretary for an overview of the Board Committee’s responsibilities and activities before meeting with key executives who present to the Board Committee, as well as with the Board Committee Chairman. An outline of the induction programme for new members of the Board Risk Committee is provided below by way of an example.

We believe that induction and professional development are critical to ensure that Directors can perform effectively and seek to make sure that all Directors have appropriate knowledge of the Company and access to its operations and staff. Accordingly, we arrange regular briefings for existing non-executive Directors on matters affecting Barclays and they also have the opportunity to attend management conferences held by our businesses. During 2010, the non-executive Directors attended briefing sessions on:

– Treating Customers Fairly

– Barclays Capital

– Derivatives

– Risk based pricing

The briefing sessions, which were interactive, were led by executives from the relevant business units, using material that was circulated in advance.

Directors were asked for feedback at the end of their induction programmes and following each briefing session. Additionally, the Board Corporate Governance and Nominations Committee undertakes an annual review of the induction and development programmes to ensure that they are appropriate and fit for purpose. The feedback gathered is used to improve the structure and content of non-executive Director induction programmes and to tailor the development programme for the year ahead. I discuss with each non-executive Director any specific development requirements as part of the annual Board Effectiveness Review.

Board Activity

As I mentioned above, our agenda in 2010 was driven largely by the impact of potential changes in the regulatory environment, which is expected to remain uncertain until the Independent Commission on Banking produces its report. During the year, as part of our overall review of Group strategy,

Board Risk Committee Induction

– Capital and Liquidity

– Economic Capital and Stress Testing

– External Audit

– Market Risk

– Operational Risk

– Retail Credit Risk

– Tax Risk

– Wholesale Credit Risk

we had a number of discussions on the strategic challenges and opportunities presented by regulatory developments and the potential impact for our business model, culminating in a review of the Group’s business portfolio at our strategy away-day in November. The purpose of this review was to assess which businesses are either producing returns on equity above the cost of capital in the new regulatory environment, or are capable of producing such returns in the future.

We received updates in 2010 from the majority of our principal businesses on the execution of their business strategy, including an update on the overall strategy for the GRB businesses following the restructuring in late 2009. The Chief Executives of the businesses attended Board meetings to present to the Board. One of our meetings in 2010 was held in Doha, where we received an update on our business operations in the Middle East. We also received updates on Brand & Marketing strategy, Investor Relations strategy, Sustainability and Franchise Health (covering customer and employee satisfaction measures). It is important that we understand the views of our investors and in 2010 we held a specific discussion on analysts’ views of our current and future performance and our current market valuation. We continued to receive regular updates on capital and liquidity during the year. The Chief Risk Officer reported to each meeting in 2010 and we also considered and approved Risk Appetite for 2011. We also considered the Group’s Individual Liquidity Adequacy Assessment, which is required by the FSA.

Information flows to the Board were timely and appropriate and we made some enhancements to the format of regular reports in 2010 to present more granular information on individual business performance.

The chart below illustrates how the Board allocated its time during 2010.

Evaluation of Board Performance

Each year the Board undertakes an effectiveness review to assess its performance as a Board. Our Board Effectiveness Review is a genuine, formal, rigorous process that has been externally facilitated since 2004. The Board Corporate Governance and Nominations Committee is responsible for overseeing the process and annually benchmarks our approach against the practices of other companies in the FTSE 20 to ensure that we remain at the forefront of best practice. My evaluation statement for 2010 is set out on pages 138 and 139.

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138


~~As above~~ Evaluation Statement
Before I describe the 2010 evaluation process and its general outcomes, I provide below a summary of the Board’s progress against its 2009 action plan:
Key themes	~~As above~~ Actions

~~As above~~	~~As above~~ Board size and diversity	~~Performance~~The Board has reduced in size and is more diverse. ~~condition~~

Holding additional Board meetings overseas, particularly given the increased size of our US operations ~~partially met~~	The Board held one meeting overseas in 2010 and plans to hold two meetings overseas in 2011.

Increasing visibility of senior executives below Board and Group Executive Committee level	Directors have had more opportunities to interact with senior executives below Board level via briefing sessions, attendance at management conferences and post-Board meeting lunches. The remit of the Board Corporate Governance and Nominations Committee is being extended to cover succession planning at business unit level.

Improving the format of strategy presentations to the Board	The form and content of strategy presentations has been revised to include enhanced financial and risk information. In addition to the regular monthly management accounts, the Board receives more detailed financial information on a quarterly basis.

For the 2010 evaluation process, the Board Corporate Governance and Nominations Committee decided again that it was appropriate for the evaluation to be independently facilitated, given the significant strategic issues under consideration and the pending appointment of a new Chief Executive. Having reviewed the facilitators available in the market, Egon Zehnder International was re-engaged to facilitate the 2010 Board Effectiveness Review. Although we will continue to monitor the market, the Board is comfortable that Egon Zehnder International provides an impartial and objective service irrespective of its position as one of Barclays executive search consultants. The 2010 evaluation process again took the form of questionnaires completed by Directors and key executives, followed by structured interviews with representatives from Egon Zehnder International. We feel that the interviews, which provide colour and context to questionnaire responses, are an essential part of the process. All participants were asked to complete the Board evaluation questionnaire, with separate Board Committee questionnaires completed by Board Committee members. The Board evaluation questionnaire covered the following areas: – Group Performance; – Strategy and performance of objectives, including involvement of the non-executive Directors; – Reporting to shareholders and stakeholders; – Structure, people and succession planning; – Decision making processes, including the culture for effective challenge; – Information flows and presentations; – Board structure and composition, including the experience and knowledge of non-executive Directors; – Board roles and responsibilities; – Board and Management relationships, including the relationship between the Chairman and the Chief Executive; and – Board Meetings and Board Committees.	The results of the evaluation were presented to the Board in December 2010 and confirmed that Barclays Board continues to operate at a very high level of effectiveness. One of the advantages of undertaking an annual evaluation is that we can monitor trends in responses to questions, as shown below. The key themes arising from the 2010 evaluation and which will form the basis of the action plan for 2011 are: – Ensuring that Board dynamics remain effective following recent membership changes, including the appointment of the new Chief Executive; – Ensuring that a wide range of skills, experience, background and diversity on the Board is maintained; – Continuing the focus on strategic decision making in light of the evolving regulatory environment; and – Revising the format of Board meetings to allow the Board to devote more time to discussion of key strategic issues, including discussions the evening before Board meetings.


				~~153~~	139

Corporate governance

Corporate governance report continued

~~Pensions~~

~~Chris Lucas receives a cash allowance of 25% of base salary in lieu of joining a Group pension scheme.~~

John Varley is a member of the Group’s 1964 UK defined benefit pension scheme. Following a review of UK pension schemes, in line with other employees, he will cease to build up benefits in this non-contributory defined benefit scheme with effect from 31st March 2010. At present Mr Varley has a contractual entitlement to an unreduced pension of 60% of pensionable salary should he retire at age 55, and a pension of up to two thirds of his pensionable salary at the normal retirement age of 60. Mr Varley has voluntarily chosen to give up this contractual entitlement with effect from 1st April 2010 and a lesser amount will now be available, equating to the benefit accrued up to 31st March 2010.

From 1st April 2010 Mr Varley will instead receive a cash allowance of 25% of his base salary in lieu of joining a Group pension scheme in line with other executive Directors. No compensation was paid to Mr Varley for giving up his contractual right to continue to accrue benefits in the defined benefit pension scheme.

~~Mr Varley also has a defined contribution benefit of £596,568 as at 31st December 2009 in respect of a previous transfer from a freestanding AVC, arising from his personal contributions only.~~

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 paid in respect of 2009 amounted to £18,786 (US$29,400).~~

Table 5 sets out the pension benefits of the current executive Directors. Pension accrued during the year represents the change in accrued pension during the year (including inflation at the prescribed rate of –1.6% (UK)). Pensions paid from the UK defined benefit pension scheme 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 value for Mr Varley has been calculated in a manner consistent with the approach used by the independent UK Retirement Fund Trustee to calculate cash equivalent transfer values in compliance with the transfer value regulations that came into force on 1st October 2008. During 2009, the UK Retirement Fund Trustee changed the transfer basis for all members. The change reflected different mortality assumptions and a lower discount rate. This contributed £3m of the increase in Mr Varley’s transfer value during the year and this amount does not relate to an increase in the pensions benefits accrued by Mr Varley (but the current actuarial assessment of the value of those benefits). The remainder of the increase in transfer value relates to Mr Varley’s additional year of pensionable service.

~~The transfer value for Mr Diamond has been calculated consistent with the approach and assumptions appropriate to the US defined benefit plans of which he is a member.~~

~~The transfer values disclosed do not represent a sum paid or payable to the executive Directors, but rather they represent the present value of accrued payments to be made under the pension schemes.~~

~~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.

Table 5: Pension provision
Age at 31st
December
2009 Completed
years of
service
Accrued
pension
at 31st
December
2008
£000
Pension
accrued
during 2009
(including
increase for
inflation)
£000 Pension
accrued
during
2009
(excluding
inflation)
£000
Accrued
pension
at 31st
December
2009
£000

Transfer
value of
accrued
pension
at 31st
December
2008
£000

Transfer
value of
accrued
pension
at 31st
December
2009
£000
Increase
in transfer
value during
the year
£000 Annual cash
in lieu of
pension
£000
John Varley
53 27 572 47 56 619 12,328 17,015 4,687 –
Robert E Diamond Jr
58 13 45 13 14 58 280 383 103 –
Chris Lucas
49 2 – – – – – – – 163

Table 6: Interests in shares of Barclays PLC at 31st December 2009
      At 1st January 2009    At 31st December 2009
      Beneficial    Non-
beneficial    Beneficial    Non-
beneficial
Executive Directors

John Varley
   593,266    –    622,418    –
Robert E
Diamond Jr
   5,866,965    –    8,333,810    –
Chris Lucas
   76,038    –    101,697    –

As part of the termination of EOP, Robert E Diamond Jr exercised his options over 100,000 BGI Holdings shares. He then sold his newly acquired BGI Holdings shares and existing 200,000 BGI Holdings shares to Barclays Bank PLC for a net consideration of £26.8m, after deducting aggregate option exercise costs of £6.0m.

Table 7: Indicative change in value of executive Director total share
interests

Indicative
value at
1st January
2009
£m
   Indicative
change in
holdings
£m
Indicative
value at
31st December
2009
£m

Indicative
increase on
total share
interest
2009
£m
Executive Directors

John Varley
   2.5    –    4.8    2.3
Robert E Diamond Jr    23.5    (3.7 ) 40.0    20.2
Chris Lucas
   0.7    0.8    2.6    1.1

~~Total share interests are beneficial interests plus share-based remuneration including any initial or provisional allocations and vested awards under ESAS, PSP, ISOP and Sharesave.~~


~~154~~ Evaluation Statementcontinued
In addition to evaluating the performance of the Board and Board Committees, we also evaluate the performance of individual Directors. Evaluation reporting lines are summarised below:
Position		Evaluated by

Group Chairman		Senior Independent Director, who meets with non-executive Directors without the Group Chairman present in order to obtain their feedback

Chief Executive		Group Chairman

Senior Independent Director		Group Chairman

Executive Directors		Chief Executive

Non-executive Directors		Group Chairman, who holds private meetings with each non-executive Director
In respect of individual non-executive Director performance, in early 2011 I held private meetings with each non executive Director to talk through the evaluation results and agree individual development plans with each of them for the year ahead.

~~Corporate governance~~

~~Remuneration report~~

~~continued~~

Board Corporate Governance and Nominations Committee Chairman’s Report

~~Shareholding guideline~~

The Committee guideline provides that executive Directors should hold Barclays PLC shares worth, as a minimum, the higher of two times base salary or average of total remuneration over 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 current executive Directors’ beneficial and non-beneficial interests in shares. Table 7 shows the indicative change in value of the executive Directors’ total share interests during 2009.

~~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: Average fixed and variable pay over the last three years (or
since joining)
   Variable
Executive Directors
   Fixed    Cash    Shares
John Varley
   79 % 9 % 12 %
Robert E Diamond Jr
   4 % 23 % 73 %
Chris Lucas
   30 % 6 % 64 %

This incorporates salary and benefits, the increase in transfer value of accrued pension or annual cash in lieu of pension, annual bonus comprising cash bonus and deferred share awards including bonus shares, and the fair value of PSP awards.

~~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.

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.

The Committee is sensitive to stakeholder concerns regarding contractual bonus payments to departing executive Directors. The executive Directors’ service contracts will be reviewed in 2010 in the light of best practice and regulatory and corporate governance developments. The Committee does not intend to include similar contractual provisions in relation to executive Director appointments going forward.

~~Details of current executive Director contract terms are shown in Table 9.~~

~~External appointments~~

~~The fees for external appointments held by executive Directors are shown in Table 10.~~

Member

Independent

Meetings

eligible to

attend

Meetings

attended

Marcus Agius (Chairman)

David Booth (from 1st January 2010)

Sir Richard Broadbent

Sir Michael Rake

Sir John Sunderland

Secretary

Lawrence Dickinson

Key

OA on appointment

I independent

What is our role?

Who are the Committee?

What did we do in 2010?

~~Table 9: Contract terms~~140

~~Effective date~~
~~of contract~~

~~Notice period~~

~~from the Company~~

~~Potential compensation for loss of office~~

~~Executive Directors~~

Board Corporate Governance and Nominations Committee Chairman’s reportcontinued

joined the Board Risk Committee, where her background in financial services and as a global economist will bring a valuable insight to that Committee’s deliberations of macro-economic risks.

LOGO


Appointing a new Chief Executive We began our search for a successor to John Varley by drawing up the role requirements for the Chief Executive position, covering both the general background/experience required and the desired attributes across a range of key competencies. Essential, of course, was that the next Chief Executive should have financial services experience and, given the size of our investment banking business following the Lehmans acquisition, we felt that knowledge and experience of investment banking would be essential. The attributes we sought included a proven track record in strategic thinking, in business leadership and execution of strategy, in leading and developing people and building capability. We also sought candidates who could lead and manage change, who could work with and influence multiple stakeholders and who had a strong awareness of and commitment to risk management, control and governance.	~~1st September 2004~~	~~12 months~~	~~12 months base salary, bonus equivalent~~ It was evident to us from an early stage that Bob Diamond was a strong internal candidate to succeed John. Nonetheless, it was important that we tested the market and we conducted a benchmarking exercise against potential external candidates, who were identified with the assistance of a search consultant, before coming to a recommendation. We also felt that, if possible, the exercise should be carried out discreetly in order to minimise any risk of disruption to the ~~average of~~business. Having fully tested the ~~previous three years~~market and ~~continuation of medical and pension benefits whilst an employee~~
~~Robert E Diamond Jr~~	~~1st June 2005~~	~~12 months~~	~~12 months base salary, bonus equivalent~~assessed all candidates against the role requirements, we agreed to recommend to the ~~average~~Board the appointment of Bob Diamond as the ~~previous three years~~next Chief Executive. The recommendation followed meetings between Bob and ~~continuation of medical~~all the non-executive Directors in order that he could set out his vision and ~~pension benefits whilst an employee~~
strategic priorities for the Group and respond to questions and challenge. ~~Chris Lucas~~	We announced on 7th September 2010 that Bob would succeed John on 1st April ~~2007~~	~~12 months~~	~~12 months base salary, bonus equivalent~~2011 following a transition and handover period. I am pleased to say that the ~~average of~~transition period went smoothly and we were able to bring forward the ~~previous three years up~~handover date to ~~100% of base salary and continuation of medical and pension benefits whilst an employee~~1st January 2011, which we announced on 17th December 2010.

Table 10: Fees for external appointments held by
executive Directors Director          2009    2008

Organisation
   Fees    Fees
retained    Fees    Fees
retained
John Varley
   British Grolux Investments Limited    £8,061    £8,061    £7,788    £7,788
   AstraZeneca PLC    £95,000    £95,000    £83,333    £83,333

~~Any other positions held by the executive Directors do not attract fees.~~


				~~155~~	141

Corporate governance
Corporate governance report continued

(3) Accountability
Sir Michael Rake, Chairman of the Board Audit Committee, now reports on the Board Audit Committee’s activities during 2010.
Board Audit Committee Chairman’s report

~~Group~~ LOGO

Member

Independent

Meetings
eligible to
attend

Meetings
attended

Sir Michael Rake (Chairman)

Alison Carnwath

(from 1st October 2010)

Fulvio Conti

Simon Fraser

Sir Andrew Likierman

Secretary

Lawrence Dickinson

Key

OA on appointment

I independent

2010 was my first full year as Chairman ~~Deputy~~of the Board Audit Committee and one which saw us appoint a new lead audit partner, Andrew Ratcliffe, who succeeded Phil Rivett. I am pleased to report that the handover to the new lead audit partner went smoothly and the transition was properly and effectively managed. My report on the Committee’s work during 2010 is set out below.

What is our role?

We are responsible for reviewing accounting policies and the contents of financial reports to ensure that we are satisfied with the integrity of the financial statements and particularly the key financial judgements within them. We also monitor the Group’s disclosure controls and procedures and the internal control environment. We consider the adequacy and scope of the external and internal audit and we oversee the relationship with our external auditors. The Committee’s full terms of reference are available from the corporate governance section of our website at:www.barclays.com/corporategovernance

Who are the Committee?

The membership of the Committee and attendance at meetings held in 2010 is set out above. The Board has determined that Sir Andrew Likierman and I are the designated financial experts for the purposes of the US Sarbanes-Oxley Act of 2002. Sir Andrew Likierman has ‘recent and relevant financial experience’, as recommended by the Combined Code, as a result of his accountancy background, his career with HM Treasury and his appointment as Chairman of the National Audit Office.

I have an accountancy background, having worked at KPMG for over thirty years, latterly as Chairman of KPMG International. Sir Andrew Likierman and ~~non-executive Directors~~I also serve on the Board Risk Committee, ensuring there is appropriate overlap between the two committees.

The Group ~~Chairman, Deputy Chairman~~Finance Director, Chief Risk Officer, Group General Counsel and ~~non-executive Directors receive fees which reflect~~Chief Internal Auditor attend each Committee meeting, as does the ~~individual responsibilities and membership of Board Committees. Fees are reviewed~~lead audit partner from our external auditor. Before each ~~year by~~Committee meeting, I hold a private session with Committee members to take soundings on the ~~Board. Fees were last increased in June 2008.~~

~~The first £20,000 of each non-executive Director’s base fee~~matters to be discussed at the meeting. Committee members also meet privately with the Chief Internal Auditor and the ~~Deputy Chairman’s fee is used~~external auditor after the majority of our meetings, without Management present, to ~~purchase Barclays PLC shares. These shares, together~~follow up on any particular matters.

Outside of our formal meetings I am in regular contact with ~~reinvested dividends, are retained on behalf~~Management, including the Group Finance Director, the Chief Risk Officer, the Chief Internal Auditor (who may raise with me any issues of concern) and the lead audit partner of our external auditors. During the year, I also visited the Group’s businesses in Spain, USA, Kenya and South Africa, attending meetings of the ~~non-executive Directors until they retire from~~local Governance and Control or Subsidiary Audit Committees. I also held one-to-one meetings with management in London, New York and Dubai.

What did we do in 2010?

We met eleven times in 2010 and the ~~Board.~~

~~Marcus Agius, Group Chairman, has a minimum~~chart on page 143 shows how we allocated our time ~~commitment to~~

Barclays 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.

~~Membership and Chairmanship of Board Committees as~~ at ~~31st December 2009 and details~~our meetings. The work of the ~~remuneration received by~~Committee principally falls under three main areas: financial statements and accounting policies, internal control and oversight of internal and external audit.

Financial Statements and Accounting Policies

Reviewing the ~~non-executive Directors during the year are~~financial statements and accounting policies requires us to make certain judgements and I set out ~~in Table 11. The Corporate Governance Report sets out current membership. Details of non-executive Director beneficial interests in Barclays PLC shares are set out in Table 12.~~

Table 11: 2009 fees
      Chairman
£000    Deputy
Chairman
£000    Board
Member
£000    Board
Audit
Committee
£000    Board HR
and
Remuneration
Committee
£000    Board
Corporate
Governance
and
Nominations
Committee
£000
Board Risk
Committee
£000
   Benefits
£000    Total
2009
£000
Total
2008
£000
Fees (at 31st Dec 09)

Full-year fee
   750    200    70    –    –    –    –    –    –    –
Committee Chair
   –    –    –    60    40    –    40    –    –    –
Committee Member
   –    –    –    25    15    15    15    –    –    –
Fees to 31st December 2009 Group Chairman

Marcus Agius
   750    –    –    –    M.    Ch.    –    1    751    751
Non-executive Directors

David Booth
   –    –    M.    –    –    –    M.    –    85    83
Sir Richard Broadbent
   –    DCh.    M.    –    Ch.    M.    Ch.    –    197    188
Leigh Clifford AO
   –    –    M.    –    M.    –    –    –    123    115
Fulvio Conti
   –    –    M.    M.    –    –    –    –    95    90
Simon Fraser
   –    –    M.    M.    M.    –    –    –    83    –
Reuben Jeffery III
   –    –    M.    –    –    –    –    –    32    –
Sir Andrew Likierman
   –    –    M.    M.    –    –    M.    –    110    105
Sir Michael Rake
   –    –    M.    Ch.    –    M.    M.    –    141    90
Sir John Sunderland
   –    –    M.    –    M.    M.    –    –    108    98

~~Leigh Clifford was also a member~~below some of the ~~Asia Pacific Advisory Committee and received fees of US$60,000 (2008: US$60,000). These fees are included~~key issues we discussed in ~~those shown above. As Deputy Chairman, Sir Richard Broadbent receives a fee of £200,000 per annum. From 16th July 2009,~~2010 in conjunction with the ~~date from which he was appointed as Deputy Chairman, Sir Richard Broadbent did not receive any additional fees for serving on Board Committees or as Senior Independent Director.~~

Sir John Sunderland was appointed as a member of the Group Brand and Reputation Committee (for which the full-year fee is £15,000) with effect from 1st July 2009 and received fees of £7,500. These fees are included in those shown above.external auditors.

Table 12: Shareholdings
      At
1st January
2009 total
beneficial
interests
At 31st
December
2009
total
beneficial
interests

At 5th
March
2010 total
beneficial
interests
Group Chairman

Marcus Agius
   113,148    113,530    113,530
Non-executive Directors

David Booth
   64,248    73,325    75,376
Sir Richard Broadbent
   24,625    34,590    36,634
Leigh Clifford AO
   26,236    35,427    37,348
Fulvio Conti
   30,482    39,304    41,274
Simon Fraser
   –    46,247    48,172
Reuben Jeffery III
   –    26,173    62,841
Sir Andrew Likierman
   13,297    23,007    25,078
Sir Michael Rake
   6,399    15,127    17,138
Sir John Sunderland
   71,463    79,775    81,705

–


~~Table 13: Terms of letters of appointment Notice Potential~~142
	~~Effective~~ ~~date~~	~~period~~ ~~from the~~ ~~Company~~	~~compensation~~ ~~for loss~~ ~~of office~~
~~Group Chairman~~			~~12 months~~ ~~contractual~~ ~~remuneration~~
~~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~~	~~16th July 2009~~	~~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~~
~~Simon Fraser~~	~~10th Mar 2009~~	~~6 months~~	~~6 months fees~~
~~Reuben Jeffery III~~	~~16th July 2009~~	~~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 John Sunderland~~	~~1st June 2005~~	~~6 months~~	~~6 months fees~~

Simon Fraser was appointed as a non-executive Director with effect from 10th March 2009. Reuben Jeffery III was appointed as a non-executive Director with effect from 16th July 2009. On 16th February 2010, 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 PLC shares were acquired by each non-executive Director as follows: David Booth 2,051; Sir Richard Broadbent 2,044; Leigh Clifford 1,921; Fulvio Conti 1,970; Simon Fraser 1,925; Reuben Jeffery 2,668; Sir Andrew Likierman 2,071; Sir Michael Rake 2,011 and Sir John Sunderland 1,930. On 17th February 2010, Reuben Jeffery also acquired 8,500 Barclays American Depositary Receipts (ADRs), representing 34,000 Barclays PLC shares. Except as described in this note, there were no changes to the beneficial or non-beneficial interests of non-executive Directors in the period 31st December 2009 – 5th March 2010.


~~156~~

~~Corporate governance~~

~~Remuneration report~~

~~continued~~

~~Letters of appointment~~

The Group Chairman, Deputy Chairman and non-executive Directors have individual letters of appointment. Each non-executive Director appointment is for an initial six-year term, renewable for a single term of three years thereafter.

~~Details of non-executive Directors standing for re-election at the 2010 AGM are set out on page 123.~~

~~Former Directors~~

~~Frits Seegers, Sir Nigel Rudd, Professor Dame Sandra Dawson, Stephen Russell and Patience Wheatcroft ceased to be Directors during the year.~~

Frits Seegers ceased to be a Director with effect from 3rd November 2009 and continued as an employee in order to effect a successful handover. Professor Dame Sandra Dawson and Sir Nigel Rudd did not put themselves forward for re-election at the 2009 AGM and received no termination payments. Patience Wheatcroft resigned as a non-executive Director with effect from 16th June 2009 and received no termination payment. Stephen Russell resigned as a non-executive Director with effect from 31st October 2009 and received no termination payment. Their remuneration for 2009 was as follows:

Table 14: Annual remuneration    Received for 2009
      Salary
and fees
£000    Annual
cash bonus
£000    Deferred
share award
(ESAS)
£000    Long term
incentive
(PSP)
£000    Benefits
£000    Cash
allowance
£000    Total
2009
£000    Total
2008
£000
Frits Seegers
   700    467    933    0    110    175    2,385    2,502
Professor Dame Sandra Dawson
   30    –    –    –    –    –    30    90
Sir Nigel Rudd DL
   63    –    –    –    –    –    63    200
Stephen Russell
   113    –    –    –    –    –    113    153
Patience Wheatcroft
   41    –    –    –    –    –    41    78

In respect of the deferred share award (ESAS), a recommendation was made to the ESAS trustee that a provisional allocation of shares is made to Mr Seegers, scheduled to vest over a three-year period (31.5% scheduled to vest at first and second anniversary of grant and 37% scheduled to vest at third anniversary of grant. The third portion alone will include 20% bonus shares). The ESAS amount shown in Table 14 shows the basic allocation, but does not include bonus shares. Including the maximum potential bonus shares, the ESAS award will have an initial value of £1,002,042 for Mr Seegers.

During Mr Seegers’ notice period, which will expire on 31st December 2010 at the latest, monthly payments of £161,150 constituting base salary, instalments in respect of bonus for 2010 and other benefits are payable in line with his contract. In the event of an earlier cessation of employment by mutual agreement, monthly payments in respect of salary, cash allowance in lieu of pension and other benefits will cease to be made.

Sir Nigel Rudd was appointed as Chairman of the Advisory Committee – UK & Ireland Private Bank with effect from 1st December 2009. As Chairman of the Advisory Committee, Sir Nigel will receive a fee of £150,000 p.a. and in 2009 received £12,500. These fees are not included in those shown above.

Patience Wheatcroft was a member of the Group Brand and Reputation Committee (for which the full-year fee is £15,000) until her resignation as a non-executive Director with effect from 16th June 2009 and received fees of £6,917. These fees are included in those shown above.


~~Table 15: Terms of contract or~~ ~~letter of appointment~~	~~Effective date~~	~~Notice period from the~~ ~~Company~~	~~Potential compensation~~ ~~for loss of office~~
~~Frits Seegers~~		~~7th June 2006~~	~~12 months~~	~~12 months base salary, bonus equivalent to the average of the previous three years and continuation of medical and pension benefits whilst an employee~~
~~Professor Dame Sandra Dawson~~	~~1st March 2003~~	~~6 months~~	~~6 months fees~~
~~Sir Nigel Rudd DL~~	~~1st February 1996~~	~~6 months~~	~~6 months fees~~
~~Stephen Russell~~	~~25th October 2000~~	~~6 months~~	~~6 months fees~~
~~Patience Wheatcroft~~	~~1st January 2008~~	~~6 months~~	~~6 months fees~~

Table 16: Other directorships held by Frits Seegers          2009    2008
Director    Organisation    Fees    Fees
retained    Fees    Fees
retained
Frits Seegers
   Absa Group Limited and
Absa Bank Limited    £ 7,598    £0    £ 26,807    £0

Board Audit Committee Chairman’s reportcontinued

~~Frits Seegers~~

–

Internal Control

2010 saw some restructuring/re-segmentation of our businesses and our focus was on ensuring that there was no impact on controls during and after the reorganisation. In October, we held an additional meeting specifically to review the overall control environment and the trends in key control indicators. During the year, we reviewed the control environment in each of Absa, Barclays Capital, Barclays Corporate, Barclays Wealth, Barclays Africa, UK Retail Banking and Western Europe Retail Banking in detail, with the Chief Executives of those businesses presenting to the Committee.

The Committee also spent time this ~~position until 11th February 2009.~~year reviewing the control environment at Barclays Capital, given the increased size of the business following the Lehman acquisition. In particular, we reviewed controls in the areas of product valuation, the trading businesses and client assets segregation. In terms of product valuation, a significant amount of activity has taken place to strengthen further the valuation framework and control and governance processes. A specific project was also initiated in 2010, at Management’s behest, to review Barclays Capital’s controls following the Lehman acquisition and taking into account the new regulatory environment to ensure they are best in class. We received reports on the progress of the project, its findings and the actions that are being taken.

We received regular reports during 2010 on the Group’s arrangements whereby employees can raise concerns and details of any action being taken to follow up specific reports.

Further details of the Group Internal Control Framework, including the main features of our internal control and risk management systems in relation to the financial reporting process, can be found in the Directors’ Report on pages 128 and 129.

Oversight of Internal Audit and External Audit

Internal Audit

External Audit

We discussed and agreed with PwC the audit plan for 2010 to ensure that key areas of judgement in the Group’s financial statements were appropriately covered.

To evaluate the performance and effectiveness of the external auditor, we sought feedback from key stakeholders across the Group via a questionnaire. The responses were analysed and presented to the Committee for review and discussion in early 2011. The Committee is fully satisfied with the performance of PwC and has recommended to the Board and to shareholders that PwC should be re-appointed as the Group’s auditors at the AGM on 27th April 2011.


				~~157~~	143

Corporate governance

Corporate governance report continued

Board Audit Committee Chairman’s reportcontinued

External auditor objectivity and independence: Non-Audit Services

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 Resources functions

– broker or dealer, investment advisor or investment banking services

– legal, expert and tax services involving advocacy

Allowable services that we 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

~~Former Directors continued~~

Table 17: Executive Share Award Scheme (ESAS)
Scheme    Number at
1st January
2009
(maximum)    Awarded
in year
(maximum)    Market
price on
award
date    Number
released Market
price on
release
date    Number
lapsed in
2009    Number at
3rd November
2009
(maximum)    Value of
release
First
release
date
   Last
release
date
Frits Seegers

ESAS
   285,712    –    –    (84,521 ) £2.83    –    201,191    £0.24m    21/03/10    20/03/11

~~Mr Seegers received 53,817 dividend shares from the ESAS released during the year (share price on release date was £2.86).~~

Table 18: Performance Share Plan (PSP)
Scheme    Number of
shares at
1st January
2009
(maximum)    Awarded
in year
(maximum)    Market
price
on
award
date    Number
released    Market
price
on
release
date    Number
lapsed
in 2009 Number of
shares at
3rd November
2009
(maximum)    Value of
release    End of
three- year
PSP
performance
period    Scheduled
release
date
Frits Seegers

PSP 2006-2008
   485,868    –    £6.30    –    –    (246,983 ) 238,885    –    31/12/08    31/08/11
PSP 2007-2009
   420,246    –    £7.08    –    –    –    420,246    –    31/12/09    22/03/10
PSP 2008-2010
   1,083,216    –    £4.25    –    –    –    1,083,216    –    31/12/10    20/03/11
PSP 2009-2011
   –    3,196,095    £2.34    –    –    –    3,196,095    –    31/12/11    27/04/12

~~In respect~~We conducted our annual review of ~~Mr Seegers’ 2006 PSP award (scheduled to vest in 2009), vesting was deferred for a further two-year period at his request, subject to the satisfaction of further~~our performance ~~conditions. The maximum number of shares that may be released is~~ as set out in the table. There is no opportunity to receive shares in excess of this number (save for any dividend shares that may be awarded by the PSP trustee). Following his cessation as a Director, a recommendation has been made for the award to vest in March 2010. The Committee determined that the further performance conditions (as requested in 2009) had been met.

50% of Mr Seegers’ 2009 PSP award was subject to the Return on Risk-Weighted Assets condition measured at GRCB level. The Committee determined that following the reorganisation of GRCB, performance would be measured for the 2009 financial year only, to reflect his contribution whilst in service (and is subject to the auditors’ final confirmation). Performance shares under this portionpart of the ~~award (if any)~~annual Board Effectiveness Review process and concluded that we continue to operate effectively. We will ~~not vest until~~focus in 2011 on ensuring that there is sufficient time at meetings for challenge and debate given the ~~third anniversary of grant. The TSR portion of the award~~Committee’s heavy agenda. Furthermore, while we receive timely and appropriate information from Management, we will continue to ~~be measured for~~work at ensuring that papers presented to the ~~full three-year period, with shares (if any) scheduled to vest on or after~~Committee are concise and distil the ~~third anniversary of grant.~~key issues effectively.

LOGO

Sir Michael Rake

Chairman, Board Audit Committee

Table 19: Sharesave
Scheme    Number at
1st January
2009
(maximum)    Awarded
in year
(maximum)    Weighted
average
exercise
price    Number
vested
in year    Number
exercised    Market
price on
exercise
date    Number
lapsed
in 2009    Number at
3rd November
2009
(maximum)    Vested
number
of share
options    Value of
exercise    First
exercise
date    Last
exercise
date
Frits Seegers

Sharesave
   3,480    –    £4.70       –    –    –    3,480    –    –    01/11/12    01/05/13

~~Gary Hoffman, a former Director, is a Director of Barclays Pension Fund Trustees Limited and received fees of £55,254.~~


~~158~~144

~~Corporate governance~~

~~Remuneration report~~

~~continued~~

~~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 44 on pages 238 and 239. The limits on the issue of new shares comply with the guidelines issued by the Association of British Insurers.


~~Table 20: Plans under which awards made in 2009~~

~~Plan name~~	~~Executive Directors eligible?~~	~~Description~~

~~Performance Share Plan (PSP)~~	~~Yes~~	~~– PSP is a performance related share plan under which awards of Barclays PLC shares may be made to selected employees (including executive Directors), subject to trustee discretion.~~
~~Performance Share Plan (PSP)~~		~~– 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.~~
~~Executive Share Award Scheme (ESAS)~~ David Booth, who became Chairman of the Board Risk Committee on 1st January 2010, now reports on that Committee’s activities during 2010.

~~Yes~~

	~~– ESAS is a deferred share award plan operated in conjunction with various 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 PLC shares under ESAS.
				~~– The mandatory provisional allocation will normally include bonus shares equal to 30% of the value of the deferred bonus amount awarded in shares.~~
				– 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 to 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~~Board Risk Committee Chairman’s report		No		~~– 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, subject to continued employment and the 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.~~

LOGO

Member

Independent

Meetings
eligible to
attend

Meetings
attended

David Booth (Chairman)

Sir Richard Broadbent

(to 30th September 2010)

Reuben Jeffery

(from 1st January 2010)

Sir Andrew Likierman

Dambisa Moyo

(from 1st October 2010)

Sir Michael Rake

Secretary

Lawrence Dickinson

Key

OA on appointment

I independent

I succeeded Sir Richard Broadbent as Chairman of the Board Risk Committee in January 2010. I am grateful to Sir Richard for his work in leading the Committee during the difficult period of the financial crisis and for his continuing support until he left the Committee at the end of September 2010. My report on the Committee’s work during 2010 is set out below.

What is our role?

As a bank, Barclays is in the business of taking risk: taking appropriate levels of credit, market, capital and liquidity risk is how we generate profits. The Board Risk Committee is responsible for recommending to the Board the total level of risk the Group is prepared to take (risk appetite). We monitor risk appetite, setting limits for individual types of risk, e.g., credit risk and market risk, and we monitor the Group’s risk profile. We obtain assurance from management that principal risks have been properly identified and are being appropriately managed. Following the publication in late 2009 of the Walker Report into Corporate Governance in Banks and other Financial Institutions (the Walker Report), our remit has expanded to include ensuring that risk is taken into account during the due diligence phase of any strategic transaction and we also provide input from a risk perspective into the deliberations of the Board Remuneration Committee. The Committee’s full terms of reference are available from the corporate governance section of our website at:www.barclays.com/corporategovernance. More information on risk management and the internal control framework can be found in the Risk management report on pages 42 to 119.

Who are the Committee?

What did we do in 2010?

We met seven times in 2010 and the chart on page 145 shows how we allocated our time at our meetings. Two of the meetings were arranged at short notice and it was not possible for all members to attend, although they had the opportunity to review the meeting papers and raise any points with the Group Risk team or with me as Chairman.

Since becoming Chairman, I have been keen to ensure that the Committee remains at the forefront of best practice. While the Committee has been in place since 1999, well before the recommendations of the Walker Report, the working practices of the Committee continue to evolve. In late 2009, we asked PwC to carry out a review of how the Committee had operated during the period of the financial crisis, to assess whether the Committee had operated effectively and whether there is anything it could do differently. The outputs of the review were shared with the full Board in early 2010. The review concluded that there had been no major failings in the operation of the Committee and that it had identified the issues on a timely basis. Some suggestions for improvements were put forward, including developing a more systematic process for agreeing what risks should be reviewed in greater detail by the Committee and a more formal process for escalating issues raised at the various management risk committees. Robert Le Blanc, the Chief Risk Officer, has a dotted reporting line to me as Chairman of the Committee and I met with Robert regularly during the year to discuss matters to be considered at Committee meetings and to get his views on the issues on which the Committee should focus its time.

During the year we implemented a number of the recommendations arising from the Walker Report. Early in 2010, we appointed a panel of retained advisers, who we can call on for an independent view of matters, should we feel it appropriate to do so. During the year, we used an external consultant to carry out an independent review of risk in remuneration, with a particular focus on the remuneration framework, the risk metrics used to assess financial performance and the role of the Group Risk Function in the remuneration process. The review demonstrated that we have a good, comprehensive set of risk metrics, particularly quantitative metrics, and that the proposals for 2010 for risk adjustments to assess financial performance and the role of the risk function in remuneration decisions are in line with regulatory requirements. Suggested areas for improvement included strengthening our qualitative risk metrics and increasing communication and awareness of the role of risk metrics in remuneration.


				~~159~~	145

Corporate governance

~~Share and long-term incentive plans~~Corporate governance report continued

~~Table 20: Plans under which awards made in 2009 continued~~

~~Plan name~~	~~Executive~~ ~~Directors~~ ~~eligible?~~	~~Description~~

~~Long Term Cash Plan (LTCP)~~Board Risk Committee Chairman’s report	No	~~– The LTCP is a forward-looking plan introduced 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.~~

~~Sharesave~~	~~Yes~~	– Sharesave was approved for a ten-year period in 2000 and is due to expire at the end of 2010. Shareholder approval will be sought at the AGM to establish a replacement scheme on substantially the same terms. – Sharesave is a share option plan under which all eligible employees in the UK, Ireland and Spain (including executive Directors) are invited to participate. It is HMRC approved in the UK and approved by the Revenue Commissioners in Ireland. ~~– Participants are granted options over Barclays PLC 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. ~~– 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 certain circumstances).

~~Sharepurchase~~	~~Yes~~	~~– 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 of 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. ~~– Purchased shares may be withdrawn from the plan at 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.~~ ~~– The plan was approved by shareholders in April 2000.~~

~~Global Sharepurchase~~	~~Yes~~	– Global Sharepurchase is an extension of the Sharepurchase plan that is offered to employees in the UK. When the Sharepurchase plan was approved by shareholders in April 2000, the approval included the option of extending the plan to other jurisdictions. – Employees in certain jurisdictions are invited under the terms of the Global Sharepurchase plan to purchase shares in Barclays PLC, which attract a matching share award awarded by Barclays (up to a cap) and associated dividend shares. ~~– Global Sharepurchase operates in substantially the same way as Sharepurchase.~~

We continued our focus on capital and liquidity in 2010 and the Barclays Treasurer reported to the Committee regularly on the Group’s capital and liquidity position, including the individual liquidity adequacy assessment, required by the FSA. We review economic and regulatory capital demand and supply and the level of losses that could be experienced before minimum regulatory capital ratios are breached. We also reviewed the Group’s liquidity profile to ensure that sufficient liquidity is held to cover both market-wide and Barclays specific stress scenarios. Stress testing, which is an exercise carried out to ensure that the Group would remain adequately capitalised and liquid even under severe stress, continued to receive our attention in 2010, as we considered various scenarios to be modelled. In addition to Barclays own annual stress testing exercise and the annual stress testing exercise conducted by the FSA, in the first quarter of 2010 a stress testing exercise was set for all European banks by the Committee of European Banking Supervisors. The results of that exercise were published in July 2010. Each of these stress tests showed that Barclays was adequately capitalised.

During the year we received the first of what we intend to be an annual presentation on macro prudential and macro-economic risk and the impact this may have on the Group’s business going forward.

In 2009, we asked Management for a report on the lessons learnt from the sub-prime crisis and in 2010, Management reported back on how the lessons learnt are being institutionalised in the business and what is being done differently in terms of controls and in the way we conduct our business. We were particularly interested in establishing what cultural change there has been as a result of the sub-prime experience and in understanding how that cultural change has been embedded.

LOGO

In view of the difficulties of some countries in the Eurozone, we spent some time in 2010 reviewing country and sovereign risk, in particular, in specific European countries (Spain, Portugal, Italy, Ireland and Greece) and in sub-investment grade countries. The review covered the extent of our exposures and the caps that are in place to limit concentrations. We also reviewed the Group’s position in the commercial property sector including risk appetite, exposures and controls in our four key geographies: UK, US, Spain and South Africa. In late 2010, we received a report on the lessons learned from the impairment suffered by our Corporate business in Spain, which has been shared with the full Board. A series of actions have been identified and are being implemented, not just in relation to Spain but also in terms of how overall risk and returns across each business in the Group are analysed.

As usual, we considered risk appetite for 2011 although this year we also reviewed risk appetite methodology and enhancements that have been made to the process. A set of financial volatility parameters, such as Profit Before Tax and Loan Loss Rate are agreed. Based upon the Medium Term Plan, the Group’s performance in a 1 in 7 and 1 in 25 scenario is then assessed. The performance of the agreed parameters in such scenarios is then assessed to identify any potential constraints, for example, we would not wish to see the Loan Loss Rate rise above certain pre-agreed levels in these scenarios. As a result of the review, we agreed to recommend the risk appetite to the Board.

We conducted our annual review of the Committee’s performance as part of the annual Board Effectiveness Review process and concluded that we continue to operate effectively. We continue to receive appropriate and timely information from Management and have provided additional guidance to Management on what we expect their reports to cover and how they should present to the Committee to ensure that we make optimum use of our meetings. The majority of the reports we see are first considered by the Group Risk Oversight Committee or the Group Executive Committee, which greatly assists the Committee’s understanding of the issues faced by Management.

LOGO

David Booth

Chairman, Board Risk Committee


~~160~~146

~~Corporate governance~~

~~Remuneration report~~

~~continued~~

~~Share and long-term incentive plans~~~~continued~~


~~Table 21: New plans under which awards to be made in 2010~~

~~Plan name~~	~~Executive~~ ~~Directors~~ ~~eligible?~~	~~Description~~

(4) Remuneration

(5) Relations with Shareholders

Institutional Shareholders

Private Shareholders

The direct engagement model we follow for our interaction with institutional investors is impractical for large numbers of private shareholders, however, we seek to follow industry best practice in terms of disclosure. All documents produced for investor events are also provided on the investor relations section of our website. We also maintain a specific shareholder enquiry line for private shareholders to request information.

We prefer to communicate electronically with our shareholders: this is beneficial for the environment and lowers costs for the Group. We also encourage private shareholders to hold their shares in Barclays Sharestore, where shares are held electronically in a cost-effective and secure environment. Private shareholders can use our Barclays e-view service to receive their shareholder documents electronically and to get immediate access to information relating to their personal shareholding and dividend history. Barclays e-view participants can also change their details and dividend mandates online and receive dividend tax vouchers electronically.

AGM

The 2010 AGM was held on Friday 30th April 2010 at the Royal Festival Hall 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. 62% of the shares in issue were voted and all resolutions were approved. All Directors attended the AGM and were available to answer shareholder questions. The 2011 AGM will be held on Wednesday 27th April 2011 at the Royal Festival Hall in London. The Notice of Annual General 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 Wednesday 27th April 2011.

(6) Statement on US Corporate Governance Standards

The statement we are required by the NYSE to make is set out below:

‘Director Independence

Board Committees

We have a Board Corporate Governance and Nominations Committee and a Board 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. The NYSE Rules state that both Committees must be composed entirely of independent Directors. 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 Remuneration Committee. Except for these appointments, both Committees are composed solely of non-executive Directors, whom the Board has determined to be independent. We comply with the NYSE Rules requirement that we 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

Code of Ethics

Shareholder Approval of Equity-compensation Plans

LOGO

Marcus Agius

Group Chairman

10th March 2011


~~Share Value Plan (SVP)~~	No	~~– The SVP is a new share incentive plan to be introduced for 2010.~~ ~~– Share awards in 2010 will be discretionary awards that may be made to selected employees (excluding executive Directors), subject to trustee discretion.~~ – Awards vest in three annual instalments over three years, subject to continued employment and the discretion of the trustee. Dividends received are normally awarded as additional shares and released at the same time. – Vesting of the awards may be reduced (to nil if appropriate) on occurrence of certain events (e.g. where the Company’s accounts have been materially restated at any time during the vesting period). – Participants who leave employment voluntarily or are dismissed for gross misconduct before the release date of any instalment will normally forfeit any outstanding awards. For categories of eligible leavers awards will vest. ~~– On a change of control awards may vest subject to the discretion of the Committee and the trustee.~~ ~~–The SVP is not an HMRC approved plan.~~

~~Cash Value Plan (CVP)~~	No	~~– The CVP is a new cash incentive plan to be introduced for 2010.~~ ~~– Discretionary awards of cash are made to eligible employees (excluding executive Directors).~~ – The CVP operates in substantially the same way as the SVP with the intention that 2010 awards are paid in three annual instalments over a three-year period, at the discretion of the Company’s Cash Plans Committee. – In addition to cash awards, participants may be awarded a service credit (10% of the initial value of the award) to be paid at the same time as the final instalment of their award, subject to continued employment in the Group. ~~– Similar leaver and change of control provisions apply under the CVP as for the SVP.~~


				~~161~~	147

Corporate governance

Remuneration report

Statement from the Chairman of the Board Remuneration Committee

The purpose of this report is to provide more detail on remuneration in aggregate and for senior management.

~~Share~~The Committee’s approach

The Committee aims to achieve a balance between delivering market competitive remuneration in order to retain talent, and ~~long-term incentive plans~~~~continued~~optimising current and future shareholder returns, including growing the dividend, maintaining capital adequacy and effective risk management.

The Committee has established frameworks for remuneration in each of the businesses and for the Group as a whole. The frameworks are forward looking and are based on financial metrics to assist with the planning and management of remuneration in each of the key businesses. The frameworks incorporate key financial ratios achieved by Barclays and its competitors and are used by the Committee to inform its decision making process. The Committee considers both relative and absolute performance when formulating its decisions.

Upfront risk assessment:

–	Before business is undertaken, detailed stress-testing and scenario analysis is performed to test the viability of plans on a risk-adjusted basis and to determine risk appetite

–	As part of the risk appetite framework, the balance sheet including remuneration outcomes are modelled under 1 in 7 and 1 in 25 stresses to ensure we build our portfolios having considered their performance under stress

Performance monitoring:

–	Detailed monitoring of risk exposures against agreed limits ensures business is conducted within the planned appetite

–	The Committee receives information on ongoing financial and risk performance, market intelligence and regulatory changes

–	The Committee monitors forecast remuneration throughout the year in the context of business performance and with the assistance of the remuneration frameworks

Remuneration outcomes determined:

–

The Committee’s work in 2010

In addition to the normal cycle of business, in 2010 the Committee also spent a significant amount of its time on:

–	Considering practice in light of new and emerging regulatory guidelines

–	Reviewing performance award funding proposals. Given the higher levels of deferral now being implemented, the Committee developed its approach for 2010 to ensure it reviewed proposals both on a “value at award” basis and on an accounting charge basis

–	Reviewing the structure of 2010 performance awards and reviewing the new remuneration arrangements that are proposed for executive Directors: the Share Value Plan and the Barclays Long Term Incentive Plan

–	Reviewing the 2010 remuneration decisions for executive Directors, Code Staff and other senior executives. Code Staff are the Group’s employees whose professional activities could have a material impact on the risk profile of the Group

–	Reviewing the remuneration package for the new Chief Executive

Financial background to the Committee’s work

Barclays overall financial performance in 2010 included:

–	Profit before tax of £6,065m (up 32% on 2009)

–	Total income of £31,440m (up 8%) and net income of £25,768m (up 22%)

–	Impairment of £5,672m (down 30%) giving a loan loss rate of 118bps (2009: 156bps)

–	Value of Group 2010 performance awards: £3.4bn, down 7% on 2009

–	Improved returns on average shareholders’ equity of 7.2% (2009: 6.7%)

–	Final dividend of 2.5p per share making 5.5p for the year (an increase of more than 100% over the 2009 dividend of 2.5p)

Key measures of the Group’s financial strength:

–	Core Tier 1 capital ratio of 10.8% (2009: 10.0%) and Tier 1 capital ratio of 13.5% (2009: 13.0%)

–	Group liquidity pool improved by 21% from £127bn in 2009 to £154bn in 2010

Key risk themes:

–	Barclays growth in 2010 was disciplined

–	Barclays impairment performance was favourable to plan

–	Barclays risk profile in 2010 stabilised and improved

–	Adherence to control frameworks has generally been good

At a business level:

–	Global Retail Banking profit before tax of £1,829m (2009: £1,821m)

–	Absa profit before tax of £616m, up 17% (2009: £528m)

–	Barclays Capital profit before tax of £4,780m (2009: £2,464m). Excluding own credit, profit before tax of £4,389m, up 2% (2009: £4,284m)

–	Barclays Corporate loss before tax of £631m (2009: profit of £157m)

–	Barclays Wealth profit before tax of £163m, up 14% (2009: £143m)

Wider background to the Committee’s decisions


148


~~Table 22: Plans under which awards not~~

The commitments that Barclays made to the UK Government under Project Merlin include commitments on remuneration. These are important and I set out here how we have met those commitments:

–	We committed to showing responsibility in ~~2009~~pay in 2010 and beyond. Our decisions for 2010 reflect this, and our robust governance processes will ensure this continues for 2011 and beyond

–	We committed that aggregate UK bonuses for 2010 would be lower than 2009. We have confirmed to the FSA that this was the case

–	We committed to greater shareholder engagement regarding remuneration. We have consulted with our key shareholders and representative bodies during 2010, and we will continue this throughout 2011

~~Plan name~~–

~~Executive~~
~~Directors~~
~~eligible?~~

~~Description~~

~~ISOP (Incentive Share Option Plan)~~

~~Yes~~

~~– The Incentive Share Option Plan is a share option plan under which share options were granted~~We committed to ~~selected employees (including~~disclosing the remuneration of the five highest paid senior executive officers (in addition to the executive Directors). ~~No options have been granted since 2004.~~

~~– ISOP contains HMRC approved and unapproved parts.~~

~~– Options were awarded at the market price at the date of grant calculated~~These disclosures are shown on page 160. In addition to our commitment to disclosure through Project Merlin, in accordance with the FSA’s disclosure rules we have also disclosed in aggregate the 2010 remuneration of our Code Staff. This is also shown on page 160

–	The Committee reviewed the remuneration proposals for at least the ten highest paid staff in each of the ~~plan.~~Group’s principal businesses. In practice we review many more than this in each business

Key Committee decisions in 2010 - quantum

The Committee’s work in 2010 included reviewing and (except for Absa) approving the proposed 2010 performance awards for each of the Group’s businesses:

–	Barclays Group - 2010 performance awards down 7% on 2009, with profit before tax up 32%

–	Global Retail Banking – ~~Options granted had an EP threshold and~~2010 performance awards up 2% on 2009, which was in line with Global Retail Banking’s profit performance for 2010

–	Absa – 2010 performance awards up 12% on 2009, which was in line with Absa’s profit performance for 2010

–

Barclays Capital - 2010 performance awards down 12% on 2009, despite profit before tax increasing year on year. Performance awards were reduced for 2010 whilst in our view maintaining them at a ~~TSR~~level within acceptable commercial limits that permitted the business to reward outperformance appropriately

–

Barclays Corporate – 2010 performance ~~condition associated with them. Options were normally exercisable between three and ten years~~awards up 36% on 2009. Performance awards reflected the improvement in profitability of the ~~grant date.~~

UK & Ireland business, and the need to maintain a minimum level of performance awards in Continental Europe and investment in senior hires. The Committee will monitor this closely in 2011

–	Barclays Wealth – ~~All options granted which met these~~2010 performance ~~criteria have now vested~~awards up 11% on 2009, less than the increase in profits

Key Committee decisions in 2010 - structure

–

~~– On cessation~~also subject to minimum Barclays shareholding guidelines. The 60% deferral rate was also applied to the annual performance incentives of ~~employment eligible leavers (as defined) normally~~a significant number of senior executives beyond those required by the FSA’s Remuneration Code

–

For executive Directors (subject to shareholder approval), Code Staff and senior management, deferred incentive awards for 2010 are ~~able~~made under the Share Value Plan (SVP) in the form of Barclays shares and under the Contingent Capital Plan (CCP) in the form of contingent capital awards. Vesting of contingent capital awards is linked 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 shareholders in April 2000.~~

~~ESOS (Executive Share Option Scheme)~~

~~n/a~~

~~– The Executive Share Option Scheme is a 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~~the Group’s core capital position at the ~~market price at~~time of vesting. Further details on the ~~date of grant calculated~~SVP and CCP are given in Tables 24 and 25

–

Deferred incentive awards and long term incentive awards include malus and prudent financial control provisions that are in accordance with the ~~rules~~FSA’s Remuneration Code that may reduce the vesting level of awards (to nil if appropriate). Malus provisions may apply, for example, if the Committee determines there is evidence of serious employee misconduct or where a business has suffered a material failure of risk management. Prudent financial control provisions may apply if the financial health of the ~~plan.~~

Group has significantly deteriorated over the vesting period

– ~~Options were normally exercisable between three~~

Executive Directors and ~~ten years~~other senior executives will also participate in a new long term incentive plan: the Barclays Long Term Incentive Plan (subject to shareholder approval). Vesting of the ~~grant date. All options are now vested.~~

~~– On cessation~~proposed 2011 awards is linked to a scorecard of ~~employment eligible leavers (as defined) normally are able~~metrics focused closely on the execution of Barclays strategy which gives primacy 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)~~

~~– The BGI Equity Ownership Plan (BGI EOP) was approved by shareholders at Barclays 2000 AGM to provide the employee share incentive arrangements required to recruit and retain senior management.~~

~~– Under the terms~~return on equity. Further details of the ~~BGI EOP, options were granted at fair value to key BGI employees over shares~~proposed Barclays LTIP and its performance condition are given on pages 153 and 154 and in ~~Barclays Global Investors UK Holdings Limited (BGI Holdings) within an overall cap of 20% of the issued ordinary share capital of BGI Holdings.~~

~~– Employees who were executive Directors of Barclays PLC at the date of grant were not eligible to receive options under the BGI EOP.~~

– Following completion of the sale of BGI on 1st December 2009, the BGI EOP was terminated on 16th December 2009, in accordance with the rules of the plan. Under the terms of EOP participants were able to exercise their outstanding options in full. Participants were then able to sell their newly acquired and existing BGI Holdings shares to Barclays Bank PLC. In accordance with the terms of EOP, the price per BGI Holdings share was determined to be £109.45.

– As part of the termination of EOP, participants exercised outstanding options to purchase 6.4 million shares and the Group repurchased all participants’ holdings totalling 10.2 million shares for a net consideration of £542m, after deducting aggregate option exercise costs of £571m.

~~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.

– 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 44 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, participants’ shareholdings are treated as non controlling interests and goodwill has been previously recognised as a result of the purchase of shares offered for sale by employees. The related goodwill and non-controlling interests relating to the scheme are included in Notes 21 and 33 to the accounts respectively.

~~– Following completion of the sale of BGI, the BGI EOP was terminated. The cost of terminating the plan has been included as a cost of disposal in Note 38 to the accounts.~~

~~BGI Equity Participation Plan~~

– The BGI Equity Participation Plan was a share plan linked to the value of BGI shares intended for selected BGI employees (in the form of stock appreciation rights settled in shares of restricted share awards).

~~– No awards have been or will be made under the plan as BGI has now been sold from the Group.~~


~~162~~				Table 25

~~Corporate governance~~

~~Accountability and audit~~

~~Going concern~~

Bob Diamond took over as Chief Executive from 1st January 2011. The ~~Group’s business activities~~Committee decides the remuneration arrangements for all executive Directors. The Chief Executive role is benchmarked against other leading global banks and financial ~~position; the factors likely to affect its future development~~services organisations and ~~performance; and its objectives and policies in managing the financial risks to which it is exposed and its capital are discussed~~other companies of a similar size 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~~FTSE100 index. Bob Diamond’s remuneration 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 2009, 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’ published2010 was unaffected 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~~changes announced for 2011 and 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~~2010 he worked under his 2010 contractual and the finance, 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.

~~Management’s report on internal control over financial reporting~~

The management of Barclays PLC and Barclays Bank PLC (collectively ‘Management’) is 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 assets that could have a material affect on the financial statements.

Management has assessed the effectiveness of Barclays PLC and Barclays Bank PLC’s internal control over financial reporting as of 31st December 2009. In making its assessment, Management has utilised the criteria set forthremuneration arrangements. Bob Diamond’s 2010 remuneration was considered carefully by the Committee ~~of Sponsoring Organisations~~as part of the ~~Treadway Commission in Internal Control – Integrated Framework. Management concluded that, based on its assessment,~~annual remuneration review and his remuneration is disclosed, together with the ~~internal control over financial reporting of Barclays PLC and Barclays Bank PLC was effective as of 31st December 2009.~~

~~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 166.~~

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 rulesremuneration of the ~~Securities~~other executive Directors, on pages 153 and ~~Exchange Commission that permit Barclays Bank PLC to provide only the management’s report in this annual report.~~154.

The ~~system of~~Committee will actively review remuneration throughout the year and will remain focused on internal ~~financial~~ and ~~operational controls~~external perspectives, including regulatory developments. Remuneration regulation is ~~also subject~~expected to ~~regulatory oversight~~evolve further in ~~the United Kingdom~~2011 and ~~overseas. Further information on supervision by the financial services regulators is provided under Supervision~~we will maintain a close dialogue with our key external stakeholders and ~~Regulation in the Risk Management section on pages 117 to 118.~~our shareholders throughout 2011.

~~Changes in internal control over financial reporting~~

There have been no changes in Barclays PLC and Barclays Bank PLC’s internal control over financial reporting that occurred during the period covered by this report which have materially affected or are reasonably likely to materially affect Barclays PLC and Barclays Bank PLC’s internal control over financial reporting.


				~~163~~

~~Statement of Directors’ responsibilities for accounts~~The Remuneration Report

The following ~~statement is made with a view to distinguishing for shareholders the respective responsibilities~~report of the ~~Directors~~Committee provides further explanation of current remuneration governance and arrangements. It is divided into the following sections:

–	Committee remit, membership, advisors and activities in 2010

–	Remuneration policy, decisions, governance and regulation

–	Employees’ annual remuneration

–	Executive Directors’, non–executive Directors’ and former Directors’ remuneration

–	2010 remuneration of the five highest paid senior executive officers (excluding executive Directors) and aggregate Code Staff remuneration

–	Share plan and long term incentive plan descriptions

The Committee unanimously recommends that you vote at the 2011 AGM to approve the Remuneration Report as all Directors ~~are required by the Companies Act 2006 to prepare accounts for each financial year and,~~will be doing with regards to Group accounts, in accordance with Article 4 of the IAS Regulation. The Directors have prepared individual accounts in accordance with IFRS as adopted by the European Union. The accounts are required by law and IFRS to present fairly the financial position of the Company and the Group and the performance for that period. The Companies Act 2006 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 167 to 282, and the additional information contained on pages 302 to 312, 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.~~

~~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 2009, 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:~~own Barclays shares.

~~(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, which is incorporated into the Directors’ Report on pages 122 to 125, 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

While I am responsible for the smooth operation of the Board, the Chief Executive is responsible for running our businesses. The table opposite highlights our respective key responsibilities:

~~9th March 2010~~Board Attendance


	Independent		Scheduled Meetings eligible to attend		Scheduled Meetings attended		Additional Meetings eligible to attended		Additional meetings attended
Group Chairman
Marcus Agius		OA		8		8		3		3
Executive Directors
Robert E Diamond^a		ED		8		8		3		2
Chris Lucas^a		ED		8		8		3		2
John Varley^a (to 31st December 2010)		ED		8		8		3		2
Non-executive Directors
David Booth		I		8		8		3		2
Sir Richard Broadbent		I		8		7		3		3
Alison Carnwath (from 1st August 2010)		I		4		3		2		2
Leigh Clifford (to 30th September 2010)		I		6		4		2		1
Fulvio Conti		I		8		7		3		2
Simon Fraser		I		8		8		3		3
Reuben Jeffery		I		8		8		3		3
Sir Andrew Likierman		I		8		8		3		3
Dambisa Moyo (from 1st May 2010)		I		5		5		2		1
Sir Michael Rake		I		8		8		3		3
Sir John Sunderland		I		8		8		3		3

Secretary
Lawrence Dickinson

Key

OA on appointment

ED executive Director

I independent non-executive Director

Note

a Although eligible to attend, the executive Directors did not attend the additional meeting held to consider and approve the appointment of a new Chief Executive.

134

Senior Independent Director and Deputy Chairman

Company Secretary

The Company Secretary, Lawrence Dickinson, supports me and the Board Committee Chairmen in all stages of managing our meetings, from setting the annual meeting agenda through to ensuring that agreed actions are completed. Lawrence also assists me in ensuring that there are timely and appropriate information flows within and to the Board, the Board Committees and between the non-executive Directors and senior management. He provides support to me in designing and facilitating induction programmes for new non-executive Directors and in putting together the development programme for Directors. He is also our principal corporate governance adviser.

(2) Effectiveness

Board Size, Composition and Qualification

The Board is currently comprised of 13 members: Group Chairman, two executive Directors and ten independent non-executive Directors. The balance of the Board is illustrated below. Board size has reduced from a peak of 18 Directors in 2007. We believe that the optimum Board size for Barclays is 12-15 members, which provides for the broad range of skills and experience required to effectively govern a global banking business, while being small enough to enable constructive group discussion and opportunity for full participation by all Directors. It also enables us to ensure that the principal Board Committees are appropriately resourced without placing an undue burden on any individual non-executive Director.

LOGO

Key responsibilities


~~Financial~~Group Chairman		~~statements~~ Chief Executive

Lead the Board and manage the business of the Board through setting its agenda and taking full account of the issues and concerns of Board members		Lead the development of short, medium and long term business strategy for approval by the Board and oversee successful delivery of the Group strategy

~~165~~ Ensure that Board members receive accurate, timely and clear information, in particular about the Group’s performance, to enable the Board to take sound decisions, monitor effectively and provide advice to promote the success of the Company		~~Presentation of information~~Lead the executive Directors and Group Executive Committee in making and implementing operational decisions and running the Group’s business on a day to day basis

~~166~~ Keep under review, with the Board, the general progress and long-term development of the Group		~~Independent Registered Public Accounting Firm’s report~~
~~167~~		~~Accounting policies~~
~~177~~		~~Accounting developments~~
~~178~~		~~Consolidated income statement~~
~~179~~		~~Consolidated statement of comprehensive income~~
~~180~~		~~Consolidated balance sheet~~
~~181~~		~~Consolidated statement of changes in equity~~
~~182~~		~~Consolidated cash flow statement~~
~~183~~		~~Parent Company accounts~~
~~186~~		~~Notes to~~Ensure the ~~accounts~~Board is provided with accurate, concise and timely information

Ensure effective communication with shareholders and ensure that members of the Board develop and maintain an understanding of the views of major investors and other key stakeholders		Chair the Group Executive Committee

Chair the Board Corporate Governance and Nominations Committee		Assist the Board Corporate Governance and Nominations Committee in executive succession planning

Establish a close relationship with the Chief Executive, providing support and advice while respecting his executive responsibilities		Establish a close relationship with the Group Chairman, providing support hile respecting his governance responsibilities


					135

Corporate governance

Corporate governance report continued

Director Independence

The Board considers non-executive Director independence on an annual basis, as part of each Director’s performance evaluation. The Board Corporate Governance and Nominations Committee and the Board reviewed the independence of each non-executive Director in early 2011 and concluded that each of them continues to demonstrate those behaviours that the Board considers to be essential indicators of independence and which are set out in our ‘Charter of Expectations’. These criteria are:

–	provides objective and constructive challenge to Management:

–	is prepared to challenge others’ assumptions, beliefs or viewpoints as necessary for the good of the organisation;

–	questions intelligently, debates constructively, challenges rigorously and decides dispassionately;

–	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 evaluate the information and responses provided by Management.

Director Re-election

Succession Planning and Board Appointments

Non-executive Director Terms of Appointment

LOGO

Note

a	Individual Directors may fall into one or more categories.

LOGO


136

Directors' Conflicts of Interest

Directors have a duty under UK company law to avoid situations in which they have or may have interests that conflict with those of the Company, unless that conflict is first authorised by the Directors. Our articles of association allow the Board to authorise such potential conflicts, taking into account all the circumstances. This includes potential conflicts that may arise when a Director takes up a position with another company. Where Directors wish to take up an external appointment, they are under an obligation to obtain authorisation before doing so. Each appointment is considered by the Board on its individual merits, taking into account the expected time commitment and any relationships with Barclays. Directors must also notify the Board if circumstances regarding external appointments change and I make myself available to all non-executive Directors should they wish to discuss any possible, actual or perceived conflicts.

Reuben Jeffery's appointment in 2010 as Chief Executive Officer of Rockefeller & Co., Inc., a privately-owned US investment and wealth management firm, was considered by the Board during the year. I discussed the potential conflict with Tom Kalaris, Chief Executive of Barclays Wealth, as well as John Varley, Bob Diamond and other key senior executives before the matter was discussed by the Board. Professional advice was also sought on the extent of the potential conflict. The Board is happy that the Barclays Wealth business overlap with Rockefeller & Co., Inc. is extremely small in a Group context and that, as a result, the likelihood of a conflict of interest arising in practice is remote. We have agreed, however, that if there is a potential conflict, Reuben Jeffery will excuse himself from specific Board discussions.

Board Induction and Professional Development

~~283~~ Board Induction Programme

Group Overview

– Duties and Responsibilities of Directors' of authorised institutions

– Group Overview

– CEO Introduction

– Group Finance Director Introduction

Review of Businesses

– Corporate and Investment Banking and Wealth Management

– Global Retail Banking

In depth Review of Businesses

– Absa

– Barclaycard

– Barclays Africa

– Barclays Capital

– Barclays Corporate

– Barclays Wealth

– UK Retail Banking

– Western Europe Retail Banking

Group Functions

– Compliance

– Group Legal

– Group Strategy

– Human Resources

– Internal Audit

– Investor Relations

– Risk

Other

– Brand & Marketing

– External Audit


					137

Corporate governance

Corporate governance report continued

– Treating Customers Fairly

– Barclays Capital

– Derivatives

– Risk based pricing

The briefing sessions, which were interactive, were led by executives from the relevant business units, using material that was circulated in advance.

Board Activity

Board Risk Committee Induction

– Capital and Liquidity

– Economic Capital and Stress Testing

– External Audit

– Market Risk

– Operational Risk

– Retail Credit Risk

– Tax Risk

– Wholesale Credit Risk

The chart below illustrates how the Board allocated its time during 2010.

Evaluation of Board Performance

LOGO


138


Evaluation Statement
Before I describe the 2010 evaluation process and its general outcomes, I provide below a summary of the Board’s progress against its 2009 action plan:
Key themes		Actions

Board size and diversity		The Board has reduced in size and is more diverse.

Holding additional Board meetings overseas, particularly given the increased size of our US operations		The Board held one meeting overseas in 2010 and plans to hold two meetings overseas in 2011.

Increasing visibility of senior executives below Board and Group Executive Committee level		Directors have had more opportunities to interact with senior executives below Board level via briefing sessions, attendance at management conferences and post-Board meeting lunches. The remit of the Board Corporate Governance and Nominations Committee is being extended to cover succession planning at business unit level.

Improving the format of strategy presentations to the Board		The form and content of strategy presentations has been revised to include enhanced financial and risk information. In addition to the regular monthly management accounts, the Board receives more detailed financial information on a quarterly basis.

For the 2010 evaluation process, the Board Corporate Governance and Nominations Committee decided again that it was appropriate for the evaluation to be independently facilitated, given the significant strategic issues under consideration and the pending appointment of a new Chief Executive. Having reviewed the facilitators available in the market, Egon Zehnder International was re-engaged to facilitate the 2010 Board Effectiveness Review. Although we will continue to monitor the market, the Board is comfortable that Egon Zehnder International provides an impartial and objective service irrespective of its position as one of Barclays executive search consultants. The 2010 evaluation process again took the form of questionnaires completed by Directors and key executives, followed by structured interviews with representatives from Egon Zehnder International. We feel that the interviews, which provide colour and context to questionnaire responses, are an essential part of the process. All participants were asked to complete the Board evaluation questionnaire, with separate Board Committee questionnaires completed by Board Committee members. The Board evaluation questionnaire covered the following areas: – Group Performance; – Strategy and performance of objectives, including involvement of the non-executive Directors; – Reporting to shareholders and stakeholders; – Structure, people and succession planning; – Decision making processes, including the culture for effective challenge; – Information flows and presentations; – Board structure and composition, including the experience and knowledge of non-executive Directors; – Board roles and responsibilities; – Board and Management relationships, including the relationship between the Chairman and the Chief Executive; and – Board Meetings and Board Committees.		The results of the evaluation were presented to the Board in December 2010 and confirmed that Barclays Board continues to operate at a very high level of effectiveness. One of the advantages of undertaking an annual evaluation is that we can monitor trends in responses to questions, as shown below. The key themes arising from the 2010 evaluation and which will form the basis of the action plan for 2011 are: – Ensuring that Board dynamics remain effective following recent membership changes, including the appointment of the new Chief Executive; – Ensuring that a wide range of skills, experience, background and diversity on the Board is maintained; – Continuing the focus on strategic decision making in light of the evolving regulatory environment; and – Revising the format of Board meetings to allow the Board to devote more time to discussion of key strategic issues, including discussions the evening before Board meetings.

139

Corporate governance

Corporate governance report continued


Evaluation Statementcontinued
In addition to evaluating the performance of the Board and Board Committees, we also evaluate the performance of individual Directors. Evaluation reporting lines are summarised below:
Position		Evaluated by

Group Chairman		Senior Independent Director, who meets with non-executive Directors without the Group Chairman present in order to obtain their feedback

Chief Executive		Group Chairman

Senior Independent Director		Group Chairman

Executive Directors		Chief Executive

Non-executive Directors		Group Chairman, who holds private meetings with each non-executive Director
In respect of individual non-executive Director performance, in early 2011 I held private meetings with each non executive Director to talk through the evaluation results and agree individual development plans with each of them for the year ahead.

Board Corporate Governance and Nominations Committee Chairman’s Report

Member

Independent

Meetings

eligible to

attend

Meetings

attended

Marcus Agius (Chairman)

David Booth (from 1st January 2010)

Sir Richard Broadbent

Sir Michael Rake

Sir John Sunderland

Secretary

Lawrence Dickinson

Key

OA on appointment

I independent

What is our role?

Who are the Committee?

What did we do in 2010?


140

Board Corporate Governance and Nominations Committee Chairman’s reportcontinued

joined the Board Risk Committee, where her background in financial services and as a global economist will bring a valuable insight to that Committee’s deliberations of macro-economic risks.

LOGO

Appointing a new Chief Executive


					141

Corporate governance

Corporate governance report continued

(3) Accountability

Sir Michael Rake, Chairman of the Board Audit Committee, now reports on the Board Audit Committee’s activities during 2010.

Board Audit Committee Chairman’s report

LOGO

Member

Independent

Meetings
eligible to
attend

Meetings
attended

Sir Michael Rake (Chairman)

Alison Carnwath

(from 1st October 2010)

Fulvio Conti

Simon Fraser

Sir Andrew Likierman

Secretary

Lawrence Dickinson

Key

OA on appointment

I independent

2010 was my first full year as Chairman of the Board Audit Committee and one which saw us appoint a new lead audit partner, Andrew Ratcliffe, who succeeded Phil Rivett. I am pleased to report that the handover to the new lead audit partner went smoothly and the transition was properly and effectively managed. My report on the Committee’s work during 2010 is set out below.

What is our role?

Who are the Committee?

What did we do in 2010?

Financial Statements and Accounting Policies

–


142

Board Audit Committee Chairman’s reportcontinued

–

Internal Control

2010 saw some restructuring/re-segmentation of our businesses and our focus was on ensuring that there was no impact on controls during and after the reorganisation. In October, we held an additional meeting specifically to review the overall control environment and the trends in key control indicators. During the year, we reviewed the control environment in each of Absa, Barclays Capital, Barclays Corporate, Barclays Wealth, Barclays Africa, UK Retail Banking and Western Europe Retail Banking in detail, with the Chief Executives of those businesses presenting to the Committee.

The Committee also spent time this year reviewing the control environment at Barclays Capital, given the increased size of the business following the Lehman acquisition. In particular, we reviewed controls in the areas of product valuation, the trading businesses and client assets segregation. In terms of product valuation, a significant amount of activity has taken place to strengthen further the valuation framework and control and governance processes. A specific project was also initiated in 2010, at Management’s behest, to review Barclays Capital’s controls following the Lehman acquisition and taking into account the new regulatory environment to ensure they are best in class. We received reports on the progress of the project, its findings and the actions that are being taken.

We received regular reports during 2010 on the Group’s arrangements whereby employees can raise concerns and details of any action being taken to follow up specific reports.

Oversight of Internal Audit and External Audit

Internal Audit

External Audit

We discussed and agreed with PwC the audit plan for 2010 to ensure that key areas of judgement in the Group’s financial statements were appropriately covered.

To evaluate the performance and effectiveness of the external auditor, we sought feedback from key stakeholders across the Group via a questionnaire. The responses were analysed and presented to the Committee for review and discussion in early 2011. The Committee is fully satisfied with the performance of PwC and has recommended to the Board and to shareholders that PwC should be re-appointed as the Group’s auditors at the AGM on 27th April 2011.


					143

Corporate governance

Corporate governance report continued

Board Audit Committee Chairman’s reportcontinued

External auditor objectivity and independence: Non-Audit Services

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 Resources functions

– broker or dealer, investment advisor or investment banking services

– legal, expert and tax services involving advocacy

Allowable services that we 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

We conducted our annual review of our performance as part of the annual Board Effectiveness Review process and concluded that we continue to operate effectively. We will focus in 2011 on ensuring that there is sufficient time at meetings for challenge and debate given the Committee’s heavy agenda. Furthermore, while we receive timely and appropriate information from Management, we will continue to work at ensuring that papers presented to the Committee are concise and distil the key issues effectively.

LOGO

Sir Michael Rake

Chairman, Board Audit Committee


144

David Booth, who became Chairman of the Board Risk Committee on 1st January 2010, now reports on that Committee’s activities during 2010.

Board Risk Committee Chairman’s report

LOGO

Member

Independent

Meetings
eligible to
attend

Meetings
attended

David Booth (Chairman)

Sir Richard Broadbent

(to 30th September 2010)

Reuben Jeffery

(from 1st January 2010)

Sir Andrew Likierman

Dambisa Moyo

(from 1st October 2010)

Sir Michael Rake

Secretary

Lawrence Dickinson

Key

OA on appointment

I independent

What is our role?

Who are the Committee?

What did we do in 2010?


					145

Corporate governance

Corporate governance report continued

Board Risk Committee Chairman’s reportcontinued

During the year we received the first of what we intend to be an annual presentation on macro prudential and macro-economic risk and the impact this may have on the Group’s business going forward.

LOGO

In view of the difficulties of some countries in the Eurozone, we spent some time in 2010 reviewing country and sovereign risk, in particular, in specific European countries (Spain, Portugal, Italy, Ireland and Greece) and in sub-investment grade countries. The review covered the extent of our exposures and the caps that are in place to limit concentrations. We also reviewed the Group’s position in the commercial property sector including risk appetite, exposures and controls in our four key geographies: UK, US, Spain and South Africa. In late 2010, we received a report on the lessons learned from the impairment suffered by our Corporate business in Spain, which has been shared with the full Board. A series of actions have been identified and are being implemented, not just in relation to Spain but also in terms of how overall risk and returns across each business in the Group are analysed.

As usual, we considered risk appetite for 2011 although this year we also reviewed risk appetite methodology and enhancements that have been made to the process. A set of financial volatility parameters, such as Profit Before Tax and Loan Loss Rate are agreed. Based upon the Medium Term Plan, the Group’s performance in a 1 in 7 and 1 in 25 scenario is then assessed. The performance of the agreed parameters in such scenarios is then assessed to identify any potential constraints, for example, we would not wish to see the Loan Loss Rate rise above certain pre-agreed levels in these scenarios. As a result of the review, we agreed to recommend the risk appetite to the Board.

LOGO

David Booth

Chairman, Board Risk Committee


146

(4) Remuneration

(5) Relations with Shareholders

Institutional Shareholders

Private Shareholders

We prefer to communicate electronically with our shareholders: this is beneficial for the environment and lowers costs for the Group. We also encourage private shareholders to hold their shares in Barclays Sharestore, where shares are held electronically in a cost-effective and secure environment. Private shareholders can use our Barclays e-view service to receive their shareholder documents electronically and to get immediate access to information relating to their personal shareholding and dividend history. Barclays e-view participants can also change their details and dividend mandates online and receive dividend tax vouchers electronically.

AGM

(6) Statement on US Corporate Governance Standards

The statement we are required by the NYSE to make is set out below:

‘Director Independence

Board Committees

We have a Board Corporate Governance and Nominations Committee and a Board 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. The NYSE Rules state that both Committees must be composed entirely of independent Directors. 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 Remuneration Committee. Except for these appointments, both Committees are composed solely of non-executive Directors, whom the Board has determined to be independent. We comply with the NYSE Rules requirement that we 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

Code of Ethics

Shareholder Approval of Equity-compensation Plans

LOGO

Marcus Agius

Group Chairman

10th March 2011


					147

Corporate governance

Remuneration report

Statement from the Chairman of the Board Remuneration Committee

The purpose of this report is to provide more detail on remuneration in aggregate and for senior management.

The Committee’s approach

The Committee has established frameworks for remuneration in each of the businesses and for the Group as a whole. The frameworks are forward looking and are based on financial metrics to assist with the planning and management of remuneration in each of the key businesses. The frameworks incorporate key financial ratios achieved by Barclays and its competitors and are used by the Committee to inform its decision making process. The Committee considers both relative and absolute performance when formulating its decisions.

Upfront risk assessment:

–	Before business is undertaken, detailed stress-testing and scenario analysis is performed to test the viability of plans on a risk-adjusted basis and to determine risk appetite

–	As part of the risk appetite framework, the balance sheet including remuneration outcomes are modelled under 1 in 7 and 1 in 25 stresses to ensure we build our portfolios having considered their performance under stress

Performance monitoring:

–	Detailed monitoring of risk exposures against agreed limits ensures business is conducted within the planned appetite

–	The Committee receives information on ongoing financial and risk performance, market intelligence and regulatory changes

–	The Committee monitors forecast remuneration throughout the year in the context of business performance and with the assistance of the remuneration frameworks

Remuneration outcomes determined:

–

The Committee’s work in 2010

In addition to the normal cycle of business, in 2010 the Committee also spent a significant amount of its time on:

–	Considering practice in light of new and emerging regulatory guidelines

–	Reviewing performance award funding proposals. Given the higher levels of deferral now being implemented, the Committee developed its approach for 2010 to ensure it reviewed proposals both on a “value at award” basis and on an accounting charge basis

–	Reviewing the structure of 2010 performance awards and reviewing the new remuneration arrangements that are proposed for executive Directors: the Share Value Plan and the Barclays Long Term Incentive Plan

–	Reviewing the 2010 remuneration decisions for executive Directors, Code Staff and other senior executives. Code Staff are the Group’s employees whose professional activities could have a material impact on the risk profile of the Group

–	Reviewing the remuneration package for the new Chief Executive

Financial background to the Committee’s work

Barclays overall financial performance in 2010 included:

–	Profit before tax of £6,065m (up 32% on 2009)

–	Total income of £31,440m (up 8%) and net income of £25,768m (up 22%)

–	Impairment of £5,672m (down 30%) giving a loan loss rate of 118bps (2009: 156bps)

–	Value of Group 2010 performance awards: £3.4bn, down 7% on 2009

–	Improved returns on average shareholders’ equity of 7.2% (2009: 6.7%)

–	Final dividend of 2.5p per share making 5.5p for the year (an increase of more than 100% over the 2009 dividend of 2.5p)

Key measures of the Group’s financial strength:

–	Core Tier 1 capital ratio of 10.8% (2009: 10.0%) and Tier 1 capital ratio of 13.5% (2009: 13.0%)

–	Group liquidity pool improved by 21% from £127bn in 2009 to £154bn in 2010

Key risk themes:

–	Barclays growth in 2010 was disciplined

–	Barclays impairment performance was favourable to plan

–	Barclays risk profile in 2010 stabilised and improved

–	Adherence to control frameworks has generally been good

At a business level:

–	Global Retail Banking profit before tax of £1,829m (2009: £1,821m)

–	Absa profit before tax of £616m, up 17% (2009: £528m)

–	Barclays Capital profit before tax of £4,780m (2009: £2,464m). Excluding own credit, profit before tax of £4,389m, up 2% (2009: £4,284m)

–	Barclays Corporate loss before tax of £631m (2009: profit of £157m)

–	Barclays Wealth profit before tax of £163m, up 14% (2009: £143m)

Wider background to the Committee’s decisions


148

The commitments that Barclays made to the UK Government under Project Merlin include commitments on remuneration. These are important and I set out here how we have met those commitments:

–	We committed to showing responsibility in pay in 2010 and beyond. Our decisions for 2010 reflect this, and our robust governance processes will ensure this continues for 2011 and beyond

–	We committed that aggregate UK bonuses for 2010 would be lower than 2009. We have confirmed to the FSA that this was the case

–	We committed to greater shareholder engagement regarding remuneration. We have consulted with our key shareholders and representative bodies during 2010, and we will continue this throughout 2011

–

–	The Committee reviewed the remuneration proposals for at least the ten highest paid staff in each of the Group’s principal businesses. In practice we review many more than this in each business

Key Committee decisions in 2010 - quantum

The Committee’s work in 2010 included reviewing and (except for Absa) approving the proposed 2010 performance awards for each of the Group’s businesses:

–	Barclays Group - 2010 performance awards down 7% on 2009, with profit before tax up 32%

–	Global Retail Banking – 2010 performance awards up 2% on 2009, which was in line with Global Retail Banking’s profit performance for 2010

–	Absa – 2010 performance awards up 12% on 2009, which was in line with Absa’s profit performance for 2010

–

–	Barclays Wealth – 2010 performance awards up 11% on 2009, less than the increase in profits

Key Committee decisions in 2010 - structure

–

The Remuneration Report

The following report of the Committee provides further explanation of current remuneration governance and arrangements. It is divided into the following sections:

–	Committee remit, membership, advisors and activities in 2010

–	Remuneration policy, decisions, governance and regulation

–	Employees’ annual remuneration

–	Executive Directors’, non–executive Directors’ and former Directors’ remuneration

–	2010 remuneration of the five highest paid senior executive officers (excluding executive Directors) and aggregate Code Staff remuneration

–	Share plan and long term incentive plan descriptions

The Committee unanimously recommends that you vote at the 2011 AGM to approve the Remuneration Report as all Directors will be doing with their own Barclays shares.

On behalf of the Board

LOGO

Sir Richard Broadbent

Chairman, Board Remuneration Committee

7th March 2011


					149

Corporate governance

Remuneration report continued

Board Remuneration Committee remit and membership

The Committee provides governance and strategic oversight of executive and all other employee remuneration, Barclays Human Resources activities and senior management development. The Committee’s terms of reference are online atwww.barclays.com/corporategovernance. The terms of reference were revised in both February 2010 and February 2011 in light of best practice and to take account of regulatory and corporate governance developments. The Committee met formally 11 times during 2010. The Chairman of the Committee reported to the Board on the substantive issues discussed at each meeting. In addition to the formal meetings, the Committee members frequently consult between meetings and also meet informally. The Chairman of the Committee also consulted extensively with shareholders and representative bodies during 2010.

The members of the Committee during 2010 were Sir Richard Broadbent (Committee Chairman), Marcus Agius (Group Chairman), Simon Fraser, Sir John Sunderland, Leigh Clifford (until 30 September 2010) and Alison Carnwath (from 1 October 2010). Details of members’ attendance is shown in Table 1.

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. Marcus Agius is also a member and he was considered independent on appointment to the Board.

Table 1: Committee attendance


Member	Meetings eligible to attend		Meetings attended
Sir Richard Broadbent (Chairman)		11		11
Marcus Agius		11		11
Alison Carnwath
(from 1 October 2010)		3		2
Leigh Clifford
(until 30 September 2010)		8		6
Simon Fraser		11		11
Sir John Sunderland		11		11

Secretary
Patrick Gonsalves

LOGO

Advisors

The Committee’s work is supported by independent professional advice. The Committee reviews the appointment of advisors each year. Towers Watson was re-appointed by the Committee in 2010.

Any potential conflicts of interest the advisors may have are disclosed to the Committee. In addition to advising the Committee, Towers Watson provided remuneration benchmarking data to the Group. Towers Watson also provided pension advice as the appointed advisor to the trustee of the UK Retirement Fund.

The Chief Executive, the Human Resources Director, the Compensation and Benefits Director and, as necessary, members of the Executive Committee, also advise the Committee, supported by their teams. No Group employee is permitted to participate in discussions or decisions of the Committee relating to his or her own remuneration.

Committee activities in 2010

The outcome of the Board effectiveness review showed that the Committee operated effectively in 2010. A chart setting out how the Committee’s time was allocated in 2010 is set out in Figure 1. Table 2 sets out the key matters discussed by the Committee in 2010.

Table 2: Key matters discussed by the Committee in 2010


Month		Key matters
January		– Regulatory update – Vesting of long term incentive awards – Payround discussions

February (2 meetings)		– Risk, financial performance and regulatory updates – Payround discussions – Resourcing update – Vesting of long term incentive awards – Executive Director and Executive Committee remuneration proposals – Review of Committee terms of reference

March		– Executive Director remuneration

April		– Long term incentive plan calibration – Resourcing update and hiring governance processes – Regulatory update

June		– Payround discussions

July		– Risk, financial performance and regulatory updates – 2009/10 payround review – Initial discussions of 2010/11 payround – Talent management update – Resourcing update – Review of Committee activity against terms of reference – Re-appointment of independent advisor

August		– Payround discussions

November		– Risk, financial performance and regulatory updates – Payround discussions – Resourcing update – Health & safety update – Pensions governance update – Talent management deep drive – All employee share plans update

December (2 meetings)		– Risk, financial performance and regulatory updates – Payround discussions – Resourcing update


150

Executive Directors’ remuneration – alignment of interests with shareholders

Figure 2 shows the aggregate total direct remuneration of the executive Directors for 2007, 2008, 2009 and 2010 compared to the indicative fair value movements on the executive Directors’ aggregate share-based remuneration and beneficial interests in Barclays PLC shares from 1st January 2007 on a cumulative basis. The performance of the Barclays PLC share price is shown for context. The chart shows that the executive Directors’ interests have decreased in value by £68m over 2007, 2008, 2009 and 2010 as a consequence of the movement in Barclays share price.

LOGO

Total Shareholder Return (TSR)

Figure 3 shows the value, at 31st December 2010, of £100 invested in Barclays on 31st December 2005 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 2010, a hypothetical £100 invested in Barclays on 31st December 2005 would have generated a total loss of £47 compared with a gain of £26 if invested in the FTSE 100 Index.

LOGO

Barclays Remuneration Policy

The aims of the Barclays Remuneration Policy are 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 remuneration that is affordable and appropriate in terms of value allocated to shareholders and employees.

5.	Encourage behaviour consistent with the following principles that guide Barclays ~~Bank PLC data~~business:

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 remuneration 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

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

The Committee keeps under review the Remuneration Policy and arrangements as detailed in this report to ensure that Barclays programmes remain competitive and provide appropriate incentive for performance.

Remuneration decisions

The Remuneration Policy provides a framework for the Committee in carrying out its work, including remuneration decisions in relation to executive Directors.

One of the core elements of Barclays approach is to deliver remuneration that is affordable and appropriate in terms of value allocated to shareholders and employees, with full consideration also being given to other relevant stakeholders such as customers, regulators and governments. When making remuneration decisions, Barclays balances the views of these stakeholders with the need to be able to attract, retain and incentivise talent in a competitive market.

A continued focus during 2010 has been to ensure that our approach to discretionary remuneration is structured in accordance with the FSA’s Remuneration Code (the FSA Code) and the Financial Stability Board Implementation Standards. Work has also continued to ensure that aggregate performance award decisions balance a number of factors including the need to continue to strengthen capital ratios, to invest in the business, to grow the dividend and to protect the business franchise.


					151

Corporate governance

Remuneration report continued

At an aggregate level, in order to ensure that a link is maintained between pay and performance, performance award decisions are made by reference to a number of quantitative and qualitative measures and are determined at the discretion of the Committee. During 2010 the role of the risk and compliance functions in remuneration governance was enhanced, building on the work done in 2009. As well as offering regular updates to the Committee on risk-adjusted business performance and the Group's risk profile, the risk function also reviewed remuneration frameworks, aggregate performance award proposals and new incentive plan design proposals from a risk management perspective. The risk function also proposed risk-adjusted metrics for use in long term incentive plans and reviewed malus provisions (including those for executive Directors).

A key element of linking pay and performance on an individual basis is the robust performance assessment framework operated across the Group. Employee behaviours are considered in the context of the principles that guide Barclays business, as set out in our Remuneration Policy. The extent to which employee behaviours accord with these standards is assessed as part of the performance assessment framework, which includes an examination of the employee's performance from both financial and non-financial perspectives. Performance against these areas helps to reinforce appropriate behaviours and so mitigate operational and reputational risks. The resulting performance ratings have a direct impact on all individual remuneration decisions. In 2010, compliance with risk and control frameworks has been further enhanced within Barclays performance assessment process.

Remuneration Policy governance

To ensure appropriate operation of the Remuneration Policy, the Committee has established frameworks for the governance of remuneration in each of the major businesses and for the Group as a whole. The frameworks are forward looking and are based on financial metrics to assist with the planning and management of remuneration in each of the key businesses. These frameworks incorporate metrics consistent with delivering the strategy of the businesses. The Committee exercises judgement in the application of the frameworks to promote the long term success of the Group for the benefit of shareholders. The current frameworks set out key financial ratios achieved by Barclays and its competitors and are used by the Committee to inform its decision-making process when approving aggregate remuneration spend, including performance awards. The Committee also approves strategic investment for new hires, and the remuneration arrangements of any employee with annual total remuneration equal to or in excess of a pre-determined threshold as stated in the Committee terms of reference (£750,000 in 2010). In addition, the remuneration of Code Staff is also reviewed by the Committee. Code Staff are the Group's employees whose professional activities could have a material impact on the Group's risk profile, including senior risk and compliance officers. The remuneration of Code Staff is subject to the remuneration principles of the FSA Code. References to the structure of remuneration for Code Staff in this report exclude Code Staff whose total remuneration falls within the FSA Code's de minimis provisions.

For individual remuneration decisions made by the Committee, including those for executive Directors and other key senior management, 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 a 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. As set out in the Committee's 2009 report, Barclays closed its UK Final Salary pension schemes to future accrual with effect from 31st March 2010 in order to reduce current and future UK pension liability risk and to ensure that our pension arrangements are sustainable and affordable over the long term. Details of the pension arrangements in place for executive Directors are set out on page 154.

Regulation

Barclays is committed to the maintenance of robust remuneration arrangements that are in accordance with regulatory requirements including the FSA Code. Table 3 sets out some of the ways that we fulfil this commitment.

Table 3: Remuneration regulation


Regulatory area		Barclays practice
Scope and application		Code Staff identified and made aware of the implications of their status

Governance		Committee scope widened to review the remuneration of Code Staff. Terms of reference updated in 2010 to reflect this

Capital		Quantum of variable remuneration in 2010 considered in the context of capital planning. Capital efficiency is a key goal in the design of new remuneration plans. Deferred incentive awards for Code Staff and other senior executives for 2010 include contingent capital awards, which are subject to a vesting condition linked to Barclays Group Core Tier 1 capital ratio

Guarantees		The policy is that guarantees are used only in exceptional circumstances in the case of new hires and for one year

Risk-focused remuneration policies		Barclays policies, procedures and practices promote sound risk management. This is embodied in the Remuneration Policy and Barclays Guiding Principles. Risk and remuneration are linked in Barclays through governance processes, performance award funding, the performance assessment process, performance metric selection, deferral structures, and malus and prudent financial control provisions

Deferral and payment in Barclays shares		In accordance with the FSA Code, deferral rates for Code Staff of up to 60% of annual performance incentives apply. Deferred incentive awards for Code Staff for 2010 include awards in Barclays shares and contingent capital awards. In addition, for Code Staff 50% of non-deferred incentives for 2010 are awarded as Barclays shares subject to a six month holding period. Code Staff are also subject to a shareholding guideline. For other employees a proportion of annual performance incentives is deferred on a graduated basis


152

Employees’ annual remuneration

The Remuneration Policy applies the same overarching principles and practices to all employees, including executive Directors and other Code Staff, though the exact structure and quantum of individual packages varies by business, geography and role.

Table 4 summarises the key elements of Barclays remuneration arrangements.

Table 4: Key elements of Barclays remuneration arrangements


Element	Strategic purpose	Programme summary
Base salary	To attract, retain and incentivise talent in a competitive market	– Reviewed annually – Salaries for all roles are determined with reference to relevant market practice – All employees’ salaries are benchmarked against the appropriate market
Annual performance incentive	To incentivise the delivery of annual goals at Group, business, team and individual levels	– Annual performance incentives are awarded on a discretionary basis, based on Group, business, team and individual performance – The aggregate level of annual performance incentives is determined by reference to Group and business unit metrics. These include a range of risk-adjusted financial metrics including profit before tax (PBT) and return on risk weighted assets (RoRWA) – Individual annual performance incentives are strongly differentiated based on individual performance (both financial and non-financial). Adherence to applicable risk and control frameworks is part of performance assessment – The structure of individual annual performance incentives may vary based on amount, and may include cash and deferred incentive awards. Details on deferred incentive awards are set out below – 50% of non-deferred annual performance incentives for 2010 for executive Directors (100% of non-deferred for Mr Diamond) and other Code Staff is in the form of Barclays shares subject to a six month holding period
Deferred incentive awards and long term incentive awards	Deferred incentive awards are designed to align performance with shareholder value and increase retention for senior employees Long term incentive awards reward execution against the Group strategy and the creation of sustained growth in shareholder value. The awards are designed to align the most senior employees’ goals with the long term success of Barclays	– Employees who are awarded an annual performance incentive over a threshold level (as determined each year by the Committee) receive part of the award as a deferred incentive award dependant on future service (including awards in Barclays shares) – 60% of 2010 annual performance incentives for executive Directors is deferred (72% for Mr Diamond), and for other Code Staff 60% is deferred (40% for annual performance incentives of no more than £500,000). For other employees a graduated system is operated so that those who receive higher value annual performance incentives receive more of the award as a deferred incentive award – The most senior employees in Barclays may also receive long term incentive awards. Long term incentive awards are subject to risk-adjusted performance conditions, normally measured over a three year performance period – The vesting of long term incentive awards is subject to the discretion of the Committee to ensure that awards only vest for appropriate performance. Delivery of vested long term incentive awards includes awards in Barclays shares – Vesting of both deferred incentive awards and long term incentive awards is subject to malus and prudent financial control provisions in accordance with the FSA Code – Barclays operates a number of deferred incentive award plans and long term incentive plans. Details of the principal plans under which awards were made in 2010 are included in Table 24 and new plans proposed for 2011 in Table 25 – Deferred incentive awards for 2010 for executive Directors, other Code Staff and other senior executives will include awards in the form of contingent capital awards, which are subject to a vesting condition that Barclays Group Core Tier 1 capital ratio is at least 7% on the vesting date
Retirement benefits (or cash allowance)	To provide a market competitive post-retirement benefit	– Barclays provides retirement benefit arrangements to employees across the Group, with appropriate consideration of market practice and geographical differences
Other benefits	To provide market competitive benefits	– Benefits vary by role and may include private medical insurance, life and disability cover and car allowance, with appropriate consideration of market practice and geographical differences


					153

Corporate governance

Remuneration report continued

Executive Director remuneration

During 2010 the Committee undertook a full review of the pay structure for executive Directors. Pay and employment conditions elsewhere in the Group are taken into account by the Committee in determining the remuneration packages for executive Directors. The general approach is the same across the Group, namely decisions are made on a total remuneration basis against the relevant market. We also seek to provide market competitive retirement and other benefits.

Table 5 sets out the executive Directors’ remuneration. The remuneration related to 2010 performance for Mr Diamond relates to his role as Chief Executive of the Corporate and Investment Banking, and Barclays Wealth businesses. The proposed long term incentive award for Mr Diamond relates to his performance as Barclays Chief Executive from 2011. Table 6 sets out the annual base salaries for executive Directors. Table 7 sets out the executive Directors’ retirement and other benefits.

Mr Varley stepped down as Chief Executive, and from the Barclays Boards and the Group Executive Committee, on 31st December 2010. Since 1st January 2011 Mr Varley has been a senior advisor on regulatory matters to Mr Diamond and to the Barclays Boards. This is expected to continue until 30th September 2011. Mr Varley is not eligible for an annual performance incentive for 2011. Mr Varley’s other terms and conditions of employment continue in accordance with his service contract.

On 1st January 2011, Mr Diamond replaced Mr Varley as Chief Executive. With effect from 1st January 2011, Mr Diamond’s remuneration arrangements reflect his new responsibilities as Chief Executive. The remuneration arrangements were benchmarked against a peer group of global universal banks, industrial companies and financial services institutions. Mr Diamond’s base salary increased to £1,350,000 and his annual performance incentive award opportunity and long term incentive award opportunity are shown below. Mr Diamond is also entitled to benefits that are consistent with his role as Chief Executive, including private medical insurance, car allowance, accommodation when required for business purposes, relief in the event of double taxation and other benefits in line with his service contract.

Annual performance incentive

The maximum annual performance incentive opportunity for executive Directors is tailored to the relevant market; this is typically 250% of base salary. The annual performance incentive award is made by reference to

a qualitative and quantitative assessment of performance. Both financial and non-financial performance is considered. Financial performance is assessed by reference to key financial metrics including PBT, return on equity (RoE) and RoRWA. Non-financial performance is assessed by reference to factors including franchise health, employee opinion surveys and customer satisfaction. The annual performance incentive for 2010 for Mr Diamond reflects the strong absolute and relative performance of the Corporate and Investment Banking, and Barclays Wealth businesses in 2010. The annual performance incentive for 2010 for Mr Lucas reflects his strong personal contribution in 2010 and the improvement in the profitability of Barclays Group.

The structure of the 2010 annual performance incentive is in accordance with the FSA Code. It is proposed to be delivered in three elements for Mr Varley and Mr Lucas: 20% in cash, 20% in Barclays shares which are subject to a six month holding period and 60% in the form of a deferred incentive award. Mr Diamond’s 2010 annual performance incentive is proposed to be delivered 28% in Barclays shares which are subject to a six month holding period and 72% in the form of a deferred incentive award.

Deferred incentive awards

It is proposed that the 2010 deferred incentive awards (as set out in Table 5) will be made under the Share Value Plan (SVP), for which shareholder approval is being sought at the 2011 AGM to enable participation by the executive Directors. 50% of the deferred incentive awards will be in the form of awards over Barclays shares. 50% will be in the form of contingent capital awards (under the Contingent Capital Plan (CCP) schedule to the SVP). No consideration is payable by the executive Directors to receive the awards.

The awards normally vest in three equal portions on each of the first, second and third anniversaries of the grant subject to malus and prudent financial control provisions. The vesting of the contingent capital awards is also subject to the condition that the Barclays Group Core Tier 1 capital ratio is at least 7% at vesting. Details of the SVP and the CCP are in the Notice of Meeting for the 2011 AGM at www.barclays.com/investorrelations.

Long term incentive awards

The maximum annual value at time of award of long term incentive awards for executive Directors is tailored to the relevant market; this will not normally exceed 500% of base salary. It is proposed that 2011 long term incentive awards (as shown in Table 5) will be granted to Mr Diamond and

Table 5: Executive Directors’ remuneration


	John Varley				Robert E Diamond Jr				Chris Lucas
	2010 £000		2009 £000		2010 £000		2009 £000		2010 £000		2009 £000
Base salary		1,100		1,100		250		250		763		650
Annual performance incentive (cash)		550		0		0		0		360		0
Total - cash remuneration related to the year		1,650		1,100		250		250		1,123		650

Annual performance incentive (shares)		550		0		1,800		0		360		0
Deferred incentive award		1,650		0		4,700		0		1,080		1,500
Total - other remuneration related to the year and deferred incentives		2,200		0		6,500		0		1,440		1,500

Total remuneration related to the year and deferred incentives		3,850		1,100		6,750		250		2,563		2,150

Long term incentive award (contingent on future performance)		0		0		2,250		6,000		1,333		1,000

Table 6: Base salary


	Base salary at 31st December 2010 £000		Base salary at 1st April 2011 £000		Date of previous increase
John Varley		1,100		1,100		1st April 2008
Robert E Diamond Jr		250		1,350		1st March 1999
Chris Lucas		800		800		1st April 2010

From 1st January 2009 to 31st December 2010, Mr Diamond received his base salary in US dollars converted from sterling into US dollars using an average sterling/US dollar exchange rate for 2008 of 1.86. From 1st January 2011, Mr Diamond will receive his base salary of £1.35m in sterling. Mr Varley’s base salary due to be paid for 2011 will be £825,000 in total (based on a leaving date of 30th September 2011). Mr Varley is not eligible for an annual performance incentive for 2011.


154

Mr Lucas under the Barclays Long Term Incentive Plan (Barclays LTIP), for which shareholder approval is being sought at the 2011 ACM. The amount shown in Table 5 is the value at grant of the proposed awards (based on 33% of the maximum number of shares subject to the award).

The 2011 Barclays LTIP awards are proposed to be in the form of awards over Barclays shares. No consideration is payable by the executive Directors to receive the awards. The 2011 awards will only vest if the performance condition is satisfied after a three year period and subject to malus and prudent financial control provisions. For 2011 awards, 50% of the Barclays shares will be releasable at the end of the three year vesting period, and 50% of the Barclays shares (after payment of tax) will be subject to an additional 12 month holding period.

The performance condition for the proposed 2011 awards has been chosen to focus closely on execution of Barclays strategy which gives primacy to return on equity. The proposed metrics for 2011 awards are based on three weighted categories as follows:

–	Financial (60%): the primary performance metric is 3 year average RoRWA, and the secondary metric is PBT. RoRWA is a key driver of RoE and reflects the level of regulatory capital held by the business. PBT ensures absolute financial performance is considered

–	Risk (30%): the performance metric is loan loss rate. This encourages strong management of credit risk

–	Sustainability (10%): performance is assessed by the Committee against non-financial factors including customer satisfaction, employee opinion surveys and Barclays relationships with its regulators

The calibration proposed for the performance condition metrics for the 2011 awards, and further details on the Barclays LTIP, are in the Notice of Meeting for the 2011 ACM at www.barclays.com/investorrelations.

Pensions

Mr Varley ceased to be an active member of the Group's non-contributory UK defined benefit pension scheme from 31st March 2010. From 1st April 2010 Mr Varley receives a cash allowance of 25% of base salary in lieu of membership of a Group pension scheme. Until 31st December 2010 Mr Diamond participated in the Group's US defined benefit plans (the US Staff Pension Plan (a funded arrangement) and the US Restoration Plan (an unfunded arrangement)) which are both non-contributory. Mr Diamond also participated in the Barclays Bank PLC 401K Thrift Savings Plan and Thrift Restoration Plan, which are both defined contribution plans. The company contributions paid in respect of 2010 amounted to £13,588 (US$21,000). With effect from 1st January 2011, Mr Diamond receives a cash allowance of 50% of base salary in lieu of membership of a Group pension scheme. Mr Lucas receives a cash allowance of 25% of base salary in lieu of membership of a Group pension scheme.

Table 7 includes the pension benefits of the executive Directors. Mr Varley also has a defined contribution benefit of £599,568 (as at 31st December 2010) in respect of a previous transfer from a freestanding AVC arising from his personal contributions only. Pension accrued during 2010 (including increase for inflation) represents the change in accrued pension during the year including inflation at the prescribed UK rate of 5%. Pensions paid from the UK defined benefit pension scheme are reviewed annually and increase by a minimum of the increase in the retail prices index (capped at 5%), subject to the scheme rules. As a result of the closure of the UK defined benefit scheme to future accrual from 31st March 2010, Mr Varley has a negative pension accrued during 2010 when inflation is excluded. Pension accrued for Mr Varley during 2010 includes a pro-rated deferred pension increase that was granted on 1st October 2010. The increase in Mr Varley's pension transfer value during 2010 is primarily due to being one year nearer to the assumed retirement age. The increase in Mr Diamond's pension transfer value during 2010 is also primarily due to being one year nearer to the assumed retirement age. The other main factors for Mr Diamond's increase were a change in the assumptions used to calculate transfer values and a fall in the average exchange rate since 2009.

Other benefits

Executive Directors are provided with benefits including private medical insurance, life and income protection cover, the use of a company-owned vehicle or the cash equivalent, use of a company driver where required for business purposes, tax advice and accommodation when required for business purposes. No executive Director has an expense allowance. Table 7 includes the benefits received by the executive Directors.

Performance-linked remuneration

Each element of remuneration has a specific role in achieving the aims of the Remuneration Policy. The combined potential remuneration from annual performance incentive, deferred incentive awards and long term incentive awards outweighs the other elements and is subject to individual and Group performance, thereby placing the majority of potential remuneration at risk. Table 8 shows the average proportions of fixed and variable remuneration over the last 3 years. Table 8 incorporates salary and benefits, the increase in transfer value of accrued pension or annual cash in lieu of pension, annual performance incentive comprising cash and share incentives, deferred incentive awards and the fair value of long term incentive awards.

Table 8: Average fixed and variable remuneration over the last three years


	Fixed		Variable
			Cash		Shares
Executive Directors
John Varley		82%		9%		9%
Robert E Diamond Jr		9%		14%		77%
Chris Lucas		28%		9%		63%

Table 7: Pension provision and other benefits


	Age at 31st December 2010		Completed years of service		Accrued pension at 31st December 2009 £000		Pension accrued during 2010 (including increase for inflation) £000		Pension accrued during 2010 (excluding inflation) £000	Accrued pension at 31st December 2010 £000			Transfer value of accrued pension at 31st December 2009 £000		Transfer value of accrued pension at 31st December 2010 £000		Increase in transfer value during 2010 £000		2010 cash in lieu of pension £000
John Varley		54		28		619		26	(5)		645	��		17,015		18,256		1,241		206
Robert E Diamond Jr		59		14		58		5	2		63			383		473		90		—
Chris Lucas		50		3		—		—	—		—			—		—		—		191

	Other benefits 2010 £000		Other benefits 2009 £000		Sub-total* 2010 £000		Sub-total* 2009 £000
John Varley		54		23		2,460		1,123	* Sub-total calculated in accordance with Schedule 8 of the Large and
Robert E Diamond Jr		268		134		2,318		384	Medium-sized Companies and Groups (Accounts and Reports) Regulations
Chris Lucas		25		19		1,699		832	2008 (total of base salary, annual performance incentive (cash), annual
									performance incentive (shares), pension cash allowance and other benefits)


					155

Corporate governance

Remuneration report continued

Outstanding share plan and long term incentive plan awards

Barclays operates a number of share plans to align the interests of employees with shareholders and the execution of Group strategy over the longer term. Table 9 summarises the interests of each executive Director in each plan, and Table 10 summarises the three year performance conditions set at grant for outstanding Performance Share Plan (PSP) cycles. The interests shown are the maximum number of Barclays shares that may be received under each plan. Executive Directors do not pay for any share plan award.

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. In relation to the 2006-2008 PSP awards, after consultation with the Committee in 2009, the participating executive Directors wrote to the PSP trustee to request that it defer the exercise of

its discretion to release shares to them for a further two year period subject to continued employment and an assessment by the Committee that the financial performance of the Group was satisfactory, including the declaration of at least one dividend. The maximum number of Barclays shares that may be released was determined in 2009 and was fixed as set out in Table 9. The Committee reviewed the performance conditions in February 2011 taking account of factors including profit performance, capital ratios, share price and payment of dividends. The Committee recommended that the number of Barclays shares shown in Table 9 be released in March 2011.

In relation to the 2007-2009 PSP awards, the executive Directors agreed to voluntary clawback arrangements to operate for a two year period following the vesting of the awards. By this voluntary agreement, the executive

Table 9: Outstanding share plan and long term incentive awards

Number of shares
under award/option
at 1st January 2010
(maximum)

Number of shares
awarded in year
(maximum)

Market price
on award date

Weighted average
exercise price

Number of shares
released/exercised

John Varley

PSP 2006-2008

232,855

–

£6.75

–

PSP 2007-2009

504,294

–

£7.08

–

(252,147

)

PSP 2008-2010

812,412

–

£4.25

–

ISOP

944,655

–

£4.46

–

Sharesave

3,735

–

£4.70

–

ESAS

430,969

–

(276,784

)

Robert E Diamond Jr

PSP 2006-2008

1,164,273

–

£6.75

–

PSP 2007-2009

2,878,686

–

£7.08

–

(1,439,343

)

PSP 2008-2010

2,031,030

–

£4.25

–

PSP 2010-2012

–

5,563,902

£3.55

–

ISOP

575,008

–

£4.42

–

ESAS

3,365,882

–

(666,667

)

Chris Lucas

PSP 2007-2009

255,396

–

£7.08

–

(127,698

)

PSP 2008-2010

541,608

–

£4.25

–

PSP 2009-2011

1,598,046

–

£2.34

–

PSP 2010-2012

–

927,318

£3.55

–

Sharesave

3,735

–

£4.70

–

ESAS

44,006

602,756

–


Numbers shown for ESAS above represent provisional allocations that have been awarded. Numbers shown as aggregate ESAS amounts may also include shares under option as at 31st December 2010. 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. At the fifth anniversary of the provisional allocation the nil cost options normally lapse and the shares (including bonus shares) are released at the discretion of the ESAS trustee. In 2010, no nil cost options were granted to the executive Directors. Nil cost options (granted

Table 10: Performance conditions attaching to the share plans in which the executive Directors participate


Scheme	Performance period	Performance measure	Target
PSP	2010-2012	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% average RoRWA	17% of maximum award released for 0.83% scaled to a maximum award at 1.46%
	2009-2011	50% of award calibrated against TSR	As above

		50% average RoRWA	17% of maximum award released for 0.83% scaled to a maximum award at 1.34%
	2008-2010	50% of award calibrated against TSR	As above

		50% of award calibrated against cumulative EP over the three-year performance period	33% of the maximum award released for £6,921m scaled to 100% of maximum award at £8,350m


156

Directors will repay the value of the Barclays shares at the end of the two year period (after deduction of taxes paid) should a dividend not be paid during the two year period or the Committee judges that the financial health of the business has deteriorated significantly over the two year period.

In relation to the 2008-2010 PSP awards, the underpin (as shown in Table 10) was satisfied, the TSR condition was met but the Economic Profit (EP) condition was not met. As a result, the awards vested in March 2011 at 0.5 times the initial award (maximum is 3 times).

For the 2009-2011 and 2010-2012 PSP awards the performance measures are relative TSR and RoRWA. TSR was selected to align performance with Barclays shareholders. RoRWA was selected as a risk-adjusted performance measure to reflect the Group’s stated goal of focus on returns over growth.

Calibration of performance measures is agreed ahead of each award by the Committee supported by a working team with representatives from Human Resources, Finance and Risk. This process includes an assessment of relevant data including financial targets, analyst forecasts, internal and external views of comparator future performance levels, shareholder views and value and broader economic trends. All performance measures are calibrated to include a significant level of stretch to attain maximum payout.

All awards and releases are recommended by the Committee to the independent trustee and are subject to trustee discretion. The trustee may also release to participants dividend shares which represent accumulated dividends (net of withholding tax) in respect of the Barclays shares under awards that vest. During 2010 Barclays highest share price was £3.83 and the lowest was £2.55. The Barclays share price at year end was £2.62.

Market price

on release/

exercise date

Number of shares
lapsed in 2010

Number of shares
under award/option at
31st December 2010
(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

–

232,855

–

31/12/2008

01/03/2011

£3.48

(252,147

)

–

£0.88m

31/12/2009

15/03/2010

–

812,412

–

31/12/2010

01/03/2011

–

(246,431

)

698,224

–

18/05/2003

30/09/2012

–

3,735

–

01/10/2011

30/03/2012

£3.48

–

154,185

–

£0.96m

15/03/2010

21/03/2012

–

1,164,273

–

31/12/2008

01/03/2011

£3.48

(1,439,343

)

–

£5.01m

31/12/2009

15/03/2010

–

2,031,030

–

31/12/2010

01/03/2011

–

5,563,902

–

31/12/2012

16/03/2013

–

575,008

–

12/03/2004

22/03/2014

£3.48

–

2,699,215

–

£2.32m

15/03/2010

20/03/2013

£3.48

(127,698

)

–

£0.44m

31/12/2009

15/03/2010

–

541,608

–

31/12/2010

01/03/2011

–

1,598,046

–

31/12/2011

27/04/2012

–

927,318

–

31/12/2012

16/03/2013

–

3,735

–

01/11/2014

30/04/2015

–

646,762

–

20/03/2011

16/03/2015

in 2008) lapsed during the year. Mr Varley held nil cost options over 206,934 shares under ESAS as at 1st January 2010, and none as at 31st December 2010. The first and last exercise dates were 7th March 2008 and 1st March 2011 respectively. Mr Varley received 45,191 dividend shares and Mr Diamond received 83,541 dividend shares from ESAS

awards released during the year (share price on release date was £3.48). On release of the 2007-09 PSP awards, Mr Varley received 28,555 dividend shares, Mr Diamond received 163,002 dividend shares and Mr Lucas received 14,462 dividend shares (share price on release date was £3.48).


TSR peer group constituents				Actual performance
UK	Mainland Europe	US	Underpin	Actual performance
HSBC	Banco Santander, BBVA, BNP Paribas, Credit Suisse, Deutsche Bank, Société Générale, Unicredit	Bank of America, JP Morgan Chase, Morgan Stanley	Committee must be satisfied with the underlying financial health of the Group after considering EP and PBT on a cumulative basis over the three year period	To be determined at vesting in March 2013



HSBC, Lloyds Banking Group, Royal Bank of Scotland	Banco Santander, BBVA, BNP Paribas, Deutsche Bank, UBS, Unicredit	Citigroup, JP Morgan Chase	As above	To be determined at vesting in March 2012



HBOS, HSBC, Lloyds TSB, Royal Bank of Scotland	As above (2009-11)	As above	Cumulative EP over performance period must exceed cumulative EP over previous three years	The performance condition was partially met


					157

Corporate governance

Remuneration report continued

Shareholding guideline

The Committee guideline provides that executive Directors should hold Barclays shares worth, as a minimum, the higher of two times base salary or average of total remuneration over 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.

Service contracts

will be given. 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 plan and pension scheme rules.

The Committee has reviewed its approach to executive Director service contracts in light of best practice and regulatory and corporate governance developments. The Committee does not intend to include automatic contractual incentive payments upon termination in relation to executive Director appointments going forward. Automatic contractual incentive payments upon termination are not included in Mr Diamond’s contract. Mr Varley is not eligible for a 2011 annual performance incentive.

Details of executive Director contract terms are shown in Table 12 and details of fees for external appointments in Table 13.

Table 11: Interests in Barclays PLC shares

At 1st

January 2010

At 31st

December 2010

Beneficial

Non-

beneficial

Beneficial

Non-

beneficial

John Varley

622,418

–

981,476

–

Robert E Diamond Jr

8,333,810

–

10,292,671

–

Chris Lucas

101,697

–

188,476

–

Beneficial interests include shares held either directly, or through a nominee, spouse, or 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. As at 4th March 2011, Mr Diamond’s beneficial interest was 12,678,784 Barclays shares, which includes 2,111,561 Barclays shares released to Mr Diamond on 1st March 2011 in respect of prior years’ deferred and long term incentive awards, and 274,552 Barclays shares awarded on 1st March 2011 for 2010 performance. As at 4th March 2011, Mr Lucas’s beneficial interest was 290,800 Barclays shares, which includes 46,905 Barclays shares released to Mr Lucas on 1st March 2011 in respect of a prior year’s long term incentive award, and 55,419 Barclays shares awarded on 1st March 2011 for 2010 performance. There were no changes in the non-beneficial interests in the period 31st December 2010 to 4th March 2011.

Table 12: Contract terms


	Effective date		Notice period from the Company		Potential compensation for loss of office
John Varley		2nd July 2010		12 months	12 months base salary and continuation of medical and pension benefits whilst an employee. No entitlement to 2011 annual performance incentive

Robert E Diamond Jr		1st January 2011		12 months	12 months base salary and continuation of medical and pension benefits whilst an employee. No automatic contractual entitlement to performance incentive on termination

Chris Lucas		1st April 2007		12 months	12 months base salary, annual performance incentive equivalent to the average of the previous three years annual incentives (up to 100% of base salary) and continuation of medical and pension benefits whilst an employee

Table 13: Fees for external appointments



		2010				2009

	Organisation	Fees		Fees retained		Fees		Fees retained
John Varley	British Grolux Investments Limited		£8,134		£8,134		£8,061		£8,061
	AstraZeneca PLC		£98,750		£98,750		£95,000		£95,000
	International Advisory Panel of the Monetary Authority of Singapore		£4,745		£4,745		£0		£0

Any other positions held by the executive Directors do not attract fees.


158

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 Barclays 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 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 receive a performance incentive, nor participate in Barclays share plans or long term 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.

Membership and Chairmanship of Board Committees as at 31st December 2010 and details of the fees received by the non-executive Directors during the year are set out in Table 14. Details of non-executive Director beneficial interests in Barclays shares are set out in Table 15.

Table 14: 2010 fees

Chairman
£000

Deputy
Chairman
£000

Board
Member
£000

Board
Audit
Committee
£000

Board
Remuneration
Committee
£000

Board
Corporate
Governance
and

Nominations
Committee
£000

Board Risk
Committee
£000

Benefits
£000

Total
2010
£000

Total

2009
£000

Fees (at 31st Dec 10)

Full-year fee

750

200

–

Committee Chair

–

Committee Member

–

Fees to 31st December 2010

Group Chairman

Marcus Agius

Ch.

–

Ch.

–

751

Non-executive Directors

David Booth

–

Ch.

–

125

Sir Richard Broadbent

–

DCh.

–

Ch.

–

200

197

Alison Carnwath

–

Fulvio Conti

–

Simon Fraser

–

110

Reuben Jeffery III

–

Sir Andrew Likierman

–

110

Dambisa Moyo

–

Sir Michael Rake

–

Ch.

–

160

141

Sir John Sunderland

–

115

108

As Deputy Chairman, Sir Richard Broadbent receives a fee of £200,000 per annum. He does not receive any additional fees for serving on Board Committees or as Senior Independent Director. Sir John Sunderland is also a member of the Group Brand and Reputation Committee and receives a fee of £15,000 per annum. He was appointed as a member of the Group Brand and Reputation Committee with effect from 1st July 2009 and received fees of £7,500 in 2009. These fees are included in those shown above.

Table 15: Interests in Barclays PLC shares


	At 1st January 2010 total beneficial interests		At 31st December 2010 total beneficial interests		At 4th March 2011 total beneficial interests
Group Chairman
Marcus Agius		113,530		115,129		115,129
Non-executive Directors
David Booth		73,325		77,285		79,220
Sir Richard Broadbent		34,590		38,777		40,729
Alison Carnwath		–		40,000		41,203
Fulvio Conti		39,304		42,970		44,836
Simon Fraser		46,247		49,768		51,583
Reuben Jeffery III		26,173		65,244		67,691
Sir Andrew Likierman		23,007		27,031		29,001
Dambisa Moyo		–		2,826		4,630
Sir Michael Rake		15,127		18,954		20,845
Sir John Sunderland		79,775		83,277		85,107

Dambisa Moyo was appointed as a non-executive Director with effect from 1st May 2010. Alison Carnwath was appointed as a non-executive Director with effect from 1st August 2010. Reuben Jeffery's beneficial interest as at 31st December 2010 comprised 15,000 American Depositary Shares and 5,244 Barclays PLC shares. On 15th February 2011, the non-executive Directors acquired ordinary shares pursuant to arrangements under which part of each non-executive Director's fee is used to buy Barclays PLC shares. Barclays PLC shares were acquired by each non-executive Director as follows: David Booth – 1,935; Sir Richard Broadbent – 1,952; Alison Carnwath – 1,203; Fulvio Conti – 1,866; Simon Fraser -1,815; Reuben Jeffery III – 2,447; Sir Andrew Likierman – 1,970; Dambisa Moyo – 1,804; Sir Michael Rake – 1,891 and Sir John Sunderland – 1,830. Reuben Jeffery's beneficial interest as at 15th February 2011 comprised 15,000 American Depositary Shares and 7,691 Barclays PLC shares. Except as described in this note, there were no changes to the beneficial or non-beneficial interests of non-executive Directors in the period 31st December 2010 to 4th March 2011.


					159

Corporate governance

Remuneration report continued

Letters of appointment

The Group Chairman, Deputy Chairman and non-executive Directors have individual letters of appointment. Each non-executive Director appointment is for an initial six year term, renewable for a single term of three years thereafter. The terms of the letters of appointment of each non-executive Director are shown in Table 16.

All non-executive Directors are standing for re-election at the 2011 ACM.

Table 16: 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

contractual

remuneration

Non-executive Directors

David Booth

1st May 2007

6 months

6 months fees

Sir Richard Broadbent

16th July 2009

6 months

6 months fees

Alison Carnwath

1st Aug 2010

6 months

6 months fees

Fulvio Conti

1st Apr 2006

6 months

6 months fees

Simon Fraser

10th Mar 2009

6 months

6 months fees

Reuben Jeffery III

16th July 2009

6 months

6 months fees

Sir Andrew Likierman

1st Sep 2004

6 months

6 months fees

Dambisa Moyo

1st May 2010

6 months

6 months fees

Sir Michael Rake

1st Jan 2008

6 months

6 months fees

Sir John Sunderland

1st June 2005

6 months

6 months fees

Former non-executive Directors

Mr Clifford resigned as a non-executive Director with effect from 30th September 2010. Mr Clifford did not receive a termination payment. Mr Clifford's remuneration for 2010 is shown in Table 17 and the terms of his letter of appointment are shown in Table 18.

Table 17: Former non-executive Director fees

Total

2010
£000

Total

2009
£000

Leigh Clifford

103

123

Mr Clifford is also a member of the Asia Pacific Advisory Committee and received fees of US$60,000 (2009: US$60,000). These fees are included in those shown above.

Table 18: Terms of letter of appointment

Effective

date

Notice
period
from the
Company

Potential
compensation
for loss

of office

Leigh Clifford

1st October 2004

6 months

6 months fees


160

Other remuneration disclosures

Five highest paid senior executive officers (excluding executive Directors)

As part of the Project Merlin agreement with the UK Government Barclays committed to disclose the 2010 remuneration of the five highest paid senior executive officers (in addition to the executive Directors). This is shown in Table 19. The senior executive officers shown in Table 19 are considered Key Management Personnel (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of Barclays PLC (directly or indirectly)). The remuneration of the executive Directors is shown in Table 5.

Table 19: 2010 remuneration of the five highest paid senior executive officers (excluding executive Directors)


Five highest paid senior executive officers (excluding executive Directors)
	Individual 1 (£000)		Individual 2 (£000)		Individual 3 (£000)		Individual 4 (£000)		Individual 5 (£000)
Fixed remuneration		734		700		700		700		600
Variable remuneration (cash)		1,017		992		1,433		900		620
Variable remuneration (shares)		1,017		992		1,433		900		620
Deferred remuneration (Contingent Capital Plan)		4,070		3,968		2,150		1,350		930
Deferred remuneration (Share Value Plan)		4,070		3,968		2,150		1,350		930
2010 remuneration and deferred incentives		10,908		10,620		7,866		5,200		3,700

Long term incentive award (outcome contingent on future performance)		3,354		3,354		1,000		1,300		1,500

Sign-on award		0		0		0		0		0
Severance award		0		0		0		0		0

Code Staff aggregate remuneration

Pages 149 to 158 and pages 161 to 163 include information required to be disclosed in accordance with the FSA’s prudential sourcebook for banks, building societies and investment firms (BIPRU) 11.5.18(1) to (5). The information in Tables 20 to 23 is provided in accordance with BIPRU 11.5.18(6) and (7). A total of 231 individuals were Code Staff in 2010. Code Staff are the Group's employees whose professional activities could have a material impact on the Group's risk profile.

Table 20: Aggregate 2010 remuneration of Code Staff by business

Barclays

Capital

(£m)

Barclays

Corporate

(£m)

Barclays

Wealth

(£m)

Global Retail

Banking

(£m)

Absa

(£m)

Group

Functions

(£m)

406

Table 21: Aggregate 2010 remuneration of Code Staff by remuneration type


	Senior management (£m)		Other Code Staff (£m)
Fixed remuneration		9		53
Variable remuneration (cash)		7		79
Variable remuneration (shares)		9		68
Deferred remuneration (Contingent Capital Plan)		17		119
Deferred remuneration (Share Value Plan and ESAS)		18		125
2010 remuneration and deferred incentives		60		444

Long term incentive award (outcome contingent on future performance)		15		35

Table 22: Additional 2010 disclosures on deferred remuneration of Code Staff


	Senior management (£m)		Other Code Staff (£m)
Deferred unvested remuneration outstanding at the beginning of the year		142		344
Deferred remuneration awarded in year		77		291
Deferred remuneration reduced in year through performance adjustments		(45)		(46)
Deferred remuneration vested in year		(39)		(118)
Deferred unvested remuneration outstanding at the end of the year		135		471

Table 23: Other 2010 disclosures for Code Staff


	Senior management (£m)		Other Code Staff (£m)
Total sign-on awards		0		0
Total buy-out awards (five individuals)		0		3
Total severance awards (one individual)		0		0.1

Note to Table 22: There was no deferred vested remuneration outstanding at the end of the year. Code Staff are subject to a minimum shareholding guideline.


					161

Corporate governance

Remurance report continued

Share plans and long term incentive plans

Barclays operates a number of share plans and long term incentive plans. The principal plans under which awards were made in 2010 are shown in Table 24 and new plans proposed for 2011 are shown in Table 25. 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 limits on the issue of new shares comply with the guidelines issued by the Association of British Insurers.

Table 24: Summary of principal share plans and long term incentive plans under which awards were made in 2010


Name of plan	Employees eligible	Executive Directors eligible?	Delivery	Design details
Performance Share Plan (PSP)	Selected employees. In 2010, only executive Directors received PSP awards	Yes	Award of Barclays shares that vests after three years, subject to performance conditions and trustee discretion	– From 2011, it is proposed that the PSP is replaced by the Barclays LTIP (see Table 25) – Awarded on a discretionary basis with participation reviewed annually by the Committee – Barclays performance over three years determines the number of Barclays shares eligible for release to each participant – For awards made in 2010 performance conditions based on relative TSR and RoRWA – Dividends normally accumulated during vesting period – On cessation of employment, eligible leavers normally receive an award pro-rated for time and performance. For other leavers awards will normally lapse. On change of control, awards may vest at the trustee’s discretion
Cash Value Plan (CVP)	All employees (excluding executive Directors) whose variable remuneration is above a set threshold	No	Deferred cash paid in three annual instalments over a three year period dependant on future service and subject to plan committee discretion	– Plan typically used for mandatory deferral of a proportion of variable remuneration where variable remuneration is above a threshold set annually by the Committee – Amount deferred increases on a graduated basis as variable remuneration increases – This plan typically works in tandem with the SVP (see below) – Awards vest over three years in equal annual tranches dependant on future service and subject to plan committee discretion – Participants may be awarded a service credit of 10% of the initial value of the award at the same time as the final instalment is paid subject to continued employment – Vesting is subject to malus and prudent financial control provisions in accordance with the FSA Code – On cessation of employment, eligible leavers normally receive an award subject to plan committee discretion. For other leavers awards will normally lapse. On change of control, awards may vest at the plan committee’s discretion
Share Value Plan (SVP)	As for CVP above	Executive Directors were not eligible for the SVP in 2010. Approval of the SVP for executive Director participation from 2011 is being sought at the 2011 AGM	Deferred Barclays shares released in three annual instalments over a three year period dependant on future service and subject to trustee discretion	– Plan typically used for mandatory deferral of a proportion of variable remuneration into Barclays shares where variable remuneration is above a threshold set annually by the Committee – Amount deferred increases on a graduated basis as variable remuneration increases – This plan typically works in tandem with the CVP (see above) – Awards vest over three years in equal annual tranches dependant on future service and subject to trustee discretion – Dividends that would normally be received may be awarded as additional Barclays shares and released alongside each tranche of the award – Vesting is subject to malus and prudent financial control provisions in accordance with the FSA Code – Change of control and leaver provisions are as for CVP (see above) subject to trustee discretion – In 2011 Barclays will add a schedule to SVP for cash-based awards to be granted on similar terms but with additional vesting conditions (known as the Contingent Capital Plan) (see Table 25)


162

Table 24: Summary of principal share plans and long term incentive plans under which awards were made in 2010continued


Name of plan	Employees eligible	Executive Directors eligible?	Delivery	Design details
Executive Share Award Scheme (ESAS)	Selected employees	Yes	Deferred Barclays shares released after three years subject to trustee discretion	–	From 2011, it is proposed that ESAS is replaced by SVP. Details of the SVP are included in Table 24 and further details are in the Notice of Meeting for the 2011 AGM which is online at www.barclays.com/investorrelations
				–	Discretionary award of a proportion of variable remuneration as Barclays shares. In addition to mandatory deferral, eligible employees may voluntarily defer additional amounts of variable remuneration awarded. In 2010 awards under ESAS were made on a limited basis as CVP and SVP were the principal mandatory deferral plans
				–	Subject to trustee discretion, the ESAS award vests after three years, at which point “bonus shares” equal to 20% of the value of the initial award may be released. If the participant does not withdraw the award shares until the fifth anniversary of the award date, a further 10% bonus shares may be released. Dividend shares may also be released by the ESAS trustee
				–	Awards are subject to forfeiture if the participant leaves Barclays other than for eligible leaver reasons
Business unit long term incentive plans	Selected senior employees (excluding executive Directors) within each business unit	No	Design varies by business unit, awards vest after at least three years, with additional deferral after this period. Awards typically vest 50% in cash and 50% in Barclays share awards	–	Awarded on a discretionary basis
				–	Risk-adjusted performance conditions vary by business unit to reflect individual business strategy
				–	Plans include a prudent financial control provision which gives the Committee power to alter the vesting of awards based on Group financial performance
				–	Awards are subject to forfeiture if the participant leaves Barclays other than for eligible leaver reasons
Sharesave	All UK, Ireland and Spain employees	Yes	Options over Barclays shares at a discount of 20% with shares or cash value of savings delivered after 3 - 7 years	–	HMRC approved in the UK and approved by the Revenue Commissioners in Ireland
	All UK, Ireland and Spain employees			–	Opportunity to purchase Barclays shares at a discount price (currently at 20%) set on award date with savings made over 3, 5 or 7 year term
				–	Maximum individual saving of £250 per month (€300 in Ireland,€225 in Spain)
				–	On cessation of employment eligible leavers may exercise options and acquire shares to the extent of their savings for 6 months
				–	On change of control, participants may exercise options and acquire shares to the extent of their savings for 6 months
Sharepurchase	All employees in the UK	Yes	Barclays shares and dividend/ matching shares held in trust for 3 to 5 years	–	HMRC approved plan
				–	Participants may purchase up to £1,500 of Barclays shares each tax year
				–	Barclays matches the first £600 of shares purchased by employees on a one for one basis
				–	Dividends received are awarded as additional shares
				–	Purchased shares may be withdrawn at any time (if removed prior to 3 years from award, the corresponding matching shares are forfeited). Matching shares must be held in trust for at least 3 years
				–	On cessation of employment participants must withdraw shares. Depending on reason for and timing of leaving matching shares may be forfeited
				–	On change of control, participants are able to instruct the Sharepurchase trustee how to act or vote on their behalf
Global Sharepurchase	Employees in certain non-UK jurisdictions	Yes	Barclays shares and dividend/ matching shares held in trust for 3 to 5 years	–	Global Sharepurchase is an extension of the Sharepurchase plan offered in the UK
Global Sharepurchase	Employees in certain non-UK jurisdictions	Yes		–	Operates in substantially the same way as Sharepurchase (see above)


					163

Corporate governance

Remuneration report continued

Table 25: Summary of new deferred incentive plans and long term incentive plans under which awards will be made in 2011


Name of plan	Employees eligible	Executive Directors eligible?	Delivery	Design details
Contingent Capital Plan (CCP)	Selected employees	Yes (subject to shareholder approval at 2011 AGM)	Deferred cash paid in three annual instalments over a three year period, subject to the Group Core Tier 1 capital ratio being above a specified threshold. Vesting is also dependant on future service and subject to plan committee discretion	–	In 2011 Barclays will add a schedule to the SVP (see Table 24) for cash-based awards to be granted on similar terms to the SVP but with additional vesting conditions.
Contingent Capital Plan (CCP)					Broadly similar provisions to the SVP apply to the CCP
(The CCP is a schedule to the SVP)				–	The CCP will typically be used for mandatory deferral of a proportion of variable remuneration for executive Directors, other Code Staff and senior management
(The CCP is a schedule to the SVP)				–	Awards vest over three years in equal annual tranches dependant on future service and subject to plan committee discretion
				–	The vesting of contingent capital awards is subject to the condition that the Group Core Tier 1 capital ratio is equal to or exceeds a predetermined threshold at vesting. For 2011 awards the threshold is proposed as 7%
				–	Vesting is also subject to malus and prudent financial control provisions in accordance with the FSA Code
				–	When a contingent capital award vests an additional discretionary benefit may be awarded equivalent to a coupon. For 2011 awards, this is proposed as 7% on the award amount (on an annualised and non-compounded basis)
				–	As for the SVP, on cessation of employment, eligible leavers normally receive an award subject to plan committee discretion. For other leavers awards will normally lapse. On change of control, awards may vest at the plan committee's discretion
				–	Details of the CCP are included in the Notice of the Meeting for the 2011 AGM which is online at www.barclays.com/investorrelations
Barclays Long Term Incentive Plan (Barclays LTIP)	Selected employees	Yes (subject to shareholder approval at 2011 AGM)	Award over Barclays shares or over other capital instruments, subject to performance conditions and Committee/ trustee discretion	–	Awarded on a discretionary basis with participation reviewed by the Committee
				–	Awards will only vest if the performance condition is satisfied over a three year period
				–	Vesting will be subject to malus and prudent financial control provisions in accordance with the FSA Code
				–	For proposed awards made in 2011, 50% of Barclays shares will be released at the end of the three year period, and 50% (after payment of tax) will be subject to an additional 12 month holding period
				–	The performance condition for the proposed 2011 awards has been chosen to focus closely on execution of Barclays strategy including return on equity. The proposed metrics for 2011 are based on three weighted categories as set out below
				–	Financial (60%): the primary performance metric is 3 year average RoRWA, and the secondary metric is PBT
				–	Risk (30%): the performance metric is loan loss rate
				–	Sustainability (10%): performance is assessed by the Committee against non-financial factors including customer satisfaction, employee opinion surveys and Barclays relationships with its regulators
				–	On cessation of employment, eligible leavers will normally receive an award pro-rated for time and performance. For other leavers awards will normally lapse
				–	On change of control, awards may vest at the Committee's discretion
				–	The calibration proposed for the performance condition metrics for the 2011 Barclays LTIP awards, and further details on the Barclays LTIP, are included in the Notice of Meeting for the 2011 AGM which is online at www.barclays.com/investorrelations


164

Additional financial information

Risk factors

The Group’s approach to identifying, assessing, managing and reporting risks is formalised in its Principal Risk framework and supporting processes. The risk categories relevant to operational risk disclosed on page 113 & 114 are: People, Legal, Regulatory, Operations, Fraud, Technology, Financial Reporting and Taxation. This summary also includes discussions of the impact of business conditions and the general economy and regulatory changes which can impact risk factors and so influence the Group’s results. The risks described below can potentially impact the Group's reputation and brand.

Business conditions and the general economy

Barclays operates a universal banking business model and its services range from current accounts for personal customers to inflation-risk hedging for governments and institutions. The Group also has significant activities in a large number of countries. Consequently, there are many ways in which changes in business conditions and the general economy can adversely impact profitability, whether at the level of the Group, the individual business units or specific countries of operation. The Group’s stress testing framework helps it to understand the impact of changes in business conditions and the general economy, as well as the sensitivity of its business goals to such changes and the scope of management actions to mitigate their impact. The general recovery in the global economy resulted in an improvement in credit conditions in our main markets during 2010. In the UK, the economy recovered slightly during 2010 reflecting the lower than expected growth in unemployment rates, the sustained low interest rate environment and moderate GDP growth. However, a slowdown in growth was evident in the fourth quarter of 2010 which is likely to lead to uncertainty in the near term. In addition, persistent unemployment and inflation, fiscal tightening, the possibility of weakening house prices, and possible rising oil prices may have an adverse impact on the strength of the recovery which could increase the risk that a higher proportion of the Group’s customers and counterparties may be unable to meet their obligations. Economic credit conditions have also continued to show signs of improvement in many other key geographies, although in Spain the housing sector remains depressed which led to significantly increased impairment in our Spanish wholesale portfolios in 2010. Unemployment rates remain high in the US.

The business conditions facing the Group in 2011 are subject to significant uncertainties, most notably:

— the extent and sustainability of economic recovery particularly in the UK, US, Spain and South Africa;

— the dynamics of unemployment particularly in the UK, US, Spain and South Africa and the impact on delinquency and charge-off rates;

— the speed and extent of possible rises in interest rates in the UK, US, South Africa and the Eurozone;

— the possibility of any further falls in residential property prices in the UK, South Africa and Western Europe;

— the impact of potentially deteriorating sovereign credit quality;

— the potential for single name losses in different sectors and geographies where credit positions are sensitive to economic downturn;

— the potential impact of increasing inflation on economic growth and corporate profitability;

— possible deterioration in our remaining credit market exposures, including commercial real estate, leveraged finance and a loan to Protium Finance LP (Protium);

— changes in the value of Sterling relative to other currencies, which could increase risk weighted assets and therefore raise the capital requirements of the Group;

— continued turmoil in the Middle East and North Africa region could result in loss of business in the affected countries, increased oil prices, increased volatility and risk aversion to this region; and

— the liquidity and volatility of capital markets and investors’ appetite for risk, which could lead to a decline in the income that the Group receives from fees and commissions.

Regulatory changes

As noted in the section on Supervision and Regulation (pages 115-119), 2010 has seen significant regulatory change. Issues dealt with in 2010 included:

—

Recovery and Resolution Plans: There has been a strong regulatory focus on resolvability in 2010, both from UK and international regulators. The Group has been engaged, and continues to be engaged, with the authorities on taking forward recovery planning and identifying information that would be required in the event of a resolution.

—	The Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA): The DFA will have an impact on the Group and its business.

The full scale of this impact remains unclear as many of the provisions of the DFA require rules to be made to give them effect and this process is still under way.

Wholesale and retail credit risk

Credit risk is the risk of the Group suffering financial loss if any of its customers, clients or market counterparties fails to fulfil their contractual obligations to the Group. The granting of credit is one of the Group’s major sources of income and, as the most significant risk, the Group dedicates considerable resources to its control. The credit risk that the Group faces arises mainly from wholesale and retail loans and advances together with the counterparty credit risk arising from derivative contracts entered into with its clients. Other sources of credit risk arise from trading activities, including debt securities, settlement balances with market counterparties, available for sale assets and reverse repurchase loans. However, credit risk may also arise where the downgrading of an entity’s credit rating causes a fall in the value of the Group’s investment in that entity’s financial instruments. Specific areas and scenarios where credit risk could lead to higher impairment charges in future years include:

— credit market exposures;

— sovereign risk; and

— economic uncertainty.

Barclays Capital holds certain exposures to credit markets that became illiquid during 2007. These exposures primarily relate to commercial real estate, leveraged finance and a loan to Protium.

Credit risk may also be manifested as sovereign risk where difficulties may arise in the country in which the exposure is domiciled, thus impeding or reducing the value of the assets, or where the counterparty may be the country itself. European Union (EU) deficits approached very high levels during 2010, leading to a loss of market confidence in certain countries to which the Group is exposed.

In a recessionary environment, such as that seen in past years in UK, the US and other economies, credit risk increases. However, more recently, conditions have continued to show signs of improvement in many key markets, although the UK has experienced a slowdown in growth in the fourth quarter of 2010, US unemployment rates remain high and the Spanish housing sector continues to be depressed, impacting our wholesale and retail credit risk exposures. In particular, in Spain, the Group has experienced elevated impairment across its operations, following a marked reduction in construction activity and shrinking consumer spending.

The Group’s credit risk governance structure, management and measurement methodologies, together with an analysis of exposures to credit risk is detailed in the ‘Credit risk management’ section on page 58 to 93 and Note 44 to the financial statements on page 267.


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Additional financial information

Risk factors continued

Market risk

Market risk is the risk that the Group’s 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 source of risk are traded market risk, non-traded interest rate risk, translational foreign exchange risk and pension risk. Traded risk resides primarily in Barclays Capital while non-traded market risk resides mainly in Global Retail Banking, Barclays Corporate, Barclays Wealth and Group Treasury.

While the Group is exposed to continued market volatility, Barclays Capital’s trading activities are principally a consequence of supporting customer activity.

The Group is exposed to three main types of non-traded interest rate risk:

— fixed rate loans and deposits that are not hedged or matched;

— structural risk due to variability of earnings on structural product and equity balances which have no contractual maturity and an interest rate which does not move in line with the base rate; and

— margin compression.

The Group’s market risk governance structure, management and measurement methodologies, together with an analysis of exposures to both traded and non-traded market risk is detailed in the ‘Market risk management’ section on page 94 to 101 and Note 44 to the financial statements on page 267. Further details relating to the Group’s pension risk is included in Note 28 on page 227.

Capital risk

Capital risk is the risk that the Group has insufficient capital resources to:

— ensure the financial holding company is well capitalised relative to the minimum regulatory capital requirements set out by the UK FSA and US Federal Reserve where regulated activities are undertaken. The Group’s authority to operate as a bank is dependent upon the maintenance of adequate capital resources;

— ensure locally regulated subsidiaries can meet their minimum regulatory requirements;

— support the Group’s risk appetite and economic capital requirements; and

— support the Group’s credit rating. A weaker credit rating would increase the Group’s cost of funds.

Regulators assess the Group’s capital position and target levels of capital resources on an ongoing basis. There have been a number of recent developments in regulatory capital requirements which are likely to have a significant impact on the Group. Most significantly, during 2010, the Second and Third Capital Requirement Directives and the guidelines from the Basel Committee on Banking Supervision for strengthening capital requirements (Basel III) were finalised. Aligned to this, markets and credit rating agencies now expect equity capital levels significantly in excess of the current regulatory minimum.

For further information see pages 102 to 106.

Liquidity risk

Liquidity risk is the risk that the Group is unable to meet its obligations as they fall due as a result of a sudden, and potentially protracted, increase in net cash outflows. Such outflows would deplete available cash resources for client lending, trading activities, and investments. In certain adverse circumstances, lack of liquidity could result in reductions in balance sheet and sales of assets, or potentially an inability to fulfil lending commitments. These outflows could be principally through customer withdrawals, wholesale counterparties removing financing, ratings downgrades or loan drawdowns. These outflows could be the result of general market dislocations or specific concerns about Barclays.

This could result in:

— limited ability to support client lending, trading activities and investments;

— forced reduction in balance sheet and sales of assets;

— inability to fulfil lending obligations; and

— regulatory breaches under the liquidity standards introduced by the FSA on 1st December 2009.

The Group’s liquidity risk management and measurement methodologies are detailed in the ‘Liquidity Risk Management’ section on page 107 to 112 and the ‘Liquidity Risk’ note to the financial statements on page 267.

People risk

People risk arises from failures of the Group to manage its key risks as an employer, including lack of appropriate people resource, failure to manage performance and reward, unauthorised or inappropriate employee activity and failure to comply with employment-related requirements. Failure to manage performance and reward in an appropriate manner can ultimately lead to lack of suitable people resource which may ultimately have a negative impact on profits generated by the Group.

During 2010, external regulatory developments in relation to remuneration continued to impact the People Risk. On 17th December 2010, the FSA published its final Remuneration Code (Remuneration Code) following its July 2010 Consultation Paper. The Remuneration Code was updated in order to implement the remuneration rules required by the Third Capital Requirements Directive and the Financial Service Act 2010. The Remuneration Code applies to remuneration paid from 1st January 2011, including remuneration in respect of 2010 performance.

Legal risk

— business may not be conducted in accordance with applicable laws around the world;

— contractual obligations may either not be enforceable as intended or may be enforced in an adverse way;

— intellectual property (such as trade names of the Group) may not be adequately protected; and

— liability for damages may be incurred to third parties harmed by the conduct of the Group’s business.

The Group faces risk where legal proceedings are brought against it. Regardless of whether such claims have merit, the outcome of legal proceedings is inherently uncertain and could result in financial loss. Defending legal proceedings can be expensive and time-consuming and there is no guarantee that all costs incurred will be recovered even if the Group is successful. Although the Group has processes and controls to manage legal risks, failure to manage these risks could impact the Group adversely, both financially and by reputation.

Further details of litigation and other legal matters are set out in the Legal Proceedings Note 26 (see page 226) and the Competition and Regulatory Matters Note 27 (see page 227).

Regulatory risk

Regulatory risk arises from a failure or inability to comply fully with the laws, regulations or codes applicable specifically to the financial services industry. Non-compliance could lead to fines, public reprimands, damage to reputation, increased prudential requirements, enforced suspension of operations or, in extreme cases, withdrawal of authorisations to operate. The Group’s businesses and earnings can be affected by the fiscal or other policies and other actions of various governmental and regulatory authorities in the UK, EU, US and elsewhere, which are all subject to change. The regulatory response to the financial crisis has led to very substantial regulatory changes in the UK, EU and US and in the other countries in which the Group operates. It has also led to a change in the style of supervision in a number of territories, with a more assertive approach being demonstrated by the authorities.


166

Additional financial information

Risk factors continued

Two specific matters that directly impact the Group are the Banking Act 2009 and the Financial Services Compensation Scheme:

Banking Act 2009

The Banking Act 2009 (the “Banking Act”) provides a permanent regime to allow the FSA, the UK Treasury and the Bank of England to resolve failing banks in the UK. Under the Banking Act, these authorities are given powers, including (a) the power to issue share transfer orders pursuant to which all or some of the securities issued by a bank may be transferred to a commercial purchaser or Bank of England entity 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. A share transfer order can extend to a wide range of securities including shares and bonds issued by a UK bank (including the Bank) or its holding company (Barclays PLC) and warrants for such shares and bonds. The Banking Act powers apply regardless of any contractual restrictions and compensation may be payable in the context of both share transfer orders and property appropriation.

Financial Services Compensation Scheme

Banks, insurance companies and other financial institutions in the UK are subject to the Financial Services Compensation Scheme (the “FSCS”) where an authorised firm is unable or is likely to be unable to meet claims made against it because of its financial circumstances. Most deposits made with branches of the Bank within the European Economic Area (the “EEA”) which are denominated in Sterling or other EEA currencies (including the Euro) are covered by the FSCS. Most claims made in respect of 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 FSCS is funded by levies on authorised UK firms such as the Bank. As at 31 December 2010, the Group had accrued £63 million (2009: £108 million) for its share of the levies. The provision is based on estimates of the Group’s market participation in the relevant charging periods and the interest the FSCS will pay on the facilities provided by HM Treasury in support of its obligations to depositors of banks declared in default (such facilities were, as at 31 December 2010, estimated by the Group to amount to £20 billion). While it is anticipated that the substantial majority of these facilities will be repaid wholly from recoveries from the institutions concerned, there is the risk of a shortfall, such that the FSCS may place additional levies on FSCS participants. As at the date of this document, it is not possible to estimate the amount of any potential additional levies or the Group’s share. Consequently, in the event that the FSCS raises funds, raises those funds more frequently or significantly increases the levies to be paid by firms, the associated costs to the Group may have a material impact on the Group’s results and financial condition.

In addition, among other things, the Bribery Act 2010, which applies to UK companies worldwide, has created an offence of failure by a commercial organisation to prevent a bribe being paid on its behalf. However, it will be a defence if the organisation has adequate procedures in place to prevent bribery. In addition, Payment Protection Insurance (PPI) has been under scrutiny by the UK competition authorities and financial services regulators. The UK Competition Commission (CC) has undertaken an in-depth enquiry into the PPI market which has resulted in the CC introducing a number of remedies including a prohibition on sale of PPI at the point of sale. Furthermore, a judicial review has been launched regarding the treatment of PPI complaints by the FSA and Financial Ombudsman Service.

As announced on 18th August 2010, Barclays reached settlements with US Authorities in relation to the investigation by those agencies into compliance with US sanctions and US dollar payment practices. In addition, an Order to Cease and Desist has been issued upon consent by the Federal Reserve Bank of New York and the New York State Banking Department.

Other future regulatory changes may potentially restrict the Group’s operations, mandate certain lending activity and impose other compliance costs.

For further information, see pages 115 to 119, 227.

Operations risk

Operations risk is the risk of losses from inadequate or failed internal processes and systems, caused by human error or external events.

These risks are transaction operations, new product development, premises and security, external suppliers, payments process, information, data quality and records management.

Fraud Risk

Fraud risk is the risk that the Group suffers losses as a result of internal and external fraud.

Technology risk

Technology is a key business enabler and requires an appropriate level of control to ensure that the most significant technology risks are effectively managed. Technology risk includes the non-availability of IT systems, inadequate design and testing of new and changed IT solutions and inadequate IT system security. Similar to many large organisations, Barclays is exposed to the risk that systems may not be continually available.

Financial reporting risk

As set out in Future Accounting Developments on page 204, the International Accounting Standards Board is undertaking a significant programme of revision to IFRS which it aims to complete by 30th June 2011. The final form of IFRS requirements, the time period over which new requirements will need to be applied and the impact on the results and financial position is not yet known.

Following the financial crisis, the financial reporting of banks has been subject to greater scrutiny. This has included consideration of accounting policies, accounting for particular transactions and financial statement disclosures. For Barclays this includes reviewing the decision not to consolidate Protium. Further details are provided on page 91 to 92.

Further details on internal control over financial reporting can be found on page 128 and on the BBA Code and improvements to Annual Report disclosures on page 184.

Taxation risk

The Group is subject to the tax laws in all countries in which it operates, including tax laws adopted at an EU level. A number of double taxation agreements entered between two countries also impact on the taxation of the Group. Tax risk is the risk that the Group suffers losses associated with changes in tax law or in the interpretation of tax law. It also includes the risk of failure to comply with procedures required by tax authorities. Failure to manage tax risks could lead to an additional tax charge. It could also lead reputational damage or a financial penalty for failure to comply with required tax procedures or other aspects of tax law. If, as a result of a particular tax risk materialising, the tax costs associated with particular transactions are greater than anticipated, it could affect the profitability of those transactions.


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Additional financial information

Additional financial disclosure (unaudited)

Deposits and short-term borrowings

Deposits

Deposits include deposits from banks and customers accounts.


Average^a for the year ended 31st December
	2010 £m		2009 £m		2008 £m
Deposits from banks
Customers in the United Kingdom		13,486		13,702		14,003
Other European Union		48,715		48,161		38,210
United States		7,373		14,757		15,925
Africa		1,783		2,218		3,110
Rest of the World		20,837		24,350		36,599
Total deposits from banks		92,194		103,188		107,847
Customer Accounts
Customers in the United Kingdom		214,466		197,363		206,020
Other European Union		44,188		38,326		30,909
United States		29,837		32,218		31,719
Africa		42,354		37,009		35,692
Rest of World		23,464		23,655		27,653
Customer Accounts		354,309		328,571		331,993

Deposits from banks in offices in the United Kingdom received from non-residents amounted to £65,146m (2009: £51,423m).


Year ended 31st December
	2010 £m		2009 £m		2008 £m
Customer Accounts		345,788		322,429		335,505
In offices in the United Kingdom:
Current and Demand Accounts
– interest free		48,125		45,160		41,351
Current and Demand Accounts
– interest bearing		27,091		24,066		20,898
Savings accounts		79,444		71,238		68,335
Other time deposits – retail		29,422		29,678		33,785
Other time deposits – wholesale		43,948		52,891		74,417
Total repayable in offices in the United Kingdom		228,030		223,033		238,786
In offices outside the United Kingdom:
– interest free		6,493		7,308		4,803
Current and Demand Accounts
– interest bearing		28,734		24,176		15,463
Savings accounts		12,484		9,950		7,673
Other time deposits		70,047		57,962		68,780
Total repayable in offices outside the United Kingdom		117,758		99,396		96,719

Customer accounts deposits in offices in the United Kingdom received from non-residents amounted to £48,815m (2009: £57,014m).

Short-term borrowings

Short-term borrowings include deposits from banks, commercial paper and negotiable certificates of deposit.

Deposits from banks

Deposits from banks are taken from a wide range of counterparties and generally have maturities of less than one year.


	2010 £m		2009 £m		2008 £m
Year-end balance		77,975		76,446		114,910
Average balance^a		92,194		103,188		107,847
Maximum balance^a		102,137		121,940		139,836
Average interest rate during year		0.4%		0.6%		3.6%
Year-end interest rate		0.2%		0.4%		2.3%

Commercial paper

Commercial paper is issued by the Group, mainly in the United States, generally in denominations of not less than US$100,000, with maturities of up to 270 days.


	2010 £m		2009 £m		2008 £m
Year-end balance		20,138		19,300		27,692
Average balance^a		19,986		21,835		24,668
Maximum balance^a		25,976		28,756		27,792
Average interest rate during year		2.3%		2.5%		4.4%
Year-end interest rate		2.4%		2.5%		4.2%

Negotiable certificates of deposit

Negotiable certificates of deposits are issued mainly in the United Kingdom and United States, generally in denominations of not less than US$100,000.


	2010 £m		2009 £m		2008 £m
Year-end balance		60,184		44,681		61,332
Average balance^a		55,242		54,960		55,122
Maximum balance^a		60,803		64,054		67,715
Average interest rate during year		2.5%		2.3%		4.4%
Year-end interest rate		2.3%		2.2%		4.1%

Repurchase Agreements

Repurchase agreements are entered into with both customers and banks and generally have maturities of not more than three months.


	2010 £m		2009 £m		2008 £m
Year-end balance		225,534		198,781		182,285
Average balance^ab		298,054		275,801		274,376
Maximum balance^ab		373,627		389,962		396,130
Average interest rate during year		0.4%		0.6%		2.9%
Year-end interest rate		0.3%		0.4%		0.7%

Notes

a	Calculated based on month-end balances.

b	For 2008, calculations were based on quarter-end balances.


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Additional financial disclosure (unaudited) continued

Commitments and contractual obligations

Commercial commitments include guarantees, contingent liabilities and standby facilities.


Commercial commitments	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
As at 31st December 2010
Securities lending arrangements^a		27,672		–		–		–		27,672
Guarantees and letters of credit pledged as collateral security		5,853		3,266		1,508		3,156		13,783
Performance guarantees, acceptances and endorsements		6,561		1,182		278		1,154		9,175
Documentary credits and other short-term trade related transactions		1,075		118		1		–		1,194
Standby facilities, credit lines and other commitments		142,026		43,545		19,300		18,092		222,963

As at 31st December 2009
Securities Lending Arrangements		27,406		–		–		–		27,406
Guarantees and letters of credit pledged as collateral security		6,770		4,103		1,286		3,247		15,406
Performance guarantees, acceptances and endorsements		8,009		856		381		716		9,962
Documentary credits and other short-term trade related transactions		722		38		2		–		762
Standby facilities, credit lines and other commitments		145,962		44,004		9,794		6,753		206,513

Contractual obligations include debt securities, operating lease and purchase obligations.


Contractual obligations	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
As at 31st December 2010
Long-term debt		102,959		25,224		13,507		34,338		176,028
Operating lease obligations		635		728		751		3,146		5,260
Purchase obligations		644		747		159		70		1,620
Total		104,245		26,713		14,164		37,786		182,908

As at 31st December 2009
Long-term debt		80,824		31,138		12,982		28,626		153,570
Operating lease obligations		468		808		675		2,936		4,887
Purchase obligations		1,109		940		541		1,243		3,833
Total		82,401		32,886		14,198		32,805		162,290

The long-term debt does not include undated loan capital of £9,094m (2009: £8,148m). Further information on the contractual maturity of the Group’s assets and liabilities is given in the Liquidity Risk section.

Note

a	Securities lending arrangements are fully collateralised, and are not expected to result in an outflow of funds from the Group; see Note 17 on page 216 for further details.


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Securities


Securities at fair value	2010				2009				2008
As at 31st December	Book value £m		Amortised cost £m		Book value £m		Amortised cost £m		Book value £m		Amortised cost £m
Investment securities – available for sale
United Kingdom government		12,056		12,130		77		74		1,238		1,240
Other government		12,635		12,959		10,958		8,389		11,456		11,338
Other public bodies and US Agencies		1,545		1,568		3,456		3,505		14,660		14,834
Mortgage and asset backed securities		2,148		2,390		2,498		2,958		3,510		4,126
Bank and building society certificates of deposit		576		599		7,697		7,343		10,478		10,535
Corporate and other issuers		21,184		21,139		19,202		18,986		17,489		17,908
Debt securities		50,144		50,785		43,888		41,255		58,831		59,981
Equity securities		5,481		6,014		6,676		6,247		2,142		1,814
Investment securities – available for sale		55,625		56,799		50,564		47,502		60,973		61,795

Other securities – held for trading
United Kingdom government		9,943		n/a		6,815		n/a		6,955		n/a
Other government		60,673		n/a		54,161		n/a		50,727		n/a
Other public bodies and US Agencies		28,181		n/a		20,517		n/a		21,909		n/a
Mortgage and asset backed securities		11,611		n/a		12,942		n/a		30,748		n/a
Bank and building society certificates of deposit		757		n/a		995		n/a		7,518		n/a
Corporate and other issuers		25,156		n/a		21,164		n/a		30,829		n/a
Debt securities		136,321		n/a		116,594		n/a		148,686		n/a
Equity securities		25,613		n/a		19,602		n/a		30,535		n/a
Other securities – held for trading		161,934		n/a		136,196		n/a		179,221		n/a

Investment debt securities include government securities held as part of the Group’s treasury management portfolio for asset and liability, liquidity and regulatory purposes and are for use on a continuing basis in the activities of the Group. In addition, the Group holds as investments listed and unlisted corporate securities. Bank and building society certificates of deposit are freely negotiable and have original maturities of up to five years, but are typically held for shorter periods.


Maturities and yield of available for sale debt securities
	Maturing with one year				Maturing after one but within five years				Maturing after five but within ten years				Maturing after ten years				Total
As at 31st December	Amount £m		Yield %		Amount £m		Yield %		Amount £m		Yield %		Amount £m		Yield %		Amount £m		Yield %
Government		2,055		5.9		5,820		2.8		11,318		2.4		5,498		2.1		24,691		2.7
Other public bodies and US Agencies		6		5.2		72		8.0		91		7.5		1,376		8.5		1,545		8.4
Other issuers		3,696		1.7		16,830		13.1		1,721		8.7		1,661		3.3		23,908		10.3
Total book value		5,757		3.2		22,722		10.4		13,130		3.3		8,535		3.4		50,144		6.5

The yield for each range of maturities is calculated by dividing the annualised interest income prevailing at 31st December 2010 by the fair value of securities held at that date.


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Additional financial disclosure (unaudited) continued

Average balance sheet

Average balances are based upon daily averages for most UK banking operations and monthly averages elsewhere


Average assets and interest income	2010								2009								2008
Year ended 31st December	Average balance £m			Interest £m			Average rate %		Average balance £m			Interest £m			Average rate %		Average balance £m			Interest £m			Average rate %
Assets
Loans and advances to banks^a:
– in offices in the United Kingdom		51,735			439			0.8		41,912			483			1.2		38,913			1,453			3.7
– in offices outside the United Kingdom		76,477			337			0.4		35,073			271			0.8		14,379			419			2.9
Loans and advances to customers^a:
– in offices in the United Kingdom		261,936			8,346			3.2		269,003			9,579			3.6		253,908			13,995			5.5
– in offices outside the United Kingdom		142,410			9,048			6.4		143,342			9,601			6.7		122,827			9,960			8.1
Financial investments:
– in offices in the United Kingdom		101,556			3,193			3.1		143,123			4,787			3.3		143,470			6,602			4.6
– in offices outside the United Kingdom		127,990			4,723			3.7		117,379			3,713			3.2		138,737			6,274			4.5
Reverse repurchase agreements and cash collateral on securities borrowed^c:
– in offices in the United Kingdom		215,982			1,169			0.5		163,139			1,770			1.1		207,521			8,768			4.2
– in offices outside the United Kingdom		148,791			526			0.4		145,606			665			0.5		128,250			4,450			3.5
Financial Assets Designated at Fair Value:
– in offices in the United Kingdom		21,822			750			3.4		18,881			822			4.4		20,299			1,325			6.5
– in offices outside the United Kingdom		8,283			129			1.6		13,552			315			2.3		8,690			426			4.9
Total average interest earning assets		1,156,982			28,660			2.5		1,091,010			32,006			2.9		1,076,994			53,672			5.0
Impairment allowances/provisions		(10,143	)							(8,705	)							(5,749	)
Non-interest earning assets		596,162								782,378								682,867
Total average assets and interest income		1,743,001			28,660			1.6		1,864,683			32,006			1.7		1,754,112			53,672			3.1
Percentage of total average interest earning assets in offices outside the United Kingdom		43.6	%							41.7	%							38.3	%
Total average interest earning assets related to:
Interest income^b					28,660			2.5					32,006			2.9					53,672			5.0
Interest expense^b					(20,511	)		1.8					(20,713	)		1.9					(39,820	)		3.8
					8,149			0.7					11,293			1.0					13,852			1.2

Notes

Loans and advances to banks and customers include all doubtful lendings, including non accrual lendings. Interest receivable on such lendings has been included to the extent to which either cash payments have been received or interest has been accrued in accordance with the income recognition policy of the Group.

b	In addition to interest income and interest expense shown on the income statement, interest income and interest expense above includes interest related to principal transactions and available for sale assets and liabilities.

Average balances for reverse repurchase agreements and cash collateral on securities borrowed have been stated on a gross basis prior to any offsetting to provide a more meaningful comparison to the related interest income and expense. The Group balance sheet on page 188 offsets financial assets and liabilities where 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 liability simultaneously.


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Additional financial disclosure (unaudited) continued


Average liabilities and interest expense	2010						2009						2008
Year ended 31st December	Average balance £m		Interest £m		Average rate %		Average balance £m		Interest £m		Average rate %		Average balance £m		Interest £m		Average rate %
Liabilities and shareholders’ equity
Deposits by banks:
– in offices in the United Kingdom		58,666		461		0.8		66,394		805		1.2		70,272		2,780		4.0
– in offices outside the United Kingdom		19,870		296		1.5		31,091		295		0.9		32,172		956		3.0
Customer accounts:
– in offices in the United Kingdom		198,149		1,602		0.8		177,499		2,549		1.4		188,252		6,938		3.7
– in offices outside the United Kingdom		72,660		2,698		3.7		81,544		3,918		4.8		73,290		4,429		6.0
Debt securities in issue:
– in offices in the United Kingdom		86,209		2,594		3.0		75,950		2,186		2.9		41,014		1,920		4.7
– in offices outside the United Kingdom		68,581		1,889		2.8		81,077		2,278		2.8		80,768		3,734		4.6
Dated and undated loan capital and other subordinated liabilities principally:
– in offices in the United Kingdom		26,794		2,180		8.1		26,379		1,889		7.2		22,912		1,435		6.3
Repurchase agreements and cash collateral on securities lent^a:
– in offices in the United Kingdom		181,043		1,104		0.6		169,824		1,300		0.8		203,967		8,445		4.1
– in offices outside the United Kingdom		226,105		714		0.3		215,714		849		0.4		177,883		2,800		1.6
Trading portfolio liabilities:
– in offices in the United Kingdom		51,073		2,225		4.4		55,704		2,193		3.9		56,675		2,657		4.7
– in offices outside the United Kingdom		48,046		1,853		3.9		36,812		999		2.7		62,239		2,087		3.4
Financial liabilities designated at fair value
– in offices in the United Kingdom		64,153		2,696		4.2		32,573		1,223		3.8		32,311		1,062		3.3
– in offices outside the United Kingdom		19,189		199		1.0		18,484		229		1.2		14,237		577		4.1
Total average interest bearing liabilities		1,120,538		20,511		1.8		1,069,045		20,713		1.9		1,055,992		39,820		3.8
Interest free customer deposits:
– in offices in the United Kingdom		47,263						43,897						40,439
– in offices outside the United Kingdom		6,563						4,816						3,089
Other non-interest bearing liabilities		499,986						696,478						617,910
Minority and other interests and shareholders’ equity		68,651						50,447						36,682
Total average liabilities, shareholders’ equity and interest expense		1,743,001		20,511		1.2		1,864,683		20,713		1.1		1,754,112		39,820		2.3
Percentage of total average interest bearing non-capital liabilities in offices outside the United Kingdom		40.6%						43.5%						41.7%

Notes

Average balances for repurchase agreements and cash collateral on securities borrowed have been stated on a gross basis prior to any offsetting to provide a more meaningful comparison to the related interest income and expense. The Group balance sheet on page 188 offsets financial assets and liabilities where 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 liability simultaneously.

172

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Additional financial disclosure (unaudited) continued

Changes in net interest income – volume and rate analysis

The following tables allocate changes in net interest income between changes in volume and changes in interest rates for the last two years. Volume and rate variances have been calculated on the movement in the average balances and the change in the interest rates on average interest earning assets and average interest bearing liabilities. Where variances have arisen from changes in both volumes and interest rates, these have been allocated proportionately between the two.


	2010/2009 Change due to increase/(decrease) in:									2009/2008 Change due to increase/(decrease) in:									2008/2007 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		(44	)		99			(143	)		(970	)		104			(1,074	)		379			354			25
– in offices outside the UK		66			219			(153	)		(148	)		310			(458	)		(360	)		117			(477	)
		22			318			(296	)		(1,118	)		414			(1,532	)		19			471			(452	)
Loans and advances to customers:
– in offices in the UK		(1,233	)		(246	)		(987	)		(4,416	)		790			(5,206	)		685			2,526			(1,841	)
– in offices outside the UK		(553	)		(62	)		(491	)		(359	)		1,522			(1,881	)		2,536			2,326			210
		(1,786	)		(308	)		(1,478	)		(4,775	)		2,312			(7,087	)		3,221			4,852			(1,631	)
Financial investments:
– in offices in the UK		(1,594	)		(1,321	)		(273	)		(1,815	)		(16	)		(1,799	)		(1,363	)		(721	)		(642	)
– in offices outside the UK		1,010			356			654			(2,561	)		(868	)		(1,693	)		2,333			3,102			(769	)
		(584	)		(965	)		381			(4,376	)		(884	)		(3,492	)		970			2,381			(1,411	)
Reverse repurchase agreements and cash collateral on securities borrowed:
– in offices in the UK		(601	)		460			(1,061	)		(6,998	)		(1,564	)		(5,434	)		(876	)		(188	)		(688	)
– in offices outside the UK		(139	)		15			(154	)		(3,785	)		532			(4,317	)		(1,004	)		855			(1,859	)
		(740	)		475			(1,215	)		(10,783	)		(1,032	)		(9,751	)		(1,880	)		667			2,547
Financial assets designated at fair value:
– in offices in the UK		(72	)		117			(189	)		(503	)		(87	)		(416	)		476			53			423
– in offices outside the UK		(186	)		(100	)		(86	)		(111	)		174			(285	)		(287	)		(146	)		(141	)
		(258	)		17			(275	)		(614	)		87			(701	)		189			(93	)		282
Total interest receivable:
– in offices in the UK		(3,544	)		(891	)		(2,653	)		(14,702	)		(773	)		(13,929	)		(699	)		2,024			(2,723	)
– in offices outside the UK		198			428			(230	)		(6,964	)		1,670			(8,634	)		3,218			6,254			(3,036	)
		(3,346	)		(463	)		(2,883	)		(21,666	)		897			(22,563	)		2,519			8,278			(5,759	)


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Changes in net interest income – volume and rate analysis


	2010/2009 Change due to increase/(decrease) in:									2009/2008 Change due to increase/(decrease) in:									2008/2007 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 payable
Deposits by banks:
– in offices in the UK		(344	)		(86	)		(258	)		(1,975	)		(146	)		(1,829	)		269			252			17
– in offices outside the UK		1			(129	)		130			(661	)		(31	)		(630	)		(269	)		181			(450	)
		(343	)		(215	)		(128	)		(2,636	)		(177	)		(2,459	)		-			433			(433	)
Customer accounts
– in offices in the UK		(947	)		270			(1,217	)		(4,389	)		(375	)		(4,014	)		(51	)		839			(890	)
– in offices outside the UK		(1,220	)		(396	)		(824	)		(511	)		463			(974	)		1,512			1,040			472
		(2,167	)		(126	)		(2,041	)		(4,900	)		88			(4,988	)		1,461			1,879			(418	)
Debt securities in issue:
– in offices in the UK		408			305			103			266			1,202			(936	)		(133	)		(26	)		(107	)
– in offices outside the UK		(389	)		(345	)		(44	)		(1,456	)		14			(1,470	)		(1,321	)		(673	)		(648	)
		19			(40	)		59			(1,190	)		1,216			(2,406	)		(1,454	)		(699	)		(755	)

Dated and undated loan capital and other subordinated liabilities principally in offices in the UK		291			30			261			454			233			221			672			620			52

Repurchase agreements and cash collateral on securities lent:
– in offices in the UK		(196	)		82			(278	)		(7,145	)		(1,217	)		(5,928	)		829			1,471			(642	)
– in offices outside the UK		(135	)		39			(174	)		(1,951	)		497			(2,448	)		(2,251	)		1,840			(4,091	)
		(331	)		121			(452	)		(9,096	)		(720	)		(8,376	)		(1,422	)		3,311			(4,733	)
Trading portfolio liabilities:
– in offices in the UK		32			(191	)		223			(464	)		(45	)		(419	)		380			408			(28	)
– in offices outside the UK		854			359			495			(1,088	)		(742	)		(346	)		652			1,189			(537	)
		886			168			718			(1,552	)		(787	)		(765	)		1,032			1,597			(565	)
Financial liabilities designated at fair value:
– in offices in the UK		1,473			1,312			161			161			8			153			(6	)		700			(706	)
– in offices outside the UK		(30	)		9			(39	)		(348	)		137			(485	)		336			168			168
		1,443			1,321			122			(187	)		145			(332	)		330			868			(538	)
Total interest payable:
– in offices in the UK		717			1,722			(1,005	)		(13,092	)		(340	)		(12,752	)		1,960			4,264			(2,304	)
– in offices outside the UK		(919	)		(463	)		(456	)		(6,015	)		338			(6,353	)		(1,341	)		3,745			(5,086	)
		(202	)		1,259			(1,461	)		(19,107	)		(2	)		(19,105	)		619			8,009			(7,390	)
Movement in net interest income
Increase/(decrease) in interest receivable		(3,346	)		(463	)		(2,883	)		(21,666	)		897			(22,563	)		2,519			8,278			(5,759	)
(Increase)/decrease in interest payable		(202	)		1,259			(1,461	)		19,107			2			19,105			(619	)		(8,009	)		7,390
		(3,548	)		796			(4,344	)		(2,559	)		899			(3,458	)		1,900			269			1,631


174

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Additional financial disclosure (unaudited) continued

Credit risk additional disclosure

This section of the report contains supplementary information that is more detailed or contains longer histories than the data presented in the credit risk management section. For commentary on this information, please refer to the preceding text (pages 58 to 93).

A Impairment


Movements in allowance for impairment by geography	2010 £m			2009 £m			2008 £m			2007 £m			2006 £m
Allowance for impairment as at 1st January		10,796			6,574			3,772			3,335			3,450
Acquisitions and disposals		78			434			307			(73	)		(23	)
Unwind of discount		(213	)		(185	)		(135	)		(113	)		(98	)
Exchange and other adjustments		331			(127	)		791			53			(153	)
Amounts written off:
United Kingdom		(1,879	)		(1,569	)		(1,514	)		(1,530	)		(1,746	)
Other European Union		(479	)		(453	)		(162	)		(143	)		(74	)
United States		(625	)		(669	)		(1,044	)		(145	)		(46	)
Africa		(512	)		(438	)		(187	)		(145	)		(264	)
Rest of World		(815	)		(251	)		(12	)		-			(44	)
Recoveries:
United Kingdom		116			48			131			154			178
Other European Union		15			12			4			32			18
United States		1			6			1			7			22
Africa		54			80			36			34			33
Rest of World		15			4			2			-			8
New and increased impairment allowance:
United Kingdom		2,761			3,123			2,160			1,960			2,253
Other European Union		1,407			1,625			659			192			182
United States		1,292			1,535			1,529			431			60
Africa		719			932			526			268			209
Rest of World		760			896			242			20			18
Reversals of impairment allowance:
United Kingdom		(336	)		(331	)		(212	)		(213	)		(195	)
Other European Union		(248	)		(205	)		(68	)		(37	)		(72	)
United States		(384	)		(4	)		(9	)		(50	)		(26	)
Africa		(52	)		(38	)		(36	)		(20	)		(33	)
Rest of World		(169	)		(53	)		(33	)		(18	)		(63	)
Recoveries:
United Kingdom		(116	)		(48	)		(131	)		(154	)		(178	)
Other European Union		(15	)		(12	)		(4	)		(32	)		(18	)
United States		(1	)		(6	)		(1	)		(7	)		(22	)
Africa		(54	)		(80	)		(36	)		(34	)		(33	)
Rest of the World		(15	)		(4	)		(2	)		-			(8	)
Allowance for impairment as at 31st December		12,432			10,796			6,574			3,772			3,335
Average loans and advances for the year		532,558			447,569			453,413			357,853			313,614


				175

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Analysis of impairment charges (audited) As at 31st December	2010 £m			2009 £m		2008 £m		2007 £m		2006 £m
Impairment charges:
United Kingdom		2,309			2,744		1,817		1,593		1,880
Other European Union		1,144			1,408		587		123		92
United States		907			1,525		1,519		374		12
Africa		613			814		454		214		143
Rest of the World		576			839		207		2		(53	)
Impairment on loans and advances		5,549			7,330		4,584		2,306		2,074
Impairment on available for sale assets		51			670		382		13		86
Impairment on reverse repurchase agreements		(4	)		43		124		-		-
Impairment charges		5,596			8,043		5,090		2,319		2,160
Other credit provisions charge/(release)		76			28		329		476		(6	)
Impairment charges		5,672			8,071		5,419		2,795		2,154

The category ‘Other Personal’ includes credit cards, unsecured loans, personal loans, second liens and personal overdrafts.

The industry classifications in Tables (iii), (iv) and (v) have been prepared at the level of the borrowing entity. This means that a loan to a 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.


Total impairment charge by industry (audited) As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
United Kingdom:
Financial institutions		22		485		76		32		64
Manufacturing		38		112		118		72		1
Construction		77		54		15		14		17
Property		123		113		80		36		15
Energy and water		-		-		1		1		(7	)
Wholesale and retail distribution and leisure		170		314		59		118		88
Business and other services		238		175		234		81		133
Home loans		37		33		28		1		4
Cards, unsecured and other personal lending		1,578		1,376		1,178		1,187		1,526
Other		26		82		28		51		39
		2,309		2,744		1,817		1,593		1,880
Overseas		3,240		4,586		2,767		713		194
Impairment charges		5,549		7,330		4,584		2,306		2,074


176

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Allowance for impairment by industry (audited)
	2010				2009				2008				2007				2006
As at 31st December	£m		%		£m		%		£m		%		£m		%		£m		%
United Kingdom:
Financial institutions		447		3.6		493		4.6		81		1.2		103		2.7		67		2.0
Manufacturing		84		0.6		142		1.3		185		2.8		65		1.7		85		2.5
Construction		76		0.6		41		0.4		18		0.3		16		0.4		16		0.5
Property		131		1.0		90		0.8		114		1.7		54		1.4		26		0.8
Energy and water		-		-		-		-		1		-		1		-		-		-
Wholesale and retail distribution and leisure		256		2.1		182		1.7		43		0.7		102		2.7		81		2.4
Business and other services		259		2.1		218		2.0		236		3.6		158		4.2		186		5.6
Home loans		85		0.7		63		0.6		46		0.7		15		0.4		10		0.3
Cards, unsecured and other personal lending		3,020		24.3		2,688		24.9		2,160		32.9		1,915		50.8		1,953		58.6
Other		71		0.6		92		0.8		63		0.9		97		2.7		53		1.6
		4,429		35.6		4,009		37.1		2,947		44.8		2,526		67.0		2,477		74.3
Overseas		8,003		64.4		6,787		62.9		3,627		55.2		1,246		33.0		858		25.7
Total		12,432		100.0		10,796		100.0		6,574		100.0		3,772		100.0		3,335		100.0


Amounts written off and recovered by industry (audited)
	Amounts written off										Recoveries of amounts previously written off
As at 31st December	2010 £m		2009 £m		IFRS 2008 £m		2007 £m		2006 £m		2010 £m		2009 £m		IFRS 2008 £m		2007 £m		2006 £m
United Kingdom:
Financial institutions		68		72		88		6		13		2		3		4		1		-
Manufacturing		102		162		53		83		73		6		4		8		7		21
Construction		42		34		19		23		17		1		3		2		3		2
Property		86		141		27		16		23		4		3		2		10		6
Energy and water		-		2		1		-		1		-		4		-		-		2
Wholesale and retail distribution and leisure		103		182		137		109		120		6		8		7		12		14
Business and other services		198		197		153		83		124		7		5		10		22		17
Home loans		20		16		4		1		-		1		-		1		1		7
Cards, unsecured and other personal lending		1,201		705		960		1,164		1,351		75		13		88		96		107
Other		59		58		72		45		24		14		5		9		2		2
		1,879		1,569		1,514		1,530		1,746		116		48		131		154		178
Overseas		2,431		1,811		1,405		433		428		85		102		43		73		81
Total		4,310		3,380		2,919		1,963		2,174		201		150		174		227		259


Impairment ratios (audited)	2010 %		2009 %		2008 %		2007 %		2006 %
Impairment charges as a percentage of average loans and advances		1.04		1.64		1.01		0.64		0.66
Amounts written off (net of recoveries) as a percentage of average loans and advances		0.77		0.72		0.61		0.49		0.61
Allowance for impairment balance as a percentage of loans and advances as at 31st December		2.60		2.29		1.27		0.97		1.05

B. Potential Credit Risk Loans


Credit risk loans summary As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
Impaired loans		26,630		16,401		12,264		8,574		4,444
Accruing loans which are contractually overdue 90 days or more as to principal or interest		4,388		5,310		2,953		794		598
Impaired and restructured loans		864		831		483		273		46
Credit risk loans		31,882		22,542		15,700		9,641		5,088


				~~165~~ 177

Additional financial information

Additional financial disclosure (unaudited) continued




Credit risk loans As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
Impaired loans:
United Kingdom		5,744		4,680		3,793		3,605		3,340
Other European Union		5,185		4,004		1,713		472		410
United States		11,915		4,612		4,397		3,703		129
Africa		2,899		2,170		1,996		757		535
Rest of the World		887		935		365		37		30
Total		26,630		16,401		12,264		8,574		4,444

Accruing loans which are contractually overdue 90 days or more as to principal or interest:
United Kingdom		1,380		2,305		1,656		676		516
Other European Union		786		951		562		79		58
United States		164		232		433		10		3
Africa		1,992		1,739		172		29		21
Rest of the World		66		83		130		-		-
Total		4,388		5,310		2,953		794		598

Impaired and restructured loans:
United Kingdom		662		582		367		179		-
Other European Union		33		41		29		14		10
United States		141		180		82		38		22
Africa		18		22		-		42		14
Rest of the World		10		6		5		-		-
Total		864		831		483		273		46

Total credit risk loans:
United Kingdom		7,786		7,567		5,816		4,460		3,856
Other European Union		6,004		4,996		2,304		565		478
United States		12,220		5,024		4,912		3,751		154
Africa		4,909		3,931		2,168		828		570
Rest of the World		963		1,024		500		37		30
Credit risk loans		31,882		22,542		15,700		9,641		5,088


178

Additional financial information

Additional financial disclosure (unaudited) continued




Potential problem loans As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
United Kingdom		892		1,013		883		419		465
Other European Union		663		790		963		59		32
United States		219		553		431		964		21
Africa		316		488		140		355		240
Rest of the World		605		679		39		-		3
Potential problem loans		2,695		3,523		2,456		1,797		761


Interest foregone on credit risk loans					2010 £m		2009 £m		2008 £m
Interest income that would have been recognised under the original contractual terms
United Kingdom						316		392		244
Rest of the World						748		736		235
Total						1,064		1,128		479


Total Impairment Allowance coverage of credit risk loans	2010 %		2009 %		2008 %		2007 %		2006 %
United Kingdom		56.9		53.0		50.7		56.6		64.2
Other European Union		46.0		40.3		41.8		60.9		65.1
United States		24.2		51.3		31.8		9.5		64.9
Africa		33.2		34.4		39.5		62.1		73.2
Rest of World		67.9		82.3		49.2		86.5		100.0
Total coverage of credit risk loans		39.0		47.9		41.9		39.1		65.6


Total Impairment Allowance coverage of potential credit risk loans	2010 %		2009 %		2008 %		2007 %		2006 %
United Kingdom		51.0		46.7		44.0		51.8		57.3
Other European Union		41.4		34.8		29.5		55.1		61.0
United States		23.8		46.2		29.2		7.6		57.1
Africa		31.2		30.6		37.1		43.4		51.5
Rest of World		41.7		49.5		45.5		86.5		91.0
Total coverage of potential credit risk lending		36.0		41.4		36.2		33.0		57.0


				179

Additional financial information

Additional financial disclosure (unaudited) continued


C. Maturity Analysis of Loans and Advances
Maturity analysis of loans and advances to customers
	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 no 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
As at 31st December 2010
United Kingdom
Corporate lending		26,480		12,435		1,308		2,585		13,925		7,866		6,382		9,485		80,466
Other lending to customers in the United Kingdom		6,441		2,217		1,993		3,180		12,787		18,986		25,304		63,034		133,942
Total United Kingdom		32,921		14,652		3,301		5,765		26,712		26,852		31,686		72,519		214,408
Other European Union		6,100		15,103		2,281		3,199		9,596		7,676		9,434		32,639		86,028
United States		4,559		20,620		1,646		2,253		4,072		2,419		13,851		6,835		56,255
Africa		7,356		1,982		1,779		3,856		8,001		4,320		7,470		19,805		54,569
Rest of the World		1,955		8,707		1,634		1,285		5,733		4,220		4,109		1,423		29,066
Loans and advances to customers		52,891		61,064		10,641		16,358		54,114		45,487		66,550		133,221		440,326

As at 31st December 2009
United Kingdom
Corporate lending		21,369		14,941		1,568		2,856		13,057		10,071		9,759		14,626		88,247
Other lending to customers in the United Kingdom		5,862		3,802		2,092		3,809		15,201		10,404		23,302		54,860		119,332
Total United Kingdom		27,231		18,743		3,660		6,665		28,258		20,475		33,061		69,486		207,579
Other European Union		4,094		16,113		1,976		3,278		11,088		9,247		10,137		30,425		86,358
United States		4,887		25,296		2,265		3,637		4,876		1,251		11,485		7,233		60,930
Africa		11,248		2,457		1,052		1,322		4,307		3,091		6,162		19,210		48,849
Rest of the World		1,967		6,616		1,189		3,758		4,367		4,485		3,154		1,707		27,243
Loans and advances to customers		49,427		69,225		10,142		18,660		52,896		38,549		63,999		128,061		430,959

180

Additional financial information

Additional financial disclosure (unaudited) continued


Maturity analysis of loans and advances to banks
	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
As at 31st December 2010
United Kingdom		428		3,637		108		460		250		-		-		366		5,249
Other European Union		2,013		8,111		157		22		72		1		-		-		10,376
United States		527		10,098		996		226		619		-		93		-		12,559
Africa		734		243		88		13		318		5		-		74		1,475
Rest of the World		2,007		4,390		527		226		1,001		-		18		19		8,188
Loans and advances to banks		5,709		26,479		1,876		947		2,260		6		111		459		37,847

As at 31st December 2009
United Kingdom		403		3,234		64		625		405		-		-		398		5,129
Other European Union		1,262		10,803		44		394		184		8		2		-		12,697
United States		1,257		10,926		77		619		157		-		38		63		13,137
Africa		565		465		221		98		974		6		41		18		2,388
Rest of the World		1,275		5,111		88		98		708		530		17		18		7,845
Loans and advances to banks		4,762		30,539		494		1,834		2,428		544		98		497		41,196

181

Additional financial information

Additional financial disclosure (unaudited) continued

D. Industrial and Geographical Concentrations of Loans and Advances


Loans and advances to customers by industry As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
Financial institutions		90,409		95,839		114,069		71,160		45,954
Manufacturing		15,096		18,855		26,374		16,974		15,451
Construction		6,173		6,303		8,239		5,423		4,056
Property		23,720		23,468		22,155		17,018		16,528
Government		5,109		4,801		5,301		2,036		2,426
Energy and water		9,240		10,735		14,101		8,632		6,810
Wholesale and retail distribution and leisure		17,886		19,746		20,208		18,216		15,490
Business and other services		27,138		30,277		37,373		30,363		26,999
Home loans		168,909		149,738		140,166		106,751		92,477
Cards, unsecured loans and other personal lending		51,724		44,971		48,305		46,423		37,535
Other		24,922		26,226		32,047		26,171		21,905
Loans and advances to customers		440,326		430,959		468,338		349,167		285,631

Loans and advances to customers in the UK As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
Financial institutions		18,824		21,975		26,091		21,131		14,011
Manufacturing		6,675		8,549		11,340		9,388		9,047
Construction		3,683		3,544		4,278		3,542		2,761
Property		13,487		13,514		12,091		10,203		10,010
Government		91		496		20		201		6
Energy and water		2,181		2,447		3,040		2,203		2,360
Wholesale and retail distribution and leisure		11,697		12,792		14,421		13,800		12,951
Business and other services		15,444		16,577		19,589		20,485		19,260
Home loans		104,957		90,903		85,672		69,874		62,621
Cards, unsecured loans and other personal lending		29,275		27,687		28,362		28,691		27,617
Other		8,094		9,095		11,114		10,829		9,874
Loans and advances to customers in the UK		214,408		207,579		216,018		190,347		170,518

Loans and advances to customers in other European Union countries As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
Financial institutions		15,203		14,475		14,218		7,585		5,629
Manufacturing		4,354		5,754		8,700		4,175		3,147
Construction		1,439		1,610		1,786		1,159		639
Property		3,641		4,224		4,814		2,510		2,162
Government		1,011		575		1,089		-		6
Energy and water		3,095		3,882		5,313		2,425		2,050
Wholesale and retail distribution and leisure		2,523		2,428		2,653		1,719		776
Business and other services		4,742		4,878		5,490		3,801		2,343
Home loans		37,157		35,752		34,451		21,405		18,202
Cards, unsecured loans and other personal lending		8,080		7,403		6,440		6,615		4,086
Other		4,783		5,377		7,109		5,139		4,390
Loans and advances to customers in other European Union countries		86,028		86,358		92,063		56,533		43,430


182

Additional financial information

Additional financial disclosure (unaudited) continued


Loans and advances to customers in the United States As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
Financial institutions		42,752		46,132		56,006		29,342		17,516
Manufacturing		722		797		2,171		818		519
Construction		5		7		21		18		13
Property		502		428		549		568		1,714
Government		324		303		336		221		153
Energy and water		2,094		2,336		3,085		1,279		1,078
Wholesale and retail distribution and leisure		516		720		1,165		846		403
Business and other services		992		1,721		2,279		1,053		1,432
Home loans		28		19		28		10		349
Cards, unsecured loans and other personal lending		7,554		7,410		7,691		3,256		2,022
Other		766		1,057		4,056		2,889		478
Loans and advances to customers in the United States		56,255		60,930		77,387		40,300		25,677

Loans and advances to customers in Africa As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
Financial institutions		2,706		3,600		1,956		3,472		2,821
Manufacturing		1,215		1,419		1,082		1,351		1,747
Construction		791		903		2,053		637		591
Property		4,709		4,154		3,485		2,433		1,987
Government		1,922		1,449		1,741		967		785
Energy and water		136		158		118		356		156
Wholesale and retail distribution and leisure		1,726		1,789		1,012		1,326		1,050
Business and other services		2,924		4,319		4,699		1,285		2,631
Home loans		25,484		22,057		19,036		15,393		11,223
Cards, unsecured loans and other personal lending		4,235		964		3,069		6,287		2,976
Other		8,721		8,037		6,979		5,660		5,724
Loans and advances to customers in Africa		54,569		48,849		45,230		39,167		31,691

Loans and advances to customers in the Rest of the World As at 31st December	2010 £m		2009 £m		2008 £m		2007 £m		2006 £m
Loans and advances		28,633		27,042		37,421		22,702		14,207
Finance lease receivables		433		201		219		118		108
Loans and advances to customers in the Rest of the World		29,066		27,243		37,640		22,820		14,315


Interest rate sensitivity of loans and advances			2010						2009
As at 31st December	Fixed rate £m		Variable rate £m		Total£m		Fixed rate £m		Variable rate £m		Total £m
Banks		17,270		20,577		37,847		15,898		25,298		41,196
Customers		101,606		338,720		440,326		94,470		336,489		430,959


				183

Additional financial information

Additional financial disclosure (unaudited) continued


Foreign outstandings in currencies other than the local currency of the borrower for countries where this exceeds 0.75% of total Group assets	As % of assets		Total £m		Banks and other financial institutions £m		Government and official institutions £m		Commercial industrial and other private sectors £m
As at 31st December 2010
United States		6.4		95,707		4,775		11,988		78,944
France		2.0		29,357		21,711		3,440		4,206
Germany		1.7		24,636		14,079		1,164		9,393
Cayman Islands		0.9		12,683		178		17		12,488
Switzerland		0.8		11,940		2,776		5,673		3,491

As at 31st December 2009
United States		1.2		16,907		4,622		-		12,285

As 31st December 2008
United States		3.1		63,614		16,724		2		46,888
Cayman Islands		1.2		23,765		271		-		23,494

Off-Balance Sheet and other Credit Exposures As at 31st December					2010 £m		2009 £m		2008 £m
Off-balance sheet exposures
Contingent liabilities						50,630		52,774		66,310
Commitments						224,157		207,275		260,816
On-balance sheet exposures
Trading portfolio assets						168,867		151,344		185,637
Financial assets designated at fair value on own account						40,056		41,311		54,542
Derivative financial instruments						420,319		416,815		984,802
Available for sale financial investments						65,110		56,483		64,976

Notional principal amounts of credit derivatives As at 31st December					2010 £m		2009 £m		2008 £m
Credit derivatives held or issued for trading purposes^a						1,952,475		2,016,796		4,129,244

Additional Related Parties disclosures

For US disclosure purposes, the aggregate emoluments of all Directors and Officers of Barclays PLC who held office during the year (2010: 26 persons, 2009: 28 persons, 2008: 24 persons) for the year ended 31st December 2010 amounted to £121.7m (2009: £29.8m, 2008: £26.8m). In addition, the aggregate amount set aside for the year ended 31st December 2010, to provide pension benefits for the Directors and Officers amounted to £1.0m (2009: £0.7m, 2008: £0.9m).

Note

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


184

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~~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~~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 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 2009. 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 accounts of Barclays Bank PLC included in this document do not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. The statutory accounts of Barclays Bank PLC, which contain an unqualified audit report and do not contain any statement under Section 498(2) or (3) of that Act, will be delivered to the Registrar of Companies in accordance with Section 441 of that Act and are published as a separate document.

~~Draft~~ BBA Code for Financial Reporting Disclosure

In accordance with the agreement set out in the FSA discussion paper, ‘Enhancing financial reporting disclosure by UK credit institutions’, Barclays confirms that it has complied with the draft BBA Code for Financial Reporting Disclosure.

~~In October 2009,~~September 2010, the British Bankers’ Association published a ~~draft~~ Code for Financial Reporting Disclosure. The ~~draft~~ Code sets out five disclosure principles together with supporting guidance. The principles are that UK banks will:

–

provide high quality, meaningful and decision-useful disclosures; review and enhance their financial instrument disclosures for key areas of interest; assess the applicability and relevance of good practice recommendations to their disclosures acknowledging the importance of such guidance; seek to enhance the comparability of financial statement disclosures across the UK banking sector; and decision-useful disclosures;

–	review and enhance their financial instrument disclosures for key areas of interest;

–	assess the applicability and relevance of good practice recommendations to their disclosures acknowledging the importance of such guidance;

–	seek to enhance the comparability of financial statement disclosures across the UK banking sector; and

–	clearly differentiate in their annual reports between information that is audited and information that is unaudited.

Barclays confirms that ~~is audited and information that is unaudited.~~

~~The Group and other major UK banks have voluntarily~~it has adopted the ~~draft~~BBA Code ~~in their 2009 financial statements. The Group’s 2009 financial statements have therefore been~~for Financial Reporting Disclosure and has prepared the 2010 Annual Report and Accounts in compliance with the ~~draft Code’s principles and the~~Code.

The Group aims to ~~continue to~~continually enhance its disclosures and their usefulness to the readers of the financial statements in ~~line with~~the light of developing market practice and areas of focus.

~~Statutory Accounts~~In particular, in 2010 we have:

The consolidated accounts of Barclays PLC and its subsidiaries are set out on pages 167 to 282 along with the accounts of Barclays PLC itself on pages 183 to 185. The consolidated accounts of Barclays Bank PLC and its subsidiaries are set out on pages 283 to 300. The accounting policies on pages 167 to 177 and the Notes commencing on page 186 apply equally to both sets of accounts unless otherwise stated.

–	concentrated our disclosures on financial risks in the Risk management section to present as far as possible, related information in one place and reduce duplication, distinguishing between audited and unaudited information;

–	enhanced our disclosures of principal risks; and

–	refocused our financial statement disclosures to concentrate on material items and to reduce disclosures of immaterial items.


~~166~~					185

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 cash flow statements and, Consolidated statements of comprehensive income and Consolidated statements of changes in equity present fairly, in all material respects, the financial position of Barclays PLC ~~(The Company)~~(the ‘Company’) and its subsidiaries at 31st December ~~2009~~2010 and 31st December ~~2008~~2009 and the results of their operations and cash flows for each of the three years in the period ended 31st December ~~2009,~~2010, in conformity with International Financial Reporting Standards ~~(IFRS)~~(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 ~~2009,~~2010, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring ~~Organisations~~Organizations of the Treadway Commission (COSO).

The Company’s management ~~are~~is 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~~’Management’s report on internal control over financial reporting’ as it pertains to Barclays PLC in the ~~section headed ‘Accountability and Audit’.~~

Directors report. Our responsibility is to express opinions on these financial statements and on the Company’s internal control over financial reporting based on our integrated 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.

/s/ ~~PricewaterhouseCoopers LLP~~

PricewaterhouseCoopers LLP

London, United Kingdom

~~9th~~10th March ~~2010~~2011


186

Consolidated financial statements

Consolidated income statement


For the year ended 31st December	Notes		2010 £m	2009 £m	2008 £m
Continuing operations
Interest income		2	20,035	21,236	28,010
Interest expense		2	(7,512)	(9,318)	(16,541)
Net interest income			12,523	11,918	11,469
Fee and commission income		3	10,368	9,946	7,573
Fee and commission expense		3	(1,497)	(1,528)	(1,082)
Net fee and commission income			8,871	8,418	6,491
Net trading income		4	8,078	7,001	1,339
Net investment income		5	1,477	56	680
Net premiums from insurance contracts			1,137	1,172	1,090
Gains on debt buy-backs and extinguishments			–	1,249	24
Other income			118	140	343
Total income			32,204	29,954	21,436
Net claims and benefits incurred on insurance contracts			(764)	(831)	(237)
Total income net of insurance claims			31,440	29,123	21,199
Impairment charges and other credit provisions		6	(5,672)	(8,071)	(5,419)
Net operating income			25,768	21,052	15,780
Staff costs		7	(11,916)	(9,948)	(7,204)
Administration and general expenses		8	(6,585)	(5,560)	(5,193)
Depreciation of property, plant and equipment		20	(790)	(759)	(606)
Amortisation of intangible assets		19	(437)	(447)	(276)
Impairment of goodwill		19	(243)	(1)	(112)
Operating expenses			(19,971)	(16,715)	(13,391)
Share of post-tax results of associates and joint ventures			58	34	14
Profit on disposal of subsidiaries, associates and joint ventures		33	81	188	327
Gain on acquisitions		35	129	26	2,406
Profit before tax from continuing operations			6,065	4,585	5,136
Tax		9	(1,516)	(1,074)	(453)
Profit after tax from continuing operations			4,549	3,511	4,683
Profit for the year from discontinued operations, including gain on disposal		34	–	6,777	604
Profit after tax			4,549	10,288	5,287

Profit attributable to equity holders of the Parent from:
Continuing operations			3,564	2,628	3,795
Discontinued operations			–	6,765	587
Total			3,564	9,393	4,382
Profit attributable to non-controlling interests		31	985	895	905

Earnings per share			p	p	p
Basic earnings per share		10	30.4	86.2	59.3
Basic earnings per share – continuing operations		10	30.4	24.1	51.4
Basic earnings per share – discontinued operations		10	–	62.1	7.9
Diluted earnings per share		10	28.5	81.6	57.5
Diluted earnings per share – continuing operations		10	28.5	22.7	49.8
Diluted earnings per share – discontinued operations		10	–	58.9	7.7
Interim dividend per ordinary share			3.0	1.0	11.5
Final dividend per ordinary share		11	2.5	1.5	–

			£m	£m	£m
Interim dividend paid		11	355	113	906
Final dividend		11	298	176	–

The Board of Directors approved the accounts set out on pages 186 to 269 on 10th March 2011.


				~~167~~	187

Consolidated financial statements

Consolidated statement of comprehensive income


For the year ended 31st December	2010 £m		2009 £m		2008 £m
Profit after tax		4,549		10,288		5,287
Other comprehensive income from continuing operations:
Currency translation reserve
– Currency translation differences		1,184		(861)		2,274
– Tax		–		(2)		840
Available for sale reserve
– Net (losses)/gains from changes in fair value		(133)		1,176		(1,731)
– Net gains transferred to net profit on disposal^a		(1,020)		(422)		(210)
– Net losses transferred to net profit due to impairment		53		672		382
– Changes in insurance liabilities		31		(67)		–
– Net gains transferred to net profit due to fair value hedging		(308)		(123)		(2)
– Tax		141		(177)		207
Cash flow hedging reserve
– Net gains from changes in fair value		601		285		305
– Net gains transferred to net profit		(684)		(120)		71
– Tax		39		(65)		(194)
Other		59		218		(7)
Other comprehensive income for the year, net of tax, from continuing operations		(37)		514		1,935
Other comprehensive income for the year, net of tax, from discontinued operations		–		(58)		114
Total comprehensive income for the year		4,512		10,744		7,336

Attributable to:
Equity holders of the Parent		2,975		9,556		6,213
Non-controlling interests		1,537		1,188		1,123
		4,512		10,744		7,336

Note

a In 2009, available for sale net gains transferred to net profit includes £349m gain relating

to continuing operations and £66m gain relating to discontinued operations.


188

Consolidated ~~accounts Barclays PLC~~financial statements

~~Accounting policies~~Consolidated balance sheet


As at 31st December		2010		2009
	Notes	£m		£m
Assets
Cash and balances at central banks			97,630		81,483
Items in the course of collection from other banks			1,384		1,593
Trading portfolio assets	12		168,867		151,344
Financial assets designated at fair value	13		41,485		42,568
Derivative financial instruments	14		420,319		416,815
Loans and advances to banks	15		37,799		41,135
Loans and advances to customers	15		427,942		420,224
Reverse repurchase agreements and other similar secured lending	17		205,772		143,431
Available for sale financial investments	16		65,110		56,483
Current tax assets	9		196		349
Prepayments, accrued income and other assets			5,269		6,358
Investments in associates and joint ventures	18		518		422
Goodwill and intangible assets	19		8,697		8,795
Property, plant and equipment	20		6,140		5,626
Deferred tax assets	9		2,517		2,303
Total assets			1,489,645		1,378,929
Liabilities
Deposits from banks			77,975		76,446
Items in the course of collection due to other banks			1,321		1,466
Customer accounts			345,788		322,429
Repurchase agreements and other similar secured borrowing	17		225,534		198,781
Trading portfolio liabilities	12		72,693		51,252
Financial liabilities designated at fair value	21		97,729		87,881
Derivative financial instruments	14		405,516		403,416
Debt securities in issue			156,623		135,902
Accruals, deferred income and other liabilities	22		13,233		14,241
Current tax liabilities	9		646		992
Subordinated liabilities	23		28,499		25,816
Deferred tax liabilities	9		514		470
Provisions	24		947		590
Retirement benefit liabilities	28		365		769
Total liabilities			1,427,383		1,320,451

Shareholders’ equity
Shareholders’ equity excluding non-controlling interests			50,858		47,277
Non-controlling interests	31		11,404		11,201
Total shareholders’ equity			62,262		58,478
Total liabilities and shareholders’ equity			1,489,645		1,378,929

Marcus Agius

Group Chairman

Bob Diamond

Chief Executive

Chris Lucas

Group Finance Director


					189

Consolidated financial statements

Consolidated statement of changes in equity


	Called up											Other
	share					Cash						reserves
	capital		Available			flow			Currency			and									Non-
	and share		for sale			hedging			translation			treasury			Retained						controlling			Total
	premium^a		reserve^b			reserve^b			reserve^b			shares^b			earnings			Total			interests			equity
	£m		£m			£m			£m			£m			£m			£m			£m			£m
Balance as at 1st January 2010		10,804		(110	)		252			1,615			871			33,845			47,277			11,201			58,478
Profit after tax		–		–			–			–			–			3,564			3,564			985			4,549
Other comprehensive income net of tax:
Currency translation movements		–		–			–			742			–			–			742			442			1,184
Available for sale investments		–		(1,245	)		–			–			–			–			(1,245	)		9			(1,236	)
Cash flow hedges		–		–			(100	)		–			–			–			(100	)		56			(44	)
Other		–		–			–			–			–			14			14			45			59
Total comprehensive income for the year		–		(1,245	)		(100	)		742			–			3,578			2,975			1,537			4,512
Issue of new ordinary shares		1,500		–			–			–			–			–			1,500			–			1,500
Issue of shares under employee share schemes		35		–			–			–			–			830			865			–			865
Net purchase of treasury shares		–		–			–			–			(989	)		–			(989	)		–			(989	)
Vesting of treasury shares		–		–			–			–			718			(718	)		–			–			–
Dividends paid		–		–			–			–			–			(531	)		(531	)		(803	)		(1,334	)
Redemption of Reserve Capital Instruments		–		–			–			–			–			–			–			(487	)		(487	)
Other reserve movements		–		–			–			–			–			(239	)		(239	)		(44	)		(283	)
Balance as at 31st December 2010		12,339		(1,355	)		152			2,357			600			36,765			50,858			11,404			62,262

Balance as at 1st January 2009		6,138		(1,190	)		132			2,840			4,490			24,208			36,618			10,793			47,411
Profit after tax		–		–			–			–			–			9,393			9,393			895			10,288
Other comprehensive income net of tax from continuing operations:
Currency translation movements		–		–			–			(1,140	)		–			–			(1,140	)		277			(863	)
Available for sale investments		–		1,071			–			–			–			–			1,071			(12	)		1,059
Cash flow hedges		–		–			119			–			–			–			119			(19	)		100
Other		–		–			–			–			–			171			171			47			218
Other comprehensive income net of tax from discontinued operations		–		10			–			(85	)		–			17			(58	)		–			(58	)
Total comprehensive income for the year		–		1,081			119			(1,225	)		–			9,581			9,556			1,188			10,744
Issue of new ordinary shares		749		–			–			–			–			–			749			–			749
Issue of shares under employee share schemes		35		–			–			–			–			298			333			–			333
Net purchase of treasury shares		–		–			–			–			(47	)		–			(47	)		–			(47	)
Vesting of treasury shares		–		–			–			–			80			(80	)		–			–			–
Dividends paid		–		–			–			–			–			(113	)		(113	)		(767	)		(880	)
Redemption of Reserve Capital Instruments		–		–			–			–			–			–			–			(82	)		(82	)
Conversion of Mandatory Convertible Notes		3,882		–			–			–			(3,652	)		(230	)		–			–			–
Other reserve movements		–		(1	)		1			–			–			181			181			69			250
Balance as at 31st December 2009		10,804		(110	)		252			1,615			871			33,845			47,277			11,201			58,478

Notes

a For further details refer to Note 29.

b For further details refer to Note 30.


190

Consolidated financial statements

Consolidated cash flow statement


For the year ended 31st December	2010			2009			2008
	£m			£m			£m
Continuing operations
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax		6,065			4,585			5,136
Adjustment for non-cash items:
Allowance for impairment		5,672			8,071			5,419
Depreciation, amortisation and impairment of property, plant, equipment and intangibles		1,346			1,196			885
Other provisions, including pensions		914			428			804
Net profit on disposal of investments and property, plant and equipment		(1,057	)		(383	)		(371	)
Net profit from disposal of subsidiaries		(77	)		(191	)		(327	)
Net gains on acquisitions		(129	)		(26	)		(2,406	)
Other non-cash movements^a		(5,698	)		4,542			946
Changes in Operating assets and Liabilities
Net (increase)/decrease in loans and advances to banks and customers		(63,212	)		25,482			(58,431	)
Net increase/(decrease) in deposits and debt securities in issue		63,711			(49,203	)		77,743
Net (increase)/decrease in derivative financial instruments		(1,298	)		3,321			(17,529	)
Net (increase)/decrease in trading assets		(17,505	)		34,334			26,919
Net increase/(decrease) in trading liabilities		21,441			(8,222	)		(5,928	)
Net decrease in financial investments		11,126			20,459			5,229
Net decrease/(increase) in other assets		1,366			(465	)		(3,016	)
Net decrease in other liabilities		(2,521	)		(907	)		(477	)
Corporate income tax paid		(1,458	)		(1,177	)		(1,404	)
Net Cash from Operating activities		18,686			41,844			33,192
Purchase of available for sale investments		(76,418	)		(78,420	)		(57,756	)
Proceeds from sale or redemption of available for sale investments		71,251			88,559			51,429
Net addition of intangible assets		(217	)		(226	)		(666	)
Purchase of property, plant and equipment		(1,767	)		(1,150	)		(1,643	)
Proceeds from sale of property, plant and equipment		556			372			799
Acquisitions of subsidiaries, net of cash acquired		886			(28	)		(961	)
Disposal of subsidiaries, net of cash disposed		81			339			238
Disposal of discontinued operation, net of cash disposed		–			2,469			–
Other cash flows associated with investing activities		1			(27	)		(102	)
Net Cash from investing activities		(5,627	)		11,888			(8,662	)
Dividends paid		(1,307	)		(633	)		(2,697	)
Proceeds of borrowings and issuance of debt securities		2,131			3,549			5,763
Repayments of borrowings and redemption of debt securities		(1,211	)		(4,383	)		(1,207	)
Net issue of shares and other equity instruments		1,535			773			9,505
Repurchase of shares and other equity instruments		–			–			(173	)
Net (purchase)/disposal of treasury shares		(989	)		33			87
Net issue of shares to non-controlling interests		–			–			1,356
Net Cash from financing activities		159			(661	)		12,634
Effect of exchange rates on cash and cash equivalents		3,842			(2,864	)		(6,018	)
Net cash from discontinued operations		–			(376	)		286
Net increase in cash and cash equivalents		17,060			49,831			31,432
Cash and cash equivalents at beginning of year		114,340			64,509			33,077
Cash and cash equivalents at end of year		131,400			114,340			64,509
Cash and cash equivalents comprise:
Cash and balances at central banks		97,630			81,483			30,019
Loans and advances to banks with original maturity less than three months		31,934			30,461			32,279
Available for sale treasury and other eligible bills with original maturity less than three months		1,667			2,244			2,100
Trading portfolio assets with original maturity less than three months		169			152			111
		131,400			114,340			64,509

Interest received in 2010 was £28,631m (2009: £32,437m, 2008: £41,017m) and interest paid in 2010 was £20,759m (2009: £20,889m, 2008: £38,975m).

The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £2,310m at 31st December 2010 (2009: £2,470m, 2008: £1,050m).

Note

a	Other non-cash movements principally comprise movements in exchange rates less subordinated debt hedging.


					191

Financial statements of Barclays PLC

Parent company accounts


Income statement For the year ended 31st December	2010 £m			2009 £m			2008 £m
Dividends received from subsidiary		235			103			1,173
Interest income		5			53			7
Trading gain		–			–			18
Management charge from subsidiary		(5	)		(4	)		(4	)
Profit before tax		235			152			1,194
Tax		–			(27	)		(1	)
Profit after tax		235			125			1,193

The Company had no staff during the year (2009: nil, 2008: nil).

Profit after tax and total comprehensive income for the year was £235m (2009: £125m, 2008: £1,193m). There were no other components of total comprehensive income other than the profit after tax.


Balance sheet As at 31st December	Notes		2010 £m		2009 £m
Assets
Non-current assets
Investment in subsidiary		32		21,429		20,215
Current assets
Cash and balances at central banks				1		1
Other assets				13		26
Total assets				21,443		20,242

Liabilities
Current liabilities
Amounts payable within one year				–		28

Shareholders’ equity
Called up share capital		29		3,045		2,853
Share premium account		29		9,294		7,951
Capital redemption reserve				394		394
Retained earnings				8,710		9,016
Total shareholders’ equity				21,443		20,214
Total liabilities and shareholders’ equity				21,443		20,242

The accompanying notes form an integral part of the accounts.

Marcus Agius

Group Chairman

Bob Diamond

Chief Executive

Chris Lucas

Group Finance Director

192


Statement of changes in equity			Called up
			share capital		Capital
			and share		reserves and			Retained
			premium^a		other equity			earnings			Total equity
	Notes		£m		£m			£m			£m
Balance as at 1st January 2010				10,804		394			9,016			20,214
Total comprehensive income:
Profit after tax and total comprehensive income				–		–			235			235
Issue of new ordinary shares				1,500		–			–			1,500
Issue of shares under employee share schemes				35		–			–			35
Dividends		11		–		–			(543	)		(543	)
Other				–		–			2			2
Balance as at 31st December 2010				12,339		394			8,710			21,443

Balance as at 1st January 2009				6,138		4,046			9,006			19,190
Total comprehensive income:
Profit after tax and total comprehensive income				–		–			125			125
Issue of new ordinary shares				749		–			–			749
Issue of shares under employee share schemes				35		–			–			35
Mandatory Convertible Notes issued				3,882		(3,652	)		(230	)		–
Dividends		11		–		–			(113	)		(113	)
Other				–		–			228			228
Balance as at 31st December 2009				10,804		394			9,016			20,214
In 2010 and 2009 there were no other components of total comprehensive income other than the net profit for the year.
Cash flow statement For the year ended 31st December					2010 £m			2009 £m			2008 £m
Reconciliation of profit before tax to net cash flows from operating activities:
Profit before tax						235			152			1,194
Changes in operating assets and liabilities						15			3			(16	)
Corporate income tax paid						(28	)		–			–
Net cash from operating activities						222			155			1,178
Capital contribution to subsidiaries						(1,214	)		(800	)		(4,362	)
Purchase of shares in subsidiaries						–			(25	)		(16	)
Liquidation of subsidiary						–			–			205
Net cash used in investing activities						(1,214	)		(825	)		(4,173	)
Issue of shares and other equity instruments						1,535			784			4,911
Dividends paid						(543	)		(113	)		(2,414	)
Repurchase of ordinary shares						–			–			(173	)
Net cash from financing activities						992			671			2,324
Net increase/(decrease) in cash and cash equivalents						–			1			(671	)
Cash and cash equivalents at beginning of year						1			–			671
Cash and cash equivalents at end of year						1			1			–

Cash and cash equivalents comprise:
Cash and balances at central banks						1			1			–

Net cash from operating activities includes:
Dividends received						235			103			1,173
Interest received						5			53			7

The Parent Company’s principal activity is to hold the investment in its wholly-owned subsidiary, Barclays Bank PLC. Dividends received are treated as operating income.

The Company was not exposed at 31st December 2010 or 2009 to significant risks arising from the financial instruments it holds, which comprised cash, balances with central banks and other assets which had no credit or market risk.

During 2008 Barclays Bank PLC issued £4,050m of Mandatorily Convertible Notes (MCNs), which had mandatorily converted into ordinary shares of Barclays PLC by 30th June 2009. Barclays PLC’s right to receive the MCNs was included in other assets in 2008, with a corresponding increase, net of issue costs, in other equity. In 2009, Barclays PLC waived its rights over the MCNs, which were added to its cost of investment in its subsidiary.

Note

a Details of share capital and share premium are shown in Note 29.


					193

Notes to the financial statements

For the year ended 31st December 2010

1 Significant accounting policies

1. Reporting entity

These financial statements are prepared for the Barclays PLC Group under Section 399 of the Companies Act 2006. 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 397 of the Companies Act 2006.~~

. Barclays PLC is a public limited company, incorporated and domiciled in England and Wales having a registered office in England and is the holding company of the ~~Group.~~Croup.

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 (IFRS) and interpretations issued by the ~~International Financial Reporting~~IFRS Interpretations Committee (IFRIC), as published by the International Accounting Standards Board (IASB). They are also in accordance with IFRS and IFRIC interpretations as adopted by the European Union.

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. Changes in accounting policy are set out on page ~~177.~~204.

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 investment property, 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.~~policies. They are stated in millions of pounds Sterling (£m), the functional currency of ~~the country in which~~ Barclays ~~PLC is incorporated.~~PLC.

Critical accounting estimates

The preparation of financial statements in accordance with IFRS 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~~Note 45 (Critical accounting estimates) sets out the ~~financial statements set out~~key 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 50), allowance for impairment (Note 47), goodwill (Note 21), intangible assets (Note 22), retirement benefit obligations (Note 30), derecognition of financial assets (Note 29), taxation (Note 10) and credit risk (Note 47).statements.

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 ~~41.~~

32. SPEs are consolidated when the substance of the relationship between the Group and that entity indicates control. Potential indicators of control include, amongst others, an assessment of the ~~Group’s~~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;

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

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.

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~~consideration transferred for the acquisition of ~~an acquisition~~a subsidiary is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or ~~assumed, plus~~assumed.

The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition related costs ~~directly related to the acquisition.~~are expensed as incurred.

The excess of the ~~cost of~~consideration paid in an acquisition over the ~~Group’s~~Croup'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~~Croup's share of the fair value of the identifiable net assets acquired over the ~~cost of the acquisition.~~consideration paid. Intra-group transactions and balances are eliminated on consolidation and consistent accounting policies are used throughout the Group for the purposes of the consolidation. Changes in ownership interests in subsidiaries are accounted for as equity transactions if they occur after control has already been obtained and they do not result in loss of control.

As the consolidated financial statements include partnerships where athe Group member is a partner, advantage has been taken of the exemption under Regulation 7 of the Partnerships (Accounts) Regulations 2008 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. Cost also includes directly attributable costs of the investment.

When the Group ceases to have control, any retained interests in the subsidiary is remeasured to its fair value, with the change in carrying amount recognised in profit or loss.

194

1 Significant accounting policiescontinued

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~~Group's investments in associates and joint ventures are initially recorded at cost and increased (or decreased) each year by the ~~Group’s~~


~~168~~

~~Consolidated accounts Barclays PLC~~

~~Accounting policies~~

~~continued~~

Group's share of the post-acquisition profit (or loss), or other movements reflected directly in the other comprehensive income 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~~(less any accumulated impairment loss). When the ~~Group’s~~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~~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~~3 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~~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 associates and joint ventures are stated at cost less impairment, if any.

5. Foreign currency translation

The presentation currency of the Group financial statements is pounds Sterling (£), which is also the functional currency of Barclays PLC and Barclays Bank PLC.

Items included in the financial statements of each of the Group’s foreign entities are measured using their functional currency, being the currency of the primary economic environment in which ~~the entity operates.~~they operate.

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 similar non-monetary items are included directly in equity.

For the purposes of translation into the presentational currency of the Group financial statements, 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.~~

transactions. The exchange differences arising on the translation of a foreign operation are included in cumulative translation reserves within ~~shareholders’~~shareholders' equity and included in ~~the~~ profit or loss when the Group loses control of, joint control of or significant influence over or 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.

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’~~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.


					195

Notes to the financial statements

For the year ended 31st December 2010 continued

1 Significant accounting policiescontinued

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.


				~~169~~

Insurance premiums

Insurance premiums are recognised in the period earned.

Net trading income

Income arises from both the sale and purchase of trading positions, margins, which are achieved through market-making and customer business and from changes in 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

Dividends are recognised when the right to receive payment is established. In the individual financial statements of Barclays PLC, this is when the dividends are received or when the 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 classificationclassifications of financial assets, and ~~liabilities at initial recognition.~~the accounting policies applicable to each classification, are as follows:

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:

a) acquired principally for the purposes of selling or repurchasing in the near term;

a)	~~acquired principally for the purposes of selling or repurchasing in the near term;~~

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

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~~

c) a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.

c)	~~a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.~~

It is not possible to transfer a financial instrument out of this category whilst it is held or issued with the exception, from 1st July 2008, of non-derivative financial assets held for trading which may be transferred out of this category ~~from 1st July 2008~~ after initial classification where:

a) in rare circumstances, they are no longer held for the purpose of selling or repurchasing in the near term, or

a)	~~in rare circumstances, it is no longer held for the purpose of selling or repurchasing in the near term, or~~

b) they are no longer held for the purpose of trading, and they would have met the definition of loans and receivables on initial classification and the Group has the intention and ability to hold them for the foreseeable future or until maturity.

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 fair value option is used in the following circumstances:

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;

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;

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

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.

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:~~

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;

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;

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

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).

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).

~~170~~

196

~~Consolidated accounts Barclays PLC~~

~~Accounting policies~~

~~continued~~

1 Significant accounting policiescontinued

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 (the available for sale reserve) until sale when the cumulative gain or loss is transferred to the income statement. Interest on debt instruments, determined using the effective interest method (see accounting policy 6), dividends on equity instruments, impairment losses and translation differences on monetary items are recognised in the income statement.

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 contracts (‘hybrid ~~contracts~~contracts’) contain both a derivative (the ‘embedded derivative’) and a non-derivative ~~component. In such cases, the derivative component is termed an embedded derivative.~~(the 'host contract'). 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~~and gains and losses ~~being~~are 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.~~

Derecognition of financial assets

The Group derecognises a financial asset, or a portion of a financial asset, where the contractual rights to that asset have ~~expired. Derecognition is also appropriate~~expired, or where the rights to further cash flows from the asset have been transferred to a third party and, with them, either:

(i) substantially all the risks and rewards of the asset; or

~~(i)~~

~~substantially all the risks and rewards of the asset; or~~

(ii) significant risks and rewards, along with the unconditional ability to sell or pledge the asset.

~~(ii)~~

~~significant risks and rewards, along with the unconditional ability to sell or pledge the asset.~~

Where significant risks and rewards have been transferred, but the transferee does not have the unconditional ability to sell or pledge the asset, the Group continues to account for the asset to the extent of its continuing involvement (‘continuing involvement accounting’).

To assess the extent to which risks and rewards have been transferred, it is often necessary to perform a quantitative analysis. Such an analysis will compare the ~~Group’s~~Group's exposure to variability in asset cash flows before the transfer with its retained exposure after the transfer.

Where neither derecognition nor continuing involvement accounting is appropriate, the Group continues to recognise the asset in its entirety and recognises any consideration received as a financial liability.

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 accounting 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.

An exchange of an existing debt instrument for a new instrument with the lender on substantially different terms is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. An assessment is made as to whether the terms are substantially different considering qualitative and quantitive characteristics. For example, if the discounted present value calculated using the original effective interest rate of the cash flows under the new terms, including fees, is at least ~~10 per cent~~10% different from the discounted present value of the remaining cash flows of the original financial liability, or if the qualitative assessment concludes that the nature and risk profile of the original financial liability is materially different from that of the new financial liability based on the terms of the instruments including repayment terms, coupon terms and call options, the original financial liability is extinguished.

When an exchange is accounted for as an extinguishment, any costs or fees incurred are recognised as part of the gain or loss on the extinguishment. The difference between the carrying amount of a financial liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

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 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 reflects the effect on fair value of changes in own credit spreads derived from observable market data, such as spreads on Barclays issued bonds or credit default swaps. 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. For valuations that include significant unobservable inputs, the difference between the model valuation and the initial transaction price is recognised in profit or ~~loss:~~loss either:

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 when previously unobservable inputs become observable.


				~~171~~	197

Notes to the financial statements

For the year ended 31st December 2010 continued

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;~~

~~released in full where previously unobservable inputs become observable.~~

1 Significant accounting policiescontinued

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 marketplace, 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 considered to be 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~~have adversely impacted the estimated future cash flows of the financial asset or the ~~portfolio that can be reliably estimated.~~portfolio. 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;

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;

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;

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;

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

e)	~~the disappearance of an active market for that financial asset because of financial difficulties; or~~

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:

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;

~~(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.

~~(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 then 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~~asset's carrying amount and the present value of estimated future cash flows discounted at the ~~asset’s~~asset's original effective interest rate. The amount of the loss is recognised using an allowance account and recognised in the income statement.

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~~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~~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 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 or properties 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 or investment properties. 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.

~~172~~

198

~~Consolidated accounts Barclays PLC~~

~~Accounting policies~~

~~continued~~

1 Significant accounting policiescontinued

In the case of available for sale 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~~and other similar secured lending and 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,~~Group. The transactions are treated as collateralised borrowing and the counterparty liability is ~~included~~presented separately on the balance sheet ~~when cash consideration is received.~~as repurchase agreements and other similar secured borrowing. Similar secured borrowing transactions including securities lending transactions and collateralised short-term notes are treated and presented in the same way.

Similarly, ~~where~~ the Group borrows or purchases securities subject to a commitment to resell them (a reverse repo) ~~but~~. Such securities are not included in the balance sheet as the Group does not acquire the risks and rewards of ~~ownership, the~~ownership. The transactions are treated as collateralised loans ~~when cash consideration is paid,~~ and the counterparty asset is presented separately on the balance sheet as reverse repurchase agreements and other similar secured lending. Where the Group enters into similar secured lending transactions, such as securities borrowing, these are ~~not included~~treated and presented in the ~~balance sheet.~~same way.

~~The difference between sale~~These secured financing transaction are initially recognised at fair value, and ~~repurchase price is accrued over the life of the agreements~~subsequently valued at amortised cost, 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.~~value.

10. Securitisation transactions

The Group enters into securitisation transactions in respect of its own financial assets and to facilitate client transactions as described in Note 2936 to the accounts.

All financial assets continue to be held on the Group balance sheet, and a liability recognised for the proceeds of the funding transaction, unless:

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

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~~

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.

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 a) or 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.

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~~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~~Cash collateral received ~~in the form of cash~~ is recorded on the balance sheet with a corresponding ~~liability. These items are assigned to~~liability within deposits received from ~~bank~~banks or ~~other counterparties.~~customers. 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 on 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 on the balance sheet.

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, 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:~~

a)	~~it is determined that a derivative is not, or has ceased to be, highly effective as a hedge;~~

b)	~~the derivative expires, or is sold, terminated, or exercised;~~

c)	~~the hedged item matures or is sold or repaid; or~~

d)	~~a forecast transaction is no longer deemed highly probable.~~


				~~173~~	199

Notes to the financial statements

For the year ended 31st December 2010 continued

1 Significant accounting policies continued

The Group discontinues hedge accounting when:

a) it is determined that a derivative is not, or has ceased to be, highly effective as a hedge;

b) the derivative expires, or is sold, terminated, or exercised;

c) the hedged item matures or is sold or repaid; or

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;~~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 isdoes 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, or other reductions in the Group’s investment in the 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.~~instruments.

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

Property, plant and equipment is stated at cost less accumulated depreciation and provisions for impairment, if required. Cost includes the original purchase price of the asset and the costs directly attributable to bringing the asset to its working condition for its intended use. 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, plant 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.

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~~	~~Over the remaining~~
~~(less than 50 years to run)~~	~~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%
Leased assets:
Leasehold property over the remaining life of the lease (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%

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.


200

1 Significant accounting policiescontinued

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.

Investment property is property held to earn rentals or for capital appreciation or for both rather than for sale or use in the business. The Group initially recognises investment properties at cost, and subsequently at their fair value at each balance sheet date reflecting market conditions at the reporting date. The fair value of investment property is determined by reference to current market prices for similar properties, adjusted as necessary for condition and location, or by reference to recent transactions updated to reflect current economic conditions. Discounted cash flow techniques may be employed to calculate fair value where there have been no recent transactions, using current external market inputs such as market rents and interest rates. Valuations are carried out by management with the support of appropriately qualified independent valuers.

Movements in fair value subsequent to initial recognition are included in the income statement. No depreciation is provided in respect of investment properties.

~~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.~~


~~174~~

~~Consolidated accounts Barclays PLC~~

~~Accounting policies~~

~~continued~~

14. Intangible assets

Goodwill

Goodwill arises on the acquisition of subsidiaries and associates 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 other valuation methodologies including discounted cash flow techniques, 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.

Computer software

Computer software is stated at cost, less amortisation and provisions for impairment, if required.

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~~3-5 years.

Other intangible assets

Other intangible assets consist of brands, customer lists, licences and other contracts, core deposit intangibles and mortgage servicing ~~rights and customer relationships.~~rights. 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 fair value less costs to sell and its value in use. Fair value less costs to sell is calculated by reference to the amount at which the asset could be disposed of in a binding sale agreement in an 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.


					201

Notes to the financial statements

For the year ended 31st December 2010 continued

1 Significant accounting policiescontinued

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 Group’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 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.~~within the impairment charge. Any liability remaining is recognised in the income statement when the guarantee is discharged, cancelled or expires.

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 Group. 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

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.


				~~175~~

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~~Barclays PLC 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

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’ as set out in policy 7.

~~Long-term 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.

Liabilities under unit-linked life insurance contracts (such as endowment policies) reflect the value of assets held within unitised investment pools.

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.


202

~~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.1 Significant accounting policiescontinued

Liability adequacy test

Liability adequacy tests are performed at each balance sheet date to ensure the adequacy of contract liabilities net of ~~DAC~~deferred acquisition costs (DAC) and ~~VOBA assets.~~value of business acquired assets (VOBA). 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 then insurance liabilities are increased ~~when these are written off in full.~~

if required. Any deficiency is immediately recognised in the income statement.

Reinsurance

~~Short-~~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

As 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~~transferred under 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.

As Lessee

~~The leases~~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.


~~176~~

~~Consolidated accounts Barclays PLC~~

~~Accounting policies~~

~~continued~~

21. Employee benefits

~~The~~Short-term employee benefits, such as salaries, paid absences, and other benefits include any estimated tax payable in respect of employee services rendered during the period and are accounted for on an accruals basis over the period in which the employees provide the related services. Bonuses are recognised to the extent that the Group ~~provides~~has a present obligation to its employees ~~worldwide with post-retirement benefits mainly in the form of pensions.~~ that can be measured reliably.

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.~~28. 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 aan asset or 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 (the corridor) are recognised in the income statement over the remaining average service lives of the employees of the related plan, on a straight-line basis.

Gains and losses on curtailments are recognised when the curtailment occurs which is when there is a demonstrable commitment to make a significant reduction in the number of employees covered by the plan or amendments have been made to the terms of the plan so that a significant element of future service will no longer qualify for benefits or will qualify only for reduced benefits. The gain or loss comprises any resulting change in the present value of the defined benefit obligation, any resulting change in the fair value of the plan assets and any related actuarial gain or loss that had not previously been recognised since they fell within the corridor.

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 benefits to certain retired employees, the cost of which ~~are~~is 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 including any related payroll taxes are accounted for on an accruals basis over the period in which the employees provide the related services. 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.


					203

Notes to the financial statements

For the year ended 31st December 2010 continued

1 Significant accounting policiescontinued

22. Share-based payments to employees

The Group ~~engages in~~makes equity settled share-based ~~payment transactions~~payments 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~~employees provide services, ~~are received,~~ which is generally 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~~Vesting conditions, ~~vesting conditions, which are~~ service ~~conditions~~ or performance 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~~value, but may lead to adjustments to 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 options. ~~Where vesting~~

Vesting conditions that are related to market conditions are reflected in the fair value of the awards granted and 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. Similarly, non-vesting conditions, which are other conditions not being service conditions or performance conditions, are taken into account in estimating the grant date fair value and share-based payment charges and are recognised when all non-market vesting conditions are satisfied irrespective of whether the non-vesting

conditions are satisfied. If meeting a non-vesting condition is a matter of employee choice, failure to meet the non-vesting condition is treated as a cancellation, resulting in an acceleration of recognition of the cost of the employee services.

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~~which 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, 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.

24. Taxes, including deferred taxes

Income tax payable on taxable profits ~~(Current Tax),~~(‘Current Tax’) is recognised as an expense in the period in which the profits arise. Withholding taxes are also treated as income taxes. Income tax recoverable on tax allowable losses is recognised as ana current tax 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 which are expected to apply when the deferred tax asset is realised or the deferred tax liability is settled. ~~Current Tax~~Deferred 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

Operating segments are 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 operating segments, has been identified as the chief operating decision maker.

All transactions between business segments are conducted on an arm’s length basis, with intra-segment revenue and costs being eliminated in Head Office. Income and expenses directly associated with each segment are 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.~~

months or less. Repurchase and reverse 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.


204


				~~177~~

1 Significant accounting policiescontinued

~~Consolidated accounts Barclays PLC~~

~~Accounting developments~~

Changes to Accounting Policy

The Group has continued to apply the accounting policies used for the ~~2008~~2009 Annual Report and has adopted the ~~following:~~following standards from 1st January 2010 (prior periods are not affected by these revised standards):

–

~~The 2008 amendments~~IFRS 3 Business Combinations. For the Group, the main change is that any costs directly related to ~~IFRS 2 – Shared-Based Payment-Vesting Conditions~~the acquisition of a subsidiary are expensed as incurred, and ~~Cancellations which has led to a change in accounting for share-based payments to employees. As a result, non-vesting conditions~~ are ~~taken into account in estimating~~not part of the ~~grant date fair value and~~cost of the ~~timing of recognition of charges. No prior year adjustments have been made as the impact on previous years is immaterial~~

business combination.

–

IFRS 7 – Improving Disclosures about Financial Instruments, an amendment to IFRS 7 – Financial Instruments: Disclosures, which has resulted in additional disclosures being made regarding liquidity risk and fair value of financial instruments

–

IAS 1 – Presentation of Financial Statements (revised), which has resulted in the reformatting of the statement of recognised income and expense into a statement of comprehensive income and the addition of a statement of changes in equity. This does not change the recognition, measurement or disclosure of specific transactions and events required by other standards

~~Future accounting developments~~

~~Consideration will be given during 2010 to the implications, if any, of the following revised standards as follows:~~

–

~~IFRS 3 – Business Combinations and~~ IAS 27 – Consolidated and Separate Financial ~~Statements~~Statements. Changes in ownership interests in subsidiaries 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 benow 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~~transactions if they occur after control has already been obtained and ~~losses on transactions with non-controlling interests that~~they do not result in loss of control. In addition, when the Group ceases to have control ~~will no longer be~~in a subsidiary, any retained interest in the subsidiary is re-measured to its fair value, with the change in carrying amount recognised in ~~the income statement but directly in equity. In 2009, gains of £3m were recognised in income relating to such transactions.~~

profit or loss.

~~The following standards and amendments to existing standards have been published and are mandatory for the Group’s~~Future accounting ~~periods beginning on or after 1st January 2010 or later periods, but have not been adopted. They are not expected to result in significant changes to the Group’s accounting policies.~~developments

–

~~Embedded derivatives: Amendments to IFRIC 9 and IAS 39~~

–

~~Group cash-settled share-based payment transactions: Amendments to IFRS 2~~

–

~~Eligible Hedged Items (an amendment to IAS 39)~~

–

~~IFRS classification of rights issues: Amendment to IAS 32~~

–

~~IAS 24 Related Party Disclosures~~

–

~~Prepayments and minimum funding requirements (Amendments to IFRIC 14)~~

–

~~IFRIC 17 – Distribution of non-cash assets to owners~~

–

~~IFRIC 18 – Transfers of assets from customers~~

–

~~IFRIC 19 – Extinguishing financial liabilities with equity instruments~~

–

~~Improvements to IFRS 2008~~

–

~~Improvements to IFRS 2009~~

IFRS 9 ~~‘Financial Instruments: Classification~~Financial Instruments contains new requirements for accounting for financial assets and ~~Measurement’ was published on 12th November 2009. It is~~liabilities, which by 30th June 2011 will include new requirements for impairment and hedge accounting, replacing the ~~first phase of a project to replace~~corresponding requirements in IAS 39 Financial Instruments: Recognition and Measurement. It will ~~ultimately result in fundamental~~introduce significant changes in the way that the Group accounts for financial instruments. The key changes issued and proposed relate to:

–	Financial assets. Financial assets will be held at either fair value or amortised cost, except for equity investments not held for trading which may be held at fair value through equity.

–	Financial liabilities. Gains and losses on own credit arising from financial liabilities designated at fair value through profit or loss will be excluded from the Income Statement and instead taken to Other Comprehensive Income.

–	Impairment. Both expected losses and incurred losses will be reflected in impairment allowances for loans and advances.

–	Hedge accounting. Hedge accounting will be more closely aligned with financial risk management.

–	Offsetting. The conditions for offsetting financial assets and financial liabilities in the balance sheet will be clarified.

Adoption ~~of the standard~~ is not mandatory until accounting periods beginning on or after 1st January ~~2013 but early~~2013. Earlier adoption is ~~permitted. However,~~possible, subject to EU endorsement. At this stage, it is not ~~available for~~possible to determine the potential financial impacts of adoption inon the ~~EU until it has been endorsed.~~Group.

The ~~main differences from IAS 39~~International Accounting Standards Board is also undertaking a comprehensive review of other IFRSs which, in June 2010, it prioritised into those IFRSs that it expects to issue by 30th June 2011. In addition to IFRS 9, the 30th June 2011 standards which are expected to be more significant for the Group are as follows:

–

~~All financial~~Leases. Under the proposals, lessees are required to recognise assets ~~except for certain equity investments, would be classified into two categories:~~

and liabilities arising from both operating and finance leases on the balance sheet.

–

~~– amortised cost, where they generate solely payments of interest and principal and the business model is~~Post employment benefits. The amendments to ~~collect contractual cash flows that represent principal and interest; or~~

IAS 19 Employee Benefits require net pension liabilities arising from defined benefit pension schemes to be recognised in full.

–

~~– fair value through profit or loss.~~

–

~~Certain non-trading equity investments would be classified at fair value through profit or loss or fair value though Other comprehensive income with dividends recognised in net income.~~

–

~~Embedded derivatives are no longer considered for bifurcation but are included in the assessment of the cash flows for the classification of the financial asset as a whole.~~

–

Financial assets which meet the requirements for classification at amortised cost are optionally permitted to be measured at fair value if that eliminates or significantly reduces an accounting mismatch.

–

~~Reclassifications are required if, and only if, there is a change in the business model.~~

~~Aspects~~In addition to the above, the IASB plans to issue new standards on Insurance Contracts, Consolidation, Fair Value Measurement, the Presentation of ~~financial instrument accounting which will be addressed in future phases of the project include the accounting for financial liabilities, impairment of amortised cost financial assets~~Other comprehensive Income and ~~hedge accounting.~~Revenue recognition. The Group ~~is assessing~~will consider the financial impacts of these new standards as they are finalised.

A number of other amendments and interpretations to IFRS have been issued that first apply from 1st January 2010 or later periods. These have not resulted in any material changes to the ~~first phase in the project, as well as following developments in the future phases.~~Group’s accounting policies.


~~178~~

~~Consolidated accounts Barclays PLC~~

~~Consolidated income statement~~

~~For the year ended 31st December~~

      Notes    2009
£m 2008
£m 2007
£m
Continuing operations

Interest income
   2    21,236    28,010    25,296
Interest expense
   2    (9,318 ) (16,541 ) (15,698 )
Net interest income
      11,918    11,469    9,598
Fee and commission income
   3    9,946    7,573    6,741
Fee and commission expense
   3    (1,528 ) (1,082 ) (970 )
Net fee and commission income
      8,418    6,491    5,771
Net trading income
   4    7,001    1,339    3,754
Net investment income
   4    56    680    1,216
Principal transactions
      7,057    2,019    4,970
Net premiums from insurance contracts
   5    1,172    1,090    1,011
Other income
   6    1,389    367    186
Total income
      29,954    21,436    21,536
Net claims and benefits incurred on insurance contracts
   5    (831 ) (237 ) (492 )
Total income net of insurance claims
      29,123    21,199    21,044
Impairment charges and other credit provisions
   7    (8,071 ) (5,419 ) (2,795 )
Net income
      21,052    15,780    18,249
Staff costs
   8    (9,948 ) (7,204 ) (7,611 )
Administration and general expenses
   9    (5,561 ) (5,305 ) (3,854 )
Depreciation of property, plant and equipment
   23    (759 ) (606 ) (453 )
Amortisation of intangible assets
   22    (447 ) (276 ) (178 )
Operating expenses
      (16,715 ) (13,391 ) (12,096 )
Share of post-tax results of associates and joint ventures
   20    34    14    42
Profit on disposal of subsidiaries, associates and joint ventures
   38    188    327    28
Gains on acquisitions
   40    26    2,406    –
Profit before tax
      4,585    5,136    6,223
Tax
   10    (1,074 ) (453 ) (1,699 )
Profit after tax from continuing operations
      3,511    4,683    4,524
Discontinued operations

Profit after tax for the year from discontinued operations, including gain on disposal
   39    6,777    604    571
Net profit for the year
      10,288    5,287    5,095
Profit attributable to equity holders of the Parent from:

Continuing operations
      2,628    3,795    3,886
Discontinued operations
      6,765    587    531
Total
      9,393    4,382    4,417
Profit attributable to non-controlling interests
   33    895    905    678
      10,288    5,287    5,095
            p p p
Earnings per share

Basic earnings per share
   11    86.2    59.3    68.9
Basic earnings per share – continuing operations
      24.1    51.4    60.6
Basic earnings per share – discontinued operations
      62.1    7.9    8.3
Diluted earnings per share
   11    81.6    57.5    66.9
Diluted earnings per share – continuing operations
      22.7    49.8    58.8
Diluted earnings per share – discontinued operations
      58.9    7.7    8.1
Interim dividend per ordinary share
      1.0    11.5    11.50
Final dividend per ordinary share
   1    1.5    –    22.50
            £m £m £m
Interim dividend paid
      113    906    768
Final dividend
   1    176    –    1,485

~~The Board of Directors approved the accounts set out on pages 167 to 282 on 9th March 2010.~~

~~The accompanying notes form an integral part of the Consolidated accounts.~~


				~~179~~	205

Notes to the financial statements

~~Consolidated accounts Barclays PLC~~

~~Consolidated statement of comprehensive income~~

For the year ended 31st December 2010 continued

      2009
£m 2008
£m 2007
£m
Net profit for the year
   10,288    5,287    5,095
Other comprehensive income:

Continuing operations

Currency translation differences
   (861 ) 2,274    43
Available for sale financial assets
   1,236    (1,561 ) 1
Cash flow hedges
   165    376    359
Other
   –    (5 ) 22
Tax relating to components of other comprehensive income
   (26 ) 851    40
Other comprehensive income for the year, net of tax, from continuing operations
   514    1,935    465
Other comprehensive income for the year, net of tax, from discontinued operations
   (58 ) 114    26
Total comprehensive income for the year
   10,744    7,336    5,586
Attributable to:

Equity holders of the Parent
   9,556    6,213    4,854
Non-controlling interests
   1,188    1,123    732
   10,744    7,336    5,586

~~Income tax relating to each component of other comprehensive income is disclosed in Note 10.~~


~~180~~

~~Consolidated accounts Barclays PLC~~

~~Consolidated balance sheet~~

~~As at 31st December~~

      Notes
2009
£m

2008
£m

Assets

Cash and balances at central banks
      81,483    30,019
Items in the course of collection from other banks
      1,593    1,695
Trading portfolio assets
   12    151,344    185,637
Financial assets designated at fair value:

– held on own account
   13    41,311    54,542
– held in respect of linked liabilities to customers under investment contracts
   13    1,257    66,657
Derivative financial instruments
   14    416,815    984,802
Loans and advances to banks
   15    41,135    47,707
Loans and advances to customers
   15    420,224    461,815
Available for sale financial investments
   16    56,483    64,976
Reverse repurchase agreements and cash collateral on securities borrowed
   17    143,431    130,354
Other assets
   18    6,358    6,302
Current tax assets
      349    389
Investments in associates and joint ventures
   20    422    341
Goodwill
   21    6,232    7,625
Intangible assets
   22    2,563    2,777
Property, plant and equipment
   23    5,626    4,674
Deferred tax assets
   19    2,303    2,668
Total assets
      1,378,929    2,052,980
Liabilities

Deposits from banks
      76,446    114,910
Items in the course of collection due to other banks
      1,466    1,635
Customer accounts
      322,429    335,505
Trading portfolio liabilities
�� 12    51,252    59,474
Financial liabilities designated at fair value
   24    86,202    76,892
Liabilities to customers under investment contracts
   13    1,679    69,183
Derivative financial instruments
   14    403,416    968,072
Debt securities in issue
      135,902    149,567
Repurchase agreements and cash collateral on securities lent
   17    198,781    182,285
Other liabilities
   25    12,101    12,640
Current tax liabilities
      992    1,216
Insurance contract liabilities, including unit-linked liabilities
   26    2,140    2,152
Subordinated liabilities
   27    25,816    29,842
Deferred tax liabilities
   19    470    304
Provisions
   28    590    535
Retirement benefit liabilities
   30    769    1,357
Total liabilities
      1,320,451    2,005,569
Shareholders’ equity

Called up share capital
   31    2,853    2,093
Share premium account
   31    7,951    4,045
Other equity
   31    –    3,652
Other reserves
   32    2,768    2,793
Retained earnings
   32    33,845    24,208
Less: treasury shares
   32    (140 ) (173 )
Shareholders’ equity excluding non-controlling interests
      47,277    36,618
Non-controlling interests
   33    11,201    10,793
Total shareholders’ equity
      58,478    47,411
Total liabilities and shareholders’ equity
      1,378,929    2,052,980

~~The accompanying notes form an integral part of the Consolidated accounts.~~

~~Marcus Agius~~

~~Group Chairman~~

~~John Varley~~

~~Group Chief Executive~~

~~Chris Lucas~~

~~Group Finance Director~~


				~~181~~

~~Consolidated accounts Barclays PLC~~2 Net interest income

~~Consolidated statement of changes in equity~~


	2010 £m			2009 £m			2008 £m
Cash and balances with central banks		271			131			174
Available for sale investments		1,483			1,937			2,355
Loans and advances to banks		440			513			1,267
Loans and advances to customers		17,677			18,456			23,754
Other interest income		164			199			460
Interest income		20,035			21,236			28,010
Deposits from banks		(370	)		(634	)		(2,189	)
Customer accounts		(1,410	)		(2,716	)		(6,697	)
Debt securities in issue		(3,632	)		(3,889	)		(5,910	)
Subordinated liabilities		(1,778	)		(1,718	)		(1,349	)
Other interest expense		(322	)		(361	)		(396	)
Interest expense		(7,512	)		(9,318	)		(16,541	)
Net interest income		12,523			11,918			11,469
Interest income includes £213m (2009: £185m, 2008: £135m) 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


	2010 £m			2009 £m			2008 £m
Fee and commission income
Banking and credit related fees and commissions		10,063			9,578			7,208
Brokerage fees		77			88			56
Investment management fees		79			133			120
Foreign exchange commission		149			147			189
Fee and commission income		10,368			9,946			7,573
Fee and commission expense		(1,497	)		(1,528	)		(1,082	)
Net fee and commission income		8,871			8,418			6,491
4 Net trading income


	2010 £m			2009 £m			2008 £m
Trading Income^a		7,017			8,139			(1,596	)
Gain on foreign exchange dealings		670			682			1,272
Own credit gain/(charge)		391			(1,820	)		1,663
Net trading income		8,078			7,001			1,339

Included within net trading income were gains of £32m (2009: £2,349m loss, 2008: £6,635m loss) on financial assets designated at fair value and losses of £903m (2009: £3,158m loss, 2008: £3,328 gain) on financial liabilities designated at fair value.

Notes
   Share capital
and share
premium^a
£m Other
Reserves^b
£m Retained
earnings^c
£m Total
£m Non-
controlling
interests^d
£m Total
equity
£m
Balance at 1st January 2009
      6,138    6,272    24,208    36,618    10,793    47,411
Net profit for the year
      –    –    9,393    9,393    895    10,288
Other comprehensive income:

Currency translation differences
      –    (1,138 ) –    (1,138 ) 277    (861 )
Available for sale financial assets
      –    1,250    –    1,250    (14 ) 1,236
Cash flow hedges
      –    194    –    194    (29 ) 165
Tax relating to components of other comprehensive income
      –    (256 ) 171    (85 ) 59    (26 )
Other comprehensive income net of tax from discontinued operations
      –    (75 ) 17    (58 ) –    (58 )
Total comprehensive income
      –    (25 ) 9,581    9,556    1,188    10,744
Issue of new ordinary shares
      749    –    –    749    –    749
Issue of shares under employee share schemes
      35    –    298    333    –    333
Net purchase of treasury shares
      –    (47 ) –    (47 ) –    (47 )
Transfers
      –    80    (80 ) –    –    –
Dividends
   1    –    –    (113 ) (113 ) (767 ) (880 )
Net decrease in non-controlling interest arising on acquisitions, disposals and capital issuances
      –    –    –    –    (82 ) (82 )
Conversion of Mandatorily Convertible Notes
      3,882    (3,652 ) (230 ) –    –    –
Other
      –    –    181    181    69    250
Balance at 31st December 2009
      10,804    2,628    33,845    47,277    11,201    58,478
Balance at 1st January 2008
      1,707    614    20,970    23,291    9,185    32,476
Net profit for the year
      –    –    4,382    4,382    905    5,287
Other comprehensive income:

Currency translation differences
      –    2,174    –    2,174    100    2,274
Available for sale financial assets
      –    (1,559 ) –    (1,559 ) (2 ) (1,561 )
Cash flow hedges
      –    271    –    271    105    376
Tax relating to components of other comprehensive income
      –    882    (46 ) 836    15    851
Other
      –    –    (5 ) (5 ) –    (5 )
Other comprehensive income net of tax from discontinued operations
      –    124    (10 ) 114    –    114
Total comprehensive income
      –    1,892    4,321    6,213    1,123    7,336
Issue of new ordinary shares
      4,422    –    –    4,422    –    4,422
Issue of shares under employee share schemes
      19    –    463    482    –    482
Issue of shares and warrants
      –    –    1,410    1,410    –    1,410
Repurchase of shares
      (10 ) 10    (173 ) (173 ) –    (173 )
Net purchase of treasury shares
      –    (350 ) –    (350 ) –    (350 )
Transfers
      –    437    (437 ) –    –    –
Dividends
      –    –    (2,344 ) (2,344 ) (703 ) (3,047 )
Net increase in non-controlling interest arising on acquisitions, disposals and capital issuances
      –    –    –    –    1,338    1,338
Issue of Mandatorily Convertible Notes
      –    3,652    –    3,652    –    3,652
Other
      –    17    (2 ) 15    (150 ) (135 )
Balance at 31st December 2008
      6,138    6,272    24,208    36,618    10,793    47,411

~~Notes~~The own credit adjustment arose on £96bn of Barclays Capital’s financial liabilities designated at fair value (2009: £86bn, 2008: £78bn).

Note

a	~~Details of share capital and share premium are shown in Note 31.~~Trading income includes fair value losses arising from Barclays Capital credit market exposures disclosed on pages 88 to 92.

b	~~Details of other reserves are shown in Note 32. Other reserves above includes treasury shares.~~

c	~~Details of retained earnings and treasury shares are shown in Note 32.~~

d	~~Details of non-controlling interests are shown in Note 33.~~


~~182~~206

~~Consolidated accounts Barclays PLC~~

~~Consolidated cash flow statement~~

~~For the year ended 31st December~~

2009
£m

2008
£m

2007
£m

Continuing operations

Reconciliation of profit before tax to net cash flows from operating activities:

Profit before tax
   4,585       5,136       6,223
Adjustment for non-cash items:

Allowance for impairment
   8,071       5,419       2,795
Depreciation, amortisation and impairment of property, plant, equipment and intangibles
   1,196       885       651
Other provisions, including pensions
   428       804       753
Net profit from associates and joint ventures
   (34 )    (14 )    (42 )
Net profit on disposal of investments and property, plant and equipment
   (383 )    (371 )    (862 )
Net profit from disposal of associates and joint ventures
   3       –       (26 )
Net profit from disposal of subsidiaries
   (191 )    (327 )    (2 )
Net gains on acquisitions
   (26 )    (2,406 )    –
Other non-cash movements^a
   4,573       960       (1,181 )
Changes in operating assets and liabilities:

Net decrease/(increase) in loans and advances to banks and customers
   25,482       (58,431 )    (77,987 )
Net (decrease)/increase in deposits and debt securities in issue
   (49,203 )    77,743       90,589
Net decrease/(increase) in derivative financial instruments
   3,321       (17,529 )    (2,144 )
Net decrease/(increase) in trading assets
   34,334       26,919       (18,227 )
Net decrease in trading liabilities
   (8,222 )    (5,928 )    (6,472 )
Net increase/(decrease) in financial investments
   20,459       5,229       (4,379 )
Net (increase)/decrease in other assets
   (465 )    (3,016 )    1,116
Net decrease in other liabilities
   (907 )    (477 )    (1,071 )
Tax paid
   (1,177 )    (1,404 )    (1,254 )
Net cash from operating activities
   41,844       33,192       (11,520 )
Purchase of available for sale investments
   (78,420 )    (57,756 )    (26,899 )
Proceeds from sale or redemption of available for sale investments
   88,559       51,429       38,423
Net addition of intangible assets
   (226 )    (666 )    (227 )
Purchase of property, plant and equipment
   (1,150 )    (1,643 )    (1,182 )
Proceeds from sale of property, plant and equipment
   372       799       617
Acquisitions of subsidiaries, net of cash acquired
   (28 )    (961 )    (270 )
Disposal of subsidiaries, net of cash disposed
   339       238       383
Disposal of discontinued operation, net of cash disposed
   2,469       –       –
Increase in investment in subsidiaries
   –       (157 )    (668 )
Decrease in investment in subsidiaries
   –       19       57
Acquisition of associates and joint ventures
   (81 )    (96 )    (220 )
Disposal of associates and joint ventures
   69       137       145
Other cash flows associated with investing activities
   (15 )    (5 )    153
Net cash from investing activities
   11,888       (8,662 )    10,312
Dividends paid
   (633 )    (2,697 )    (2,151 )
Proceeds of borrowings and issuance of debt securities
   3,549       5,763       4,646
Repayments of borrowings and redemption of debt securities
   (4,383 )    (1,207 )    (683 )
Net issue of shares and other equity instruments
   773       9,505       2,494
Repurchase of shares and other equity instruments
   –       (173 )    (1,802 )
Net disposal/(purchase) of treasury shares
   33       87       (48 )
Net issue of shares to non-controlling interests
   –       1,356       1,331
Net cash from financing activities
   (661 )    12,634       3,787
Effect of exchange rates on cash and cash equivalents
   (2,864 )    (6,018 )    (537 )
Net cash from discontinued operations
   (376 )    286       83
Net increase in cash and cash equivalents
   49,831       31,432       2,125
Cash and cash equivalents at beginning of year
   64,509       33,077       30,952
Cash and cash equivalents at end of year
   114, 340       64,509       33,077
Cash and cash equivalents comprise:

Cash and balances at central banks
   81,483       30,019       5,801
Loans and advances to banks
   41,135       47,707       40,120
Less: non-cash and amounts with original maturity greater than three months
   (10,674 )    (15,428 )    (19,377 )
   30,461       32,279       20,743
Available for sale treasury and other eligible bills
   56,483       64,976       43,072
Less: non-cash and amounts with original maturity greater than three months
   (54,239 )    (62,876 )    (41,688 )
   2,244       2,100       1,384
Trading portfolio assets
   151,344       185,637       193,691
Less: non-cash and amounts with original maturity greater than three months
   (151,192 )    (185,526 )    (188,556 )
   152       111       5,135
Other
   –       –       14
   114,340       64,509       33,077

Interest received in 2009 was £32,437m (2008: £41,017m, 2007: £49,441m) and interest paid in 2009 was £20,889m (2008: £38,975m, 2007: £37,821m). The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £2,470m at 31st December 2009 (2008: £1,050m).

~~Note~~

a	~~Other non-cash movements principally comprise movements in exchange rates and the fair value of available for sale investments less subordinated debt hedging.~~


				~~183~~

~~Accounts of Barclays PLC~~

~~Parent company accounts~~

Income statement
For the year ended 31st December

   2009
£m 2008
£m 2007
£m
Dividends received from subsidiary
   103    1,173    3,287
Interest income
   53    7    4
Trading gain/(loss)
   –    18    (13 )
Other income
   –    –    15
Management charge from subsidiary
   (4 ) (4 ) (4 )
Profit before tax
   152    1,194    3,289
Tax
   (27 ) (1 ) –
Profit after tax
   125    1,193    3,289

~~The Company had no staff during the year (2008: nil, 2007: nil).~~

Profit after tax and total comprehensive income for the year was £125m (2008: £1,193m, 2007: £3,289m). There were no other components of total comprehensive income other than the net profit for the year.

Balance sheet
As at 31st December

   Notes    2009
£m    2008
£m
Assets

Non-current assets

Investment in subsidiaries
   41    20,215    15,340
Current assets

Cash and balances at central banks
      1    –
Other assets
      26    3,851
Total assets
      20,242    19,191
Liabilities

Current liabilities

Amounts payable within one year
      28    1
Shareholders’ equity

Called up share capital
   31    2,853    2,093
Share premium account
   31    7,951    4,045
Other equity
   31    –    3,652
Capital redemption reserve
   32    394    394
Retained earnings
   32    9,016    9,006
Total shareholders’ equity
      20,214    19,190
Total liabilities and shareholders’ equity
      20,242    19,191

~~The accompanying notes form an integral part of the accounts.~~

~~Marcus Agius~~

~~Group Chairman~~

~~John Varley~~

~~Group Chief Executive~~

~~Chris Lucas~~

~~Group Finance Director~~


~~184~~

~~Accounts of Barclays PLC~~

~~Parent company accounts~~

~~continued~~

Statement of changes in equity    Notes    Share capital
and share
premium^a
£m Other
reserves^b
£m Retained
earnings^c
£m Total
equity
£m
Balance at 1st January 2009
      6,138    4,046    9,006    19,190
Total comprehensive income:

Net profit for the year and total comprehensive income
      –    –    125    125
Issue of new ordinary shares
      749    –    –    749
Issue of shares under employee share schemes
      35    –    –    35
Issue of warrants
      –    –    –    –
Mandatorily Convertible Notes issued
      3,882    (3,652 ) (230 ) –
Repurchase of shares
      –    –    –    –
Dividends
   1    –    –    (113 ) (113 )
Other
      –    –    228    228
Balance at 31st December 2009
      10,804    394    9,016    20,214
Balance at 1st January 2008
      1,707    384    8,990    11,081
Total comprehensive income:

Net profit for the year and total comprehensive income
      –    –    1,193    1,193
Issue of new ordinary shares
      4,422    –    634    5,056
Issue of shares under employee share schemes
      19    –    –    19
Issue of warrants
      –    –    776    776
Mandatorily Convertible Notes issued
      –    3,652    –    3,652
Repurchase of shares
      (10 ) 10    (173 ) (173 )
Dividends
      –    –    (2,414 ) (2,414 )
Other
      –    –    –    –
Balance at 31st December 2008
      6,138    4,046    9,006    19,190

~~In 2009 and 2008 there were no other components of total comprehensive income other than the net profit for the year.~~

~~Notes~~5 Net investment income

a	~~Details of share capital and share premium are shown in Note 31.~~


	2010 £m		2009 £m			2008 £m
Net gain from disposal of available for sale assets		1,027		349			212
Dividend income		116		6			196
Net gain/(loss) from financial instruments designated at fair value		274		(208	)		33
Other investment income/(losses)		60		(91	)		239
Net investment income		1,477		56			680
6 Impairment charges and other credit provisions See page 63 for analysis of the impairment charges and other credit provisions. 7 Staff costs


	2010 £m		2009 £m			2008 £m
Salaries and accrued performance costs		8,809		7,795			5,562
Share based payments (Note 39)		860		286			225
Social security costs		719		606			444
Bank payroll tax		96		225			–
Post retirement benefits:
– defined contribution plans		297		224			221
– defined benefit plans (Note 28)		213		(33	)		89
– other post-retirement benefits (Note 28)		18		16			1
Other		904		829			662
Staff costs		11,916		9,948			7,204
The UK Government applied a bank payroll tax of 50% to all discretionary bonuses over £25,000 awarded to UK bank employees between 9th December 2009 and 5th April 2010. The total bank payroll tax paid was £437m, of which £225m was recognised in 2009 in respect of 2009 cash awards and certain prior year deferrals distributed during the taxable period. For 2010 a charge of £96m has been recognised in relation to prior year deferrals, with the remaining £116m recognised over the period 2011 to 2013. Staff costs above relate to continuing operations only. Staff costs arising on discontinued operations for 2009 totalled £735m (2008: £575m), principally comprising £514m of salaries and accrued performance costs (2008: £486m), social security costs of £15m (2008: £20m), post-retirement benefits of £29m (2008: £16m) and other staff costs of £177m (2008: £53m). The average total number of persons employed by the Group including both continuing and discontinued operations was 151,300 (2009:153,800). 8 Administration and general expenses


	2010 £m		2009 £m			2008 £m
Property and equipment		1,813		1,641			1,356
Outsourcing and professional services		1,705		1,496			1,472
Operating lease rentals		637		639			520
Marketing, advertising and sponsorship		631		492			591
Subscriptions, publications and stationery		584		519			458
Travel and accommodation		358		273			275
Other administration and general expenses		732		439			491
Impairment of property, equipment and intangible assets		125		61			30
Administration and general expenses		6,585		5,560			5,193

In June 2010, the UK Government announced its intention to introduce a bank levy, which will apply to elements of the Group’s consolidated liabilities and equity held as at 31st December 2011. The draft legislation is expected to be enacted by the UK Parliament later this year. Based on the 31st December 2010 balance sheet position and the draft requirements, we estimate that the bank levy would result in an annual charge to the income statement of approximately £400m from 2011 onwards.

b	~~Details of other reserves are shown in Note 32.~~

c	~~Details of retained earnings are shown in Note 32.~~


				~~185~~

Cash flow statement
For the year ended 31st December

   2009
£m 2008
£m 2007
£m
Reconciliation of profit before tax to net cash flows from operating activities:

Profit before tax
   152    1,194    3,289
Changes in operating assets and liabilities:

Net decrease/(increase) in other assets
   2    (16 ) (3 )
Net increase/(decrease) in other liabilities
   1    –    (3 )
Net cash from operating activities
   155    1,178    3,283
Capital contribution to subsidiaries
   (800 ) (4,362 ) (1,434 )
Purchase of shares in subsidiaries
   (25 ) (16 ) (316 )
Liquidation of subsidiary
   –    205    –
Net cash used in investing activities
   (825 ) (4,173 ) (1,750 )
Issue of shares and other equity instruments
   784    4,911    2,494
Dividends paid
   (113 ) (2,414 ) (2,129 )
Repurchase of ordinary shares
   –    (173 ) (1,802 )
Net cash from financing activities
   671    2,324    (1,437 )
Net increase/(decrease) in cash and cash equivalents
   1    (671 ) 96
Cash and cash equivalents at beginning of year
   –    671    575
Cash and cash equivalents at end of year
   1    –    671
Cash and cash equivalents comprise:

Cash and balances at central banks
   1    –    671
Net cash from operating activities includes:

Dividends received
   103    1,173    3,287
Interest received
   53    7    4

~~The Parent Company’s principal activity is to hold the investment in its wholly-owned subsidiary, Barclays Bank PLC. Dividends received are treated as operating income.~~

The Company was not exposed at 31st December 2009 or 2008 to significant risks arising from the financial instruments it holds; which comprised cash, balances with central banks and other assets which had no credit or market risk.

~~Non-cash transactions~~

During 2008 Barclays Bank PLC issued £4,050m of Mandatorily Convertible Notes (MCNs), which had mandatorily converted into ordinary shares of Barclays PLC by 30th June 2009. Barclays PLC’s right to receive the MCNs was included in other assets in 2008, with a corresponding increase, net of issue costs, in other equity. In 2009, Barclays PLC waived its rights over the MCNs, which have been added to its cost of investment in its subsidiary.

~~The accompanying notes form an integral part of the accounts.~~


~~186~~			207

Notes to the ~~accounts~~financial statements

For the year ended 31st December ~~2009~~2010 continued

~~1 Dividends per share~~

The Directors have recommended the final dividend in respect of 2009 of 1.5p per ordinary share of 25p each, amounting to a total of £176m, which will be paid on 19th March 2010. The financial statements for the year ended 31st December 2009 do not reflect these dividends, which will be accounted for in shareholders’ equity as an appropriation of retained profits in the year ending 31st December 2010. The financial statements to 31st December 2009 include the 2009 interim dividend of £113m.

~~2 Net interest income~~

Interest arising from:
2009
£m

2008
£m

2007
£m

Cash and balances with central banks
   131    174    145
Available for sale investments
   1,937    2,355    2,580
Loans and advances to banks
   513    1,267    1,416
Loans and advances to customers
   18,456    23,754    19,559
Other interest income
   199    460    1,596
Interest income
   21,236    28,010    25,296
Deposits from banks
   (634 ) (2,189 ) (2,720 )
Customer accounts
   (2,716 ) (6,697 ) (4,110 )
Debt securities in issue
   (3,889 ) (5,910 ) (6,651 )
Subordinated liabilities
   (1,718 ) (1,349 ) (878 )
Other interest expense
   (361 ) (396 ) (1,339 )
Interest expense
   (9,318 ) (16,541 ) (15,698 )
Net interest income
   11,918    11,469    9,598

~~Interest income includes £185m (2008: £135m, 2007: £113m) arising from 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~~

2009
£m

2008
£m

2007
£m

Fee and commission income

Brokerage fees
   88    56    78
Investment management fees
   133    120    122
Banking and credit related fees and commissions
   9,578    7,208    6,363
Foreign exchange commissions
   147    189    178
Fee and commission income
   9,946    7,573    6,741
Fee and commission expense
   (1,528 ) (1,082 ) (970 )
Net fee and commission income
   8,418    6,491    5,771


				~~187~~

~~4 Principal transactions~~

      2009
£m 2008
£m    2007
£m
Net trading income
   7,001    1,339    3,754
Net gain from disposal of available for sale assets
   349    212    560
Dividend income
   6    196    26
Net (loss)/gain from financial instruments designated at fair value
   (208 ) 33    293
Other investment (losses)/income
   (91 ) 239    337
Net investment income
   56    680    1,216
Principal transactions
   7,057    2,019    4,970

Net trading income includes the profits and losses arising both on the purchase and sale of trading instruments and from the revaluation to fair value, together with the interest income earned from these instruments and the related funding cost.

~~Net trading income included a £682m gain (2008: £1,272m, 2007: £640m) related to foreign exchange dealings.~~

The net loss on financial assets designated at fair value included within principal transactions was £2,557m (2008: £6,602m loss, 2007: £78m gain) of which losses of £2,349m (2008: £6,635m loss, 2007: £215m loss) were included in net trading income and losses of £208m (2008: £33m gain, 2007: £293m gain) were included within net investment income.

The net loss on financial liabilities designated at fair value included within principal transactions was £3,158m (2008: £3,328m gain, 2007: £231m loss) all of which was included within net trading income.

~~Net trading income includes the net loss from tightening credit spreads relating to Barclays Capital issued structured notes held at fair value of £1,820m (2008: £1,663m gain, 2007: £658m gain).~~

~~5 Insurance premiums and insurance claims and benefits~~

      2009
£m 2008
£m 2007
£m
Gross premiums from insurance contracts
   1,224    1,138    1,062
Premiums ceded to reinsurers
   (52 ) (48 ) (51 )
Net premiums from insurance contracts
   1,172    1,090    1,011

      2009
£m 2008
£m 2007
£m
Gross claims and benefits incurred on insurance contracts
   858    263    520
Reinsurers’ share of claims incurred
   (27 ) (26 ) (28 )
Net claims and benefits incurred on insurance contracts
   831    237    492

~~6 Other income~~

      2009
£m 2008
£m 2007
£m
Increase/(decrease) in fair value of assets held in respect of linked liabilities to customers under investment contracts
   102    (1,219 ) 23
(Increase)/decrease in liabilities to customers under investment contracts
   (102 ) 1,219    (23 )
Property rentals
   64    73    53
Gains on debt buy backs and extinguishments
   1,255    24    –
Other
   70    270    133
Other income
   1,389    367    186


~~188~~

~~Notes to the accounts~~

~~For the year ended 31st December 2009~~

~~continued~~

~~7 Impairment charges and other credit provisions~~

      2009
£m 2008
£m 2007
£m
Impairment charges on loans and advances

New and increased impairment allowances
   8,111    5,116    2,871
Releases
   (631 ) (358 ) (338 )
Recoveries
   (150 ) (174 ) (227 )
Impairment charges on loans and advances
   7,330    4,584    2,306
Charge in respect of provision for undrawn contractually committed facilities and guarantees provided
   28    329    476
Impairment charges on loans and advances and other credit provisions
   7,358    4,913    2,782
Impairment charges on reverse repurchase agreements
   43    124    –
Impairment on available for sale assets
   670    382    13
Impairment charges and other credit provisions
   8,071    5,419    2,795

~~An analysis of the impairment charges by class of financial instrument is included in Note 47.~~

8 ~~Staff costs~~

      2009
£m 2008
£m    2007
£m
Salaries and accrued incentive payments
   8,081    5,787    6,322
Social security costs
   606    444    480
Pension costs – defined contribution plans
   224    221    119
Pension costs – defined benefit plans (Note 30)
   (33 ) 89    150
Other post-retirement benefits (Note 30)
   16    1    9
Other
   1,054    662    531
Staff costs
   9,948    7,204    7,611
Included in salaries and incentive payments is £290m (2008: £257m, 2007: £551m) arising from equity settled share-based payments, of which £56m (2008: £23m, 2007: £60m) is a charge related to option-based schemes and of which £12m (2008: £35m, 2007: £74m) relates to discontinued operations. Also included is £8m (2008: £3m, 2007: £8m) arising from cash settled share-based payments.
In December 2009, the UK government announced that the Finance Bill 2010 will introduce a bank payroll tax of 50% applicable to discretionary bonuses over £25,000 awarded to UK bank employees between 9th December 2009 and 5th April 2010. Draft legislation and further guidance on its application has been published. Based on this, and in accordance with IAS 19 – Employee benefits, the Group has accrued for the estimated tax payable in respect of employee services provided during the period. For 2009, £190m has been included within Other Staff Costs in respect of 2009 cash awards. A further provision of £35m has also been included in Other Staff Costs in respect of certain prior year awards being distributed during the tax window, which may fall within the proposed legislation.
~~Staff costs above relate to continuing operations only. Total staff costs for the Group (including both continuing and discontinued operations) was~~
£10,683m (2008: £7,779m, 2007: £8,405m) comprising salaries and accrued incentive payments of £8,595m (2008: £6,273m, 2007: £6,993m), social security costs of £621m (2008: £464m, 2007: £508m), pension costs of £217m (2008: £326m, 2007: £291m), other post-retirement benefits of £19m (2008: £1m, 2007: £10m) and other staff costs of £1,231m (2008: £715m, 2007: £603m).
~~The total average number of persons employed by the Group (including both continuing and discontinued operations) during the year was 153,800 (2008: 151,500).~~
9 Administration and general expenses

      2009
£m 2008
£m 2007
£m
Administrative expenses
   4,889    4,791    3,691
Impairment charges/(releases)

– property and equipment (Note 23)
   34    33    2
– intangible assets (Note 22)
   27    (3 ) 14
– goodwill (Note 21)
   1    112    –
Operating lease rentals
   639    520    414
Gain on property disposals
   (29 ) (148 ) (267 )
Administration and general expenses
   5,561    5,305    3,854
~~189~~
~~9 Administration and general expenses~~continued
Auditors’ remuneration
Auditors’ remuneration is included within outsourcing and professional services costs above and comprises:

      Notes Audit
£m    Audit
related
£m    Taxation
services
£m    Other
services
£m    Total
£m
2009

Audit of the Group’s annual accounts
   12    –    –    –    12
Other services:

Fees payable for the audit of the Company’s associates pursuant to legislation
   a ) 23    –    –    –    23
Other services supplied pursuant to such legislation
   b ) –    2    –    –    2
Other services relating to taxation
   c ) –    –    7    –    7
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
   d ) –    –    –    3    3
Other
   –    4    –    1    5
Total auditors’ remuneration
   35    6    7    4    52
2008

Audit of the Group’s annual accounts
   12    –    –    –    12
Other services:

Fees payable for the audit of the Company’s associates pursuant to legislation
   a ) 19    –    –    –    19
Other services supplied pursuant to such legislation
   b ) –    2    –    –    2
Other services relating to taxation
   c ) –    –    9    –    9
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
   d ) –    –    –    2    2
Other
   –    4    –    1    5
Total auditors’ remuneration
   31    6    9    3    49
2007

Audit of the Group’s annual accounts
   7    –    –    –    7
Other services:

Fees payable for the audit of the Company’s associates pursuant to legislation
   a ) 11    –    –    –    11
Other services supplied pursuant to such legislation
   b ) 6    2    –    –    8
Other services relating to taxation
   c ) –    –    3    –    3
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
   d ) –    –    –    5    5
Other
   –    1    –    1    2
Total auditors’ remuneration
   24    3    3    6    36
   Notes
Audit
£m

Audit
related
£m

Taxation
services
£m

Other
services
£m

Total
£m

2010

Audit of the Group’s annual accounts
      12       –       –       –       12
Other services:

Fees payable for the Company’s associates pursuant to legislation
   a)       26       –       –       –       26
Other services supplied pursuant to such legislation
   b)       –       3       –       –       3
Services relating to taxation

– compliance services
      –       –       7       –       7
– advisory services
   c)       –       –       1       –       1
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    d)       –       –       –       1       1
Other
      –       4       –       2       6
Total auditors’ remuneration
      38       7       8       3       56
2009

Audit of the Group’s annual accounts
      12       –       –       –       12
Other services:

Fees payable for the Company’s associates pursuant to legislation
   a)       23       –       –       –       23
Other services supplied pursuant to such legislation
   b)       –       2       –       –       2
Services relating to taxation

– compliance services
      –       –       6       –       6
– advisory services
   c)       –       –       1       –       1
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    d)       –       –       –       3       3
Other
      –       4       –       1       5
Total auditors’ remuneration
      35       6       7       4       52
2008

Audit of the Group’s annual accounts
      12       –       –       –       12
Other services:

Fees payable for the Company’s associates pursuant to legislation
   a)       19       –       –       –       19
Other services supplied pursuant to such legislation
   b)       –       2       –       –       2
Services relating to taxation

– compliance services
      –       –       7       –       7
– advisory services
   c)       –       –       2       –       2
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    d)       –       –       –       2       2
Other
      –       4       –       1       5
Total auditors’ remuneration
      31       6       9       3       49
The figures shown in the above table relate to fees paid to PricewaterhouseCoopers LLP and its associates for continuing operations of business. Fees paid to other auditors not associated with PricewaterhouseCoopers LLP in respect of the audit of the Company’s subsidiaries were £4m (2009: £3m, ~~(2008: £3m, 2007: £2m)~~2008: £3m).
a) 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 £0.4m (2009: £0.5m, 2008: £0.2m).
a) 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 £0.5m (2008: £0.2m, 2007: £0.3m).
b) Other services supplied pursuant to such legislation comprise services in relation to statutory and regulatory filings. These include audit services for the review of the interim financial information under the Listing Rules of the UK listing authority.
b) Other services supplied pursuant to such legislation comprise services in relation to statutory and regulatory filings. These 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 2009 and 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.
c) Advisory services relating to taxation include consultation on tax matters, tax advice relating to transactions and other tax planning and advice.
c) Other services relating to taxation 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.
d) Services relating to corporate finance transactions comprise due diligence related to transactions and other work in connection with such transactions.
d) ~~Services relating to corporate finance transactions comprise due diligence related to transactions and other work in connection with such transactions.~~
Excluded from the total auditors’ remuneration above are fees paid to PricewaterhouseCoopers LLP and associates relating to ~~BGI (discontinued operations)~~Barclays Global Investors, the Group’s discontinued operations, of £nil (2009: £4m, ~~(2008: £3m, 2007: £8m)~~2008: £3m).


~~190~~208

~~Notes to the accounts~~

~~For the year ended 31st December 2009~~

~~continued~~

~~10 Tax~~

~~The charge for tax is based upon the UK corporation tax rate of 28% (2008: 28.5%, 2007: 30%) and comprises:~~

      2009
£m 2008
£m 2007
£m
Current tax charge/(credit)

Current year
   1,249    1,201    2,013
Adjustment for prior years
   (118 ) 98    10
   1,131    1,299    2,023
Deferred tax charge/(credit)

Current year
   45    (577 ) (297 )
Adjustment for prior years
   (102 ) (269 ) (27 )
   (57 ) (846 ) (324 )
Total charge
   1,074    453    1,699
~~The effective tax rate for the years 2009, 2008 and 2007 is lower than the standard rate of corporation tax in the UK of 28% (2008: 28.5%, 2007: 30%). The differences are set out below:~~

      2009
£m 2008
£m 2007
£m
Profit before tax
   4,585    5,136    6,223
Tax charge at standard UK corporation tax rate of 28% (2008: 28.5%, 2007: 30%)
   1,284    1,464    1,867
Adjustment for prior years
   (220 ) (171 ) (17 )
Effect of overseas tax rates different from UK standard tax rate
   (27 ) 175    (82 )
Non-taxable gains and income (including amounts offset by unrecognised tax losses)
   (112 ) (859 ) (136 )
Share-based payments
   (38 ) 201    71
Deferred tax assets not recognised/(previously not recognised)
   27    (504 ) (159 )
Change in tax rates
   (12 ) (1 ) 24
Other non-allowable expenses
   172    148    131
Overall tax charge
   1,074    453    1,699
Effective tax rate
   23 % 9 % 27 %
The effective tax rate for 2009, based on profit before tax on continuing operations was 23.4% (2008: 8.8%). The effective tax rate differs from the UK tax rate of 28% (2008: 28.5%) because of non-taxable gains and income, different tax rates applied to taxable profits and losses outside the UK, disallowed expenditure and adjustments in respect of prior years. The low effective tax rate of 8.8% on continuing operations in 2008 mainly resulted from the Lehman Brothers North American business acquisition.
~~Tax effects relating to each component of other comprehensive income~~

For the year ended 31st December 2009 2008 2007
   Before tax
amount
£m Tax
(expense)/
benefit
£m Net of
tax
amount
£m Before tax
amount
£m Tax
(expense)/
benefit
£m Net of tax
amount
£m Before tax
amount
£m Tax
(expense)/
benefit
£m Net of tax
amount
£m
Continuing operations

Currency translation differences
(861 ) (2 ) (863 ) 2,274    840    3,114    43 102    145
Available for sale
1,236    (177 ) 1,059    (1,561 ) 207    (1,354 ) 1 (1 ) –
Cash flow hedge
165    (65 ) 100    376    (194 ) 182    359 (119 ) 240
Other
–    218    218    (5 ) (2 ) (7 ) 22 58    80
Other comprehensive income
540    (26 ) 514    1,084    851    1,935    425 40    465
   ~~191~~

9 Tax
Tax charge

2010
£m

2009
£m

2008
£m

Current tax charge/(credit)

Current year
   1,413    1,249    1,201
Adjustment for prior years
   (20 ) (118 ) 98
   1,393    1,131    1,299
Deferred tax charge/(credit)

Current year
   118    45    (577 )
Adjustment for prior years
   5    (102 ) (269 )
   123    (57 ) (846 )
Tax charge
   1,516    1,074    453

Tax relating to each component of other comprehensive income can be found in the consolidated statement of comprehensive income on page 187, including within Other, tax credits of £59m (2009: £218m; 2008: £2m charge) principally relating to share based payments.

Factors impacting income tax charge for the year
The table below shows the reconciliation between the tax charge that would result from applying the standard UK corporation tax rate to the Group’s profit before tax and the actual tax charge.




2010
£m

2009
£m

2008
£m

Profit before tax from continuing operations
   6,065    4,585    5,136
Tax charge based on the standard UK corporation tax rate of 28% (2009: 28%, 2008: 28.5%)    1,698    1,284    1,464
Adjustments for prior years    (15 ) (220 ) (171 )
Effect of overseas tax rates different from the standard UK tax rate^a    (135 ) (27 ) 175
Non-taxable gains and income^b    (152 ) (112 ) (859 )
Impact of share price movements on share-based payments    41    (38 ) 201
Deferred tax assets (previously not recognised)/not recognised    (160 ) 27    (504 )
Change in tax rates^c    34    (12 ) (1 )
Non-deductible expenses and other items
   205    172    148
Tax charge
   1,516    1,074    453
Effective tax rate^d
   25 % 23 % 9 %
The introduction of the UK bank levy is expected to result in a charge to operating expenses in 2011 (refer to Note 8).

Current tax assets and liabilities
Movements on current tax assets and liabilities were as follows:



2010
£m

2009
£m

Assets
   349    389
Liabilities
   (992 ) (1,216 )
As at 1st January
   (643 ) (827 )
Income statement
   (1,393 ) (1,153 )
Equity
   180    (109 )
Corporate income tax paid
   1,458    1,283
Acquisitions and disposals
   (4 ) (33 )
Exchange and other adjustments
   (48 ) 196
   (450 ) (643 )
Assets
   196    349
Liabilities
   (646 ) (992 )
As at 31st December
   (450 ) (643 )
Notes
a Includes a deferred tax benefit of £205rn in 2010 arising from the reorganisation of Spanish securitisation financing,
b Non-taxable gains and income is net of £42m relating to £58m withholding tax on the intra-group return of capital. Revenue of £58rn has been recognised in relation to related payments received.
c The UK has passed legislation to reduce the UK tax rate from 28% to 27% from 1st April 2011. This reduced the value of the net UK deferred tax asset at 31st December 2010 resulting in a tax charge of £14m (2009: £nil) included in the £34m for the impact of change in tax rates.
d The low effective tax rate of 9% in 2008 mainly resulted from the Lehman Brothers North American business acquisition.
209
Notes to the financial statements
For the year ended 31st December 2010 continued
9 Tax continued
Deferred tax assets and liabilities
The deferred tax amounts disclosed on the balance sheet are as follows:

2010
£m

2009
£m

Deferred tax asset
   2,517    2,303
Deferred tax liability
   (514 ) (470 )
Net deferred tax
   2,003    1,833

Deferred taxes are calculated on all temporary differences under the liability method. Movements on deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, were as follows:



Fixed asset
timing
differences
£m

Available
for sale
investments
£m

Cash flow
hedges
£m

Pensions
and other
retirement
benefits
£m

Allowances
for
impairment
on loans
£m

Other
provisions
£m

Tax losses
carried
forward^a
£m

Share
based
payments
£m

Other
£m

Total
£m

Assets
   117    28    139    219    379    294    1,038    336    472    3,022
Liabilities
   (660 ) (54 ) (278 ) –    –    –    –    –    (197 ) (1,189 )
As at 1st January

2010
   (543 ) (26 ) (139 ) 219    379    294    1,038    336    275    1,833
Income statement
   42    12    (3 ) (101 ) (46 ) (151 ) 591    25    (492 ) (123 )
Equity
   –    53    38    –    –    –    –    12    (44 ) 59
Acquisitions and disposals
   56    –    –    –    –    –    –    –    2    58
Exchange and other

adjustments
   21    (6 ) (5 ) –    12    19    (71 ) (1 ) 207    176
   (424 ) 33    (109 ) 118    345    162    1,558    372    (52 ) 2,003
Assets
   134    76    –    118    345    162    1,558    372    668    3,433
Liabilities
   (558 ) (43 ) (109 ) –    –    –    –    –    (720 ) (1,430 )
As at 31st

December 2010
   (424 ) 33    (109 ) 118    345    162    1,558    372    (52 ) 2,003
Assets
   87    57    246    403    356    532    1,659    342    1,116    4,798
Liabilities
   (945 ) (46 ) (368 ) _    –    –    –    –    (1,075 ) (2,434 )
As at 1st January

2009
   (858 ) 11    (122 ) 403    356    532    1,659    342    41    2,364
Income statement
   340    (8 ) 44    (189 ) 39    15    (785 ) 50    293    (201 )
Equity
   –    (21 ) (59 ) –    –    –    –    156    24    100
Acquisitions and disposals
   1    –    –    (5 ) (1 ) (8 ) 4    (41 ) (98 ) (148 )
Exchange and other adjustments
   (26 ) (8 ) (2 ) 10    (15 ) (245 ) 160    (171 ) 15    (282 )
   (543 ) (26 ) (139 ) 219    379    294    1,038    336    275    1,833
Assets
   117    28    139    219    379    294    1,038    336    472    3,022
Liabilities
   (660 ) (54 ) (278 ) –    –    –    –    –    (197 ) (1,189 )
As at 31st

December 2009
   (543 ) (26 ) (139 ) 219    379    294    1,038    336    275    1,833

Notes
a The deferred tax asset arising from tax losses mainly relates to entities in the USA, the UK and Spain.
b The net deferred tax asset at 31st December 2010 includes £1,715m (2009: £197m) in entities which have suffered a loss in either the current or prior year. Recognition is based on profit forecasts which indicate that it is probable that the relevant entities will have future taxable profits against which the temporary differences can be utilised.
c The amount of deferred tax liability expected to be settled after more than 12 months is £911m (2009: £955m). The amount of deferred tax asset expected to be recovered after more than 12 months is £1,645m (2009: £2,446m).
d Deferred tax assets have not been recognised in respect of deductible temporary differences (gross) of £506m (2009: £4m), and unused tax losses (gross) of £4,571m (2009: £8,542m) of which £70m (2009: £nil) expires within 5 years, £239m (2009: £nil) expires within 6-10 years and £4,262m (2009: £8,542m)
expires within 11-20 years. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits will be available against which the Group can utilise benefits. The unused tax losses include amounts relating to the US branch of Barclays Bank PLC where the applicable tax rate for deferred tax purposes would be the excess of the US tax rate over the UK tax rate,
e Deferred tax is not recognised in respect of the Group’s investments in subsidiaries and branches where remittance is not contemplated and for those associates and interests in joint ventures where it has been determined that no additional tax will arise. The aggregate amount of temporary differences for which deferred tax liabilities have not been recognised is £530m (2009: £738m).
210

1110 Earnings per share

      2009
£m 2008
£m 2007
£m
Continuing operations

Profit attributable to equity holders of Parent
   2,628    3,795    3,886
Dilutive impact of convertible options
   (17 ) (19 ) (15 )
Profit attributable to equity holders of Parent including dilutive impact of convertible options
   2,611    3,776    3,871
Discontinued operations
   6,765    587    531

      2009
million 2008
million 2007
million
Basic weighted average number of shares in issue
   10,890    7,389    6,410
Number of potential ordinary shares
   594    188    177
Diluted weighted average number of shares
   11,484    7,577    6,587

      p p p
Basic earnings per share
   86.2    59.3    68.9
Continuing operations
   24.1    51.4    60.6
Discontinued operations
   62.1    7.9    8.3
Diluted earnings per share
   81.6    57.5    66.9
Continuing operations
   22.7    49.8    58.8
Discontinued operations
   58.9    7.7    8.1

2010
£m

2009
£m

2008
£m

Continuing Operations

Profit attributable to equity holders of parent from continuing operations
   3,564    2,628    3,795
Dilutive impact of convertible options
   (10 ) (17 ) (19 )
Profit attributable to equity holders of parent including dilutive impact of convertible options
   3,554    2,611    3,776
Profit attributable to equity holders of the parent from discontinued operations
   –    6,765    587


2010
million

2009
million

2008
million

Basic weighted average number of shares in issue
   11,719    10,890    7,389
Number of potential ordinary shares
   733    594    188
Diluted weighted average number of shares
   12,452    11,484    7,577

   P P P
Basic earnings per ordinary share from continuing operations
   30.4    24.1    51.4
Basic earnings per ordinary share from discontinued operations
   –    62.1    7.9
Basic earnings per ordinary share
   30.4    86.2    59.3
Diluted earnings per ordinary share from continuing operations
   28.5    22.7    49.8
Diluted earnings per ordinary share from discontinued operations
   –    58.9    7.7
Diluted earnings per ordinary share
   28.5    81.6    57.5
The calculation of basic earnings per share is based on the profit attributable to equity holders of the ~~Parent~~parent and the number of basic weighted average number of shares excluding own shares held in employee ~~benefits~~benefit trusts ~~and shares~~or held for trading.
The basic weighted average number of shares in issue in the year ended 31st December ~~2009~~2010 reflects the full year impact of the ~~1,803~~exercise of 379 million ~~shares issued during 2008, the 2,642 million shares that were issued during the first six months of~~warrants in 2009, ~~following conversion in full of the Mandatorily Convertible Notes,~~ and the weighted average impact of the ~~379~~758 million warrants exercised ~~during 2009. The increase~~ in ~~the number of potential ordinary shares is primarily driven by the warrants issued in 2008 becoming dilutive in 2009 as the average share price exceeded the warrants’ exercise price.~~2010.
When calculating the diluted earnings per share, the profit attributable to equity holders of the Parent is adjusted for the dilutive impact of the potential conversion of outstanding options held in respect of Absa Group Limited that would increase the Group’s non-controlling interests on exercise. In addition, the weighted average number of shares in issue is adjusted for the effects of all dilutive potential ordinary shares held in respect of Barclays PLC, totalling 733 million (2009: 594 million) shares. In addition, the profit attributable to equity holders of the parent is adjusted for the dilutive impact of the potential conversion of outstanding options held in respect of Absa Group Limited.
The increase in the number of potential ordinary shares is primarily driven by the impact of the increase in the average share price to £3.06 (2009: £2.56) on both the 379 million ~~(2008: 188~~(2009:1,138 million) unexercised warrants and the 795 million ~~2007: 177~~(2009: 667 million) outstanding options granted under employee share schemes, which have strike prices ranging from £1.44 to £6.49 with an average of £4.01 (2009: £4.03).
Of the total number of employee share options and share awards at 31st December ~~2009, 97~~2010, 59 million were anti-dilutive ~~(2008: 64 million, 2007: nil)~~(2009: 97 million).
Subsequent to the balance sheet date, the Group continued to make on-market purchases of treasury shares for the purposes of satisfying its various employee share schemes. No adjustment has been made to earnings per share in respect of these purchases.
~~12 Trading portfolio~~11 Dividends on Ordinary Shares


2009
£m

2008
£m

Trading portfolio assets

Treasury and other eligible bills
   9,926    4,544
Debt securities
   116,594    148,686
Equity securities
   19,602    30,535
Traded loans
   2,962    1,070
Commodities
   2,260    802
Trading portfolio assets
   151,344    185,637
Trading portfolio liabilities

Treasury and other eligible bills
   (381 ) (79 )
Debt securities
   (44,327 ) (44,309 )
Equity securities
   (6,468 ) (14,919 )
Commodities
   (76 ) (167 )
Trading portfolio liabilities
   (51,252 ) (59,474 )
~~As disclosed~~The Directors have approved a final dividend in ~~Note 51, £8,027m~~respect of ~~collateralised loan obligations were reclassified from~~2010 of 2.5p per ordinary share of 25p each, amounting to a total of £298m, which will be paid on 18th March 2011. The financial statements for the ~~trading portfolio~~year ended 31st December 2010 does not reflect this dividend, which will be accounted for in shareholders’ equity as an appropriation of retained profits in the year ending 31st December 2011. The financial statements to ~~loans~~31st December 2010 include the 2010 interim dividends of £355m and ~~receivables during the year.~~final dividend declared in relation to 2009 of £176m.
~~192~~    211
Notes to the ~~accounts~~financial statements
For the year ended 31st December ~~2009~~
2010 continued

~~13 Financial assets designated at fair value~~
~~Held on own account~~12 Trading portfolio


2010
£m

2009
£m

Debt securities
     139,240       126,520
Equity securities
     25,613       19,602
Traded loans
     2,170       2,962
Commodities
     1,844       2,260
Trading portfolio assets
     168,867       151,344
Debt securities
     (64,607 )    (44,708 )
Equity Securities
     (7,568 )    (6,468 )
Commodities
     (518 )    (76 )
Trading portfolio liabilities
     (72,693 )    (51,252 )

13 Financial assets designated at fair value


   2009
£m    2008
£m
2010
£m
   2009
£m
Loans and advances
   22,390    30,187      22,352       22,390
Debt securities
   4,007    8,628      1,918       4,007
Equity securities
   6,256    6,496      5,685       6,256
Customers’ assets held under investment contracts
     1,429       1,257
Other financial assets
   8,658    9,231      10,101       8,658
Financial assets designated at fair value – held on own account
   41,311    54,542
Financial assets designated at fair value
     41,485       42,568
The maximum exposure to credit risk on loans and advances designated at fair value at 31st December 2009 was £22,390m (2008: £30,187m). The amount by which related credit derivatives and similar instruments mitigate the exposure to credit risk at 31st December 2009 was £1,416m (2008: £2,084m).
The net loss attributable to changes in credit risk for loans and advances designated at fair value was £2,370m in 2009 (2008: £2,550m). The gains on related credit derivatives was £229m for the year (2008: £519m).
The cumulative net loss attributable to changes in credit risk for loans and advances designated at fair value since initial recognition is £5,321m at 31st December 2009 (2008: £2,951m). The cumulative change in fair valuetotal portfolio of ~~related credit derivatives at 31st December 2009 is £744m (2008: £515m).~~
~~Held~~assets held in respect of linked liabilities to customers under investment ~~contracts/liabilities arising from investment~~ contracts

      2009
£m 2008
£m
Financial assets designated at fair value held in respect of linked liabilities to customers under investment contracts
   1,257    66,657
Cash and bank balances within the portfolio
   422    2,526
Assets held in respect of linked liabilities to customers under investment contracts
   1,679    69,183
Liabilities to customers under investment contracts
   (1,679 ) (69,183 )
~~A portion~~ also includes £518m (2009: £422m) of the Group’s fund management business in 2008, mostly relating to BGI, takes the legal form of investment contracts, under which legal title to the underlying investment is held by the Group, but the inherent riskscash 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~~bank balances included within cash and balances at central banks. The carrying value of the total assets is always the same as the carrying value of the liabilities ~~and any~~to customers under investment contracts as shown in Note 21. 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~~ Therefore, the Group is ~~therefore~~ not exposed to the financial risks ~~– market~~inherent in the investments.
Credit risk of loans and advances held at fair value and related credit derivatives
The following table shows the maximum exposure to credit risk, the changes in fair value due to changes in credit risk and ~~liquidity risk – inherent~~the cumulative changes in ~~the investments~~fair value since initial recognition on loans and ~~they are omitted from the disclosures on financial risks in Notes 47 to 49.~~
~~On the balance sheet, the assets are included as ‘Financial assets~~advances designated at fair value ~~– held in respect of linked liabilities to customers under investment contracts’. Balances within~~together with 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’.amount by which related credit derivatives mitigate this risk:
~~The increase/decrease in fair value arising from the return on the investments and the corresponding increase/decrease in linked liabilities to customers is disclosed in Note 6.~~
      Maximum Exposure as
at 31st December    Changes in fair value during
the year ended Cumulative changes in fair
value from inception
   2010    2009    2010 2009 2010 2009
Loans and advances designated at fair value, attributable to credit risk
   22,352       22,390       326    (2,370 ) (4,995 ) (5,321 )
Fair value of related credit derivatives
   2,206       1,416       (481 ) 229    263    744
212           ~~193~~

14 Derivative 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~~discussed in the Risk Management section on pages 42 to 119.
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 94 to 101.
The Group’s exposure to credit risk arising from derivative contracts, as well as the Group’s participation in exchange traded and over the counter derivatives markets are outlined in the Credit risk section on page 86.
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.
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 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 of the protection 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.
213
Notes 46 to ~~49.~~the financial statements
For the year ended 31st December 2010 continued
14 Derivative financial instrumentscontinued
The Group’s total derivative asset and liability position as reported on the balance sheet is as follows:
Total derivatives    2010 2009

Notional
contract
amount
£m


Fair value

Notional
contract
amount
£m
   Fair value
      Assets
£m    Liabilities
£m    Assets
£m    Liabilities
£m
Total derivative assets/(liabilities) held for trading
   48,517,204       418,586       (403,163 ) 39,131,979       415,638       (402,019 )
Total derivative assets/(liabilities) held for risk management
   240,353       1,733       (2,353 ) 180,018       1,177       (1,397 )
Derivative assets/(liabilities)
   48,757,557       420,319       (405,516 ) 39,311,997       416,815       (403,416 )
Derivative movements on the balance sheet were broadly flat compared to prior year with assets of £420bn as at 31 December 2010 (2009: £417bn) and liabilities of £406bn (2009: £403bn). Movements in derivatives during the year were mainly the result of decreases in forward interest rates in major currencies and new and increased business activity, partly offset by initiatives to reduce balance sheet usage such as the placement of existing derivative positions with clearing houses and the compression of over the counter derivative contracts via Tri-optima, a third party intermediary.
The fair values and notional amounts of derivative instruments held for trading are set out in the following table:

            2009             2008

Notional
contract
amount
£m
   Fair value
Notional
contract
amount
£m
   Fair value
Year ended 31st December
Derivatives held for trading
      Assets
£m    Liabilities
£m    Assets
£m    Liabilities
£m
Foreign exchange derivatives

Forward foreign exchange
   1,457,271    18,148    (18,019 ) 1,374,108    44,631    (46,371 )
Currency swaps
   810,666    26,008    (32,357 ) 828,983    47,077    (53,116 )
OTC options bought and sold
   539,976    7,332    (7,321 ) 426,739    15,405    (14,331 )
OTC derivatives
   2,807,913    51,488    (57,697 ) 2,629,830    107,113    (113,818 )
Exchange traded futures – bought and sold
   2,035    –    –    8,008    –    –
Exchange traded options – bought and sold
   28,220    –    –    1,295    –    –
Foreign exchange derivatives
   2,838,168    51,488    (57,697 ) 2,639,133    107,113    (113,818 )
Interest rate derivatives

Interest rate swaps
   9,408,811    193,133    (179,744 ) 17,624,591    498,661    (496,292 )
Forward rate agreements
   4,436,628    3,595    (3,289 ) 4,377,619    8,853    (8,224 )
OTC options bought and sold
   5,113,613    63,647    (61,304 ) 5,598,960    105,743    (101,005 )
OTC derivatives
   18,959,052    260,375    (244,337 ) 27,601,170    613,257    (605,521 )
Exchange traded futures – bought and sold
   547,685    –    –    586,312    –    –
Exchange traded options – bought and sold
   272,960    –    –    276,752    –    –
Exchange traded swaps
   13,424,261    –    –    9,411,001    –    –
Interest rate derivatives
   33,203,958    260,375    (244,337 ) 37,875,235    613,257    (605,521 )
Credit derivatives

Swaps
   2,016,796    56,295    (51,780 ) 4,129,244    184,072    (170,011 )
Equity and stock index derivatives

OTC options bought and sold
   124,944    13,042    (15,681 ) 180,157    19,576    (19,998 )
Equity swaps and forwards
   45,922    2,057    (1,718 ) 51,267    3,432    (2,819 )
OTC derivatives
   170,866    15,099    (17,399 ) 231,424    23,008    (22,817 )
Exchange traded futures – bought and sold
   57,565    –    –    38,340    –    –
Exchange traded options – bought and sold
   130,885    2,631    (2,371 ) 121,712    5,551    (3,109 )
Equity and stock index derivatives
   359,316    17,730    (19,770 ) 391,476    28,559    (25,926 )
Commodity derivatives

OTC options bought and sold
   92,508    4,262    (4,215 ) 78,680    6,565    (10,261 )
Commodity swaps and forwards
   252,621    22,872    (22,012 ) 407,015    38,316    (35,556 )
OTC derivatives
   345,129    27,134    (26,227 ) 485,695    44,881    (45,817 )
Exchange traded futures – bought and sold
   312,883    2,436    (2,008 ) 165,564    3,953    (2,745 )
Exchange traded options – bought and sold
   55,729    180    (200 ) 54,435    161    (233 )
Commodity derivatives
   713,741    29,750    (28,435 ) 705,694    48,995    (48,795 )
Derivative assets/(liabilities) held for trading
   39,131,979    415,638    (402,019 ) 45,740,782    981,996    (964,071 )
Derivatives held for trading    2010 2009

Notional
contract
amount
£m


Fair value

Notional
contract
amount
£m
   Fair value
      Assets
£m    Liabilities
£m
Assets
£m
   Liabilities
£m
Foreign exchange derivatives

Forward foreign exchange
   1,823,186       22,882       (22,674 ) 1,457,271       18,148       (18,019 )
Currency swaps
   935,420       29,802       (32,433 ) 810,666       26,008       (32,357 )
OTC options bought and sold
   739,949       7,736       (7,034 ) 539,976       7,332       (7,321 )
OTC derivatives
   3,498,555       60,420       (62,141 ) 2,807,913       51,488       (57,697 )
Exchange traded futures – bought and sold
   8,149       –       –    2,035       –       –
Exchange traded options – bought and sold
   7,207       –       –    28,220       –       –
Foreign exchange derivatives
   3,513,911       60,420       (62,141 ) 2,838,168       51,488       (57,697 )
Interest rate derivatives

Interest rate swaps
   10,316,455       202,050       (183,665 ) 9,408,811       193,133       (179,744 )
Forward rate agreements
   4,711,960       2,625       (2,881 ) 4,436,628       3,595       (3,289 )
OTC options bought and sold
   4,551,516       66,055       (65,395 ) 5,113,613       63,647       (61,304 )
OTC derivatives
   19,579,931       270,730       (251,941 ) 18,959,052       260,375       (244,337 )
Exchange traded futures – bought and sold
   706,678       –       –    547,685       –       –
Exchange traded options – bought and sold
   268,855       –       –    272,960       –       –
Exchange traded swaps
   21,209,173       –       –    13,424,261       –       –
Interest rate derivatives
   41,764,637       270,730       (251,941 ) 33,203,958       260,375       (244,337 )
Credit derivatives

OTC swaps
   1,780,264       45,977       (44,068 ) 1,932,635       55,302       (51,000 )
Exchange traded credit default swaps
   172,211       1,040       (976 ) 84,161       993       (780 )
Credit derivatives
   1,952,475       47,017       (45,044 ) 2,016,796       56,295       (51,780 )
Equity and stock index derivatives

OTC options bought and sold
   118,363       9,340       (13,424 ) 124,944       13,042       (15,681 )
Equity swaps and forwards
   56,478       2,226       (2,359 ) 45,922       2,057       (1,718 )
OTC derivatives
   174,841       11,566       (15,783 ) 170,866       15,099       (17,399 )
Exchange traded futures – bought and sold
   96,582       1       (4 ) 57,565       –       –
Exchange traded options – bought and sold
   206,881       3,016       (2,812 ) 130,885       2,631       (2,371 )
Equity and stock index derivatives
   478,304       14,583       (18,599 ) 359,316       17,730       (19,770 )
Commodity derivatives

OTC options bought and sold
   93,937       3,778       (3,751 ) 92,508       4,262       (4,215 )
Commodity swaps and forwards
   326,336       18,743       (19,133 ) 252,621       22,872       (22,012 )
OTC derivatives
   420,273       22,521       (22,884 ) 345,129       27,134       (26,227 )
Exchange traded futures – bought and sold
   358,550       3,240       (2,326 ) 312,883       2,436       (2,008 )
Exchange traded options – bought and sold
   29,054       75       (228 ) 55,729       180       (200 )
Commodity derivatives
   807,877       25,836       (25,438 ) 713,741       29,750       (28,435 )
Derivative assets/(liabilities) held for trading
   48,517,204       418,586       (403,163 ) 39,131,979       415,638       (402,019 )
  ~~194~~214

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~

14 Derivative financial instrumentscontinued
The fair values and notional amounts of derivative instruments held for risk management are set out in the following table:

Derivatives held for risk management    2010 2009
   Notional
contract
amount
£m

Fair value
Notional
contract
amount
£m    Fair value
   2009 2008    Assets
£m    Liabilities
£m    Assets
£m    Liabilities
£m
   Notional
contract
amount
£m    Fair value Notional
contract
amount
£m    Fair value
Year ended 31st December
Derivatives held for trading
   Assets
£m    Liabilities
£m    Assets
£m    Liabilities
£m
Derivatives designated as cash flow hedges

Currency swaps
   –    –    –    586    –    (271 )
Interest rate swaps
   79,241    478    (494 ) 60,669    1,013    (1,011 )    126,904       760       (882 ) 79,241       478       (494 )
Equity options
   –    –    –    400    –    (154 )
OTC options bought and sold
   673    2    –    –    –    –       –       –       –    673       2       –
Forward foreign exchange
   2,224    237    (51 ) 1,871    309    (354 )    581       –       (43 ) 2,224       237       (51 )
Exchange traded interest rate swaps
   33,534    –    –    20,028    –    –       22,278       –       –    33,534       –       –
Derivatives designated as cash flow hedges
   115,672    717    (545 ) 83,554    1,322    (1,790 )    149,763       760       (925 ) 115,672       717       (545 )
Derivatives designated as fair value hedges

Currency swaps
   502    10    –    2,666    283    (105 )    679       –       (54 ) 502       10       –
Interest rate swaps
   12,199    357    (459 ) 14,010    1,052    (357 )    42,301       905       (872 ) 12,199       357       (459 )
Equity options
   7,710    53    (56 ) 259    124    (110 )    –       –       –    7,710       53       (56 )
Forward foreign exchange
   5,386    18    (103 ) –    –    –       4,561       19       (86 ) 5,386       18       (103 )
Exchange traded interest rate swaps
   32,257    –    –    18,767    –    –       36,427       –       –    32,257       –       –
Derivatives designated as fair value hedges
   58,054    438    (618 ) 35,702    1,459    (572 )    83,968       924       (1,012 ) 58,054       438       (618 )
Derivatives designated as hedges of net investments

Forward foreign exchange
   5,321    22    (97 ) 2,019    4    (76 )    5,870       28       (199 ) 5,321       22       (97 )
Currency swaps
   971    –    (137 ) 3,675    21    (1,563 )    752       21       (217 ) 971       –       (137 )
Derivatives designated as hedges of net investment
   6,292    22    (234 ) 5,694    25    (1,639 )    6,622       49       (416 ) 6,292       22       (234 )
Derivative assets/(liabilities) held for risk management
   180,018    1,177    (1,397 ) 124,950    2,806    (4,001 )    240,353       1,733       (2,353 ) 180,018       1,177       (1,397 )
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:~~

      2009 2008
   Notional
contract
amount
£m    Fair value
Notional
contract
amount £m
   Fair value
Year ended 31st December       Assets
£m    Liabilities
£m    Assets
£m    Liabilities
£m
Total derivative assets/(liabilities) held for trading
   39,131,979    415,638    (402,019 ) 45,740,782    981,996    (964,071 )
Total derivative assets/(liabilities) held for risk management
   180,018    1,177    (1,397 ) 124,950    2,806    (4,001 )
Derivative assets/(liabilities)
   39,311,997    416,815    (403,416 ) 45,865,732    984,802    (968,072 )
Derivative assets and liabilities subject to counterparty netting agreements amounted to £343bn (2008: £862bn). Additionally, the Group held £31bn (2008: £55bn) of collateral against the net derivative assets exposure.
   ~~195~~ 215
Notes to the financial statements
For the year ended 31st December 2010 continued

14 Derivative financial instrumentscontinued
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:

   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
2010

Forecast receivable cash flows
   2,861       440       570       625       526       291       409
Forecast payable cash flows
   307       69       52       76       82       22       6
   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
2009

Forecast receivable cash flows
   3,304    467    838    837    700    370    92    3,304       467       838       837       700       370       92
Forecast payable cash flows
   558    51    96    122    145    116    28    558       51       96       122       145       116       28
2008

Forecast receivable cash flows
   2,569    875    586    596    347    127    38
Forecast payable cash flows
   974    275    166    175    145    123    90
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 ~~nine~~fourteen years ~~(2008: seven~~(2009: nine years).
Amounts recognised in net interest income    2010
£m      2009
£m
Fair value hedging:

(Losses)/gains on the hedged items attributable to the hedged risk
   (1,172 )      1,604
Gains/(losses) on the hedging instruments
   1,286         (1,478 )
Fair value ineffectiveness
   114         126
Cash flow hedging ineffectiveness
   138         21
Net investment hedging ineffectiveness
   (10 )      (5 )
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 of £1,478m on hedging instruments was recognised in relation to fair value hedges in net interest income (2008: £2,439m gain). A gain of £1,604m on the hedged items was recognised in relation to fair value hedges in net interest income (2008: £2,423m loss).
~~Ineffectiveness recognised in relation to~~Transfers from cash flow ~~hedges~~hedging reserve
Gains and losses transferred from the cash flow hedging reserve in the current year were to: interest income: £88m gain (2009: £22m loss), interest expense: £515m gain (2009: £272m gain), net ~~interest income was a~~trading income: £148m loss (2009: £165m loss), and administration and general expenses: £99m gain ~~of £21m (2008: £14m gain). Ineffectiveness recognised in relation to hedges of net investment was a loss of £5m (2008: £2m~~(2009: £7m gain).
15 Loans and advances to banks and customers
Disclosures relevant to the Group’s loans and advances to banks and customers are included on pages 71 to 84.


2009
£m

2008
£m

Gross loans and advances to banks
   41,196    47,758
Less: Allowance for impairment
   (61 ) (51 )
Loans and advances to banks
   41,135    47,707
Gross loans and advances to customers
   430,959    468,338
Less: Allowance for impairment
   (10,735 ) (6,523 )
Loans and advances to customers
   420,224    461,815
16 Available for sale financial investments
   2010
£m      2009
£m
Debt securities and other eligible bills
   59,629         49,807
Equity securities
   5,481         6,676
Available for sale financial investments
   65,110         56,483
The Group’s investment in BlackRock, Inc. shares of £4.6bn (2009: £5.4bn) is included within available for sale equity securities and was assessed for impairment as at 31st December 2010. This analysis identified that the reduction in fair value from the original acquisition cost of £5.3bn was not significant or prolonged in the light of the volatile stock market conditions of 2010 which saw the share price falling below the acquisition price in March 2010 and continued to fall until it reached a low in August 2010. Since then, the share price has continued to rise through the second half of the year and into 2011. As such no impairment has been recognised. The Group will continue to consider the need to recognise impairment in the light of any continuing volatility in the share price and of the length of time it has been below cost.
  ~~196~~216

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~

~~16 Available for sale financial investments~~


2009
£m

2008
£m

Debt securities
   43,888    58,831
Treasury bills and other eligible bills
   5,919    4,003
Equity securities
   6,676    2,142
Available for sale financial investments
   56,483    64,976

Movement in available for sale financial investments

At beginning of year
   64,976    43,072
Exchange and other adjustments
   (4,399 ) 14,275
Acquisitions and transfers
   83,915    59,703
Disposals (through sale and redemption)
   (88,854 ) (50,501 )
Gains/(losses) from changes in fair value recognised in equity
   1,576    (1,174 )
Impairment charge
   (670 ) (382 )
Amortisation charge
   (6 ) (17 )
Business disposals/discontinued operations
   (55 ) –
At end of year
   56,483    64,976
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~~other similar secured lending
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.


2009
£m

2008
£m

2010
£m

2009
£m

Banks
   67,872    55,471    104,233         67,872
Customers
   75,559    74,883    101,539         75,559
Reverse repurchase agreements and cash collateral held on securities borrowed
   143,431    130,354    205,772         143,431
b) Repurchase agreements and ~~cash collateral on securities lent~~other similar secured borrowing
Securities that are not recorded on the balance sheet (for example, securities that have been obtained as a result of reverse repurchase and stock borrowing transactions) may also be lent or sold subject to a commitment to repurchase – such securities remain off-balance sheet. In both instances, amounts received from counterparty are treated as liabilities, which at 31st December were as follows:


2009
£m

2008
£m
Banks
   93,692    87,403
Customers
   105,089    94,882
Repurchase agreements and cash collateral on securities lent
   198,781    182,285
~~18 Other assets~~

      2009
£m    2008
£m
Sundry debtors
   4,909    4,814
Prepayments
   1,010    882
Accrued income
   347    483
Reinsurance assets
   92    123
Other assets
   6,358    6,302
Included in the above are balances of £4,978m (2008: £4,704m) expected to be recovered within no more than 12 months after the balance sheet date and balances of £1,380m (2008: £1,598m) expected to be recovered more than 12 months after the balance sheet date.
~~Other assets include £3,476m (2008: £3,096m) of receivables which meet the definition of financial assets.~~
~~197~~
~~19 Deferred tax~~
~~The components of deferred taxes disclosed on the balance sheet are as follows:~~

      2009
£m 2008
£m
Deferred tax liability
   (470 ) (304 )
Deferred tax asset
   2,303    2,668
Net deferred tax
   1,833    2,364
~~Deferred taxes are calculated on all temporary differences under the liability method. Movements on deferred tax assets and liabilities were as follows:~~

   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
(945 ) (46 ) (368 ) –    –    –    –    –    (1,075 ) (2,434 )
Assets
87    57    246    403    356    532    1,659    342    1,116    4,798
At 1st January 2009
(858 ) 11    (122 ) 403    356    532    1,659    342    41    2,364
Income statement
340    (8 ) 44    (189 ) 39    15    (785 ) 50    293    (201 )
Equity
–    (21 ) (59 ) –    –    –    –    156    24    100
Acquisitions and disposals
1    –    –    (5 ) (1 ) (8 ) 4    (41 ) (98 ) (148 )
Exchange and other adjustments
(26 ) (8 ) (2 ) 10    (15 ) (245 ) 160    (171 ) 15    (282 )
(543 ) (26 ) (139 ) 219    379    294    1,038    336    275    1,833
Liabilities
(660 ) (54 ) (278 ) –    –    –    –    –    (197 ) (1,189 )
Assets
117    28    139    219    379    294    1,038    336    472    3,022
At 31st December 2009
(543 ) (26 ) (139 ) 219    379    294    1,038    336    275    1,833

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
~~The amount of deferred tax liability expected to be settled after more than 12 months is £955m (2008: £1,949m).~~
~~The amount of deferred tax asset expected to be recovered after more than 12 months is £2,446m (2008: £4,593m).~~
The deferred tax assets balance includes £197m (2008: £2,139m) 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.
Deferred tax assets have not been recognised in respect of deductible temporary differences (gross) of £4m (2008: £9m), unused tax losses (gross) of £8,542m (2008: £4,083m loss) and unused tax credits of £nil (2008: £46m). Tax losses of £8,516m expire in 2029. 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 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 £738m (2008: £8,429m).
  ~~198~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~20 Investments in associates and joint ventures~~
~~Share of net assets~~

      Associates Joint ventures Total
.    2009
£m 2008
£m 2009
£m 2008
£m 2009
£m 2008
£m
At beginning of year
   175    90    166    287    341    377
Share of results before tax
   21    25    21    (6 ) 42    19
Share of tax
   (2 ) (3 ) (6 ) (2 ) (8 ) (5 )
Share of post-tax results
   19    22    15    (8 ) 34    14
Dividends paid
   –    –    (1 ) –    (1 ) –
New investments
   198    6    1    27    199    33
Acquisitions
   38    62    3    1    41    63
Disposals
   (58 ) (20 ) (14 ) (117 ) (72 ) (137 )
Exchange and other adjustments
   (122 ) 15    2    (24 ) (120 ) (9 )
At end of year
   250    175    172    166    422    341
~~Goodwill included above:~~

      Associates    Joint ventures    Total
.    2009
£m 2008
£m    2009
£m 2008
£m    2009
£m 2008
£m
Cost

At beginning of year
   –    –    31    27    31    27
Acquisitions
   19    –    –    –    19    –
Exchange and other adjustments
   (1 ) –    (1 ) 4    (2 ) 4
At end of year
   18    –    30    31    48    31
The Group holds investments in associates listed on the Johannesburg Stock Exchange: Pinnacle Point Group Limited, Blue Financial Services Limited (acquired during 2009) and Sekunjalo Investments Limited (acquired during 2009). The fair value of the Group’s investment in these associates is £15m (2008: £60m). Ambit Properties Limited was disposed during 2009 (2008: fair value of £51m).
Aggregate cash consideration paid for additional investments in associates and joint ventures was £82m (2008: £96m), which also included New China Trust. Additional investments for non-cash consideration, include Barclays Vida y Pensiones Compañía de Seguros (£69m) and associates held by Crescent Real Estate Holdings LLC (£89m).

2010
£m

2009
£m

Banks
   99,997         93,692
Customers
   125,537         105,089
Repurchase agreements and cash collateral on securities lent
   225,534         198,781
18 Investments in associates and joint ventures


   2010
£m      2009
£m
Investment in associates
   261         250
Investment in joint ventures
   257         172
Total
   518         422
Summarised financial information for the Group’s associates and joint ventures is set out ~~below:~~

      2009 2008
.    Associates
£m Joint
ventures
£m Associates
£m Joint
ventures
£m
Property, plant and equipment
   1,174    98    788    104
Financial investments
   772    6    124    –
Trading portfolio assets
   426    –    –    –
Loans to banks and customers
   712    3,124    271    2,883
Other assets
   1,855    293    1,343    418
Total assets
   4,939    3,521    2,526    3,405
Deposits from banks and customers
   2,200    2,751    1,376    2,207
Trading portfolio liabilities
   370    107    –    –
Other liabilities
   1,666    380    985    890
Shareholders’ equity
   703    283    165    308
Total liabilities and shareholders’ equity
   4,939    3,521    2,526    3,405
Net income
   1,022    391    859    357
Operating expenses
   (1,045 ) (342 ) (732 ) (364 )
(Loss)/profit before tax
   (23 ) 49    127    (7 )
(Loss)/profit after tax
   (96 ) 30    52    (11 )
below. The amounts ~~included above, which include the entire~~shown are assets, liabilities and net income of the investees, not just the Group’s share, ~~are based on accounts made up to~~as at and for the year ended 31st December ~~2009~~2010 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.
      2010    2009
   Associates
£m Joint
Ventures
£m    Associates
£m Joint
Ventures
£m
Total assets
   4,819    3,452       4,939    3,521
Total liabilities
   4,089    3,024       4,236    3,238
(Loss)/Profit after tax
   (167 ) 93       (96 ) 30
The Group’s share of commitments and contingencies of its associates and joint ventures is ~~£5m (2008: £nil)~~comprised of insurance guarantees of £nil (2009: £5m) and unutilised credit facilities provided to customers of £1,237m (2009: £1,126m).
   ~~199~~ 217
Notes to the financial statements
For the year ended 31st December 2010 continued
19 Goodwill and intangible assets
   Goodwill
£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
2010

Cost

As at 1st January 2010
   7,058    963    237    301    175    1,521    164    462    10,881
Acquisitions and disposals of subsidiaries    12    –    –    –    –    28    –    25    65
Additions and disposals
   –    88    3    –    –    –    (168 ) (3 ) (80 )
Exchange and other adjustments
   189    40    (6 ) 46    27    137    4    (11 ) 426
As at 31st December 2010
   7,259    1,091    234    347    202    1,686    –    473    11,292
Accumulated amortisation and impairment
As at 1st January 2010
   (826 ) (465 ) (58 ) (82 ) (84 ) (318 ) (117 ) (136 ) (2,086 )
Disposals
   –    100    –    –    –    2    144    11    257
Amortisation charge
   –    (178 ) (36 ) (19 ) (18 ) (141 ) (7 ) (38 ) (437 )
Impairment charge
   (243 ) (14 ) –    (7 ) –    (15 ) (19 ) (17 ) (315 )
Exchange and other adjustments
   29    5    8    (13 ) (7 ) (21 ) (1 ) (14 ) (14 )
As at 31st December 2010
   (1,040 ) (552 ) (86 ) (121 ) (109 ) (493 ) –    (194 ) (2,595 )
Net book value
   6,219    539    148    226    93    1,193    –    279    8,697
2009

Cost

As at 1st January 2009
   8,551    721    328    261    155    1,565    173    426    12,180
Acquisitions and disposals of subsidiaries    63    –    –    –    –    1    –    109    173
Disposals of discontinued operations    (1,587 ) (66 ) –    –    (2 ) –    –    (32 ) (1,687 )
Additions and disposals
   –    264    (36 ) –    –    –    –    11    239
Exchange and other adjustments
   31    44    (55 ) 40    22    (45 ) (9 ) (52 ) (24 )
As at 31st December 2009
   7,058    963    237    301    175    1,521    164    462    10,881
Accumulated amortisation and impairment
As at 1st January 2009
   (926 ) (284 ) (69 ) (52 ) (55 ) (172 ) (116 ) (104 ) (1,778 )
Disposals of discontinued operations    84    25    –    –    2    –    –    8    119
Disposals
   –    12    4    –    –    –    –    –    16
Amortisation charge
   –    (190 ) (29 ) (22 ) (17 ) (136 ) (13 ) (54 ) (461 )
Impairment charge
   (1 ) (11 ) –    –    (6 ) –    –    (10 ) (28 )
Exchange and other adjustments
   17    (17 ) 36    (8 ) (8 ) (10 ) 12    24    46
As at 31st December 2009
   (826 ) (465 ) (58 ) (82 ) (84 ) (318 ) (117 ) (136 ) (2,086 )
Net book value
   6,232    498    179    219    91    1,203    47    326    8,795
Of the intangibles amortisation charge for 2009 £447m related to continuing operations.
218

~~21 Goodwill~~

      2009
£m 2008
£m
Net book value

At beginning of year
   7,625    7,014
Acquisitions
   63    400
Business disposals/discontinued operations
   (1,503 ) (10 )
Impairment charge
   (1 ) (112 )
Exchange and other adjustments
   48    333
At end of year
   6,232    7,625
19 Goodwill and Intangible Assetscontinued
Goodwill
Goodwill is allocated to business operations according to business segments ~~identified by the Group under IFRS 8,~~ as follows:

      2009
£m    2008^a
£m
UK Retail Banking
   3,146    3,139
Barclays Commercial Bank
   22    10
Barclaycard
   525    413
GRCB – Western Europe
   886    948
GRCB – Emerging Markets
   39    49
GRCB – Absa
   1,116    1,084
Barclays Capital
   107    95
Barclays Global Investors
   –    1,496
Barclays Wealth
   391    391
Goodwill
   6,232    7,625
   2010
£m    2009
£m
UK Retail Banking
   3,148       3,146
Barclaycard
   585       552
Western Europe Retail Banking
   505       520
Barclays Africa
   36       39
Barclays Capital
   133       105
Barclays Corporate
   150       389
Barclays Wealth
   391       391
Absa
   1,271       1,090
Total Goodwill
   6,219       6,232
~~The~~Goodwill has been allocated to the revised business segments in line with the resegmentation communicated to the market in March 2010. This means that the £243m of goodwill ~~disposal relates~~in Barclays Bank Russia was allocated to Barclays ~~Global Investors. During~~Corporate and goodwill in Spain of £565m was allocated between Western Europe Retail Banking (£439m) and Barclays Corporate (£126m). The comparative figures for 2009 ~~the allocation of balances has~~have been updated to reflect ~~certain changes in the business structure.~~this resegmentation.
Impairment testing of goodwill
Goodwill is reviewed annually for impairment, or more frequently when there are 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~~operation's goodwill is based on value-in-use ~~or fair value less costs to sell~~ calculations. The 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~~management's view of future performance.
~~At 31st December 2009, the~~Key assumptions
The key assumptions used for impairment testing are set out below for each significant goodwill balance. Other goodwill of £1,253m (2009: £1,986m) was allocated to UK Retail Banking was £3,146m (2008: £3,139m) including £3,130m (2008: £3,130m) relating to Woolwich, the goodwill allocated to GRCB – Absa was £1,116m (2008: £1,084m) and the goodwill allocated to Barclays Global Investors was £nil (2008: £1,496m). The remaining aggregate of goodwill of £1,986m (2008: £1,915m) consists of balances relating to multiple ~~business operations~~cash-generating units which are not considered individually significant.
~~Key assumptions used in impairment testing for significant goodwill~~
UK Retail Banking
The recoverable amount of UK Retail Banking has been determined ~~based on a value in use calculation. The calculation uses~~using cash flow predictions based on financial budgets approved by management and covering a ~~three-year~~five-year period, with a terminal growth rate of 2% (2009: 3%) applied thereafter. The forecast ~~cash flows~~cashflows have been discounted at a pre-tax rate of 13% (2009: 14%). ~~The~~Based on the above assumptions, the recoverable amount exceeded the carrying amount including goodwill by ~~£1.2bn.~~£4.0bn (2009: £1.2bn). A one percentage point change in the discount rate or the terminal growth rate would reduce the recoverable amount by ~~£0.7bn~~£1.0bn (2009: £0.7bn) and ~~£0.5bn~~£0.8bn (2009: £0.5bn) respectively. A reduction in the forecast cash flows of 5%10% per annum would reduce the recoverable amount by ~~£0.4bn.~~£1.1bn (2009: £0.8bn).
~~Global Retail and Commercial Banking –~~ Absa
The recoverable amount of ~~GRCB –~~ Absa has been determined using cash flow predictions based on financial budgets approved by management and covering a five year period, with a terminal growth rate of 6% (2009: 6%) applied thereafter. The forecast cashflows have been discounted at a pre-tax rate of 14% (2009: 14%). The recoverable amount calculated based on value in use ~~calculation.~~exceeded the carrying amount including goodwill by £5.0bn (2009: £4.7bn). The ~~calculation uses~~result of the impairment test would not be materially different if alternative reasonably possible changes in key assumptions were applied.
Spain
The recoverable amount of the Spanish business has been determined using cash flow predictions based on financial budgets approved by management covering a ~~three year~~five-year period, with a terminal growth rate of 6%2% (2009: 2%) applied thereafter. The forecast cash flows have been discounted at a pre-tax rate of ~~14%~~12% (2009: 13%). The ~~result of~~recoverable amount calculated based on value in use exceeded the ~~impairment test is not sensitive to reasonably possible~~carrying amount including goodwill by £383m. The cash flow projections include the estimated benefits from changes in ~~key assumptions.~~product mix, improved product pricing and impairment levels coming back into line with historic loan loss rates. There is no impact from any cost restructuring or any future planned investments included within the forecasts. An increase in the discount rate to 15%, a decrease in the terminal growth rate to negative 1.3% or a reduction in the forecast cash flows by 26% per annum would reduce the headroom over the carrying amount to nil.
Barclays ~~Global Investors~~Corporate – Russia
~~All~~At 31st December 2010, Barclays recognised an impairment charge of £243 million (2009: nil) in respect of all of the goodwill held by Barclays Corporate in Barclays ~~Global Investors has~~Bank Russia (BBR), which arose from the Expo bank acquisition in 2008. The impairment principally reflects changes in expected future cash flows arising from BBR as our activities there have been ~~disposed~~refocused. The recoverable amount of ~~following~~BBR was calculated based on the ~~sale~~value in use approach using a pre-tax rate of ~~this business to BlackRock, Inc on 1st December 2009. The value of the goodwill was recovered in full as a result of the transaction.~~17%.
~~Note~~
a ~~Figures have been restated for the transfer of Barclays Russia from GRCB – Emerging Markets to GRCB – Western Europe.~~
  ~~200~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~22 Intangible assets~~

      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
2009

Cost

At 1st January 2009
   721    328    261    155    1,565    173    426    3,629
Acquisitions and disposals of subsidiaries
   –    –    –    –    1    –    109    110
Disposal of discontinued operations
   (66 ) –    –    (2 ) –    –    (32 ) (100 )
Additions/disposals
   264    (36 ) –    –    –    –    11    239
Exchange and other adjustments
   44    (55 ) 40    22    (45 ) (9 ) (52 ) (55 )
At 31st December 2009
   963    237    301    175    1,521    164    462    3,823
Accumulated amortisation and impairment

At 1st January 2009
   (284 ) (69 ) (52 ) (55 ) (172 ) (116 ) (104 ) (852 )
Disposal of discontinued operations
   25    –    –    2    –    –    8    35
Disposals
   12    4    –    –    –    –    –    16
Amortisation charge
   (190 ) (29 ) (22 ) (17 ) (136 ) (13 ) (54 ) (461 )
Impairment charge
   (11 ) –    –    (6 ) –    –    (10 ) (27 )
Exchange and other adjustments
   (17 ) 36    (8 ) (8 ) (10 ) 12    24    29
At 31st December 2009
   (465 ) (58 ) (82 ) (84 ) (318 ) (117 ) (136 ) (1,260 )
Net book value
   498    179    219    91    1,203    47    326    2,563
2008

Cost

At 1st January 2008
   388    188    244    149    524    126    161    1,780
Acquisitions and disposals of subsidiaries
   –    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
~~Of the amortisation charge for the year, £447m (2008: £276m) relates to continuing operations.~~
~~The impairment release detailed above has been included within other operating expenses.~~
   ~~201~~ 219
Notes to the financial statements
For the year ended 31st December 2010 continued

2320 Property, plant and equipment

   Investment
property
£m    Property
£m Equipment
£m Leased
assets
£m Total
£m    Investment
property
£m Property
£m Equipment
£m Leased
assets
£m Total
£m
2010

Cost

As at 1st January 2010
   1,207    3,830    4,197    66    9,300
Acquisitions and disposals of subsidiaries
   46    2    4    –    52
Additions and disposals
   353    283    120    9    765
Change in fair value of investment properties
   (54 ) –    –    –    (54 )
Fully depreciated assets written off
   –    (2 ) (1 ) –    (3 )
Exchange and other adjustments
   18    116    429    –    563
As at 31st December 2010
   1,570    4,229    4,749    75    10,623
Accumulated depreciation and impairment

As at 1st January 2010
   –    (1,128 ) (2,529 ) (17 ) (3,674 )
Acquisitions and disposals of subsidiaries
   –    6    –    –    6
Depreciation charge
   –    (231 ) (555 ) (4 ) (790 )
Impairment charge
   –    (28 ) (25 ) –    (53 )
Disposals
   –    86    341    (3 ) 424
Fully depreciated assets written off
   –    2    1    –    3
Exchange and other adjustments
   –    (33 ) (366 ) –    (399 )
As at 31st December 2010
   –    (1,326 ) (3,133 ) (24 ) (4,483 )
Net book value
   1,570    2,903    1,616    51    6,140
2009

Cost

At 1st January 2009
   –    3,624    3,944    304    7,872
As at 1st January 2009
   –    3,624    3,944    304    7,872
Acquisitions and disposals of subsidiaries
   978    171    5    –    1,154       978    171    5    –    1,154
Disposal of discontinued operations
   –    (120 ) (99 ) –    (219 )    –    (120 ) (99 ) –    (219 )
Additions/disposals
   137    233    387    (37 ) 720
Additions and disposals
   137    233    387    (37 ) 720
Change in fair value of investment properties
   6    –    –    –    6       6    –    –    –    6
Fully depreciated assets written off
   –    (6 ) (17 ) –    (23 )    –    (6 ) (17 ) –    (23 )
Exchange and other adjustments
   86    (72 ) (23 ) (201 ) (210 )    86    (72 ) (23 ) (201 ) (210 )
At 31st December 2009
   1,207    3,830    4,197    66    9,300
As at 31st December 2009
   1,207    3,830    4,197    66    9,300
Accumulated depreciation and impairment

At 1st January 2009
   –    (1,011 ) (2,144 ) (43 ) (3,198 )
As at 1st January 2009
   –    (1,011 ) (2,144 ) (43 ) (3,198 )
Acquisitions and disposals of subsidiaries
   –    –    2    –    2       –    –    2    –    2
Disposal of discontinued operations
   –    33    64    –    97       –    33    64    –    97
Depreciation charge
   –    (201 ) (565 ) (20 ) (786 )    –    (201 ) (565 ) (20 ) (786 )
Impairment charge
   –    (32 ) (2 ) –    (34 )    –    (32 ) (2 ) –    (34 )
Disposals
   –    46    97    1    144       –    46    97    1    144
Fully depreciated assets written off
   –    6    17    –    23       –    6    17    –    23
Exchange and other adjustments
   –    31    2    45    78       –    31    2    45    78
At 31st December 2009
   –    (1,128 ) (2,529 ) (17 ) (3,674 )
As at 31st December 2009
   –    (1,128 ) (2,529 ) (17 ) (3,674 )
Net book value
   1,207    2,702    1,668    49    5,626       1,207    2,702    1,668    49    5,626
2008

Cost

At 1st January 2008
   –    2,451    2,995    413    5,859
Acquisitions and disposals of subsidiaries
   –    992    218    –    1,210
Additions/disposals
   –    8    570    (109 ) 469
Fully depreciated assets written off
   –    (15 ) (7 ) –    (22 )
Exchange and other adjustments
   –    188    168    –    356
At 31st December 2008
   –    3,624    3,944    304    7,872
Accumulated depreciation and impairment

At 1st January 2008
   –    (1,044 ) (1,804 ) (15 ) (2,863 )
Acquisitions and disposals of subsidiaries
   –    (8 ) (12 ) –    (20 )
Depreciation charge
   –    (124 ) (475 ) (31 ) (630 )
Impairment charge
   –    –    (33 ) –    (33 )
Disposals
   –    168    185    3    356
Fully depreciated assets written off
   –    15    7    –    22
Exchange and other adjustments
   –    (18 ) (12 ) –    (30 )
At 31st December 2008
   –    (1,011 ) (2,144 ) (43 ) (3,198 )
Net book value
   –    2,613    1,800    261    4,674
Of the depreciation charge for ~~the year~~2009, £759m ~~(2008: £606m)~~ relates to continuing operations.
The fair value of Barclays investment property is based on valuations supported by appropriately qualified independent valuers.
~~Leased assets represent assets leased to customers under operating leases.~~
~~Certain~~Property rentals of ~~the Group’s equipment is held~~£48m (2009: £64m) have been included in other income and gains on ~~finance leases, see Note 37.~~property disposals of £29m (2009: £29m) have been included in administration and general expenses.
  ~~202~~220

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~

2421 Financial liabilities designated at fair value

   2009    2008    2010    2009
   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
   72,191    77,636    61,297    69,197    76,907       81,589       72,191       77,636
Deposits
   6,275    6,544    10,518    10,109    10,243       10,950       6,275       6,544
Other
   7,736    8,811    5,077    6,761
Liabilities to customers under investment contracts
   1,947       —       1,679       —
Other financial liabilities
   8,632       9,533       7,736       8,811
Financial liabilities designated at fair value
   86,202    92,991    76,892    86,067    97,729       102,072       87,881       92,991
~~At 31st December 2009, the~~The own credit adjustment arose ~~from the fair valuation of £61.5bn~~on £96bn of Barclays ~~Capital structured notes (2008: £54.5bn). The movement in Barclays credit spreads in the year affected the~~Capital’s financial liabilities designated at fair value ~~of these notes and as a result revaluation losses of £1,820m were recognised in trading income (2008: £1,663m gains)~~(2009: £86bn).
The cumulative own credit net gain that has been recognised ~~on issued notes~~ is ~~£501m~~£892m at 31st December ~~2009 (2008: £2,321m)~~2010 (2009: £501 m).
~~25 Other~~22 Accruals, deferred income and other liabilities

      2009
£m    2008
£m
Accruals and deferred income
   6,007    6,495
Sundry creditors
   5,972    6,049
Obligations under finance leases (Note 37)
   122    96
Other liabilities
   12,101    12,640
Included in the above are balances of £10,966m (2008: £11,068m) expected to be settled within no more than 12 months after the balance sheet date; and balances of £1,135m (2008: £1,572m) expected to be settled more than 12 months after the balance sheet date.
Accruals and deferred income includes £108m (2008: £101m) for the Group’s estimated share of levies that will be raised by the Financial Services Compensation Scheme (FSCS). The provision is based on estimates of the Group’s market participation in the relevant charging periods and the interest FSCS will pay on the facilities provided by HM Treasury in support of its obligations to depositors of banks declared in default. The total of these facilities is understood to be some £20bn.
While it is anticipated that the substantial majority of these facilities will be repaid wholly from recoveries from the institutions concerned, there is the risk of shortfall, such that the FSCS may place additional levies on FSCS participants. It is not currently possible to estimate the amount of potential additional levies, or the Group’s share, which is expected to be based on a future level of market participation, or the effect that such levies may have upon operating results in any particular financial period.
~~26 Insurance assets and liabilities~~
~~Insurance assets~~
Reinsurance assets are £92m (2008: £123m) and relate principally to the Group’s long-term business. Reinsurers’ share of provisions relating to the Group’s short-term business are £7m (2008: £32m). The reinsurance assets expected to be recovered after more than one year are £85m (2008: £91m).
~~Insurance contract liabilities including unit-linked liabilities~~

2010
£m

2009
£m
Accruals and deferred income
   5,539    6,007
Other creditors
   5,198    5,972
Obligations under finance leases (see Note 37)
   87    122
Insurance contract liabilities, including unit-linked liabilities
   2,409    2,140
Accruals, deferred income and other liabilities
   13,233    14,241
Insurance ~~liabilities comprise the following:~~

      2009
£m    2008
£m
Insurance contract liabilities:

– linked liabilities
   139    125
– non-linked liabilities
   1,886    1,908
Provision for claims
   115    119
Insurance contract liabilities including unit-linked liabilities
   2,140    2,152
~~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 ~~£132m (2008: £73m)~~£131 m (2009: £132m).
~~203~~
~~26 Insurance assets and liabilities~~~~continued~~
~~Movements in insurance liabilities and reinsurance assets~~
~~Movements in insurance assets and insurance contract liabilities were as follows:~~

         2009          2008
      Gross
£m Reinsurance
£m Net
£m    Gross
£m Reinsurance
£m Net
£m
At beginning of year
   2,152    (123 ) 2,029    3,903    (157 ) 3,746
Change in year
   (12 ) 31    19    (1,751 ) 34    (1,717 )
At end of year
   2,140    (92 ) 2,048    2,152    (123 ) 2,029
~~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 2009 that have had a material effect on the financial statements.~~
~~Uncertainties associated with cash flows related to insurance contracts and risk management activities~~
~~The assumptions used to determine uncertainties in cash flows and the processes used to manage risk were as follows:~~
~~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 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 affect 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.
~~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.

      2009          2008
      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    –    10    1
Worsening of mortality (assured lives only)
   10    14    10    20
Worsening of base renewal expense level
   20    11    20    19
Worsening of expense inflation rate
   10    3    10    1
Short-term insurance contracts:

Worsening of claim expense assumptions
   10    5    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.~~
  ~~204~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~26 Insurance assets and liabilities~~~~continued~~
~~Options and guarantees~~
~~The Group’s insurance contracts do not contain options or guarantees that give rise to 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~~products, ignoring 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~~policies were £71bn (2009: £63bn) or £67bn (2009: £57bn) after reinsurance. Of this insured risk ~~before~~£56bn (2009: £49bn) was concentrated in short-term insurance contracts and ~~after~~£65bn (2009: £55bn) was concentrated in Africa.
The maximum impact to profit or loss and equity under any reasonably possible change in the ~~impact of reinsurance that represents~~assumptions used to calculate the ~~risk that is passed~~insurance liabilities would be £12m(2009:£14m).
221
Notes to ~~other insurers.~~

      2009          2008
      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
   13,405    (1,547 ) 11,858    19,193    (3,591 ) 15,602
Short-term insurance contracts
   49,359    (4,145 ) 45,214    36,228    (2,735 ) 33,493
Total benefits insured
   62,764    (5,692 ) 57,072    55,421    (6,326 ) 49,095
Total benefits insured by geographic location

United Kingdom
   5,727    (363 ) 5,364    8,120    (525 ) 7,595
Other European Union
   1,724    (20 ) 1,704    6,519    (2,305 ) 4,214
Africa
   55,313    (5,309 ) 50,004    40,782    (3,496 ) 37,286
Total benefits insured
   62,764    (5,692 ) 57,072    55,421    (6,326 ) 49,095
~~Reinsurer credit risk~~the financial statements
For the long-term business, reinsurance programmes are in place to restrict the amount of cover on 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.year ended 31st December 2010 continued
2723 Subordinated liabilities
Subordinated liabilities, which are all issued by Barclays Bank PLC (‘The Bank’) or other subsidiaries of the Group, include accrued interest and comprise dated and undated loan capital as follows:


2009
£m

2008
£m
Undated loan capital
      8,148    13,673
Dated loan capital
      17,668    16,169
      25,816    29,842
Undated loan capital


      Notes
2009
£m

2008
£m
Non-convertible

Barclays Bank PLC

6% Callable Perpetual Core Tier One Notes
   a,p    424    487
6.86% Callable Perpetual Core Tier One Notes (US$1,000m)
   a,p    784    1,118
5.3304% Step-up Callable Perpetual Reserve Capital Instruments
   b,q    560    652
5.926% Step-up Callable Perpetual Reserve Capital Instruments (US$1,350m)
   c,r    928    1,109
6.3688% Step-up Callable Perpetual Reserve Capital Instruments
   m,ac    567    600
7.434% Step-up Callable Perpetual Reserve Capital Instruments (US$1,250m)
   n,ad    866    1,055
14% Step-up Callable Perpetual Reserve Capital Instruments
   e,s    2,608    2,514
Junior Undated Floating Rate Notes (US$121m)
   d,t    75    83
7.7% Undated Subordinated Notes (US$99m, 2008: US$2,000m)
   o,af    65    1,644
Undated Floating Rate Primary Capital Notes Series 3
   d,u    145    147
9.25% Perpetual Subordinated Bonds (ex-Woolwich plc)
   f,v    95    232
9% Permanent Interest Bearing Capital Bonds
   g,w    43    120
8.25% Undated Subordinated Notes
   o,ae    152    1,092
7.125% Undated Subordinated Notes
   h,x    180    620
6.875% Undated Subordinated Notes
   i,y    151    729
6.375% Undated Subordinated Notes
   j,z    147    526
6.125% Undated Subordinated Notes
   k,aa    220    666
6.5% Undated Subordinated Notes (FFr 1,000m)
      –    151
5.03% Reverse Dual Currency Undated Subordinated Loan (Yen 8,000m)
   l,ab    55    51
5% Reverse Dual Currency Undated Subordinated Loan (Yen 12,000m)
   l,ab    83    77
Undated loan capital – non-convertible
      8,148    13,673

2010
£m

2009
£m

Undated loan capital
      9,094       8,148
Dated loan capital
      19,405       17,668
      28,499       25,816

Undated loan capital    Initial call date
2010
£m

2009
£m

Non-convertible

Barclays Bank PLC

Tier One Notes (TONs)

6% Callable Perpetual Core Tier One Notes
   2032       453       424
6.86% Callable Perpetual Core Tier One Notes (US$1,000m)
   2032       866       784
Reserve Capital Instruments (RCIs)

5.926% Step-up Callable Perpetual Reserve Capital Instruments (US$1,350m)
   2016       1,010       928
6.3688% Step-up Callable Perpetual Reserve Capital Instruments
   2019       608       567
7.434% Step-up Callable Perpetual Reserve Capital Instruments (US$1,250m)
   2017       950       866
14% Step-up Callable Perpetual Reserve Capital Instruments
   2019       2,887       2,608
5.3304% Step-up Callable Perpetual Reserve Capital Instruments
   2036       599       560
Undated Notes

6.875% Undated Subordinated Notes
   2015       156       151
6.375% Undated Subordinated Notes
   2017       150       147
7.7% Undated Subordinated Notes (US$99m)
   2018       69       65
8.25% Undated Subordinated Notes
   2018       156       152
7.125% Undated Subordinated Notes
   2020       190       180
6.125% Undated Subordinated Notes
   2027       234       220
Junior Undated Floating Rate Notes (US$121 m)
   Any interest payment date       78       75
Undated Floating Rate Primary Capital Notes Series 3
   Any interest payment date       145       145
Bonds

9.25% Perpetual Subordinated Bonds (ex-Woolwich plc)
   2021       96       95
9% Permanent Interest Bearing Capital Bonds
   At any time       41       43
Loans

5.03% Reverse Dual Currency Undated Subordinated Loan (Yen 8,000m)
   2028       70       55
5% Reverse Dual Currency Undated Subordinated Loan (Yen 12,000m)
   2028       104       83
Barclays SLCSM Funding B.V. guaranteed by the Bank

6.140% Fixed Rate Guaranteed Perpetual Subordinated Notes
   2015       232       —
Undated loan capital – non-convertible
      9,094       8,148
~~205~~
~~27 Subordinated liabilities~~~~continued~~The principal terms of the undated loan capital are described below:
Security ~~and subordination~~
None of the undated loan capital is secured.
~~The Junior Undated Floating Rate Notes (the Junior Notes) rank~~Subordination
All undated loan capital ranks behind the claims against the ~~Bank~~bank of depositors and other unsecured unsubordinated creditors and holders of dated loan ~~capital.~~
~~All~~capital in the following order: Junior Undated Floating Rate Notes; other issues of ~~undated loan capital rank~~Undated Notes, Bonds and Loans-ranking 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 14% Step-up Callable Perpetual Reserve Capital Instruments (the RCIs) (such issues, excluding theother; followed by TONs and ~~the RCIs, being the Undated Notes and Loans).~~
~~The TONs and the RCIs rank~~RCIs-ranking pari passu with each ~~other and behind the claims of the holders of the Undated Notes and Loans.~~other.
~~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.~~
e) 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.
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.
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 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.
m) 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.
n) 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.
o) 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.
  ~~206~~222

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~

2723 Subordinated liabilitiescontinued
Interest
All undated loan capital bears a fixed rate of interest until the initial call date, with the exception of the 9% Bonds which are fixed for the life of the issue, and the Junior and Series 3 Undated Notes which are floating rate.
After the initial call date, in the event that they are not redeemed, the 6.875%, 6.375%, 7.125%, 6.125% Undated Notes, the 9.25% Bonds and the 6.140% Perpetual Notes will bear interest at rates fixed periodically in advance for five year periods based on market rates. All other undated loan capital except the two floating rate Undated Notes will bear interest, and the two floating rate Undated Notes currently bear interest, at rates fixed periodically in advance based on London interbank rates.
Payment of interest
Barclays Bank PLC is not obliged to make a payment of interest on its Undated Notes, Bonds and Loans excluding the ~~9.25% Perpetual Subordinated Bonds,~~ 7.7% Undated ~~Subordinated~~ Notes, ~~and~~ 8.25% Undated ~~Subordinated~~Notes, 9.25% Bonds and 6.140% Perpetual 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 Issuer and the Bank may elect to defer any payment of interest on the ~~RCIs (b, c, e, m~~6.140% Perpetual Notes. However, any deferred interest will automatically become immediately due and ~~n above).~~payable on the earlier of: (i) the date on which any dividend or other distribution or interest or other payment is made in respect of any pari passu or any junior obligations or on which any pari passu or any junior obligations are purchased, (ii) the date of redemption or purchase of the 6.140% Perpetual Notes and (iii) certain other events including bankruptcy, liquidation or winding up of the Issuer or the Bank.
The Bank may elect to defer any payment of interest on the RCIs. Any such deferred payment of interest must be paid on the earlier ofof: (i) the date of redemption of the RCIs, (ii) the coupon payment date falling on or nearest to the tenth anniversary of the date of deferral of such payment, and (iii) in respect of ~~e above~~the 14% RCIs 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.
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
All undated loan capital is repayable, at the option of the Bank generally in whole at the initial call date and on any subsequent coupon or interest payment date or in the case of the 6.875%, 6.375%, 7.125%, 6.125% Undated Notes,
p) ~~These TONs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after June 2032.~~
q) ~~These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2036.~~
r) ~~These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2016.~~
s) ~~These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after June 2019.~~
t) ~~These Notes are repayable, at the option of the Bank, in whole or in part on any interest payment date.~~
u) ~~These Notes are repayable, at the option of the Bank, in whole on any interest payment date.~~
v) ~~These Bonds are repayable, at the option of the Bank, in whole in 2021, or on any fifth anniversary thereafter.~~
w) ~~These Bonds are repayable, at the option of the Bank, in whole at any time.~~
x) ~~These Notes are repayable, at the option of the Bank, in whole in 2020, or on any fifth anniversary thereafter.~~
y) ~~These Notes are repayable, at the option of the Bank, in whole in 2015, or on any fifth anniversary thereafter.~~
z) ~~These Notes are repayable, at the option of the Bank, in whole in 2017, or on any fifth anniversary thereafter.~~
~~aa)~~ ~~These Notes are repayable, at the option of the Bank, in whole in 2027, or on any fifth anniversary thereafter.~~
~~ab)~~ ~~These Loans are repayable, at the option of the Bank, in whole in 2028, or on any fifth anniversary thereafter.~~
~~ac)~~ ~~These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2019.~~
~~ad)~~ ~~These RCIs are repayable, at the option of the Bank, in whole on any coupon payment date falling in or after December 2017.~~
~~ae)~~ ~~These Notes are repayable, at the option of the Bank, in whole on any interest payment date falling in or after December 2018.~~
~~af)~~ ~~These Notes are repayable, at the option of the Bank, in whole on any interest payment date falling in or after April 2018.~~
the 9.25% Bonds and the 6.140% Perpetual Notes on any fifth anniversary after the initial call date. 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~~euro currency market and/or under Rule 144A, and no issues have been registered under the US Securities Act of 1933.
   ~~207~~ 223
Notes to the financial statements
For the year ended 31st December 2010 continued
23 Subordinated liabilitiescontinued
Dated loan capital    Initial call date    Maturity date
2010
£m

2009
£m

Non-convertible

Barclays Bank PLC

12% Unsecured Capital Loan Stock
      2010       –       27
5.75% Subordinated Notes (€1,000m)
      2011       836       853
5.25% Subordinated Notes (€250m) (ex-Woolwich plc)
      2011       221       246
5.015% Subordinated Notes (US$150m)
      2013       104       99
4.875% Subordinated Notes (€750m)
      2013       670       693
Callable Floating Rate Subordinated Notes (US$1,500m)
   2010       2015       –       927
4.38% Fixed Rate Subordinated Notes (US$75m)
      2015       55       51
4.75% Fixed Rate Subordinated Notes (US$150m)
      2015       111       103
Floating Rate Subordinated Step-up Callable Notes (US$750m)
   2011       2016       484       463
Callable Floating Rate Subordinated Notes (€1,250m)
   2011       2016       1,082       1,115
Callable Floating Rate Subordinated Notes (US$500m)
   2012       2017       323       309
10.125% Subordinated Notes (ex-Woolwich plc)
   2012       2017       105       107
Floating Rate Subordinated Step-up Callable Notes (US$1,500m)
   2012       2017       969       926
Floating Rate Subordinated Step-up Callable Notes (€1,500m)
   2012       2017       1,296       1,337
6.05% Fixed Rate Subordinated Notes (US$2,250m)
      2017       1,662       1,505
Floating Rate Subordinated Notes (€40m)
      2018       35       36
6% Fixed Rate Subordinated Notes (€1,750m)
      2018       1,596       1,641
CMS-Linked Subordinated Notes (€100m)
      2018       90       92
CMS-Linked Subordinated Notes (€135m)
      2018       121       124
Floating Rate Subordinated Notes (€50m)
      2019       42       43
Callable Fixed/Floating Rate Subordinated Notes (€1,000m)
   2014       2019       904       915
5.14% Lower Tier 2 Notes (US$1,250m)
   2015       2020       791       –
6% Fixed Rate Subordinated Notes (€1,500m)
      2021       1,316       –
9.5% Subordinated Bonds (ex-Woolwich plc)
      2021       292       276
Subordinated Floating Rate Notes (€100m)
      2021       85       87
10% Fixed Rate Subordinated Notes
      2021       2,160       2,022
10.179% Fixed Rate Subordinated Notes (US$1,521 m)
      2021       1,040       942
Subordinated Floating Rate Notes (€50m)
      2022       43       45
Subordinated Floating Rate Notes (€50m)
      2023       43       45
Fixed/Floating Rate Subordinated Callable Notes
   2018       2023       590       568
5.75% Fixed Rate Subordinated Notes
      2026       675       631
5.4% Reverse Dual Currency Subordinated Loan (Yen 15,000m)
      2027       132       105
6.33% Subordinated Notes
      2032       53       52
Subordinated Floating Rate Notes (€100m)
      2040       86       89
Absa

10.75% Subordinated Callable Notes (ZAR 1,100m)
   2010       2015       –       95
Subordinated Callable Notes (ZAR 400m)
   2010       2015       –       36
8.75% Subordinated Callable Notes (ZAR 1,500m)
   2012       2017       154       129
Subordinated Callable Notes (ZAR 1,886m)
   2013       2018       210       173
8.8% Subordinated Fixed Rate Callable Notes (ZAR 1,725m)
   2014       2019       178       143
Subordinated Callable Notes (ZAR 3,000m)
   2014       2019       331       268
8.1% Subordinated Callable Notes (ZAR 2,000m)
   2015       2020       200       160
10.28% Subordinated Callable Notes (ZAR 600m)
   2017       2022       60       –
Subordinated Callable Notes (ZAR 400m)
   2017       2022       41       –
Subordinated Callable Notes (ZAR 1,500m)
   2023       2028       156       127
Other capital issued by Barclays Spain, Ghana, Kenya and Zambia
      2011-2016       37       38
Dated loan capital – non-convertible
         19,379       17,643
Dated loan capital – convertible issued by Barclays Botswana and Zambia
      2014-2015       26       25
Total dated loan capital
         19,405       17,668
224

2723 Subordinated liabilitiescontinued
Dated loan capital
Dated loan capital is issued by the Bank for the development and expansion of the Group’s business and to strengthen its capital ~~base~~base; by Barclays Bank Spain SA (Barclays Spain), Barclays Bank of Botswana Ltd ~~(BBB)~~(Barclays Botswana), Barclays Bank Zambia PLC (Barclays Zambia) and Barclays Bank of Kenya (Barclays Kenya) to enhance their respective capital ~~bases~~bases; and by Absa and Barclays Bank of Ghana Ltd ~~(BBG)~~(Barclays Ghana) for general corporate purposes. ~~It comprises:~~

      Notes    2009
£m    2008
£m
Non-convertible

Barclays Bank PLC

7.4% Subordinated Notes 2009 (US$400m)
      –    275
Subordinated Fixed to CMS-Linked Notes 2009 (€31m)
      –    31
12% Unsecured Capital Loan Stock 2010
   a    27    27
5.75% Subordinated Notes 2011 (€1,000m)
   a    853    943
5.25% Subordinated Notes 2011 (€250m) (ex-Woolwich plc)
   a    246    260
5.015% Subordinated Notes 2013 (US$150m)
   a    99    112
4.875% Subordinated Notes 2013 (€750m)
   a    693    750
Callable Floating Rate Subordinated Notes 2015 (US$1,500m)
   b,j    927    1,031
4.38% Fixed Rate Subordinated Notes 2015 (US$75m)
   a    51    88
4.75% Fixed Rate Subordinated Notes 2015 (US$150m)
   a    103    81
Floating Rate Subordinated Step-up Callable Notes 2016 (US$750m)
   b,j    463    514
Callable Floating Rate Subordinated Notes 2016 (€1,250m)
   b,j    1,115    1,211
Callable Floating Rate Subordinated Notes 2017 (US$500m)
   b,j    309    343
10.125% Subordinated Notes 2017 (ex-Woolwich plc)
   g,j    107    109
Floating Rate Subordinated Step-up Callable Notes 2017 (US$1,500m)
   b,j    926    1,029
Floating Rate Subordinated Step-up Callable Notes 2017 (€1,500m)
   b,j    1,337    1,444
6.05% Fixed Rate Subordinated Notes 2017 (US$2,250m)
   a    1,505    1,856
Floating Rate Subordinated Notes 2018 (€40m)
   b    36    38
6% Fixed Rate Subordinated Notes due 2018 (€1,750m)
   a    1,641    1,767
CMS-Linked Subordinated Notes due 2018 (€100m)
   b    92    100
CMS-Linked Subordinated Notes due 2018 (€135m)
   b    124    135
Floating Rate Subordinated Notes 2019 (€50m)
   b    43    47
Callable Fixed/Floating Rate Subordinated Notes 2019 (€1,000m)
   h    915    984
9.5% Subordinated Bonds 2021(ex-Woolwich plc)
   a    276    298
Subordinated Floating Rate Notes 2021 (€100m)
   b    87    94
10% Fixed Rate Subordinated Notes 2021
   a    2,022    –
10.179% Fixed Rate Subordinated Notes 2021 (US$ 1,521m)
   a    942    –
Subordinated Floating Rate Notes 2022 (€50m)
   b    45    49
Subordinated Floating Rate Notes 2023 (€50m)
   b    45    48
Fixed/Floating Rate Subordinated Callable Notes 2023
   m,j    568    571
5.75% Fixed Rate Subordinated Notes 2026
   a    631    690
5.4% Reverse Dual Currency Subordinated Loan 2027 (Yen 15,000m)
   i    105    128
6.33% Subordinated Notes 2032
   a    52    53
Subordinated Floating Rate Notes 2040 (€100m)
   b    89    96
Barclays Bank SA, Spain (Barclays Spain)

Subordinated Floating Rate Capital Notes 2011 (€11m)
   b    4    11
Absa

14.25% Subordinated Callable Notes 2014 (ZAR 3,100m)
      –    240
10.75% Subordinated Callable Notes 2015 (ZAR 1,100m)
   c,j    95    85
Subordinated Callable Notes 2015 (ZAR 400m)
   d,j    36    30
8.75% Subordinated Callable Notes 2017 (ZAR 1,500m)
   e,j    129    115
Subordinated Callable Notes 2018 (ZAR 1,886m)
   d,j    173    144
8.8% Subordinated Fixed Rate Callable Notes 2019 (ZAR 1,725m)
   n,j    143    146
Subordinated Callable Notes 2019 (ZAR 3,000m)
   d,j    268    –
8.1% Subordinated Callable Notes 2020 (ZAR 2,000m)
   f,j    160    130
Subordinated Callable Notes 2028 (ZAR 1,500m)
   d,j    127    –
Barclays Bank of Ghana Ltd (BBG)

14% Fixed Rate BBG Subordinated Callable Notes 2016 (GHC 10m)
   a,j    4    5
Barclays Bank of Kenya (Barclays Kenya)

Floating Rate Subordinated Notes 2014 (KES 968m)
   o    8    8
Floating Rate Subordinated Notes 2015 (KES 740m)
   o    6    6
Fixed Rate Subordinated Notes 2015 (KES 1,260m)
   a    10    12
Barclays Bank Zambia PLC (Barclays Zambia)

Subordinated Unsecured Floating Rate Capital Notes 2016 (ZMK 49,232m)
   p    6    –
Dated loan capital – non-convertible
      17,643    16,134
  ~~208~~
~~Notes to~~The principal terms of the ~~accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
dated loan capital are described below:
~~27 Subordinated liabilities~~~~continued~~Security

      Notes 2009
£m    2008
£m
Convertible

Barclays Bank of Botswana (BBB)

Subordinated Unsecured Fixed Rate Capital Notes 2014 (BWP 190m)
   j,k ) 18    17
Barclays Bank Zambia PLC (Barclays Zambia)

Subordinated Unsecured Floating Rate Capital Notes 2015 (ZMK 49,086m)
   j,l ) 7    7
Absa

Redeemable cumulative option-holding preference shares (ZAR 147m)
   –    11
Dated loan capital convertible
   25    35
Total dated loan capital
   17,668    16,169
None of the ~~Group’s~~Groups 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 and the~~
Subordination
All dated loan capital ~~has been issued on the basis that~~ranks behind the claims ~~thereunder are subordinated to~~against the ~~respective claims~~bank of ~~their~~ depositors and other unsecured unsubordinated ~~creditors.~~creditors but before the claims of the undated loan capital and the holders of their equity. The dated loan capital issued by subsidiaries, are similarly subordinated.
Interest
Interest on the floating rate Notes are fixed periodically in advance, based on the related interbank or local central bank rates.
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 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.
d) ~~These Notes bear interest at rates fixed periodically in advance based on Johannesburg interbank acceptance rates.~~
e) 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.
f) 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.
g) 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 fiveAll other non-convertible Notes except the 10.125% Subordinated Notes 2017 are generally fixed interest for the life of the issue, but some are reset to a floating rate after a fixed period, with varying interest rate terms. The 10.125% Subordinated Notes 2017, if not called in 2012, will bear interest at a rate fixed in advance for a further period of 5 years.
h) 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.
i) 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.
j) ~~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.~~
k) 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.
l) 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.
m) 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.
n) 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.
o) ~~These Notes bear interest at rates fixed periodically in advance based on the Central Bank of Kenya Treasury Bill rates.~~
p) ~~These Notes bear interest at rates fixed periodically in advance based on the Central Bank of Zambia Treasury Bill rates.~~
~~209~~
~~27 Subordinated liabilities~~~~continued~~
The ~~7.4% Subordinated~~5.14% Lower Tier 2 Notes ~~2009 (the ‘7.4% Notes’) issued by the Bank~~ were 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~~have been made in ~~non-US~~the euro currency market, local markets ~~have not been so registered.~~and/or under Rule 144A.
Repayment terms
~~Unless otherwise indicated,~~Those Notes with a call date are repayable at the ~~Group’s~~option of the issuer, on conditions governing the respective debt obligations, some in whole or in part, and some only in whole. The remaining dated loan capital outstanding at 31st December ~~2009~~2010 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~~Barclays Botswana 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, or in the case of ~~BBB,~~ the ~~prior~~overseas issues, the 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.~~local regulator for that jurisdiction.
There are no committed facilities in existence at the balance sheet date which permit the refinancing of debt beyond the date of maturity.
2824 Provisions

   Onerous
contracts
£m Redundancy
and
restructuring
£m
Undrawn
contractually
committed
facilities and
guarantees
provided
£m
Sundry
provisions
£m Total
£m
At 1st January 2010
   68    162    162    198    590
Acquisitions and disposals of subsidiaries
   –    –    1    6    7
Exchange and other adjustments
   –    –    6    12    18
Additions
   36    139    118    533    826
Amounts utilised
   (28 ) (68 ) (8 ) (229 ) (333 )
Unused amounts reversed
   (4 ) (56 ) (50 ) (53 ) (163 )
Amortisation of discount
   2    –    –    –    2
At 31st December 2010
   74    177    229    467    947
   Onerous
contracts
£m Redundancy
and
restructuring
£m
Undrawn
contractually
committed
facilities and
guarantees
provided
£m
Sundry
provisions
£m Total
£m
At 1st January 2009
   50    118    109    258    535       50    118    109    258    535
Acquisitions and disposals of subsidiaries
   –    (2 ) 1    (6 ) (7 )    –    (2 ) 1    (6 ) (7 )
Exchange and other adjustments
   –    4    2    –    6       –    4    2    –    6
Additions
   51    269    119    125    564       51    269    119    125    564
Amounts used
   (27 ) (201 ) (21 ) (142 ) (391 )
Amounts utilised
   (27 ) (201 ) (21 ) (142 ) (391 )
Unused amounts reversed
   (8 ) (26 ) (48 ) (37 ) (119 )    (8 ) (26 ) (48 ) (37 ) (119 )
Amortisation of discount
   2    –    –    –    2       2    –    –    –    2
At 31st December 2009
   68    162    162    198    590       68    162    162    198    590
At 1st January 2008
   64    82    475    209    830
Acquisitions and disposals of subsidiaries
   9    (9 ) –    (1 ) (1 )
Exchange and other adjustments
   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
Provisions expected to be recovered or settled within no more than 12 months after 31st December 2010 were £658m (2009: £466m).
Included in sundry provisions are provisions in respect of litigation of £151 m (2009: £27m).
225
Notes to the financial statements
For the year ended 31st December 2010 continued
25 Contingent liabilities and commitments
The following table summarises the nominal principal amount of contingent liabilities and commitments with off-balance sheet risk:

2010
£m

2009
£m

Securities lending arrangements
   27,672       27,406
Guarantees and letters of credit pledged as collateral security
   13,783       15,406
Performance guarantees, acceptances and endorsements
   9,175       9,962
Contingent liabilities
   50,630       52,774
Documentary credits and other short-term trade related transactions
   1,194       762
Standby facilities, credit lines and other commitments
   222,963       206,513
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.
Contingent Liabilities
Up to the disposal of Barclays Global Investors on 1st December 2009, the Group facilitated securities lending arrangements for its managed investment funds whereby securities held by funds under management were lent to third parties. Borrowers provided cash or investment grade assets as collateral equal to 100% of the market value of the securities lent plus a margin of 2%-10%. The Group agreed with BlackRock, Inc. to continue to provide indemnities to support these arrangements for three years following the sale of the business. As at 31st December 2010, the fair value of the collateral held was £28,465m (2009: £28,248m) and that of the stock lent was £27,672m (2009: £27,406m).
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.
Performance guarantees are generally, short-term commitments to third parties which are not directly dependent on the customer’s creditworthiness. 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.
Documentary Credits and other Short-Term Trade Related Transactions
Documentary credits commit the Group to make payments to third parties, on production of documents, which are usually reimbursed immediately by customers.
Standby Facilities, Credit Lines and Other Commitments
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.
Financial Services Compensation Scheme
The Financial Services Compensation Scheme (FSCS) is the UK’s compensation fund for customers of authorised financial services firms that are unable to pay claims. The FSCS raises levies on all UK deposit taking institutions. Previously compensation has been paid out by facilities provided by HM Treasury to FSCS in support of FSCS’s obligations to the depositors of banks declared in default. The total of these facilities is understood to be approximately £20bn. While it is anticipated that the substantial majority of these facilities will be repaid wholly from recoveries from the institutions concerned, there is the risk of a shortfall, such that the FSCS may place additional levies on all FSCS participants. Barclays has included an accrual of £63m in other liabilities as at 31st December 2010 (2009: £108m) in respect of levies raised by the FSCS.
Barclays Capital US Mortgage Activities
Barclays activities within the US mortgage sector during the period 2005 through 2008 included: sponsoring and underwriting of approximately $39bn of private-label securitisations; underwriting of approximately $34bn of other private-label securitisations; sales of approximately $150m of loans to government sponsored enterprises (GSEs); and sales of approximately $7bn of loans to others - including loans sold in 2009. Some of the loans sold were originated by a Barclays subsidiary. Barclays also performed servicing activities through its US residential mortgage servicing business which Barclays acquired in Q4 2006 and subsequently sold in Q3 2010.
In connection with certain Barclays whole loan sales and sponsored private-label securitisations, Barclays made certain loan level representations and warranties (R&Ws) generally relating to the underlying borrower, property and/or mortgage documentation. Under certain circumstances, Barclays may be required to repurchase the related loans or make other payments related to such loans if the R&Ws were breached. The $7bn of loans sold to others were generally priced at significant discounts and contained more limited R&Ws than loans sold to GSEs. Third party originators provided loan level R&Ws directly to the securitisation trusts for approximately $34bn of the $39bn in Barclays sponsored securitisations. Barclays or a subsidiary provided loan level R&Ws to the securitisation trusts for approximately $5bn of the Barclays sponsored securitisations. Total unresolved repurchase requests associated with all loans sold to others and private-label activities were $21m at 31st December 2010. Current provisions are adequate to cover estimated losses associated with outstanding repurchase claims. However, based upon the large number of defaults occurring in US residential mortgages, there is a potential for additional claims for repurchases.
Claims against Barclays as an underwriter of RMBS offerings have been brought in certain civil actions. Additionally, Barclays has received inquiries from various regulatory and governmental authorities regarding its mortgage-related activities and is cooperating with such inquiries.
It is not possible to provide a meaningful estimate of the financial impact of the potential exposure relating to all of the foregoing matters at this time.
226
25 Contingent liabilities and commitmentscontinued
Assets pledged
Assets are pledged as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as security deposits relating to 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:

2010
£m

2009
£m

Trading portfolio assets
   111,703       96,176
Loans and advances
   30,584       48,846
Available for sale investments
   22,941       24,264
Other
   45       77
Assets Pledged
   165,273           169,363
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:

2010
£m

2009
£m

Fair value of securities accepted as collateral
   422,890       357,159
Of which fair value of securities repledged/transferred to others
   347,557           283,334
26 Legal proceedings
Lehman Brothers Holdings Inc.
On 15th September 2009, motions were filed in the United States Bankruptcy Court for the Southern District of New York (the Court) by Lehman Brothers Holdings Inc. (LBHI), the SIPA Trustee for Lehman Brothers Inc. (the Trustee) and the Official Committee of Unsecured Creditors of Lehman Brothers Holdings Inc. (the Committee). All three motions challenge certain aspects of the transaction pursuant to which Barclays Capital Inc. (BCI) and other companies in the Group acquired most of the assets of Lehman Brothers Inc. (LBI) in September 2008 and the court order approving such sale. The claimants seek an order voiding the transfer of certain assets to BCI; requiring BCI to return to the LBI estate alleged excess value BCI received; and declaring that BCI is not entitled to certain assets that it claims pursuant to the sale documents and order approving the sale. On 16th November 2009, LBHI, the Trustee and the Committee filed separate complaints in the Court asserting claims against BCI based on the same underlying allegations as the pending motions and seeking relief similar to that which is requested in the motions. On 29th January 2010, BCI filed its response to the motions. Barclays considers that the motions and claims against BCI are without merit and BCI is vigorously defending its position. On 29th January 2010, BCI also filed a motion seeking delivery of certain assets that LBHI and LBI have failed to deliver as required by the sale documents and the court order approving the sale. Approximately £2.6bn of the assets acquired as part of the acquisition had not been received by 31st December 2010, approximately £2.0bn of which were recognised as part of the accounting for the acquisition and are included in the balance sheet as at 31st December 2010. This results in an effective provision of £0.6bn against the uncertainty inherent in the litigation.
On 22nd February 2011, the Court issued its Opinion in relation to these matters. The Opinion calls for the parties to submit proposed Orders that will implement the Opinion, and anticipates a possible status conference to resolve any potential differences between the parties regarding the final Order that should be entered. Any such Order should clarify the precise impact of the Opinion, and may include specific guidance regarding the treatment of specific types of assets. Such an Order may be the subject of further proceedings or appeals by one or more of the parties.
Barclays has considered the Opinion and the decisions contained therein and its possible actions with respect thereto. If the Opinion were to be unaffected by future proceedings, Barclays estimates that its maximum possible loss, based on its worst case reading of the Opinion, would be approximately £2.6bn, after taking into account the effective provision of £0.6bn. Any such loss, however, is not considered probable and Barclays is satisfied with the current level of provision.
American Depositary Shares
Barclays Bank PLC, Barclays PLC and various current and former members of Barclays PLC’s Board of Directors have been named as defendants in five proposed securities class actions (which have been consolidated) pending in the United States District Court for the Southern District of New York. The consolidated amended complaint, dated 12th February 2010, alleges that the registration statements relating to American Depositary Shares representing Preferred Stock, Series 2, 3,4 and 5 (ADS) offered by Barclays Bank PLC at various times between 2006 and 2008 contained misstatements and omissions concerning (amongst other things) Barclays portfolio of mortgage-related (including US subprime-related) securities, Barclays exposure to mortgage and credit market risk and Barclays financial condition. The consolidated amended complaint asserts claims under Sections 11,12(a)(2) and 15 of the Securities Act of 1933. On 5th January 2011, the Court issued an order, and on 7th January 2011, judgment was entered, granting the defendants’ motion to dismiss the complaint in its entirety and closing the case. On 4th February 2011, the plaintiffs filed a motion asking the Court to reconsider in part its dismissal order, and that motion is pending. Barclays considers that these ADS-related claims against it are without merit and is defending them vigorously. It is not possible to estimate any possible loss in relation to these claims or any effect that they might have upon operating results in any particular financial period.
Other
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 statements 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.
227
Notes to the financial statements
For the year ended 31st December 2010 continued
27 Competition and regulatory matters
This note highlights some of the key competition and regulatory challenges facing Barclays, many of which are beyond our control. The extent of the impact of these matters on Barclays cannot always be predicted but may materially impact our businesses and earnings.
Regulatory Change
The scale of regulatory change remains challenging with a significant tightening of regulation and changes to regulatory structures globally especially for banks that are deemed to be of systemic importance. Concurrently, there is continuing political and regulatory scrutiny of the operation of the banking and consumer credit industries which, in some cases, is leading to increased or changing regulation which is likely to have a significant effect on the industry.
In the UK, the FSA’s current responsibilities are to be reallocated between the Prudential Regulatory Authority (a subsidiary of the Bank of England) and a new Consumer Protection and Markets Authority by the end of 2012. The Independent Commission on Banking has been charged by the UK Government with reviewing the UK banking system. Its remit includes looking at reducing systemic risk, mitigating moral hazard, reducing the likelihood and impact of bank failure and competition issues. Its findings and recommendations are expected by September 2011.
In the United States, the Dodd-Frank Wall Street Reform and Consumer Protection Act contains far reaching regulatory reform although the full impact will not be known until implementing rules are made by governmental authorities, a process which is currently ongoing.
Payment Protection Insurance (PPI)
PPI has been under scrutiny by the UK competition authorities and financial services regulators. The UK Competition Commission (CC) has undertaken an in-depth enquiry into the PPI market which has resulted in the CC introducing a number of remedies including a prohibition on sale of PPI at the point of sale.
On 10th August 2010, the FSA issued a Policy Statement which amends the DISP (Dispute Resolution: Complaints) rules in the FSA Sourcebook for the handling of such complaints. In October 2010 the British Bankers’ Association launched a judicial review of the FSA on the basis that the Policy Statement applies incorrect standards for the management of PPI sales complaints, including retrospective application of rules with higher standards than those that were in place at the time of sale. These proceedings are also against the Financial Services Ombudsman Service (FOS) which seeks to implement the same standards for the resolution of complaints referred to it. The hearing took place in January 2011. There is currently no indication of the timetable for judgment.
The final conclusion of the Judicial Review could result in a range of outcomes with the consequence that complaints relating to the sale of PPI fall to be determined in different ways with varying financial impacts for customers and Barclays. These outcomes depend on the extent to which the Policy Statement is upheld, whether the Court holds that the Policy Statement imposes requirements in addition to the DISP rules in force at the time of sale, and the impact of such matters on banks’ complaints handling and remediation practices. It is therefore not practicable to provide a reliable estimate or range of estimates of the potential financial impact of any Court decision on this matter.
Interchange
The Office of Fair Trading (OFT), as well as other competition authorities elsewhere in Europe, continues to carry out investigations into Visa and MasterCard credit and debit interchange rates. These investigations may have an impact on the consumer credit industry as well as having the potential for the imposition of fines. Timing of these cases is uncertain but outcomes may be known within the next 2-4 years.
Sanctions
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 conducted an internal review of its conduct with respect to US Dollar payments involving countries, persons and entities subject to US economic sanctions and reported the results of that review to various governmental authorities, including the US Department of Justice, the Manhattan District Attorney’s Office and the US Department Of Treasury’s Office of Foreign Assets Control (together the US Authorities), which conducted investigations of the matter.
On 18th August 2010, Barclays announced that it had reached settlements with the US Authorities in relation to the investigation by those agencies into compliance with US sanctions and US Dollar payment practices. In addition, an Order to Cease and Desist was issued upon consent by the Federal Reserve Bank of New York and the New York State Banking Department. Barclays agreed to pay a total penalty of $298m and entered into Deferred Prosecution Agreements covering a period of 24 months. Barclays fully briefed other relevant regulators on this settlement. The Deferred Prosecution Agreements mean that no further action will be taken against Barclays by the US Authorities if, as is Barclays intention, for the duration of the defined period Barclays meets the conditions set down in its agreements with the US Authorities. Barclays does not anticipate any further regulatory actions relating to these issues.
28 Retirement benefit obligations
Pension schemes
The Group has in place a number of defined benefit and defined contribution schemes in the UK and overseas.
The UK Retirement Fund (UKRF) is the Group’s main scheme, representing 93% of the Group’s total retirement benefit obligations. The UKRF comprises ten sections, the most significant of which are:
–
Afterwork: combines a contributory cash balance element with a voluntary defined contribution element. The majority of new employees outside of Barclays Capital since 1st October 2003 have been eligible to join Afterwork. In addition, the large majority of active members who joined the Group between July 1997 and September 2003 were transferred to Afterwork in respect of future benefits accruing from 1st January 2004.
228
28 Retirement benefit obligationscontinued
– The 1964 Pension Scheme: most employees recruited before July 1997 built up benefits in this non-contributory defined benefit scheme in respect of service up to 31st March 2010. Pensions were calculated by reference to service and pensionable salary.
– The Pension Investment Plan (PIP): a defined contribution plan created from 1st July 2001 to provide benefits for employees of Barclays Capital.
The costs of ill-health retirements and death in service benefits are generally borne by the UKRF.
Governance
The UKRF operates under trust law and is managed and administered on behalf of the members in accordance with the terms of the Trust Deed and Rules and all relevant legislation. The Corporate Trustee is Barclays Pension Funds Trustees Limited (BPFTL), a private limited company incorporated on 20th December 1990 and a wholly owned subsidiary of Barclays Bank PLC. The Trustee is the legal owner of the assets of the UKRF which are held separately from the assets of the Group.
The Trustee Board comprises six Management Directors selected by Barclays, of whom three are independent Directors with no relationship with Barclays or the UKRF, plus three Member Nominated Directors. Member Nominated Directors are selected from those eligible active staff and pensioner members who apply to be considered for the role.
The same principles of pension governance apply to the Group’s other pension schemes, although different legislation covers overseas schemes where, in most cases, the Group has the power to determine the funding rate.
The following tables present an analysis of: defined benefit obligations, the fair value of plan assets and the amounts recognised in the income statement for all Group pension schemes and unfunded post-retirement benefits.
   2010 2009
   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
(19,209 ) (1,277 ) (65 ) (95 ) (20,646 ) (14,395 ) (1,220 ) (43 ) (125 ) (15,783 )
Current service cost
(293 ) (50 ) –    (6 ) (349 ) (254 ) (27 ) (1 ) (9 ) (291 )
Interest cost
(1,049 ) (88 ) (3 ) (6 ) (1,146 ) (941 ) (51 ) (3 ) (6 ) (1,001 )
Past service cost
240    (2 ) –    –    238    (1 ) –    –    –    (1 )
Curtailments or settlements
(16 ) 6    –    –    (10 ) 482    (7 ) –    1    476
Actuarial (loss)/gain
(522 ) (64 ) (2 ) (2 ) (590 ) (4,757 ) (33 ) (3 ) 7    (4,786 )
Contributions by plan participants
(2 ) (7 ) –    –    (9 ) (2 ) (5 ) –    –    (7 )
Benefits paid
678    94    1    6    779    659    58    1    6    724
Business disposals
–    2    –    –    2    –    9    –    6    15
Exchange and other adjustments
–    (84 ) 17    (3 ) (70 ) –    (1 ) (16 ) 25    8
Benefit obligation at end of the year
(20,173 ) (1,470 ) (52 ) (106 ) (21,801 ) (19,209 ) (1,277 ) (65 ) (95 ) (20,646 )
Fair value of plan assets at beginning of the year
15,675    1,025    –    –    16,700    13,537    959    –    –    14,496
Expected return on plan assets
1,031    91    –    –    1,122    904    31    –    –    935
Employer contribution
666    55    1    6    728    525    76    1    6    608
Settlements
–    (2 ) –    –    (2 ) –    (2 ) –    –    (2 )
Contributions by plan participants
2    7    –    –    9    2    5    –    –    7
Actuarial gain/(loss)
995    17    –    –    1,012    1,424    (8 ) –    –    1,416
Benefits paid
(678 ) (94 ) (1 ) (6 ) (779 ) (659 ) (58 ) (1 ) (6 ) (724 )
Business disposals
–    –    –    –    –    –    (6 ) –    –    (6 )
Exchange and other adjustments
(70 ) 185    –    –    115    (58 ) 28    –    –    (30 )
Fair value of plan assets at the end of the year
17,621    1,284    –    –    18,905    15,675    1,025    –    –    16,700
Net deficit
(2,552 ) (186 ) (52 ) (106 ) (2,896 ) (3,534 ) (252 ) (65 ) (95 ) (3,946 )
Unrecognised actuarial losses/(gains)
2,501    150    (6 ) 12    2,657    3,087    158    (7 ) 10    3,248
Net recognised liability
(51 ) (36 ) (58 ) (94 ) (239 ) (447 ) (94 ) (72 ) (85 ) (698 )
Recognised assets^a
–    126    –    –    126    –    71    –    –    71
Recognised liability
(51 ) (162 ) (58 ) (94 ) (365 ) (447 ) (165 ) (72 ) (85 ) (769 )
Net recognised liability
(51 ) (36 ) (58 ) (94 ) (239 ) (447 ) (94 ) (72 ) (85 ) (698 )
Note
a Included within other assets.
229
Notes to the financial statements
For the year ended 31st December 2010 continued
28 Retirement benefit obligationscontinued
      2010 2009 2008
   Pensions
£m Other post-
retirement
benefits
£m    Total
£m Pensions
£m Other post-
retirement
benefits^a
£m    Total
£m Pensions
£m Other post-
retirement
benefits
£m Total
£m
Current service cost
   343    6       349    281    10       291    299    2    301
Interest cost
   1,137    9       1,146    992    9       1,001    991    8    999
Expected return on scheme assets
   (1,122 ) –       (1,122 ) (935 ) –       (935 ) (1,175 ) –    (1,175 )
Recognised actuarial (gain)/loss
   72    3       75    96    –       96    (23 ) (1 ) (24 )
Past service cost
   (233 ) –       (233 ) 6    –       6    2    (8 ) (6 )
Curtailment or settlements
   16    –       16    (473 ) –       (473 ) (5 ) –    (5 )
Total income statement charge
   213    18       231    (33 ) 19       (14 ) 89    1    90
The Group’s IAS 19 pension deficit in respect of the UKRF as at 31st December 2010 was £2,552m (2009: £3,534m). The reduction in the deficit resulted principally from better than expected asset performance, contributions paid in excess of the pension expense and a credit to past service costs following amendments to the treatment of minimum defined benefits.
During 2009, the Trust Deed was amended such that with effect from 1st April 2010, the defined benefit sections within the UKRF were closed to the accrual of future pension benefits. From that date members were eligible to accrue future service pension benefits in either Afterwork or PIP. This gave rise to the recognition in 2009 of a curtailment gain of £487m, actuarial losses of £79m and an additional cost of £37m included in other staff costs.
Out of the benefit obligations of £21,801m (2009: £20,646m), £258m (2009: £288m) were wholly unfunded.
Assumptions
The benefit obligations arising under the Group’s defined benefit schemes are actuarially valued using the projected unit credit method.
Principal assumptions    UK schemes    Overseas schemes
   2010    2009    2010    2009
       % p.a.        % p.a.        % p.a.        % p.a.
Discount rate
   5.31       5.61       6.94       7.53
Rate of increase in salaries
   4.00       4.26       5.26       5.49
Inflation rate
   3.50       3.76       3.63       3.78
Rate of increase for pensions in payment
   3.35       3.56       3.08       3.27
Rate of increase for pensions in deferment
   3.50       3.76       2.86       2.81
Afterwork revaluation rate
   3.97       4.17       n/a       n/a
Initial health care inflation
   6.50       7.00       8.00       8.50
Long-term health care inflation
   5.00       5.00       5.00       5.00
Expected return on plan assets
   6.30       6.70       6.79       7.44
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 scheme discount rate assumption is based on a liability-weighted rate derived from an AA corporate bond yield curve. The overseas health care inflation assumptions relate to the US.
Note
a Includes £3m relating to discontinued operations.
230
28 Retirement benefit obligationscontinued
Mortality assumptions
The UKRF’s post-retirement mortality assumptions were based on the standard 2000 series tables published by the Institute and Faculty of Actuaries as they are considered to be most relevant. These tables were adjusted in line with the UKRF’s actual experience and an allowance has been made for future mortality improvements based on the medium cohort projections published by the Continuous Mortality Investigation Bureau subject to a floor of % pa on future improvements. On this basis the post-retirement mortality assumptions for the UKRF are as follows:
         2010          2009          2008          2007          2006
  Longevity at 60 for current pensioners (years)

  – Males
   27.6       27.5       27.4       26.7       25.8
  – Females
   28.7       28.7       28.5       27.9       29.5
  Longevity at 60 for future pensioners currently aged 40 (years)

  – Males
   29.7       29.6       29.5       28.0       27.1
  – Females
   30.7       30.6       30.5       29.1       30.7
Sensitivity analysis on principal assumptions
  UKRF sensitivity
Impact on UKRF
benefit obligation


(Decrease)/
Increase
%
(Decrease)/
Increase
£bn
  0.5% increase in:

  – Discount rate
   (9.4 ) (1.9 )
  – Rate of inflation
   8.4    1.7
  1 year increase to longevity at 60
   2.5    0.5
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 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 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.
231
Notes to the financial statements
For the year ended 31st December 2010 continued
28 Retirement benefit obligationscontinued
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 2010 and 31st December 2009 were ~~£466m (2008: £333m)~~as follows:
      UK Schemes    Overseas Schemes    Total
  Analysis of scheme assets    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
%

  2010

  Equities
   5,349    30.4       8.4       516       40.2       7.4       5,865    31.0       8.3
  Bonds
   9,164    52.0       4.6       477       37.1       6.0       9,641    51.0       4.7
  Property
   1,277    7.2       6.8       20       1.6       10.3       1,297    6.9       6.9
  Derivatives
   410    2.3       –       –       –       –       410    2.2       –
  Cash
   1,057    6.0       0.5       158       12.3       5.8       1,215    6.4       1.2
  Other
   364    2.1       4.3       113       8.8       9.9       477    2.5       5.6
  Fair value of plan assets^a
   17,621    100       6.3       1,284       100       7.0       18,905    100       6.3
  2009

  Equities
   4,236    27.0       8.6       400       39.0       7.8       4,636    27.7       8.5
  Bonds
   8,787    56.0       4.9       387       37.7       6.0       9,174    54.9       4.9
  Property
   1,186    7.5       7.0       20       2.0       12.6       1,206    7.2       7.1
  Derivatives
   (37 ) –       –       –       –       –       (37 ) –       –
  Cash
   1,157    7.3       0.5       139       13.6       3.2       1,296    7.7       0.8
  Other
   346    2.2       5.0       79       7.7       8.1       425    2.5       5.6
  Fair value of plan assets^a
   15,675    100       6.7       1,025       100       6.6       16,700    100       6.7
The UKRF plan assets include £58m relating to UK private equity investments (2009: £58m) and £1,128m relating to overseas private equity investments (2009: £921m). These are disclosed within Equities.
Amounts included in the fair value of plan assets include £14m (2009: £4m) relating to shares in Barclays Group, £13m (2009: £5m) relating to bonds issued by the Barclays Group, and £10m (2009: £10m) relating to property occupied by Group companies. The UKRF also invests in pooled investment vehicles which may, or may not hold shares/bonds of Barclays Group.
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 an increase of £2,134m (2009: £2,351m increase).
~~Sundry provisions~~Note
a Excludes £1,004m (2009: £890m) representing the defined contribution assets of the UKRF.
232
28 Retirement benefit obligationscontinued
Actuarial gains and losses
The actuarial gains and losses arising on plan liabilities and plan assets are as follows:

2010
£m

2009
£m

2008
£m

2007
£m

2006
£m

UK schemes

Present value of obligations
   (20,225)       (19,274)       (14,438)       (16,623)       (17,353)
Fair value of plan assets
   17,621       15,675       13,537       17,231       16,761
Net (deficit)/surplus in the plans
   (2,604)       (3,599)       (901)       608       (592)
Experience (losses) and gains on plan liabilities

–amount
   (207)       107       (81)       (297)       48
–as percentage of plan liabilities
   (1%)       1%       (1%)       (2%)       –
Difference between actual and expected return on plan assets

–amount
   995       1,424       (4,534)       (332)       423
–as percentage of plan assets
   6%       9%       (33%)       (2%)       3%
Overseas schemes

Present value of obligations
   (1,576)       (1,372)       (1,345)       (1,011)       (970)
Fair value of plan assets
   1,284       1,025       959       796       745
Net deficit in the plans
   (292)       (347)       (386)       (215)       (225)
Experience losses on plan liabilities

–amount
   (9)       (45)       (96)       (79)       (54)
–as percentage of plan liabilities
   (1%)       (3%)       (7%)       (8%)       (6%)
Difference between actual and expected return on plan assets

–amount
   17       (8)       (121)       (11)       25
–as percentage of plan assets
   1%       (1%)       (13%)       –       3%
Total UK and Overseas schemes

Present value of obligations
   (21,801)       (20,646)       (15,783)       (17,634)       (18,323)
Fair value of plan assets
   18,905       16,700       14,496       18,027       17,506
Net (deficit)/surplus in the plans
   (2,896)       (3,946)       (1,287)       393       (817)
Experience (losses) and gains on plan liabilities

–amount
   (216)       62       (177)       (376)       (6)
–as percentage of plan liabilities
   (1%)       –       (1%)       (2%)       –
Difference between actual and expected return on plan assets

–amount
   1,012       1,416       (4,655)       (343)       448
–as percentage of plan assets
   5%       8%       (32%)       (2%)       3%
Funding
The triennial funding valuation of the UKRF is currently in progress with an effective date of 30th September 2010. The last triennial funding valuation of the UKRF was performed with an effective date of 30th September 2007 which showed a surplus of £0.2bn. In compliance with the Pensions Act 2004, the Bank and Trustee 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 UKRF has sufficient assets to make payments to members in respect of their accrued benefits as and when they fall due. This funding valuation used a discount rate that reflected a prudent expectation of long-term future investment returns from the current and assumed future investment strategy.
The Scheme Actuary prepares an annual update of the funding position as at 30th September. The latest annual update was carried out as at 30th September 2010 and showed a deficit of £4.8bn.
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, and in 2010 made an additional voluntary contribution of £300m (2009: £150m). Defined benefit contributions paid with respect to ~~commission clawbacks,~~the UKRF were as follows:
   £m
Contributions paid

2010
   666
2009
   525
2008
   336
Based on the current schedule of contributions, the Group is committed to making estimated contributions to the UKRF in 2011 of £285m. The 30th September 2010 UKRF valuation is due to be finalised by the end of 2011. Excluding the UKRF, the Group is expected to pay contributions of approximately £1m to UK schemes and £60m to overseas schemes in 2011.
233
Notes to the financial statements
For the year ended 31st December 2010 continued
29 Ordinary shares, share premium, and other equity
  Called up share capital, allotted and fully paid
Number of
shares
m
   Ordinary
shares
£m    Share
premium
£m    Total
£m
  As at 1st January 2010
   11,412       2,853       7,951       10,804
  Issued to staff under share incentive plans
   12       2       33       35
  Issue of new ordinary shares
   758       190       1,310       1,500
  As at 31st December 2010
   12,182       3,045       9,294       12,339
  As at 1st January 2009
   8,372       2,093       4,045       6,138
  Issued to staff under share incentive plans
   19       5       30       35
  Issue of new ordinary shares
   379       94       655       749
  Conversion of Mandatorily Convertible Notes
   2,642       661       3,221       3,882
  As at 31st December 2009
   11,412       2,853       7,951       10,804
Warrants
On 31st October 2008, Barclays PLC issued warrants to subscribe for up to 1,516.9 million new ordinary shares at a price of £1.97775, in conjunction with a simultaneous issue by Barclays Bank PLC of Reserve Capital Instruments. A total of 758.4 million (2009: 379.2 million) of these warrants were exercised during the year, resulting in a credit to share capital of £190m (2009: £94m) and to the share premium account of £1,310m (2009: £655m). As at 31st December 2010 there were unexercised warrants to subscribe for 379.2 million shares (2009: 1,137.7 million).
Conversion of Mandatorily Convertible Notes
The Mandatorily Convertible Notes (MCNs), issued by Barclays Bank PLC on 27th November 2008, were converted into 2,642 million ordinary shares in Barclays PLC during 2009 at the conversion price of £1.53276. £661m was credited to share capital and the remaining £3,221m net of issuance costs was credited to the share premium account.
Share repurchase
At the 2010 AGM on 30th April 2010, Barclays PLC was authorised to repurchase 1,203,988,028 of its ordinary shares of 25p. The authorisation is effective until the AGM in 2011. No share repurchases were made during either 2010 or 2009.
30 Reserves
Available for sale reserve
The available for sale reserve represents the unrealised change in the fair value of available for sale investments since initial recognition.
The available for sale reserve movement of £1,236m was driven by the decrease in the fair value of the Group’s investment in BlackRock, Inc. of £764m, partially offset by increases in the fair value of other available for sale assets as markets recovered.
The movement also includes the net gains transferred to net profit on disposal that arose on the disposal of the structural hedge portfolio, sovereign positions that were no longer eligible for liquidity purposes and excess Euro, US Dollar and Japanese Yen government securities.
Cash flow hedging reserve
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.
Movements in the cash flow hedge reserve principally reflected increases in the fair value of interest rate swaps held for hedging purposes more than offset by related gains transferred to net profit.
Currency translation reserve
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. Currency translation differences of £1,184m, including £442m associated with non-controlling interests, is largely due to the appreciation in the Rand and US Dollar, offset by the depreciation in the Euro.
During the year, £279m of the currency translation reserve was recognised in the income statement, principally as a result of the restructuring of group entities based in the US and repatriation of capital from overseas.
Other reserves and treasury shares
Other reserves represent the excess of the repurchase price over the nominal of redeemed ordinary and preference shares issues by the Group.
Treasury shares are deducted from shareholders’ equity within other reserves and treasury shares. A transfer is made to retained earnings in line with the vesting of treasury shares held for the purposes of share based payments.
The treasury shares primarily relate to Barclays PLC shares held by employee benefit trusts in relation to the Group’s various share schemes. These schemes are described in Note 39.
234
31 Non-controlling interests
      Profit attributable to
Non-controlling interests    Equity attributable to
Non-controlling interests

2010
£m

2009
£m

2010
£m

2009
£m

  Barclays Bank PLC issued:

  – Preference shares
   478       477       5,933       5,933
  – Reserve Capital Instruments
   113       116       1,418       1,908
  – Upper Tier 2 instruments
   3       6       586       586
  Absa Group Limited
   362       272       3,208       2,539
  Other non-controlling interests
   29       24       259       235
  Total
   985       895       11,404       11,201
The increase in Absa Group Limited non-controlling interest is attributed to £362m share of net profit and £436m upward foreign exchange movement, partially offset by £138m dividend payment.
32 Investment in subsidiaries
Barclays Bank PLC is a wholly owned subsidiary of Barclays PLC and is the Group’s main licensed deposit taking institution under the Financial Services and Markets Act. The consolidated results and financial position of Barclays Bank PLC and Barclays PLC are materially the same, with the key differences being that, in accordance with IFRS:
– Barclays PLC shares held in employee share schemes and for trading purposes are deducted from reserves in Barclays PLC but recognised as available for sale and trading portfolio assets within Barclays Bank PLC;
– Preference shares issued by Barclays Bank PLC are included within share capital and share premium in Barclays Bank PLC but represent non-controlling interests in Barclays PLC; and
– Certain issuances of reserve capital instruments and capital notes by Barclays Bank PLC are included within other shareholders’ equity in Barclays Bank PLC, but represent non-controlling interests in Barclays PLC.
The risk exposures and business performance for Barclays Bank PLC are materially the same as those in Barclays PLC.
The investment in Barclays Bank PLC is stated on the balance sheet of Barclays PLC at a cost of £21,429m (2009: £20,215m). The increase of £1,214m (2009: £4,875m) during the year represents capital contributions of £1,214m (2009: £800m). There have been no additional shares (2009: £25m) or non-cash contributions (2009: £4,050m) during the year.
  Country of
  registration or
  incorporation
Company name Nature of business Percentage of
equity capital
held (%)
  England
Barclays Bank PLC Banking, holding company 100
  Botswana
Barclays Bank of Botswana Limited Banking 67.8 *
  Egypt
Barclays Bank Egypt SAE Banking 100 *
  England
Barclays Mercantile Business Finance Limited Loans and advances including leases to customers 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
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 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 55.5 *
  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 Delaware Holdings LLC Holding company for US credit card issuer 100 *
  USA
Barclays Group US Inc. Holding company 100 *
  Zimbabwe
Barclays Bank of Zimbabwe Limited Banking 67.7
In accordance with Section 410(2)(a) of the Companies Act 2006, 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 subsidiaries held directly by Barclays Bank PLC are marked *.
235
Notes to the financial statements
For the year ended 31st December 2010 continued
32 Investment in subsidiariescontinued
Following the restructuring of Group operations in the US during the year, Barclays Group US Inc. is no longer a US Bank Holding Company.
Full information of all subsidiaries will be included in the Annual Return to be filed at UK Companies House.
Entities in which the Group holds less than half the voting rights
There are a number of entities in which the Group holds less than half the voting rights which are consolidated when the substance of the relationship between the Group and the entity indicates that the entity is controlled by the Group. Such entities are deemed to be controlled by the Group when relationships with such entities give 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 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.
Subsidiaries with a different reporting date from that of the Parent of 31st December
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 where the Group’s interest exceeds 50% which are excluded from consolidation
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 controlling 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 2006 Section 410(2)(b).
Country of registration or incorporation    Name    Percentage
of ordinary
share
capital held
%
Equity
shareholders’
funds
£m

Retained
Profit for the
year
£m

UK
   Fitzroy Finance Limited    100       –       –
Cayman Islands
   Palomino Limited    100       1       –
33 Profit on disposal of subsidiaries, associates and joint ventures
During the year, the profit on disposal of subsidiaries, associates and joint ventures was £81m (2009: £188m), principally relating to the disposal of Barclays Africa custody business to Standard Chartered Bank for a consideration of £81m generating a gain on disposal before tax of £77m. During 2009, the Group disposed of 50% of Barclays Vida y Pensiones Compañía de Seguros and the 7% of Barclays Africa Botswana business for consideration of £276m generating a gain on disposal before tax of £184m.
34 Discontinued operations
On 1st December 2009 the Group completed the sale of BGI to BlackRock, Inc. (BlackRock) recognising a profit on disposal before tax of £6,331m. The tax charge of £43m reflects the application of UK substantial shareholdings relief in accordance with UK tax law.
The consideration at completion was $15.2bn (£9.5bn), including 37.567 million new BlackRock shares, giving an economic interest of 19.9% of the enlarged BlackRock group. Barclays Group holds 4.9% of the voting rights and under the terms of the transaction may not acquire additional voting rights and will vote in accordance with the recommendations of the BlackRock Board of Directors. John Varley and Bob Diamond were appointed to the BlackRock Board, which comprises 18 Directors. The Group is not deemed to exercise significant influence and the investment has been accounted for as an available for sale equity investment.
236
34 Discontinued operationscontinued
The Group has provided BlackRock with customary warranties and ~~litigation claims.~~indemnities in connection with the sale. Barclays will also continue to indemnify securities lending arrangements until 30th November 2012 (included within contingent liabilities in Note 25) and provide support to certain BGI cash funds until December 2013 in the form of credit derivatives (included within derivative liabilities in Note 14) and financial guarantees (included within provisions in Note 24).
In addition, Barclays, BlackRock and their respective affiliates also enter into agreements and transactions with one another in the ordinary course of their respective businesses and on an arm’s length commercial basis, subject to applicable regulation and agreements with relevant regulators.
In connection with its financing of its acquisition of BGI, BlackRock entered into a 364-day revolving credit facility with a group of lenders including Barclays, who is also acting as revolving agent. Of the $2bn credit facility, $0.8bn was committed by other lenders and following completion BlackRock had borrowed or notified to be borrowed $1.5bn under the facility. All amounts borrowed under this facility were repaid and the facility was terminated prior to 31st December 2009.
The disposed BGI business has been treated as a discontinued operation, the results of which are set out below. For the year ended 31st December 2009 the results are for the 11 month period up to the date of disposal (1st December 2009). There were no discontinued operations in 2010.
   2010
£m    2009
£m 2008
£m
  Net interest income
   –       33    –
  Net fee and commission income
   –       1,759    1,916
  Net trading income/(loss)
   –       67    (10 )
  Other income
   –       4    10
  Total income
   –       1,863    1,916
  Operating expenses excluding amortisation of intangible assets
   –       (1,123 ) (960 )
  Amortisation of intangible assets
   –       (14 ) (15 )
  Operating expenses
   –       (1,137 ) (975 )
  Profit before tax from discontinued operations
   –       726    941
  Tax on discontinued operations
   –       (237 ) (337 )
  Profit after tax from discontinued operations
   –       489    604
  Profit on disposal of discontinued operations
   –       6,331    –
  Tax on disposal
   –       (43 ) –
  Net profit on the disposal of the discontinued operation
   –       6,288    –
  Profit after tax from discontinued operations, including gain on disposal
   –       6,777    604

Other comprehensive income relating to discontinued operations is as follows:


   2010
£m    2009
£m 2008
£m
  Available for sale assets
   –       10    (9 )
  Currency translation reserve
   –       (85 ) 133
  Tax relating to components of other comprehensive income
   –       17    (10 )
  Other comprehensive income, net of tax from discontinued operations
   –       (58 ) 114

The cash flows attributable to the discontinued operations were as follows:


   2010
£m    2009
£m 2008
£m
  Cash Flows from discontinued operations

  Net cash flows from operating activities
   –       333    524
  Net cash flows from investing activities
   –       (25 ) (93 )
  Net cash flows from financing activities
   –       (550 ) (362 )
  Effect of exchange rates on cash and cash equivalents
   –       (134 ) 217
  Net cash flows from discontinued operations
   –       (376 ) 286
237
Notes to the financial statements
For the year ended 31st December 2010 continued
35 Acquisition of subsidiaries
  Acquisition    % Acquired Goodwill/
(Gain on sale)
£m Date
  Standard Life Bank PLC
   100 % (100 ) 1st January 2010
  Citibank International PLC – Italian credit card business
   100 % (29 ) 31st March 2010
  Tricorona
   86 % 13    26th July 2010
None of these acquisitions were individually material. Details of the net assets acquired and the consideration paid are set out in aggregate below. The operating results of these acquisitions have been included from the dates acquired and, since acquisition, have contributed £142m to consolidated income and £86m to consolidated profit before tax.


   Carrying
Value pre-
Acquisition
£m Fair Value
Adjustments^a
£m
Fair Values
£m

  Assets

  Cash and balances at central banks
   1,358    –    1,358
  Financial assets designated at fair value held on own account
   195    –    195
  Derivative financial instruments
   145    76    221
  Loans and advances to banks
   165    –    165
  Loans and advances to customers
   7,709    (96 ) 7,613
  Other assets
   83    10    93
  Total assets
   9,655    (10 ) 9,645
  Liabilities

  Deposits from banks
   (80 ) –    (80 )
  Customer accounts
   (5,853 ) –    (5,853 )
  Derivative financial instruments
   (104 ) (11 ) (115 )
  Debt securities in issue
   (2,782 ) 64    (2,718 )
  Subordinated liabilities
   (279 ) 53    (226 )
  Other liabilities
   (16 ) (36 ) (52 )
  Total liabilities
   (9,114 ) 70    (9,044 )
  Net assets acquired
   541    60    601
  Group share of assets acquired
   535    53    588
  Total consideration paid in cash
   472
  Goodwill
   13
  Gain on acquisitions
   129
Acquisition related costs of £7m have been included in operating expenses.
29Cashflows in respect of acquisitions
The aggregate net inflow of cash from the acquisition of the above Group entities was as follows:
2010
£m
  Cash consideration on acquisitions
(472 )
  Cash and cash equivalent acquired
1,358
Cash inflow on acquisition
886
Note
a. Fair value adjustments include revaluations and accounting policy re-alignments.
238
36 Securitisations
The Group was party to securitisation transactions involving its 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.
  ~~210~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~29 Securitisations~~~~continued~~
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 on the balance sheet:

   2009 2008    2010 2009

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
   10,374    (10,738 ) 12,754    (13,172 )    9,709       (10,674 ) 10,374       (10,738 )
Credit card receivables
   1,288    (1,288 ) 1,888    (2,109 )    801       (723 ) 1,288       (1,288 )
Other personal lending
   94    (124 ) 212    (256 )    –       –    94       (124 )
Wholesale and corporate loans and advances
   4,835    (5,999 ) 7,702    (8,937 )    2,560       (2,878 ) 4,835       (5,999 )
Total
   16,591    (18,149 ) 22,556    (24,474 )    13,070       (14,275 ) 16,591       (18,149 )
Assets designated at fair value through profit or loss

Retained interest in residential mortgage loans
   26    316       5       26
Balances included within loans and advances to customers represent securitisations where substantially all the risks and rewards of the asset have been retained by the Group.
The excess of total associated liabilities over the carrying amount of assets primarily reflects timing differences in the receipt and payment of cash flows, and foreign exchange movements where the assets and associated liabilities are denominated in different currencies. Foreign exchange movements and associated risks are hedged economically through the use of cross currency swap derivative contracts.
Retained interests in residential mortgage loans are securities which represent a continuing exposure to the prepayment and credit risk in the underlying securitised assets. The total amount of the loans was ~~£14,795m (2008: £31,734m)~~£15,458m (2009: £14,795m). 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.
~~30 Retirement benefit obligations~~
~~Pension schemes~~
~~The UK Retirement Fund (UKRF), which is the main scheme of the Group, amounting to 93% 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 in respect of future benefit accrual with effect from 1st January 2004. There are 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 employees of Barclays Capital.~~
~~Afterwork~~
Combines a contributory cash balance element with a voluntary defined contribution element. The majority of new employees outside of Barclays Capital since 1st October 2003 are eligible to join Afterwork. In addition, the large majority of active members of the RIS (now closed) were transferred to 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 contribute by way of salary sacrifice to the UKRF.
On 10th September 2009, the Trust Deed was amended such that with effect from 1st April 2010 the following sections of the UKRF will close to the accrual of future pension benefits: 1964 Pension Scheme; AP89 Section; 1951 Fund Section; Mercantile Section; Career Average Section; and CCS Section. Members of these sections will be eligible to accrue future service pension benefits in either Afterwork or PIP from 1st April 2010. This gave rise to the recognition of a curtailment gain during the year of £487m, the recognition of actuarial losses of £79m and an additional cost of £37m included in other staff costs.
   ~~211~~ 239
~~30 Retirement benefit obligations~~~~continued~~
~~Governance~~
The UKRF operates under trust law and is managed and administered on behalf of the members in accordance with the terms of the Trust Deed and all relevant legislations. The Corporate Trustee is Barclays Pension Funds Trustees Limited (BPFTL), a private limited company incorporated on 20th December 1990 and is a wholly owned subsidiary of Barclays Bank PLC. The Trustee is the legal owner of the assets of the UKRF which are held separately from the assets of the Group.
The Trustee Board comprises six Management Directors selected by Barclays, of whom three are independent Directors with no relationship with Barclays or the UKRF, and three are Member Nominated Directors. In addition there are three Alternate Management Directors and three Alternate Member Nominated Directors. Member Nominated Directors are selected from those eligible active staff and pensioner members who apply to be considered for the role.
The Pensions Act 2004 (the Act) requires corporate trustees to take responsibility for making arrangements for the nomination and selection of Member Nominated Directors (MNDs). A formal procedure has been in place since 1st September 2007, which is fully compliant with the legal requirements and reflects best practice. Eligibility for nomination and selection is open to all members of the UKRF but excludes those in receipt of solely spouses, civil partners, dependants or ex-spouse participants pensions, deferred pensioners and members with eligibility for death benefits only.
Under the Act, the Bank and the 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 was carried out as at 30th September 2007.
There are other pension schemes (both defined benefit and defined contribution) in the UK and overseas. The same principles of pension governance applies to UK based schemes, although different legislation covers overseas schemes where, in most cases, the Bank has the power to determine the funding rate.
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.

      2009 2008 2007
      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
Income statement charge

Current service cost
   281    10    291    299    2    301    332    2    334
Interest cost
   992    9    1,001    991    8    999    905    8    913
Expected return on scheme assets
   (935 ) –    (935 ) (1,175 ) –    (1,175 ) (1,074 ) –    (1,074 )
Recognised actuarial (gain)/loss
   96    –    96    (23 ) (1 ) (24 ) (1 ) –    (1 )
Past service cost
   6    –    6    2    (8 ) (6 ) 20    –    20
Curtailment or settlements
   (473 ) –    (473 ) (5 ) –    (5 ) (32 ) –    (32 )
Total included in staff costs
   (33 ) 19    (14 ) 89    1    90    150    10    160
~~Staff costs are included in other operating expenses. Of the other post retirement benefit costs £16m relate to continuing operations (2008: £1m, 2007: £9m).~~

      2009       2008
      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
   (14,395 ) (1,220 ) (43 ) (125 ) (15,783 ) (16,563 ) (913 ) (60 ) (98 ) (17,634 )
Current service cost
   (254 ) (27 ) (1 ) (9 ) (291 ) (276 ) (23 ) –    (2 ) (301 )
Interest cost
   (941 ) (51 ) (3 ) (6 ) (1,001 ) (946 ) (45 ) (3 ) (5 ) (999 )
Past service cost
   (1 ) –    –    –    (1 ) (2 ) (11 ) 7    –    (6 )
Curtailments or settlements
   482    (7 ) –    1    476    7    2    –    –    9
Actuarial (loss)/gain
   (4,757 ) (33 ) (3 ) 7    (4,786 ) 2,807    –    11    (5 ) 2,813
Contributions by plan participants
   (2 ) (5 ) –    –    (7 ) (20 ) (3 ) –    –    (23 )
Benefits paid
   659    58    1    6    724    598    42    2    9    651
Business disposals
   –    9    –    6    15    –    –    –    –    –
Exchange and other adjustments
   –    (1 ) (16 ) 25    8    –    (269 ) –    (24 ) (293 )
Benefit obligation at end of the year
   (19,209 ) (1,277 ) (65 ) (95 ) (20,646 ) (14,395 ) (1,220 ) (43 ) (125 ) (15,783 )
  ~~212~~

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
Notes to the financial statements
For the year ended 31st December 2010 continued

~~30 Retirement benefit obligations~~~~continued~~
~~The benefit obligation arises from plans that are wholly unfunded and wholly or partly funded as follows:~~

      2009
£m 2008
£m
Unfunded obligations
   (288 ) (297 )
Wholly or partly funded obligations
   (20,358 ) (15,486 )
Total
   (20,646 ) (15,783 )
~~Change in plan assets~~

            2009             2008

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
   13,537    959    –    –    14,496    17,231    796    –    –    18,027
Expected return on plan assets
   904    31    –    –    935    1,134    41    –    –    1,175
Employer contribution
   525    76    1    6    608    336    71    2    9    418
Settlements
   –    (2 ) –    –    (2 ) –    (2 ) –    –    (2 )
Contributions by plan participants
   2    5    –    –    7    20    3    –    –    23
Actuarial gain/(loss)
   1,424    (8 ) –    –    1,416    (4,534 ) (121 ) –    –    (4,655 )
Benefits paid
   (659 ) (58 ) (1 ) (6 ) (724 ) (598 ) (42 ) (2 ) (9 ) (651 )
Business disposals
   –    (6 ) –    –    (6 ) –    –    –    –    –
Exchange and other adjustments
   (58 ) 28    –    –    (30 ) (52 ) 213    –    –    161
Fair value of plan assets at the end of the year
   15,675    1,025    –    –    16,700    13,537    959    –    –    14,496
~~Amounts recognised on-balance sheet~~
~~The pension and post-retirement benefit assets and liabilities recognised on the balance sheet are as follows:~~

            2009             2008

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
   (19,209 ) (1,277 ) (65 ) (95 ) (20,646 ) (14,395 ) (1,220 ) (43 ) (125 ) (15,783 )
Fair value of plan assets at end of period
   15,675    1,025    –    –    16,700    13,537    959    –    –    14,496
Net deficit
   (3,534 ) (252 ) (65 ) (95 ) (3,946 ) (858 ) (261 ) (43 ) (125 ) (1,287 )
Unrecognised actuarial losses/(gains)
   3,087    158    (7 ) 10    3,248    (167 ) 150    (11 ) 23    (5 )
Net recognised liability
   (447 ) (94 ) (72 ) (85 ) (698 ) (1,025 ) (111 ) (54 ) (102 ) (1,292 )
Recognised assets^a
   –    71    –    –    71    –    65    –    –    65
Recognised liability
   (447 ) (165 ) (72 ) (85 ) (769 ) (1,025 ) (176 ) (54 ) (102 ) (1,357 )
Net recognised liability
   (447 ) (94 ) (72 ) (85 ) (698 ) (1,025 ) (111 ) (54 ) (102 ) (1,292 )
The UKRF funded status, as measured using the IAS 19 assumptions detailed below, has decreased from a deficit of £0.9bn at 31st December 2008 to a deficit of £3.5bn at 31st December 2009. The most significant reasons for this change were the decrease in AA corporate bond yields which resulted in a lower discount rate of 5.61% (31st December 2008: 6.75%) and an increase in the long-term inflation assumption to 3.76% (31st December 2008: 3.16%). The impact of the change in assumptions was partially offset by a one-off curtailment credit resulting from the closure of the UK final salary pension schemes to existing members, better than expected asset performance, and contributions paid in excess of the pension expense.
~~Note~~
a ~~Included within other assets.~~
~~213~~

~~30 Retirement benefit obligations~~~~continued~~
~~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 IFRS valuations were carried out as at 31st December using the following assumptions:

      UK schemes    Overseas schemes
      2009
% p.a.    2008
% p.a.    2009
% p.a.    2008
% p.a.
Discount rate
   5.61    6.75    7.53    7.09
Rate of increase in salaries
   4.26    3.66    5.49    5.93
Inflation rate
   3.76    3.16    3.78    3.98
Rate of increase for pensions in payment
   3.56    3.06    3.27    3.17
Rate of increase for pensions in deferment
   3.76    3.16    2.81    4.37
Initial health care inflation
   7.00    8.00    8.50    9.00
Long-term health care inflation
   5.00    5.00    5.00    5.01
Expected return on plan assets
   6.70    6.80    7.44    7.95
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 a liability-weighted rate derived from an AA corporate bond yield curve.~~
~~The overseas health care inflation assumptions relate to the US.~~
~~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 Continuous Mortality Investigation Bureau subject to a floor of 1% pa on future improvements. On this basis the post-retirement mortality assumptions for the UKRF includes:

      2009    2008    2007    2006    2005
Longevity at 60 for current pensioners (years)

– Males
   27.5    27.4    26.7    25.8    25.8
– Females
   28.7    28.5    27.9    29.5    29.5
Longevity at 60 for future pensioners currently aged 40 (years)

– Males
   29.6    29.5    28.0    27.1    27.1
– Females
   30.6    30.5    29.1    30.7    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

(Decrease)/
Increase
%

(Decrease)/
Increase
£bn

0.5% increase to:

– Discount rate
   (8.5 ) (1.6 )
– Rate of inflation
   7.7    1.5
1 year increase to longevity at 60
   2.5    0.5
~~Following the amendment to the UKRF Trust Deed on 10th September 2009, the UKRF benefit obligation is not sensitive to future salary growth.~~
  ~~214~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~30 Retirement benefit obligations~~~~continued~~
~~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 2009:~~

      1% increase
£m    1% decrease
£m
Effect on total of service and interest cost components
   1    (1 )
Effect on post-retirement benefit obligation
   13    (11 )
~~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 Trustees 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 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 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.
During the second half of 2009, an investment de-risking programme was agreed for the UKRF between the Bank and the Trustee in order to achieve a better matching between assets and liabilities and to reduce the investment risk profile of the plan. This involved a partial sale of physical equities and purchase of index-linked gilts.
~~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 2009 and 31st December 2008 were as follows:~~

      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
%
2009

Equities
   4,236    27    8.6    400    39    7.8    4,636    28    8.5
Bonds
   8,787    56    4.9    387    38    6.0    9,174    55    4.9
Property
   1,186    8    7.0    20    2    12.6    1,206    7    7.1
Derivatives
   (37 ) –    –    –    –    –    (37 ) –    –
Cash
   1,157    7    0.5    139    14    3.2    1,296    8    0.8
Other
   346    2    5.0    79    7    8.1    425    2    5.6
Fair value of plan assets^a
   15,675    100    6.7    1,025    100    6.6    16,700    100    6.7
2008

Equities
   5,813    43    8.5    217    23    9.3    6,030    42    8.5
Bonds
   6,360    47    5.3    166    17    6.2    6,526    45    5.3
Property
   1,214    9    7.2    16    2    13.4    1,230    8    7.3
Derivatives
   (420 ) (3 ) –    –    –    –    (420 ) (3 ) –
Cash
   (131 ) (1 ) 2.0    415    43    7.6    284    2    3.9
Other
   701    5    7.4    145    15    6.4    846    6    7.2
Fair value of plan assets^a
   13,537    100    6.8    959    100    8.0    14,496    100    6.9
~~Note~~
a ~~Excludes £890m (2008: £675m) representing the money purchase assets of the UKRF.~~
~~215~~
~~30 Retirement benefit obligations~~~~continued~~
The UKRF plan assets include £58m relating to UK private equity investments (2008: £27m) and £921m relating to overseas private equity investments (2008: £735m). These are disclosed within Equities.
Amounts included in the fair value of plan assets include £4m (2008: £5m) relating to shares in Barclays Group, £5m (2008: £11m) relating to bonds issued by the Barclays Group, £nil (2008: £nil) relating to other investments in the Barclays Group, and £10m (2008: £17m) 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 an increase of £2,351m (2008: £3,480m decrease).~~
~~Actuarial gains and losses~~
~~The actuarial gains and losses arising on plan liabilities and plan assets are as follows:~~


2009
£m

2008
£m

2007
£m

2006
£m

2005
£m

UK schemes

Present value of obligations
   (19,274 ) (14,438 ) (16,623 ) (17,353 ) (18,252 )
Fair value of plan assets
   15,675    13,537    17,231    16,761    15,571
Net (deficit)/surplus in the plans
   (3,599 ) (901 ) 608    (592 ) (2,681 )
Experience gains and (losses) on plan liabilities

– amount
   107    (81 ) (297 ) 48    (2 )
– as percentage of plan liabilities
   1%    (1% ) (2% ) –    –
Difference between actual and expected return on plan assets

– amount
   1,424    (4,534 ) (332 ) 423    1,599
– as percentage of plan assets
   9%    (33% ) (2% ) 3%    10%
Overseas schemes

Present value of obligations
   (1,372 ) (1,345 ) (1,011 ) (970 ) (1,017 )
Fair value of plan assets
   1,025    959    796    745    819
Net deficit in the plans
   (347 ) (386 ) (215 ) (225 ) (198 )
Experience losses on plan liabilities

– amount
   (45 ) (96 ) (79 ) (54 ) (2 )
– as percentage of plan liabilities
   (3% ) (7% ) (8% ) (6% ) –
Difference between actual and expected return on plan assets

– amount
   (8 ) (121 ) (11 ) 25    2
– as percentage of plan assets
   (1% ) (13% ) –    3%    –
Total UK and Overseas schemes

Present value of obligations
   (20,646 ) (15,783 ) (17,634 ) (18,323 ) (19,269 )
Fair value of plan assets
   16,700    14,496    18,027    17,506    16,390
Net (deficit)/surplus in the plans
   (3,946 ) (1,287 ) 393    (817 ) (2,879 )
Experience gains and (losses) on plan liabilities

– amount
   62    (177 ) (376 ) (6 ) (4 )
– as percentage of plan liabilities
   0%    (1% ) (2% ) –    –
Difference between actual and expected return on plan assets

– amount
   1,416    (4,655 ) (343 ) 448    1,601
– as percentage of plan assets
   8%    (32% ) (2% ) 3%    10 %
  ~~216~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~30 Retirement benefit obligations~~~~continued~~
~~Funding~~
The most recent triennial funding valuation of the UK Retirement Fund (UKRF) was performed with an effective date of 30th September 2007. In compliance with the Pensions Act 2004, the Bank 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 investment strategy, and takes into account projected future salary increases when assessing liabilities arising from accrued service.
As at 30th September 2007 the funding valuation showed a surplus of £0.2bn. The Scheme Actuary prepares an annual update of the funding position as at 30th September. The latest annual update was carried out as at 30th September 2009 and showed a deficit of £4.8bn. The next triennial funding valuation will take place with an effective date of 30th September 2010.
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 19 service cost; and in 2009 made an additional voluntary contribution of £150m.
~~Defined benefit contributions paid with respect to the UKRF were as follows:~~

      £m
Contributions paid

2009
   525
2008
   336
2007
   355
~~Excluding the UKRF, the Group is expected to pay contributions of approximately £1m to UK schemes and £59m to overseas schemes in 2010.~~
~~The Group is committed to making estimated contributions to UKRF in 2010 of £290m, with potential additional voluntary contributions dependent on the scheme’s funding level.~~
~~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 2009
   8,372    2,093    4,045    6,138
Issued under the Incentive Share Option Plan^a
   –    –    –    –
Issued to staff under the Share Incentive Plan
   19    5    30    35
Issue of new ordinary shares
   379    94    655    749
Conversion of Mandatorily Convertible Notes
   2,642    661    3,221    3,882
At 31st December 2009
   11,412    2,853    7,951    10,804
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
~~Note~~
a ~~The nominal value of share options issued during 2008 for the Incentive Share Option Plan and Share Incentive Plan was less than £500,000 in each case.~~
~~217~~
~~31 Ordinary shares, share premium, and other equity~~~~continued~~
~~The authorised share capital of Barclays PLC is £5,290m, US$77.5m,~~€~~40m and Japanese Yen (¥)4,000m (31st December 2008: £3,540m, US$77.5m,~~€40m and ¥4,000m) comprising 20,996 million (31st December 2008: 13,996 million) ordinary shares of 25p each, 0.4 million (31st December 2008: 0.4 million) Sterling preference shares of £100 each, 0.4 million (31st December 2008: 0.4 million) US Dollar preference shares of $100 each, 150 million (31st December 2008: 150 million) US Dollar preference shares of $0.25 each, 0.4 million (31st December 2008: 0.4 million) Euro preference shares of€~~100 each, 0.4 million (31st December 2008: 0.4 million) Yen preference shares of ¥10,000 each and 1 million (31st December 2008: 1 million) staff shares of £1 each.~~

Called up share capital, allotted and fully paid    2009
£m    2008
£m
Ordinary shares:

At beginning of year
   2,093    1,650
Issued to staff under the Sharesave Share Option Scheme
   –    1
Issued to staff under the Share Incentive Plan
   5    –
Issue of new ordinary shares
   94    451
Conversion of Mandatorily Convertible Notes
   661    –
Repurchase of shares
   –    (9 )
At end of year
   2,853    2,093
Staff shares:

At beginning of year
   –    1
Repurchase of shares
   –    (1 )
At end of year
   –    –
Total
   2,853    2,093
~~Issue of new ordinary shares~~
~~During the year, the following share issues took place:~~
~~Conversion of Mandatorily Convertible Notes~~
The Mandatorily Convertible Notes (MCNs), issued by Barclays Bank PLC on 27th November 2008, were converted into 2,642 million ordinary shares in Barclays PLC by 30th June 2009 at the conversion price of £1.53276. £661m was credited to share capital and the remaining £3,221m (net of issuance costs) was credited to the share premium account.
~~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 Nahyan.
On 28th October 2009, Qatar Holding LLC exercised 379.2 million warrants to subscribe for new Barclays PLC Shares. £94m was credited to share capital and the remaining £655m was credited to the share premium account.
~~Share repurchase~~
~~No share repurchases were made during the year. In 2008, Barclays PLC repurchased shares at a cost of £173m.~~
~~At the 2009 AGM on 23rd April 2009, Barclays PLC was authorised to repurchase 837,620,130 of its ordinary shares of 25p. The authorisation is effective until the AGM in 2010.~~
~~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.~~
At 31st December 2009, 91.3 million (2008: 94.1 million) options were outstanding under the terms of the Sharesave Share Option Scheme (Sharesave), no options were outstanding under the terms of the Executive Share Option Scheme (ESOS) (2008: 0.5 million), 0.1 million (2008: 0.4 million) options were outstanding under the terms of the Woolwich Executive Share Option Plan (Woolwich ESOP) and 12.6 million (2008: 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 2009 and 2017 at prices ranging from 144p to 547p.
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 44. 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.
  ~~218~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~31 Ordinary shares, share premium, and other equity~~~~continued~~
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 44.~~
The Global Sharepurchase scheme which was established in 2009 is open to all eligible non UK employees, excluding executive Directors. The key terms of the Global Sharepurchase scheme are described in Note 44.
~~32 Reserves~~
~~Other reserves~~


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 2009
   394    617    (1,190 ) 132    2,840    2,793
Net gains from changes in fair value
   –    –    1,194    287    –    1,481
Net gains transferred to net profit
   –    –    (415 ) (92 ) –    (507 )
Currency translation differences
   –    –    –    –    (1,223 ) (1,223 )
Net losses transferred to net profit due to impairment
   –    –    670    –    –    670
Changes in insurance liabilities
   –    –    (67 ) –    –    (67 )
Net gains transferred to net profit due to fair value hedging
   –    –    (123 ) –    –    (123 )
Tax
   –    –    (179 ) (75 ) (2 ) (256 )
At 31st December 2009
   394    617    (110 ) 252    1,615    2,768
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
   –    –    (212 ) 19    –    (193 )
Currency translation differences
   –    –    –    –    2,307    2,307
Net losses transferred to net profit due to impairment
   –    –    382    –    –    382
Changes in insurance liabilities
   –    –    17    –    –    17
Net gains transferred to net profit due to fair value hedging
   –    –    (2 ) –    –    (2 )
Tax
   –    –    207    (165 ) 840    882
Repurchase of shares
   10    –    –    –    –    10
At 31st December 2008
   394    617    (1,190 ) 132    2,840    2,793
~~Available for sale net gains transferred to net profit includes £349m gain (2008: £212m gain) relating to continuing operations and £66m gain (2008: £nil) relating to discontinued operations.~~
~~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: £22m loss (2008: £4m loss), interest expense: £272m gain (2008: £74m loss), net trading income: £165m loss (2008: £119m gain), and administration and general expenses: £7m gain (2008: £60m loss).
~~219~~
~~32 Reserves~~~~continued~~
~~Retained earnings and treasury shares~~

      Retained
earnings
£m Treasury
shares
£m Total
£m
At 1st January 2009
   24,208    (173 ) 24,035
Profit attributable to equity holders of the Parent
   9,393    –    9,393
Equity-settled share schemes
   298    –    298
Tax on equity-settled share schemes
   156    –    156
Other taxes
   32    –    32
Net purchases of treasury shares
   –    (47 ) (47 )
Transfer
   (80 ) 80    –
Dividends paid
   (113 ) –    (113 )
Conversion of mandatorily convertible notes
   (230 ) –    (230 )
Other
   181    –    181
At 31st December 2009
   33,845    (140 ) 33,705
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
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.
The total number of Barclays shares held in Group employee benefit trusts at 31st December 2009 was 125.1 million (2008: 217.9 million). No dividend rights have been waived on these shares. The total market value of the shares held in trust, based on the year-end share price of £2.75 (2008: £1.53), was £344m (2008: £333m). As at 31st December 2009, options over 15.6 million (2008: 19.1 million) of the total shares held in the trusts were exercisable.
The Group operates in a number of countries subject to regulations under which subsidiaries and other operations have to maintain minimum levels of capital. The current policy of the Group is that the local capital requirements are met, to the greatest possible extent, through the retention of profit. Certain countries also operate exchange control regulations which limit the amount of dividends that can be remitted to non-resident shareholders.
~~Retained earnings – Barclays PLC (Parent Company)~~

      Retained
earnings
£m
Capital
redemption
reserve
£m
At 1st January 2009
   9,006    394
Profit after tax
   125    –
Dividends paid
   (113 ) –
Conversion of mandatorily convertible notes
   (230 ) –
Other
   228    –
At 31st December 2009
   9,016    394
At 1st January 2008
   8,990    384
Profit after tax
   1,193    –
Dividends paid
   (2,414 ) –
Arising on share issue
   634    –
Repurchase of shares
   (173 ) 10
Issue of warrants
   776    –
At 31st December 2008
   9,006    394
~~Details of principal subsidiaries held through Barclays Bank PLC are shown in Note 41.~~
  ~~220~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~33 Non-controlling interests~~

      2009
£m 2008
£m
At beginning of year
   10,793    9,185
Share of profit after tax
   895    905
Dividend and other payments
   (767 ) (703 )
Equity issued by subsidiaries
   –    1,349
Available for sale reserve: net (loss)/gain from changes in fair value
   (12 ) (1 )
Cash flow hedges: (loss)/gain from changes in fair value
   (19 ) 76
Currency translation differences
   277    100
Additions
   9    –
Disposals
   (91 ) (11 )
Other
   116    (107 )
At end of year
   11,201    10,793
~~The non-controlling interests as at 31st December represented holdings in the following:~~

      2009
£m    2008
£m
Barclays Bank PLC issued Preference shares
   5,933    5,927
Barclays Bank PLC issued Reserve Capital Instruments – equity accounted
   1,908    1,908
Barclays Bank PLC issued Upper Tier 2 instruments – equity accounted
   586    586
Absa Group Limited – issued preference shares and other non-controlling interests
   2,539    1,994
Other
   235    378
Total
   11,201    10,793
~~There were no Preference Shares issued by Barclays Bank PLC during the year.~~
~~34 Contingent liabilities and commitments~~
~~The following table summarises the nominal principal amount of contingent liabilities and commitments with off-balance sheet risk:~~

      2009
£m    2008
£m
Acceptances and endorsements
   375    585
Guarantees and letters of credit pledged as collateral security
   15,406    15,652
Securities lending arrangements
   27,406    38,290
Other contingent liabilities
   9,587    11,783
Contingent liabilities
   52,774    66,310
Documentary credits and other short-term trade related transactions
   762    859
Undrawn note issuance and revolving underwriting facilities:

Forward asset purchases and forward deposits placed
   46    291
Standby facilities, credit lines and other
   206,467    259,666
Commitments
   207,275    260,816
~~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.
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.
Until the disposal of BGI on 1st December 2009, the Group facilitated securities lending arrangements for its managed investment funds whereby securities held by funds under management were lent to third parties. Borrowers provided cash or investment grade assets as collateral equal to 100% of the market value of the securities lent plus a margin of 2% – 10%. The Group has agreed with BlackRock to continue to provide indemnities to support these arrangements for a further three years. As at 31st December 2009, the value of the collateral held was £28,248m (2008: £39,690m) and that of the stock lent was £27,406m (2008: £38,290m).
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.
~~221~~
~~34 Contingent liabilities and commitments~~~~continued~~
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 2009 the commitments for capital expenditure under contract amounted to £129m (2008: £48m).~~
~~Assets pledged~~
Assets are pledged as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as security deposits relating to 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:~~


2009
£m

2008
£m
Trading portfolio assets
   96,176    81,186
Loans and advances
   48,846    28,789
Available for sale investments
   24,264    32,321
Other
   77    3,812
Assets pledged
   169,363    146,108
~~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:

      2009
£m    2008
£m
Fair value of securities accepted as collateral
   357,159    424,819
Of which fair value of securities repledged/transferred to others
   283,334    374,222
~~35 Legal proceedings~~
On 25th November 2009, the UK Supreme Court decided the test case relating to current account overdraft charges in favour of the banks. The Office of Fair Trading subsequently confirmed that it will not proceed with its investigation into the fairness of these charges following the Supreme Court judgment. Accordingly, we are seeking to have all outstanding claims which were premised on the same legal principles as those at issue in the test case discontinued or dismissed. There remain a small number of residual complaints challenging the charges on a different basis, but these complaints are not expected to have a material effect on Barclays.
Barclays Bank PLC, Barclays PLC and various current and former members of Barclays PLC’s Board of Directors have been named as defendants in five proposed securities class actions (which have been consolidated) pending in the United States District Court for the Southern District of New York. The consolidated amended complaint, dated 12th February 2010, alleges that the registration statements relating to American Depositary Shares representing Preferred Stock, Series 2, 3, 4 and 5 (ADS) offered by Barclays Bank PLC at various times between 2006 and 2008 contained misstatements and omissions concerning (amongst other things) Barclays portfolio of mortgage-related (including US subprime-related) securities, Barclays exposure to mortgage and credit market risk and Barclays financial condition. The consolidated amended complaint asserts claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933. Barclays considers that these ADS-related claims against it are without merit and is defending them vigorously. It is not possible to estimate any possible loss in relation to these claims or any effect that they might have upon operating results in any particular financial period.
On 15th September 2009 motions were filed in the United States Bankruptcy Court for the Southern District of New York by Lehman Brothers Holdings Inc. (LBHI), the SIPA Trustee for Lehman Brothers Inc. (the Trustee) and the Official Committee of Unsecured Creditors of Lehman Brothers Holdings Inc. (the Committee). All three motions challenge certain aspects of the transaction pursuant to which Barclays Capital Inc. (BCI) and other companies in the Barclays Group acquired most of the assets of Lehman Brothers Inc. (LBI) in September 2008 and the court order approving such sale. The claimants seek an order: voiding the transfer of certain assets to BCI; requiring BCI to return to the LBI estate alleged excess value BCI received; and declaring that BCI is not entitled to certain assets that it claims pursuant to the sale documents and order approving the sale. On 16th November 2009, LBHI, the Trustee and the Committee filed separate complaints in the Bankruptcy Court asserting claims against BCI based on the same underlying allegations as the pending motions and seeking relief similar to that which is requested in the motions. On 29th January 2010, BCI filed its response to the motions. Barclays considers that the motions and claims against BCI are without merit and BCI is vigorously defending its position. On 29th January 2010, BCI also filed a motion seeking delivery of certain assets that LBHI and LBI have failed to deliver as required by the sale documents and the court order approving the sale. It is not possible to estimate any possible loss to Barclays in relation to these matters or any effect that these matters might have upon operating results in any particular financial period.
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.
  ~~222~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~36 Competition and regulatory matters~~
The scale of regulatory change remains challenging and the global financial crisis is resulting in a significant tightening of regulation and changes to regulatory structures globally, especially for banks that are deemed to be of systemic importance. Concurrently, there is continuing political and regulatory scrutiny of the operation of the banking and consumer credit industries in the UK and elsewhere which, in some cases, is leading to increased regulation. For example, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 in the US will restrict many credit card pricing and marketing practices. The nature and impact of future changes in the legal framework, policies and regulatory action cannot currently be fully predicted and are beyond Barclays control but, especially in the area of banking regulation, are likely to have an impact on Barclays businesses and earnings.
The market for payment protection insurance (PPI) has been under scrutiny by the UK competition authorities and financial services regulators. Following a reference from the Office of Fair Trading (OFT), the UK Competition Commission (CC) undertook an in-depth enquiry into the PPI market. The CC published its final report on 29th January 2009 concluding that the businesses which offer PPI alongside credit face little or no competition when selling PPI to their credit customers. In March 2009, Barclays submitted a targeted appeal focused on the prohibition on sale of PPI at the point of sale (POSP) remedy on the basis that it was not based on sound analysis, and is unduly draconian. The Competition Appeals Tribunal (CAT) upheld Barclays appeal on two grounds, meaning that the CC will be required to reconsider the POSP remedy and the basis for it, and made an order to that effect on 26th November 2009.
~~This remittal process is expected to take until the autumn of 2010, at which time the CC will publish its final Remedies Order.~~
Separately, in 2006, the 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 and that the FSA would strengthen its actions against such firms. Tackling poor PPI sales practices remains a priority for the FSA. In September 2009, the FSA issued a Consultation Paper on the assessment and redress of PPI complaints made on or after 14th January 2005. The FSA has announced that it intends to publish a final version of the policy statement in early 2010 and will amend the DISP (Dispute Resolution: Complaints) rules in the FSA Sourcebook. Barclays voluntarily complied with the FSA’s request to cease selling single premium PPI by the end of January 2009.
The OFT has carried out investigations into Visa and MasterCard credit card interchange rates. A decision by the OFT in the MasterCard interchange case was set aside by the CAT in 2006. The OFT is progressing its investigations in the Visa interchange case and a second MasterCard interchange case in 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 business in this sector. In 2007, the OFT expanded its investigations into interchange rates to include debit cards.
Notwithstanding the Supreme Court ruling in relation to the test case (see Note 35 on page 221) Barclays continues to be involved in the OFT’s work on personal current accounts. The OFT initiated a market study into personal current accounts (PCAs) in the UK in 2007 which 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. In 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 reached the provisional view that some form of regulatory intervention is necessary in the UK PCA market. The OFT also held a consultation to seek views on the findings and possible measures to address the issues raised in its report. In October 2009, the OFT published a follow-up report containing details of voluntary initiatives in relation to transparency and switching agreed between the OFT and the industry. A further follow-up report is expected in March 2010 to provide details of voluntary initiatives agreed in relation to charging structures. Barclays has participated fully in the market study process and will continue to 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 has been conducting an internal review of its conduct with respect to US Dollar payments involving countries, persons and entities subject to these sanctions and has been reporting to governmental authorities about the results of that review. Barclays received inquiries relating to these sanctions and certain US 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 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 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 impact of any resolution, which could be substantial.
~~223~~
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:~~

   2009    2008
Investment in finance lease receivables    2010    2009

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    Un-
guaranteed
residual
values£m    Gross
investment
in finance
lease
receivables
£m    Future
finance
income
£m Present
value of
minimum
lease
payments
receivable
£m
Un-
guaranteed
residual
values
£m

Not more than one year
   3,513    (456 ) 3,057    55    3,929    (689 ) 3,240    149    3,440       (479 ) 2,961       60       3,513       (456 ) 3,057       55
Over one year but not more than five years
   7,597    (1,117 ) 6,480    154    8,668    (1,673 ) 6,995    355    7,200       (1,058 ) 6,142       123       7,597       (1,117 ) 6,480       154
Over five years
   2,084    (427 ) 1,657    407    3,419    (768 ) 2,651    25    1,591       (340 ) 1,251       560       2,084       (427 ) 1,657       407
Total
   13,194    (2,000 ) 11,194    616    16,016    (3,130 ) 12,886    529    12,231       (1,877 ) 10,354       743       13,194       (2,000 ) 11,194       616
The allowance for uncollectable finance lease receivables included in the allowance for impairment amounted to ~~£321m~~£351m at 31st December ~~2009 (2008: £189m)~~2010 (2009: £321m).
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 included within ~~plant and equipment~~leased assets (see Note ~~23)~~20) and are generally disposed of at the end of the lease term.
The future minimum lease payments expected to be received under non-cancellable operating leases as at 31st December ~~2009 were as follows:~~

      2009    2008

Plant and
equipment
£m

Plant and
equipment
£m
Not more than one year
   10    80
Over one year but not more than two years
   7    42
Over two years but not more than three years
   7    36
Over three years but not more than four years
   6    24
Over four years but not more than five years
   8    13
Over five years
   1    39
Total
   39    234
  ~~224~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~37 Leasing~~~~continued~~2010 was £43m (2009: £39m).
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 Accruals, deferred income and other liabilities (see Note ~~25)~~22).
~~Obligations~~As at 31st December 2010, the total future minimum payments under finance leases were ~~as follows:~~£87m (2009: £122m), of which £16m (2009: £16m) was due within one year.

      2009    2008
      Total
future
minimum
payments
£m    Total
future
minimum
payments
£m
Not more than one year
   16    35
Over one year but not more than two years
   7    13
Over two years but not more than three years
   30    14
Over three years but not more than four years
   18    17
Over four years but not more than five years
   17    14
Over five years
   34    3
Net obligations under finance leases
   122    96
~~The~~As at 31st December 2010, the carrying amount of assets held under finance leases ~~at the balance sheet date was:~~was £29m (2009: £43m).

      2009
£m 2008
£m
Cost
   127    87
Accumulated depreciation
   (84 ) (67 )
Net book value
   43    20
Operating lease commitments
The Group leases various offices, branches and other premises under non-cancellable operating lease arrangements. With such operating lease arrangements, the asset is kept on the lessor’s balance sheet and the Group reports the future minimum lease payments as an expense over the lease term.
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.
Operating lease rentals of £637m (2009: £639m) have been included in administration and general expenses.
Where the Group is the lessee the future minimum lease payment under non-cancellable operating leases are as follows:

      2009    2008
      Property
£m    Equipment
£m    Property
£m    Equipment
£m
Not more than one year
   459    9    275    5
Over one year but not more than two years
   424    6    354    1
Over two years but not more than three years
   378    –    334    1
Over three years but not more than four years
   334    –    315    –
Over four years but not more than five years
   341    –    465    5
Over five years
   2,933    3    2,744    1
Total
   4,869    18    4,487    13
      2010    2009
   Property
£m    Equipment
£m    Property
£m    Equipment
£m
  Not more than one year
   628       7       459       9
  Over one year but not more than five years
   1,477       2       1,477       6
  Over five years
   3,146       –       2,933       3
  Total
   5,251       9       4,869       18
The total of future minimum sublease payments to be received under non-cancellable subleases at the balance sheet date is ~~£147m (2008: £158m)~~£111m (2009: £147m).
~~225~~
~~38 Disposal of subsidiaries~~
~~During the year, the Group disposed of Barclays Global Investors (BGI), 50% of Barclays Vida y Pensiones Compañía de Seguros and 7% of the GRCB –Emerging Markets Botswana business.~~

      BGI Other Total
      2009
£m 2009
£m 2009
£m
Consideration received including hedging gains:

Cash received^a
   4,207    158    4,365
Non-cash consideration
   5,294    118    5,412
Total consideration received
   9,501    276    9,777
Assets and liabilities disposed of:

Assets

Cash and balances at central banks
   667    –    667
Financial assets designated at fair value:

– held on own account
   –    393    393
– held in respect of linked liabilities to customers under investment contracts
   71,791    –    71,791
Derivative financial instruments
   –    5    5
Loans and advances to customers
   –    4    4
Available for sale investments
   55    788    843
Other assets
   398    204    602
Goodwill and Intangible assets
   1,586    –    1,586
Property, plant and equipment
   122    –    122
Deferred tax assets
   99    –    99
Total
   74,718    1,394    76,112
Liabilities

Customer accounts
   –    (368 ) (368 )
Liabilities to customers under investment contracts
   (71,791 ) (415 ) (72,206 )
Derivative financial instruments
   –    (8 ) (8 )
Other liabilities
   (911 ) (74 ) (985 )
Current tax liabilities
   35    –    35
Insurance contract liabilities, including unit-linked liabilities
   –    (354 ) (354 )
Deferred tax liabilities
   –    (16 ) (16 )
Total
   (72,667 ) (1,235 ) (73,902 )
Net assets disposed of
   2,051    159    2,210
Group share of net assets disposed of
   2,051    82    2,133
Transaction costs
   (539 ) (10 ) (549 )
Amounts relating to non-controlling interests
   (580 ) –    (580 )
Gain on sale before tax
   6,331    184    6,515
Tax
   (43 ) (28 ) (71 )
Gain on sale, net of tax
   6,288    156    6,444
On 1st December 2009 the Group completed the sale of BGI to BlackRock, Inc. (BlackRock) recognising a profit on disposal before tax of £6,331m. The tax charge of £43m reflects the application of UK substantial shareholdings relief in accordance with UK tax law.
The consideration at completion was $15.2bn (£9.5bn), including 37.567 million new BlackRock shares, giving an economic interest of 19.9% of the enlarged BlackRock group. Barclays Group holds 4.9% of the voting rights and under the terms of the transaction may not acquire additional voting rights and will vote in accordance with the recommendations of the BlackRock Board of Directors. John Varley and Robert E Diamond Jr. have been appointed to the BlackRock Board, which comprises 18 Directors. The Group is not deemed to exercise significant influence and the investment has been accounted for as an available for sale equity investment.
The Group has provided BlackRock with customary warranties and indemnities in connection with the sale. Barclays will also continue to indemnify securities lending arrangements until 30th November 2012 (included within contingent liabilities in Note 34) and provide support to certain BGI cash funds until December 2013 in the form of credit derivatives (included within derivative liabilities in Note 14) and financial guarantees (included within provisions in Note 28).
In addition, Barclays, BlackRock and their respective affiliates also enter into agreements and transactions with one another in the ordinary course of their respective businesses and on an arm’s length commercial basis, subject to applicable regulation and agreements with relevant regulators.
In connection with its financing of its acquisition of BGI, BlackRock entered into a 364-day revolving credit facility with a group of lenders including Barclays, who is also acting as revolving agent. Of the $2bn credit facility, $0.8bn was committed by other lenders and following completion BlackRock had borrowed or notified to be borrowed $1.5bn under the facility. All amounts borrowed under this facility have been fully repaid and the facility was terminated prior to 31st December 2009.
~~Prior year disposals~~
~~In 2008, the Group disposed of Barclays Life Assurance Limited. There were no material disposals in 2007.~~
~~Note~~
a ~~Net cash consideration received from the sale of BGI, excluding the effect of hedging, cash balances disposed of and transaction costs paid, was £2,469m.~~
  ~~226~~240

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~

~~39 Discontinued operations~~38 Off-balance sheet arrangements
In the ordinary course of business and primarily to facilitate client transactions, the Group enters into transactions which may involve the use of off-balance sheet arrangements and special purpose entities (SPEs). These arrangements include the provision of guarantees, loan commitments, retained interests in assets which have been transferred to an unconsolidated SPE or obligations arising from the Group’s involvements with such SPEs.
Guarantees
The ~~disposed BGI business has been treated as~~Group issues guarantees on behalf of its customers. In the majority of cases, the Group will hold collateral against the exposure, have a ~~discontinued operation,~~right of recourse to the ~~results~~customer or both. In addition, the Group issues guarantees on its own behalf. The main types of ~~which are~~guarantees provided are: financial guarantees given to banks and financial institutions on behalf of customers to secure loans; overdrafts; and other banking facilities, including stock borrowing indemnities and standby letters of credit. Other guarantees provided include performance guarantees, advance payment guarantees, tender guarantees, guarantees to Her Majesty’s Revenue and Customs and retention guarantees. The nominal principal amount of contingent liabilities with off-balance sheet risk is set out ~~below. For~~in Note 25.
Loan commitments
The Group enters into commitments to lend to its customers subject to certain conditions. Such loan commitments are made either for a fixed period or are cancellable by the ~~year ended 31st December 2009~~Group subject to notice conditions. Information on loan commitments and similar facilities is set out in Note 25.
Leasing
The Group leases various offices, branches, other premises and equipment under non-cancellable operating lease arrangements. With such operating lease arrangements, the ~~results~~asset is kept on the lessor’s balance sheet and the Group reports the future minimum lease payments as an expense over the lease term. Information on leasing can be found in Note 37.
Special purpose entities
SPEs are ~~for the 11 month period up~~entities that are created to ~~the date~~accomplish a narrow and well defined objective. There are often specific restrictions or limits around their ongoing activities. The Group’s transactions with SPEs take a number of ~~disposal.~~

      2009
£m 2008
£m 2007
£m
Net interest income
   33    –    12
Net fee and commission income
   1,759    1,916    1,937
Net trading income/(loss)
   67    (10 ) 5
Other income
   4    10    2
Total income
   1,863    1,916    1,956
Operating expenses excluding amortisation of intangible assets
   (1,123 ) (960 ) (1,095 )
Amortisation of intangible assets
   (14 ) (15 ) (8 )
Operating expenses
   (1,137 ) (975 ) (1,103 )
Profit before tax from discontinued operations
   726    941    853
Tax on discontinued operations
   (237 ) (337 ) (282 )
Profit after tax from discontinued operations
   489    604    571
Profit on disposal of discontinued operations^a
   6,331    –    –
Tax on disposal
   (43 ) –    –
Net profit on the disposal of the discontinued operation
   6,288    –    –
Profit after tax from discontinued operations, including gain on disposal
   6,777    604    571
~~Other comprehensive income relating to discontinued operations is as follows:~~

      2009
£m 2008
£m 2007
£m
Available for sale assets
   10    (9 ) 1
Currency translation reserve
   (85 ) 133    11
Tax relating to components of other comprehensive income
   17    (10 ) 14
Other comprehensive income, net of tax, from discontinued operations
   (58 ) 114    26
~~The cash flows attributable to the discontinued operations were as follows:~~

      2009
£m 2008
£m 2007
£m
Cash flows from discontinued operations

Net cash flows from operating activities
   333    524    773
Net cash flows from investing activities
   (25 ) (93 ) (248 )
Net cash flows from financing activities
   (550 ) (362 ) (429 )
Effects of exchange rates on cash and cash equivalents
   (134 ) 217    (13 )
Net cash flows from discontinued operations
   (376 ) 286    83
~~Notes~~forms, including:

a– ~~Details~~The provision of ~~the profit on disposal are shown in Note 38.~~
~~227~~  financing to fund asset purchases, or commitments to provide finance for future purchases.

~~40 Acquisition of subsidiaries~~
~~a) Crescent Real Estate~~
On 19th November 2009, Barclays formed Crescent Real Estate Holdings LLC a joint venture with Goff Capital, Inc., to assume 99.7% ownership of Crescent Real Estate Equities Limited partnership (Crescent) following the completion of a debt restructuring transaction. Crescent is a real estate investment company that owns and manages office space, as well as investments in resort residential developments and luxury hotels across the US. These properties are accounted for as investment properties.
~~The assets and liabilities of Crescent at acquisition were as follows:~~

      Carrying
value pre-
acquisition
£m Fair value
adjustments
£m Fair
values
£m
Assets

Loans and advances to customers
   85    –    85
Investment in associates and joint ventures
   132    (45 ) 87
Property, plant and equipment
   879    69    948
Other assets
   154    (2 ) 152
Total assets
   1,250    22    1,272
Liabilities

Deposits from banks
   (170 ) –    (170 )
Other liabilities
   (102 ) 3    (99 )
Total liabilities
   (272 ) 3    (269 )
Net assets
   978    25    1,003
Group share of net assets acquired
   978    25    1,003
Acquisition cost

Loans
   1,003
Total consideration
   1,003
~~No goodwill arose on acquisition.~~
The results of Crescent’s operations have been included from 19th November 2009 and did not materially contribute to the consolidated profit before tax. It is impracticable to disclose the revenue and profit or loss of the combined entity as though the acquisition date had been 1st January 2009.
–
  ~~228~~ Derivative transactions to provide investors in the SPE with a specified exposure.

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~40 Acquisition of subsidiaries~~~~continued~~
~~b) Other acquisitions~~
Other acquisitions made by the Group during the year included 100% of PT Bank Akita on 1st February 2009 and 100% of the Portuguese credit card business of Citibank International PLC on 1st December 2009.
The Group increased its share in Abseq Properties (Pty) Ltd (previously accounted for as an associate) to 85% on 30th January 2009. On 6th April 2009, the Group acquired 100% of Care Principles as part of a debt restructuring transaction.
~~None of these acquisitions were individually material.~~
Details of the net assets acquired and the consideration paid are set out in aggregate below. The results of their operations have been included from the dates acquired and contributed a loss of £17m to the consolidated profit before tax.

      Carrying
value pre-
acquisition
£m Fair value
adjustments
£m Other
adjustments
£m Fair
values
£m
Assets

Loans and advances to customers
   598    (9 ) –    589
Investments in associates and joint ventures
   3    –    –    3
Intangible assets
   –    75    16    91
Property, plant and equipment
   201    5    –    206
Other assets
   38    –    –    38
Total assets
   840    71    16    927
Liabilities

Deposits from banks
   (806 ) 45    117    (644 )
Customer accounts
   (48 ) –    –    (48 )
Derivative financial instruments
   –    (32 ) 19    (13 )
Deferred tax liabilities
   (14 ) (26 ) –    (40 )
Other liabilities
   (111 ) 18    (2 ) (95 )
Total liabilities
   (979 ) 5    134    (840 )
Net assets acquired
   (139 ) 76    150    87
Group share of net assets acquired
   66
Acquisition cost

Cash Paid
   24
Deferred consideration
   19
Attributable costs
   4
Total consideration
   47
Goodwill
   7
Gain on acquisition
   26
~~Cash outflows in respect of acquisitions~~
~~The aggregate net outflow of cash from the acquisition of the above Group entities was £28m, representing cash consideration and attributable costs.~~
~~Prior year acquisitions~~
The initial accounting for the 2008 acquisition of the North American businesses of Lehman Brothers was completed on 22nd September 2009. There were no revisions to the initial accounting disclosed in the 2008 financial statements. Approximately £2.3bn of the assets acquired as part of the acquisition had not been received by 31st December 2009, approximately £1.8bn of which were recognised as part of the accounting for the acquisition and are included in the balance sheet as at 31st December 2009. Ongoing legal proceedings related to the acquisition, including in respect of assets not yet received, are discussed in Note 35.
~~In addition, in 2008 the Group acquired Macquarie Bank Limited’s residential mortgage businesses, Goldfish credit card UK businesses and 100% of the ordinary shares of Expobank.~~
~~In 2007, the Group acquired 100% of the ordinary shares of each of Indexchange Investment AG, Equifirst Corporation and Walbrook Group Limited.~~
–
~~229~~  The provision of liquidity or backstop facilities which may be drawn upon if the SPE experiences future funding difficulties.

– Direct investment in the notes issued by SPEs.
~~41 Investment in subsidiaries~~
~~The investment in Barclays Bank PLC is stated~~Depending on the nature of the Group’s resulting exposure, it may consolidate the SPE on to the Group’s balance ~~sheet~~sheet. The consolidation of ~~Barclays PLC~~SPEs is considered at ~~a cost of £20,215m (2008: £15,340m). The increase of £4,875m (2008: £5,154m) during~~inception, based on the ~~year represents~~arrangements in place and the ~~cost of additional shares of £25m (2008: £16m), capital contributions of £800m (2008: £4,362m) and a non-cash capital contribution of £4,050m (2008: £776m).~~
~~Principal subsidiaries~~
~~Country of registration~~
~~or incorporation~~ ~~Company name~~ ~~Nature of business~~ ~~Percentage~~
~~of equity~~
~~capital~~
~~held %~~
~~Botswana~~
~~Barclays Bank of Botswana Limited~~ ~~Banking~~ ~~67.8~~
~~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 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~~
~~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~~ ~~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~~ ~~55.5~~
~~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 Financial Corporation~~ ~~Holding company for US credit card issuer~~ ~~100~~ *
~~USA~~
~~Barclays Group US Inc.~~ ~~Holding company~~ ~~100~~
~~Zimbabwe~~
~~Barclays Bank of Zimbabwe Limited~~ ~~Banking~~ ~~67.7~~ *
assessed risk exposures at that time. In accordance with ~~Section 410(2)(a) of the Companies Act 2006, 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 UK Companies House.~~
~~Entities in which the Group holds less than half the voting rights~~
~~There are a number of entities in which the Group holds less than half the voting rights which~~IFRS, SPEs are consolidated when the substance of the relationship between the Group and the entity indicates control. Potential indicators of control include, amongst others, an assessment of the Group’s exposure to the risks and benefits of the SPE. The initial consolidation analysis is revisited at a later date if:
i) the Group acquires additional interests in the entity;
ii) the contractual arrangements of the entity are amended such that the relative exposures to risks and rewards change; or
iii) the Group acquires control over the main operating and financial decisions of the entity.
A number of the Group’s transactions have recourse only to the assets of unconsolidated SPEs. Typically, the majority of the exposure to these assets is borne by third parties and the Group’s risk is mitigated through over-collateralisation, unwind features and other protective measures.
The business activities within the Group where SPEs are used include multi-seller conduit programmes, asset securitisations, client intermediation, credit structuring, asset realisations and fund management. These activities are described below. In addition, later sections provide quantitative information on the Group’s involvements with CDOs, SIVs SIV-Lites and conduits.
Multi-seller conduit programmes
Barclays creates, administers and provides liquidity and credit enhancements to several commercial paper conduit programmes, primarily in the United States. These conduits provide clients access to liquidity in the commercial paper markets by allowing them to sell consumer or trade receivables to the conduit, which then issues commercial paper to investors to fund the purchase. The conduits have sufficient collateral, credit enhancements and liquidity support to maintain an investment grade rating for the commercial paper.
Asset securitisations
The Group has assisted its customers with the formation of asset securitisations, some of which are effected through the use of SPEs. These entities have minimal equity and rely on funding in the form of notes to purchase the assets for securitisation. As these SPEs are created for other companies, the Group does not usually control these entities and therefore does not consolidate them. The Group may provide financing in the form of senior notes or junior notes and may also provide derivatives to the SPE. These transactions are included on the balance sheet.
The Group has also used SPEs to securitise part of its originated and purchased retail and commercial lending portfolios and credit card receivables. These SPEs are usually consolidated and derecognition only occurs when the Group transfers 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 carrying amount of securitised assets together with the associated liabilities are set out in Note 36.
241
Notes to the financial statements
For the year ended 31st December 2010 continued
38 Off-balance sheet arrangementscontinued
Client intermediation
The Group has structured transactions as a financial intermediary to meet investor and client needs. These transactions involve entities structured by either the Group or the client and are used to modify cash flows of third party assets to create investments with specific risk or return profiles or to assist clients in the efficient management of other risks. Such transactions will typically result in a derivative being shown on the balance sheet, representing the Group’s exposure to the relevant asset. The Group also invests in lessor entities specifically to acquire assets for leasing. Client intermediation also includes arrangements to fund the purchase or construction of specific assets (most common in the property industry).
Credit structuring
The Group structures investments to provide specific risk profiles to investors. This may involve the sale of credit exposures, often by way of derivatives, to an entity which subsequently funds those exposures by issuing securities. These securities may initially be held by Barclays prior to sale outside of the Group.
Asset realisations
The Group establishes SPEs to facilitate the recovery of loans in circumstances where the borrower has suffered financial loss.
To the extent that there are guarantees and commitments in relation to SPEs the details are included in Note 25.
Collateralised debt obligations (CDOs)
The Group has structured and underwritten CDOs. At inception, the Group’s exposure principally takes the form of a liquidity facility provided to support future funding difficulties or cash shortfalls in the vehicles. If required by the vehicle, the facility is ~~controlled~~drawn with the amount advanced included within loans and advances on the balance sheet. Upon an event of default or other triggering event, the Group may acquire control of a CDO and, therefore, be required to fully consolidate the vehicle for accounting purposes. The potential for transactions to hit default triggers before the end of 2011 has been assessed and is included in the determination of a £137m impairment release and other credit provisions in relation to ABS CDO Super Senior and other credit market exposures for the year ended 31st December 2010.
The Group’s exposure to ABS CDO Super Senior positions before hedging was £1,992m as at 31st December 2010, equivalent to an aggregate 50.97% decline in value on average for all investors. This represents the Group’s exposure to High Grade CDOs, stated net of write downs and charges. These facilities are fully drawn and included within loans and advances on the balance sheet.
Collateral
The collateral underlying unconsolidated CDOs comprised 78% residential mortgage-backed securities, 3% non-residential asset-backed securities and 19% in other categories (a proportion of which will be backed by residential mortgage collateral).
The remaining Weighted Average Life (WAL) of all collateral is 6.3 years. The combined Net Asset Value (NAV) for all of the CDOs was £1bn.
Funding
The CDOs were funded with senior unrated notes and rated notes up to AAA. The capital structure senior to the AAA notes on cash CDOs was supported by a liquidity facility provided by the Group. ~~Such entities are deemed to be controlled~~The senior portion covered by liquidity facilities is on average 86% of the ~~Group when relationships with such entities give rise to benefits that are in substance no different from those that would arise were the entity a subsidiary.~~capital structure.
The ~~consolidation~~initial WAL of ~~such entities may be appropriate~~the notes in ~~a number of situations, but primarily when:~~issue averaged 6.7 years. The full contractual maturity is 38.2 years.
Interests in third party CDOs
The Group has purchased securities in and entered into derivative instruments with third party CDOs. These interests are held as trading assets or liabilities on the Group’s balance sheet and measured at fair value. The Group has not provided liquidity facilities or similar agreements to third party CDOs.
Structured investment vehicles (SIVs)
The Group does not structure or manage SIVs. Group exposure to third party SIVs comprised:

–
~~the operating and financial policies~~£nil (2009: £16m) 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;~~
senior liquidity facilities.

–
Derivative exposures included on the ~~Group has rights to obtain the majority~~balance sheet at their net fair value of ~~the benefits of the entity and/or retains the majority of the residual or ownership risks related to the entity; or~~
£46m (2009: £53m).
SIV-Lites
–
~~the activities of the entity are being conducted largely on behalf of the Group according to its specific business objectives.~~
~~Such~~The Group has exposure to a SIV-Lite transaction. The Group is not involved in its ongoing management. Exposures have decreased to £345m (2009: £461m) representing assets designated at fair value.
Commercial paper and medium-term note conduits
The Group provided £17bn in undrawn backstop liquidity facilities to its own sponsored CP conduits. The Group fully consolidates these entities such that the underlying assets are ~~created for a variety~~reflected on the Group balance sheet.
These consolidated entities in turn provide facilities of ~~purposes including securitisation, structuring, asset realisation, intermediation and management.~~
~~Subsidiaries with a different reporting date from that of the Parent of~~£740m to third party conduits containing prime UK buy-to-let Residential Mortgage Backed Securities (RMBS) assets. As at 31st December 2010, the entire facility had been drawn and is included in available for sale financial investments.
~~Entities may have~~The Group provided backstop facilities to support the paper issued by one third party conduit. This facility totalled £129m, with underlying collateral comprising 100% auto loans. There were no drawings on this facility as at 31st December 2010.
The Group provided backstop facilities to six third party SPEs that fund themselves with medium-term notes. These notes are sold to investors as a ~~different reporting~~series of 12-month securities and remarketed to investors annually. If investors decline to renew their holdings at a price below a pre-agreed spread, the backstop facility requires the Group to purchase the outstanding notes at scheduled maturity. The Group has provided facilities of £1.2bn to SPEs holding prime UK and Australian owner-occupied RMBS assets. As at the balance sheet 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 inclusionthese facilities had been drawn and were included in ~~the consolidated financial statements of Barclays PLC, entities with different reporting dates are made up until 31st December.~~loans and advances.
  ~~230~~242
39 Share-based payments
The Group operates share schemes for employees throughout the world. The share based payment charge represents 7.2% (2009: 3.0%) of employee costs and unvested share awards, including options, amount to 6.6% (2009: 6.0%) of issued share capital.
The charge for the year arising from share based payment schemes was as follows:
      Charge for the year
   2010
£m    2009
£m    2008
£m
  Share Value Plan
   361       –       –
  Performance share Plan
   58       33       14
  Incentive share Plan
   50       18       7
  Executive Share Award Scheme
   304       178       216
  Sharesave
   20       29       (7 )
  Others
   44       20       (8 )
  Total Equity Settled
   837       278       222
  Cash Settled
   23       8       3
  Total Continuing operation
   860       286       225
  Discontinued operations
   –       12       35
  Total share based payments
   860       298       260
The terms of the main current plans are as follows:
Share value plan (SVP)
The Share Value Plan (SVP) was introduced in March 2010. SVP awards are granted to participants in the form of a provisional allocation of Barclays shares which vest over a period of three years in equal annual tranches. Participants do not pay to receive an award or to receive a release of shares. Awards under the SVP qualify for dividends.
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 (ISP)
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.
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 under JSAP (Joiners Share Award Plan). All awards are subject to potential forfeiture if the individual resigns and commences work with a competitor business. LTIP plans are cash and equity performance plans which after 3 years (dependant on performance) pay half in cash and the remaining half in shares which are placed into ESAS for a further 1 or 2 years.
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:€300, Spain:€225) 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.
UK 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 maximum value of £600 per tax year. 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.
243
Notes to the financial statements
For the year ended 31st December 2010 continued
39 Share-based paymentscontinued
Other schemes
In addition to the above schemes, the Group operates a number of other schemes including schemes operated by and settled in the shares of subsidiary undertakings, none of which are individually or in aggregate material in relation to the charge for the year or the numbers of issued shares.
Share option plans
As noted above, the Group’s schemes include a number of share option schemes – including grants of nil cost options.
The weighted average fair value per option granted during the year is as follows:
       2010
£m            2009
£m
  SVP
   3.54       –
  ESAS
   2.88       1.08
  PSP
   3.55       2.81
  ISP
   3.55       2.58
  Sharepurchase
   3.07       1.82
  Sharesave
   1.29       1.43
Sharepurchase, ISP, SVP and ESAS 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 2010 is £22m (2009: £10m, 2008: £10m).
Fair values for Sharesave and PSP are calculated at the date of grant using either a Black-Scholes model or Monte Carlo simulation.
The significant weighted average assumptions used to estimate the fair value of the options granted from 2007 to 2010 under the Group’s major share schemes are as follows:
   Weighted
average
share price    Weighted
average
exercise price    Expected
volatility Expected
option life
  2010

  PSP
   3.55       3.46       45 % 2 years
  Sharesave
   3.21       2.67       45 % 4 years
  2009

  PSP
   2.34       1.77       45 % 2 years
  Sharesave
   3.51       2.70       45 % 4 years
  2008

  PSP
   5.45       2.07       37 % 3 years
  Sharesave
   3.11       2.51       37 % 4 years
  2007

  PSP
   7.07       –       25 % 3 years
  Sharesave
   5.82       4.81       25 % 4 years
Expected Volatility
Expected volatility and dividend yield on the date of grant have been used as inputs into the respective valuation models for Sharesave and PSP.
The assumed dividend yield for Barclays PLC is the average annual dividend yield on the date of grant of 2% (2009: 2%).
Discount Rate
The yield on UK government bonds with a commensurate life has been used to determine the risk-free discount rate of 2% (2009: 3%) for Sharesave and PSP. Option life is estimated based upon historical data for the holding period of options between grant and exercise dates.
Expected option life and number expected to vest
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.
244

39 Share-based paymentscontinued
Movements in options
Analysis of the movement in the number and weighted average exercise price of options for the major schemes is set out below:
      ESAS^a,b    PSP^a

Number
(000s)
Weighted average
ex. price (£)
Number
(000s)
Weighted average
ex. price (£)
   2010 2009 2010    2009    2010 2009 2010    2009
  Outstanding at beginning of year/acquisition date
   464,511    267,937    –       –       31,262    50,729    –       –
  Granted in the year
   85,489    311,977    –       –       6,491    4,794    –       –
  Exercised/released in the year
   (139,220 ) (90,296 ) –       –       (8,355 ) (6,496 ) –       –
  Less: forfeited in the year
   (27,297 ) (25,107 ) –       –       (10,749 ) (17,765 ) –       –
  Outstanding at end of year
   383,483    464,511    –       –       18,649    31,262    –       –
  Of which exercisable:
   5,220    12,714    –       –       40    –    –       –

      ISP^a,b    SVP^a,b

Number
(000s)
Weighted average
ex. price (£)
Number
(000s)

Weighted average
ex. price (£)

   2010 2009 2010    2009    2010 2009 2010    2009
  Outstanding at beginning of year/acquisition date
   54,978    7,100    –       –       –    –    –       –
  Granted in the year
   800    50,652    –       –       241,931    –    –       –
  Exercised/released in the year
   (587 ) (19 ) –       –       (4,932 ) –    –       –
  Less: forfeited in the year
   (5,208 ) (2,755 ) –       –       (10,157 ) –    –       –
  Outstanding at end of year
   49,983    54,978    –       –       226,842    –    –       –
  Of which exercisable:
   –    –    –       –       –    –    –       –

      Sharesave^a    Sharepurchase^a,b

Number
(000s)

Weighted average
ex. price (£)

Number
(000s)

Weighted average
ex. price (£)

   2010 2009 2010    2009    2010 2009 2010    2009
  Outstanding at beginning of year/acquisition date
   91,311    94,131    3.01       1.83       12,320    6,961    –       –
  Granted in the year
   21,296    28,005    2.46       2.70       4,176    6,832    –       –
  Exercised/released in the year
   (1,079 ) (153 ) 2.67       2.83       (1,190 ) (952 ) –       –
  Less: forfeited in the year
   (19,368 ) (30,672 ) 3.42       3.58       (845 ) (521 ) –       –
  Outstanding at end of year
   92,160    91,311    2.80       3.01       14,461    12,320    –       –
  Of which exercisable:
   5,814    7,537    4.35       4.19       2,529    1,621    –       –
Notes
a Options/award granted over Barclays PLC shares.
b Nil cost award
245
Notes to the ~~accounts~~financial statements
For the year ended 31st December ~~2009~~2010 continued
~~continued~~
39 Share-based paymentscontinued
The table below shows the weighted average share price at the date of exercise/release of shares:

2010
£

2009
£

Sharesave^a
   3.17       3.21
Sharepurchase^a,b
   3.02       2.64
SVP^a,b
   3.10       –
ESAS^a,b
   3.39       2.02
PSP^a,b
   3.46       1.77
ISP^a,b
   3.10       3.43
Certain of the Groups share option plans enable certain directors and members of staff employees the option to subscribe for new ordinary shares of Barclays PLC between 2010 and 2018.
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:
  Exercise price range    2010    2009

Weighted
average
remaining
contractual
life in years
   Number of
options
Outstanding
(000s)
Weighted
average
remaining
contractual
life in years
   Number of
options
Outstanding
(000s)
Sharesave^a

£1.44-£2.49
   4       22,345       2       1,818
£2.50-£3.49
   2       58,046       3       69,543
£3.50-£4.49
   –       4,828       1       9,058
£4.50-£5.49
   1       6,940       2       10,892
Sharepurchase^a,b
   1       14,461       2       12,320
SVP^a,b
   2       226,842       –       –
ESAS^a,b
   3       383,483       3       464,511
ISP^a,b
   1       49,983       2       54,978
PSP^a,b
   1       18,649       1       31,262
There were no modifications to the share-based payment arrangements in the years 2010, 2009 and 2008.
As at 31st December 2010, the total liability arising from cash-settled share-based payment transactions was £23m (2009: £13m; 2008: £23m).
Treasury Shares
The Group, through various employee benefit trusts, holds shares in Barclays PLC (‘treasury shares’) to meet its obligations under its share based payment schemes.
The total number of Barclays shares held in Group employee benefit trusts at 31st December 2010 was 259.0m (2009: 125.1m). No dividend rights have been waived on these shares. The total market value of the shares held in trust, based on the year-end share price of £2.61 (2009: £2.75), was £676m (2009: £344m). As at 31st December 2010, options over 5.2 million (2009: 15.6 million) of the total shares held in the trusts were exercisable. Further details on the treatment of treasury shares is provided on page 233.
Notes
a Options/award granted over Barclays PLC shares.
b Nil cost award.
246

~~41 Investment in subsidiaries~~~~continued~~
~~Entities where the Group’s interest exceeds 50% which are excluded from consolidation~~
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 cannot 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 2006 Section 410(2)(b).~~

Country of registration
or incorporation
   Name
Percentage of
ordinary share
capital held
%
   Equity
share-
holders’
funds
£m    Retained
loss for
the year
£m
UK
   Fitzroy Finance Limited    100    –    –
Cayman Islands
   Palomino Limited    100    1    –
4240 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 in its balance sheet and income statement. A list of the Group’s principal subsidiaries is shown in Note ~~41.~~32.
Associates, joint ventures and other entities
The Group provides banking services to its associates, joint ventures, 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 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.
Entities under common directorships
The Group enters into normal commercial relationships with entities for which members of the Group’s Board also serve as Directors. The amounts included in the Group’s financial statements relating to such entities that are not publicly listed are shown in the table opposite under Entities under common directorships.
~~231~~
~~42 Related party transactions and Directors’ remuneration~~~~continued~~
Amounts included in the accounts, in aggregate, by category of related party entity are as follows:


      Associates
£m Joint
ventures
£m Entities
under
common
directorships
£m
Pension
funds, unit
trusts and
investment
funds
£m
   Total
£m
For the year ended and as at 31st December 2009

Income statement:

Interest received
   3    90    7    –    100
Interest paid
   –    (18 ) –    –    (18 )
Fees received for services rendered (including investment management and custody and commissions)    10    9    –    6    25
Fees paid for services provided
   (47 ) (113 ) –    –    (160 )
Principal transactions
   (11 ) (35 ) 6    –    (40 )
Impairment
   (2 ) (5 ) –    –    (7 )
Assets:

Loans and advances to banks and customers
   144    1,145    192    –    1,481
Derivative transactions
   3    8    48    –    59
Other assets
   76    193    –    –    269
Liabilities:

Deposits from banks
   –    654    –    –    654
Customer accounts
   54    252    29    23    358
Derivative transactions
   –    3    10    –    13
Other liabilities
   2    22    –    23    47

      Associates
£m Joint
ventures
£m Entities
under
common
directorships
£m
Pension
funds, unit
trusts and
investment
funds
£m
Total
£m
For the year ended and as at 31st December 2008

Income statement:

Interest received
   –    105    3    –    108
Interest paid
   –    (73 ) –    –    (73 )
Fees received for services rendered (including investment management and custody and commissions)    –    15    –    5    20
Fees paid for services provided
   (44 ) (146 ) –    –    (190 )
Principal transactions
   8    59    60    (25 ) 102
Assets:

Loans and advances to banks and customers
   110    954    34    –    1,098
Derivative transactions
   –    9    311    15    335
Other assets
   67    276    –    3    346
Liabilities:

Deposits from banks
   –    592    –    –    592
Customer accounts
   –    167    74    10    251
Derivative transactions
   –    –    111    41    152
Other liabilities
   3    18    –    28    49

      Associates
£m Joint
ventures
£m Entities
under
common
directorships
£m
Pension
funds, unit
trusts and
investment
funds
£m
   Total
£m
For the year ended and as at 31st December 2007

Income statement:

Interest received
   5    88    1    –    94
Interest paid
   (1 ) (58 ) (1 ) –    (60 )
Fees received for services rendered (including investment management and custody and commissions)    1    34    –    26    61
Fees paid for services provided
   (52 ) (78 ) –    –    (130 )
Principal transactions
   (27 ) 45    (16 ) –    2
Assets:

Loans and advances to banks and customers
   142    1,285    40    –    1,467
Derivative transactions
   –    4    36    –    40
Other assets
   213    106    –    14    333
Liabilities:

Deposits from banks
   11    –    –    –    11
Customer accounts
   –    61    33    12    106
Derivative transactions
   –    10    50    –    60
Other liabilities
   4    125    –    –    129
  ~~232~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~42 Related party transactions and Directors’ remuneration~~~~continued~~
   Associates
£m Joint
ventures
£m Entities
under
common
directorships
£m
Pension
funds, unit
trusts and
investment
funds
£m

  For the year ended and as at 31st December 2010

  Income
   19    (15 ) 10    –
  Impairment
   (5 ) (9 ) –    –
  Total Assets
   135    2,113    45    –
  Total Liabilities
   28    477    110    19
  For the year ended and as at 31st December 2009^a

  Income
   (57 ) (55 ) (64 ) 6
  Impairment
   (2 ) (5 ) –    –
  Total Assets
   155    2,080    43    –
  Total Liabilities
   4    503    27    46
  For the year ended and as at 31st December 2008^a

  Income
   (36 ) (40 ) 45    (20 )
  Total Assets
   177    1,239    108    18
  Total Liabilities
   3    777    93    79
No guarantees, pledges or commitments have been given or received in respect of these transactions in 2010, 2009 ~~2008~~ or ~~2007.~~2008.
~~Derivatives~~There were no derivatives transacted on behalf of the Pensions Funds Unit Trusts and Investment Funds ~~amounted to~~(2009: £192m, ~~(2008: £318m, 2007: £22m)~~2008: £318m).
In 2008 Barclays paid £12m (2007: £18m) of its charitable donations through the Charities Aid Foundation, a registered charitable organisation, in which a Director of the Company was a Trustee. In 2009, following personnel changes, Charities Aid Foundation is not a related party.
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.
There were no material related party transactions with Entities under common directorship 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.
Note
a Comparatives have been restated to reflect changes to entities identified as
related parties.
247
Notes to the financial statements
For the year ended 31st December 2010 continued
40 Related party transactions and Directors’ remunerationcontinued
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 ~~2009~~2010 were as follows:

   Directors, other Key Management
Personnel and connected persons
Directors, other Key Management Personnel and connected persons

2009
£m

2008
£m

2007
£m
   2010
£m 2009
£m 2008
£m
Loans outstanding at 1st January
   7.3    7.4    7.8       6.6    7.3    7.4
Loans issued during the year
   1.9    6.9    2.7       0.5    1.9    6.9
Loan repayments during the year
   (1.6 ) (5.5 ) (3.2 )    (2.1 ) (1.6 ) (5.5 )
Loans outstanding at 31st December
   7.6    8.8    7.3       5.0    7.6    8.8
Interest income earned
   0.1    0.4    0.4       –    0.1    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 2010, 2009 ~~2008~~ or ~~2007.~~2008.

      2009
£m 2008
£m 2007
£m
Deposits outstanding at 1st January
   28.7    8.9    15.0
Deposits received during the year
   160.0    235.7    114.4
Deposits repaid during the year
   (158.0 ) (221.9 ) (115.0 )
Deposits outstanding at 31st December
   30.7    22.7    14.4
Interest expense on deposits
   0.1    0.5    0.6
During 2009 the membership of the Group Executive Committee increased. These additional persons became Officers of the Group and as such are included in Key Management Personnel for 2009, but not 2008.
   2010
£m 2009
£m 2008
£m
Deposits outstanding at 1st January
   30.3    28.7    8.9
Deposits received during the year
   104.9    160.0    235.7
Deposits repaid during the year
   (99.3 ) (158.0 ) (221.9 )
Deposits outstanding at 31st December
   35.9    30.7    22.7
Interest expense on deposits
   –    0.1    0.5
Of the loans outstanding above, £0.5m (2009: £0.1m, ~~(2008: £1.6m, 2007: £nil)~~2008: £1.6m) relates to Directors and other Key Management Personnel (and persons connected to them) ~~that~~, who left the Group during the year. Of the deposits outstanding above, £0.2m (2009: £3.7m, ~~(2008: £6.1m, 2007: £2.8m)~~2008: £6.1m) related to Directors and other Key Management Personnel (and persons connected to them) ~~that~~, who left the Group during the year. The amounts disclosed as at 1st January includes deposits outstanding for those who became Directors or Key Management Personnel during the year.
All loans to Directors and other Key Management Personnel (and persons connected to them), (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; with the exception of £692 provided on an interest free basis.~~features.
AIn 2009, a loan of £692 provided on an interest free basis was granted to one non-Director member of Barclays Key Management to purchase a commuter rail ticket. The maximum loan outstanding during ~~the year~~2009 was £692. Commuter rail ticket loans are provided to all Barclays staff members upon request on the same terms.
~~233~~
~~42 Related party transactions and Directors’ remuneration~~~~continued~~ No loans provided on an interest free basis were granted to any member of Barclays Key Management in 2010.
Remuneration of Directors and other Key Management Personnel

Remuneration of Directors, other Key Management Personnel and connected persons
   Directors, other Key Management
Personnel and connected persons    2010
£m 2009
£m 2008
£m

2009
£m

2008
£m

2007
£m
   8.
Salaries and other short-term benefits
   8.6    10.7    23.7    28.1    6    10.7
Employer social security charges on emoluments
   12.4    2.9    2.7
Pension costs
   0.7    0.9    1.1    1.0    0.7    0.9
Other long-term benefits
   2.5    1.6    9.2    41.9    2.5    1.6
Share-based payments
   15.8    11.8    31.7    39.3    15.8    11.8
Costs recognised for accounting purposes
   122.7    30.5    27.7
Employer social security charges on emoluments
   2.9    2.7    7.8    (12.4 ) (2.9 ) (2.7 )
   30.5    27.7    73.5
Other long-term benefits – difference between awards granted and costs recognised
   (9.3 ) 15.2    0.4
Share-based payments – difference between awards granted and costs recognised
   (20.8 ) 32.7    (8.5 )
Total remuneration awarded
   80.2    75.5    16.9
The population of Directors and other Key Management Personnel increased as a result of the formation of the Executive Committee in November 2009. Figures are provided for the period that individuals met the definition of Directors and other Key Management Personnel.
Total remuneration awarded to Directors and other Key Management Personnel represents the awards made to individuals that have been approved by the Board Remuneration Committee as part of the latest payround decisions and is consistent with the approach adopted for disclosures set out on pages 147 to 163. Costs recognised in the income statement reflect the accounting charge for the year included within operating expenses. The difference between the values awarded and the recognised income statement charge principally relates to the recognition of deferred costs for prior year awards.
248
40 Related party transactions and Directors’ remunerationcontinued
b) Disclosure required by the Companies Act 2006
The following information is presented in accordance with the Companies Act 2006:
Directors’ remuneration

   2009
£m    2008
£m    2010
£m    2009
£m    2008
£m
Aggregate emoluments
   8.8    6.0    15.8       8.8       6.0
Gains made on the exercise of share options
   8.9    –    –       8.9       –
Amounts paid under long-term incentive schemes
   –    7.4    7.0       –       7.4
   17.7    13.4    22.8       17.7       13.4
Actual pension contributions of ~~£18,786~~£13,588 were paid to ~~money purchase~~defined contribution schemes on behalf of one Director ~~(2008:~~(2009: £18,786, one Director, 2008: £11,745, one Director). Notional pension contributions to ~~money purchase~~defined contribution schemes were £nil ~~(2008:~~(2009: £nil, 2008: £nil).
As at 31st December ~~2009, two Directors were~~2010, one Director was accruing retirement benefits under a defined benefit scheme ~~(2008:~~(2009: two Directors, 2008: two Directors).
One Director (Frits Seegers) agreed to waive his fees as non-executive Director of Absa Group Limited and Absa Bank Limited. The fees for 2009 were ZAR 0.1m (£0.01m). The fees for 2008 were ZAR 0.4m (£0.03m). In both 2008 and 2009 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 ~~23 persons) and Barclays Bank PLC (involving~~ 24 persons) at 31st December ~~2009~~2010 amounted ~~20,000,820~~29,102,334 ordinary shares of 25p each ~~(0.18%~~(0.24% of the ordinary share capital outstanding) ~~and 20,008,541 ordinary shares of 25p each (0.18% of the ordinary share capital outstanding), respectively.~~.
Executive Directors and Officers of Barclays PLC ~~held in total~~as a Group (involving 1213 persons) held, at 31st December ~~2009,~~2010, options to purchase ~~3,279,642~~2,961,264 Barclays PLC ordinary shares of 25p each at prices ranging from 255p to 470p under Sharesave and ranging from 317p to 520p under the Incentive Share Option Plan, respectively.
  ~~234~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~42 Related party transactions and Directors’ remuneration~~~~continued~~
Advances and credit to Directors and guarantees on behalf of Directors
In accordance with Section 413 of the Companies Act 2006 and in relation to those who served as Directors of the Company at any time in the financial year, the total amount of advances and credits at 31st December ~~2009~~2010 was £nil (2009: £1.8m, ~~(2008:~~2008: £0.8m). The total amount of guarantees on behalf of Directors at 31st December ~~2009~~2010 was £nil ~~(2008:~~(2009: £nil, 2008: £nil).
~~c) US disclosures~~
For US disclosure purposes, the aggregate emoluments of all Directors and Officers of Barclays PLC who held office during the year (2009: 28 persons, 2008: 24 persons, 2007: 22 persons) for the year ended 31st December 2009 amounted to £29.8m (2008: £26.8m, 2007: £64.6m). In addition, the aggregate amount set aside for the year ended 31st December 2009, to provide pension benefits for the Directors and Officers amounted to £0.7m (2008: £0.9m, 2007: £1.1m). The aggregate emoluments of all Directors and Officers of Barclays Bank PLC who held office during the year (2009: 29 persons, 2008: 25 persons, 2007: 23 persons) for the year ended 31st December 2009 amounted to £30.1m (2008: £26.9m and 2007: £64.9m). In addition, the aggregate amount set aside by the Bank and its subsidiaries for the year ended 31st December 2009, to provide pension benefits for the Directors and Officers amounted to £0.7m (2008: £0.9m, 2007: £1.1m).
~~43 Events after the balance sheet date~~
On 1st January 2010, the Group acquired 100% ownership of Standard Life Bank Plc for a consideration of £227m in cash. The assets acquired include a savings book of approximately £5.8bn, and a mortgage book with outstanding balances of approximately £7.5bn.
As announced on 3rd November 2009, the Group has made changes to its business structure, which will be reflected in the Group’s external financial reporting for periods commencing 1st January 2010. The segmental information presented in Note 53 represents the business segments and other operations used for management and reporting purposes during the year ended 31st December 2009.
On 17th February 2010, 626.8 million of the 758.4 million warrants held by PCP Gulf Invest 3 Limited (a subsidiary of Nexus Capital Investing Limited) were exercised for an aggregate exercise price of approximately £1,240m. As a result 626.8 million new ordinary shares were issued representing a 5.2% ownership in the Group’s enlarged share capital.
~~44 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: ¤500, Spain: ¤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.
~~UK Sharepurchase~~
UK 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.
~~Global Sharepurchase~~
Global Sharepurchase was introduced in August 2009. The plan is open to all eligible employees in countries outside the UK, including executive Directors. In 2009, the plan was launched in Germany, Hong Kong, Japan, Singapore and Switzerland. Under the plan, participants are able to purchase up to £1,500 worth of Barclays PLC ordinary shares per calendar year, from post-tax salary. The purchase of Barclays shares by the participant is matched by the Company on a one-for-one basis up to a value of £600 per calendar year. Matching Shares are forfeited if the participant chooses to sell shares purchased from their post-tax salary before the third anniversary of purchase. 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.
   ~~235~~
~~44 Share-based payments~~~~continued~~
~~Options granted under the following schemes are over subsidiaries of Barclays PLC:~~
~~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 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 Absa 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.
~~Absa Group Limited Performance Share Plan (AGLPSP)~~
The Performance Share Plan (PSP) was implemented in 2008. Performance shares are ‘free’ Absa Group Limited shares for which no exercise price is payable and which qualify for dividends. Performance share awards are communicated to participants as an initial allocation. Absa Group Limited’s performance over a three-year period determines the final number of shares that may be released to participants.
~~Options remain outstanding under the following closed schemes:~~
~~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 2009.
~~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.
~~In addition, there were no options outstanding at year end under the following closed schemes:~~
~~Absa Group Broad-based Black Economic Empowerment transaction (BEE)~~
The Group entered into a black economic empowerment (BEE) transaction with Batho Bonke Capital (Proprietary) Limited in July 2004. The shares issued in terms of the transaction vested immediately. Due to the shares issued vesting immediately and also as a result of the issue being before 1st January 2005, the provisions of IFRS 2 Share-based payments were not applicable. In the current period 49.9% of the options were repurchased from Batho Bonke (Proprietary) Limited at a discount to their fair value. Batho Bonke utilised the proceeds to exercise 11,970,536 options. The Group provided bridging finance for the remaining 24,678,764 options. The life of these options was effectively extended for three months, effective 1st June 2009. The modification did not result in an increase in the fair value of these options and therefore, in terms of the provisions of IFRS 2, no cost was recognised in the statement of comprehensive income in the current period.
~~The bridging finance was redeemed on 1st September 2009 and Batho Bonke Capital (Proprietary) Limited exercised the balance of the options outstanding.~~
~~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 (£3.81 to £5.48) dependent on the 30-day volume weighted trading price on the JSE Limited. Options are redeemed by Absa on the final exercise date.
~~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.
~~Barclays Global Investors Equity Ownership Plan (BGI EOP)~~
The EOP was provided to key employees of BGI and was wound up following the disposal of BGI. The exercise price of the options was determined by the Remuneration Committee of Barclays PLC based on the fair value of BGI as determined by an independent appraiser. The options were granted over shares in Barclays Global Investors UK Holdings Limited, a subsidiary of Barclays Bank PLC.
Options were not exercisable until vesting, with a third of the options held generally becoming exercisable at each anniversary of grant. The shareholder had the right to offer to sell the shares to Barclays Bank PLC 355 days following the exercise of the option. The most recently agreed valuation was £109.45, at 30th November 2009. No awards were made under the BGI EOP in 2009.
The scheme rules provided that in the event of a sale of the business, outstanding options vest before the disposal. During the year the Group disposed of Barclays Global Investors. Accordingly, the share-based payment charge has been accelerated in these financial statements.
  ~~236~~ 249
Notes to the ~~accounts~~financial statements
For the year ended 31st December ~~2009~~
~~continued~~
~~44 Share-based payments continued~~
~~At the balance sheet date the following cash-settled schemes operated within the Group:~~
~~Absa Group Limited Phantom Performance Share Plan (Phantom PSP)~~
The Phantom PSP is a cash-settled plan and payments made to participants in respect of their awards are in the form of cash. The Phantom PSP shares (and any associated notional dividend shares) are awarded at no cost to the 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 the Phantom PSP awards will be subject to two non-market performance conditions which will be measured over a three-year period, starting on the first day of 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 three- or 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.
~~The weighted average fair value per option granted during the year is as follows:~~

      2009
£    2008
£
Sharesave
   1.43    0.92
PSP
   2.81    4.89
Sharepurchase
   1.82    3.38
ISP
   2.58    4.22
ESAS
   1.08    4.09
AGLPSP
   6.88    7.76
AGLESAS
   6.82    7.17
Fair values for Sharesave and PSP are calculated at the date of grant using either a Black-Scholes model or Monte Carlo simulation. Sharepurchase, ISP, ESAS, AGLPSP 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 2009 is £10m (2008: £10m, 2007: £66m).
~~The significant weighted average assumptions used to estimate the fair value of the options granted in 2009 are as follows:~~

      2009
   Sharesave    PSP
Weighted average share price
   3.51    2.34
Weighted average exercise price
   2.70    1.77
Expected volatility
   45 % 45 %
Expected option life
   4 years    2 years
~~The significant weighted average assumptions used to estimate the fair value of the options granted in 2008 are as follows:~~

      2008
   Sharesave    PSP
Weighted average share price
   3.11    5.45
Weighted average exercise price
   2.51    2.07
Expected volatility
   37 % 37 %
Expected option life
   4 years    3 years
~~The significant weighted average assumptions used to estimate the fair value of the options granted in 2007 are as follows:~~

         2007
   Sharesave    PSP    BGI EOP    AGLSIT
Weighted average share price
   5.82    7.07    95.33    9.18
Weighted average exercise price
   4.81    –    95.33    7.62
Expected volatility
   25 % 25 % 20 % 30 %
Expected option life
   4 years    3 years    4 years    5 years
~~237~~
~~44 Share-based payments~~~~continued~~
~~Expected volatility and dividend yield on the date of grant have been used as inputs into the respective valuation models for Sharesave and PSP.~~
The yield on UK government bonds with a commensurate life has been used to determine the risk-free discount rate of 3% for Sharesave and PSP. Option life is estimated based upon historical data for the holding period of options between grant and exercise dates.
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 2%.~~
~~Analysis of the movement in the number and weighted average exercise price of options is set out below:~~

      Sharesave^a    Sharepurchase^{a, c}

Number
(000s)
Weighted average
ex. price (£)
Number
(000s)
Weighted average
ex. price (£)
      2009 2008 2009    2008    2009 2008 2009    2008
Outstanding at beginning of year
   94,131    74,027    1.83    4.48    6,961    3,824    –    –
Granted in the year
   28,005    56,024    2.70    2.51    6,832    3,834    –    –
Adjustment in grants for open offer
   –    1,354    –    4.33    –    –    –    –
Exercised/released in the year
   (153 ) (3,357 ) 2.83    3.71    (952 ) (64 ) –    –
Less: forfeited in the year
   (30,672 ) (33,917 ) 3.58    4.35    (521 ) (633 ) –    –
Less: expired in the year
   –    –    –    –    –    –    –    –
Outstanding at end of year
   91,311    94,131    3.01    1.83    12,320    6,961    –    –
Of which exercisable:
   7,537    4,025    4.19    3.71    1,621    737    –    –
      ESAS^{a, c}    PSP^{a, c}

Number
(000s)
Weighted average
ex. price (£)
Number
(000s)
Weighted average
ex. price (£)
      2009 2008 2009    2008    2009 2008 2009    2008
Outstanding at beginning of year
   267,937    182,200    –    –    50,729    63,163    –    –
Granted in the year
   311,977    141,269    –    –    4,794    8,528    –    –
Adjustment in grants for open offer
   –    6,884    –    –    –    1,370    –    –
Exercised/released in the year
   (90,296 ) (56,231 ) –    –    (6,496 ) (1,467 ) –    –
Less: forfeited in the year
   (25,107 ) (6,185 ) –    –    (17,765 ) (20,865 ) –    –
Less: expired in the year
   –    –    –    –    –    –    –    –
Outstanding at end of year
   464,511    267,937    –    –    31,262    50,729    –    –
Of which exercisable:
   12,714    15,131    –    –    –    –    –    –
      ISP^{a, c}    Absa BEE^b

Number
(000s)
Weighted average
ex. price (£)
Number
(000s)
Weighted average
ex. price (£)
      2009 2008 2009    2008    2009 2008 2009    2008
Outstanding at beginning of year/acquisition date
   7,100    –    –    –    73,152    73,152    3.16-4.55    3.40-3.89
Granted in the year
   50,652    6,923    –    –    –    –    –    –
Adjustment in grants for open offer
   –    177    –    –    –    –    –    –
Exercised/released in the year
   (19 ) –    –    –    (36,649 ) –    5.42    –
Less: repurchased in the year
   –    –    –    –    (36,503 ) –    –    –
Less: forfeited in the year
   (2,755 ) –    –    –    –    –    –    –
Less: expired in the year
   –    –    –    –    –    –    –    –
Outstanding at end of year
   54,978    7,100    –    –    –    73,152    –    3.16-4.55
Of which exercisable:
   –    –    –    –    –    73,152    –    3.16-4.55
~~Notes~~
a ~~Options/award granted over Barclays PLC shares.~~
b ~~Options/award granted over Absa Group Limited shares.~~
c ~~Nil cost award.~~
  ~~238~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~44 Share-based payments~~~~continued~~

      AGLSIT^b    AGLSOT^b

Number
(000s)

Weighted average
ex. price (£)

Number
(000s)
Weighted average
ex. price (£)
      2009 2008 2009    2008    2009 2008 2009    2008
Outstanding at beginning of year/acquisition date
   9,967    13,618    4.91    4.81    559    946    3.16-4.55    3.40-3.89
Exercised/released in the year
   (3,569 ) (3,252 ) 5.10    3.37    (539 ) (368 ) 5.33    –
Less: forfeited in the year
   (100 ) (399 ) 6.99    4.96    (20 ) (19 ) 3.81-5.48    3.16-4.55
Outstanding at end of year
   6,298    9,967    6.28    4.91    –    559    –    3.16-4.55
Of which exercisable:
   5,016    5,944    5.67    3.86    –    559    –    3.16-4.55
      AGLPSP^b,^c    AGLESAS^{b, c}

Number
(000s)

Weighted average
ex. price (£)

Number
(000s)
Weighted average
ex. price (£)
      2009 2008 2009    2008    2009 2008 2009    2008
Outstanding at beginning of year
   2,008    –    –    –    1,015    37    –    –
Granted in the year
   1,589    2,134    –    –    1,324    1,019    –    –
Less: forfeited in the year
   (180 ) (126 ) –    –    (155 ) (41 ) –    –
Outstanding at end of year
   3,417    2,008    –    –    2,184    1,015    –    –
Of which exercisable:
   –    –    –    –    –    –    –    –
      ISOP^a    ESOS^a

Number
(000s)

Weighted average
ex. price (£)

Number
(000s)
Weighted average
ex. price (£)
      2009 2008 2009    2008    2009 2008 2009    2008
Outstanding at beginning of year
   20,547    20,549    4.44    4.56    473    1,423    4.33    4.13
Adjustment in grants for open offer
   –    537    –    4.44    –    12    –    4.33
Exercised/released in the year
   (253 ) (539 ) 3.17    4.06    –    (70 ) –    3.97
Less: forfeited in the year
   (7,648 ) –    4.54    –    (473 ) (892 ) 4.33    3.97
Outstanding at end of year
   12,646    20,547    4.41    4.44    –    473    –    4.33
Of which exercisable:
   12,646    20,547    4.41    4.44    –    473    –    4.33
      Woolwich ESOP^a    BGI EOP^d

Number
(000s)

Weighted average
ex. price (£)

Number
(000s)
Weighted average
ex. price (£)
      2009 2008 2009    2008    2009 2008 2009    2008
Outstanding at beginning of year
   442    540    3.70    3.81    6,584    7,502    78.50    75.66
Adjustment in grants for open offer
   –    12    –    3.70    –    –    –    –
Exercised/released in the year
   (7 ) (104 ) 3.20    3.10    (6,417 ) (550 ) 78.16    34.55
Less: forfeited in the year
   (89 ) (6 ) 3.80    3.65    (167 ) (368 ) 91.54    86.57
Less: expired in the year
   (281 ) –    –    –    –    –    –    –
Outstanding at end of year
   65    442    3.20    3.70    –    6,584    –    78.50
Of which exercisable:
   65    442    3.20    3.70    –    3,631    –    69.29
~~Notes~~
a ~~Options/award granted over Barclays PLC shares.~~
b ~~Options/award granted over Absa Group Limited shares.~~
c ~~Nil cost award.~~
d ~~Options/award granted over Barclays Global Investors UK Holdings Limited shares.~~
~~239~~
~~44 Share-based payments~~~~continued~~
~~The table below shows the weighted average share price at the date of exercise/release of shares:~~


2009
£

2008
£
Sharesave^a
   3.21    4.70
Sharepurchase^{a, c}
   2.64    1.59
ESAS^{a, c}
   2.02    4.07
PSP^{a, c}
   1.77    2.07
BGI EOP^d
   109.45    87.22
Absa BEE^b
   7.92    –
AGLSIT^b
   9.18    6.78
AGLSOT^b
   7.86    6.79
ISP^{a, c}
   3.43    –
ISOP^a
   3.61    4.59
ESOS^a
   –    4.74
Woolwich ESOP^a
   3.52    4.72
~~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:~~

Exercise price range    2009    2008
      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
   2    1,817,640    3    2,121,926
£2.50-£3.49
   3    69,543,729    4    54,437,940
£3.50-£4.49
   1    9,057,990    1    19,986,642
£4.50-£5.49
   2    10,892,016    3    17,584,689
Sharepurchase^{a, c}
   2    12,319,993    2    6,960,593
ESAS^{a, c}
   3    464,511,395    3    267,936,513
ISP^{a, c}
   2    54,978,012    2    7,099,655
PSP^{a, c}
   1    31,261,898    1    50,729,245
AGLSIT^b

£1.66-£7.50
   5    6,298,491    6    9,967,000
AGLESAS^{b, c}
   3    2,184,286    3    1,015,000
AGLPSP^{b, c}
   2    3,417,488    2    2,008,000
ISOP^a

£2.50-£3.49
   3    2,701,442    4    3,862,322
£3.50-£4.49
   1    955,045    2    1,558,449
£4.50-£5.49
   3    8,989,576    4    14,899,933
£5.50-£6.49
   –    –    7    225,894
ESOS^a

£3.50-£4.49
   –    –    1    472,561
Woolwich ESOP^a

£2.50-£3.49
   –    65,024    1    89,644
£3.50-£4.49
   –    –    1    352,961
There were no modifications to the share-based payment arrangements in the years 2009, 2008 and 2007. As at 31st December 2009, the total liability arising from cash-settled share-based payment transactions was £13m (2008: £23m).
In accordance with the scheme rules, all options awarded vested and were exercised by the holders following the disposal of the BGI business on 1st December 2009. The options were all exercised during December 2009.
~~Notes~~
a ~~Options/award granted over Barclays PLC shares.~~
b ~~Options/award granted over Absa Group Limited shares.~~
c ~~Nil cost award.~~
d ~~Options/award granted over Barclays Global Investors UK Holdings Limited shares.~~
  ~~240~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~45 Off-balance sheet arrangements~~
In the ordinary course of business and primarily to facilitate client transactions, the Group enters into transactions which may involve the use of off-balance sheet arrangements and special purpose entities (SPEs). These arrangements include the provision of guarantees, loan commitments, retained interests in assets which have been transferred to an unconsolidated SPE or obligations arising from the Group’s involvements with such SPEs.
~~Guarantees~~
The Group issues guarantees on behalf of its customers. In the majority of cases, the Group will hold collateral against the exposure, have a right of recourse to the customer or both. In addition, the Group issues guarantees on its own behalf. The main types of guarantees provided are: financial guarantees given to banks and financial institutions on behalf of customers to secure loans; overdrafts; and other banking facilities, including stock borrowing indemnities and standby letters of credit. Other guarantees provided include performance guarantees, advance payment guarantees, tender guarantees, guarantees to Her Majesty’s Revenue and Customs and retention guarantees. The nominal principal amount of contingent liabilities with off-balance sheet risk is set out in Note 34 (Contingent liabilities and commitments).
~~Loan commitments~~
The Group enters into commitments to lend to its customers subject to certain conditions. Such loan commitments are made either for a fixed period or are cancellable by the Group subject to notice conditions. Information on loan commitments and similar facilities is set out in Note 34 (Contingent liabilities and commitments).
~~Leasing~~
The Group leases various offices, branches, other premises and equipment under non-cancellable operating lease arrangements. With such operating lease arrangements, the asset is kept on the lessor’s balance sheet and the Group reports the future minimum lease payments as an expense over the lease term. Information on leasing can be found in Note 37 (Leasing).
~~Special purpose entities~~
SPEs are entities that are created to accomplish a narrow and well defined objective. There are often specific restrictions or limits around their ongoing activities. The Group’s transactions with SPEs take a number of forms, including:
–
~~The provision of financing to fund asset purchases, or commitments to provide finance for future purchases.~~
–
~~Derivative transactions to provide investors in the SPE with a specified exposure.~~
–
~~The provision of liquidity or backstop facilities which may be drawn upon if the SPE experiences future funding difficulties.~~
–
~~Direct investment in the notes issued by SPEs.~~
Depending on the nature of the Group’s resulting exposure, it may consolidate the SPE on to the Group’s balance sheet. The consolidation of SPEs is considered at inception, based on the arrangements in place and the assessed risk exposures at that time. In accordance with IFRS, SPEs are consolidated when the substance of the relationship between the Group and the entity indicates control. Potential indicators of control include, amongst others, an assessment of the Group’s exposure to the risks and benefits of the SPE. The initial consolidation analysis is revisited at a later date if:
i) ~~the Group acquires additional interests in the entity;~~
~~ii)~~ ~~the contractual arrangements of the entity are amended such that the relative exposures to risks and rewards change; or~~
~~iii)~~ ~~the Group acquires control over the main operating and financial decisions of the entity.~~
A number of the Group’s transactions have recourse only to the assets of unconsolidated SPEs. Typically, the majority of the exposure to these assets is borne by third parties and the Group’s risk is mitigated through over-collateralisation, unwind features and other protective measures.
The business activities within the Group where SPEs are used include multi-seller conduit programmes, asset securitisations, client intermediation, credit structuring, asset realisations and fund management. These activities are described below. In addition, later sections provide quantative information on the Group’s involvements with CDOs,SIVs SIV-Lites and conduits.
~~Multi-seller conduit programmes~~
Barclays creates, administers and provides liquidity and credit enhancements to several commercial paper conduit programmes, primarily in the United States. These conduits provide clients access to liquidity in the commercial paper markets by allowing them to sell consumer or trade receivables to the conduit, which then issues commercial paper to investors to fund the purchase. The conduits have sufficient collateral, credit enhancements and liquidity support to maintain an investment grade rating for the commercial paper.
~~Asset securitisations~~
The Group has assisted its customers with the formation of asset securitisations, some of which are effected through the use of SPEs. These entities have minimal equity and rely on funding in the form of notes to purchase the assets for securitisation. As these SPEs are created for other companies, the Group does not usually control these entities and therefore does not consolidate them. The Group may provide financing in the form of senior notes or junior notes and may also provide derivatives to the SPE. These transactions are included on the balance sheet.
The Group has also used SPEs to securitise part of its originated and purchased retail and commercial lending portfolios and credit card receivables. These SPEs are usually consolidated and derecognition only occurs when the Group transfers 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 carrying amount of securitised assets together with the associated liabilities are set out in Note 29.
~~241~~
~~45 Off-balance sheet arrangements~~~~continued~~
~~Client intermediation~~
The Group has structured transactions as a financial intermediary to meet investor and client needs. These transactions involve entities structured by either the Group or the client and they are used to modify cash flows of third party assets to create investments with specific risk or return profiles or to assist clients in the efficient management of other risks. Such transactions will typically result in a derivative being shown on the balance sheet, representing the Group’s exposure to the relevant asset. The Group also invests in lessor entities specifically to acquire assets for leasing. Client intermediation also includes arrangements to fund the purchase or construction of specific assets (most common in the property industry).
~~Credit structuring~~
The Group structures investments to provide specific risk profiles to investors. This may involve the sale of credit exposures, often by way of derivatives, to an entity which subsequently funds those exposures by issuing securities. These securities may initially be held by Barclays prior to sale outside of the Group.
~~Asset realisations~~
~~The Group establishes SPEs to facilitate the recovery of loans in circumstances where the borrower has suffered financial loss.~~
~~To the extent that there are guarantees and commitments in relation to SPEs the details are included in Note 34 Contingent liabilities and commitments.~~
~~Collateralised debt obligations (CDOs)~~
The Group has structured and underwritten CDOs. At inception, the Group's exposure principally takes the form of a liquidity facility provided to support future funding difficulties or cash shortfalls in the vehicles. If required by the vehicle, the facility is drawn with the amount advanced included within loans and advances on the balance sheet. Upon an event of default or other triggering event, the Group may acquire control of a CDO and, therefore, be required to fully consolidate the vehicle for accounting purposes. The potential for transactions to hit default triggers before the end of 2010 has been assessed and is included in the determination of £714m impairment charges and other credit provisions in relation to ABS CDO Super Senior and other credit market exposures for the year ended 31st December 2009.
The Group's exposure to ABS CDO Super Senior positions before hedging was £1,931m as at 31st December 2009, equivalent to an aggregate 50.83% decline in value on average for all investors. This represents the Group's exposure to High Grade CDOs, stated net of write-downs and charges. These facilities are fully drawn and included within loans and advances on the balance sheet.
~~Collateral~~
The collateral underlying unconsolidated CDOs comprised 78% residential mortgage-backed securities, 3% non-residential asset-backed securities and 19% in other categories (a proportion of which will be backed by residential mortgage collateral).
~~The remaining Weighted Average Life (WAL) of all collateral is 5.9 years. The combined Net Asset Value (NAV) for all of the CDOs was £0.9bn.~~
~~Funding~~
The CDOs were funded with senior unrated notes and rated notes up to AAA. The capital structure senior to the AAA notes on cash CDOs was supported by a liquidity facility provided by the Group. The senior portion covered by liquidity facilities is on average 88% of the capital structure.
~~The initial WAL of the notes in issue averaged 6.7 years. The full contractual maturity is 38.2 years.~~
~~Interests in third party CDOs~~
The Group has purchased securities in and entered into derivative instruments with third party CDOs. These interests are held as trading assets or liabilities on the Group's balance sheet and measured at fair value. The Group has not provided liquidity facilities or similar agreements to third party CDOs.
~~Structured investment vehicles (SIVs)~~
~~The Group does not structure or manage SIVs. Group exposure to third party SIVs comprised:~~
–
~~£16m (2008: £52m) of senior liquidity facilities.~~
–
~~Derivative exposures included on the balance sheet at their net fair value of £53m (2008: £273m).~~
~~SIV-Lites~~
The Group has exposure to two SIV-Lite transactions. The Group is not involved in their ongoing management. Exposures have decreased to £461m (2008: £638m) representing drawn liquidity facilities of £106m and assets designated at fair value of £355m.
  ~~242~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
continued
~~45 Off-balance sheet arrangements~~~~continued~~
~~Commercial paper and medium-term note conduits~~
The Group provided £16bn in undrawn backstop liquidity facilities to its own sponsored CP conduits. The Group fully consolidates these entities such that the underlying assets are reflected on the Group balance sheet.
These consolidated entities in turn provide facilities of £753m to third party conduits containing prime UK buy-to-let RMBS. As at 31st December 2009, the entire facility had been drawn and is included in available for sale financial investments.
The Group provided backstop facilities to support the paper issued by four third party conduits. These facilities totalled £287m, with underlying collateral comprising 100% auto loans. Drawings on these facilities were £125m as at 31st December 2009 and are included within loans and advances to customers.
The Group provided backstop facilities to four third party SPEs that fund themselves with medium-term notes. These notes are sold to investors as a series of 12-month securities and remarketed to investors annually. If investors decline to renew their holdings at a price below a pre-agreed spread, the backstop facility requires the Group to purchase the outstanding notes at scheduled maturity. The Group has provided facilities of £1.6bn to SPEs holding prime UK and Australian owner-occupied Residential Mortgage Back Securities (RMBS) assets. As at the balance sheet date these facilities had been drawn and were included in loans and advances.
~~46 Financial risks~~
~~Financial risk management~~
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. Financial instruments are fundamental to the Group’s business and managing financial risks, especially credit risk, is a fundamental part of its business activity.
The Group’s 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.
~~Risk responsibilities~~
~~The Board approves risk appetite and the Board Risk Committee (BRC) monitors the Group’s risk profile against this appetite:~~
–
~~The Chief Risk Officer, 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-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 Group Risk Oversight Committee which is chaired by the Chief Risk Officer under authority delegated by the Group Finance Director. The Group 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 Executive Committee monitors and manages risk-adjusted performance of businesses and receives a regular update on forward risk trends and the Group Risk Profile Report.~~
~~The 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 Group Risk Oversight Committee is chaired by the Chief Risk Officer 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 47 to 49.~~
~~243~~
~~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.
The Group 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 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 2009 and 2008 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.
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.
  ~~244~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~47 Credit risk~~~~continued~~
A description of the credit risk management and 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:

~~At 31st December 2009~~


Loans and
advances
£m

Debt
securities
£m

Derivatives
£m

Reverse
repurchase
agreements
£m

Others
£m

Total
£m
On-balance sheet:

Cash and balances at central banks
               81,483    81,483
Items in course of collection from other banks
               1,593    1,593
Trading portfolio:

Treasury and other eligible bills
      9,926             9,926
Debt securities
      116,594             116,594
Traded loans
   2,962                2,962
Total trading portfolio
   2,962    126,520             129,482
Financial assets designated at fair value held on own account:

Loans and advances
   22,390                22,390
Debt securities
      4,007             4,007
Other financial assets
   557          7,757    344    8,658
Total financial assets designated at fair value held on own account
   22,947    4,007       7,757    344    35,055
Derivative financial instruments
         416,815          416,815
Loans and advances to banks
   41,135                41,135
Loans and advances to customers:

Residential mortgage loans
   149,099                149,099
Credit card receivables
   21,889                21,889
Other personal lending
   25,435                25,435
Wholesale and corporate loans and advances
   212,928                212,928
Finance lease receivables
   10,873                10,873
Total loans and advances to customers
   420,224                420,224
Available for sale financial investments:

Treasury and other eligible bills
      5,919             5,919
Debt securities
      43,888             43,888
Total available for sale financial investments
      49,807             49,807
Reverse repurchase agreements
            143,431       143,431
Other assets
               3,476    3,476
Total on-balance sheet
   487,268    180,334    416,815    151,188    86,896    1,322,501
Off-balance sheet:

Acceptances and endorsements
                  375
Guarantees and letters of credit pledged as collateral security and securities lending arrangements                   42,812
Commitments
                  207,275
Total off-balance sheet
                  250,462
Total maximum exposure
                  1,572,963
~~245~~
~~47 Credit risk~~~~continued~~
~~At 31st December 2008~~


Loans and
advances
£m

Debt
securities
£m

Derivatives
£m

Reverse
repurchase
agreements
£m

Others
£m

Total
£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
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
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
Loans and advances to banks
   47,707                47,707
Loans and advances to customers:

Residential mortgage loans
   139,845                139,845
Credit card receivables
   22,304                22,304
Other personal lending
   27,270                27,270
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
Available for sale financial investments:

Treasury and other eligible bills
      4,003             4,003
Debt securities
      58,831             58,831
Total available for sale financial investments
      62,834             62,834
Reverse repurchase agreements
            130,354       130,354
Other assets
               3,096    3,096
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
Total off-balance sheet
                  315,343
Total maximum exposure
                  2,240,011
  ~~246~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~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 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.~~

Credit risk concentrations by geographical sector
      United
Kingdom
£m
Other
European
Union
£m

United
States
£m
   Africa
£m    Rest of
the
World
£m
Total
£m
2009

On-balance sheet:

Cash and balances at central banks
   37,697    5,584    32,279    1,742    4,181    81,483
Items in the course of collection from other banks
   1,340    56    –    196    1    1,593
Trading portfolio
   12,232    35,088    52,229    1,414    28,519    129,482
Financial assets designated at fair value held on own account
   13,945    3,986    10,800    2,352    3,972    35,055
Derivative financial instruments
   133,713    128,881    111,269    2,511    40,441    416,815
Loans and advances to banks
   5,117    12,697    13,137    2,388    7,796    41,135
Loans and advances to customers
   203,582    84,343    58,355    47,495    26,449    420,224
Available for sale financial investments
   16,752    14,028    7,175    4,993    6,859    49,807
Reverse repurchase agreements
   22,222    44,014    60,759    527    15,909    143,431
Other assets
   1,565    417    651    661    182    3,476
Total on-balance sheet
   448,165    329,094    346,654    64,279    134,309    1,322,501
Off-balance sheet:

Acceptances and endorsements
   134    5    –    26    210    375
Guarantees and letters of credit pledged as collateral security and securities lending arrangements    3,337    2,783    32,849    1,795    2,048    42,812
Commitments
   95,120    26,344    57,598    19,480    8,733    207,275
Total off-balance sheet
   98,591    29,132    90,447    21,301    10,991    250,462
Total
   546,756    358,226    437,101    85,580    145,300    1,572,963
2008

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
~~247~~
~~47 Credit risk~~~~continued~~

Credit risk concentrations by industrial sector

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
2009

On-balance sheet:
Cash and balances at central banks    81,483    –    –    –    –    –    –    –    –    81,483
Items in the course of collection from other banks    7    1,586    –    –    –    –    –    –    –    1,593
Trading portfolio    76,454    41,482    2,811    4,536    1,063    3,136    –    –    –    129,482
Financial assets designated at fair value held on own account    5,435    13,366    2,893    948    11,929    330    150    4    –    35,055
Derivative financial instruments    6,119    379,901    8,424    7,805    2,416    12,081    –    69    –    416,815
Loans and advances to banks    4,425    36,710    –    –    –    –    –    –    –    41,135
Loans and advances to customers    4,800    93,370    40,034    41,645    29,175    10,727    149,099    40,501    10,873    420,224
Available for sale financial investments    16,320    30,398    1,962    377    269    57    416    –    8    49,807
Reverse repurchase agreements    5,347    136,184    608    366    926    –    –    –    –    143,431
Other assets

   414    1,588    543    64    60    13    106    682    6    3,476

Total on-balance sheet



200,804



734,585



57,275



55,741



45,838



26,344



149,771



41,256



10,887



1,322,501

Off-balance sheet:

Acceptances and endorsements    –    85    95    155    2    33    –    5    –    375
Guarantees and letters of credit pledged as collateral security and securities lending arrangements    –    33,117    2,805    2,308    715    2,872    584    411    –    42,812
Commitments

   1,687

   39,806

   18,670

   28,552

   10,647

   13,502

   15,356

   79,055

   –

   207,275

Total off-balance sheet



1,687



73,008



21,570



31,015



11,364



16,407



15,940



79,471



–



250,462

Total



202,491



807,593



78,845



86,756



57,202



42,751



165,711



120,727



10,887



1,572,963

  ~~248~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~47 Credit risk~~~~continued~~

Credit risk concentrations by industrial sector

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
2008

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    139,845    46,094    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



140,569



47,134



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



152,765



159,916



12,721



2,240,011

~~249~~
~~47 Credit risk~~~~continued~~
~~Loans and advances~~
~~Credit risk management~~
~~Governance and 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 Chief Risk Officer.
The 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 its implementation across the businesses.
The principal committees that review credit risk management, formulate overall Group credit policy and resolve all significant credit policy issues are the Board Risk Committee, the Group Risk Oversight Committee, the Wholesale Credit Risk Management Committee and the Retail Credit Risk Management Committee.
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 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 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 Wholesale and Retail Credit Risk Directors.
~~Credit monitoring~~
Wholesale and corporate loans which are deemed to contain heightened levels of risk are recorded on early-warning or watch lists. These lists are graded in line with the perceived severity of the risk attached to the lending and its probability of default. 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 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 loans (which tend to comprise homogeneous assets) are monitored on a portfolio basis.~~
~~Credit risk measurement~~
Barclays uses statistical modelling techniques throughout its business in its credit rating systems. 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). 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 lending, Barclays assesses the credit quality of borrowers and other counterparties and assigns them an internal risk rating. Barclays 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, therefore their probability of default is considered.
The Group considers Credit Risk Loans (defined as all customers overdue by 90 days or more, and/or individually impaired or restructured) and 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 annualised 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 disposals.
Diversification to avoid unwanted credit risk concentrations is achieved through setting maximum exposure guidelines to individual counterparties. Excesses are reported to the Board Risk Committee and the Group Risk Oversight Committee. Mandate and scale limits are used to limit the stock of current exposures in a loan portfolio and the flow of new exposures into a loan portfolio. Limits are typically based on the tenor and nature of the lending.
~~Collateral and security~~
~~The Group routinely obtains collateral and 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 practice.~~
  ~~250~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~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, which includes restructured loans.~~
~~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.

      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
%

As at 31st December 2009

Trading portfolio:

Traded loans
   2,962    –    –    2,962    –    2,962    –    –
Financial assets designated at fair value held on own account:
Loans and advances
   22,210    180    –    22,390    –    22,390    –    –
Other financial assets
   557    –    –    557    –    557    –    –
Loans and advances to banks
   38,859    2,280    57    41,196    (61 ) 41,135    57    100.0
Loans and advances to customers:
Residential mortgage loans
   139,199    8,846    1,693    149,738    (639 ) 149,099    3,604    17.7
Credit card receivables
   20,195    1,544    2,459    24,198    (2,309 ) 21,889    3,068    75.3
Other personal lending
   23,796    2,175    2,372    28,343    (2,908 ) 25,435    3,466    83.9
Wholesale and corporate loans and advances    199,800    7,598    10,088    217,486    (4,558 ) 212,928    11,497    39.6
Finance lease receivables

   10,128    664    402    11,194    (321 ) 10,873    696    46.1

Total



457,706



23,287



17,071



498,064



(10,796

)

487,268



22,388



48.2

As at 31st December 2008
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^c:
Residential mortgage loans
   131,017    7,481    1,668    140,166    (321 ) 139,845    2,528    12.7
Credit card receivables
   21,092    1,426    1,231    23,749    (1,445 ) 22,304    1,990    72.6
Other personal lending
   25,885    1,274    1,980    29,139    (1,869 ) 27,270    2,560    73.0
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

~~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.~~
c ~~Loans and advances to customers in the above table have been reanalysed between Residential mortgage loans and Other personal lending.~~
~~251~~
~~47 Credit risk~~~~continued~~
~~Credit quality of loans and advances neither past due nor individually impaired~~

            2009                2008
      Strong
£m    Satisfactory
£m    Higher risk
£m    Total
£m    Strong
£m    Satisfactory
£m    Higher risk
£m    Total
£m
Trading portfolio:

Traded loans
   1,366    1,290    306    2,962    759    220    91    1,070
Financial assets designated at fair value held on own account:
Loans and advances
   15,909    3,809    2,492    22,210    25,665    2,792    725    29,182
Other financial assets
   261    –    296    557    –    1,469    –    1,469
Loans and advances to banks
   35,825    2,492    542    38,859    40,181    6,384    100    46,665
Loans and advances to customers:

Residential mortgage loans
   66,956    69,919    2,324    139,199    86,937    42,770    1,310    131,017
Credit card receivables
   –    20,038    157    20,195    –    20,426    666    21,092
Other personal lending
   3,417    18,108    2,271    23,796    2,975    21,750    1,160    25,885
Wholesale and corporate loans and advances
   119,764    70,132    9,904    199,800    141,868    94,453    10,184    246,505
Finance lease receivables

   2,664    7,082    382    10,128    4,214    7,504    649    12,367

Total loans and advances



246,162


192,870


18,674


457,706


302,599


197,768


14,885


515,252
~~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~~
~~Probability of default~~
~~Probability of default~~
~~Default grade~~
~~Strong~~
~~0.0-0.60%~~
~~0.0-0.05%~~
~~0.05-0.15%~~
~~0.15-0.30%~~
~~0.30-0.60%~~
~~1-3~~
~~4-5~~
~~6-8~~
~~9-11~~
~~Satisfactory~~
~~0.60-10.00%~~
~~0.60-2.15%~~
~~2.15-11.35%~~
~~12-14~~
~~15-19~~
~~Higher risk~~
~~10.00% +~~
~~11.35% +~~
~~20-21~~

~~Financial statement descriptions can be summarised as follows:~~
~~Strong – there is a very high likelihood of the asset being recovered in full.~~
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 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.
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 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.
  ~~252~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~

~~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.

      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
2009

Financial assets designated at fair value held on own account:

Loans and advances

   170    –    1    –    9    180    –

Loans and advances to banks



2,280


–


–


–


–


2,280


–

Loans and advances to customers:

Residential mortgage loans
   4,849    1,453    633    1,410    501    8,846    1,911
Credit card receivables
   501    214    220    459    150    1,544    609
Other personal lending
   369    295    417    413    681    2,175    1,094
Wholesale and corporate loans and advances
   5,403    292    494    866    543    7,598    1,409
Finance lease receivables

   186    86    98    282    12    664    294

Total loans and advances to customers



11,308


2,340


1,862


3,430


1,887


20,827


5,317

Total financial assets past due but not individually impaired



13,758


2,340


1,863


3,430


1,896


23,287


5,317
2008

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
   4,421    1,570    630    713    147    7,481    860
Credit card receivables
   293    224    150    291    468    1,426    759
Other personal lending
   219    202    273    338    242    1,274    580
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

~~253~~
~~47 Credit risk~~~~continued~~
~~Loans and advances individually assessed as impaired~~
~~An analysis of financial assets individually assessed as impaired is as follows:~~


2009
   2008
      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

   57

   (49

)

8

   48

   (44

)

4

Loans and advances to customers:

Residential mortgage loans
   1,693    (317 ) 1,376    1,668    (240 ) 1,428
Credit card receivables
   2,459    (1,690 ) 769    1,231    (727 ) 504
Other personal lending
   2,372    (1,531 ) 841    1,980    (1,237 ) 743
Wholesale and corporate loans and advances
   10,088    (3,837 ) 6,251    7,586    (2,310 ) 5,276
Finance lease receivables
   402    (233 ) 169    234    (140 ) 94

Total loans and advances individually impaired

   17,071

   (7,657

)

9,414

   12,747

   (4,698

)

8,049

Collective impairment allowance

      (3,139

)

      (1,876

)

Total impairment allowance

      (10,796

)

      (6,574

)

~~The movements on the impairment allowance during the year were as follows:~~

      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
2009

Loans and advances to banks



51


–


–



(11)



–



10


11


61

Loans and advances to customers:

Residential mortgage loans
   321    19    (59 ) 46    (82 ) 3    391    639
Credit card receivables
   1,445    415    (79 ) (28 ) (1,009 ) 78    1,487    2,309
Other personal lending
   1,869    –    (26 ) (89 ) (633 ) 21    1,766    2,908
Wholesale and corporate loans and advances    2,699    –    (15 ) (48 ) (1,538 ) 28    3,432    4,558
Finance lease receivables

   189    –    (6)    3    (118)    10    243    321

Total loans and advances to
customers



6,523


434


(185)



(116)



(3,380)



140


7,319


10,735

Total impairment allowance



6,574


434


(185)



(127)



(3,380)



150


7,330


10,796

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
2008

Loans and advances to banks

   3    –    –    1    –    7    40    51

Loans and advances to
customers:

Residential mortgage loans
   137    –    (35 ) 19    (44 ) 3    241    321
Credit card receivables
   841    306    (68 ) 94    (845 ) 69    1,048    1,445
Other personal lending    1,368    1    (32 ) 134    (525 ) 42    881    1,869
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

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 points

As at 31st December 2009
   472,155    (10,796 ) 461,359    7,358    156
As at 31st December 2008
   516,096    (6,574 ) 509,522    4,913    95
  ~~254~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~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 be partially or fully collateralised or subject to other forms of credit enhancement.~~
Assets in these categories subject to collateralisation are mainly corporate loans, residential mortgage loans and finance lease receivables. Credit card receivables and other personal lending are generally unsecured (although in some instances a charge over the borrowers property of other assets may be sought).
~~Corporate loans~~
Security is usually taken in the form of a fixed charge over the borrower’s property or a floating charge over the assets of the borrower. Loan covenants may be put in place to safeguard the Group’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.
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.
~~Residential mortgage loans~~
~~These are secured by a fixed charge over the property.~~
~~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 is as follows:~~

Nature of assets


2009
Fair value
£m

2008
Fair value
£m

Residential property



9,628


7,264
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.
~~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 2009 as a result of the enforcement of collateral was as follows:~~

Nature of assets


2009
Carrying
amount
£m

2008
Carrying
amount
£m

Residential property
   71    171
Commercial and industrial property
   66    2
Other credit enhancements

   248    61

Total



385


234
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.
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.
~~255~~
~~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:~~

      2009    2008
      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
   9,901    25    –    9,926    4,491    53    –    4,544
Debt securities

   109,237    5,321    2,036    116,594    141,454    5,556    1,676    148,686

Total trading portfolio



119,138


5,346


2,036


126,520


145,945


5,609


1,676


153,230

Financial assets designated at fair value held on own account:

Debt securities

   2,200    1,791    16    4,007    1,222    7,406    –    8,628

Available for sale financial investments:

Treasury and other eligible bills
   4,049    1,870    –    5,919    2,823    1,180    –    4,003
Debt securities

   40,184    3,185    519    43,888    55,817    2,347    667    58,831

Total available for sale financial investments



44,233



5,055


519


49,807


58,640


3,527


667


62,834

Total debt securities



165,571


12,192


2,571


180,334


205,807


16,542


2,343


224,692

%



91.8


6.8


1.4


100.0


91.6


7.4


1.0


100.0
~~Included in the table above, there are impaired available for sale debt securities with a carrying value at 31st December 2009 of £265m (2008: £329m), after a write-down of £692m (2008: £363m).~~
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 obtainable 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 2009 and 2008 was as follows:~~

      2009    2008
      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

Derivatives



399,534



15,565


1,716


416,815


939,071


42,266


3,465


984,802

%



95.9


3.7


0.4


100.0


95.3


4.3


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 predetermined 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 £374bn (2008: £917bn) lower than reported if netting were permitted for assets and liabilities with the same counterparty or for which the Group holds cash collateral.
  ~~256~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~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.~~

      2009    2008
      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
   4,749    1,955    1,053    7,757    3,882    3,401    –    7,283
Reverse repurchase agreements

   136,366    6,674    391    143,431    122,188    6,101    2,065    130,354

Total reverse repurchase agreements



141,115


8,629


1,444


151,188


126,070


9,502


2,065


137,637

%



93.3


5.7


1.0


100.0


91.6


6.9


1.5


100.0
No reverse repurchase agreements held by the Group at 31st December 2009 or 2008 were individually impaired, however during the year, the Group wrote off £43m of reverse repurchase agreements (2008: 124m).
~~Other credit risk assets~~
The Group’s other assets that are subject to credit risk are cash with central banks of £81,483m (2008: £30,019m), items in course of collection from other Banks £1,593m (2008: £1,695m), other financial assets £3,476m (2008: £3,096m).
~~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~~
~~Other financial assets comprise £3,476m (2008: £3,096m) of other assets and £344m (2008 £609m) 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 commitments 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~~
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.
~~The exposures are set out by asset class below:~~

US Residential Mortgages    As at
31.12.09
£m    As at
31.12.08
£m

ABS CDO Super Senior



1,931


3,104

Other US sub-prime and Alt-A



1,392


7,729

Monoline wrapped US RMBS



6


1,639
Commercial mortgages


Commercial real estate loans and properties
   7,734    11,578
Commercial mortgage-backed securities
   471    735
Monoline wrapped CMBS

   30    1,854

Other Credit Market Exposures



Leveraged finance^a



5,507


9,048

SIVs, SIV-Lites and CDPCs



553


1,113

Monoline wrapped CLO and other



2,126


4,939

Total exposures



19,750


41,739

Loan to Protium



7,859


–
On 16th September 2009, Barclays Capital sold assets of £7,454m, including £5,087m in credit market assets, to Protium Finance LP (Protium), a newly established fund. As part of the transaction, Barclays extended a £7,669m 10-year loan to Protium Finance LP. At 31st December 2009, this loan had a carrying value of £7,859m (including accrued interest).
~~Note~~
a ~~This is a change in presentation from 31st December 2008, which reflected certain loan facilities originated post 1st July 2007.~~
~~257~~
~~48 Market risk~~
~~Market risk management~~
Market risk is the risk that the Group’s 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 majority of market risk exposure resides in Barclays Capital. 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 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 Chief Risk Officer, 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 Chief Risk Officer, the Market Risk Director, the Group 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 Barclays Market Risk Control Framework. Oversight and support is provided to the business by the Market Risk Director, assisted by the Group 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 Chief Risk Officer, respective business risk managers and Group Market Risk.
~~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.
~~Risk measurement and control~~
The measurement techniques used to measure and control traded market risk include Daily Value at Risk (DVaR), Expected Shortfall , average of the three worst hypothetical losses from the DVaR simulation (3W), Global Asset Class stress testing and Global Scenario stress 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 methodology with a two-year unweighted historical period at the 95% confidence level.
~~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 all hypothetical profit or losses for day one across all positions, giving one total profit or loss. Repeat 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.
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), 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 2009 and 2008.
Expected Shortfall is the average of all hypothetical losses from the historical simulation beyond DVaR. To improve the control framework, formal monitoring of 3W (average of the three worst observations from the DVaR historical simulation) was started in the first half of 2009.
Stress testing provides an indication of the potential size of losses that could arise in extreme conditions. Global Asset Class stress testing has been designed to cover major asset classes including interest rate, credit spread, commodity, equity and foreign exchange rates. They are based on past stress moves in respective asset class prices and rates. Global Scenario stress testing is based on hypothetical events which could lead to extreme yet plausible stress type moves, under which profitability is seriously challenged.
Market Risk is controlled through the use of limits where appropriate on the above risk measures. Limits are set at the total Barclays Capital level, risk factor level such as interest rate risk, and business line level. Book limits such as foreign exchange and interest rate sensitivity limits are also in place.
  ~~258~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~48 Market risk~~~~continued~~
~~Analysis of traded market risk exposures~~
Barclays Capital's market risk exposure, as measured by average total DVaR, increased by 45% to £77m (2008: £53m). The rise was mainly due to volatility considerations, increased interest rate and credit spread exposure, and the Lehman Brothers North America businesses acquisition. Volatility impacted average DVaR because 2008’s extreme volatility impacted DVaR throughout 2009 but only impacted 2008 DVaR in the last four months of 2008.
Expected shortfall and 3W averaged £121m and £209m respectively representing increases of £51m (73%) and £93m (80%) compared to 2008. The daily average, maximum and minimum values of DVaR, Expected Shortfall and 3W were calculated as below.

DVaR (95%)

12 months to
31st December 2009

12 months to
31st December 2008


Average
£m
High^a
£m    Low^a
£m    Average
£m High^a
£m    Low^a
£m

Interest rate risk
   44    83    23    29    48    15
Credit spread risk
   58    102    35    31    72    15
Commodity risk
   14    20    11    18    25    13
Equity risk
   13    27    5    9    21    5
Foreign exchange risk
   8    15    3    6    13    2
Diversification effect^a

   (60 ) n/a    n/a    (40 ) n/a    n/a
Total DVaR

   77



119

   50

   53



95

   36

Expected shortfall

   121



188

   88

   70



146

   41

3W

   209



301

   148

   116



282

   61

~~Non-traded 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 non-trading interest rate market exposures are within Global Retail and Commercial Banking, and Group Treasury. Trading activity is not permitted outside Barclays Capital.
~~Risk measurement and control~~
The risk in each business is measured and controlled using both an income metric (Annual Earnings at Risk) and a present value metric (Daily Value at Risk or stress testing). In addition scenario stress analysis is carried out by the business and reviewed by senior management and business-level asset and liability committees, when required.
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, subject to a minimum interest rate of 0%. Balances are adjusted for an assumed behavioural profile. This includes the treatment of non-maturity deposits.
Daily Value at Risk and stress testing is calculated using a Barclays Capital consistent approach. Both these metrics are calculated by each respective business area with oversight provided by Group Market Risk.
Risk exposures are monitored by respective business risk managers with oversight provided by Group Market Risk. The main business limits are approved by Market Risk Committee. Book limits such as foreign exchange and interest rate sensitivity limits are also in place where appropriate.
To further improve the market risk control framework, Group Market Risk initiated an ongoing programme of conformance visits to non-traded Treasury operations. These visits review both the current market risk profile and potential market risk developments, as well as verifying conformance with Barclays policies and standards as detailed in the market risk control framework.
~~Note~~
a 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.
~~259~~
~~48 Market risk~~~~continued~~
~~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 2009. The sensitivity has been measured using AEaR methodology as described above. The benchmark interest rate for each currency is set as at 31st December 2009. 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 income sensitivity (AEaR) by currency

      +100 basis
points
2009 £m –100 basis
points
2009 £m +100 basis
points
2008 £m –100 basis
points
2008 £m
GBP
   30    (360 ) 3    (273 )
USD
   (43 ) 14    (25 ) 7
EUR
   (34 ) –    (34 ) 30
ZAR
   29    (27 ) 13    (13 )
Others

   (1 ) 4    –    (8 )

Total

   (19 ) (369 ) (43 ) (257 )

As percentage of net interest income

   (0.16% ) (3.10% ) (0.37% ) (2.24% )
Non-traded interest rate risk, as measured by AEaR, was £369m in 2009, an increase of £112m compared to 2008. This estimate takes into account the rates in place as at 31st December 2009. 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 2009 would have been £704m (2008: £670m).
DVaR is also used to control market risk in Global Retail and Commercial Banking – Western Europe and in Group Treasury. The indicative average DVaRs for 2009 are £1.4m (2008: £1.3m) for Western Europe and £1.0m (2008: £0.6m) for Group Treasury.
~~Analysis of equity sensitivity~~

      +100 basis
points
2009 £m –100 basis
points
2009 £m +100 basis
points
2008 £m –100 basis
points
2008 £m

Net interest income
   (19 ) (369 ) (43 ) (257 )
Taxation effects on the above

   4    86    6    33

Effect on profit for the year

   (15 ) (283 ) (37 ) (224 )

As percentage of net profit after tax

   (0.15% ) (2.75% ) (0.70% ) (4.24% )

Effect on profit for the year (per above)
   (15 ) (283 ) (37 ) (224 )
Available for sale reserve
   (527 ) 527    (806 ) 806
Cash flow hedge reserve
   (929 ) 957    (473 ) 474
Taxation effects on the above

   341    (347 ) 166    (166 )

Effect on equity

   (1,130 ) 854    (1,150 ) 890

As percentage of equity

   (1.93% ) 1.46%    (2.43% ) 1.88%
  ~~260~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~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.~~
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 2009 or 2008. 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 2009 or 2008.
~~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, non-controlling interests, deductions from capital and debt capital instruments) and risk weighted assets (RWAs) being denominated in foreign currencies. Changes in foreign exchange rates result in changes in the Sterling equivalent value of foreign currency 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 capital ratio hedge strategy is to minimise the volatility of the capital ratios caused by foreign exchange rate movements. To achieve this, the Group aims to maintain the ratio of foreign currency Core Tier 1, Tier 1 and Total Capital resources to foreign currency RWAs the same as the Group’s capital ratios.
~~The Group’s foreign currency capital resources include investments in subsidiaries and branches, intangible assets, non-controlling interests, deductions from capital and debt capital instruments.~~
The Group’s investments in foreign currency subsidiaries and branches create capital resources denominated in foreign currencies. Changes in the Sterling value of the investments due to foreign currency movements are captured in the currency translation reserve, resulting in a movement in Core Tier 1 capital.
During 2009, structural currency exposures net of hedging instruments increased from £6.4bn to £12.5bn primarily as a result of US Dollar hedging decisions taken in accordance with the Group’s capital ratio hedge strategy for foreign exchange rate movements.
To create foreign currency Tier 1 and Total Capital resources additional to the Core Tier 1 capital resources, the Group issues, where possible, debt capital in non sterling currencies. This is primarily achieved by the issuance of debt capital from Barclays Bank PLC, 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 2009 were as follows:

At 31st December 2009
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

US Dollar
   16,677    3,205    –    13,472    6,056    7,416
Euro
   6,772    3,418    –    3,354    2,902    452
Rand
   4,055    –    1,542    2,513    189    2,324
Japanese Yen
   4,436    3,484    940    12    –    12
Swiss Franc
   2,840    2,734    92    14    –    14
Other

   2,983    –    677    2,306    –    2,306

Total

   37,763    12,841    3,251    21,671    9,147    12,524
At 31st December 2008



US 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
~~261~~
~~48 Market risk~~~~continued~~
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 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 management~~
Liquidity risk is the risk that the Group is unable to meet its obligations when they fall due as a result of a sudden, and potentially protracted, increase in net cash outflows. Such outflows would deplete available cash resources for client lending, trading activities, investments and deposits. In extreme circumstances lack of liquidity could result in reductions in balance sheet and sales of assets, or potentially an inability to fulfil lending commitments. The risk that it will be unable to do so is inherent in all banking operations and can be affected by a range of institution-specific and market-wide events.
~~Organisation and structure~~
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 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.
~~Liquidity risk framework~~
Barclays has a comprehensive Liquidity Risk Management Framework (the Liquidity Framework) for managing the Group’s liquidity risk. The objective of the Liquidity Framework is for the Group to have sufficient liquidity to continue to operate for at least the minimum period specified by the FSA in the event that the wholesale funding markets are neither open to Barclays nor to the market as a whole. Many of the stress tests currently applied under the Liquidity Framework will also be applied under the FSA’s new regime, although the precise calibration may differ in Barclays final Individual Liquidity Guidance to be set by the FSA. The framework considers a range of possible wholesale and retail factors leading to loss of financing including:
–
~~maturing of wholesale liabilities;~~
–
~~loss of secured financing and widened haircuts on remaining book;~~
–
~~retail and commercial outflows from savings and deposit accounts;~~
–
~~drawdown of loans and commitments;~~
–
~~potential impact of a two-notch ratings downgrade; and~~
–
~~withdrawal of initial margin amounts by counterparties.~~
These stressed scenarios are used to assess the appropriate level for the Group’s liquidity pool, which comprises unencumbered assets and cash. Barclays regularly uses these assets to access secured funding markets, thereby testing the liquidity assumptions underlying pool composition. The Group does not presume the availability of central bank facilities to monetise the liquidity pool in any of the stress scenarios under the Liquidity Framework.
~~Liquidity pool~~
~~The Group liquidity pool as at 31st December 2009 was £127bn gross (31st December 2008: £43bn) and comprised the following cash and unencumbered assets:~~

Composition of Group liquidity pool

      Cash and
deposits
with central
banks
£bn    Government
guaranteed
bonds
£bn    Government
and
supranational
bonds
£bn    Other
available
liquidity
£bn    Total
£bn

As at 31st December 2009
   81    3    31    12    127
As at 31st December 2008^a
   30    –    2    11    43
~~The cost of maintaining the liquidity pool is a function of the source of funding for the buffer and the reinvestment spread.~~
~~Note~~
a ~~Previously disclosed as Barclays Capital only.~~
  ~~262~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~49 Liquidity risk~~~~continued~~
~~Term financing~~
~~Raising term funding is important in meeting the risk appetite of the Barclays Liquidity Framework. Barclays has continued to increase the term of issued liabilities during 2009 by issuing:~~
–
~~£15bn equivalent of public senior term funding~~
–
~~£1.8bn equivalent of public covered bonds~~
–
~~£21bn equivalent of structured notes~~
~~The Group has £4bn of publicly issued debt and £11bn of structured notes maturing in 2010.~~
~~Intraday liquidity~~
The need to monitor, manage and control intraday liquidity in real time is recognised by the Group as a critical process: any failure to meet specific intraday commitments would have significant 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 through limits on wholesale borrowings, secured borrowings and funding mismatches. These ensure that on any day and over any period there is a limited amount of refinancing requirement. These requirements include replenishment of funds as they mature or are borrowed by customers.
In addition to cash flow management, Treasury also monitors 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.
~~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 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.

Wholesale depositor split by counterparty type – Barclays Capital

      Banks
%    Corporates
%    Governments
%    Other
central
banks
%    Other
financial
institutions
%    Total
%

As at 31st December 2009
   36    15    2    16    31    100
As at 31st December 2008
   32    15    11    9    33    100

Wholesale depositor split by geography – Barclays Capital

      US
%    UK
%    Other EU
%    Japan
%    Africa
%    World
%    Rest of
Total
%

As at 31st December 2009
   9    25    23    3    16    24    100
As at 31st December 2008
   13    22    16    9    17    23    100
~~Funding structure~~
Global Retail and Commercial Banking, Barclays Wealth and Head Office Functions are structured to be self-funded through customer deposits and Barclays equity and other long-term capital. The Barclays Capital and Absa businesses are funded through the wholesale secured and unsecured funding markets.
~~The ratio of customer loans to customer deposits and long-term funding has improved to 81% at 31st December 2009, from 93% at 31st December 2008.~~
~~263~~
~~49 Liquidity risk~~~~continued~~
~~Global retail and commercial banking, Barclays Wealth and Head Office functions~~
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 contractually 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.
Group policy is to ensure that the assets of the retail, wealth and corporate bank, together with Head Office functions, on a global basis, do not exceed customer deposits and subordinated funding so that these businesses place no reliance on wholesale markets. The exception to this policy is Absa, which has a large portion of wholesale funding due to the structure of the South African financial sector.
In order to assess liquidity risk, the balance sheet is modelled to reflect behavioural experience in both assets and liabilities and is managed to maintain a cash surplus. The maturity profile, excluding Absa, resulting from this behavioural modelling is set out below. This shows that there is a funding surplus of £94.5bn, and that there are expected outflows of £10.2bn within one year from asset repayments being less than liability attrition. For subsequent years the expected repayments on assets are larger than the roll off of liabilities resulting in cash inflows. Maturities of net liabilities are, therefore, behaviourally expected to occur after five years.

Behavioural maturity profile of assets and liabilities^a

         Cash inflow/(outflow)
      Funding
surplus
£bn    Not more
than
1 year
£bn Over
1 year
but not
more than
2 years
£bn    Over
2 years
but not
more than
3 years
£bn    Over
3 years
but not
more than
4 years
£bn    Over
4 years
but not
more than
5 years
£bn    Over
5 years
£bn
As at 31st December 2009    94.5    (10.2 ) 17.8    21.2    7.8    1.8    (132.9 )
~~Barclays Capital~~
~~Barclays Capital manages its liquidity to be primarily funded through wholesale sources, managing access to liquidity to ensure that potential cash outflows in a stressed environment are covered.~~
73% of the inventory is funded on a secured basis (31st December 2008: 50%). Additionally, much of the short-term funding is invested in highly liquid assets and central bank cash and therefore contributes towards the Group liquidity pool.
Barclays Capital undertakes secured funding in the repo markets 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 percentage of secured funding using each asset class as collateral is set out below:

Secured funding by asset class

      Government
%    Agency
%    MBS
%    ABS
%    Corporate
%    Equity
%    Other
%
As at 31st December 2009    59    7    7    6    10    8    3
As at 31st December 2008
   49    9    11    9    15    4    3
Unsecured wholesale funding for the Group (excluding Absa) is managed by Barclays Capital within specific term limits. Excluding short-term deposits that are included within the Group’s liquidity pool, the term of unsecured liabilities has been extended, with average life improving from at least 14 months^b ~~at 31st December 2008 to at least 26 months at 31st December 2009.~~

Contractual maturity of unsecured liabilities^a
(Net of assets available from the Group liquidity pool)

      Not more
than
1 month
%    Not more
than
2 months
%    Not more
than
3 months
%    Not more
than
6 months
%    Not more
than
1 year
%
Over
1 year
%
As at 31st December 2009    –    –    –    –    19    81
The extension of the term of the wholesale financing has meant that, as at 31st December 2009, 81% of net wholesale funding had remaining maturity of greater than one year and, as at the same date, there was no net wholesale unsecured refinancing required within six months.
~~Notes~~
a ~~In accordance with IFRS 7, prior year figures have not been provided as these measures have not previously been reported on a comparable basis.~~
b ~~The 31st December 2008 average unsecured liability term has been restated to at least 14 months to reflect refinements in the underlying calculation.~~
  ~~264~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~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. Such information is used (amongst other things) as the basis for modelling a behavioural balance sheet, for input into the liquidity framework, as discussed above.
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 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.
~~At 31st December 2009~~

      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    80,592    891    –    –    –    –    –    –    81,483
Items in the course of collection from other banks    1,243    350    –    –    –    –    –    –    1,593
Trading portfolio assets    151,344    –    –    –    –    –    –    –    151,344
Financial assets designated at fair value:
– held on own account
   679    10,795    1,679    2,456    5,514    3,998    2,293    13,897    41,311
Derivative financial instruments:
– held for trading
   415,638    –    –    –    –    –    –    –    415,638
– designated for risk management    –    216    115    89    236    101    334    86    1,177
Loans and advances to banks    5,114    30,385    314    1,787    2,396    544    98    497    41,135
Loans and advances to customers    44,826    68,876    8,987    17,848    51,886    38,357    63,180    126,264    420,224
Available for sale financial investments    1,157    6,999    8,356    3,434    20,530    5,871    6,802    3,334    56,483
Reverse repurchase agreements and cash collateral on securities borrowed    248    129,095    3,558    5,604    4,680    31    210    5    143,431
Other financial assets

   –

   2,816



–



–



660



–



–



–

   3,476

Total financial assets

   700,841    250,423    23,009    31,218    85,902    48,902    72,917    144,083    1,357,295
Other assets

         21,634
Total assets

         1,378,929
Liabilities

Deposits from other banks    3,861    50,020    4,850    15,558    1,325    200    420    212    76,446
Items in the course of collection due to other banks    1,373    93    –    –    –    –    –    –    1,466
Customer accounts    205,868    86,481    8,226    11,940    2,954    3,049    2,864    1,047    322,429
Trading portfolio liabilities    51,252    –    –    –    –    –    –    –    51,252
Financial liabilities designated at fair value:
– held on own account
   1,219    17,599    5,755    7,145    18,780    14,701    14,647    6,356    86,202
Derivative financial instruments:
– held for trading
   402,019    –    –    –    –    –    –    –    402,019
– designated for risk management    –    186    68    37    111    433    394    168    1,397
Debt securities in issue    64    43,390    17,761    19,408    29,904    11,607    7,838    5,930    135,902
Repurchase agreements and cash collateral on securities lent    502    189,843    5,446    2,525    326    108    29    2    198,781
Subordinated liabilities    –    173    1    27    1,234    1,375    9,871    13,135    25,816
Other financial liabilities    –    4,959    –    –    1,135    –    –    –    6,094
Total financial liabilities

   666,158    392,744    42,107    56,640    55,769    31,473    36,063    26,850    1,307,804
Other liabilities

         12,647
Total liabilities

         1,320,451
Cumulative liquidity gap

   34,683    (107,638 ) (126,736 ) (152,158 ) (122,025 ) (104,596 ) (67,742 ) 49,491    58,478
~~265~~
~~49 Liquidity risk~~~~continued~~

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
Other financial assets    –

   2,459



–



–



637



–



–



–

   3,096

Total financial assets

   1,255,885    259,290    28,767    46,314    89,766    61,589    72,056    150,976    1,964,643
Other assets

         88,337
Total assets

         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
Other financial liabilities    –    4,573    –    –    1,572    –    –    –    6,145
Total financial liabilities

   1,235,435    484,064    39,707    37,377    43,979    25,287    27,197    31,281    1,924,327
Other liabilities

         81,242
Total liabilities

         2,005,569
Cumulative liquidity gap

   20,450    (204,324 ) (215,264 ) (206,327 ) (160,540 ) (124,238 ) (79,379 ) 40,316    47,411
~~Expected maturity dates do not differ significantly from the contract dates, except for:~~
–
Trading Portfolio Assets and Liabilities and derivative financial instruments, which may not be held to maturity as part of the Group’s trading strategies. For these instruments, which are mostly held by Barclays Capital, liquidity and repricing risk is managed through the Daily Value at Risk (DVaR) methodology.
–
Retail deposits, which are included within customer accounts, are repayable on demand or at short notice on a contractual basis. In practice, these instruments form a stable base for the Group’s operations and liquidity needs because of the broad base of customers – both numerically and by depositor type.
–
~~Financial assets designated at fair value held in respect of linked liabilities, which are managed with the associated liabilities.~~
  ~~266~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~49 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 2009~~


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
   3,861    70,645    1,607    773    76,886
Items in the course of collection due to other banks
   1,373    93    –    –    1,466
Customer accounts
   205,868    106,991    6,898    5,488    325,245
Trading portfolio liabilities
   51,252    –    –    –    51,252
Financial liabilities designated at fair value:

– held on own account
   1,219    31,030    35,733    34,206    102,188
Derivative financial instruments:

– held for trading
   402,019    –    –    –    402,019
– designated for risk management
   –    311    627    998    1,936
Debt securities in issue
   64    82,215    46,055    22,243    150,577
Repurchase agreements and cash collateral on securities lent
   502    197,864    450    37    198,853
Subordinated liabilities
   –    2,101    6,295    26,842    35,238
Other financial liabilities

   –    4,959    1,135    –    6,094
Total financial liabilities

   666,158    496,209    98,800    90,587    1,351,754
Off-balance sheet items

Loan commitments
   127,540    74,111    4,181    861    206,693
Other commitments

   386    384    19    –    789
Total off-balance sheet items

   127,926    74,495    4,200    861    207,482
Total financial liabilities and off-balance sheet items

   794,084    570,704    103,000    91,448    1,559,236
At 31st December 2008
Deposits from other banks
   10,850    101,537    2,224    671    115,282
Items in the course of collection due to other banks
   1,633    2    –    –    1,635
Customer accounts
   195,728    132,927    5,249    5,807    339,711
Trading portfolio liabilities
   59,474    –    –    –    59,474
Financial liabilities designated at fair value:

– held on own account
   1,043    33,860    28,300    30,427    93,630
Derivative financial instruments:

– held for trading
   964,071    –    –    –    964,071
– designated for risk management
   –    1,809    1,671    1,206    4,686
Debt securities in issue
   2,567    108,955    34,510    11,853    157,885
Repurchase agreements and cash collateral on securities lent
   69    181,895    547    24    182,535
Subordinated liabilities^a
   –    1,273    5,114    28,726    35,113
Other financial liabilities

   –    4,573    1,572    –    6,145
Total financial liabilities

   1,235,435    566,831    79,187    78,714    1,960,167
Off-balance sheet items

Loan commitments
   222,801    30,502    5,799    917    260,019
Other commitments

   493    318    340    –    1,151
Total off-balance sheet items

   223,294    30,820    6,139    917    261,170
Total financial liabilities and off-balance sheet items

   1,458,729    597,651    85,326    79,631    2,221,337
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 do 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.
~~Note~~
a ~~Subordinated liabilities maturity has been reanalysed to reflect the date on which the counterparty can require repayment as opposed to the date of first call.~~
~~267~~
5041 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 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 liabilities presented on the Group’s balance sheet, and their fair values differentiating between financial assets and liabilities ~~subsequently~~ measured at fair value and those ~~subsequently~~ measured at amortised ~~cost:~~cost.

            2009    2008
      Notes    Carrying
amount
£m    Fair
value
£m    Carrying
amount
£m    Fair
value
£m
Financial assets:

Cash and balances at central banks
   a    81,483    81,483    30,019    30,019
Items in the course of collection from other banks
   a    1,593    1,593    1,695    1,695
Trading portfolio assets

– Treasury and other eligible bills
   b    9,926    9,926    4,544    4,544
– Debt securities
   b    116,594    116,594    148,686    148,686
– Equity securities
   b    19,602    19,602    30,535    30,535
– Traded loans
   b    2,962    2,962    1,070    1,070
– Commodities
   b    2,260    2,260    802    802
Financial assets designated at fair value:

held in respect of linked liabilities under investment contracts
   b    1,257    1,257    66,657    66,657
held under own account:

– Equity securities
   b    6,256    6,256    6,496    6,496
– Loans and advances
   b    22,390    22,390    30,187    30,187
– Debt securities
   b    4,007    4,007    8,628    8,628
– Other financial assets designated at fair value
   b    8,658    8,658    9,231    9,231
Derivative financial instruments
   b    416,815    416,815    984,802    984,802
Loans and advances to banks
   c    41,135    41,135    47,707    47,594
Loans and advances to customers

– Residential mortgage loans
   c    149,099    142,726    139,845    138,373
– Credit card receivables
   c    21,889    21,889    22,304    22,312
– Other personal lending
   c    25,435    25,430    27,270    26,496
– Wholesale and corporate loans and advances
   c    212,928    207,648    259,699    247,798
– Finance lease receivables
   c    10,873    10,898    12,697    12,697
Available for sale financial instruments

– Treasury and other eligible bills
   b    5,919    5,919    4,003    4,003
– Debt securities
   b    43,888    43,888    58,831    58,831
– Equity securities
   b    6,676    6,676    2,142    2,142
Reverse repurchase agreements and cash collateral on securities borrowed
   c    143,431    142,524    130,354    129,296
Financial liabilities:

Deposits from banks
   d    76,446    76,457    114,910    114,912
Items in the course of collection due to other banks
   a    1,466    1,466    1,635    1,635
Customer accounts:

– Current and demand accounts
   d    100,710    100,710    82,515    82,515
– Savings accounts
   d    81,188    81,188    76,008    76,008
– Other time deposits
   d    140,531    140,544    176,982    176,966
Trading portfolio liabilities:

– Treasury and other eligible bills
   b    381    381    79    79
– Debt securities
   b    44,327    44,327    44,309    44,309
– Equity securities
   b    6,468    6,468    14,919    14,919
– Commodities
   b    76    76    167    167
Financial liabilities designated at fair value:

– Held on own account
   b    86,202    86,202    76,892    76,892
– Liabilities to customers under investment contracts
   b    1,679    1,679    69,183    69,183
Derivative financial instruments
   b    403,416    403,416    968,072    968,072
Debt securities in issue
   d    135,902    135,405    149,567    148,736
Repurchase agreements and cash collateral on securities lent
   d    198,781    198,781    182,285    182,285
Subordinated liabilities
   d    25,816    25,299    29,842    22,944
  ~~268~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~50 Fair value of financial instruments~~~~continued~~
            2010    2009
      Notes    Carrying
amount
£m    Fair
Value
£m    Carrying
amount
£m    Fair
Value
£m
Financial assets:

Cash and balances at central banks
   a       97,630       97,630       81,483       81,483
Items in the course of collection from other banks
   a       1,384       1,384       1,593       1,593
Trading portfolio assets:

– Debt securities and other eligible bills
   b       139,240       139,240       126,520       126,520
– Equity securities
   b       25,613       25,613       19,602       19,602
– Traded Loans
   b       2,170       2,170       2,962       2,962
– Commodities
   b       1,844       1,844       2,260       2,260
Financial assets designated at fair value:

– Equity securities
   b       5,685       5,685       6,256       6,256
– Loans and advances
   b       22,352       22,352       22,390       22,390
– Debt securities
   b       1,918       1,918       4,007       4,007
– Other financial assets designated at fair value
   b       10,101       10,101       8,658       8,658
– Held in respect of linked liabilities under investment contracts
   b       1,429       1,429       1,257       1,257
Derivative financial instruments
   b       420,319       420,319       416,815       416,815
Loans and advances to banks
   c       37,799       37,768       41,135       41,135
Loans and advances to customers:

– Residential mortgage loans
   c       168,055       161,439       149,099       142,726
– Credit card receivables
   c       22,658       22,658       21,889       21,889
– Other personal lending
   c       26,608       26,240       25,435       25,430
– Wholesale and corporate loans and advances
   c       200,618       196,124       212,928       207,648
– Finance lease receivables
   c       10,003       10,046       10,873       10,898
Available for sale financial investments:

– Debt securities and other eligible bills
   b       59,629       59,629       49,807       49,807
– Equity securities
   b       5,481       5,481       6,676       6,676
Reverse repurchase agreements and other similar secured lending
   c       205,772       205,527       143,431       142,524
Financial liabilities:

Deposits from banks
   d       77,975       77,949       76,446       76,457
Items in the course of collection due to other banks
   a       1,321       1,321       1,466       1,466
Customer accounts:

– Current and demand accounts
   d       110,443       110,443       100,710       100,710
– Savings accounts
   d       91,928       91,928       81,188       81,188
– Other time deposits
   d       143,417       143,580       140,531       140,544
Trading portfolio liabilities:

– Debt securities and other eligible bills
   b       64,607       64,607       44,708       44,708
– Equity securities
   b       7,568       7,568       6,468       6,468
– Commodities
   b       518       518       76       76
Financial liabilities designated at fair value:

– Debt securities
   b       76,907       76,907       72,191       72,191
– Deposits
   b       10,243       10,243       6,275       6,275
– Other financial assets designated at fair value
   b       8,632       8,632       7,736       7,736
– Liabilities to customers under investment contracts
   b       1,947       1,947       1,679       1,679
Derivative financial instruments
   b       405,516       405,516       403,416       403,416
Debt securities in issue
   d       156,623       155,974       135,902       135,405
Repurchase agreements and other similar secured lending
   d       225,534       225,511       198,781       198,781
Subordinated liabilities
   d       28,499       27,183       25,816       25,299
Notes

a)a Fair value approximates carrying value due to the short-term nature of these financial assets and liabilities.
b)b 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 the accounting policy as noted on pages ~~168~~196 and ~~169 and further~~198. Further description and analysis of these fair values are set out below.
c)c 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 as noted on ~~page 169.~~pages 195 to 199. 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~~ market derived interest ~~rates or, where~~rates. Alternatively, the ~~counterparty is a bank, rates currently offered by other financial institutions for placings with similar characteristics. Alternatively,~~ fair value ~~can be~~is determined by applying an
average of available regional and industry segmental credit spreads to the loan portfolio, taking the contractual maturity of the loan facilities into consideration.
d)d 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 and subordinated liabilities) is determined in accordance with the accounting policy as noted on page ~~169.~~196. 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 prices where available, or where these are unavailable, are estimated using a valuation model. 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.
250
41 Fair value of financial instrumentscontinued
Valuation inputs
~~During the year, the Group adopted the requirements of~~ ‘IFRS 7 – Financial Instruments: ~~Disclosures. This~~Disclosures’ requires an entity to classify its financial ~~assets and liabilities~~instruments held at fair value according to a hierarchy that reflects the significance of observable market inputs.
The classification of ~~these instruments~~a financial instrument is based on the lowest level input that is significant to the fair value measurement in its entirety. The three levels of the fair value hierarchy are defined below.
Quoted market prices – Level 1
Financial instruments ~~the valuation of which~~ are ~~determined~~classified as Level 1 if their value is observable in an active market. Such instruments are valued by reference to unadjusted quoted prices for identical assets or liabilities 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. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis.
This category includes ~~highly liquid~~exchange traded government bonds, ~~short dated US agency securities, active~~actively traded listed equities and actively exchange-traded derivatives.
Valuation technique using observable inputs – Level 2
Financial instruments ~~that~~classified as Level 2 have been valued using models whose inputs ~~other than quoted prices~~are observable in an active market. Valuations based on observable inputs include financial instruments such as ~~described for level 1 but~~swaps and forwards which are ~~observable for~~valued using market standard pricing techniques, and options that are commonly traded in markets where all the ~~asset or liability, either directly or indirectly.~~inputs to the market standard pricing models are observable.
This category includes most investment grade and liquid high yield ~~bonds;~~bonds, certain asset backed ~~securities; long dated~~securities, US agency ~~securities; certain~~securities, government bonds, less ~~liquid~~actively traded listed ~~equities;~~equities, bank, corporate and municipal ~~obligations;~~obligations, certain OTC ~~derivatives;~~derivatives, certain convertible ~~bonds;~~bonds, certificates of deposit, ~~and~~ commercial ~~paper;~~paper, certain collateralised debt obligations (CDOs) (cash and synthetic underlyings);, collateralised loan obligations (CLOs);, most commodities based ~~derivatives;~~derivatives, credit derivatives, certain credit default swaps (CDSs);, most fund ~~units;~~units, certain ~~loans;~~loans, foreign exchange spot and forward ~~transactions;~~transactions and certain issued notes.
Valuation technique using significant unobservable inputs – Level 3
Financial instruments ~~the~~are classified as Level 3 if their valuation ~~of which incorporate~~incorporates significant inputs ~~for the asset or liability~~ that are not based on observable market data (unobservable inputs). ~~Unobservable inputs are those not readily available in an active market due to market illiquidity or complexity of the product. These~~Such inputs are generally determined based on observable inputs of a similar nature, ~~historic~~historical observations on the level of the input or other analytical techniques.
This category includes certain corporate debt ~~securities; highly~~securities, distressed ~~debt;~~debt, private equity ~~investments;~~investments, commercial real estate ~~loans;~~loans, certain OTC derivatives (requiring complex and unobservable inputs such as correlations and long dated volatilities);, certain convertible ~~bonds;~~bonds, some CDOs (cash and synthetic underlyings)~~; certain~~, credit default ~~swaps;~~swaps, derivative exposures to Monoline ~~insurers;~~insurers, fund ~~units;~~units, certain asset backed ~~securities;~~securities, certain issued ~~notes;~~notes, certain collateralised loan obligations (CLOs) and certain loans.
   ~~269~~ 251
Notes to the financial statements
For the year ended 31st December 2010 continued

5041 Fair value of financial instrumentscontinued
The following table shows the Group’s financial assets and liabilities that are ~~recognised and~~ measured at fair value ~~and~~ analysed by level within the fair value hierarchy.

Financial assets and liabilities measured at fair value

      Valuation technique using
      Quoted
market
prices
(Level 1)
£m Observable
inputs
(Level 2)
£m Significant
unobservable
inputs
(Level 3)
£m Total
£m
31st December 2009

Trading portfolio assets
   76,256    69,010    6,078    151,344
Financial assets designated at fair value:

– held on own account
   5,766    24,845    10,700    41,311
– held in respect of linked liabilities to customers under investment contracts
   1,209    48    –    1,257
Derivative financial assets
   3,163    401,451    12,201    416,815
Available for sale assets
   19,919    35,287    1,277    56,483
Total assets

   106,313



530,641



30,256



667,210



Trading portfolio liabilities
   (42,238 ) (8,936 ) (78 ) (51,252 )
Financial liabilities designated at fair value
   –    (82,374 ) (3,828 ) (86,202 )
Liabilities to customers under investment contracts
   (109 ) (1,570 ) –    (1,679 )
Derivative financial liabilities
   (2,386 ) (391,916 ) (9,114 ) (403,416 )
Total liabilities

   (44,733

)

(484,796

)

(13,020

)

(542,549

)

31st December 2008

Trading portfolio assets
   72,120    98,892    14,625    185,637
Financial assets designated at fair value:

– held on own account
   5,129    32,340    17,073    54,542
– held in respect of linked liabilities to customers under investment contracts
   33,554    32,495    608    66,657
Derivative financial assets
   5,548    956,348    22,906    984,802
Available for sale assets
   14,391    47,448    3,137    64,976
Total assets

   130,742



1,167,523



58,349



1,356,614



Trading portfolio liabilities
   (42,777 ) (16,439 ) (258 ) (59,474 )
Financial liabilities designated at fair value
   (23 ) (73,698 ) (3,171 ) (76,892 )
Liabilities to customers under investment contracts
   (32,640 ) (35,935 ) (608 ) (69,183 )
Derivative financial liabilities
   (3,516 ) (949,143 ) (15,413 ) (968,072 )
Total liabilities

   (78,956

)

(1,075,215

)

(19,450

)

(1,173,621

)

  Financial assets and liabilities measured at fair value         Valuation technique using

Quoted
market
prices
(Level 1)
£m

Observable
inputs
(Level 2)
£m

Significant
unobservable
inputs
(Level 3)
£m

Total
£m

  As at 31st December 2010

  Trading portfolio assets
   48,466    114,660    5,741    168,867
  Financial assets designated at fair value
   5,406    25,175    10,904    41,485
  Derivative financial assets
   3,023    408,214    9,082    420,319
  Available for sale financial investments
   25,619    36,201    3,290    65,110
  Total assets
   82,514    584,250    29,017    695,781
  Trading portfolio liabilities
   (30,247 ) (42,345 ) (101 ) (72,693 )
  Financial liabilities designated at fair value
   (4 ) (94,088 ) (3,637 ) (97,729 )
  Derivative financial liabilities
   (2,567 ) (396,695 ) (6,254 ) (405,516 )
  Total Liabilities
   (32,818 ) (533,128 ) (9,992 ) (575,938 )
  As at 31st December 2009

  Trading portfolio assets
   76,256    69,010    6,078    151,344
  Financial assets designated at fair value
   6,975    24,893    10,700    42,568
  Derivative financial assets
   3,163    401,451    12,201    416,815
  Available for sale financial investments
   19,919    35,287    1,277    56,483
  Total assets
   106,313    530,641    30,256    667,210
  Trading portfolio liabilities
   (42,238 ) (8,936 ) (78 ) (51,252 )
  Financial liabilities designated at fair value
   (109 ) (83,944 ) (3,828 ) (87,881 )
  Derivative financial liabilities
   (2,386 ) (391,916 ) (9,114 ) (403,416 )
  Total Liabilities
   (44,733 ) (484,796 ) (13,020 ) (542,549 )
~~The table above has been compiled using the new definitions required by IFRS 7 revised~~Transfers between Level 1 and ~~as a result, the classifications~~Level 2 primarily comprised government bonds that had less observable market prices.
252
41 Fair value of ~~assets and liabilities are not directly comparable to the Group’s previously published tables of fair value measurement.~~financial instrumentscontinued
The following table shows the Group’s financial assets and liabilities that are ~~recognised and~~ measured at fair value disaggregated by valuation ~~techniques~~technique and by product type.

Financial assets and liabilities measured at
fair value by product type
At 31st December 2009
Financial assets and liabilities measured at fair value by product type Financial assets and liabilities measured at fair value by product type
   Assets
Valuation technique using    Liabilities
Valuation technique using
Assets
Valuation technique using

Liabilities
Valuation technique using

   Quoted
market prices
Level 1
£m    Observable
inputs
Level 2
£m    Significant
unobservable
inputs
Level 3
£m    Quoted
market prices
Level 1
£m Observable
inputs
Level 2
£m Significant
unobservable
inputs
Level 3
£m
Quoted
market
prices
(Level 1)
£m

Observable
inputs
(Level 2)
£m

Significant
unobservable
inputs
(Level 3)
£m

Quoted
market
prices
(Level 1)
£m

Observable
inputs
(Level 2)
£m

Significant
unobservable
inputs
(Level 3)
£m


As at 31st December 2010

Commercial real estate loans
   –    –    7,170    –    –    –       –       –       5,424       –    –    –
Asset backed products
   –    34,779    5,840    –    (6,165 ) (2,334 )    –       39,649       4,628       –    (6,287 ) (1,912 )
Other credit products
   1    47,202    2,020    –    (47,904 ) (2,827 )    –       50,230       1,097       –    (42,216 ) (1,318 )
Derivative exposure to Monoline insurers
   –    –    2,027    –    –    –       –       –       1,449       –    –    –
Non-asset backed debt instruments
   72,578    66,885    3,127    (35,760 ) (73,371 ) (3,202 )    47,108       99,625       2,956       (23,008 ) (105,481 ) (2,719 )
Equity products
   28,053    11,772    1,536    (8,788 ) (13,737 ) (1,922 )    33,054       9,708       1,478       (9,292 ) (14,342 ) (1,895 )
Private equity
   73    176    1,978    –    –    –       –       27       2,844       –    –    –
Funds and fund-linked products
   3,856    5,387    1,241    –    (2,049 ) –       591       3,674       1,084       –    (1,827 ) –
FX products
   –    24,885    761    –    (25,159 ) (379 )
Foreign exchange products
   –       29,883       506       –    (30,349 ) (241 )
Interest rate products
   176    288,718    2,357    –    (275,684 ) (1,775 )    –       305,235       2,407       –    (291,420 ) (1,079 )
Commodity products
   1,414    31,562    748    (76 ) (37,091 ) (581 )    1,378       28,520       493       (518 ) (36,191 ) (629 )
Other
   162    19,275    1,451    (109 ) (3,636 ) –       383       17,699       4,651       –    (5,015 ) (199 )
Total
   106,313    530,641    30,256    (44,733 ) (484,796 ) (13,020 )    82,514       584,250       29,017       (32,818 ) (533,128 ) (9,992 )
As at 31st December 2009

Commercial real estate loans
   –       –       7,170       –    –    –
Asset backed products
   –       34,779       5,840       –    (6,165 ) (2,334 )
Other credit products
   1       47,202       2,020       –    (47,904 ) (2,827 )
Derivative exposure to Monoline insurers
   –       –       2,027       –    –    –
Non-asset backed debt instruments
   72,578       66,885       3,127       (35,760 ) (73,371 ) (3,202 )
Equity products
   28,053       11,772       1,536       (8,788 ) (13,737 ) (1,922 )
Private equity
   73       176       1,978       –    –    –
Funds and fund-linked products
   3,856       5,387       1,241       –    (2,049 ) –
Foreign exchange products
   –       24,885       761       –    (25,159 ) (379 )
Interest rate products
   176       288,718       2,357       –    (275,684 ) (1,775 )
Commodity products
   1,414       31,562       748       (76 ) (37,091 ) (581 )
Other
   162       19,275       1,451       (109 ) (3,636 ) –
Total
   106,313       530,641       30,256       (44,733 ) (484,796 ) (13,020 )
253
Notes to the financial statements
For the year ended 31st December 2010 continued
41 Fair value of financial instrumentscontinued
Level 3 classification
The following table shows Level 3 financial assets and liabilities disaggregated by balance sheet classification and product type.
  Level 3 financial assets and liabilities by balance sheet classification and product type
      Non-derivative assets    Non-derivative liabilities Derivatives
   Trading
portfolio
assets
£m
Financial
assets
designated at
fair value
£m
   Available for
sale assets
£m    Trading
portfolio
liabilities
£m Financial
liabilities
designated
at fair value
£m
Net
derivative
financial
instruments^a
£m

  As at 31st December 2010

  Commercial real estate loans
   –       5,424       –       –    –    –
  Asset backed products
   1,720       364       312       (5 ) (17 ) 342
  Other credit products
   –       237       –       (4 ) (716 ) 262
  Derivative exposure to Monoline insurers
   –       –       –       –    –    1,449
  Non-asset backed debt instruments
   2,460       325       168       (1 ) (2,690 ) (25 )
  Equity products
   135       –       27       –    –    (579 )
  Private equity
   50       1,995       799       –    –    –
  Funds and fund-linked products
   1,084       –       –       –    –    –
  Foreign exchange products
   –       –       –       –    –    265
  Interest rate products
   –       61       –       –    (27 ) 1,294
  Commodity products
   –       14       4       –    (161 ) 7
  Other
   292       2,484       1,980       (91 ) (26 ) (187 )
  Total
   5,741       10,904       3,290       (101 ) (3,637 ) 2,828
  As at 31st December 2009

  Commercial real estate loans
   –       7,170       –       –    –    –
  Asset backed products
   1,840       423       205       (5 ) (63 ) 1,106
  Other credit products
   –       92       –       –    (595 ) (304 )
  Derivative exposure to Monoline insurers
   –       –       –       –    –    2,027
  Non-asset backed debt instruments
   2,461       438       166       (73 ) (3,081 ) 14
  Equity products
   190       –       157       –    –    (733 )
  Private equity
   104       1,237       637       –    –    –
  Funds and fund-linked products
   1,128       8       105       –    –    –
  Foreign exchange products
   –       –       –       –    –    382
  Interest rate products
   –       64       –       –    (25 ) 543
  Commodity products
   –       12       4       –    (64 ) 215
  Other
   355       1,256       3       –    –    (163 )
  Total
   6,078       10,700       1,277       (78 ) (3,828 ) 3,087
Note
a The derivative financial instruments in the tables above are represented on a net basis
of £2,828m (2009: £3,087m). On a gross basis derivative financial assets are £9,082m
(2009: £12,201m), derivative financial liabilities are £6,254m (2009: £9,114m).
  ~~270~~254

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~

5041 Fair value of financial instrumentscontinued

Level 3 financial assets and liabilities by balance sheet classification and product type
As at 31st December 2009          Non-derivative assets    Non-derivative liabilities Derivatives
   �� Trading
portfolio
assets
£m    Financial
assets
designated
at fair
value
£m    Available
for sale
assets
£m    Trading
portfolio
liabilities
£m Financial
liabilities
designated
at fair
value
£m Net derivative
financial
instruments^a
£m
Commercial real estate loans
   –    7,170    –    –    –    –
Asset backed products
   1,840    423    205    (5 ) (63 ) 1,106
Other credit products
   –    92    –    –    (595 ) (304 )
Derivative exposure to Monoline insurers
   –    –    –    –    –    2,027
Non-asset backed debt instruments
   2,461    438    166    (73 ) (3,081 ) 14
Equity products
   190    –    157    –    –    (733 )
Private equity
   104    1,237    637    –    –    –
Funds and fund-linked products
   1,128    8    105    –    –    –
FX products
   –    –    –    –    –    382
Interest rate products
   –    64    –    –    (25 ) 543
Commodity products
   –    12    4    –    (64 ) 215
Other
   355    1,256    3    –    –    (163 )
Total
   6,078    10,700    1,277    (78 ) (3,828 ) 3,087
Level 3 ~~Movement Analysis~~movement analysis
The following table summarises the movements in the ~~level~~Level 3 balance during the ~~year ended 31st December 2009.~~year. The table shows gains and losses and includes amounts for all financial assets and liabilities transferred to ~~level~~and from Level 3 ~~during the year. The table does not reflect gains and losses for level 3 financial assets and liabilities that were transferred out~~ during the year. Transfers have been reflected as if they had taken place at the beginning of the year.

Analysis of movement in level 3 financial assets and liabilities
For the period ended 31st December 2009

Analysis of movements in Level 3 financial assets
and liabilities
   Trading
portfolio
assets
£m Financial
assets
designated
at fair value
£m Available
for sale
assets
£m Trading
portfolio
liabilities
£m
Financial
liabilities
designated
at fair value
£m

Net
derivative
financial
instruments^a
£m

Total
£m

As at 1st January 2010
   6,078    10,700    1,277    (78 ) (3,828 ) 3,087    17,236
Purchases
   2,830    890    234    (96 ) (12 ) 762    4,608
Sales
   (3,334 ) (1,117 ) (121 ) –    39    147    (4,386 )
Issues
   –    –    –    –    (243 ) (555 ) (798 )
Settlements
   (455 ) (924 ) (206 ) 63    601    (94 )   (1,015 )
Total gains and losses in the period recognised in the
income statement:

– trading income
   683    203    –    –    (730 ) (5 ) 151
– other income
   –    173    (94 ) –    –    –    79
Total gains or losses recognised in other comprehensive
income
   –    –    208    –    –    –    208
Transfers in/(transfers out)
   (61 ) 979    1,992    10    536    (514 ) 2,942
As at 31st December 2010
   5,741    10,904    3,290    (101 ) (3,637 ) 2,828    19,025
   Trading
portfolio
assets
£m Financial
assets
designated
at fair value
£m Available
for sale
assets
£m Trading
portfolio
liabilities
£m Financial
liabilities
designated
at fair value
£m Net
derivative
financial
instruments^a
£m Total
£m
As at 1st January 2009
   14,625    17,681    3,137    (258 ) (3,779 ) 7,493    38,899       14,625    17,681    3,137    (258 ) (3,779 ) 7,493    38,899
Purchases
   2,021    700    459    (70 ) (313 ) 2,334    5,131       2,021    700    459    (70 ) (313 ) 2,334    5,131
Sales
   (7,018 ) (4,875 ) (9 ) 172    690    (3,548 ) (14,588 )    (7,018 ) (4,875 ) (9 ) 172    690    (3,548 ) (14,588 )
Issues
   –    –    –    –    (1,343 ) (1,718 ) (3,061 )    –    –    –    –    (1,343 ) (1,718 ) (3,061 )
Settlements
   (410 ) (804 ) (347 ) –    763    (100 ) (898 )    (410 ) (804 ) (347 ) –    763    (100 ) (898 )
Total gains and losses in the period

Recognised in the income statement

Total gains and losses in the period recognised in the
income statement:

– trading income
   (2,290 ) (3,356 ) –    27    1,574    (3,516 ) (7,561 )    (2,290 ) (3,356 ) –    27    1,574    (3,516 ) (7,561 )
– other income
   –    (434 ) (131 ) –    –    –    (565 )    –    (434 ) (131 ) –    –    –    (565 )
Total gains or losses recognised in other comprehensive income
   –    –    (103 ) –    –    –    (103 )    –    –    (103 ) –    –    –    (103 )
Transfers in/transfers out
   (850 ) 1,788    (1,729 ) 51    (1,420 ) 2,142    (18 )
Transfers in/(transfers out)
   (850 ) 1,788    (1,729 ) 51    (1,420 ) 2,142    (18 )
As at 31st December 2009
   6,078    10,700    1,277    (78 ) (3,828 ) 3,087    17,236       6,078    10,700    1,277    (78 ) (3,828 ) 3,087    17,236
The ~~following table discloses~~significant movements in Level 3 positions during the ~~gains and losses recognised in the period arising on level 3 financial assets and liabilities held as at 31st December 2009.~~

Gains and losses recognised during the period on level 3 financial assets and liabilities held
As at 31st December 2009
      Trading
portfolio
assets
£m Financial
assets
designated
at fair value
£m Available
for sale
assets
£m Trading
portfolio
liabilities
£m    Financial
liabilities
designated
at fair value
£m Net
derivative
financial
instruments
£m Total
£m
Total gains and losses held as at 31st December 2009

Recognised in the income statement

– trading income
   (736 ) (3,034 ) –    8    (269 ) (2,817 ) (6,848 )
– other income
   –    (452 ) (140 ) –    –    –    (592 )
Total gains or losses recognised in other comprehensive income
   –    –    (65 ) –    –    –    (65 )
Total
   (736 ) (3,486 ) (205 ) 8    (269 ) (2,817 ) (7,505 )
~~Note~~year are explained below:

– purchases of £4.6bn were primarily composed of £2.3bn of asset backed products, £0.6bn of equity products, £0.4bn of non-asset backed debt instruments and £0.4bn of private equity assets;
– sales of £4.4bn included the sale of £2.4bn of asset backed products, £0.6bn of non-asset backed debt instruments, £0.6bn of private equity assets and £0.4bn of commercial real estate loans;
– net Issuances and Settlements of £1.8bn were primarily driven by £0.6bn of commercial real estate settlements, and £0.5bn of equity product issuances;
– transfers into Level 3 primarily reflected a £2.0bn receivable arising as part of the acquisition of the North American businesses of Lehman Brothers. This resulted from a change in the accounting treatment from loans and advances to available for sale financial instruments. This classification is due to the uncertainty inherent in any litigation, rather than uncertainty relating to the valuation of the assets themselves. In addition, a further £1.0bn was transferred from Level 2 to Level 3 due to unobservable valuation inputs becoming significant to the overall valuation of certain fixed rate loans.
Note
a The derivative financial instruments in the tables above are represented on a net basis
of ~~£3,087m.~~£2,828m (2009: £3,087m). On a gross basis derivative financial assets are ~~£12,201m,~~£9,082m
(2009: £12,201m), derivative financial liabilities are ~~£9,114m.~~£6,254m (2009: £9,114m).
   ~~271~~ 255
Notes to the financial statements
For the year ended 31st December 2010 continued

5041 Fair value of financial instrumentscontinued
Gains and losses on Level 3 financial assets and liabilities
The ~~significant movements~~following table discloses the gains and losses recognised in the ~~level~~year arising on Level 3 ~~positions during the~~financial assets and liabilities held at year ~~ended 31st December 2009 are explained below:~~end.
~~– Purchases of £5.1bn were primarily composed of £1.7bn of asset backed products, £1.5bn of credit derivatives and £0.6bn of equity products.~~
Gains and losses recognised during the period on
Level 3 financial assets and liabilities held Trading
portfolio
assets
£m Financial
assets
designated
at fair value
£m Available for
sale assets
£m Trading
portfolio
liabilities
£m Financial
liabilities
designated
at fair value
£m Net
derivative
financial
instruments
£m Total
£m
As at 31st December 2010

Recognised in the income statement

– trading income
345    215    –    (1 ) (528 ) (66 ) (35 )
– other income
–    115    (166 ) –    –    –    (51 )
Total gains or losses recognised in other comprehensive income
–    –    133    –    –    –    133
Total
345    330    (33 ) (1 ) (528 ) (66 ) 47
As at 31st December 2009

Recognised in the income statement

– trading income
(736 ) (3,034 ) –    8    (269 ) (2,817 ) (6,848 )
– other income
–    (452 ) (140 ) –    –    –    (592 )
Total gains or losses recognised in other comprehensive income
–    –    (65 ) –    –    –    (65 )
Total
(736 ) (3,486 ) (205 ) 8    (269 ) (2,817 ) (7,505 )
~~– Sales of £14.6bn include the disposal of £7.5bn of assets backed products and Monoline exposures through the Protium transaction.~~
The Crescent debt restructuring, disclosed in Note 40, resulted in the sale of £1.0bn of commercial real estate loans and there were additional sales of £3.8bn asset backed products and £0.6bn Monoline exposures during the period.
~~– Issuances of £3.1bn were driven by £1.3bn of new credit-linked notes and equity, credit and commodity derivatives of £1.7bn.~~
– Losses in Trading Income of £7.6bn were primarily attributable to the £4.4bn of writedowns on the credit market exposures summarised in Note 47, along with writedowns on other asset backed products, funds and other Monoline insurers. These were offset by gains on interest rate and commodity products.
~~– Losses in Other Income of £0.6bn were driven by the writedown and impairment of commercial real estate loans.~~
~~– Transfers into level 3 were largely due to the lack of observable valuation inputs for certain securities as well as curves becoming unobservable for certain derivative products.~~
– Transfers out of level 3 were principally due to unobservable valuation inputs being deemed insignificant to the overall valuation of certain instruments particularly on investment grade asset backed products.
~~There were no significant transfers between level 1 and level 2.~~
Valuation techniques
Valuations based on observable inputs include financial instruments such as swaps and forwards which are valued using market standard pricing techniques; and options that are commonly traded in markets where all the inputs to the market standard pricing models are observable.
~~Valuation models are reviewed at least annually for model performance and calibration.~~ Current year valuation methodologies were consistent with the prior year unless otherwise noted below. These methodologies are commonly used by market participants.
The valuation techniques used for the main products ~~whose valuation includes unobservable inputs~~that are not determined by reference to unadjusted quoted prices (Level 1), are described below.
Commercial real estate loans
This category includes lending on a range of commercial property types including retail, hotels, office and development properties.
~~The valuations are considered unobservable due to the bespoke nature of the instruments and the high level of volatility in the commercial real estate market at present.~~ Fair value is calculated using a risk adjusted spread based methodology performed on a loan by loan basis with consideration of characteristics such as property type, geographic location, yields, credit quality and property performance reviews.
The valuation inputs are reviewed with reference to ~~CMBX and CMBS~~published bond indices. Initial spreads are sourced from market quoted origination spreads by property type and classified into Loan-to-Value (LTV) buckets which are adjusted for internal credit rating and subordination of the loans. The internal credit ratings used in the valuation model are subject to a monthly review process. The model is calibrated monthly based on external quotes of new origination property type spreads and the latest internal credit ratings.
The ~~methodology used differs~~valuations are considered unobservable due to the ~~prior period in that internal credit ratings, additional risk factors and property performance reviews are now incorporated. The changes were made to take advantage~~bespoke nature of ~~data that has become available and to enhance~~ the ~~assessment of credit risk.~~instruments.
Asset backed products
These are debt and derivative products that are linked to the cash flows of a pool of referenced assets. This category includes asset backed ~~loans;~~loans, CDOs (cash underlyings)~~; CLOs;~~, CLOs, asset backed credit ~~derivatives;~~derivatives, asset and mortgage backed securities.
~~Within this population, valuation inputs are unobservable for non-investment grade ABS; non-agency residential mortgage backed securities (RMBS) and asset backed credit derivatives. The valuations~~Valuations are determined using industry standard cash flow models that calculate fair value based on loss projections, prepayment, recovery and discount rates. These parameters are determined by reference to underlying collateral performance, independent research, ABX indices, broker quotes, observable trades on similar securities and third party pricing sources.
Within this population, certain valuation inputs are unobservable for non-investment grade ABS, non-agency residential mortgage backed securities (RMBS) and asset backed credit derivatives. Where unobservable, a parameter will be set with reference to an observable proxy. The determination of parameter levels takes account of a range of factors such as deal vintage, underlying asset composition (historical ~~losses;~~losses, borrower ~~characteristics;~~characteristics, various loan attributes such as loan-to-value and debt-to-income ratios and geographic concentration), credit ratings (original and current), home price changes and interest rates.
  ~~272~~256

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~

5041 Fair value of financial instrumentscontinued
Other credit products
These products are linked to the credit spread of a referenced entity, index or basket of referenced entities. This category includes synthetic ~~CDOs;~~CDOs, single name and index CDS and Nth to default basket swaps. Within this population, valuation inputs are unobservable for ~~certain synthetic CDOs and~~ CDS with illiquid reference ~~assets.~~assets and certain synthetic CDOs.
A market standard model is used in the valuation of CDS whereby the credit curve is the significant input in the overall valuation. Credit spreads are observed directly from broker data, third party vendors or priced to proxies. Where credit spreads are unobservable, they are determined with reference to recent transactions or bond spreads from observable issuances of the same issuer or other similar entities as a proxy.
Synthetic CDOs are valued using a model that calculates fair value based on observable and unobservable parameters including credit spreads, recovery rates, correlations and interest rates and is calibrated daily. For index and bespoke synthetic CDOs with unobservable inputs, correlation is set with reference to index tranche market.
CDS with illiquid reference assets are valued using an industry standard ‘hazard-type’ model that calculates fair value of the credit protection using interest rates, credit spreads and recovery rates of the underlying issuers. Interest rates are observable and sourced from liquid interest rate instruments. Credit spreads are unobservable and are determined with reference to recent transactions or bond spreads from observable issuances of the same issuer or other similar obligors as a proxy.
Derivative exposure to Monoline insurers
These products ~~comprise securities, principally CLOs, on~~are derivatives through which default protection has been ~~purchased. Credit~~purchased on securities, primarily CLOs.
The credit spreads of the counterparty providing protection are ~~unobservable.~~
unobservable at the required maturity. The derivative positions are valued with reference to the price of the underlying security. As the security and derivative are hedged, the net present value of the derivative increases as the net present value of the security decreases. The derivative valuation is then adjusted to reflect the credit quality of the counterparty.
Non-asset backed debt instruments
These are government ~~bonds;~~bonds, US agency ~~bonds;~~bonds, corporate ~~bonds;~~bonds, commercial ~~paper;~~paper, certificates of ~~deposit;~~deposit, convertible ~~bonds;~~bonds, notes and other non-asset backed bonds. Within this population, valuation inputs are unobservable for certain convertible bonds, corporate bonds and issued notes.
Exchange traded government bonds are classified as Level 1. Less liquid, government bonds, US agency bonds, corporate bonds, commercial paper and certificates of deposit are valued using observable market prices which are sourced from broker quotes, inter-dealer prices or other reliable pricing services. Where there are not observable market prices, fair value is determined by reference to either issuances or CDS spreads of the same issuer as proxy inputs to obtain discounted cash flows to value the bond. In the absence of observable bond or CDS spreads for the respective issuer, similar reference assets or sector averages are applied as a proxy.
Convertible bonds are valued using prices observed through broker sources, market data services and trading activity. Prices are validated against liquid external sources. Where liquid external sources are not available, fair value is determined using a spread to the equity conversion value or the value of the bond without the additional equity conversion. The spread level is determined with reference to similar proxy assets. ~~Positions are valued on a daily basis.~~
Corporate bonds are valued on a price basis or using spreads over risk free interest rate curves built from liquid instruments. Where unobservable, bond spreads are determined by reference to either issuances or alternatively CDS spreads of the same issuer are used as proxy inputs to obtain discounted cash flows and accordingly the value of the bond. In the absence of observable bond or CDS spreads of the respective issuer, similar reference assets or sector averages are applied as a proxy.
~~Fixed~~Most fixed and floating rate notes issued ~~in certain emerging markets,~~ are valued using models that discount expected future cash flows. These ~~proprietary~~ models calculate fair value based on observable interest rates and ~~unobservable~~ funding or credit spreads. The interest rates are derived from broker and bank notes rates. In certain emerging markets, funding spreads may be unobservable. Funding spreads up to five years are sourced from negotiable commercial deposit rates in the market as a proxy. Funding spreads greater than five years are determined by applying ~~linear extrapolation.~~extrapolation techniques.
Equity Linked Notes valuations are determined using industry standard models. The models calculate fair value based on input parameters such as stock prices, dividends, volatilities, interest rates, equity repo curves and, for multi-asset products, correlations. In general, input parameters are observable, with unobservable inputs having an insignificant impact on the valuation.
The valuation for fund linked notes is consistent with the valuation of the underlying (see the ‘Funds and fund–linked products’ section below).
Equity products
This category includes listed ~~equities;~~equities, exchange traded ~~derivatives;~~equity derivatives, OTC equity ~~derivatives;~~derivatives, preference shares and contracts for difference. ~~Within this population, valuation inputs for certain OTC equity derivatives are unobservable.~~
OTC equity derivatives ~~valuation~~valuations are determined using industry standard models. The models calculate fair value based on input parameters such as stock prices, dividends, volatilities, interest rates, equity repo curves and, for multi-asset products, correlations. In general, input parameters are deemed observable up to liquid maturities which are determined separately for each parameter and underlying instrument. Unobservable model inputs are set by ~~referencing~~reference to liquid market instruments and applying extrapolation techniques to match the risk profile of the trading portfolio. These are validated against consensus market data services for the same or similar underlying instrument. ~~Models are calibrated daily based on liquid market instrument prices.~~
Private equity
Private equity investments are valued in accordance with the ‘International Private Equity and Venture Capital Valuation Guidelines’. This requires the use of a number of individual pricing benchmarks such as the prices of recent transactions in the same or similar instruments, discounted ~~cash flow~~cashflow analysis, and comparison with the earnings multiples of listed comparative companies. Unobservable inputs include earnings estimates, multiples of comparative companies, marketability discounts and discount rates. Model inputs are based on market conditions at the reporting date. The valuation of unquoted equity instruments is subjective by nature. However, the relevant methodologies are commonly applied by other market participants and have been consistently applied over time. Full valuations are performed bi-annually, with the portfolio reviewed on a monthly basis for material events that might impact upon fair value.
   ~~273~~ 257
Notes to the financial statements
For the year ended 31st December 2010 continued

5041 Fair value of financial instrumentscontinued
~~Fund~~Funds and fund-linked products
This category includes holdings in hedge ~~funds;~~funds, funds of ~~funds;~~funds, and fund derivatives. Fund derivatives are derivatives whose underlyings include mutual funds, hedge funds, fund indices and multi-asset portfolios. They are valued using underlying fund prices, yield curves and other available market information.
In general fund holdings are valued based on the latest available valuation received from the fund administrator. Funds are deemed unobservable where the fund is either suspended, in wind-down, has a redemption restriction that severely affects liquidity, or where the latest ~~Net Asset Value (NAV)~~net asset value from the fund administrators is more than three months old. In the case of illiquid fund holdings the valuation will take account of all available information in relation to the underlying fund or collection of funds and ~~may be~~maybe adjusted relative to the performance of relevant index benchmarks. ~~Prices are marked based on available valuation data and any adjustments are reviewed on a monthly basis.~~
FXForeign exchange products
These products are derivatives linked to the foreign exchange market. This category includes ~~Forward~~forward contracts, FX swaps and FX options.
Exotic derivatives are valued using industry standard and ~~proprietary~~bespoke models.
Fair value is based on input parameters that include FX rates, interest rates, FX volatilities, interest rate volatilities, FX interest rate correlations and other model parameters. Certain correlations and long dated forward and volatilities are unobservable. Unobservable model inputs are set by referencing liquid market instruments and applying extrapolation techniques to match the risk profile of the trading portfolio. These are validated against consensus market data ~~services on a monthly basis.~~services.
Interest rate products
These are products ~~with a payoff~~ linked to interest rates ~~for example Libor (London interbank offer rate)~~ or inflation ~~rates and~~ indices. This category includes interest rate and inflation ~~swaps; swaptions; caps; floors;~~swaps, swaptions, caps, floors, inflation ~~options; Bank of England base rate derivatives~~options, balance guaranteed swaps and other exotic interest rate derivatives.
~~Inflation structured and property index-linked~~ Interest rate products are valued using an industry standard model. The model calculates fair value based on observable and unobservable parameters such as inflation index levels, volatilities and correlations sourced from trading information, broker data and historical analysis. The assumptions and inputs applied reflect observable parameters such as yield curves, interpolation adjustments for the seasonal nature of inflation and volatility surfaces. The most significant unobservable input is correlation between inflation indices. The suitability of the models employed is reviewed on an annual basis.
~~Bank of England base rate derivatives~~ are valued using standard discounted cash flow techniques.
Interest rate derivative cash flows ~~techniques. Bank~~are valued using interest rates yield curves whereby observable market data is used to construct the term structure of ~~England~~ forward ~~base rates are~~rates. This is then used ~~as inputs into~~to project and discount future cash flows based on the ~~valuation model. These forward base rates are~~parameters of the trade. An instrument with optionality is valued using a volatility surface constructed from market observable inputs. Exotic interest rate derivatives are valued using industry standard and bespoke models based on observable market parameters which are determined separately for each parameter and underlying instrument. Where unobservable, a parameter will be set with reference to an observable proxy.
For inflation swaps, the ~~base~~inflation adjusted yield curve is the most significant input in the overall valuation. In an inflation swap, an inflation based cash flow is swapped for either a fixed or floating interest rate cash flow. Flows on the inflation leg of the trades are projected using the relevant inflation forward curve and discounted. Any floating rates will be projected using the relevant interest rate yield curve ~~set from market data up to five years. For maturities greater than five years, spreads to observable proxies are applied. The base~~and discounted. Inflation forward curves and interest rate yield ~~curve~~curves are extrapolated beyond observable tenors and verified against any available market data.
Balance guaranteed swaps are valued using industry standard cash flow models that calculate fair value based on loss projections, prepayment, recovery and discount rates. These parameters are determined by reference to underlying asset performance, independent research, ABX indices, broker quotes, observable trades on similar securities and third party pricing sources. Prepayment is projected based on observing historic prepayment.
During 2010, in line with changes in market practice, the methodology for valuing certain collateralised interest rate products was updated to make use of more relevant interest rate yield curves to discount cash flows. For certain collateralised vanilla swaps, inflation derivatives and other linear fixed income derivatives Overnight Indexed Swap (OIS) rates were used ~~is updated daily.~~rather than other market reference rates such as LIBOR.
Commodity products
These products are exchange traded and OTC derivatives based on an underlying commodity such as metals, oil and oil related, agriculturals, power and natural gas. ~~Within this population, valuation inputs of certain commodity swaps and options are unobservable.~~
Valuation inputs of certain commodity swaps and options are determined using models incorporating discounting of cash flows ~~closed form Black models~~ and ~~Monte-Carlo simulation. The models calculate fair~~other industry standard modelling techniques. Fair value ~~based on~~is calculated using inputs such as forward curves, volatility surfaces and tenor correlation. Unobservable inputs are set with reference to similar observable products or by applying extrapolation techniques from the observable market. ~~As markets close at different times, curves are constructed using a spread to the primary market benchmark to ensure that all curves are valued using the dominant market base price.~~
~~The frequency and method used to calibrate the model is based on an assessment of observable option and swap prices.~~
Other
This category is ~~primarily~~largely made up of fixed rate loans, which are valued using models that discount expected future cash flows. These models calculate the fair value based on observable interest rates and unobservable funding or credit spreads. Unobservable funding or credit spreads are determined by applying ~~linear~~ extrapolation of observable spreads.
The receivables resulting from the acquisition of the North American businesses of Lehman Brothers is included within ‘Other’. For more details, refer to Note 26 Legal Proceedings.
258
41 Fair value of financial instrumentscontinued
Fair value adjustments
The main adjustments to model or system balances to arrive at a fair value are described below:
Bid-Offer valuation adjustments
Portfolios are valued to reflect the most advantageous market price to which Barclays has immediate access. For assets and liabilities where the firm is not a market maker, mid prices are adjusted to bid and offer prices respectively. The bid-offer adjustment factors reflect the expected close out strategy and, for derivatives, that they are managed on a portfolio basis. The methodology for determining the bid-offer adjustment for a derivative portfolio will generally involve netting between long and short positions and the bucketing of risk by strike and term in accordance with hedging strategy. Bid-offer levels are derived from market sources, such as broker data, and are reviewed periodically. For those assets and liabilities where the firm is a market maker (which is the case for certain equity, bond and vanilla derivative markets), since the bid-offer spread does not represent a transaction cost, mid prices are used.
Uncertainty adjustments
  ~~274~~
~~Notes~~Market data input for exotic derivatives may not have a directly observable bid offer spread. In such instances, an uncertainty adjustment is applied as a proxy for the bid offer adjustment. An example of this is correlation risk where an adjustment is required to reflect the ~~accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
possible range of values that market participants apply. The uncertainty adjustment may be determined by calibrating to derivative prices, or by scenario analysis or historical analysis.
~~50 Fair value of financial instruments~~~~continued~~
Model ~~valuation~~Valuation adjustments
New valuation models ~~used for valuing the firm’s positions~~ are reviewed under the firm’s Trade Approval Procedures and Model Validation Policy. This ~~assesses~~process identifies the assumptions used ~~in modelling~~ and ~~recommends any model fair value adjustments. Such adjustments take account of~~ any model limitations ~~which may include additional~~(for example, if the model does not incorporate volatility skew). Where necessary, fair value adjustments will be applied to take these factors ~~such as volatility skew or uncertainties such as prepayment rates. These~~into account. Model valuation adjustments ~~calibrate the carrying value to fair value. The magnitude of the valuation adjustment is~~are dependant on the size of portfolio, complexity of the model, whether the model is market standard and to what extent it incorporates all known risk factors. ~~Models~~All models and model ~~value adjustment recommendations~~valuation adjustments are subject to review on at least an annual ~~review process.~~basis.
Credit and debit valuation adjustments
Credit ~~Valuation Adjustments~~valuation adjustments (CVAs) and Debit valuation adjustments (DVAs) are incorporated into derivative valuations to reflect the impact on the fair value of counterparty risk and ~~Barclays’~~Barclays own credit ~~quality.~~quality respectively. These adjustments are modelled for OTC derivatives across all asset classes.
Probability of Default (PD) and Loss Given Default (LGD) are applied to expected exposures at a counterparty level to arrive at a CVA and DVA adjustment.
Monoline credit valuation adjustments
Barclays determines its internal credit ratings for Monolines based upon its independent, fundamental credit analysis in conjunction with a cross reference to external ratings where available. These internal credit ratings can, and at times do, differ from the publicly available ratings.
For Monolines where a default has either occurred, is imminent or there is a possibility of regulatory intervention, an adjustment may be made to the internal credit rating. This will be based on the estimated recovery from a range of potential scenarios.
The PD used to calculate the CVA is derived from the relevant internal credit rating and is based on internal simulations of credit factor indices by region and industry designations, calibrated to historical time-series and forecast on the basis of current values. The LGD used is a function of available historical data, the Monoline’s credit quality and risk concentration, and recovery values observed in executed commutation settlements.
The CVA for all Monolines is based upon an expected exposure methodology. Expected exposure is calculated by simulating default losses on the underlying assets, calibrated to market observable parameters and forward looking market research. This exposure is then further adjusted for any spread between prices derived from observable ~~proxies and~~proxies. Barclays will then apply the PD of the Monoline to this expected exposure ~~based on~~and multiply the ~~PD or regulatory intervention.~~
~~The PD used~~result by the LGD to ~~calculate~~determine the CVA ~~is derived from external ratings cross referenced~~for each Monoline.
259
Notes to ~~internal default grades and is based on internal simulations~~the financial statements
For the year ended 31st December 2010 continued
41 Fair value of credit-factor indices by region and industry designations, calibrated to historical time-series and forecast on the basis of current values. The LGD used to calculate the CVA is a function of available historical data, the monoline’s credit quality and risk concentration.financial instrumentscontinued
Other credit and debit valuation adjustments
Derivative CVAs and DVAs for ~~non Monoline~~non-Monoline exposures are calculated using Monte-Carlo simulation to generate an expected exposure profile. The expected exposure is calculated at a counterparty level after netting and collateral are applied. The PD and LGD are derived from a combination of single name credit default swap prices where observable, industry curves, indices, and loan/note pricing taking into account geographic factors, internal credit ratings, loss assumptions and ratings agency data.
For counterparties with an observable credit market, the PD and LGD are derived from single name credit default swap prices. For ~~all other~~ counterparties ~~PDs~~with no observable credit market, the PD and LGD are derived from either a ~~combination of industry curves; indices;~~generic or a specific curve. The PD and ~~loan/note pricing taking into account geographic factors,~~LGD is derived from internal credit ratings ~~loss assumptions~~ and ~~ratings agency data.~~ the appropriate geographic index. Specific curves will incorporate any relevant additional factors into the generic curve.
Where the curve is unobservable and the CVA is significant to the overall value of the underlying derivative, the full value of the derivative and its associated credit valuation adjustment ~~has been~~is deemed unobservable.
CVAs are not incorporated into the fair value of certain counterparties where it has been observed that the market does not apply a credit charge. The categories of counterparties excluded are as follows:

– Strongly collateralised counterparties – this is any counterparty with a collateral agreement with minimum weekly calls and the collateral threshold plus minimum transfer amount below a defined level;

– Certain highly-rated sovereigns, supra-nationals and government agencies; and

– Liquidity providers – when trading on the interbank market with certain collateralised market making counterparties no counterparty spreads are applied.
Where counterparty credit quality and exposure to that counterparty are linked, wrong way risk may arise. In these instances, wrong way risk suggests that exposure to the counterparty is likely to increase as counterparty credit quality deteriorates. Exposure to ‘wrong way risk’ is limited via internal governance processes and deal pricing.
Barclays Capital uses credit default swap spreads to determine the impact of Barclays own credit quality on the fair value of derivative liabilities. At 31st December 2010, cumulative adjustments of £352m (31st December 2009: £307m) were recorded against derivative liabilities. The impact of these adjustments in both periods was more than offset by the impact of the credit valuation adjustments to reflect counterparty creditworthiness that were netted against derivative assets.
Own credit adjustments
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.
For funded instruments such as issued notes, credit spreads on Barclays issued bonds represent the most appropriate basis for this adjustment. However, from 30th September 2007 to 30th June 2009, Barclays credit default swap spreads were used to calculate the carrying amount of issued notes, since there were insufficient observable own credit spreads through secondary trading prices in issued bonds. From 1st July 2009, the carrying amount of issued notes has been calculated using credit spreads derived from secondary trading in Barclays issued bonds.
At 31st December ~~2009,~~2010, the own credit adjustment arose from the fair valuation of ~~£61.5bn~~£96.0bn (31st December 2009: £86.0bn) of Barclays ~~Capital structured notes (31st December 2008: £54.5bn).~~Capital’s financial liabilities designated at fair value. Barclays credit spreads ~~improved~~widened during ~~2009,~~2010, leading to a profit of £391m (2009: loss ~~of £1,820m (2008: gain £1,663m)~~£1,820m) from the fair value of changes ~~in own credit. If Barclays had calculated the carrying amount of issued notes using credit default swap spreads at 31st December 2009, the fair value of changes~~primarily in own credit ~~would have been a loss~~but also from the effects of ~~£2,448m in the year.~~foreign exchange rates, time decay and trade activity.
Barclays Capital also uses credit default swap spreads to determine the impact of Barclays own credit quality on the fair value of derivative liabilities. At 31st December 2009, cumulative adjustments of £307m (31st December 2008: £1,176m) were netted against derivative liabilities. The impact of these adjustments in both periods was more than offset by the impact of the credit valuation adjustments to reflect counterparty creditworthiness that were netted against derivative assets.
260           ~~275~~

5041 Fair value of financial instrumentscontinued
Unrecognised gains as a result of the 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:

Year ended 31st December
      2010
£m 2009
£m
   2009
£m 2008
£m
Opening balance
   128    154       99    128
Additions
   39    77       56    39
Amortisation and releases
   (68 ) (103 )    (18 ) (68 )
Closing balance
   99    128       137    99
Sensitivity analysis of valuations using unobservable inputs

At 31st December 2009    Fair value Favourable
changes    Unfavourable
change
   Fair value Favourable changes    Unfavourable changes
Product type    Total
assets
£m    Total
liabilities
£m Profit
and
loss
£m    Equity
£m    Profit
and loss
£m Equity
£m    Total
assets
£m    Total
liabilities
£m Profit
and loss
£m    Equity
£m    Profit
and loss
£m Equity
£m
As at 31st December 2010

Commercial real estate loans
   7,170    –    429    –    (437 ) –       5,424       –    183       –       (167 ) –
Asset backed products
   5,840    (2,334 ) 175    4    (175 ) (4 )    4,628       (1,912 ) 317       11       (289 ) (11 )
Other credit products
   2,020    (2,827 ) 171    –    (152 ) –       1,097       (1,318 ) 38       –       (66 ) –
Derivative exposure to Monoline insurers
   2,027    –    336    –    (532 ) –       1,449       –    78       –       (230 ) –
Non-asset backed debt instruments
   3,127    (3,202 ) 145    2    (141 ) (2 )    2,956       (2,719 ) 56       –       (55 ) –
Equity products
   1,536    (1,922 ) 28    15    (28 ) (15 )    1,478       (1,895 ) 156       8       (154 ) (8 )
Private equity
   1,978    –    267    73    (339 ) (95 )    2,844       –    279       111       (280 ) (69 )
Funds and fund-linked products
   1,241    –    100    –    (100 ) –       1,084       –    275       –       (275 ) –
FX products
   761    (379 ) 33    –    (33 ) –
Foreign exchange products
   506       (241 ) 51       –       (52 ) –
Interest rate products
   2,357    (1,775 ) 78    –    (78 ) –       2,407       (1,079 ) 38       –       (52 ) –
Commodity products
   748    (581 ) 36    –    (36 ) –       493       (629 ) 30       –       (55 ) –
Other
   1,451    –    52    –    (52 ) –       4,651       (199 ) 51       –       (55 ) –
Total
   29,017       (9,992 ) 1,552       130       (1,730 ) (88 )
As at 31st December 2009

Commercial real estate loans
   7,170       –    429       –       (437 ) –
Asset backed products
   5,840       (2,334 ) 175       4       (175 ) (4 )
Other credit products
   2,020       (2,827 ) 171       –       (152 ) –
Derivative exposure to Monoline insurers
   2,027       –    336       –       (532 ) –
Non-asset backed debt instruments
   3,127       (3,202 ) 145       2       (141 ) (2 )
Equity products
   1,536       (1,922 ) 28       15       (28 ) (15 )
Private equity
   1,978       –    267       73       (339 ) (95 )
Funds and fund-linked products
   1,241       –    100       –       (100 ) –
Foreign exchange products
   761       (379 ) 33       –       (33 ) –
Interest rate products
   2,357       (1,775 ) 78       –       (78 ) –
Commodity products
   748       (581 ) 36       –       (36 ) –
Other
   1,451       –    52       –       (52 ) –
Total
   30,256    (13,020 ) 1,850    94    (2,103 ) (116 )    30,256       (13,020 ) 1,850       94       (2,103 ) (116 )
As part of risk management processes, an analysis is performed on products with significant unobservable parameters (Level 3) to generate a range of reasonably possible alternative valuations.
The effect of stressing ~~the~~ unobservable ~~assumptions~~inputs to a range of reasonably possible alternatives would be to increase ~~the~~ fair values by up to ~~£1.9bn (2008: £2.4bn)~~£1.7bn (2009: £1.9bn) or to decrease ~~the~~ fair values by up to ~~£2.2bn (2008: £3bn)~~£1.8bn (2009: £2.2bn) with substantially all the potential effect impacting profit orand loss rather than equity. ~~The metric has not been offset for the effect of hedging.~~
The stresses applied take account of the nature of valuation techniques used, as well as the availability and reliability of observable proxy and historic data. ~~In all cases, an assessment is made to determine the suitability of available data. The sensitivity~~
Sensitivity methodologies are based on a range, standard deviation or spread data of a reliable reference source or a scenario based on alternative market views. The level of shift or scenarios applied is considered for each product and varied according to the quality of the data and variability of underlying market. The approach adopted in determining these sensitivities has ~~evolved~~continued to evolve during the year, in the context of changing market conditions.
261
Notes to the financial statements
For the year ended 31st December 2010 continued
41 Fair value of financial instrumentscontinued
Commercial real estate loans
~~The unobservable~~Unobservable inputs include, but are not limited to, market quoted origination spreads, internal credit ratings and ~~subordination of the loans.~~loan subordination. The sensitivity is determined by applying a +/- 6%3% shift for each underlying position based on the largest upward and downward price movement of observable published indices of a similar nature in the preceding 12-month period.
Asset backed products
For non-agency RMBS, ~~and~~ non-investment grade ~~ABS, sensitivity is calculated on the price movement on observable ABX.HE indices. For~~MBS, mortgage related asset backed credit derivatives ~~sensitivity is calculated on~~and other ABS, the price movements ~~within the ABX.HE.AAA indices.~~on appropriate indices are used. Sensitivity is based on the average of the largest ~~price movement~~ upward and ~~the largest~~downward price movement ~~downward~~ in the preceding 12-month period.
  ~~276~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~50 Fair value of financial instruments~~~~continued~~
Other credit products
Sensitivity of synthetic CDOs is determined by using valuations based on different assumptions for recovery and tranche mapping. The sensitivity represents the impact of the application of different modelling assumptions. These model assumptions change the distribution of losses on the trades.
The sensitivity of valuations of the illiquid CDS portfolio is determined by applying a +/- ~~0.5%~~0.2% stress to the DV01 for each underlying reference asset. The stress is based upon the average bid offer spreads observed in the market for similar CDS.
Derivative exposure to Monoline insurers
The main unobservable input ~~in the valuation of the derivative exposure to Monoline insurers~~for these exposures is the credit quality of the relevant Monoline insurers. The approach to determine ~~downside~~ sensitivity is dependent on the credit quality of the Monoline insurer. ~~For higher quality Monoline insurers a shift in~~Sensitivity is computed by shifting the internal credit ~~ratings has been applied. For lower quality~~rating of the Monoline insurers the impact has been assessed by a shift to default and recovery rates. The recovery rate was set to 10% and risk of default to 100%. To assess the upside risk to Monoline insurers, the underlying assets were flexed by 3%,insurer based on scenario analysis determined by evaluating estimated counterparty ratings in the ~~average monthly move for~~event of a decline in the ~~LCDX index over the preceding 12 month period.~~market environment.
Non-asset backed debt instruments
The sensitivity onfor convertible bonds, is determined by applying a +/- 1% shift ~~for~~to each underlying ~~value. The~~position. This shift is based upon the bid offer spreads observed in the market for similar bonds.
The sensitivity onfor corporate bonds portfolio is determined by applying a +/- 1% shift ~~for~~to each underlying ~~value. The~~position. This shift is based upon a multiplier to the average bid offer spreads observed in the market for similar bonds.
The sensitivity for fixed and floating rate notes is calculated using a +/- 1% shift in credit spreads.
Equity products
The sensitivity is estimated based on the ~~statistical spread~~dispersion of consensus data services either directly or through proxies. ~~The estimate has been calculated using 1 standard deviation of the consensus returns.~~
Private equity
The relevant valuation models are sensitive to each of ~~the~~a number of key assumptions, such as projected future earnings, comparator multiples, marketability discounts and discount rates. Valuation sensitivity is estimated by flexing such assumptions to reasonable alternative levels and determining the impact toon the ~~outcome of the valuation, for example comparator multiples for a range of similar companies.~~resulting valuation.
~~Fund~~Funds and fund-linked products
The sensitivity ~~measure~~ is calculated on an individual fund basis using a loss based ~~on observing the largest monthly move~~scenario approach which factors in the ~~main hedge~~underlying assets of the specific fund ~~index (HFRX) over the prior two-year period.~~and assumed recovery rates.
FXForeign exchange products
The sensitivity is based on the statistical spread of consensus data ~~services. The estimate has been~~services, calculated using ~~consensus data service statistical standard deviation and this represents~~ 2 standard deviations of the mid ~~correlations.~~correlation dispersion.
262
41 Fair value of financial instrumentscontinued
Interest rate products
~~For inflation products, the sensitivity is calculated by stressing the correlation parameters. The sensitivity was determined by applying a +/- 8% shift~~Uncertainty relating to the ~~correlation risks~~valuation of the products is mainly driven from the range and ~~this was based on~~ the ~~historical observation~~standard deviation of ~~correlation levels over~~ the ~~preceeding month.~~consensus data used for price testing.
For base rate derivatives, the sensitivity is based on bid offer spreads of base rates swaps. The sensitivity was determined by applying a +/- ~~0.125%~~0.12% shift toon the ~~PV01 for each underlying position.~~net PV01.
Commodity products
~~The sensitivity~~Sensitivity is determined primarily by ~~applying values based on historic~~measuring historical variability over two years. The estimate has been calculated using data for ~~shortdated forward volatility~~short dated parameter curves to generate a best and worst case ~~likely scenario. The sensitivities are based on a 25% probability of occurrence over two years, and taking 50% of the difference between the best and worst multiplied~~scenarios. Where historical data is unavailable or uncertainty is due to volumetric risk, sensitivity is measured by ~~exposure to the relevant risk factor.~~applying appropriate stress scenarios or using proxy bid-offer spread levels.
Other
The sensitivity for fixed rate loans is calculated using a +/- 1% shift in credit ~~spreads.~~spreads, except for certain loans within Barclays Corporate where the sensitivity is calculated using a shift in credit spreads of +/- 0.02% – 0.11%.
No stress has been applied to the receivables relating to the Lehman acquisition. As outlined in Note 26, it is possible to identify a maximum loss. However, due to the uncertainty inherent in such legal proceedings, it is not possible to identify reasonable upside and downside stresses on a basis comparable with the other assets analysed.
Valuation control framework
The Independent Valuation Control function is responsible for independent price verification, oversight of fair value adjustments and escalation of valuation issues. This process covers all fair value positions and is a key control in ensuring the material accuracy of ~~valuation.~~ valuations.
Price verification ~~procedures cover all fair value positions. Data sources~~uses independently sourced data that ~~are~~is deemed most representative of the ~~market and readily available~~market. The reliability of the data source is assessed in determining the independent valuation. The characteristics against which the data source is assessed are ~~used. The data sources are assessed against the following characteristics: independence; reliability;~~independence, reliability, consistency ~~between~~with other sources and evidence that itthe data represents an executable ~~levels. This control process assists~~price. The most current data available at balance sheet date is used. Where significant variances are noted in the ~~determination~~independent price verification process, an adjustment is taken to the fair value position. Additional fair value adjustments may be taken to reflect such factors as bid-offer spreads, market data uncertainty, model limitations and counterparty risk.
Independent price verification results and fair value adjustments are reported on a monthly basis to the Valuation Committee. This committee is responsible for overseeing valuation and fair value adjustment policy within Barclays Capital and this is the forum to which valuation issues are escalated.
The Valuation Committee delegates more detailed review to the following five Sub-Committees: Independent Valuations, Primary Commercial Real Estate, Available for Sale and Other Assets, Models and Governance.
The Independent Valuations sub-committee reviews the results of ~~whether market levels represent forced transactions which should~~the independent price verification and fair value adjustments process on a monthly basis. This includes, but is not ~~be considered~~limited to, reviewing fair value adjustments and methodologies, independent price verification results, limits and valuation uncertainty. The Primary Commercial Real Estate and Available for Sale and Other Assets sub-committees focus on independent price verification results specific to the asset classes. The Available for Sale and Other Assets sub-committee also assesses contingent risks and examines counterparty related issues.
The Models sub-committee is responsible for overseeing policies and controls related to the use of valuation models. This includes but is not limited to reviewing (i) global model risk reports and defining associated procedures and controls (ii) output from pipeline meetings and approximate booking meetings, and the trade approval process (iii) issues arising from model review (iv) population of valuation adjustments (v) defining policies and procedures relating to valuation models and (vi) instances of independent price verification variances or collateral disputes relating to model usage.
The Governance sub-committee is responsible for the governance of valuation processes, policies and procedures. This sub-committee oversees each sub-committee to ensure that the objectives set out in each committee’s terms of reference are being achieved. Regulatory and accounting issues related to fair value are also assessed by the ~~assessment of fair value.~~Governance sub-committee.
   ~~277~~ 263
Notes to the financial statements
For the year ended 31st December 2010 continued

5142 Reclassification of financial assets held for trading
~~On 25th November 2009~~Prior to 2010, the Group reclassified certain financial assets, originally classified as held for trading that were deemed to be ~~no longer~~not held for trading purposes, and thus considered as loans and receivables. ~~The reclassified~~
There were no additional reclassifications of financial assets ~~comprised Collateralised Loan Obligations (CLOs) against which the Group held credit protection with monoline counterparties rated below investment grade.~~
As at the 25th November, the assets had a carrying value of £8,027m. The effective interest rates on these assets ranged from 0.50% to 2.99% with undiscounted interest and principal cash flows of £8,769m.
In the period prior to reclassification, £1,500m of fair value gains were recognised in the consolidated income statement. Since the 25th November, paydowns and maturities of £26m along with foreign exchange movements on the assets and accrued interest resulted in a carrying value as at 31st December 2009 of £8,099m.during 2010.
The carrying value of the securities previously reclassified ~~during 2008~~ into loans and receivables has decreased from ~~£3,986m~~£9,378m to ~~£1,279m primarily~~£8,625m as a result of sales, paydowns and maturities of the underlying securities, offset by foreign exchange movements and increases due to reversal of ~~£2,733m. No impairment has been identified~~the discount on ~~these securities.~~reclassification.
Sales of securities from the 16th December 2008 reclassification totalled £390m (2009: £1,280m) and sales of securities from the 25th November 2009 reclassification totalled £178m (2009: nil).
The following table provides a summary of the assets reclassified from held for trading to loans and ~~advances.~~receivables.

   As at 31st December 2009    As at 31st December 2008      2010          2009
   Carrying
value
£m    Fair value
£m    Carrying
value
£m    Fair value
£m

Carrying
value
£m



Fair
value
£m



Carrying
value
£m



Fair
value
£m


As at 31st December

Trading assets reclassified to loans and receivables

Reclassification 25th November 2009
   8,099    7,994    –    –    8,081         7,842       8,099         7,994
Reclassification 16th December 2008
   1,279    1,335    3,986    3,984    544         545       1,279         1,335
Total financial assets reclassified to loans and receivables
   9,378    9,329    3,986    3,984    8,625         8,387       9,378         9,329
The reclassified financial assets contributed £359m (2009: £192m) to interest income. If the reclassifications had not been made, the ~~Group's~~Group’s income statement for ~~2009~~2010 would have ~~included net~~additional losses on the reclassified trading assets of ~~£49m (2008: £2m)~~£189m (2009: loss of £49m).
~~After reclassification,~~43 Segmental reporting
Since 1st January 2010, for management reporting purposes, we have reorganised our activities under the ~~reclassified financial assets contributed £192m (2008: £4m) to interest income.~~
~~52 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:~~following business structure:

– ~~maintain sufficient capital resources~~
UK Retail Banking is a leading UK high street bank providing current account and savings products and Woolwich branded mortgages. UK Retail Banking also provides unsecured loans, protection products and general insurance as well as banking and money transmission services to ~~meet the minimum regulatory capital requirements set by the FSA~~small and ~~the US Federal Reserve Bank’s requirements that a financial holding company be well capitalised;~~medium enterprises.

– ~~maintain sufficient capital resources to support the Group’s risk appetite~~
Barclaycard is an international payments services provider for consumer and ~~economic capital requirements;~~business customers including credit cards and consumer lending.

– ~~support the Group’s~~
Western Europe Retail Banking provides retail banking and credit ~~rating;~~card services in Spain, Italy, Portugal and France.

– ~~ensure locally regulated subsidiaries can meet their minimum capital requirements;~~
Barclays Africa provides retail, corporate and credit card services across Africa and the Indian Ocean as well as tailored banking services (including mobile banking and Sharia-compliant products).

– ~~allocate capital~~
Absa provides a full range of retail banking services and insurance products through a variety of distribution channels. It also offers customised business solutions for commercial and large corporate customers.
–
Barclays Capital is the investment banking division of Barclays. It provides large corporate, government and institutional clients with a full spectrum of solutions to ~~businesses~~meet their strategic advisory, financing and risk management needs.
–
Barclays Corporate provides integrated banking solutions to ~~support~~large corporates, financial institutions and multinationals in the UK & Ireland, Continental Europe and New Markets.
–
Barclays Wealth is the wealth management division of Barclays. It focuses on private and intermediary clients worldwide, providing international and private banking, investment management, fiduciary services and brokerage.
–
Investment Management manages the Group’s ~~strategic objectives, including optimising returns~~19.9% economic interest in BlackRock, Inc. and the residual elements relating to Barclays Global Investors, which was sold on ~~economic and regulatory capital.~~1st December 2009.
~~External regulatory capital requirements~~
–
Head Office Functions and Other Operations comprise head office and central support functions, businesses in transition and consolidation adjustments.
Comparatives have been restated to reflect this new Group structure, as detailed in our announcement on 22nd March 2010.
~~The Group is subject~~Products and services offered to ~~minimum capital requirements imposed~~customers are organised 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.~~business segment as described above.
Under Basel II, effective from 1st January 2008, the Group has approval by the FSA to use the advanced approaches to credit and operational risk management. Pillar 1 capital requirements are generated using the Group’s risk models.
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.
  ~~278~~264

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~

~~52 Capital Management~~43 Segmental reportingcontinued
~~Outside~~This segmental presentation is consistent with the ~~UK,~~information provided to Barclays chief operating decision-maker to make decisions about allocating resources to, and assessing the ~~Group has operations (and main regulators) located~~performance of, operating segments and is measured in ~~continental Europe,~~accordance with IFRSs. The financial information shown below includes the effects of intra-Barclays transactions between operating segments which are conducted on an arm’s length basis and eliminated in ~~particular France, Germany, Spain, Portugal and Italy (local central banks and other regulatory authorities); Asia Pacific (various regulatory authorities including~~a separate row. Shared costs are included in operating segments on 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 Governorsbasis 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.
~~Regulatory capital~~
~~The table below provides details of the regulatory capital resources managed by the Group.~~actual recharges made.

      Basel ll
2009
£m Basel II
2008
£m
Total qualifying Tier 1 capital
   49,637    37,250
Total qualifying Tier 2 capital
   14,703    22,333
Total deductions
   (880 ) (856 )
Total net capital resources
   63,460    58,727
~~53 Segmental reporting~~
~~The following section analyses the Group’s performance by business. For management reporting purposes during 2009, Barclays was 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.
As at
31st December 2010

UK
Retail
Banking
£m

Barclaycard
£m

Western
Europe
Retail
Banking
£m

Barclays
Africa
£m

Absa
£m

Barclays
Capital
£m

Barclays
Corporate
£m

Barclays
Wealth
£m

Investment
Manage-
ment
£m

Head Office
Functions
and Other
Operations
£m

Total
Continuing
Operations
£m

Interest income from external customers 2,949    2,653    591    534    1,554    684    1,749    668    (56 ) 1,197    12,523
Other income from external customers 1,617    1,337    573    265    1,366    12,414    1,276    947    134    (1,012 ) 18,917
Income from external customers, net of insurance claims 4,566    3,990    1,164    799    2,920    13,098    3,025    1,615    78    185    31,440
Inter-segment income (48 ) 34    –    2    (21 ) 502    (51 ) (55 ) –    (363 ) –
Total income net of insurance claims 4,518    4,024    1,164    801    2,899    13,600    2,974    1,560    78    (178 ) 31,440
Impairment charges and other credit provisions (819 ) (1,688 ) (314 ) (82 ) (480 ) (543 ) (1,696 ) (48 ) –    (2 ) (5,672 )
Segment expenses – external (2,682 ) (1,609 ) (1,265 ) (718 ) (1,902 ) (8,330 ) (1,560 ) (1,160 ) –    (745 ) (19,971 )
Inter-segment expenses (127 ) 39    232    110    92    35    (347 ) (189 ) (11 ) 166    –
Total expenses (2,809 ) (1,570 ) (1,033 ) (608 ) (1,810 ) (8,295 ) (1,907 ) (1,349 ) (11 ) (579 ) (19,971 )
Share of post-tax results of associates and joint ventures (1 ) 25    15    –    3    18    (2 ) –    –    –    58
Profit on disposal of subsidiaries, associates and joint ventures –    –    –    77    4    –    –    –    –    –    81
Gain on acquisitions 100    –    29    –    –    –    –    –    –    –    129
Business segment profit before tax 989    791    (139 ) 188    616    4,780    (631 ) 163    67    (759 ) 6,065
Additional information
Depreciation and amortisation 176    171    98    70    145    415    87    52    –    13    1,227
Impairment loss – intangible assets 7    5    1    –    –    21    39    –    –    –    73
Impairment of goodwill –    –    –    –    –    –    243    –    –    –    243
Investments in associates and joint ventures 3    58    88    1    56    199    (6 ) –    –    119    518
Total assets 121,590    30,324    53,609    7,891    52,373    1,094,799    85,735    17,849    4,612    20,863    1,489,645
Total liabilities 118,799    5,960    31,078    7,551    29,938    1,032,758    79,558    48,743    263    72,735    1,427,383
   ~~279~~ 265

Notes to the financial statements
For the year ended 31st December 2010 continued
43 Segmental reporting continued

As at
31st December 2009
UK
Retail
Banking
£m Barclaycard
£m Western
Europe
Retail
Banking
£m Barclays
Africa
£m Absa
£m Barclays
Capital
£m Barclays
Corporate
£m Barclays
Wealth
£m
Investment
Manage-
ment
£m
Head Office
Functions
and Other
Operations
£m Total
Continuing
Operations
£m
Interest income from external customers 2,623    2,573    800    523    1,385    1,002    1,891    470    (37 ) 688    11,918
Other income from external customers 1,638    1,455    518    216    1,170    10,097    1,219    955    76    (139 ) 17,205
Income from external customers, net of insurance claims 4,261    4,028    1,318    739    2,555    11,099    3,110    1,425    39    549    29,123
Inter-segment income 15    13    –    –    (2 ) 526    71    (103 ) 1    (521 ) –
Total income net of insurance claims 4,276    4,041    1,318    739    2,553    11,625    3,181    1,322    40    28    29,123
Impairment charges and other credit provisions (1,031 ) (1,798 ) (338 ) (121 ) (567 ) (2,591 ) (1,558 ) (51 ) –    (16 ) (8,071 )
Segment expenses – external (2,324 ) (1,522 ) (1,224 ) (775 ) (1,520 ) (6,559 ) (1,094 ) (1,016 ) 2    (683 ) (16,715 )
Inter-segment expenses (214 ) (5 ) 337    237    69    (33 ) (372 ) (113 ) (19 ) 113    –
Total expenses (2,538 ) (1,527 ) (887 ) (538 ) (1,451 ) (6,592 ) (1,466 ) (1,129 ) (17 ) (570 ) (16,715 )
Share of post-tax results of associates and joint ventures 3    8    4    –    (4 ) 22    –    –    –    1    34
Profit on disposal of subsidiaries, associates and joint ventures –    3    157    24    (3 ) –    –    1    (1 ) 7    188
Gain on acquisitions –    –    26    –    –    –    –    –    –    –    26
Business segment profit before tax 710    727    280    104    528    2,464    157    143    22    (550 ) 4,585
Additional information
Depreciation and amortisation 157    143    95    71    122    452    90    51    –    25    1,206
Impairment loss – intangible assets 4    17    1    1    2    –    1    –    –    1    27
Impairment of goodwill –    –    –    –    –    –    1    –    –    –    1
Investments in associates and joint ventures 2    (5 ) 92    –    34    170    (5 ) –    –    134    422
Total assets 109,327    30,274    51,027    7,893    45,765    1,019,120    88,798    14,889    5,406    6,430    1,378,929
Total liabilities 107,354    5,575    42,428    7,478    25,698    951,192    78,236    41,458    416    60,616    1,320,451

~~53 Segmental reporting~~~~continued~~
~~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, France and Russia. 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.
~~Global Retail and Commercial Banking – Emerging Markets~~
GRCB – Emerging Markets serves retail and commercial banking customers in Botswana, Egypt, Ghana, India, Kenya, Mauritius, Pakistan, Seychelles, Tanzania, Uganda, the UAE, Zambia, Indonesia and Zimbabwe. Through a network of more than 683 distribution points and 1,023 ATMs, we provide 3.7 million customers and clients with a full range of products and services. This includes current accounts, savings, investments, mortgages and secured and unsecured lending.
~~Global Retail and Commercial Banking – Absa~~
GRCB – Absa represents Barclays consolidation of Absa, excluding Absa Capital and Absa Card and Absa Wealth which is included as part of Barclays Capital, Barclaycard and Barclays Wealth 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~~
The majority of the BGI business, which was previously reported as a separate business segment, was sold on 1st December 2009 to BlackRock, Inc. and represents the Group’s discontinued operations. The continuing operations of BGI disclosed in the segmental analysis represent residual obligations under the cash support arrangements and associated liquidity support charges and, from 1st December 2009, include the Group’s 19.9% ongoing economic interest in BlackRock, Inc. This investment is accounted for as an available for sale equity investment, with no dividends being received during 2009.
~~Barclays Wealth~~
~~Barclays Wealth focuses on private and intermediary clients worldwide providing international and private banking, fiduciary services, investment management, and brokerage.~~
~~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.~~

  ~~280~~266

~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~53 Segmental reporting~~~~continued~~

As at 31st December 2009
   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^a
£m


   Barclays
Wealth
£m

   Head office
functions
and other
operations
£m





Total
Continuing
Operations
£m



Interest income from external customers    2,421    1,568    2,573    1,083    765    1,385    1,002    (37 ) 470    688    11,918
Other income from external customers    1,550    1,096    1,456    640    280    1,166    10,097    76    966    (122 ) 17,205
Income from external customers, net of insurance claims    3,971    2,664    4,029    1,723    1,045    2,551    11,099    39    1,436    566    29,123
Inter-segment income
   14    89    13    –    –    (2 ) 526    1    (103 ) (538 ) –
Total income net of insurance claims    3,985    2,753    4,042    1,723    1,045    2,549    11,625    40    1,333    28    29,123
Impairment charges and other credit provisions    (936 ) (974 ) (1,798 ) (667 ) (471 ) (567 ) (2,591 ) –    (51 ) (16 ) (8,071 )
Segment expenses – external    (2,187 ) (838 ) (1,440 ) (1,318 ) (934 ) (1,743 ) (6,559 ) 2    (1,015 ) (683 ) (16,715 )
Inter-segment expenses
   (253 ) (192 ) (54 ) 205    82    274    (33 ) (19 ) (123 ) 113    –
Total expenses
   (2,440 ) (1,030 ) (1,494 ) (1,113 ) (852 ) (1,469 ) (6,592 ) (17 ) (1,138 ) (570 ) (16,715 )
Share of post-tax results of associates and joint ventures    3    –    8    4    –    (4 ) 22    –    –    1    34
Profit on disposal of subsidiaries, associates and joint ventures    –    –    3    157    24    (3 ) –    (1 ) 1    7    188
Gains on acquisitions
   –    –    –    26    –    –    –    –    –    –    26
Business segment profit before tax    612    749    761    130    (254 ) 506    2,464    22    145    (550 ) 4,585
Additional information

Depreciation and amortisation    146    69    133    110    77    143    452    –    51    25    1,206
Impairment loss – intangible assets    4    1    17    1    1    2    –    –    –    1    27
Impairment of goodwill
   –    1    –    –    –    –    –    –    –    –    1
Investments in associates and joint ventures    2    (1 ) (5 ) 88    –    34    170    –    –    134    422
Total assets
   105,228    75,547    30,220    64,185    11,874    45,8241,019,120    5,406    15,095    6,430    1,378,929
Total liabilities
   102,934    68,108    5,543    48,049    9,836    25,769    951,192    416    41,648    66,956    1,320,451
~~Note~~

a
~~The discontinued operations of the Barclays Global Investors business are disclosed in Note 39.~~
  43 Segmental reportingcontinued
  As at
  31st December 2008

UK
Retail
Banking
£m
Barclaycard
£m Western
Europe
Retail
Banking
£m Barclays
Africa
£m Absa
£m Barclays
Capital
£m Barclays
Corporate
£m Barclays
Wealth
£m
Investment
Manage-
ment^a
£m

Head Office
Functions
and Other
Operations
£m

Total
Continuing
Operations
£m

Interest income from external customers
   3,051    1,677    614    422    1,223    2,026    1,772    494    (52 ) 242    11,469
Other income from external customers
   1,800    1,493    547    303    936    2,989    1,139    904    (26 ) (355 ) 9,730
Income from external customers, net of insurance claims
   4,851    3,170    1,161    725    2,159    5,015    2,911    1,398    (78 ) (113 ) 21,199
Inter-segment income
   (31 ) 51    (2 ) 1    28    216    81    (86 ) 6    (264 ) –
Total income net of insurance claims
   4,820    3,221    1,159    726    2,187    5,231    2,992    1,312    (72 ) (377 ) 21,199
Impairment charges and other credit provisions
   (642 ) (1,097 ) (172 ) (71 ) (347 ) (2,423 ) (593 ) (44 ) –    (30 ) (5,419 )
Segment expenses – external
   (2,313 ) (1,523 ) (1,139 ) (744 ) (1,338 ) (3,789 ) (960 ) (809 ) (256 ) (520 ) (13,391 )
Inter-segment expenses
   (315 ) 76    332    269    55    15    (369 ) (114 ) (18 ) 69    –
Total expenses
   (2,628 ) (1,447 ) (807 ) (475 ) (1,283 ) (3,774 ) (1,329 ) (923 ) (274 ) (451 ) (13,391 )
Share of post-tax results of associates and joint ventures
   8    (3 ) –    –    5    6    (2 ) –    –    –    14
Profit on disposal of subsidiaries, associates and joint ventures
   –    –    –    –    1    –    –    326    –    –    327
Gain on acquisitions
   –    92    52    –    –    2,262    –    –    –    –    2,406
Business segment profit before tax
   1,558    766    232    180    563    1,302    1,068    671    (346 ) (858 ) 5,136
Additional information

Depreciation and amortisation
   122    122    74    51    101    272    68    40    1    31    882
Impairment loss – intangible assets
   –    –    –    –    –    –    –    (3 ) –    –    (3 )
Impairment of goodwill
   –    37    –    –    –    74    –    –    1    –    112
Investments in associates and joint ventures
   1    (13 ) –    –    84    150    (3 ) –    –    122    341
Total assets
   105,873    30,985    52,007    8,472    40,279    1,629,117    98,529    13,232    71,340    3,146    2,052,980
Total liabilities
   109,004    3,014    35,108    7,907    20,724    1,603,093    74,936    45,816    68,372    37,595    2,005,569
Note
a At 31st December 2008 includes assets of the disposal group.
   ~~281~~ 267

Notes to the financial statements
For the year ended 31st December 2010 continued

5343 Segmental reportingcontinued

As at 31st December 2008
UK
Retail
Banking
£m


   Barclays
Commercial
Bank
£m




Barclaycard
£m


GRCB –
Western
Europe^b
Markets^b
£m



   GRCB –
Emerging
£m

   GRCB –
Absa
£m

   Barclays
Capital
£m

   Barclays
Global
Investors^a
£m


   Barclays
Wealth
£m

   Head office
functions
and other
operations
£m



   Total
Continuing
Operations
£m



Interest income from external customers 2,816    1,589    1,677    831    621    1,223    2,026    (52 ) 496    242    11,469
Other income from external customers 1,702    1,068    1,492    627    373    946    2,989    (26 ) 914    (355 ) 9,730
Income from external customers, net of insurance claims 4,518    2,657    3,169    1,458    994    2,169    5,015    (78 ) 1,410    (113 ) 21,199
Inter-segment income
(36 ) 88    50    (3 ) –    29    216    6    (86 ) (264 ) –
Total income net of insurance claims 4,482    2,745    3,219    1,455    994    2,198    5,231    (72 ) 1,324    (377 ) 21,199
Impairment charges and other credit provisions (602 ) (414 ) (1,097 ) (297 ) (165 ) (347 ) (2,423 ) –    (44 ) (30 ) (5,419 )
Segment expenses – external (2,138 ) (934 ) (1,405 ) (1,139 ) (825 ) (1,576 ) (3,789 ) (256 ) (809 ) (520 ) (13,391 )
Inter-segment expenses
(381 ) (129 ) (17 ) 179    137    271    15    (18 ) (126 ) 69    –
Total expenses
(2,519 ) (1,063 ) (1,422 ) (960 ) (688 ) (1,305 ) (3,774 ) (274 ) (935 ) (451 ) (13,391 )
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    250    141    552    1,302    (346 ) 671    (858 ) 5,136
Additional information

Depreciation and amortisation 111    69    114    75    52    117    272    1    40    31    882
Impairment loss – intangible assets –    –    –    –    –    –    –    –    (3 ) –    (3 )
Impairment of goodwill –    –    37    –    –    –    74    1    –    –    112
Investments in associates and joint ventures 1    (3 ) (13 ) –    –    84    150    –    –    122    341
Total assets
101,384    84,029    30,925    65,519    13,866    40,391    1,629,117    71,340    13,263    3,146    2,052,980
Total liabilities
104,640    64,997    3,004    37,632    10,135    20,720    1,603,093    68,372    45,846    47,130    2,005,569
~~Note~~
a ~~The discontinued operations of the Barclays Global Investors business are disclosed in Note 39.~~
b ~~Figures have been restated for Barclays Russia, which was transferred from GRCB – Emerging Markets to GRCB – Western Europe during 2009.~~
  ~~282~~
~~Notes to the accounts~~
~~For the year ended 31st December 2009~~
~~continued~~
~~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^a
£m

   Barclays
Wealth
£m

   Head office
functions
and other
operations
£m

   Total
Continuing
Operations
£m


Interest income from external customers 2,725    1,624    1,303    472    344    1,140    1,536    (14 ) 453    15    9,598
Other income from external customers 1,652    922    1,086    474    189    832    5,398    (27 ) 890    30    11,446
Income from external customers, net of insurance claims 4,377    2,546    2,389    946    533    1,972    6,934    (41 ) 1,343    45    21,044
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    (30 ) 1,287    (192 ) 21,044
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 ) (77 ) (829 ) (253 ) (12,096 )
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 ) (89 ) (973 ) (234 ) (12,096 )
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    (119 ) 307    (428 ) 6,223

Additional information

Depreciation and amortisation
101    33    79    42    30    121    181    –    18    26    631
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
~~Revenue by products and services~~
~~Details of revenue from external customers by product or service are disclosed in Notes 2 to 6 on pages 186 and 187.~~
Geographical information
(i) A geographical analysis of revenues from external customers is presented below:

      2009
£m    2008
£m 2007
£m
Continuing operations

Attributed to the UK
   12,850    11,958    12,744
Other European Union
   4,397    3,514    3,232
United States
   5,547    (471 ) 1,119
South Africa
   2,980    2,618    2,374
Other Africa
   917    1,015    814
Rest of the World
   2,432    2,565    761
Total
   29,123    21,199    21,044
Discontinued operations

Attributed to the UK
   432    319    383
Other European Union
   100    119    142
United States
   1,084    1,181    1,090
Rest of the World
   247    297    341
   2010
£m    2009
£m    2008
£m
Continuing operations

UK and Ireland
   12,807       12,946       12,023
Europe region
   4,735       4,359       4,009
Americas
   7,742       6,531       51
Africa
   4,697       4,016       3,587
Asia
   1,459       1,271       1,529
Total
   31,440       29,123       21,199
~~There are no individual~~Individual countries ~~included in Other European Union, Other Africa, or Rest of the World contributing~~which represent more than 5% of income from external ~~customers.~~customers are as follows:
   2010
£m    2009
£m    2008
£m
UK
   12,714       12,850       11,958
US
   7,172       5,547       (471 )
South Africa
   3,684       2,980       2,618
In 2009, discontinued operations of the Barclays Global Investors business included £432m (2008: £319m) relating to UK and Ireland, £1,084m (2008: £1,181m) relating to Americas and £347m (2008: £416m) relating to Rest of the World.
~~Note~~44 Financial risks, liquidity and capital management
The disclosures required under IFRS relating to financial risks and capital resources have been included within the Risk management and governance section on pages 58 to 119.
This move has been to improve transparency and ease of reference, by concentrating related information in one place, and to reduce duplication. The relevant disclosures have been marked as audited and can be found as follows:

a– ~~The discontinued operations of the Barclays Global Investors business are disclosed in Note 39.~~credit risk, on pages 58 to 93;
– market risk, on pages 94 to 101;
– capital resources, on pages 102 to 106; and
– liquidity risk, on pages 107 to 112.
45 Critical accounting estimates
The Group’s accounting policies are set out on pages 193 to 204. Certain of these policies, as well as estimates made by management, are considered to be important to an understanding of the Group’s financial condition since they require management to make difficult, complex or subjective judgements and estimates, some of which may relate to matters that are inherently uncertain. The following accounting policies include estimates which are particularly sensitive in terms of judgements and the extent to which estimates are used. Other accounting policies involve significant amounts of judgements and estimates, but the total amounts involved are not significant to the financial statements. Management has discussed the accounting policies and critical accounting estimates with the Board Audit Committee.
Fair value of financial instruments
Some of the Group’s financial instruments are carried at fair value through profit or loss, such as those held for trading, designated by management under the fair value option and non-cash flow hedging derivatives.
Other non-derivative financial assets may be designated as available for sale. Available for sale financial investments are initially recognised at fair value and are subsequently held at fair value. Gains and losses arising from changes in fair value of such assets are included as a separate component of equity.
An analysis of financial instruments carried at fair value by valuation hierarchy, particulars of the valuation techniques used and a sensitivity analysis of valuations using unobservable inputs is included in Note 41. This note also includes a discussion of the more judgemental aspects of valuation in the period, including: credit valuation adjustments on monoline exposures, commercial real estate loans, private equity investments, and fair value loans to government and business and other services.
Approximately £2.6bn of the assets acquired as part of the 2008 acquisition of the North American business of Lehman Brothers had not been received by 31st December 2010. Approximately £2.0bn of this amount was recognised as part of the acquisition accounting and is included as an available for sale asset in the balance sheet. As discussed in Note 26, on 22nd February 2011 the Court issued its Opinion in relation to the related legal proceedings. This Opinion holds that Barclays is not entitled to receive approximately £1.3bn, and is only conditionally entitled to receive approximately £0.5bn, of the undelivered assets. In addition, the Opinion holds that Barclays is not entitled to approximately £1.3bn of assets it has already received.
268
45 Critical accounting estimatescontinued
The anticipated final Order, referred to in Note 26, should clarify the precise impact of the decisions set forth in the Opinion, and may be the subject of further proceedings or appeals by one or more of the parties concerned. Barclays has considered the Opinion, the decisions contained therein and its possible actions with respect thereto. As a result, there is significant judgement involved in the valuation of this asset. There is uncertainty relating to the interpretation of the Opinion and also the potential for further proceedings or appeals by the parties involved. The Group takes the view that the effective allowance of £0.6bn that is reflected in its estimate of fair value is appropriate. If the Opinion were to be unaffected by future proceedings and appeals, Barclays estimates that its maximum possible loss, based on its worst case reading of the Opinion, would be approximately £2.6bn, after taking into account the £0.6bn effective provision. The appropriate valuation of this asset will be kept under review as legal proceedings progress.
Allowances for impairment
Allowances for loan impairment represent management’s estimate of the losses incurred in the loan portfolios as at the balance sheet date. Changes to the allowances for loan impairment and changes to the provisions for undrawn contractually committed facilities and guarantees provided are reported in the consolidated income statement as part of the impairment charge. Provision is made for undrawn loan commitments and similar facilities if it is probable that the facility will be drawn and result in recognition of an asset at an amount less than the amount advanced.
Within the retail and small businesses portfolios, which comprise large numbers of small homogeneous assets with similar risk characteristics where credit scoring techniques are generally used, statistical techniques are used to calculate impairment allowances on a portfolio basis, based on historical recovery rates and assumed emergence periods. These statistical analyses use as primary inputs the extent to which accounts in the portfolio are in arrears and historical information on the eventual losses encountered from such delinquent portfolios. There are many such models in use, each tailored to a product, line of business or customer category. Judgement and knowledge is needed in selecting the statistical methods to use when the models are developed or revised. The impairment allowance reflected in the financial statements for these portfolios is therefore considered to be reasonable and supportable. The impairment charge reflected in the income statement for these retail portfolios is £3,296m (2009: £3,919m) and amounts to 59% (2009: 53%) of the total impairment charge on loans and advances in 2010.
For individually significant assets, impairment allowances are calculated on an individual basis and all relevant considerations that have a bearing on the expected future cash flows are taken into account, for example, the business prospects for the customer, the realisable value of collateral, the Group’s position relative to other claimants, the reliability of customer information and the likely cost and duration of the work-out process. The level of the impairment allowance is the difference between the value of the discounted expected future cash flows (discounted at the loan’s original effective interest rate), and its carrying amount. Subjective judgements are made in the calculation of future cash flows. Furthermore, judgements change with time as new information becomes available or as work-out strategies evolve, resulting in frequent revisions to the impairment allowance as individual decisions are taken. Changes in these estimates would result in a change in the allowances and have a direct impact on the impairment charge. The impairment charge reflected in the financial statements in relation to wholesale portfolios is £2,329m (2009: £3,439m) and amounts to 41% (2009: 47%) of the total impairment charge on loans and advances. Further information on impairment allowances and related credit information is set out within the credit risk management section on page 73.
The fair value of the Group’s 19.9% holding in BlackRock, Inc. was £4.6bn as at 31st December 2010, as compared to £5.4bn as at 31st December 2009 and £5.1bn at original acquisition date (1st December 2009). For an available-for-sale equity instrument, impairment should be recognised if any decline in fair value is significant or prolonged. The observed decline is not considered either significant or prolonged, in light of an increase in share price through the second half of the year and ongoing price volatility.
The Group’s loan to Protium Finance LP, as detailed on pages 90 to 92, is collateralised by underlying financial assets of the borrower. The cash flow expected to be generated by Protium’s assets over their contractual term would be sufficient to enable loan repayment. However, following a reassessment of the period over which the loan is expected to be realised, it is considered appropriate to record an impairment calculated by reference to the fair value of these assets. This has resulted in the recognition of an impairment charge of £532m as at 31st December 2010.
Goodwill
Management have to consider at least annually whether the current carrying value of goodwill is impaired. The first step of the process requires the identification of independent cash generating units and the allocation of goodwill to these units. This allocation is based on the areas of the business expected to benefit from the synergies derived from the acquisition. The allocation is reviewed following business reorganisation. The carrying value of the unit, including the allocated goodwill, is compared to its fair value to determine whether any impairment exists. If the fair value of a unit is less than its carrying value, goodwill will be impaired. Detailed calculations may need to be carried out taking into consideration changes in the market in which a business operates (e.g. competitive activity, regulatory change). In the absence of readily available market price data this calculation is based upon discounting expected pre-tax cash flows at a risk adjusted interest rate appropriate to the operating 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 detailed 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. The most significant amounts of goodwill relate to UK Retail Banking and Absa, where goodwill impairment testing performed in 2010 indicated that this goodwill was not impaired. An analysis of goodwill by cluster, together with key assumptions underlying the impairment testing, is included in Note 19 on page 217.
Intangible assets
Intangible assets that derive their value from contractual customer relationships or that can be separated and sold and have a finite useful life are amortised over their estimated useful life. Determining the estimated useful life of these finite life intangible assets requires an analysis of circumstances, and judgement by the Group’s management. At each balance sheet date, or more frequently when events or changes in circumstances dictate, intangible assets are assessed for indications of impairment. If indications are present, these assets are subject to an impairment review. 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 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 most significant amounts of intangible assets relate to Absa and Lehman Brothers North American businesses.
   ~~283~~ 269

~~Barclays Bank PLC data~~
~~284~~
~~Independent registered public accounting firm’s report~~
~~285~~
~~Consolidated income statement~~
~~286~~
~~Consolidated statement of comprehensive income~~
~~287~~
~~Consolidated balance sheet~~
~~288~~
~~Consolidated statement of changes in equity~~
~~289~~
~~Consolidated cash flow statement~~
~~290~~
Notes to the ~~accounts~~financial statements
~~299~~
~~Financial data~~For the year ended 31st December 2010 continued

45 Critical accounting estimates continued
Retirement benefit obligations
The Group provides pension plans for employees in most parts of the world. Arrangements for staff retirement benefits vary from country to country and are made in accordance with local regulations and customs. For defined contribution schemes, the pension cost recognised in the income statement represents the contributions payable to the scheme. 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 in accordance with the requirements of IAS 19.
The actuarial valuation is dependent upon a series of assumptions, the key ones being interest rates, mortality, investment returns and inflation. Mortality estimates are based on standard industry and national mortality tables, adjusted where appropriate to reflect the Group’s own experience. The returns on fixed interest investments are set to market yields at the valuation date (less an allowance for risk) to ensure consistency with the asset valuation. The returns on UK and overseas equities are based on the long-term outlook for global equities at the calculation date having regard to current market yields and dividend growth expectations. The inflation assumption reflects long-term expectations of retail price inflation.
The Group’s IAS 19 pension deficit across all schemes as at 31st December 2010 was £2,896m (2009: £3,946m). There are net recognised liabilities of £239m (2009: £698m) and unrecognised actuarial losses of £2,657m (2009: £3,248m). The net recognised liabilities comprised retirement benefit liabilities of £365m (2009: £769m) and assets of £126m (2009: £71m).
The Group’s IAS 19 pension deficit in respect of the main UK scheme as at 31st December 2010 was £2,552m (2009: £3,534m). The reduction in the deficit resulted principally from better than expected asset performance, contributions paid in excess of the pension expense and a credit to past service costs following amendments to the treatment of minimum defined benefits.
Further information on retirement benefit obligations, including the sensitivity of principal assumptions, is included on pages 227 to 232.
Derecognition of financial assets
The Group derecognises a financial asset, or a portion of a financial asset, where the contractual rights to that asset have expired. Derecognition is also appropriate where the rights to further cash flows from the asset have been transferred to a third party and, with them, either:
(i) substantially all the risks and rewards of the asset; or
(ii) significant risks and rewards, along with the unconditional ability to sell or pledge the asset.
Where significant risks and rewards have been transferred, but the transferee does not have the unconditional ability to sell or pledge the asset, the Group continues to account for the asset to the extent of its continuing involvement (‘continuing involvement accounting’).
To assess the extent to which risks and rewards have been transferred, it is often necessary to perform a quantitative analysis. Such an analysis will compare the Group’s exposure to variability in asset cash flows before the transfer with its retained exposure after the transfer.
A cash flow analysis of this nature typically involves significant judgement. In particular, it is necessary to estimate the asset’s expected future cash flows as well as potential variability around this expectation. The method of estimating expected future cash flows depends on the nature of the asset, with market and market-implied data used to the greatest extent possible. The potential variability around this expectation is typically determined by stressing underlying parameters to create reasonable alternative upside and downside scenarios. Probabilities are then assigned to each scenario. Stressed parameters may include default rates, loss severity or prepayment rates.
Where neither derecognition nor continuing involvement accounting is appropriate, the Group continues to recognise the asset in its entirety and recognises any consideration received as a financial liability.
Income taxes
The Group is subject to income taxes in numerous jurisdictions and the calculation of the Group’s tax charge and worldwide provisions for income taxes necessarily involves a degree of estimation and judgement. There are many transactions and calculations for which the ultimate tax treatment is uncertain and cannot be determined until resolution has been reached with the relevant tax authority. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due after taking into account external advice where appropriate. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. These risks are managed in accordance with the Group’s Tax Principal Risk Framework.
46 Events after the balance sheet date
On 22 February 2011, the US Bankruptcy Court for the Southern District of New York issued its opinion in relation to Lehman Brothers Holdings Inc.. Further information is provided on page 226.
On 1st March 2011, Barclays agreed to acquire Egg’s UK credit card assets. Under the terms of the transaction, Barclays will purchase Egg’s UK credit card accounts, consisting of approximately 1.15 million credit card accounts with approximately £2.3bn of gross receivables. Completion is subject to competition clearance, and is expected to occur during the first half of 2011.

  ~~284~~270

~~Barclays Bank PLC data~~
Independent Registered Public Accounting Firm’s Report

Report of Independent Registered Public Accounting Firm To the Board of
Directors and ~~Shareholders~~Shareholder of Barclays Bank PLC:
In our opinion, the accompanying Consolidated income ~~statements~~statement and the related Consolidated ~~statements~~statement of comprehensive income, Consolidated balance ~~sheet,~~sheets, Consolidated ~~statement~~statements of changes in equity and Consolidated cash flow statements present fairly, in all material respects, the financial position of Barclays Bank PLC and its subsidiaries at 31 December ~~2009~~2010 and 31 December ~~2008,~~2009, and the results of their operations and their cash flows for each of the three years in the period ended 31 December ~~2009~~2010 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards ~~Board and in conformity with International Financial Reporting Standards as adopted by the European Union.~~Board. These ~~financial-~~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 statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) ~~and International Standards on Auditing.~~. 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.
/s/ PricewaterhouseCoopers LLP
~~PricewaterhouseCoopers LLP~~
London, United Kingdom
~~9th~~10 March ~~2010~~

2011
   ~~285~~ 271
Barclays Bank PLC data
272 Consolidated income statement
273 Consolidated statement of comprehensive income
274 Consolidated balance sheet
275 Consolidated statement of changes in equity
276 Consolidated cash flow statement
277 Notes to the accounts
286 Financial data
Barclays Bank PLC is a wholly owned subsidiary of Barclays PLC and is the Group’s main licensed deposit taking institution under the Financial Services and Markets Act. The consolidated results and financial position of Barclays Bank PLC and Barclays PLC are materially the same, with the key differences being that, in accordance with IFRS:
•
Barclays PLC shares held by the Group in employee share schemes and for trading purposes are deducted from reserves in Barclays PLC but recognised as available for sale and trading portfolio assets within Barclays Bank PLC; and

•
Preference shares issued by Barclays Bank PLC are included within share capital and share premium in Barclays Bank PLC Group but represent non-controlling interests in Barclays PLC; and
•
Certain issuances of reserve capital instruments and capital notes by Barclays Bank PLC are included within other shareholders’ equity in Barclays Bank PLC, but represent non-controlling interests in Barclays PLC.
The risk exposures and business performance for Barclays Bank PLC are materially the same as those in Barclays PLC.
272

Barclays Bank PLC data
Consolidated income statement

~~For the year ended 31st December~~
   Notes    2009
£m 2008
£m 2007
£m
For the year ended 31st December    Notes
2010
£m

2009
£m

2008
£m

Continuing operations

Interest income
   a    21,236    28,010    25,296       a       20,035 21,236 28,010
Interest expense

   a    (9,567 ) (16,595 ) (15,707 )    a       (7,517 ) (9,567 ) (16,595)
Net interest income

      11,669    11,415    9,589          12,518 11,669 11,415
Fee and commission income
   b    9,946    7,573    6,745       b       10,368 9,946 7,573
Fee and commission expense

   b    (1,528 ) (1,082 ) (970 )    b       (1,497 ) (1,528 ) (1,082)
Net fee and commission income

      8,418    6,491    5,775          8,871 8,418 6,491
Net trading income
   c    6,994    1,270    3,754       c       8,080 6,994 1,270
Net investment income

   c    283    680    1,216       d       1,490 283 680
Principal transactions

      7,277    1,950    4,970
Net premiums from insurance contracts
   5    1,172    1,090    1,011          1,137 1,172 1,090
Gains on debt buy backs and extinguishments
      –    1,249 24
Other income

   f    1,389    444    222          118 140 420
Total income
      29,925    21,390    21,567          32,214 29,925 21,390
Net claims and benefits incurred on insurance contracts

   5    (831 ) (237 ) (492 )       (764 ) (831 ) (237)
Total income net of insurance claims
      29,094    21,153    21,075          31,450 29,094 21,153
Impairment charges and other credit provisions

   7    (8,071 ) (5,419 ) (2,795 )    6    (5,672 ) (8,071 ) (5,419)
Net income

      21,023    15,734    18,280
Net operating income
      25,778 21,023 15,734
Staff costs
   8    (9,948 ) (7,204 ) (7,611 )    7    (11,916 ) (9,948 ) (7,204)
Administration and general expenses
   d    (5,558 ) (5,301 ) (3,854 )    e       (6,581 ) (5,557 ) (5,189)
Depreciation of property, plant and equipment
   23    (759 ) (606 ) (453 )    20    (790 ) (759 ) (606)
Amortisation of intangible assets

   22    (447 ) (276 ) (178 )    19    (437 ) (447 ) (276)
Impairment of goodwill
   19    (243 ) (1 ) (112)
Operating expenses

      (16,712 ) (13,387 ) (12,096 )       (19,967 ) (16,712 ) (13,387)
Share of post-tax results of associates and joint ventures
   20    34    14    42          58 34 14
Profit on disposal of subsidiaries, associates and joint ventures
      188    327    28       33    81 188 327
Gains on acquisitions

   40    26    2,406    –
Gain on acquisitions
   35    129 26 2,406
Profit before tax from continuing operations
      6,079 4,559 5,094
Tax
   f       (1,516 ) (1,047 ) (449)
Profit after tax from continuing operations
      4,563 3,512 4,645
Profit after tax for the year from discontinued operations, including gain on disposal
   34    –    6,777 604
Profit after tax
      4,563 10,289 5,249
Profit before tax
      4,559    5,094    6,254
Tax

   e    (1,047 ) (449 ) (1,699 )
Profit after tax from continuing operations

      3,512    4,645    4,555
Discontinued operations

Profit after tax for the year from discontinued operations, including gain on disposal

      6,777    604    571
Net profit for the year
      10,289    5,249    5,126
Profit attributable to equity holders of the Parent from:

Continuing operations
      3,228    4,259    4,218          4,172 3,228 4,259
Discontinued operations

      6,765    587    531          –    6,765 587
Total

      9,993    4,846    4,749          4,172 9,993 4,846
Profit attributable to non-controlling interests

      296    403    377       l       391 296 403
      10,289



5,249



5,126



The note numbers refer to the notes on pages ~~186~~193 to ~~282,~~269, whereas the note letters refer to ~~those~~Barclays Bank PLC supplementary notes on pages ~~290~~277 to ~~298.~~285.
Barclays Bank PLC supplementary notes provided on pages 277 to 285 cover the line items where there is a difference to Barclays PLC.
  ~~286~~
~~Barclays Bank PLC data~~
~~Consolidated statement of comprehensive income~~
~~continued~~
~~For the year ended 31st December~~

      2009
£m 2008
£m 2007
£m
Net profit for the year

   10,289    5,249    5,126
Other comprehensive income:

Continuing operations

Currency translation differences
   (853 ) 2,233    34
Available for sale financial assets
   1,320    (1,577 ) (94 )
Cash flow hedges
   165    376    359
Other
   (1 ) (56)    22
Tax relating to components of other comprehensive income

   (26 ) 851    40
Other comprehensive income for the year, net of tax from continuing operations
   605    1,827    361
Other comprehensive income for the year, net of tax from discontinued operations

   (58 ) 114    26
Total comprehensive income for the year

   10,836    7,190    5,513
Attributable to:

Equity holders of the Parent
   10,286    6,654    5,135
Non-controlling interests

   550    536    378
   10,836



7,190



5,513



   ~~287~~   273
Barclays Bank PLC data
Consolidated statement of comprehensive income

For the year ended 31st December
2010
£m

2009
£m

2008
£m

Profit after tax
   4,563 10,289 5,249
Other comprehensive income from continuing operations:

Currency translation reserve

– Currency translation differences
   1,177 (853 ) 2,233
– Tax
   –    (2 ) 840
Available for sale reserve

– Net (losses)/gains from changes in fair value
   (152 ) 1,487 (1,747)
– Net gains transferred to net profit on disposal
   (1,020 ) (649 ) (210)
– Net losses transferred to net profit due to impairment
   53 672 382
– Changes in insurance liabilities
   31 (67 ) –
– Net gains transferred to net profit due to fair value hedging
   (308 ) (123 ) (2)
– Tax
   141 (177 ) 207
Cash flow hedging reserve

– Net gains from changes in fair value
   601 285 305
– Net gains transferred to net profit
   (684 ) (120 ) 71
– Tax
   39 (65 ) (194)
Other
   59 217 (58)
Other comprehensive income for the year, net of tax, from continuing operations
   (63 ) 605 1,827
Other comprehensive income for the year, net of tax, from discontinued operations
   –    (58 ) 114
Total comprehensive income for the year
   4,500 10,836 7,190
Attributable to:

Equity holders of the Parent
   3,609 10,286 6,654
Non-controlling interests
   891 550 536
   4,500 10,836 7,190
274

Barclays Bank PLC data
Consolidated balance sheet

~~As at 31st December~~
   Notes    2009
£m    2008
£m
As at 31st December    Notes
2010
£m

2009
£m

Assets

Cash and balances at central banks
      81,483    30,019       97,630    81,483
Items in the course of collection from other banks
      1,593    1,695       1,384    1,593
Trading portfolio assets
   g    151,395    185,646    g       168,930    151,395
Financial assets designated at fair value:

– held on own account
   13    41,311    54,542
– held in respect of linked liabilities to customers under investment contracts
   13    1,257    66,657
Financial assets designated at fair value
   13    41,485    42,568
Derivative financial instruments
   14    416,815    984,802    14    420,319    416,815
Loans and advances to banks
   15    41,135    47,707    15    37,799    41,135
Loans and advances to customers
   15    420,224    461,815    15    427,942    420,224
Reverse repurchase agreements and other similar secured lending
   17    205,772    143,431
Available for sale financial investments
   h    56,651    65,016    h       65,440    56,651
Reverse repurchase agreements and cash collateral on securities borrowed
   17    143,431    130,354
Other assets
   18    6,358    6,302
Current tax assets
      349    389    f       196    349
Prepayments, accrued income and other assets
      5,269    6,358
Investments in associates and joint ventures
   20    422    341    18    518    422
Goodwill
   21    6,232    7,625
Intangible assets
   22    2,563    2,777
Goodwill and intangible assets
   19    8,697    8,795
Property, plant and equipment
   23    5,626    4,674    20    6,140    5,626
Deferred tax assets

   19    2,303    2,668    9    2,517    2,303
Total assets

      1,379,148    2,053,029       1,490,038    1,379,148
Liabilities

Deposits from banks
      76,446    114,910       77,975    76,446
Items in the course of collection due to other banks
      1,466    1,635       1,321    1,466
Customer accounts
      322,455    335,533       345,802    322,455
Repurchase agreements and other similar secured borrowing
   17    225,534    198,781
Trading portfolio liabilities
   12    51,252    59,474    12    72,693    51,252
Financial liabilities designated at fair value
   24    86,202    76,892    21    97,729    87,881
Liabilities to customers under investment contracts
   13    1,679    69,183
Derivative financial instruments
   14    403,416    968,072    14    405,516    403,416
Debt securities in issue
      135,902    153,426       156,623    135,902
Repurchase agreements and cash collateral on securities lent
   17    198,781    182,285
Other liabilities
   25    12,101    12,640
Accruals, deferred income and other liabilities
   22    13,233    14,241
Current tax liabilities
      964    1,215    f       646    964
Insurance contract liabilities, including unit-linked liabilities
   26    2,140    2,152
Subordinated liabilities
   27    25,816    29,842    23    28,499    25,816
Deferred tax liabilities
   19    470    304    9    514    470
Provisions
   28    590    535    24    947    590
Retirement benefit liabilities

   30    769    1,357    28    365    769
Total liabilities

      1,320,449    2,009,455       1,427,397    1,320,449
Shareholders’ equity

Called up share capital
   i    2,402    2,398
Share premium account
   i    12,092    12,060
Other reserves
   j    1,783    1,723
Other shareholders’ equity
   k    2,559    2,564
Retained earnings
   j    37,089    22,457
Shareholders’ equity excluding non-controlling interests
      55,925    41,202       59,174    55,925
Non-controlling interests

   l    2,774    2,372    l       3,467    2,774
Total shareholders’ equity

      58,699    43,574       62,641    58,699
Total liabilities and shareholders’ equity

      1,379,148    2,053,029       1,490,038    1,379,148
The note numbers refer to the notes on pages ~~186~~193 to ~~282,~~269, whereas the note letters refer to those on pages ~~290~~277 to ~~298.~~285.
These financial statements have been approved for issue by the Board of Directors on ~~9th~~10th March ~~2009.~~
2011.
  ~~288~~
~~Barclays Bank PLC data~~
~~Consolidated statement of changes in equity~~

.    Share capital
and share
premium^a
£m    Other
reserves^b
and
shareholders ’
equity
£m Retained
earnings^c
£m Total
£m Non-
controlling
interests
£m Total
equity
£m
Balance at 1st January 2009
   14,458    4,287    22,457    41,202    2,372    43,574
Net profit for the year
   –    –    9,993    9,993    296    10,289
Other comprehensive income:

Currency translation differences
   –    (1,138 ) –    (1,138 ) 285    (853 )
Available for sale financial assets
   –    1,334    –    1,334    (14 ) 1,320
Cash flow hedges
   –    194    –    194    (29 ) 165
Tax relating to components of other comprehensive income
   –    (209 ) 171    (38 ) 12    (26 )
Other
   –    –    (1 ) (1 ) –    (1 )
Other comprehensive income net of tax from discontinued operations

   –
   (75
)
17

(58
)
–

(58
)
Total comprehensive income

   –    106    10,180    10,286    550    10,836
Issue of new ordinary shares
   25    –    –    25    –    25
Issue of new preference shares
   –    –    –    –    –    –
Equity settled share schemes
   –    –    298    298    –    298
Vesting of Barclays PLC shares under share-based payment schemes    –    –    (80 ) (80 ) –    (80 )
Capital injection from Barclays PLC
   –    –    4,850    4,850    –    4,850
Dividends paid
   –    –    (103 ) (103 ) (132 ) (235 )
Dividends on preference shares and other shareholders equity
   –    –    (599 ) (599 ) –    (599 )
Net increase/decrease in non-controlling interest arising on acquisitions, disposals and capital issuances    –    –    –    –    (82 ) (82 )
Other

   11    (51 ) 86    46    66    112
Balance at 31st December 2009

   14,494    4,342    37,089    55,925    2,774    58,699
Balance at 1st January 2008
   13,133    2,517    14,222    29,872    1,949    31,821
Net profit for the year
   –    –    4,846    4,846    403    5,249
Other comprehensive income:

Currency translation differences
   –    2,174    –    2,174    59    2,233
Available for sale financial assets
   –    (1,575 ) –    (1,575 ) (2 ) (1,577 )
Cash flow hedges
   –    271    –    271    105    376
Tax relating to components of other comprehensive income
   –    926    (46 ) 880    (29 ) 851
Other
   –    –    (56 ) (56 ) –    (56 )
Other comprehensive income net of tax from discontinued operations

   –    124    (10 ) 114    –    114
Total comprehensive income

   –    1,920    4,734    6,654    536    7,190
Issue of new ordinary shares
   16    –    –    16    –    16
Issue of new preference shares
   1,309    –    –    1,309    –    1,309
Equity settled share schemes
   –    –    463    463    –    463
Vesting of Barclays PLC shares under share-based payment schemes    –    –    (437 ) (437 ) –    (437 )
Capital injection from Barclays PLC
   –    –    5,137    5,137    –    5,137
Dividends paid
   –    –    (1,160 ) (1,160 ) (134 ) (1,294 )
Dividends on preference shares and other shareholders equity
   –    –    (502 ) (502 ) –    (502 )
Net increase/decrease in non-controlling interest arising on acquisitions, disposals and capital issuances    –    –    –    –    4    4
Other

   –    (150 ) –    (150 ) 17    (133 )
Balance at 31st December 2008

   14,458    4,287    22,457    41,202    2,372    43,574
~~Notes~~
a ~~Details of share capital and share premium are shown in Note i.~~
b ~~Details of other reserves are shown in Note j.~~
c ~~Details of retained earnings are shown in Note j.~~
   ~~289~~ 275

Barclays Bank PLC data
Consolidated ~~cash flow~~ statement of changes in equity

Called up
share
capital and
share
premium^a
£m

Available
for sale
reserve^b
£m

Cash flow
hedging
reserve^b
£m

Currency
translation
reserve^b
£m

Other
shareholders’
equity^c
£m

Retained
earnings
£m

Total
£m

Non-
controlling
interests
£m

Total
equity
£m

Balance as at 1st January 2010
14,494 (84 ) 252 1,615 2,559 37,089 55,925 2,774 58,699
Profit after tax
–    –    –    –    –    4,172 4,172 391 4,563
Other comprehensive income net of tax:

Currency translation movements
–    –    –    742 –    –    742 435 1,177
Available for sale investments
–    (1,264 ) –    –    –    –    (1,264 ) 9 (1,255)
Cash flow hedges
–    –    (100 ) –    –    –    (100 ) 56 (44)
Other
–    –    –    –    45 14 59 –    59
Total comprehensive income for the year
–    (1,264 ) (100 ) 742 45 4,186 3,609 891 4,500
Equity settled share schemes
–    –    –    –    –    830 830 –    830
Vesting of Barclays PLC shares under share-based payment schemes
–    –    –    –    –    (718 ) (718 ) –    (718)
Capital injection from Barclays PLC
–    –    –    –    –    1,214 1,214 –    1,214
Dividends paid
–    –    –    –    –    (235 ) (235 ) (158 ) (393)
Dividends on preference shares and other shareholders’ equity
–    –    –    –    –    (645 ) (645 ) –    (645)
Net decrease in other shareholders’ equity arising on
acquisitions, disposals and capital issuances
–    –    –    –    (487 ) –    (487 ) –    (487)
Other reserve movements
–    –    –    –    (48 ) (271 ) (319 ) (40 ) (359)
Balance as at 31st December 2010
14,494 (1,348 ) 152 2,357 2,069 41,450 59,174 3,467 62,641
Balance as at 1st January 2009
14,458 (1,249 ) 132 2,840 2,564 22,457 41,202 2,372 43,574
Profit after tax
–    –    –    –    –    9,993 9,993 296 10,289
Other comprehensive income net of tax from continuing operations:

Currency translation movements
–    –    –    (1,140 ) –    –    (1,140 ) 285 (855)
Available for sale investments
–    1,155 –    –    –    –    1,155 (12 ) 1,143
Cash flow hedges
–    –    119 –    –    –    119 (19 ) 100
Other
–    –    –    –    47 170 217 –    217
Other comprehensive income net of tax from discontinued operations
–    10 –    (85 ) –    17 (58 ) –    (58)
Total comprehensive income for the year
–    1,165 119 (1,225 ) 47 10,180 10,286 550 10,836
Issue of new ordinary shares
25 –    –    –    –    –    25 –    25
Equity settled share schemes
–    –    –    –    –    298 298 –    298
Vesting of Barclays PLC shares under share-based payment schemes
–    –    –    –    –    (80 ) (80 ) –    (80)
Capital injection from Barclays PLC
–    –    –    –    –    4,850 4,850 –    4,850
Dividends paid
–    –    –    –    –    (103 ) (103 ) (132 ) (235)
Dividends on preference shares and other shareholders’ equity
–    –    –    –    –    (599 ) (599 ) –    (599)
Net increase/(decrease) in non-controlling interests arising on acquisitions, disposals and capital issuances
–    –    –    –    –    –    –    (82 ) (82)
Other reserve movements
11 –    1 –    (52 ) 86 46 66 112
Balance as at 31st December 2009
14,494 (84 ) 252 1,615 2,559 37,089 55,925 2,774 58,699
Notes
a For further details refer to Note i.
b For further details refer to Note j.

For the year ended 31st December
      2009
£m       2008
£m       2007
£m
Continuing operations

Reconciliation of profit before tax to net cash flows from operating activities:

Profit before tax
   4,559       5,094       6,254
Adjustment for non-cash items:

Allowance for impairment
   8,071       5,419       2,795
Depreciation and amortisation and impairment of property, plant, equipment and intangibles
   1,196       885       651
Other provisions, including pensions
   428       804       753
Net profit from associates and joint ventures
   (34 )    (14 )    (42 )
Net profit on disposal of investments and property, plant and equipment
   (610 )    (371 )    (862 )
Net profit from disposal of associates and joint ventures
   3       –       (26 )
Net profit from disposal of subsidiaries
   (191 )    (327 )    (2 )
Net gains on acquisitions
   (26 )    (2,406 )    –
Other non-cash movements
   4,255       994       (1,519 )
Changes in operating assets and liabilities:

Net decrease/(increase) in loans and advances to banks and customers
   25,482       (58,432 )    (77,987 )
Net (decrease)/increase in deposits and debt securities in issue
   (49,014 )    76,886       91,451
Net decrease/(increase) in derivative financial instruments
   3,321       (17,529 )    (2,144 )
Net decrease/(increase) in trading assets
   34,292       26,945       (18,245 )
Net decrease in trading liabilities
   (8,222 )    (5,928 )    (6,472 )
Net increase/(decrease) in financial investments
   20,459       5,229       (4,379 )
Net (increase)/decrease in other assets
   (465 )    (3,013 )    1,113
Net decrease in other liabilities
   (907 )    (492 )    (1,056 )
Tax paid

   (1,176 )    (1,398 )    (1,254 )

Net cash from operating activities


41,421




32,346




(10,971

)
Purchase of available for sale financial investments
   (78,420 )    (57,756 )    (26,947 )
Proceeds from sale or redemption of available for sale financial investments
   88,931       51,429       38,423
Net addition of intangible assets
   (226 )    (666 )    (227 )
Purchase of property, plant and equipment
   (1,150 )    (1,643 )    (1,182 )
Proceeds from sale of property, plant and equipment
   372       799       617
Acquisition of subsidiaries, net of cash acquired
   (28 )    (961 )    (270 )
Disposal of subsidiaries, net of cash disposed
   339       238       383
Disposal of discontinued operation, net of cash acquired
   2,469       –       –
Increase in investment in subsidiaries
   –       (157 )    (668 )
Decrease in investment in subsidiaries
   –       19       57
Acquisition of associates and joint ventures
   (81 )    (96 )    (220 )
Disposal of associates and joint ventures
   69       137       145
Other cash flows associated with investing activities
   (15 )    (5 )    153
Net cash from investing activities
   12,260       (8,662 )    10,264
Dividends paid
   (590 )    (1,446 )    (3,010 )
Proceeds from borrowings and issuance of debt securities
   3,549       9,645       4,646
Repayments of borrowings and redemption of debt securities
   (4,383 )    (1,207 )    (683 )
Net issue of shares and other equity instruments
   14       1,339       1,355
Capital injection from Barclays PLC
   800       5,137       1,434
Net issues of shares to non-controlling interests

   –       11       199
Net cash from financing activities
   (610 )    13,479       3,941
Effect of exchange rates on cash and cash equivalents
   (2,864 )    (6,018 )    (641 )
Net cash from discontinued operations
   (376 )    286       83
Net increase in cash and cash equivalents
   49,831       31,431       2,676
Cash and cash equivalents at beginning of year
   64,509       33,078       30,402
Cash and cash equivalents at end of year
   114,340       64,509       33,078
Cash and cash equivalents comprise:

Cash and balances at central banks
   81,483       30,019       5,801
Loans and advances to banks
   41,135       47,707       40,120
Less: non-cash amounts and amounts with original maturity greater than three months
   (10,674 )    (15,428 )    (19,376 )
   30,461       32,279       20,744
Available for sale treasury and other eligible bills
   56,483       64,976       43,256
Less: non-cash and amounts with original maturity greater than three months
   (54,239 )    (62,876 )    (41,872 )
   2,244       2,100       1,384
Trading portfolio assets
   151,344       185,637       193,726
Less: non-cash and amounts with maturity greater than three months
   (151,192 )    (185,526 )    (188,591 )
   152       111       5,135
Other
   –       –       14
   114,340       64,509       33,078
c For further details refer to Note k.
  ~~290~~276

Barclays Bank PLC data
~~Notes to the accounts~~Consolidated cash flow statement
For the year ended 31st December
2010
£m

2009
£m

2008
£m

Continuing operations

Reconciliation of profit before tax to net cash flows from operating activities:

Profit before tax
   6,079 4,559 5,094
Adjustment for non-cash items:

Allowance for impairment
   5,672 8,071 5,419
Depreciation, amortisation and impairment of property, plant, equipment and intangibles
   1,346 1,196 885
Other provisions, including pensions
   914 428 804
Net profit on disposal of investments and property, plant and equipment
   (1,057 ) (610 ) (371 )
Net profit from disposal of subsidiaries
   (77 ) (191 ) (327 )
Net gains on acquisitions
   (129 ) (26 ) (2,406 )
Other non-cash movements^a
   (6,680 ) 4,224 980
Changes in Operating assets and Liabilities

Net (increase)/decrease in loans and advances to banks and customers
   (63,212 ) 25,482 (58,432 )
Net increase/(decrease) in deposits and debt securities in issue
   63,699 (49,014 ) 76,886
Net (increase)/decrease in derivative financial instruments
   (1,298 ) 3,321 (17,529 )
Net (increase)/decrease in trading assets
   (17,517 ) 34,292 26,945
Net increase/(decrease) in trading liabilities
   21,441 (8,222 ) (5,928 )
Net decrease in financial investments
   11,126 20,459 5,229
Net decrease/(increase) in other assets
   1,366 (465 ) (3,013 )
Net decrease in other liabilities
   (2,521 ) (907 ) (492 )
Corporate income tax paid
   (1,430 ) (1,176 ) (1,398 )
Net Cash from Operating activities
   17,722 41,421 32,346
Purchase of available for sale investments
   (76,418 ) (78,420 ) (57,756 )
Proceeds from sale or redemption of available for sale investments
   71,251 88,931 51,429
Net addition of intangible assets
   (217 ) (226 ) (666 )
Purchase of property, plant and equipment
   (1,767 ) (1,150 ) (1,643 )
Proceeds from sale of property, plant and equipment
   556 372 799
Acquisitions of subsidiaries, net of cash acquired
   886 (28 ) (961 )
Disposal of subsidiaries, net of cash disposed
   81 339 238
Disposal of discontinued operation, net of cash disposed
   -    2,469 -
Other cash flows associated with investing activities
   1 (27 ) (102 )
Net Cash from investing activities
   (5,627 ) 12,260 (8,662 )
Dividends paid
   (1,011 ) (590 ) (1,446 )
Proceeds of borrowings and issuance of debt securities
   2,131 3,549 9,645
Repayments of borrowings and redemption of debt securities
   (1,211 ) (4,383 ) (1,207 )
Net issue of shares and other equity instruments
   -    14 1,339
Capital injection from Barclays PLC
   1,214 800 5,137
Net issue of shares to non-controlling interests
   -    -    11
Net Cash from financing activities
   1,123 (610 ) 13,479
Effect of exchange rates on cash and cash equivalents
   3,842 (2,864 ) (6,018 )
Net cash from discontinued operations
   -    (376 ) 286
Net increase in cash and cash equivalents
   17,060 49,831 31,431
Cash and cash equivalents at beginning of year
   114,340 64,509 33,078
Cash and cash equivalents at end of year
   131,400 114,340 64,509
Cash and cash equivalents comprise:

Cash and balances at central banks
   97,630 81,483 30,019
Loans and advances to banks with original maturity less than three months
   31,934 30,461 32,279
Available for sale treasury and other eligible bills with original maturity less than three months
   1,667 2,244 2,100
Trading portfolio assets with original maturity less than three months
   169 152 111
   131,400 114,340 64,509

Note
~~a Net interest income~~

      2009
£m 2008
£m 2007
£m
Cash and balances with central banks
   131    174    145
Available for sale investments
   1,937    2,355    2,580
Loans and advances to banks
   513    1,267    1,416
Loans and advances to customers
   18,456    23,754    19,559
Other
   199    460    1,596
Interest income
   21,236    28,010    25,296
Deposits from banks
   (634 ) (2,189 ) (2,720 )
Customer accounts
   (2,720 ) (6,714 ) (4,110 )
Debt securities in issue
   (4,134 ) (5,947 ) (6,651 )
Subordinated liabilities
   (1,718 ) (1,349 ) (878 )
Other
   (361 ) (396 ) (1,348 )
Interest expense
   (9,567 ) (16,595 ) (15,707 )
Net interest income
   11,669    11,415    9,589
~~Interest income includes £185m (2008: £135m, 2007: £113m) 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.~~
~~b Net fee and commission income~~

   2009
£m
   2008
£m
   2007
£m

Fee and commission income

Brokerage fees
   88    56    78
Investment management fees
   133    120    122
Banking and credit related fees and commissions
   9,578    7,208    6,367
Foreign exchange commissions
   147    189    178
Fee and commission income
   9,946    7,573    6,745
Fee and commission expense
   (1,528 ) (1,082 ) (970 )
Net fee and commission income
   8,418    6,491    5,775
~~c Principal transactions~~

   2009
£m
   2008
£m    2007
£m
Net trading income
   6,994    1,270    3,754
Net gain from disposal of available for sale assets
   576    212    560
Dividend income
   6    196    26
Net (loss)/gain from financial instruments designated at fair value
   (208 ) 33    293
Other investment (losses)/income
   (91 ) 239    337
Net investment income
   283    680    1,216
Principal transactions
   7,277    1,950    4,970
a Other non-cash movements principally comprise movements in exchange rates less subordinated hedging.
   ~~291~~ 277

Barclays Bank PLC data
Notes to the accounts

~~d Administration and general expenses~~a Net interest income

   2009
£m
   2008
£m
   2007
£m

Administrative expenses
   4,886    4,787    3,691
Impairment charges/(releases):

– property and equipment (Note 23)
   34    33    2
– intangible assets (Note 22)
   27    (3 ) 14
– goodwill (Note 21)
   1    112    –
Operating lease rentals
   639    520    414
Gain on property disposals
   (29 ) (148 ) (267 )
Administration and general expenses
   5,558    5,301    3,854
~~Auditors’ remuneration~~

      2009
      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
   23    –    –    –    23
Other services supplied pursuant to such legislation
   –    2    –    –    2
Other services relating to taxation
   –    –    7    –    7
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
   35    6    7    4    52
      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
   19    –    –    –    19
Other services supplied pursuant to such legislation
   –    2    –    –    2
Other services relating to taxation
   –    –    9    –    9
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    –    –    –    2    2
Other
   –    4    –    1    5
Total auditors’ remuneration
   31    6    9    3    49
      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
   11    –    –    –    11
Other services supplied pursuant to such legislation
   6    2    –    –    8
Other services relating to taxation
   –    –    3    –    3
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
   –    1    –    1    2
Total auditors’ remuneration
   24    3    3    6    36
The figures shown in the above tables relate to fees paid to PricewaterhouseCoopers LLP and its associates for continuing operations of business. Fees paid to other auditors not associated with PricewaterhouseCoopers LLP in respect of the audit of the Bank’s subsidiaries were £3m (2008: £3m, 2007: £2m).

2010
£m

2009
£m

2008
£m

Cash and balances with central banks
   271 131 174
Available for sale investments
   1,483 1,937 2,355
Loans and advances to banks
   440 513 1,267
Loans and advances to customers
   17,677 18,456 23,754
Other interest income
   164 199 460
Interest income
   20,035 21,236 28,010
Deposits from banks
   (370 ) (634 ) (2,189 )
Customer accounts
   (1,415 ) (2,720 ) (6,714 )
Debt securities in issue
   (3,632 ) (4,134 ) (5,947 )
Subordinated liabilities
   (1,778 ) (1,718 ) (1,349 )
Other interest expense
   (322 ) (361 ) (396 )
Interest expense
   (7,517 ) (9,567 ) (16,595 )
Net interest income
   12,518 11,669 11,415

Interest income includes £213m (2009: £185m, 2008: £135m) 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.

b Net fee and commission income






2010
£m

2009
£m

2008
£m

Banking and credit related fees and commissions
   10,063 9,578 7,208
Brokerage fees
   77 88 56
Investment management fees
   79 133 120
Foreign exchange commission
   149 147 189
Fee and commission income
   10,368 9,946 7,573
Fee and commission expense
   (1,497 ) (1,528 ) (1,082 )
Net fee and commission income
   8,871 8,418 6,491

c Net trading income



2010
£m

2009
£m

2008
£m

Trading income
   7,019 8,132 (1,665 )
Gain on foreign exchange dealings
   670 682 1,272
Own credit gain/(charge)
   391 (1,820 ) 1,663
Net trading income
   8,080 6,994 1,270

d Net investment income



2010
£m

2009
£m

2008
£m

Net gain from disposal of available for sale assets
   1,027 576 212
Dividend income
   129 6 196
Net gain/(loss) from financial instruments designated at fair value
   274 (208 ) 33
Other investment income/(losses)
   60 (91 ) 239
Net investment income
   1,490 283 680
  ~~292~~278

Barclays Bank PLC data
Notes to the accounts
continued

de 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.

2010
£m

2009
£m

2008
£m

Property and equipment
   1,813 1,641 1,356
Outsourcing and professional services
   1,704 1,495 1,471
Operating lease rentals
   637 639 520
Marketing, advertising and sponsorship
   631 492 591
Subscriptions, publications and stationery
   584 519 458
Travel and accommodation
   358 273 275
Other administration and general expenses
   729 437 488
Impairment of property, equipment and intangible assets
   125 61 30
Administration and general expenses
   6,581 5,557 5,189

In June 2010, the UK Government announced its intention to introduce a bank levy, which will apply to elements of the Group’s consolidated liabilities and equity held as at 31st December 2011. The draft legislation is expected to be enacted by the UK Parliament later this year. Based on the 31st December 2010 balance sheet position and the draft requirements, we estimate that the bank levy would result in an annual charge to the income statement of approximately £400m from 2011 onwards.

f Tax

Tax charge





2010
£m

2009
£m

2008
£m

Current tax charge/(credit)

Current year
   1,413    1,235    1,197
Adjustment for prior years
   (20 ) (131 ) 98
   1,393    1,104    1,295
Deferred tax charge/(credit)

Current year
   118    45    (577 )
Adjustment for prior years
   5    (102 ) (269 )
   123    (57 ) (846 )
Tax charge
   1,516    1,047    449

Tax relating to each component of other comprehensive income can be found in the consolidated statement of comprehensive income on page 273, including within Other, tax credits of £59m (2009: £218; 2008: £2m charge) principally relating to share based payments.

Factors impacting income tax charge for the year
The table below shows the reconciliation between the tax charge that would result from applying the standard UK corporation tax rate to the Group’s profit before tax and the actual tax charge.





2010
£m

2009
£m

2008
£m

Profit before tax from continuing operations
   6,079    4,560    5,094
Tax charge based on the standard UK corporation tax rate of 28% (2009:28%, 2008:28.5%)
   1,702    1,277    1,452
Adjustments for prior years
   (15 ) (233 ) (171 )
Effect of overseas tax rates different from the standard UK tax rate^a
   (135 ) (27 ) 175
Non-taxable gains and income^b
   (156 ) (119 ) (851 )
Impact of share price movements on share-based payments
   41    (38 ) 201
Deferred tax assets (previously not recognised)/not recognised
   (160 ) 27    (504 )
Change in tax rates^c
   34    (12 ) (1 )
Non-deductible expenses and other items
   205    172    148
Tax charge
   1,516    1,047    449
Effective tax rate^d
   25%    23%    9%
The ~~fees relating to the audit of the associated pension schemes were £0.5m (2008: £0.2m, 2007: £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 Rulesintroduction of the UK listing authority and fees paid for reporting under Section 404 of the US Sarbanes-Oxley Act (Section 404). In 2008 and 2009 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 therebank levy is ~~no difference~~expected to result in ~~the amounts reported~~a charge to operating expenses in ~~both Annual Reports.~~
~~Other services related~~2011 (refer to ~~taxation 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 other work in connection with such transactions.~~
~~Excluded from the total auditors’ remuneration above are fees paid to PricewaterhouseCoopers LLP and associates relating to BGI (discontinued operations) of £4m (2008: £3m, 2007: £8m)~~note 8).
~~e Tax~~Notes
~~The charge for tax is based upon the UK corporation tax rate of 28% (2008: 28.5%, 2007: 30%) and comprises:~~
a Includes a deferred tax benefit of £205m in 2010 arising from the reorganisation of Spanish securitisation financing.
b Non-taxable gains and income is net of £42m relating to £58m withholding tax on the intra-group return of capital. Revenue of £58m has been recognised in relation to related payments received.
c The UK has passed legislation to reduce the UK tax rate from 28% to 27% from 1st April 2011. This reduced the value of the net UK deferred tax asset at 31st December 2010 resulting in a tax charge of £14m (2009: £nil) included in the £34m for the impact of change in tax rates.
d The low effective tax rate of 9% in 2008 mainly resulted from the Lehman Brothers North American business acquisition.

      2009
£m 2008
£m 2007
£m
Current tax charge/(credit)

Current year
   1,235    1,197    2,013
Adjustment for prior years
   (131 ) 98    10
   1,104    1,295    2,023
Deferred tax (credit)/charge

Current year
   45    (577 ) (297 )
Adjustment for prior years
   (102 ) (269 ) (27 )
   (57 ) (846 ) (324 )
Total charge
   1,047    449    1,699
~~The effective tax rate for the years 2009, 2008 and 2007 is lower than the standard rate of corporation tax in the UK of 28% (2008: 28.5%, 2007: 30%). The differences are set out below:~~

      2009
£m 2008
£m 2007
£m
Profit before tax

   4,560



5,094



6,254



Tax charge at standard UK corporation tax rate of 28% (2008: 28.5%, 2007: 30%)
   1,277    1,452    1,876
Adjustment for prior years
   (233 ) (171 ) (17 )
Differing overseas tax rates
   (27 ) 175    (82 )
Non-taxable gains and income (including amounts offset by unrecognised tax losses)
   (119 ) (851 ) (145 )
Share-based payments
   (38 ) 201    71
Deferred tax assets not recognised/(previously not recognised)
   27    (504 ) (159 )
Change in tax rates
   (12 ) (1 ) 24
Other non-allowable expenses
   172    148    131
Overall tax charge
   1,047    449    1,699
Effective tax rate
   23%    9%    27%
The effective tax rate for 2009, based on profit before tax on continuing operations was 23.0% (2008: 8.8%). The effective tax rate differs from the UK tax rate of 28% (2008: 28.5%) because of non-taxable gains and income, different tax rates applied to taxable profits and losses outside the UK, disallowed expenditure and adjustments in respect of prior years. The low effective tax rate of 8.8% on continuing operations in 2008 mainly resulted from the Lehman Brothers North American business acquisition.
   ~~293~~ 279

Barclays Bank PLC data
Notes to the accounts continued

~~f Other income~~Current tax assets and liabilities
Movements on current tax assets and liabilities were as follows:

      2009
£m 2008
£m 2007
£m
Increase/(decrease) in fair value of assets held in respect of linked liabilities to customers under investment contracts
   102    (1,219 ) 23
(Increase)/decrease in liabilities to customers under investment contracts
   (102 ) 1,219    (23 )
Property rentals
   64    73    53
Gain on debt buy backs and extinguishments
   1,255    24    –
Other income
   70    347    169
Other income
   1,389    444    222
~~g Trading portfolio assets~~

      2009
£m 2008
£m
Trading portfolio assets

Treasury and other eligible bills
   9,926    4,544
Debt securities
   116,594    148,686
Equity securities
   19,653    30,544
Traded loans
   2,962    1,070
Commodities
   2,260    802
Trading portfolio assets
   151,395    185,646

h Available for sale financial investments

      2009
£m 2008
£m
Debt securities
   43,888    58,831
Treasury bills and other eligible bills
   5,919    4,003
Equity securities
   6,844    2,182
Available for sale financial investments
   56,651    65,016

Movement in available for sale financial investments

      2009
£m 2008
£m
At beginning of year
   65,016    43,256
Exchange and other adjustments
   (4,439 ) 14,275
Acquisitions and transfers
   83,915    59,703
Disposals (through sale and redemption)
   (88,999 ) (50,629 )
Gains/(losses) from changes in fair value recognised in equity
   1,889    (1,190 )
Impairment charge
   (670 ) (382 )
Amortisation charge
   (6 ) (17 )
Business disposals/discontinued operations
   (55 ) –
At end of year
   56,651    65,016

2010
£m

2009
£m

Assets
   349    389
Liabilities
   (964 ) (1,215 )
As at 1st January
   (615 ) (826 )
Income statement
   (1,393 ) (1,125 )
Equity
   180    (109 )
Corporate income tax paid
   1,430    1,282
Acquisitions and disposals
   (4 ) (33 )
Exchange and other adjustments
   (48 ) 196
   (450 ) (615 )
Assets
   196    349
Liabilities
   (646 ) (964 )
As at 31st December
   (450 ) (615 )
g Trading portfolio assets



2010
£m

2009
£m

Debt securities and other eligible bills
   139,240 126,520
Equity securities
   25,676 19,653
Traded loans
   2,170 2,962
Commodities
   1,844 2,260
Trading portfolio assets
   168,930 151,395

h Available for sale financial investments



2010
£m

2009
£m

Debt securities and other eligible bills
   59,629 49,807
Equity securities
   5,811 6,844
Available for sale financial investments
   65,440 56,651
  ~~294~~280

Barclays Bank PLC data
Notes to the accounts
continued

i Called up share capital
Ordinary Shares
The ~~authorised~~issued ordinary share capital of Barclays Bank PLC, as at 31st December ~~2009, was 3,000~~2010, comprised 2,342 million ordinary shares of £1 each ~~(2008: 3,000~~(2009: 2,342 million). ~~During the year 4 million ordinary shares were issued for cash consideration of £25m.~~
Preference Shares
The authorised preference share capital of Barclays Bank PLC, as at 31st December 2009, was 1,000 Preference Shares of £1 each (2008: 1,000); 400,000 Preference Shares of ¤100 each (2008: 400,000); 400,000 Preference Shares of £100 each (2008: 400,000); 400,000 Preference Shares of US$100 each (2008: 400,000); 300 million Preference Shares of US$0.25 each (2008: 300 million).
The issued preference share capital of Barclays Bank PLC, as at 31st December ~~2009,~~2010, comprised 1,000 ~~Sterling~~sterling Preference Shares of £1 each ~~(2008:~~(2009: 1,000); 240,000 Euro Preference Shares of ~~¤100~~€100 each ~~(2008:~~(2009: 240,000); 75,000 Sterling Preference Shares of £100 each ~~(2008:~~(2009: 75,000); 100,000 US Dollar Preference Shares of US$100 each ~~(2008:~~(2009: 100,000); 237 million US Dollar Preference Shares of US$0.25 each ~~(2008:~~(2009: 237 million).


2009
£m

2008
£m
Called up share capital, allotted and fully paid

At beginning of year
   2,338    2,336
Issued for cash
   4    2
At end of year
   2,342    2,338
Called up preference share capital, allotted and fully paid

At beginning of year
   60    46
Issued for cash
   –    14
At end of year
   60    60
Called up share capital
   2,402    2,398

Share premium

      2009
£m    2008
£m
At beginning of year
   12,060    10,751
Ordinary shares issued for cash
   21    15
Preference shares issued for cash
   –    1,294
Preference shares – other movement
   11    –
At end of year
   12,092    12,060
Share capital
2010
£m

2009
£m

Called up ordinary share capital, alloted and fully paid

As at 1st January
   2,342    2,338
Issued for cash
   -       4
As at 31st December
   2,342    2,342
Called up preference share capital, allotted and fully paid as at 1st January and 31st December
   60    60
Called up share capital
   2,402    2,402

Share premium
2010
£m

2009
£m

As at 1st January
   12,092    12,060
Ordinary shares issued for cash
   -       21
Preference shares – other movement
   -       11
As at 31st December
   12,092    12,092
Sterling £1 Preference Shares
1,000 ~~Sterling~~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 cumulative cash dividends out of distributable profits of Barclays Bank PLC, semi-annually at a rate reset semi-annually equal to the Sterling interbank offered rate for six-month sterling deposits.
Barclays Bank PLC shall be obliged to pay such dividends if: (1) it has profits available for the purpose of distribution under the Companies Act 2006 as at each dividend payment 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 if: (1) it is able to pay its debts to senior creditors as they fall 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 ~~wil~~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 2006 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.
   ~~295~~ 281

Barclays Bank PLC data
Notes to the accounts continued

~~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~~€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 £743.7m, 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.
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.
282
Barclays Bank PLC data
Notes to the accounts continued
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.
  ~~296~~
~~Barclays Bank PLC data~~
~~Notes to the accounts~~
~~continued~~
~~i Called up share capital~~~~continued~~
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.
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.
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 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 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 2006 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: (1) junior to the holder of any shares of Barclays Bank PLC in issue ranking in priority to the Preference 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; 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~~€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, 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~~€10,000 per 4.875% Preference Share, ~~¤10,000~~€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, 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 of: (1) the date on which Barclays Bank PLC next declares and pays in full a preference 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.
   ~~297~~ 283
Barclays Bank PLC data
Notes to the accounts continued

j Reserves
Available for Sale Reserve

Other reserves


Available
for sale
reserve
£m

Cash flow
hedging
reserve
£m

Translation
reserve
£m
Total
£m
At 1st January 2009
   (1,249 ) 132    2,840    1,723
Net gains from changes in fair value
   1,506    287    –    1,793
Net gains transferred to net profit
   (642 ) (92 ) –    (734 )
Currency translation differences
   –    –    (1,223 ) (1,223 )
Net losses transferred to net profit due to impairment
   670    –    –    670
Changes in insurance liabilities
   (67 ) –    –    (67 )
Net gains transferred to net profit due to fair value hedging
   (123 ) –    –    (123 )
Tax
   (179)    (75)    (2)    (256)
At 31st December 2009
   (84)    252    1,615    1,783
The available for sale reserve represents the unrealised change in the fair value of available for sale investments since initial recognition.
~~Retained earnings~~
~~Retained~~
~~earnings~~
£m
~~At 1st January 2009~~
~~22,457~~
~~Profit attributable to equity holders~~
~~9,993~~
~~Equity-settled share schemes~~
~~298~~
~~Tax on equity-settled shares schemes~~
~~156~~
~~Other taxes~~
32
~~Vesting of Barclays PLC shares under share-based payment schemes~~
~~(80~~ )
~~Dividends paid~~
~~(103~~ )
~~Dividends on preference shares and other shareholders’ equity~~
~~(599~~ )
~~Capital injection from Barclays PLC~~
~~4,850~~
~~Other movements~~
85
~~At 31st December 2009~~
~~37,089~~
~~At 1st January 2008~~
~~14,222~~
~~Profit attributable to equity holders~~
~~4,846~~
~~Equity-settled share schemes~~
~~463~~
~~Tax on equity-settled shares schemes~~
(4 )
~~Other taxes~~
~~(52~~ )
~~Vesting of Barclays PLC shares under share-based payment schemes~~
~~(437~~ )
~~Dividends paid~~
~~(1,160~~ )
~~Dividends on preference shares and other shareholders’ equity~~
~~(502~~ )
~~Capital injection from Barclays PLC~~
~~5,137~~
~~Other movements~~
~~(56~~ )
~~At 31st December 2008~~
~~22,457~~
~~Transfers from~~The available for sale reserve movement of £1,255m was driven by the decrease in the fair value of the Group’s investment in BlackRock Inc. of £764m, partially offset by increases in the fair value of other available for sale assets as markets recovered.
The movement also includes the net gains transferred to net profit on disposal that arose on the disposal of the structural hedge portfolio, sovereign positions that were no longer eligible for liquidity purposes and excess Euro, US Dollar and Japanese Yen government securities.
Cash Flow Hedge Reserve
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 ~~were:~~when the hedged transactions affect profit or loss.
Movements in the cash flow hedge reserve principally reflected increases in the fair value of interest rate swaps held for hedging purposes more than offset by related gains transferred to net profit.
Currency Translation Reserve
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. Currency translation differences of £1,177m, including £435m associated with non-controlling interests, is largely due to the appreciation in the Rand and US Dollar, offset by the depreciation in the Euro.
During the year, £279m of the currency translation reserve was recognised in the income ~~£22m loss (2008: £4m loss), interest expense £272m gain (2008: £74m loss), net trading income £165m loss (2008: £119m gain)~~statement, principally as a result of the restructuring of group entities based in the US and ~~administration and general expenses~~repatriation of ~~£7m gain (2008: £60m loss).~~capital from overseas.
k Other shareholders’ equity

      2009
£m    2008
£m
At 1st January
   2,564    2,687
Appropriations
   –    23
Tax credits
   47    44
Other movements
   (52)    (190)
At 31st December
   2,559    2,564

2010
£m

2009
£m

As at 1st January
   2,559    2,564
Tax Credits
   45    47
Other Movements
   (48)       (52)
Redemption
   (487)       -
As at 31st December
   2,069    2,559
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. The reserve capital instruments which matured during 2010 were redeemed in full, resulting in a reduction in other shareholders’ equity of £487m.
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.
  ~~298~~284
Barclays Bank PLC data
Notes to the accounts
continued

l Non-controlling interests

      2009
£m 2008
£m
At beginning of year
   2,372    1,949
Share of profit after tax
   296    403
Dividend and other payments
   (132 ) (134 )
Equity issued by subsidiaries
   –    4
Available for sale reserve: net (loss)/gain from changes in fair value
   (12 ) (1 )
Cash flow hedges: net (loss)/gain from changes in fair value
   (19 ) 76
Currency translation differences
   285    59
Additions
   9    –
Disposals
   (91 ) (11 )
Other
   66    27
At end of year
   2,774    2,372
      Profit attributable to
Non-controlling interests    Equity attributable to
Non-controlling interests

2010
£m

2009
£m

2010
£m

2009
£m

Absa Group Limited
   362    272    3,208    2,539
Other
   29    24    259    235
Total
   391    296    3,467    2,774
The increase in Absa Group Limited non-controlling interest is attributed to £362m share of net profit and £436m upward foreign exchange movement, partially offset by £138m dividend payment.
m Dividends
Dividends paid in the year were:

      2009
£m    2008
£m
On ordinary shares

Final dividend
   –    1,030
Interim dividends
   103    130
Dividends
   103    1,160

2010
£m

2009
£m

On ordinary shares

Final dividend
   -       -
Interim dividend
   235    103
Dividends
   235    103
These dividends are paid to enable Barclays PLC to fund its dividends to its ~~shareholders.~~shareholders and in 2009, to fund the repurchase by Barclays PLC of ordinary share capital.
Dividends per ordinary share for 2010 were 10p (2009: 4p). Dividends paid on the 4.75%€100 preference shares amounted to £433.27 per share (2009: £441.42). Dividends paid on the 4.875%€100 preference shares amounted to £408.11 per share (2009: £439.34). Dividends paid on the 6.0% £100 preference shares amounted to £600.00 per share (2009: £600.00). Dividends paid on the 6.278% US$100 preference shares amounted to £413.25 per share (2009: £385.59). Dividends paid on the 6.625% US$0.25 preference shares amounted to £1.09 per share (2009: £1.06). Dividends paid on the 7.1% US$0.25 preference shares amounted to £1.17 per share (2009: £1.13). Dividends paid on the 7.75% US$0.25 preference shares amounted to £1.28 per share (2009: £1.24). Dividends paid on the 8.125% US$0.25 preference shares amounted to £1.34 per share (2009: £1.30).
Dividends paid on preference shares amounted to ~~£477m (2008: £390m)~~£485m (2009: £477m). Dividends paid on other equity instruments as detailed in Note k amounted to ~~£122m (2008: £112m)~~£160m (2009: £122m).
n Financial risks, liquidity and capital management
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~~The disclosures ~~regarding~~required under IFRS relating to financial risks ~~appearing~~and capital resources have been included within the Risk management and governance section on pages 42 to 119.
This move has been to improve transparency and ease of reference, by concentrating related information in ~~Notes 46~~one place, and to ~~49 are in all material respects the same for Barclays Bank PLC~~reduce duplication. The relevant disclosures have been marked as audited and ~~Barclays PLC.~~can be found as follows:
– credit risk, on pages 58 to 93;
– market risk, on pages 94 to 101;
– liquidity risk, on pages 107 to 112; and
– capital resources, on pages 102 to 106.
o 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 52.~~on pages 102 to 106.
The table below provides details of the Barclays Bank PLC Group at 31st December ~~2009~~2010 and ~~2008.~~2009.

      2009
Basel II
£m 2008
Basel II
£m
Total qualifying Tier 1 capital
   49,722    37,101
Total qualifying Tier 2 capital
   14,620    22,356
Total deductions
   (880 ) (964 )
Total net capital resources
   63,462    58,493
Regulatory Capital

Basel II
2010
£m

Basel II
2009
£m

Total qualifying Tier 1 Capital
   53,729    49,722
Total qualifying Tier 2 Capital
   15,823    14,620
Total Deductions
   (2,250)       (880)
Total net Capital resources
   67,302    63,462
p Related Parties
Executive Directors and Officers of Barclays Bank PLC as a Group (involving 14 persons) held, at 31st December 2010, options to purchase 2,977,914 Barclays PLC ordinary shares of 25p each at prices ranging from 255p to 470p under Sharesave and ranging from 317p to 520p under the Incentive Share Option Plan, respectively.
The aggregate emoluments of all Directors and Officers of Barclays Bank PLC who held office during the year (2010: 27 persons, 2009: 29 persons, 2008: 25 persons) for the year ended 31st December 2010 amounted to £122.0m (2009: £30.1m, 2008: £26.9m). In addition, the aggregate amount set aside by the Bank and its subsidiaries for the year ended 31st December 2010, to provide pension benefits for the Directors and Officers amounted to £1.0m (2009: £0.7m , 2008: £0.9m).
285
Barclays Bank PLC data
Notes to the accounts continued
q Segmental reporting
Segmental reporting by Barclays Bank PLC is the same as that presented in Note 5343 to the Barclays PLC financial statements, except for:

–
the difference in profit before tax of ~~£26m (2008: £42m)~~£14m (2009: £26m) between Barclays PLC and Barclays Bank PLC is included in Head ~~office functions~~Office Functions and ~~other operations;~~Other Operations ; and

–
the difference in total assets of ~~£219m (2008: £49m)~~£393m (2009: £219m) is represented by holdings of Barclays PLC shares held by the businesses.
286        ~~299~~
~~Barclays Bank PLC data~~
~~Financial data~~

   IFRS
Selected financial statistics
2009
%

2008
%

2007
%

2006
%

2005
%

Attributable profit from continuing operations as a percentage of:

– average total assets
   0.2    0.3    0.4    0.4    0.4
– average shareholders’ equity
   6.5    12.1    14.5    18.8    15.9
Average shareholders’ equity as a percentage of average total assets

   2.9    2.0    2.2    2.2    2.2
Selected income statement data


£m

£m

£m

£m

£m

Continuing operations

Interest income
   21,236    28,010    25,296    21,795    17,217
Interest expense
   (9,567 ) (16,595 ) (15,707 ) (12,662 ) (9,157 )
Non-interest income
   18,256    9,975    11,948    11,433    8,631
Operating expenses
   (16,712 ) (13,387 ) (12,096 ) 11,723    (9,748 )
Impairment charges
   (8,071 ) (5,419 ) (2,795 ) (2,154 ) (1,571 )
Share of post-tax results of associates and joint ventures
   34    14    42    46    45
Profit on disposal of subsidiaries, associates and joint ventures
   188    327    28    323    –
Gains on acquisitions
   26    2,406    –    –    –
Profit before tax from continuing operations
   4,559    5,094    6,254    6,483    4,772
Profit for the year from discontinued operations, including gain on disposal
   6,777    604    571    384    351
Profit attributable to equity holders of the Parent from:

Continuing operations
   3,228    4,259    4,218    4,578    3,385
Discontinued operations

   6,765



587



531



336



310



Selected balance sheet data


£m

£m

£m

£m

£m

Total shareholders’ equity
   58,699    43,574    31,821    27,106    24,243
Subordinated liabilities
   25,816    29,842    18,150    13,786    12,463
Deposits from banks, customer accounts and debt securities in issue
   534,803    603,869    506,623    447,453    417,139
Loans and advances to banks and customers
   461,359    509,522    385,518    313,226    300,001
Total assets

   1,379,148    2,053,029    1,227,583    996,503    924,170
  ~~300~~

Barclays Bank PLC data
Financial data

Selected financial statistics    IFRS

2010
%

2009
%

2008
%

2007
%

2006
%

Attributable profit from continuing operations as a percentage of:

- average total assets
   0.3    0.2    0.3    0.4    0.4
- average shareholders’ equity
   6.8    6.5    12.1    14.5    18.8
Average shareholders’ equity as a percentage of average total assets
   4.0    2.9    2.0    2.2    2.2

Selected income statement data    £m    £m    £m    £m    £m
Continuing operations

Interest income
   20,035    21,236    28,010    25,296    21,795
Interest expense
   (7,517)       (9,567)       (16,595)       (15,707)       (12,662)
Non-interest income
   19,696    18,256    9,975    11,948    11,433
Operating expenses
   (19,967)       (16,712)       (13,387)       (12,096)       11,723
Impairment charges
   (5,672)       (8,071)       (5,419)       (2,795)       (2,154)
Share of post-tax results of associates and joint ventures
   58    34    14    42    46
Profit on disposal of subsidiaries, associates and joint ventures
   81    188    327    28    323
Gain on acquisitions
   129    26    2,406    -       -
Profit before tax from continuing operations
   6,079    4,559    5,094    6,254    6,483
Profit for the year from discontinued operations, including gain on disposal
   -       6,777    604    571    384
Profit attributable to equity holders of the Parent from:

Continuing operations
   4,172    3,228    4,259    4,218    4,578
Discontinued operations
   -       6,765    587    531    336

Selected balance sheet data    £m    £m    £m    £m    £m
Total shareholders’ equity
   62,641    58,699    43,574    31,821    27,106
Subordinated liabilities
   28,499    25,816    29,842    18,150    13,786
Deposits from banks, customer accounts and debt securities in issue
   580,400    534,803    603,869    506,623    447,453
Loans and advances to banks and customers
   465,741    461,359    509,522    385,518    313,226
Total assets
   1,490,038    1,379,148    2,053,029    1,227,583    996,503
Ratio of earnings to fixed charges – Barclays Bank ~~PLC~~Plc

   2009 2008 2007 2006 2005
   (in £m except for ratios)       2010    2009    2008    2007    2006
      (In £m except for ratios)
Ratio of earnings to fixed charges

Fixed charges

Interest expense
   20,962    38,197    37,903    30,385    20,965       20,516    20,962    38,197    37,903    30,385
Rental expense

   256    235    158    135    124       254    256    235    158    135
Total fixed charges

   21,218    38,432    38,061    30,520    21,089       20,770    21,218    38,432    38,061    30,520
Earnings

Income before taxes and non-controlling interests
   4,559    5,094    6,254    6,483    4,772       6,079    4,559    5,094    6,254    6,483
Less: Unremitted pre-tax income of associated companies and joint ventures

   (43 ) (19 ) (45 ) (41 ) (28 )
Less: unremitted pre-tax income of associated companies and joint ventures
   (49)       (43)       (19)       (45)       (41)
   4,516    5,075    6,209    6,442    4,744       6,030    4,516    5,075    6,209    6,442
Fixed charges

   21,218    38,432    38,061    30,520    21,089       20,770    21,218    38,432    38,061    30,520
Total earnings including fixed charges

   25,734    43,507    44,270    36,962    25,833       26,800    25,734    43,507    44,270    36,962
Ratio of earnings to fixed charges

   1.21    1.13    1.16    1.21    1.22       1.29    1.21    1.13    1.16    1.21
Ratio of earnings to fixed charges and preference shares – Barclays Bank ~~PLC~~Plc

      2009 2008 2007 2006 2005
   (in £m except for ratios)
Combined fixed charges, preference share dividends and similar appropriations

Interest expense
   20,962    38,197    37,903    30,385    20,965
Rental expense

   256    235    158    135    124
Fixed charges
   21,218    38,432    38,061    30,520    21,089
Preference share dividends and similar appropriations

   646    583    345    395    304
Total fixed charges

   21,864    39,015    38,406    30,915    21,393
Earnings

Income before taxes and non-controlling interests
   4,559    5,094    6,254    6,483    4,772
Less: Unremitted pre-tax income of associated companies and joint ventures

   (43 ) (19 ) (45 ) (41 ) (28 )
   4,516    5,075    6,209    6,442    4,744
Fixed charges

   21,864    39,015    38,406    30,915    21,393
Total earnings including fixed charges

   26,380    44,090    44,615    37,357    26,137
Ratio of earnings to combined fixed charges, preference share dividends and similar appropriations

   1.21    1.13    1.16    1.21    1.22
      2010    2009    2008    2007    2006
      (In £m except for ratios)
Combined fixed charges, preference share dividends and similar appropriations

Interest expense
   20,516    20,962    38,197    37,903    30,385
Rental expense
   254    256    235    158    135
Fixed charges
   20,770    21,218    38,432    38,061    30,520
Preference share dividends and similar appropriations
   594    646    583    345    395
Total fixed charges
   21,364    21,864    39,015    38,406    30,915
Earnings

Income before taxes and non-controlling interests
   6,079    4,559    5,094    6,254    6,483
Less: unremitted pre-tax income of associated companies and joint ventures
   (49)       (43)       (19)       (45)       (41)
   6,030    4,516    5,075    6,209    6,442
Fixed charges
   21,364    21,864    39,015    38,406    30,915
Total earnings including fixed charges
   27,394    26,380    44,090    44,615    37,357
Ratio of earnings to fixed charges, preference share dividends and similar appropriations
   1.28    1.21    1.13    1.16    1.21
   ~~301~~ 287

Shareholder information

~~302~~
~~Shareholder information~~
~~312~~
~~Shareholder enquiries~~
~~313~~
~~Index~~
~~315~~
~~Glossary of terms~~

  ~~302~~
~~Shareholder information~~

Dividends on the ordinary shares of Barclays PLC
Barclays PLC has paid dividends on its ordinary shares every year since its incorporation in 1896.
~~As announced~~Since December 2009 Barclays has declared and paid dividends on ~~10th November~~a quarterly basis. A final dividend for the full year ended 31st December 2009 ~~the Board resumed dividend~~of 1.5p was paid in March 2010 and there were three equal payments ~~with an interim cash dividend~~in June, September and December 2010 of 1p per ordinary ~~share paid on 11th December 2009.~~share. A final cash dividend for the full-year ended
31st December ~~2009~~2010 of ~~1.5p per ordinary share~~2.5p was announced on ~~16th~~15th February ~~2010~~2011 for payment on ~~19th~~18th March ~~2010.~~
~~We intend to make three quarterly fixed payments in 2010 and a final variable payment relating to the calendar year 2010 in March~~ 2011. Given uncertainty about the full consequences of regulatory reform, prudence dictates that our dividend policy should be conservative. But, subject to that caveat, we intend our dividend policy to be progressive relative to a 2009 annualised dividend of 4.5p per share.
The dividends declared for each of the last five years were:

Pence per 25p ordinary share

      2009    2008    2007    2006    2005
Interim
   1.00    11.50    11.50    10.50    9.20
Final

   1.50    –    22.50    20.50    17.40
Total

   2.50    11.50    34.00    31.00    26.60

US Dollars per 25p ordinary share

      2009    2008    2007    2006    2005
Interim
   0.02    0.20    0.23    0.20    0.16
Final

   0.02    –    0.45    0.41    0.31
Total

   0.04    0.20    0.68    0.61    0.47
~~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

   2009    2008    2007    2006    2005
Pence per 25p ordinary share    2010    2009    2008    2007    2006
Interim
   0.07    0.82    0.93    0.80    0.65    3.0       1.00       11.50       11.50       10.50
Final

   0.09    –    1.78    1.64    1.24    2.5       1.50       –       22.50       20.50
Total
   5.5       2.50       11.50       34.00       31.00

US Dollars per 25p ordinary share    2010    2009    2008    2007    2006
Interim
   0.05       0.02       0.20       0.23       0.20
Final
   0.04       0.02       –       0.45       0.41
Total

   0.16    0.82    2.71    2.44    1.89    0.09       0.04       0.20       0.68       0.61

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    2010    2009    2008    2007    2006
Interim
   0.18       0.07       0.82       0.93       0.80
Final
   0.16       0.09       –       1.78       1.64
Total
   0.34       0.16       0.82       2.71       2.44
For years prior to 2009, final dividends expressed in Dollars have been 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). From January 2009, the Federal Reserve Bank of New York discontinued the publication of Noon Buying Rates. The final dividend for ~~2009~~2010 is expressed in Dollars translated at the closing spot rate for Pounds Sterling as determined by Bloomberg at 5pm in New York City (the ‘Closing Spot Rate’) on ~~5th~~4th March ~~2010.~~2011 (the latest practicable date for inclusion in this report). 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 20,996,000,000 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 million staff shares of £1 each. At the close of business on 31st December 2009, 11,411,577,230 ordinary shares were outstanding.~~
The principal trading market for Barclays PLC ordinary shares is the London Stock Exchange. At the close of business on 31st December 2010, 12,181,940,871 ordinary shares were in issue.
Ordinary share listings were also obtained on the New York Stock Exchange (NYSE) with effect from 9th September 1986.
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 J P Morgan Chase Bank, N.A. Details of trading activity are published in the stock tables of leading daily newspapers in the US.
There were ~~891~~791 ADR holders and ~~1,595~~1,612 recorded holders of ordinary shares with US addresses at 31st December ~~2009,~~2010, whose shareholdings represented approximately ~~12.08%~~2.85% 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.
288           ~~303~~

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.

Sale prices for ordinary shares
25p ordinary shares
   American
Depositary Shares
   High    Low    High    Low
   25p ordinary shares
American
Depositary Shares
   p    p    US$    US$

High
p

Low
p
   High
US$    Low
US$
2010

2011

By month:

January
   320.6    265.0    21.1    17.0    311.0       272.8       19.8       16.6
February
   316.3    262.0    19.9    16.3    333.6       298.5       21.7       19.1
2009

2010

By month:

July
   314.8    287.0    20.9    18.4    339.6       255.4       21.4       15.4
August
   380.3    322.6    24.7    22.2    344.0       298.0       22.0       18.2
September
   380.0    351.3    25.4    22.9    325.0       299.6       20.3       18.8
October
   383.6    319.0    25.2    20.6    308.8       274.6       19.8       17.5
November
   342.9    291.1    23.2    19.6    297.0       256.2       19.2       15.9
December
   304.5    264.3    20.1    17.4    276.0       259.8       17.5       16.1
By quarter:

First quarter
   184.6    51.2    11.0    3.1    367.6       262.0       22.2       16.3
Second quarter
   316.3    157.0    20.5    9.3    383.2       267.4       24.1       15.7
Third quarter
   380.3    287.0    25.4    18.4    344.0       255.4       22.0       15.4
Fourth quarter
   383.6    264.3    25.2    17.4    308.8       256.2       19.8       15.9
2008

2009

First quarter
   506.4    382.3    41.4    32.3    184.6       51.2       11.0       3.1
Second quarter
   490.8    291.5    39.9    23.2    316.3       157.0       20.5       9.3
Third quarter
   389.0    260.5    32.5    20.8    380.3       287.0       25.4       18.4
Fourth quarter
   368.0    127.7    25.9    7.4    383.6       264.3       25.2       17.4
2009

2008
   506.4    127.7    41.4    7.4    506.4       127.7       41.4       7.4
2007
   790.0    474.5    62.5    39.9    790.0       474.5       62.5       39.9
2006
   737.0    586.0    61.5    41.8    737.0       586.0       61.5       41.8
2005
   615.0    520.0    47.0    37.2    615.0       520.0       47.0       37.2
2004
   586.0    443.0    46.0    32.8
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 2009^a

   Number of
shareholders    Percentage
of holders    Shares held
(millions)    Percentage
of capital
Shareholdings at 31st December 2010^a    Number of
shareholders    Percentage
of holders    Shares held    Percentage
of capital
Classification of shareholders

Personal holders
   732,028    97.34    762.49    6.68    319,583       94.53       500,485,255       4.11
Banks and nominees
   18,083    2.40    9,537.83    83.58    16,613       4.91       11,046,633,158       90.68
Other companies
   1,859    0.25    1,111.18    9.74    1,842       0.54       634,705,904       5.21
Insurance companies
   12    –    0.05    –    11       0.00       102,293       0.00
Pensions funds
   18    –    0.03    –    11       0.00       14,261       0.00
Totals

   752,000    100.00    11,411.58    100    338,060       100       12,181,940,871       100
Shareholding range

1-100
   30,251    4.02    1.28    0.01    18,785       5.56       771,751       0.01
101-250
   230,779    30.69    48.54    0.43    78,862       23.33       16,264,958       0.13
251-500
   238,196    31.68    81.45    0.71    90,031       26.63       31,281,722       0.26
501-1,000
   116,153    15.45    81.71    0.72    55,015       16.27       39,759,461       0.33
1,001-5,000
   104,331    13.87    215.08    1.88    69,449       20.54       152,623,678       1.25
5,001-10,000
   17,538    2.33    123.89    1.09    13,667       4.04       96,870,207       0.80
10,001-25,000
   10,192    1.36    154.08    1.35    8,163       2.41       123,584,716       1.01
25,001-50,000
   2,296    0.31    78.57    0.69    1,933       0.57       66,180,910       0.54
50,001 and over
   2,264    0.30    10,626.98    93.12    2,155       0.64       11,654,603,468       95.67
Totals

   752,000    100.00    11,411.58    100    338,060       100       12,181,940,871       100
United States holdings

   1,595    0.21    3.39    0.03    1,612       0.48       3,513,522       0.03
Note
a These figures include Barclays Sharestore members.
a ~~These figures include Barclays Sharestore members.~~
~~304~~    289
Shareholder information
continued

Currency of presentation
In this report, unless otherwise specified, all amounts are expressed in Pound Sterling. For the months of September ~~2009~~2010 through to February ~~2010,~~2011, the highest and lowest closing spot rates as determined by Bloomberg at 5:~~00pm~~00 p.m (New York time) (the “Closing Spot Rate”), expressed in US Dollars per Pound Sterling were:

   (US Dollars per Pound Sterling)    (US Dollars per Pound Sterling)
   February    January    December    November    October    September    February    January    December    November    October    September
   2010    2009
2011

2010

High
   1.60    1.64    1.66    1.68    1.66    1.67    1.63       1.60       1.59       1.63       1.60       1.58
Low
   1.52    1.59    1.59    1.64    1.58    1.59    1.60       1.55       1.54       1.56       1.57       1.54
For the years 2005 through to 2008 the average of the noon buying rates on the last day of each month is shown in the table below. From January 2009, the Federal Reserve Bank of New York discontinued the publication of Noon Buying Rates. For 2009 the average Closing Spot Rate on the last day of each month is shown in the table below.

      (US Dollars per Pound Sterling)
Average
   2009    2008    2007    2006    2005
   1.57    1.84    2.0    1.86    1.81
   (US Dollars per Pound Sterling)

2010

2009

2008

2007

2006

Average
   1.54       1.57       1.84       2       1.86
On ~~5th~~4^th March ~~2010,~~2011, the Closing Spot Rate in Pound Sterling was ~~$1.51.~~$1.63.
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.
290           ~~305~~

Shareholder information
continued

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~~Under the ~~Company are set out in full in clause 4 of its~~Companies Act 2006 (Act) a company’s Memorandum of Association ~~which provides, among other things, that~~now need only contain the ~~Company’s objects are to carry on business as an investment and holding company~~names of the subscribers and the ~~business~~number of ~~banking~~shares each subscriber has agreed to take. For companies in ~~all its aspects. The Memorandum of Association is treated as forming part of the Company’s Articles of Association~~existence as of 1st October 2009, ~~by virtue~~all other provisions which were contained in the company’s Memorandum of Association, including the ~~Companies~~company’s objects, are now deemed to be contained in the company’s articles. The Act ~~2006.~~also states that a company’s objects are unrestricted unless that company’s articles provide otherwise. Barclays PLC adopted new Articles of Association at its Annual General Meeting (AGM) on 30th April 2010 to reflect these changes and as a result its objects are now unrestricted.
The Company may, by Special Resolution, amend its Articles of Association. ~~The Company is proposing~~In addition to ~~adopt new~~the changes referred to above, the Articles of Association adopted at ~~its Annual General Meeting (AGM) in~~the 2010 ~~to update its~~AGM updated the Articles of Association ~~following~~to reflect the implementation of the remaining provisions of the Companies Act 2006. ~~A summary of the proposed changes may be found in the Notice of Meeting that accompanies this report.~~
The following is a summary of the current Articles of ~~Association.~~Association (Articles):
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~~£2,000,000 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 Director may act (either himself/herself or through his/her firm) as an auditor of the Company. A Director may hold any other office of the Company on such terms as the Board shall determine.
(iv)   At each 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) 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);
~~(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;
~~(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 obtain insurance for the benefit of Directors;
~~(c)~~ ~~to obtain insurance 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;
~~(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);
~~(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
~~(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 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.
~~(g)~~ 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.
(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.
(xi)   Subject to applicable legislation, the provisions described in sub-paragraphs (ix) and (x) may be relaxed or suspended by an ordinary resolution of the members of the Company or any applicable governmental or other regulatory body.
(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 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 shares but must acquire the qualification shares within two months from his/her appointment. Where a Director is unable to acquire the requisite number of shares within that time owing to law, regulation or requirement of any governmental or other relevant authority, he/she must acquire the shares as soon as reasonably practicable once the restriction(s) end.
(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~~Shares
The Company only has Ordinary Shares in issue. ~~However, the Company has authorised but unissued~~The Articles also provide for sterling preference shares of £100 each, dollar preference shares of $100 each, dollar preference shares of $0.25 each, euro preference shares of€100 each and yen preference shares of ¥10,000 each (together, the Preference Shares) ~~which may (pursuant to a resolution passed by~~. In accordance with the ~~shareholders of the Company~~authority granted at the ~~AGM)~~AGM, Preference Shares may 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.~~No Preference Shares have been issued to date. The Articles ~~of Association~~ contain provisions to the following effect:
291
Shareholder information
continued
(i) Dividends
Subject to the provisions of the Articles and applicable legislation, the Company in 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.

  ~~306~~
~~Shareholder information~~
~~continued~~
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 ranking pari passu with 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.
Notwithstanding the above, the Board may, at its absolute discretion, determine that any Preference Dividend which would otherwise be 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 dividend on a series of Preference Shares is not paid in full on the 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 until the earlier of such time as the Company next pays in full a dividend on the relevant series of Preference Shares or the date on which all of the relevant series of Preference Shares are redeemed.
All unclaimed dividends payable in respect of any 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.
(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.~~hands (when a proxy is appointed by more than one member, the proxy will have one vote for and one vote against a resolution if he has received instructions to vote for the resolution by one or more members and against the resolution by one or more members). On a poll, every member who is present or represented and who is entitled to vote has one vote for every share held. ~~Any~~In the case of joint ~~holder may vote in respect of jointly owned shares, but~~holders, only the vote of the senior holder (as determined by order in the share register) ~~shall take precedence.~~or his proxy may be counted. 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~~‘excepted 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~~‘excepted transfer’ of all of the relevant shares 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 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 Ordinary Shares shall be made in accordance with the ~~applicable regulations. The Board may make any arrangements to regulate~~Act and ~~evidence the transfer of Ordinary Shares as they consider fit in accordance with applicable legislation and the rules of the FSA.~~
~~Registration of 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).~~Uncertificated Securities Regulations.
The Board is not bound to register a transfer of partly paid 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 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 are entitled to receive such capital in proportion to the amounts paid up or credited as paid up on the shares of each 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 Ordinary Shares and any other shares in the Company ranking junior to the relevant series of Preference Shares and pari passu with any other class of Preference Shares, repayment of the amount paid up or treated as paid up in respect of the nominal value of 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)~~(iv) 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 Directors are authorised to determine the terms, conditions and manner of redemption of any such shares under the Articles. While the Company currently has no redeemable shares in 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~~Note that under the Companies Act 1985, in addition to obtaining shareholder approval, companies required specific enabling provisions in their articles to purchase ~~its~~their own ~~shares subject~~shares. Following implementation of the Act, this enabling provision is now included in the Act and is therefore no longer included in the Articles. Shareholder approval is still required under the Act in order to ~~the provisions of applicable legislation, the Articles and the approval of any class of convertible shares in issue (by special resolution or written consent of 75% of such class).~~purchase shares.
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continued
~~(vi)~~
(v) 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%) per annum).

~~307~~
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, the Company may sell such shares.
~~(vii)~~(vi) Variation of Rights
The rights attached to any class of shares may be varied either with the consent in writing of the holders of at least 75% in nominal value of the issued shares of that class or with the sanction of 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 other general meetings
The Company is required to hold an AGM in addition to such other general meetings as the Directors think fit. The type of the meeting will be specified in the notice calling it. Under the Companies Act 2006, the AGM must be held within six months of the financial year end. A general meeting may be convened by the Board on requisition in accordance with the applicable legislation.
In the case of an AGM, a minimum of 21 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 a special resolution shall specify the intention to propose the resolution as such. The accidental 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~~satellite meeting ~~at a~~ place or, if the meeting place is inadequate to accommodate all members and proxies entitled to attend, another meeting place may be arranged to accommodate such persons other than that specified in the notice of meeting, in which case shareholders may be excluded from the ~~specified~~principal 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.
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 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~~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~~recipient, in accordance with the provisions set out in the Act. Accordingly, 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~~In addition, the Company may ~~by way~~cease to send notices to any member who has been sent documents on two consecutive occasions over a period of ~~ordinary resolution:~~at least 12 months and when each of those documents is returned undelivered or notification is received that they have not been delivered.
–
~~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.Capitalisation of profits
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 be allotted to members credited as fully paid 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 Director or other officer of the Company (other than any person engaged by the company as auditor) shall be indemnified by the Company against any liability in relation to the Company, other than (broadly) any liability to the Company or a member of the ~~Group,~~Croup, or any criminal or regulatory fine.

Officers of the Group
Date of appointment
as officer
~~Date of~~
~~appointment~~
~~as officer~~
Lawrence Dickinson

Company Secretary
2002
~~Peter Estlin~~
~~Group Financial Controller~~
~~2008~~
~~Patrick Gonsalves~~
~~Joint Secretary, Barclays Bank PLC~~
~~2002~~
Mark Harding

Group General Counsel
2003
Antony Jenkins

Chief Executive of
Global Retail Banking
   2009
Tom Kalaris

Chief Executive of Barclays Wealth
2009
Robert Le Blanc

Group Risk Officer
2004
Jerry del Missier

~~President~~Co-Chief Executive of Barclays
Capital and Co-Chief Executive of
Corporate and Investment Banking
   2009
Maria Ramos

Group Chief Executive, Absa
2009
Rich Ricci

Co-Chief Executive of Barclays
Capital and Co-Chief Executive of
Corporate and Investment Banking
   2009
Cathy Turner

Group Human Resources Director
2009
  John Worth^a
   ~~2009~~Group Financial Controller 2011
Note
a John Worth held the position of Interim Group Financial Controller during 2010.

~~308~~    293
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continued

Taxation of UK holders
The following is a summary of certain UK tax issues which are Iikely to be material to the holding and disposal of Ordinary Shares of Barclays PLC (the “Bank”), Preference Shares of Barclays Bank PLC, or ADSs representing such Ordinary Shares or Preference Shares (together the “Shares”).
It is based on current law and the practice of Her Majesty’s Revenue and Customs (“HMRC”), which may be subject to change, possibly with retrospective effect. It is a general guide for information purposes and should be treated with appropriate caution. It is not intended as tax advice and it does not purport to describe all of the tax considerations that may be relevant to a prospective purchaser, holder or disposer of Shares. In particular, the summary deals with shareholders who are resident in the UK for UK tax purposes, who are absolute beneficial owners of the Shares, and who hold the Shares as capital assets for tax purposes. It does not discuss the tax treatment classes of shareholder subject to special rules such as dealers in securities.
Persons who are in any doubt as to their tax position should consult their professional advisers. Persons who may be liable to taxation in jurisdictions other than the United Kingdom in respect of their acquisition, holding or disposal of Shares are particularly advised to consult their professional advisers as to whether they are so liable.
(i) Taxation of dividends
In accordance with UK law, Barclays PLC or Bank (as the case may be) pays dividends on the Shares without any deduction or withholding tax in respect of any taxes imposed by the UK government or any UK taxing authority.
UK resident individuals receiving a dividend will generally be entitled to a tax credit in respect of such dividend which may used by certain shareholders to set against any liability they may have to UK income tax on that dividend. The value of the tax credit is currently equal to one-ninth of the amount of the cash dividend. The cash dividend received plus the related tax credit (together, the “gross dividend”) will be part of the shareholder’s total income for UK income tax purposes. It will be regarded as the top slice of the shareholder’s income, and will be subject to UK income tax at a special rate (see below).
If the shareholder is a UK resident individual liable to income tax only at the basic rate, then he/she will be liable to UK income tax of 10% of the gross dividend. Since the tax credit will fully match this liability, there should be no further tax liability in respect of the dividend received. If, however, the individual shareholder is subject to income tax at the higher or additional rates, there will be a further liability to tax because the tax credit will not fully match the tax liability. Higher/additional rate taxpayers are taxable on the gross dividend at a special rate (currently 32.5%/ 42.5% respectively) against which the tax credit may be set.
Subject to special rules for small companies, UK resident shareholders within the charge to UK corporation tax will be subject to UK corporation tax on the dividends paid on the Shares unless the dividend falls within an exempt class and certain conditions are met.
UK resident shareholders are not entitled to any repayment of tax credits. A non-UK resident shareholder will not generally be entitled to any payment from HMRC of a tax credit in respect of a UK dividend paid on the Shares. Some non-UK resident shareholders may be able to recover some or all of the tax credit under an applicable double tax treaty and should consult their own professional advisers as to whether they are so entitled and as to the process for making such a claim.
(ii) Taxation of shares under the Dividend Reinvestment Plan
Where a shareholder elects to purchase shares using their cash dividend, the individual will generally be Iiable for income tax on dividends reinvested in the Dividend Reinvestment 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.
(iii) Taxation of capital gains
Where shares are disposed of, a liability to tax on capital/chargeable gains may arise, depending on the shareholder’s circumstances. Where shares are sold, a liability to tax 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). To arrive at the total base cost of any Barclays PLC shares held, in appropriate cases 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. Shareholders other than those within the charge to corporation tax should note that, following the Finance Act 2008, no indexation allowance will be available. Shareholders within the charge to UK corporation tax may be eligible for indexation allowance.
The calculations required to compute chargeable capital gains 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.
(iv) Stamp duty and stamp duty reserve tax
Dealings in Shares will generally be subject to stamp duty or stamp duty reserve tax (although see the comments below as regards ADSs in the section “Taxation of US holders – Stamp Duty”. The transfer on sale of Ordinary Shares and Preference Shares will generally be liable to stamp duty at 0.5% of the consideration paid for that transfer. An unconditional agreement to transfer Ordinary Shares and Preference Shares, or any interest therein, will generally be subject to stamp duty reserve tax at 0.5% of the consideration given. Such liability will be cancelled, or a right to a repayment (generally, with interest) in respect of the stamp duty reserve tax liability will arise, if the agreement Is completed by a duty stamped transfer within six years of the agreement having become unconditional. Both stamp duty and stamp duty reserve tax are normally the liability of the transferee.
Paperless transfers of Ordinary Shares and Preference Shares within CREST are liable to stamp duty reserve tax rather than stamp duty. Stamp duty reserve tax on transactions settled within the CREST system or reported through it for regulatory purposes will be collected by CREST.
Special rules apply to certain categories of person, including intermediaries, market makers, brokers, dealers and persons connected with depositary arrangements and clearance services.
(v) Inheritance tax
An individual may be liable to inheritance tax on the transfer of 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
The following is a summary of the principal US tax consequences for US holders of Ordinary Shares of Barclays PLC, Preference Shares of Barclays Bank PLC (the ~~Bank)~~“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 orof 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, orincluding (i) dealers in securities, (ii) traders in securities that elect to use a mark-to-market method of accounting for securities holdings, (iii) tax-exempt organizations, (iv) life insurance companies, (v) holders liable
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Shareholder information
continued
for alternative minimum tax, (vi) holders that ~~directly~~actually or ~~indirectly, hold~~constructively own 10% or more of Barclays voting ~~stock.~~stock, (vii) holders that hold shares or ADSs as part of a straddle or a hedging or conversion transaction, or (viii) US holders (as defined below) whose functional currency is not the US dollar. 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. If a partnership holds the shares or ADSs, the United States federal income tax treatment of a partner will generally depend on the status of the partner and the tax treatment of the partnership. A partner in a partnership holding the shares or ADSs should consult its tax adviser with regard to the United States federal income tax treatment of an investment in the shares or ADSs.
Unless otherwise noted, the statements of tax laws set out below are based on the tax laws of the UK in force as at 5th March 2010 and are subject to any subsequent changes in UK law, in particular any announcements made in the Chancellor’s expected UK Budget in March 2010.
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)~~“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 Agreement and any related agreement will be performed in accordance with its terms.
For the 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.
~~Taxation of UK holders~~
~~Taxation of dividends~~
In accordance with UK law, Barclays pays 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, 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/highest rates (currently 40%/50%), there will be a further liability to tax. Higher/highest rate taxpayers are taxable on dividend income at a special rate (currently 32.5%/42.5%) 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 Dividend Reinvestment 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). 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 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~~
(i) Taxation of dividends
Subject 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 Barclays Bank PLC, 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~~2013 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, 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. 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

~~309~~
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.~~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.
(ii) Taxation of capital gains
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. Generally, a US holder will recognise capital gain or loss for United States federal income tax purposes equal to the difference between the US dollar value of the amount realised and a US holder’s tax basis, determined in US Dollars, in its 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%~~preferential rates 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.
(iii) 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 Barclays Bank PLC 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.
(iv) Taxation of passive foreign investment companies (PFICs)
Barclays PLC and Barclays Bank PLC 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 Barclays Bank PLC 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 rateably 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 Barclays Bank PLC was a PFIC at any time during such holder’s holding period in their shares or ADSs. Dividends that a US holder receives will not be eligible for the special tax rates applicable to qualified dividend income if Barclays PLC or Barclays Bank PLC 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.
(v) 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.
(vi) 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.
295
Shareholder information
continued
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 Barclays Bank PLC, or (subject to the effect of any such economic sanctions) under current UK laws, which relate only to ~~nonresidents~~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 Advocacy located at 100 F Street, NE Washington DC 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.

  ~~310~~296
Shareholder information
continued

Fees and Charges Payable by a Holder of ADSs
The ADR depositary collects fees for delivery and surrender of ADSs directly from investors depositing ordinary shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. ~~The ADR depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of the distributable property to pay the fees.~~
The charges of the ADR depositary payable by investors are as follows:

Type of Service ADR Depositary Actions Fee
ADR depositary or substituting the underlying shares

Issuance of ADSs against the deposit of ordinary shares, including deposits and issuances in respect of:
~~– Share distributions, stock splits, rights, merger~~
~~– Exchange of securities or other transactions or event or other distribution affecting the ADSs or deposited securities~~
$5.00 or less per 100 ADSs (or portion thereof) evidenced by the new ADSs delivered
– Share distributions, stock splits, rights issues, mergers
– Exchange of securities or other transactions or event or other distribution affecting the ADSs or deposited securities
Receiving or distributing cash dividends
Distribution of cash dividends No fee currently payable
Selling or exercising rights
Distribution or sale of securities, the fee being in an amount equal to the fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities $5.00 or less per each 100 ADSs (or portion thereof)
Withdrawing an underlying ordinary share
Acceptance of ADSs surrendered for withdrawal of deposited ordinary shares $5.00 or less for each 100 ADSs (or portion thereof) evidenced by the ADSs surrendered
General depositary services, particularly those charged on an annual basis
Other services performed by the ADS depositary in administering the ADS program No fee currently payable
Expenses of the ADR depositary

Expenses incurred on behalf of Holders in connection with:

~~– Taxes and other governmental charges~~
~~– Cable, telex and facsimile transmission/delivery~~
~~– Transfer or registration fees, if applicable, for the registration of transfers or underlying ordinary shares~~
~~– Expenses of the Depositary in connection with the conversion of foreign currency into US dollars (which are paid out of such foreign currency)~~
~~– Any other charge payable by ADR depositary or its agents~~
Expenses payable at the sole discretion of the ADR depositary by billing Holders or by deducting charges from one or more cash dividends or other cash distributions
– Taxes and other governmental charges
– Cable, telex and facsimile transmission/delivery
– Transfer or registration fees, if applicable, for the registration of transfers or underlying ordinary shares
– Expenses of the Depositary in connection with the conversion of foreign currency into US dollars (which are paid out of such foreign currency)
– ~~311~~Any other charge payable by ADR depositary or its agents
Fees and Payments made by the ADR depositary to Barclays
The ADR depositary has agreed to reimburse certain Barclays expenses related to the Barclays ADS program and incurred by Barclays in connection with the program. In the year ended 31 December ~~2009,~~2010, the ADR depositary reimbursed to Barclays, or paid amounts on its behalf to third parties, a total sum of ~~$1,000,000.~~¹$937,242. The table below sets out the ~~types of~~ expenses that the ADR depositary ~~has agreed to reimburse~~reimbursed and the amounts reimbursed in the year ended 31 December ~~2009,~~2010, which include certain expenses paid by the ADR depositary to third parties on behalf of Barclays:

Category of expense reimbursed to
Barclays

Amount Reimbursed for the Year ended 31
December ~~2009~~2010
(000s)
Legal fees
$~~298~~372
Investor relations
$~~212~~280
Distribution of voting documentation – AGM
$~~138~~
~~Distribution of voting documentation – General Meeting~~
~~$169~~158
NYSE listing fees
$98127
~~US Share Plans~~
~~$82~~
~~Form 6-K filing fees~~
$3
Total
$~~1,000~~937
Under certain circumstances, including removal of the ADR depositary or termination of the ADR program by Barclays, Barclays is required to repay the ADR depositary certain amounts reimbursed and/or expenses paid to or on behalf of Barclays.
The ADR depositary has ~~also~~ agreed to waive certain of its fees ~~for~~chargeable to the Company with respect to standard costs associated with the administration of the ADR program.
1 ~~In early 2009, Barclays also received certain reimbursements from the ADR depositary with respect to services provided in the year ended 31 December 2008 in connection with the program.~~
~~312~~    297
Shareholder enquiries

Investors who have any questions about their investment in Barclays, or
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
745 Seventh Avenue
New York, NY 10019, USA
Registered and Head ~~office:~~office
1 Churchill Place
London
E14 5HP
Tel: +44 (0) 20 7116 1000
~~Registrar:~~Registrar
The Registrar to Barclays
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:~~Depositary
JP Morgan Chase Bank, N.A.
PO Box 64504 ~~St.~~
St. Paul MN
MN 55164-0504
USA
Tel: 1-800-990-1135 (toll-free for US domestic callers)
or +1 651 453 2128
Email: 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.
298
Index
Absa
29-30 business analysis
29 business description
Accounting
204 developments
193-204 policies
184 presentation
Acquisitions
237 notes to the accounts
Allowance for impairment
268 notes to the accounts
73 risk management
128 Annual General Meeting
186 Annual Report and Accounts (approval)
Assets
263-266 by class of business
Auditors
185 report
215 Available for sale investments
Balance sheet
188 consolidated
Barclaycard
23-24 business analysis
23 business description
Barclays Africa
27-28 business analysis
27 business description
Barclays Capital
31-32 business analysis
31 business description
Barclays Corporate
33-34 business analysis
33 business description
Barclays Wealth
35-36 business analysis
35 business description
Capital adequacy data
102-106 capital management and resources
15 capital ratios
Cash flow statement
190 consolidated
39-41 Citizenship
227 Competition and regulatory matters
61-62 Concentrations of credit risk
225-226 Contingent liabilities and commitments
Corporate governance
130-146 corporate governance report
133 attendance at board meetings
58-93 Credit risk
267-269 Critical accounting estimates
194 Currency of presentation
100 Currency risk
Derivatives and other financial instruments
86 credit risk
212-215 notes to the accounts
Directors and officers
120-123 biographies
125 emoluments
125 interests
246-248 notes to the accounts
124-129 Directors’ report
210 Dividends
210 Earnings per share
105-106 Economic capital
Employees
126 diversity and inclusion
126 involvement
269 Events after the balance sheet date
249-262 Fair value of financial instruments
211 Financial assets designated at fair value
220 Financial liabilities designated at fair value
8-38 Financial review
267 Financial risks
300-306 Glossary
217-218 Goodwill
Head Office and Other Operations
38 business analysis
38 business description
Impairment charges
206 notes to the accounts
63 risk management
Income statement
186 consolidated
217-218 Intangible assets
97-99 Interest rate risk
216 Investment in associates and joint ventures
Investment Management
37 business analysis
37 business description
2-5 Key performance indicators
239 Leasing
226 Legal proceedings
   ~~313~~ 299

~~Index~~
Liabilities
220 other
~~Absa~~107-112
42
~~business analysis~~
41 ~~business description~~
~~162~~ ~~Accountability and Audit~~Liquidity risk
~~Accounting~~215
Loans and advances to banks
~~177~~215 ~~developments~~Loans and advances to customers
~~167-177~~94-101 ~~policies~~Market risk
~~165~~290-292 ~~presentation~~Memorandum and Articles of Association
~~Acquisitions~~234
Non-controlling interests
~~227~~Net fee and commission income
205 notes to the accounts
~~Allowance for impairment~~9
summary
~~243~~Net interest income
205 notes to the accounts
~~113~~9 summary
241-243 Off-balance sheet arrangements
Operating expenses
206-207 administration and general expenses
206 staff costs
11 summary
Ordinary shares, share premiums, and other equity
233 called up
Other income
9 summary
191-192 Parent Company accounts (Barclays PLC)
Pensions
154 Directors
227-233 notes to the accounts
74 Potential credit risk loans
184 Presentation of information
219 Property, plant and equipment
224 Provisions
246-248 Related party transactions
147-163 Remuneration report
233 Reserves
19-38 Results by business
49-57 Risk factors
Risk management
42-48
Barclays approach to risk management
~~125~~50-57 principal risks
58-93 credit risk management
94-101 market risk management
102-106 capital risk management
107-112 liquidity risk management
113-114 operational risk management
115-119 supervision and regulation
104 Risk weighted assets
216
Securities borrowing, securities lending,
~~Annual General Meeting~~repurchase and reverse repurchase agreements
~~178~~238
~~Annual Report and Accounts (approval)~~Securitisation
~~Assets~~Segmental reporting
~~280~~263-266 by class of business
~~196~~267 ~~other~~by geographical segments
~~Auditors~~242-245
Share-based payments
~~166~~287-296 ~~reports~~Shareholder information
~~196~~
~~Available for sale investments~~Statement of comprehensive income
~~Balance sheet~~187
22 ~~average~~
~~180~~ consolidated
~~287~~221-224 ~~consolidated (Barclays Bank)~~Subordinated liabilities
Tax
206 bank payroll tax and bank levy
41 tax contributions
57 tax risk
~~Barclaycard~~193-269
36 ~~business analysis~~
35 ~~business description~~
~~Barclays Bank PLC~~
~~285~~ ~~consolidated accounts~~
~~299~~ ~~financial data~~
~~290~~ notes to the accounts
~~Barclays Capital~~16
Total assets
44211 Trading portfolio
UK Retail Banking
21-22 business analysis
4321 business description
~~Barclays Commercial Bank~~Western Europe Retail Banking
3425-26 business analysis
3325 business description
~~Barclays Global Investors~~
46 ~~business analysis~~
45 ~~business description~~
~~161~~ ~~BGI Equity Ownership Plan (EOP)~~
~~Barclays Wealth~~
48 ~~business analysis~~
47 ~~business description~~
~~Capital adequacy data~~
14 ~~total assets and risk weighted assets~~
17 ~~capital management~~
17 ~~capital ratios~~
~~17-18~~ ~~capital resources~~
~~277-278~~
~~Capital management~~
~~Cash flow statement~~
~~182~~ ~~consolidated~~
~~289~~ ~~consolidated (Barclays Bank)~~
~~186~~ ~~notes to the accounts~~
~~222~~
~~Competition and regulatory matters~~
~~246-248~~
~~Concentrations of credit risk~~
~~220-221~~
~~Contingent liabilities and commitments~~
20
~~Contractual obligations~~
~~Corporate governance~~
~~126-144~~ ~~corporate governance report~~
~~130~~ ~~attendance at board meetings~~
52
~~Corporate sustainability~~
~~243-256~~
~~Credit risk~~
~~26-28~~
~~Critical accounting estimates~~
~~304~~
~~Currency of presentation~~
~~260-261~~
~~Currency risk~~
~~Derivatives and other financial~~
~~instruments~~
~~193-195~~ ~~notes to the accounts~~
~~Directors’ and officers’~~
~~119-121~~ ~~biographies~~
~~123~~ ~~emoluments~~
~~123~~ ~~interests~~
~~230-234~~ ~~notes to the accounts~~
~~122-125~~
~~Directors’ report~~
~~186~~
~~Dividends~~
~~191~~
~~Earnings per share~~
~~100-101~~
~~Economic capital~~
~~Emerging Markets~~
40 ~~business analysis~~
39 ~~business description~~
~~Employees~~
~~124~~ ~~equality and diversity~~
~~124~~ ~~involvement~~
~~234~~
~~Events after the balance sheet date~~
~~121~~
~~Executive management structure~~
~~267-276~~
~~Fair value of financial instruments~~
~~192~~
~~Financial assets designated at fair value~~
~~202~~
~~Financial liabilities designated at fair value~~
~~Financial review~~
~~242~~ ~~Financial risks~~
~~Global Retail and Commercial~~
~~Banking~~
30 ~~business analysis~~
~~316-320~~
~~Glossary~~
~~199~~
~~Goodwill~~
~~Head office functions and other~~
~~operations~~
50 ~~business analysis~~
49 ~~business description~~
~~Impairment charges~~
~~188~~ ~~notes to the accounts~~
74 ~~risk management~~
~~Income statement~~
~~178~~ ~~consolidated~~
~~285~~ ~~consolidated (Barclays Bank)~~
~~202-204~~
~~Insurance assets and liabilities~~
~~187~~
~~Insurance premiums and insurance claims and benefits~~
~~200~~
~~Intangible assets~~
~~258-259~~
~~Interest rate risk~~

  ~~314~~300

~~Index~~
~~continued~~
Glossary of terms

~~Investment Banking and~~
~~Investment Management~~
30
~~business analysis~~
~~198~~
~~Investment~~Term used in ~~associates and joint ventures~~Annual Report
~~223-224~~
~~Leasing~~
~~221~~
~~Legal proceedings~~
~~Liabilities~~
~~202~~ ~~other~~
~~261-266~~
~~Liquidity risk~~
~~Loans and advances to banks~~
~~107~~ ~~interest rate sensitivity~~
~~107~~ ~~maturity analysis~~
~~195~~
~~notes to the accounts~~
~~Loans and advances to~~
~~customers~~
~~107~~ ~~interest rate sensitivity~~
~~110~~ ~~maturity analysis~~
~~195~~
~~notes to the accounts~~
~~257-261~~
~~Market risk~~
~~305~~
~~Memorandum and Articles of Association~~
~~220~~

~~Non-controlling interests~~US equivalent or brief description
~~Net fee and commission income~~
~~186~~ ~~notes to the accounts~~
4
~~summary~~
~~Net interest income~~
~~186~~ ~~notes to the accounts~~
4
~~summary~~
~~240-242~~
~~Off-balance sheet arrangements~~
~~Operating expenses~~
~~188-189~~ ~~administration and general expenses~~
~~188~~ ~~staff costs~~
7
~~summary~~
~~Ordinary shares, share premiums, and other equity~~
~~216-218~~
~~called up~~
~~Other income~~
~~187~~ ~~notes to the accounts~~
5 ~~summary~~
51
~~Our people~~
~~183-185~~
~~Parent Company accounts (Barclays PLC)~~
~~Pensions~~
~~153~~ ~~directors~~
~~210-216~~
~~notes to the accounts~~
~~229-230~~
~~Principal subsidiaries~~
~~Principal transactions~~
~~187~~ ~~notes to the accounts~~
5
~~summary~~
75
~~Potential credit risk loans~~
~~165~~
~~Presentation of information~~
~~201~~
~~Property, plant and equipment~~
~~209~~
~~Provisions~~
~~230-234~~
~~Related party transactions~~
~~145-161~~
~~Remuneration report~~
~~218-219~~
~~Reserves~~
~~29-50~~
~~Results by business~~
~~54-58~~
~~Risk factors~~
~~Risk management~~
~~59-65~~ ~~Barclays approach to risk management~~
~~66-93~~ ~~credit risk management~~
~~94-98~~ ~~market risk management~~
~~99-101~~ ~~capital risk management~~
~~102-104~~ ~~liquidity risk management~~
~~105-106~~ ~~operational risk management~~
~~107-116~~ ~~statistical information~~
~~117-118~~
~~supervision and regulation~~
17
~~Risk weighted assets~~
~~196~~
~~Securities borrowing, securities lending, repurchase and reverse repurchase agreements~~
~~209-210~~
~~Securitisation~~
~~Segmental reporting~~
~~278-282~~Accounts ~~by class~~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
~~282~~Finance lease
~~by geographical segments~~
Capital lease
~~234-239~~Freehold
~~Share-based payments~~
Ownership with absolute rights in perpetuity
~~302-312~~Loans and advances
~~Shareholder information~~
Lendings
19Loan capital
~~Short-term borrowings~~
Long-term debt
~~Statement of comprehesive income~~
Net asset value Book value
~~179~~Net operating income ~~consolidated~~Net revenue
~~286~~Profit
~~consolidated (Barclays Bank)~~
Income
~~204-209~~Share capital
~~Subordinated liabilities~~
Ordinary shares, capital stock or common stock issued and fully paid
~~Tax~~
Share premium account Additional paid-up capital or paid-in surplus (not distributable)
~~190~~Shares in issue ~~notes to the accounts~~Shares outstanding
~~309-310~~Write-offs ~~shareholder information~~
14
~~Total assets~~
~~191~~
~~Trading portfolio~~
~~176~~
~~Trust activities~~
~~UK Retail Banking~~
32 ~~business analysis~~
31
~~business description~~
~~Western Europe~~
38 ~~business analysis~~
37
~~business description~~

~~315~~  Charge-offs

‘Absa’ The South African segment of Barclays PLC, comprising Absa Group Limited, but excluding Absa Capital, Absa Card and Absa Wealth which are reported within Barclays Capital, Barclaycard, and Barclays Wealth respectively.
~~Glossary~~‘Absa Card’ The portion of ~~terms~~Absa's results that arises from the Absa credit card business and is reported within Barclaycard.
‘Absa Capital’ The portion of Absa's results that is reported by Barclays within the Barclays Capital business.
‘Absa Group Limited’ Refers to the consolidated results of the South African group which is listed on the Johannesburg Stock Exchange in which Barclays owns a controlling stake.
‘ABS CDO Super Senior’ The super senior tranches of debt linked to collateralised debt obligations of asset backed securities (defined below). Payment of super senior tranches takes priority over other obligations. See Risk Management section – Barclays Capital Credit Market Exposures.
‘~~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 non-controlling interests.
~~‘Absa Capital’~~ ~~The portion of Absa’s results that is reported by Barclays within the Barclays Capital business.~~
~~‘Absa Card’~~ ~~The portion of Absa’s results that arises from the Absa credit card business and is reported within Barclaycard.~~
~~‘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.~~
~~‘ABX Index’~~ ~~An index tracking the yields of a basket of credit default swaps linked to sub-prime mortgages, widely used in the industry.~~
~~‘ABX.HE Index’~~ ~~An index referencing the yield on a basket of 20 subprime mortgage-backed securities, widely used in the industry.~~
‘Adjusted ~~Gross~~Cross Leverage’ The multiple of adjusted total tangible assets over total qualifying Tier 1 capital. Adjusted total tangible assets are total assets less derivative counterparty netting, assets under management on the balance sheet, settlement balances and cash collateral on derivative liabilities, goodwill and intangible assets. See ~~‘Tier~~'Tier 1 ~~Capital’~~Capital' below.
‘Adjusted profit before tax’ Profit before tax excluding the gain on own credit of £391m (2009:£1,820m charge), gains on acquisitions and disposals of £210m (2009:£214m) and gains on debt buy-backs and extinguishments of £nil (2009: £1,429m).
‘Africa’ The geographic segment comprising countries where Barclays operates within Africa and the Indian Ocean.
‘Alt-A’ Loans regarded as lower risk than sub-prime, but with higher risk characteristics than lending under normal criteria. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Americas’ The geographic segment comprising the USA, Canada and countries where Barclays operates within Latin America.
‘Annual Earnings at Risk (AEaR)’ ~~is the~~The sensitivity of annual earnings to shocks in market rates, at approximately 99th percentile for change over one year. For interest rates this equates to a 2% parallel shift in rates. For equity indices, it equates to a 25% change from one-year end to the next, or 15% from one-year end to the next ~~year’s~~year's average.
‘Arrears’ Customers are said to be in arrears when they are behind in fulfilling their obligations with the result that an outstanding loan is
unpaid or overdue. Such a customer is also said to be in a state of delinquency. When a customer is in arrears, his entire outstanding balance is said to be delinquent, meaning that delinquent balances are the total outstanding loans on which payments are overdue.
‘Asia’ The geographic segment comprising countries where Barclays operates within Asia (including Singapore, Japan, China and India), Australasia and the Middle East.
‘Asset backed products’ As used in Note ~~50,~~41 'Fair value of financial instruments', asset backed products are debt and derivative products that are linked to the cash flow of a referenced asset. This category includes asset backed loans; collateralised debt obligations (CDOs); collateralised loan obligations (CLOs); asset backed credit derivatives (ABS CDS); asset backed and mortgage backed securities.
‘Asset Backed Securities (ABS)’ Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages and, in the case of Collateralised Debt Obligations (CDOs), the referenced pool may be ABS or other classes of assets. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Assets margin’ Interest earned on customer assets relative to the average internal funding rate, divided by average customer assets, expressed as an annualised percentage.
‘Average customer balances’ ~~which make up~~Balances in the average balance sheet which are based ~~upon~~on daily averages for most UK banking operations and monthly averages outside the UK.
‘Average ~~base rates’~~Daily Value at Risk’ ~~Average~~The average Daily Value at Risk (defined below) for a specified period of ~~the official base rate.~~time.
‘Average ~~net income generated per member~~LTV on new mortgages’ The ratio of ~~staff’~~ ~~Total operating income compared~~all new mortgage balances disbursed in the period to the ~~average number~~appraised property value of ~~employees for~~those mortgages, i.e. total amount disbursed year-to-date divided by total amount of appraised property value.
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‘Bank levy’ The levy that will apply to certain UK banks, building societies and the ~~reporting period.~~UK operations of foreign banks from 1st January 2011. The levy is payable based on a percentage of the chargeable equity and liabilities of the bank as at the balance sheet date.
‘Barclays Business’ The business unit within UK Retail Banking providing banking services to small and medium enterprises.
‘Barclays Corporate’ A business unit that provides global banking services across 10 countries grouped into three regions: UK & Ireland, Continental Europe (Spain, Italy, Portugal and France) and New Markets (India, Pakistan, Russia and the UAE).
‘Backstop facility’ A standby facility, that is a liquidity arrangement whereby another party agrees to make a payment should the primary party not do so.
‘Basel III leverage ratio’ The ratio of Tier 1 capital to certain on and off balance sheet exposures, calculated in accordance with the methodology set out in the Basel III guidelines published in December 2010.
‘Basis point’ One hundredth of a per cent (0.01%), so 100 basis points is 1%. Used in quoting movements in interest rates or yields on securities.
‘~~CMBS Index Products (CMBX)’~~BCBS’ ~~The CMBX is~~Basel Committee of Banking Supervisors (‘BCBS’, or ‘The Basel Committee’), a ~~series of CMBS credit default swap indices. It allows investors to take diversified exposure (long~~forum for regular cooperation on banking supervisory matters which develops global supervisory standards for the banking industry. Its members are officials from central banks or ~~short) synthetically across rating categories. CMBX is administered by Markit, which serves as the calculation~~prudential supervisors from 27 countries and ~~marketing agent for CMBX.~~territories.
‘~~CMBS IG Index’~~Capital ratios’ ~~An index compiled by Barclays Capital, which measures~~Key financial ratios measuring the ~~return for CMBS securities with an original deal size of $500m~~Group’s capital adequacy or ~~greater, combined with a required rating of Baa3/BBB- or higher (investment grade). In addition, maturity must be equal to or greater than one year~~financial strength. These include the Core Tier 1 ratio, Tier 1 ratio and ~~no floating rate certificates may be included.~~Risk asset ratio.
‘Collateralised Debt Obligations (CDOs)’ Securities issued by a third party which reference Asset Backed Securities (ABSs) (defined above) and/or certain other related assets purchased by the issuer. CDOs may feature exposure to sub-prime mortgage assets through the underlying assets. ~~CDO2~~CDO² securities represent investments in CDOs that have been securitised by a third party. See Risk Management section – Barclays Capital Credit Market Exposures.

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~~continued~~
‘Collateralised Loan Obligation (CLO)’ A security backed by the repayments from a pool of commercial loans. The payments may be made to different classes of owners (in tranches). See Risk Management section – Barclays Capital Credit Market Exposures.
‘Collateralised Synthetic Obligation (CSO)’’ A form of synthetic collateralised debt obligation (CDO) that does not hold assets like bonds or loans but invests in credit default swaps (CDSs) or other non-cash assets to gain exposure to a portfolio of fixed income assets.
‘Commercial Mortgage Backed Securities (CMBS)’ Securities that represent interests in a pool of commercial mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). See Risk Management section – Barclays Capital Credit Market Exposures.
‘Commercial Real Estate’ Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multifamily housing buildings, warehouses, garages, and industrial properties. Commercial real estate loans are those backed by a package of commercial real estate assets. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Commercial Paper’ An unsecured promissory note issued to finance short-term credit needs. It specifies the face amount paid to investors on the maturity date.
‘Commodity products’ As used in Note ~~50,~~41 ‘Fair value of financial instruments’, these products are exchange traded and OTC derivatives based on a commodity underlying (e.g. metals, precious metals, oil and oil related, power and natural gas).
‘Compensation:income ratio’ Staff compensation based costs compared to total ~~income net of insurance claims.~~income.
‘Conduits’ A financial vehicle that holds asset-backed debt such as mortgages, vehicle loans, and credit card receivables, all financed with short-term loans (generally commercial paper) that use the asset-backed debt as collateral. The profitability of a conduit depends on the ability to roll over maturing short-term debt at a cost that is lower than the returns earned from asset-backed securities held in the portfolio. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Continental Europe’ See Barclays Corporate.
‘Core Tier 1 capital’ Called-up share capital and eligible reserves plus equity non-controlling interests, less intangible assets and deductions relating to the excess of expected loss over regulatory impairment allowance and securitisation positions, as specified by the FSA.
‘Core Tier 1 capital ratio’ Core Tier 1 capital as a percentage of risk weighted assets.
‘Corporate income tax paid’ Tax paid during the year on taxable profits, including withholding tax deducted from income.
‘Cost:income ratio’ Operating expenses compared to total income net of insurance claims.
‘Cost:net income ratio’ Operating expenses compared to ~~total~~net operating income ~~net~~less other credit provisions.
‘Cost of ~~insurance claims less impairment charges.~~Equity’ The rate of return targeted by the equity holders of the company.
‘Coverage ratio (CRL)’ Impairment allowances as a percentage of CRL balances.
‘~~Credit conversion factors (CCFs)’~~Covered bonds’ ~~The portion~~Debt securities backed by a portfolio of ~~an off-balance sheet commitment drawn in~~mortgages that i segregated from the ~~event~~issuer’s other assets solely for the benefit of ~~a future default. The conversion factor is expressed as a percentage. The conversion factor is used to calculate~~ the ~~exposure at default (EAD).~~holders of the covered bonds.
‘Credit Default Swaps (CDS)’ 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 in the event of a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.
‘Credit Derivative Product Company (CDPC)’ A company that sells protection on credit derivatives. CDPCs are similar to monoline insurers.
However, unlike monoline insurers, they are not regulated as insurers. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Credit market exposures’ Relates to commercial real estate and leveraged finance businesses that have been significantly impacted by the ~~continued~~ deterioration in the global credit markets. The exposures include positions subject to fair value movements in the Income Statement, positions that are classified as loans and advances and available for sale.
~~‘Other credit products’~~ As used in Note 50, these are products linked to the credit risk of a referenced entity, index or a basket. This category includes collateralised synthetic obligations (non-asset backed CDOs) and OTC derivatives. The OTC derivatives are namely, CDS single name; CDS index; CDS index tranche and Nth to default basket swaps (in which the payout is linked to one in a series of defaults, such as first-, second- or third-to-default, with the contract terminating at that point).
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Glossary of terms
continued
‘Credit Risk Loans (CRLs)’ A loan becomes a credit risk loan when evidence of deterioration has been observed, for example a missed payment or other breach of covenant. A loan may be reported in one of three categories: impaired loans, accruing past due 90 days or more or impaired and restructured loans. These may include loans which, while impaired, are still performing but have associated individual impairment allowances raised against them.
‘Credit spread’ The yield spread between securities with the same coupon rate and maturity structure but with different associated credit risks, with the yield spread rising as the credit rating worsens. It is the premium over the benchmark or risk-free rate required by the market to accept a lower credit quality.
‘Credit Valuation Adjustment (CVA)’ The difference between the risk-free value of a portfolio of trades and the market value which takes into account the counterparty’s risk of default. The CVA therefore represents an estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk of the counterparty due to any failure to perform on contractual agreements.
‘Customer deposits’ Money deposited by all individuals and companies that are not credit institutions. Such funds are recorded as liabilities in the ~~Group’s~~Croup’s balance sheet under Customer Accounts.
‘Daily Value at Risk (DVaR)’ An estimate of the potential loss which might arise from market movements under normal market conditions, if the current positions were to be held unchanged for one business day, measured to a confidence level. (Also see VaR).
‘Debit Valuation Adjustment (DVA)’ The opposite of credit valuation adjustment (CVA). It is the difference between the risk-free value of a portfolio of trades and the market value which takes into account Barclays ~~Group’s~~Croup’s risk of default. The DVA, therefore, represents an estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk of Barclays Group due to any failure to perform on contractual agreements. The DVA decreases the value of a liability to take into account a reduction in the remaining balance that would be settled should Barclays Group default or not perform in terms of contractual agreements.
‘Debt restructuring’ This is when the terms and provisions of outstanding debt agreements are changed. This is often done in order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the repayment schedule as well as reducing the debt or interest charged on the loan.
‘Debt securities in issue’ Transferable certificates of indebtedness of the Croup to the bearer of the certificates. These are liabilities of the Group and include certificates of deposits.
‘Delinquency’ See ‘Arrears’.
‘Dividend payout ratio’ Yearly dividends paid per share as a fraction of earnings per share.
‘~~Economic capital’~~Equities and Prime Services’ ~~An internal measure of the minimum equity and preference capital required for the Group to maintain its credit rating based upon its risk profile.~~The Barclays Capital trading businesses encompassing Cash Equities, Equity Derivatives & Equity Financing.

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‘Equity products’ As used in Note ~~50,~~41 ‘Fair value of financial instruments’, these products are linked to equity markets. This category includes listed equities, exchange traded derivatives, equity derivatives, preference shares and contract for difference (CFD) products.
‘Equity structural hedge’ An interest rate hedge which functions to reduce the impact of the volatility of short-term interest rate movements on equity positions on the balance sheet that do not reprice with market rates.
‘Europe region’ The geographic segment comprising countries in which Barclays operates within the EU (excluding UK & Ireland), Northern, Continental and Eastern Europe, including Russia.
‘Expected loss’ The Group measure of anticipated loss for exposures captured under an internal ratings based credit risk approach for capital adequacy calculations. It is measured as the Barclays modelled view of anticipated loss based on Probability of Default (PD), Loss Given Default ~~(LGD)~~(LCD) and Exposure at Default (EAD), with a one-year time horizon.
‘Exposure in the event of default (EAD)’ The estimation of the extent to which Barclays may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty’s default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure is typically less than the approved loan limit.
~~‘FICO score’~~ ~~A credit score, based on the Fair Isaac Corporation (being the US rating company that wrote the software that calculates the scores).~~
‘First/Second Lien’ First lien: debt that places its holder first in line to collect compensation from the sale of the underlying collateral in the event of a default on the loan. Second lien: debt that is issued against the same collateral as higher lien debt but that is subordinate to it. In the case of default, compensation for this debt will only be received after the first lien has been repaid and thus represents a riskier investment than the first lien. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Fixed charge’ Security taken over a specific asset of a borrower to secure the repayment of a loan. In this arrangement the asset is signed over to the creditor and the borrower would need the lender’s permission to sell it. The lender also registers a charge against the asset which remains in force until the loan is repaid.
‘Fixed Income, Currency and Commodities’ The Barclays Capital trading businesses encompassing Rates, Credit, Emerging Markets, Commodities, Foreign Exchange & Fixed Income Financing.
‘Forbearance’ Forbearance Programmes that assist customers in financial difficulty through agreements to accept less than contractual amounts due where financial distress would otherwise prevent satisfactory repayment within the original terms and conditions of the contract. These agreements may be initiated by the customer, Barclays or a third party and include approved debt counselling plans, minimum due reductions, interest rate concessions and switches from capital and interest repayments to interest-only payments.
‘FSA-eligible pool assets (liquid assets buffer)’ High quality unencumbered assets that meet the FSAs requirements for liquidity. These assets include, for example, high quality government or central bank securities, certain sight deposits with central banks, and securities issued by designated multilateral development banks.
‘Full time equivalent’ Full time equivalent employee units are the on-job hours paid for employee services divided by the number of ordinary-time hours normally paid for a full-time staff member when on the job (or contract employee where applicable).
‘Funds and fund-linked products’ As used in Note ~~50,~~41 ‘Fair value of financial instruments’, this category includes holdings in mutual funds, hedge funds, fund of funds and fund linked derivatives.
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‘Funded/unfunded’ Exposures where the notional amount of the transaction is either funded or unfunded. Represents exposures where a commitment to provide future funding has been made and the funds have been released/not released.
‘FX products’As used in Note ~~50,~~41 ‘Fair value of financial instruments’, these products are derivatives linked to the foreign exchange market. This category includes FX spot and forward contracts; FX swaps; FX options.
‘Gain on acquisition’ The amount by which the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities, recognised in a business combination, exceeds the cost of the ~~combination.~~acquisition.
‘Global Retail ~~and Commercial~~ Banking ~~– Absa’~~(GRB)’ ~~The portion of Absa’s results that is reported within~~UK Retail Banking, Barclaycard, Western Europe Retail Banking and Barclays Africa.
‘Gross new UK lending’ New lending advanced to UK customers during the ~~Global Retail and Commercial Banking business.~~year.
‘Home Loans’ ~~A loan~~Loans to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a residential mortgage.
‘Impaired loans’ Loans are reported as Credit Risk Loans (defined above) and 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.
‘Impairment allowances’ ~~A provision~~Provisions held on the balance sheet as a result of the raising of a charge against profit for the incurred loss
inherent in the lending book. An impairment allowance may either be identified or unidentified and individual or collective.
‘Income’ Total income net of insurance claims, unless otherwise specified.
‘Incremental Default Risk Charge (IDRC)’ The IDRC captures default risk. This means the potential for a direct loss due to an obligor’s default as well as the potential for indirect losses that may arise from a default event.
‘Individually/Collectively Assessed’ 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.
‘Individual liquidity guidance (ILG)’ Guidance given to a firm about the amount, quality and funding profile of liquidity resources that the FSA has asked the firm to maintain.
‘Interchange income’ A fee that is paid to a credit card issuer in the clearing and settlement of a sales or cash advance transaction.
‘Interest rate products’ As used in Note ~~50,~~41 ‘Fair value of financial instruments’, these are products with a payoff linked to interest rates. This category includes interest rate swaps, swaptions, caps and exotic interest rate derivatives.
‘Internal funds pricing’ The Group’s mechanism for pricing intra-group funding and liquidity.
‘Investment banking’ Fee generating businesses encompassing Advisory, Debt and Equity Origination within Barclays Capital.
‘Investment grade’ A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB.
~~‘LCDX Index’~~ The Loan Credit Default Swap Index, a generally accepted loan-only credit default swap index created by CDSIndexCo. The LCDX index is a tradeable index with 100 equally-weighted underlying single-name loan-only credit default swaps (LCDS).
‘Leveraged Finance’ Loans or other financing agreements provided to companies whose overall level of debt is high in relation to their cash flow (net debt: EBITDA) typically arising from private equity sponsor led acquisitions of the businesses concerned.
‘Liabilities margin’ Interest paid on customer liabilities relative to the average internal funding rate, divided by average customer liabilities. Expressed as an annualised percentage.
‘Liquidity and Credit enhancements’ Credit enhancement facilities are used to enhance the creditworthiness of financial obligations and cover losses due to asset default. Two general types of credit enhancement are third-party loan guarantees and self-enhancement through over collateralization. Liquidity enhancement makes funds available if required, for ~~other~~ther reasons than asset default, e.g. to ensure timely repayment of maturing commercial paper.
‘Liquidity Coverage Ratio (LCR)’ The ratio of the stock of high quality liquid assets to expected net cash outflows over the following 30 days. High-quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible. These include, for example, cash and claims on central governments and central banks. The Basel III guidelines require this ratio to be at least 100% and it is expected to apply from 2015.
‘Liquidity pool/buffer’ The Group liquidity pool comprises cash at central banks and highly liquid collateral specifically held by the Group as contingency to enable the bank to meet cash outflows in the event of stressed market conditions.
‘Loan loss rate’ 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).
‘Loan to deposit ratio’ The ratio of loans and advances to customer accounts. This excludes certain liabilities issued by the retail business that have characteristics comparable to retail deposits (for example, structured CDs and retail bonds), which are included within debt securities in issue.
‘Loan to deposit and long term funding ratio’ The ratio of wholesale and retail loans and advances to customers net of impairment allowance, divided by the total of customer ~~deposits. ‘Loan~~accounts, long term debt (due after 1 year) and equity.
‘Loan funding ratio’ The ratio of wholesale and retail loans and advances to customers net of impairment allowance, divided by the total of customer accounts, long-term debt (>1 yr) and equity.
‘Loan to value ratio (LTV)’ ~~The~~Expresses the amount ofborrowed against an asset (e.g. a ~~first mortgage lien~~mortgage) as a percentage of the ~~total~~ appraised ~~value of real property.~~value. The ~~LTV~~ ratio is used in ~~determining~~assessing the appropriate level of risk for the loan and ~~therefore the price of the loan~~is generally reported as an average for new mortgages or an entire portfolio.
‘Loan to ~~the borrower. LTV ratios may be expressed in a number of ways, including origination LTV and mark to market (MTM) LTV. Origination LTVs use the current outstanding loan balance and the~~ value of ~~the property at origination of the loan. MTM LTVs use the current outstanding loan value and the current value of the property (which is estimated using one or more external house price indices).~~new mortgage lending’ See Average LTV in new mortgage.
‘Loans past due’ Loans are past due when a counterparty has failed to make a payment when contractually due.
‘Loss Given Default (LGD)’ The fraction of Exposure at Default (EAD) (defined above) that will not be recovered following default. LGD comprises the actual loss (the part that is not expected to be recovered), together with the economic costs associated with the recovery process.
‘~~Markit LCDX Index’~~ An index compiled by Markit Inc, a specialist securities market researcher, compiled by reference to first lien loans issued by 100 entities listed on the Markit Syndicated Secured List, widely used in the industry.
‘Medium Term Notes (MTNs)’ Corporate notes continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years.

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continued

‘Monoline’ An entity which specialises in providing credit protection to the holders of debt instruments in the event of default by a debt security counterparty. This protection is typically held in the form of derivatives such as credit default swaps (CDS) referencing the underlying exposures held. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Monoline Wrapped’ Debt instruments for which credit enhancement or protection by a monoline insurer has been obtained. The wrap is credit protection against the notional and principal interest cash flows due to the holders of debt instruments in the event of default in payment of these by the underlying counterparty. Therefore, if a security is monoline wrapped its payments of principal and interest are guaranteed by a monoline insurer. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Mortgage Backed Securities (MBS)’ Securities that represent interests in a group of mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). See Risk Management section – Credit Market Exposures.
‘Mortgage vintage’ The year the mortgage was issued.
‘Mortgage related securities’ Securities which are referenced to underlying mortgages. See RMBS, CMBS and MBS.
‘Net ~~Asset Value per Share’~~Interest Income’ ~~Computed by dividing shareholders’ equity excluding non-controlling interests by~~The difference between interest received on assets and interest paid on liabilities including the ~~number of issued ordinary shares.~~interest income on Group equity.
‘Net Interest Margin’ The margin is expressed as annualised net interest income for ~~GRCB~~Global Retail Banking, Absa, Barclays Corporate and Barclays Wealth divided by the sum of the average assets and average liabilities for ~~GRCB and Barclays Wealth.~~those businesses.
‘Net ~~Tangible Asset Value per Share’~~Investment Income’ ~~Computed by dividing shareholders’~~Includes the net result of revaluing financial instruments designated at fair value, dividend income and the net result on disposal of available for sale assets.
‘Net Operating Income’ Total income net of insurance claims less impairment changes.
‘Net Stable Funding Ratio (NSFR)’ The ratio of available stable funding to required stable funding over a one year time horizon, assuming a stressed scenario. The ratio is required to be over 100% with effect from 2015. Available stable funding would include such items as equity ~~excluding non-controlling interests less goodwill~~capital, preferred stock with a maturity of over 1 year, or liabilities with a maturity of over 1 year. The required amount of stable funding is calculated as the sum of the value of the assets held and ~~intangible assets,~~funded by the ~~number~~institution, multiplied by a specific required stable funding (RSF) factor assigned to each particular asset type, added to the amount of ~~issued ordinary shares.~~potential liquidity exposure multiplied by its associated RSF factor.
‘Net Trading Income’ Income arising from trading positions which are held at fair value, including market-making and customer business. The resulting gains and losses are included in the income statement together with interest, dividends and funding costs relating to trading activities.
‘New Markets’ See Barclays Corporate.
‘Non-asset backed debt instruments’ As used in Note ~~50,~~41 ‘Fair value of financial instruments’, these products are debt instruments. This category includes government bonds; US agency bonds; corporate ~~bonds;~~bonds: commercial paper; certificates of deposit; convertible bonds; corporate bonds and issued notes.
‘Non-investment grade’ A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of BB+ or below.
‘~~Notional Collateral’~~Non-performing loans’ ~~Collateral based~~A loan that is in default or close to being in default because interest or capital payments are not made on time.
‘Other credit products’ As used in Note 41 ‘Fair value of financial instruments’, these are products linked to the ~~notional amount~~credit risk of a ~~financial instrument.~~referenced entity, index or a basket. This category includes collateralised synthetic obligations (non-asset backed CDOs) and OTC derivatives. The OTC derivatives are namely, CDS single name; CDS index; CDS index tranche and Nth to default basket swaps (in which the payout is linked to one in a series of defaults, such as first-, second- or third-to-default, with the contract terminating at that point).
‘Over the counter derivatives (OTC)’ Contracts that are traded (and privately negotiated) directly between two parties, without going through an exchange or other intermediary. They offer flexibility because, unlike standardised exchange-traded products, they can be tailored to fit specific needs.
‘Own Credit’ The effect of the Group’s own credit standing on the fair value of financial liabilities.
‘Performance costs’ The accounting charge recognised in the period for performance awards. For deferred incentives and long-term incentives the accounting charge is spread over the relevant periods in which the employee delivers service.
‘Performance awards’Annual performance incentives (including deferred incentives), long-term incentive awards and commission payments. A detailed description of the Group’s incentive plans is provided in the Directors’ Remuneration Report.
‘PCRL Coverage ratio’ Impairment allowances as a percentage of total CRL (credit risk loan) & PPL (potential problem loan) balances. See CRL and PPL.
‘Portfolio MTM LTV’ The ratio of the total outstanding balance to the current value of the security, which is estimated using one or more external house price indices, i.e. total outstanding balance divided by total current property value (mark to market).
‘Potential Credit Risk Loans (PCRLs)’ Comprise the outstanding balances to Potential Problem Loans (defined below) and the three categories of Credit Risk Loans (defined above).
‘Potential Problem Loans (PPLs)’ Loans where serious doubt exists as to the ability of the borrowers to continue to comply with repayment terms in the near future.
‘Prime’ Loans of a higher credit quality and would be expected to satisfy the criteria for inclusion into Government programmes.
‘Principal ~~transactions’~~Investments’ ~~Principal transactions comprise net trading income~~Private Equity Investments.
‘Prior year compensation deferrals’ The accounting charge recognised for service delivered in the current period in respect of deferred incentives and ~~net investment income.~~long-term incentives previously awarded.
‘Private equity investments’ As used in Note ~~50,~~41 ‘Fair value of financial instruments’, private equity is equity securities in operating companies not quoted on a public exchange. Investment in private equity often involves the investment of capital in private companies or the acquisition of a public company that results in the delisting of public equity. Capital for private equity investment is raised by retail or institutional investors and used to fund investment strategies such as leveraged buyouts, venture capital, growth capital, distressed investments and mezzanine capital.
‘Private-label securitisation’ Residential mortgage-backed security transactions sold or guaranteed by entities that are not sponsored or owned by the government.
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‘Probability of default (PD)’ The likelihood that a loan will not be repaid and will fall into default. PD may be calculated for each client who has a loan (normally applicable to wholesale customers/clients) or for a portfolio of clients with similar attributes (normally applicable to retail customers). To calculate PD, Barclays assesses the credit quality of borrowers and other counterparties and assigns them an internal risk rating. Multiple rating methodologies may be used to inform the rating decision on individual large credits, such as internal and external models, rating agency ratings, and for wholesale assets market information such as credit spreads. For smaller credits, a single source may suffice such as the result from an internal rating model.
‘Product structural hedge’ An interest rate hedge which functions to reduce the impact of the volatility of short-term interest rate movements on-balance sheet positions that can be matched to a specific product, e.g. customer balances that do not reprice with market rates.
‘Proprietary trading’ When a bank, brokerage or other financial institution trades on its own account, at its own risk, rather than on behalf of customers, so as to make a profit for itself.
‘Renegotiated loans’ 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.
‘Repo/Reverse repo’ A repurchase agreement that allows a borrower to use a financial security as collateral for a cash loan at a fixed rate of interest. In a repo, the borrower agrees to sell a security to the lender subject to a commitment to repurchase the asset at a specified price on a given date. For the party selling the security (and agreeing to repurchase it in the future) it is a repo; for the party on the other ~~end~~side of the transaction (buying the security and agreeing to sell in the future) it is a reverse repurchase agreement or reverse repo.
‘Residential Mortgage Backed Securities (RMBS)’Securities that represent interests in a group of residential mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). See Risk Management section – Barclays Capital Credit Market Exposures.
‘Restructured loans’ ‘Impaired and restructured loans’ comprises loans 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 original effective interest rate being less than the loan’s carrying value, an impairment allowance will be raised.
‘Retail Loans’ Loans to individuals rather than ~~institutions.~~institutions as well as loans to certain smaller business customers. This includes both secured and unsecured loans such as mortgages and credit card balances.
‘Return on average risk weighted assets’ Calculated as profit after tax for the year divided by average risk weighted assets for the year.
‘Risk asset ratio’ A measure of the risk attached to the assets of a business using definitions of capital and risk weightings established in accordance with the Basel Capital Accord as implemented by the FSA.
‘Risk weighted assets’ A measure of a bank’s assets adjusted for their associated risks. Risk weightings are established in accordance with the Basel Capital Accord as implemented by the FSA.

~~319~~
‘Securitisation’ A process by which debt instruments are aggregated into a pool, which is used to back new securities. A company ~~sells~~may sell assets to an SPV (special purpose vehicle) ~~who~~which then issues securities backed by the assets based on their value. This allows the credit quality of the assets to be separated from the credit rating of the original company and transfers risk to external investors.
‘SIV Lites’ ~~Are SPEs (Special Purpose Entities)~~Vehicles which invest in diversified portfolios of interest earning assets to take advantage of the spread differentials between the assets in the SIV and the funding cost. Unlike SIVs they are not perpetual, making them look more like CDOs, which have fixed maturity dates. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Special Purpose Entities (SPEs)/Special Purpose Vehicles (SPVs)’ Entities ~~that are~~ created to accomplish a narrow and well defined objective. There are often specific restrictions or limits around their ongoing activities. Transactions with ~~SPEs~~SPEs/SPVs take a number of forms, including:

– The provision of financing to fund asset purchases, or commitments to provide finance for future purchases.

– Derivative transactions to provide investors in the ~~SPE~~SPE/SPV with a specified exposure.

– The provision of liquidity or backstop facilities which may be drawn upon if the ~~SPE~~SPE/SPV experiences future funding difficulties.

– Direct investment in the notes issued by ~~SPEs.~~SPEs/SPVs.
‘Spot Daily Value at Risk’The Daily Value at Risk (defined above) recorded for a specified day.
‘Structural hedge’An interest rate hedge which functions to reduce the impact of the volatility of short-term interest rate movements on positions that exist within the balance sheet that carry interest rates that do not reprice with market rates. See also equity structural hedge and product structural hedge.
‘Structured Investment Vehicles (SIVs)’ ~~SPEs (Special Purpose Entities)~~Entities which invest in diversified portfolios of interest earning assets to take advantage of the spread differentials between the assets in the SIV and the funding cost. See Risk Management section – Barclays Capital Credit Market Exposures.
‘Structural liquidity’The liquidity available from current positions – principally unpledged marketable assets and holdings of term liabilities with long remaining lives.
‘Structured finance/notes’A structured note is an investment tool which pays a return linked to the value or level of a specified asset or index and sometimes offers capital protection if the value declines. Structured notes can be linked to equities, interest rates, funds, commodities and foreign currency.
‘Subordination’The state of prioritising repayments of principal and interest on debt to a creditor lower than repayments to other creditors by the same debtor. That is, claims of a security are settled by a debtor to a creditor only after the claims of securities held by other creditors of the same debtor have been settled.
306

Glossary of terms
continued
‘Subordinated liabilities’ Liabilities which, in the event of insolvency or liquidation of the issuer, are subordinated to the claims of depositors and other creditors of the issuer.
‘Sub-Prime’ Defined as loans to borrowers typically having weakened credit histories that include payment delinquencies and potentially more severe problems such as court judgements and bankruptcies. They may also display reduced repayment capacity as measured by credit scores, high debt-to-income ratios, or other criteria indicating heightened risk of default. See Risk Management section – Credit Market Exposures.
‘Tax paid’All amounts paid to taxation authorities during the year in respect of taxes borne and collected by the Group. This includes corporate income tax paid, taxes paid on behalf of employees, irrecoverable VAT and other taxes.
‘Tier 1 capital’A measure of a ~~bank's~~bank’s financial strength defined by the FSA. It captures Core Tier 1 capital plus other Tier 1 securities in issue, but is subject to a deduction in respect of material holdings in financial companies.
‘Tier 1 capital ratio’The ratio expresses Tier 1 capital as a percentage of risk weighted assets.
‘Tier 2 capital’ ~~Defined~~A capital measure defined by the FSA. Broadly it includes qualifying subordinated debt and other Tier 2 securities in issue, eligible collective impairment allowances, unrealised available for sale equity gains and revaluation reserves. It is subject to deductions relating to the excess of expected loss over regulatory impairment allowance, securitisation positions and material holdings in financial companies.
‘Top-line income’Income before own credit gains/losses and credit market ~~write-downs.~~write downs.
‘Total shareholder return (TSR)’ Defined as the value created for shareholders through share price appreciation, plus reinvested dividend payments.
‘UK & Ireland’See Barclays Corporate.
‘US Credit Card Act’Credit Card Accountability Responsibility and Disclosure Act of 2009 (CARD Act). Legislation signed into US law on 22nd ay 2009 to provide changes to credit card industry practices in the US including significantly restricting credit card issuers’ ability to change interest rates and assess fees to reflect individual consumer risk, change the way payments are applied and requiring changes to consumer credit card disclosures. The majority of the provisions became effective in February 2010.
‘Value at Risk (VaR)’ An estimate of the potential loss which might arise from market movements under normal market conditions, if the current positions were to be held unchanged for one business day, measured to a confidence level. (Also see DVaR).
‘Whole loans’A mortgage loan sold in its entirety when the buyer assumes the entire loan along with its rights and responsibilities. A whole loan is differentiated from investments in which the buyer becomes part owner of a pool of mortgages. See Risk Management section – Credit Market Exposures.
‘~~Write-Down’~~Wholesale Loans’Lending to larger businesses, financial institutions and sovereign entities.
‘Write down’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-downs~~Write downs will occur when, and to the extent that, the whole or part of a debt is considered irrecoverable.

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 ~~19th, 2010~~18th, 2011
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 ~~19th, 2010~~18th, 2011
Barclays Bank PLC
(Registrant)
By
/s/ Chris Lucas
Chris Lucas, Group Finance Director
~~BACK COVER~~
EXHIBIT INDEX

EXHIBIT
NUMBER

DESCRIPTION
~~1.1~~ ~~Memorandum of Association of Barclays PLC~~
~~1.2~~
1.1
Articles of Association of Barclays PLC (incorporated by reference to the ~~2008~~ Form ~~20-F~~6-K filed on ~~March 24~~^th~~, 2009)~~May 13th, 2010)
~~1.3~~
1.2
~~Memorandum and~~ Articles of Association of Barclays Bank PLC (incorporated by reference to the ~~2008~~ Form ~~20-F~~6-K filed on ~~March 24th, 2009)~~May 13th, 2010)
2.1
Long term debt instruments
~~4.1~~
4.0
Rules of the Barclays Group Performance Share Plan (2005) (incorporated by reference to the 2006 Form 20-F filed on March 26^th,26th, 2007)
~~4.2~~
4.1
Rules of the Barclays PLC Renewed 1986 Executive Share Option Scheme (incorporated by reference to the Barclays PLC Registration Statement on Form S-8 (File no. 333-153723) filed on September 29^th,29th, 2008)
~~4.3~~
4.2
Rules of the Barclays PLC Approved Incentive Share Option Plan (incorporated by reference to the Barclays PLC Registration Statement on Form S-8 (File no. 333-153723) filed on September 29^th,29th, 2008)
~~4.4~~
4.3
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,29th, 2008)
~~4.5~~
4.4
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,29th, 2008)
~~4.6~~
4.5
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,29th, 2008
~~4.7~~
4.6
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,29th, 2008)
~~4.8~~
4.7
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,~~19th, 2008)
~~4.9~~
4.8
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,~~19th, 2008)
~~4.10~~
4.9
~~Service Contract – John Varley~~Rules of the Barclays Group Share Value Plan (incorporated by reference to the ~~2003~~Barclays PLC Registration Statement on Form ~~20-F~~S-8 (File no. 333-167232) filed on ~~March 26~~^th~~, 2004)~~June 1st, 2010).
~~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)~~
~~EXHIBIT~~
~~NUMBER~~4.10

~~DESCRIPTION~~
~~4.12~~ Service Contract – Robert E. Diamond Jr ~~(incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~
~~4.13~~
4.11
Contract of Employment – Christopher Lucas (incorporated by reference to the 2006 Form 20-F filed on March 26^th,26th, 2007)
~~4.14~~
4.12
~~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)~~
~~4.15~~ ~~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)~~
~~4.16~~ 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,24th, 2005)
~~4.17~~
4.13
~~Appointment Letter – Leigh Clifford (incorporated by reference to the 2004 Form 20-F filed on March 24~~^th~~, 2005)~~
~~4.18~~ Appointment Letter – Sir Andrew Likierman (incorporated by reference to the 2004 Form 20-F filed on March 24^th,24th, 2005)
~~4.19~~
4.14
Appointment Letter ~~– Dr Daniël Cronjé (incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~- Dambisa Moyo
~~4.20~~
4.15
Appointment Letter - Alison Carnwath
4.16
Appointment Letter – John Sunderland (incorporated by reference to the 2005 Form 20-F filed on March 29^th,29th, 2006)
~~4.21~~
4.17
Appointment Letter – Marcus Agius (incorporated by reference to the 2006 Form 20-F filed on March 26^th,26th, 2007)
~~4.22~~
4.18
Appointment Letter – Fulvio Conti (incorporated by reference to the 2006 Form 20-F filed on March 26^th,26th, 2007)
~~4.23~~
4.19
Appointment Letter – David Booth (incorporated by reference to the 2007 20-F filed on March 26^th,26th, 2008)
~~4.24~~
4.20
Appointment Letter – Sir Michael Rake (incorporated by reference to the 2007 20-F filed on March 26^th,26th, 2008)
~~4.25~~
4.21
Appointment Letter – Simon Fraser (incorporated by reference to the 2008 Form 20-F filed on March 24th, 2008)
~~4.26~~
4.22
Appointment Letter – Reuben Jeffery III (incorporated by reference to the 2009 Form 20-F filed on March 19, 2010)
~~4.27~~ ~~Indemnity Letter – John Varley (incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~
~~4.28~~ ~~Indemnity Letter – Gary Hoffman (incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~
~~EXHIBIT~~
~~NUMBER~~4.23

~~DESCRIPTION~~
  ~~4.29~~ Indemnity Letter – Robert E. Diamond Jr ~~(incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~
  ~~4.30~~
4.24
Indemnity Letter – Sir Richard Broadbent (incorporated by reference to the 2005 Form 20-F filed on March 29^th,29th, 2006)
  ~~4.31~~
4.25
~~Indemnity Letter – Leigh Clifford (incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~
  ~~4.32~~ Indemnity Letter – Sir Andrew Likierman (incorporated by reference to the 2005 Form 20-F filed on March 29^th,29th, 2006)
  ~~4.33~~
4.26
~~Indemnity Letter – Dr Daniël Cronjé (incorporated by reference to the 2005 Form 20-F filed on March 29~~^th~~, 2006)~~
  ~~4.34~~ Indemnity Letter – John Sunderland (incorporated by reference to the 2005 Form 20-F filed on March 29^th,29th, 2006)
  ~~4.35~~
4.27
Term sheet for Barclays PLC Warrants (incorporated by reference to the 2008 Form 20-F filed March 24^th,24th, 2008)
  ~~4.36~~
4.28
Amended and Restated Stock Purchase Agreement, dated as of June 16, 2009, by and among Barclays Bank PLC, Barclays PLC (solely for the purposes of Section 6.16, Section 6.18 and Section 6.24) and BlackRock, Inc. (incorporated by reference to the 2009 Form 20-F filed on March 19th, 2010)
  ~~4.37~~
4.29
Stockholder Agreement, dated as of December 1, 2009, by and among BlackRock, Inc., Barclays Bank PLC and Barclays BR Holdings S.à r.l. (incorporated by reference to the 2009 Form 20-F filed on March 19th, 2010)
7.1
Ratios of earnings to fixed charges
7.2
Ratios of earnings 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	Barclays PLC	1-09246
	Barclays Bank PLC	1-10257


Title of Each Class		Name of Each Exchange On Which Registered

25p ordinary shares		New York Stock Exchange*

American Depository Shares, each representing four 25p ~~ordinary shares~~		New York Stock Exchange


~~Title of Each Class~~ordinary shares		~~Name of Each Exchange On Which Registered~~
~~Callable Floating Rate Notes 2035~~		~~New York Stock Exchange~~
~~Non-Cumulative Callable Dollar Preference Shares, Series 2~~		New York Stock Exchange*
~~American Depository Shares, Series 2, each representing one 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 Depository Shares, Series 3, each representing one Non-Cumulative Callable Dollar Preference Share, Series 3~~		~~New York Stock Exchange~~
~~Non-Cumulative Callable Dollar Preference Shares, Series 4~~		New York Stock Exchange*
~~American Depository Shares, Series 4, each representing one Non-Cumulative Callable Dollar Preference Share, Series 4~~		~~New York Stock Exchange~~
~~Non-Cumulative Callable Dollar Preference Shares, Series 5~~		New York Stock Exchange*
~~American Depository Shares, Series 5, each representing one Non-Cumulative Callable Dollar Preference Share, Series 5~~		~~New York Stock Exchange~~
~~iPath~~^® ~~Dow Jones – UBS Commodity Index Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Agriculture Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Aluminum Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Cocoa Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Coffee Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Copper Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Cotton Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Energy Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Grains Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Industrial Metals Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Lead Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Livestock Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Natural Gas Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Nickel Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Platinum Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Precious Metals Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Softs Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Sugar Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Dow Jones – UBS Tin Subindex Total Return~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~S&P GSCI~~^® ~~Total Return Index ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~S&P GSCI~~^® ~~Crude Oil Total Return Index ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~CBOE S&P 500 BuyWrite Index~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~MSCI India Index~~^SM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~EUR/USD Exchange Rate ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~GBP/USD Exchange Rate ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~JPY/USD Exchange Rate ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~S&P 500 VIX Short-Term Futures~~^TM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~S&P 500 VIX Mid-Term Futures~~^TM ~~ETN~~		~~NYSE Arca~~
~~iPath~~^® ~~Global Carbon 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 ETN + Short C Leveraged Exchange Traded Notes Linked to the Inverse Performance of the S&P 500~~^® ~~Total Return Index~~^SM		~~NYSE Arca~~
~~Barclays ETN + Short D Leveraged Exchange Traded Notes Linked to the Inverse Performance of the S&P 500~~^® ~~Total Return Index~~^SM		~~NYSE Arca~~
~~Barclays ETN + Long B Leveraged Exchange Traded Notes Linked to the S&P 500~~^® ~~Total Return Index~~^SM		~~NYSE Arca~~
~~Barclays ETN + Short B Leveraged Exchange Traded Notes Linked to the Inverse Performance of the S&P 500~~^® ~~Total Return Index~~^SM		~~NYSE Arca~~
~~Barclays ETN + Long C Leveraged Exchange Traded Notes Linked to the S&P 500~~^® ~~Total Return Index~~^SM		~~NYSE Arca~~


~~Barclays PLC~~	~~25p ordinary shares~~	~~11,411,577,230~~
~~Barclays Bank PLC~~	~~£1 ordinary shares~~	~~2,342,558,515~~
	~~£1 preference shares~~	~~1,000~~
	~~£100 preference shares~~	~~75,000~~
	€~~100 preference shares~~	~~240,000~~
	~~$0.25 preference shares~~	~~237,000,000~~
	~~$100 preference shares~~	~~100,000~~


~~Form 20-F~~ ~~item number~~		~~Page and caption references~~ in this document*
1	~~Identity of Directors, Senior Management and Advisers~~	~~Not applicable~~
2	~~Offer Statistics and Expected Timetable~~	~~Not applicable~~
3	~~Key Information~~
	~~A. Selected financial data~~	~~11, 12, 304~~
	~~B. Capitalization and indebtedness~~	~~Not applicable~~
	~~C. Reason for the offer and use of proceeds~~	~~Not applicable~~
	~~D. Risk factors~~	~~54-58~~
4	~~Information on the Company~~
	~~A. History and development of the company~~	~~165, 225 (Note 38)-230 (Note 41), 234 (Note 43), 305, 312~~
	~~B. Business overview~~	~~117-118, 193-195 (Note 14), 222 (Note 36), 278-282 (Note 53)~~
	~~C. Organizational structure~~	~~229-230 (Note 41)~~
	~~D. Property, plants and equipment~~	~~201 (Note 23), 223-224 (Note 37)~~
4A	~~Unresolved staff comments~~	~~Not applicable~~
5	~~Operating and Financial Review and Prospects~~
	~~A. Operating results~~	~~2-50, 117-118, 193-195 (Note 14), 222 (Note 36), 257-261 (Note 48)~~
	~~B. Liquidity and capital resources~~	~~17-18, 92-93, 102-104, 182, 193-195 (Note 14), 204-209 (Note 27), 209-210 (Note 29), 216-218 (Note 31), 220-221 (Note 34), 261-266 (Note 49), 277-278 (Note 52)~~
	~~C. Research and development, patents and licenses, etc.~~	~~Not applicable~~
	~~D. Trend information~~	-
	~~E. Off-balance sheet arrangements~~	~~240-242 (note 45)~~
	~~F. Tabular disclosure of contractual obligations~~	20
	~~G. Safe harbor~~	~~i (Forward-looking statements)~~
6	~~Directors, Senior Management and Employees~~
	~~A. Directors and senior management~~	~~119-121~~
	~~B. Compensation~~	~~145-161, 210-216 (Note 30), 230-234 (Note 42)~~
	~~C. Board practices~~	~~119-140, 147, 154-156~~
	~~D. Employees~~	~~8, 51~~
	~~E. Share ownership~~	~~145-161, 233 (Note 42)~~
7	~~Major Shareholders and Related Party Transactions~~
	~~A. Major shareholders~~	~~123, 165~~
	~~B. Related party transactions~~	~~230-234 (Note 42)~~
	~~C. Interests of experts and counsel~~	~~Not applicable~~
8	~~Financial Information~~
	~~A. Consolidated statements and other financial information~~	~~122, 166-300, 302, 305-306~~
	~~B. Significant changes~~	~~125, 234 (Note 43)~~
9	~~The Offer and Listing~~
	~~A. Offer and listing details~~	~~303~~
	~~B. Plan of distribution~~	~~Not applicable~~
	~~C. Markets~~	~~302~~
	~~D. Selling shareholders~~	~~Not applicable~~
	~~E. Dilution~~	~~Not applicable~~
	~~F. Expenses of the issue~~	~~Not applicable~~
10	~~Additional Information~~


~~Form 20-F~~ ~~item number~~		~~Page and caption references~~ in this document*
	~~A. Share capital~~	~~Not applicable~~
	~~B. Memorandum and Articles of Association~~	~~305-307~~
	~~C. Material contracts~~	~~125, 154, 156, 217-218 (Note 31)~~
	~~D. Exchange controls~~	~~309~~
	~~E. Taxation~~	~~308-309~~
	~~F. Dividends and paying assets~~	~~Not applicable~~
	~~G. Statement by experts~~	~~Not applicable~~
	~~H. Documents on display~~	~~309~~
	~~I. Subsidiary information~~	~~229-230 (Note 41)~~
11	~~Quantitative and Qualitative Disclosure about Market Risk~~	~~53-116, 242 (Note 46)-266 (Note 49)~~
12	~~Description of Securities Other than Equity Securities~~
	~~A. Debt Securities~~	~~Not applicable~~
	~~B. Warrants and Rights~~	~~Not applicable~~
	~~C. Other Securities~~	~~Not applicable~~
	~~D. American Depositary Shares~~	~~310-311~~
13	~~Defaults, Dividends Arrearages and Delinquencies~~	~~Not applicable~~
14	~~Material Modifications to the Rights of Security Holders and Use of Proceeds~~	~~Not applicable~~
15	~~Controls and Procedures~~
	~~A. Disclosure controls and procedures~~	~~163~~
	~~B. Management’s annual report on internal control over financial reporting~~	~~162~~
	~~C. Attestation report of the registered public accounting firm~~	~~166~~
	~~D. Changes in internal control over financial reporting~~	~~162~~
~~15T~~	~~Controls and Procedures~~	~~162-163~~
~~16A~~	~~Audit Committee Financial Expert~~	~~134~~
~~16B~~	~~Code of Ethics~~	~~144~~
~~16C~~	~~Principal Accountant Fees and Services~~	~~125, 137 (Non-Audit Services Policy), 188-189 (Note 9)~~
~~16D~~	~~Exemptions from the Listing Standards for Audit Committees~~	~~Not applicable~~
~~16E~~	~~Purchases of Equity Securities by the Issuer and Affiliated Purchasers~~	~~217 (Share Repurchase)~~
~~16F~~	~~Change in Registrant’s Certifying Accountant~~	~~Not applicable~~
~~16G~~	~~Corporate Governance~~	~~127, 144~~
17	~~Financial Statements~~	~~Not applicable~~
18	~~Financial Statements~~	~~164-300~~
19	~~Exhibits~~	~~Exhibit Index~~




~~Section 1~~
~~Business review~~

3		~~Financial Review~~

51		~~Our people~~

52		~~Corporate sustainability~~


~~Section 2~~
~~Risk management and governance~~

54		~~Risk management~~

~~119~~		~~Board and Executive Committee~~

~~122~~		~~Directors’ report~~

~~126~~		~~Corporate governance report~~

~~145~~		~~Remuneration report~~

~~162~~		~~Accountability and audit~~




~~Section 3~~
~~Financial statements~~

~~165~~		~~Presentation of information~~

~~166~~		~~Independent Registered Public Accounting Firm’s report~~

~~167~~		~~Consolidated accounts Barclays PLC~~

~~283~~		~~Barclays Bank PLC data~~


~~Section 4~~
~~Shareholder information~~

~~302~~		~~Shareholder information~~

~~312~~		~~Shareholder enquiries~~

~~313~~		~~Index~~

~~315~~		~~Glossary of terms~~


~~Business review~~
2		~~Financial Review~~
2		~~Consolidated summary income statement~~
3		~~Income statement commentary~~
11		~~Five-year consolidated summary income statement~~
12		~~Consolidated summary balance sheet~~
13		~~Balance sheet commentary~~
17		~~Capital management~~
19		~~Additional financial disclosure~~
29		~~Analysis of results by business~~

51		~~Our people~~

52		~~Corporate sustainability~~


Year ended 31st December	2009								2008						2007
	Continuing operations £m		Discontinued operations £m		Total £m		Continuing operations £m		Discontinued operations £m		Total £m		Continuing operations £m		Discontinued operations £m		Total £m
Net interest income	11,918		33		11,951		11,469		–		11,469		9,598		12		9,610
Net fee and commission income	8,418		1,759		10,177		6,491		1,916		8,407		5,771		1,937		7,708
Principal transactions	7,057		67		7,124		2,019		(10	)	2,009		4,970		5		4,975
Net premiums from insurance contracts	1,172		–		1,172		1,090		–		1,090		1,011		–		1,011
Other income	1,389		4		1,393		367		10		377		186		2		188
Total income	29,954		1,863		31,817		21,436		1,916		23,352		21,536		1,956		23,492
Net claims and benefits incurred on insurance contracts	(831	)	–		(831	)	(237	)	–		(237	)	(492	)	–		(492	)

Total income net of insurance claims	29,123		1,863		30,986		21,199		1,916		23,115		21,044		1,956		23,000
Impairment charges and other credit provisions	(8,071	)	–		(8,071	)	(5,419	)	–		(5,419	)	(2,795	)	–		(2,795	)
Net income	21,052		1,863		22,915		15,780		1,916		17,696		18,249		1,956		20,205
Operating expenses	(16,715	)	(1,137	)	(17,852	)	(13,391	)	(975	)	(14,366	)	(12,096	)	(1,103	)	(13,199	)
Share of post-tax results of associates and joint ventures	34		–		34		14		–		14		42		–		42
Profit on disposal of subsidiaries, associates and joint ventures	188		–		188		327		–		327		28		–		28
Gains on acquisitions	26		–		26		2,406		–		2,406		–		–		–

Profit before tax and disposal of discontinued operations	4,585		726		5,311		5,136		941		6,077		6,223		853		7,076
Profit on disposal of discontinued operations	–		6,331		6,331		–		–		–		–		–		–

Profit before tax	4,585		7,057		11,642		5,136		941		6,077		6,223		853		7,076
Tax	(1,074	)	(280	)	(1,354	)	(453	)	(337	)	(790	)	(1,699	)	(282	)	(1,981	)

Profit after tax	3,511		6,777		10,288		4,683		604		5,287		4,524		571		5,095

Profit for the year attributable to
Equity holders of the Parent	2,628		6,765		9,393		3,795		587		4,382		3,886		531		4,417
Non-controlling interests	883		12		895		888		17		905		638		40		678
	3,511		6,777		10,288		4,683		604		5,287		4,524		571		5,095

Earnings per share
Basic earnings per share	24.1p		62.1p		86.2p		51.4p		7.9p		59.3p		60.6p		8.3p		68.9p
Diluted earnings per share	22.7p		58.9p		81.6p		49.8p		7.7p		57.5p		58.8p		8.1p		66.9p


Staff numbers As at 31st December
	2009	2008	2007
UK Retail Banking	30,400	32,600	31,900
Barclays Commercial Bank	9,100	9,500	9,300
Barclaycard	10,300	10,600	9,400
GRCB – Western Europe	11,600	11,800	8,200
GRCB – Emerging Markets	17,400	20,100	13,300
GRCB – Absa	33,300	35,800	35,200
Barclays Capital	23,200	23,100	16,200
Barclays Wealth	7,400	7,900	6,900
Head office functions and other operations	1,500	1,400	1,100
Total Group permanent and fixed- term contract staff worldwide	144,200	152,800	131,500



For the year ended 31st December
	2009 £m		2008 £m		2007 £m		2006 £m		2005 £m
Continuing operations
Net interest income	11,918		11,469		9,598		9,133		8,060
Non-interest income	18,036		9,967		11,938		11,372		8,600
Net claims and benefits incurred on insurance contracts	(831	)	(237	)	(492	)	(575	)	(645	)
Total income net of insurance claims	29,123		21,199		21,044		19,930		16,015
Impairment charges and other credit provisions	(8,071	)	(5,419	)	(2,795	)	(2,154	)	(1,571	)
Operating expenses	(16,715	)	(13,391	)	(12,096	)	(11,723	)	(9,748	)
Share of post-tax results of associates and joint ventures	34		14		42		46		45
Profit on disposal of subsidiaries, associates and joint ventures	188		327		28		323		–
Gain on acquisitions	26		2,406		–		–		–
Profit before tax from continuing operations	4,585		5,136		6,223		6,422		4,741
Tax from continuing operations	(1,074	)	(453	)	(1,699	)	(1,611	)	(1,251	)
Profit after tax from continuing operations	3,511		4,683		4,524		4,811		3,490
Profit for the year from discontinued operations, including gain on disposal	6,777		604		571		384		351
Net profit for the year	10,288		5,287		5,095		5,195		3,841
Profit attributable to equity holders of the Parent	9,393		4,382		4,417		4,571		3,447
Profit attributable to non-controlling interests	895		905		678		624		394
	10,288		5,287		5,095		5,195		3,841

Selected financial statistics
Basic earnings per share	86.2p		59.3p		68.9p		71.9p		54.4p
Basic earnings per share from continuing operations	24.1p		51.4p		60.6p		66.6p		49.5p
Diluted earnings per share	81.6p		57.5p		66.9p		69.8p		52.6p
Dividends per ordinary share	2.5p		11.5p		34.0p		31.0p		26.6p
Dividend payout ratio	2.9%		19.4%		49.3%		43.1%		48.9%
Profit attributable to the equity holders of the Parent as a percentage of:
average shareholders’ equity	23.8%		16.5%		20.3%		24.7%		21.1%
average total assets	0.5%		0.2%		0.3%		0.4%		0.4%
Average United States Dollar exchange rate used in preparing the accounts	1.57		1.86		2.00		1.84		1.82
Average Euro exchange rate used in preparing the accounts	1.12		1.26		1.46		1.47		1.46
Average Rand exchange rate used in preparing the accounts	13.14		15.17		14.11		12.47		11.57



As at 31st December
	2009 £m	2008 £m	2007 £m	2006 £m	2005 £m
Assets
Cash and other short-term funds	83,076	31,714	7,637	9,753	5,807
Trading portfolio and financial assets designated at fair value	193,912	306,836	341,171	292,464	251,820
Derivative financial instruments	416,815	984,802	248,088	138,353	136,823
Loans and advances to banks	41,135	47,707	40,120	30,926	31,105
Loans and advances to customers	420,224	461,815	345,398	282,300	268,896
Available for sale financial investments	56,483	64,976	43,072	51,703	53,497
Reverse repurchase agreements and cash collateral on securities borrowed	143,431	130,354	183,075	174,090	160,398
Other assets	23,853	24,776	18,800	17,198	16,011
Total assets	1,378,929	2,052,980	1,227,361	996,787	924,357
Liabilities
Deposits and items in the course of collection due to banks	77,912	116,545	92,338	81,783	77,468
Customer accounts	322,429	335,505	294,987	256,754	238,684
Trading portfolio and financial liabilities designated at fair value	137,454	136,366	139,891	125,861	104,949
Liabilities to customers under investment contracts	1,679	69,183	92,639	84,637	85,201
Derivative financial instruments	403,416	968,072	248,288	140,697	137,971
Debt securities in issue	135,902	149,567	120,228	111,137	103,328
Repurchase agreements and cash collateral on securities lent	198,781	182,285	169,429	136,956	121,178
Insurance contract liabilities, including unit-linked liabilities	2,140	2,152	3,903	3,878	3,767
Subordinated liabilities	25,816	29,842	18,150	13,786	12,463
Other liabilities	14,922	16,052	15,032	13,908	14,918
Total liabilities	1,320,451	2,005,569	1,194,885	969,397	899,927
Shareholders’ equity
Shareholders’ equity excluding non-controlling interests	47,277	36,618	23,291	19,799	17,426
Non-controlling interests	11,201	10,793	9,185	7,591	7,004
Total shareholders’ equity	58,478	47,411	32,476	27,390	24,430
Total liabilities and shareholders’ equity	1,378,929	2,052,980	1,227,361	996,787	924,357

Risk weighted assets and capital ratios^a
Risk weighted assets	382,653	433,302	353,878	297,833	269,148
Tier 1 ratio	13.0%	8.6%	7.6%	7.7%	7.0%
Risk asset ratio	16.6%	13.6%	11.2%	11.7%	11.3%

Selected financial statistics
Net asset value per ordinary share	414p	437p	353p	303p	269p
Number of ordinary shares of Barclays PLC (in millions)	11,412	8,372	6,601	6,535	6,490
Year-end United States Dollar exchange rate used in preparing the accounts	1.62	1.46	2.00	1.96	1.72
Year-end Euro exchange rate used in preparing the accounts	1.12	1.04	1.36	1.49	1.46
Year-end Rand exchange rate used in preparing the accounts	11.97	13.74	13.64	13.71	10.87


Title of Each Class		Name of Each Exchange On Which Registered

Callable Floating Rate Notes 2035		New York Stock Exchange

Non-Cumulative Callable Dollar Preference Shares, Series 2		New York Stock Exchange*

American Depository Shares, Series 2, each representing one 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 Depository Shares, Series 3, each representing one Non-Cumulative Callable Dollar Preference Share, Series 3		New York Stock Exchange

Non-Cumulative Callable Dollar Preference Shares, Series 4		New York Stock Exchange*

American Depository Shares, Series 4, each representing one Non-Cumulative Callable Dollar Preference Share, Series 4		New York Stock Exchange

Non-Cumulative Callable Dollar Preference Shares, Series 5		New York Stock Exchange*

American Depository Shares, Series 5, each representing one Non-Cumulative Callable Dollar Preference Share, Series 5		New York Stock Exchange

5.140% Lower Tier 2 Notes due October 2020		New York Stock Exchange

iPath^® Dow Jones – UBS Commodity Index Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones – UBS Agriculture Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones-UBS Aluminum Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones-UBS Cocoa Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones-UBS Coffee Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones – UBS Copper Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones-UBS Cotton Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones – UBS Energy Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones – UBS Grains Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones – UBS Industrial Metals Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones-UBS Lead Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones – UBS Livestock Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones – UBS Natural Gas Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones – UBS Nickel Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones-UBS Platinum Subindex Total Return^SM		NYSE Arca


ETN

iPath^® Dow Jones-UBS Precious Metals Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones-UBS Softs Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones-UBS Sugar Subindex Total Return^SM ETN		NYSE Arca

iPath^® Dow Jones-UBS Tin Subindex Total Return^SM ETN		NYSE Arca

iPath^® S&P GSCI^® Total Return Index ETN		NYSE Arca

iPath^® S&P GSCI^® Crude Oil Total Return Index ETN		NYSE Arca

iPath^® CBOE S&P 500 BuyWrite Index^SM ETN		NYSE Arca

iPath^® MSCI India Index^SM ETN		NYSE Arca

iPath^® EUR/USD Exchange Rate ETN		NYSE Arca

iPath^® GBP/USD Exchange Rate ETN		NYSE Arca

iPath^® JPY/USD Exchange Rate ETN		NYSE Arca

iPath^® S&P 500 VIX Short-Term Futures^TM ETN		NYSE Arca

iPath^® S&P 500 VIX Mid-Term Futures^TM ETN		NYSE Arca

iPath^® Inverse S&P 500 VIX Short-Term Futures^TM ETN		NYSE Arca

iPath^® Inverse January 2021 S&P 500 VIX Short-Term Futures^TM ETN		NYSE Arca

iPath^® Long Enhanced S&P 500 VIX Mid-Term Futures^SM ETN		NYSE Arca

iPath^® Long Extended Russell 1000^® TR Index ETN		NYSE Arca

iPath^® Short Extended Russell 1000^® TR Index ETN		NYSE Arca

iPath^® Long Extended Russell 2000^® TR Index ETN		NYSE Arca

iPath^® Short Extended Russell 2000^® TR Index ETN		NYSE Arca

iPath^® Long Enhanced MSCI EAFE^® TR Index ETN		NYSE Arca

iPath^® Short Enhanced MSCI EAFE^® TR Index ETN		NYSE Arca

iPath^® Long Enhanced MSCI Emerging Markets Index ETN		NYSE Arca

iPath^® Short Enhanced MSCI Emerging Markets Index ETN		NYSE Arca

iPath^® Long Extended S&P 500^® TR Index ETN		NYSE Arca

iPath^® Short Extended S&P 500^® TR Index ETN		NYSE Arca

iPath^® Global Carbon ETN		NYSE Arca

iPath^® Optimized Currency Carry ETN		NYSE Arca

iPath^® US Treasury Steepener ETN		NYSE Arca

iPath^® US Treasury Flattener ETN		NYSE Arca

iPath^® US Treasury 2-year Bull ETN		NYSE Arca

iPath^® US Treasury 2-year Bear ETN		NYSE Arca

iPath^® US Treasury 10-year Bull ETN		NYSE Arca

iPath^® US Treasury 10-year Bear ETN		NYSE Arca



iPath^® US Treasury Long Bond Bull ETN		NYSE Arca

iPath^® US Treasury Long Bond Bear 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 ETN+ S&P 500^® Dynamic VEQTOR™ ETN		NYSE Arca

Barclays ETN + Short C Leveraged Exchange Traded Notes Linked to the Inverse Performance of the S&P 500^® Total Return Index^SM		NYSE Arca

Barclays ETN + Short D Leveraged Exchange Traded Notes Linked to the Inverse Performance of the S&P 500^® Total Return Index^SM		NYSE Arca

Barclays ETN + Long B Leveraged Exchange Traded Notes Linked to the S&P 500^® Total Return Index^SM		NYSE Arca

Barclays ETN + Short B Leveraged Exchange Traded Notes Linked to the Inverse Performance of the S&P 500^® Total Return Index^SM		NYSE Arca

Barclays ETN + Long C Leveraged Exchange Traded Notes Linked to the S&P 500^® Total Return Index^SM		NYSE Arca


Barclays PLC	25p ordinary shares	12,181,940,871
Barclays Bank PLC	£1 ordinary shares	2,342,558,515
	£1 preference shares	1,000
	£100 preference shares	75,000
	€100 preference shares	240,000
	$0.25 preference shares	237,000,000
	$100 preference shares	100,000


Large Accelerated Filerþ		Accelerated Filer¨		Non-Accelerated Filer¨


Large Accelerated Filer¨		Accelerated Filer¨		Non-Accelerated Filerþ


Form 20-F item number		Page and caption references in this document*

1	Identity of Directors, Senior Management and Advisers	Not applicable

2	Offer Statistics and Expected Timetable	Not applicable
3	Key Information
	A. Selected financial data	7, 15, 287-289
	B. Capitalization and indebtedness	Not applicable
	C. Reason for the offer and use of proceeds	Not applicable
	D. Risk factors	164-166
4	Information on the Company
	A. History and development of the company	127, 184, 234 (Note 32) - 237 (Note 35), 269 (Note 46), 271, 297
	B. Business overview	i, 6, 115-119, 212-215 (Note 14), 227 (Note 27), 263-267 (Note 43)
	C. Organizational structure	234-235 (Note 32)
	D. Property, plants and equipment	219 (Note 20), 239 (Note 37)
4A	Unresolved staff comments	Not applicable
5	Operating and Financial Review and Prospects
	A. Operating results	6-38, 100, 115-119, 193-204 (Note 1), 212-215 (Note 14), 227 (Note 27), 267-269 (Note 45)
	B. Liquidity and capital resources	18, 86-87, 102-112, 192, 212-215 (Note 14), 221-224 (Note 23), 225-226 (Note 25), 233 (Note 29), 238 (Note 36)
	C. Research and development, patents and licenses, etc.	Not applicable

	D. Trend information	–
	E. Off-balance sheet arrangements	240-241 (Note 38)
	F. Tabular disclosure of contractual obligations	168
	G. Safe harbor	i (Forward-looking statements)
6	Directors, Senior Management and Employees
	A. Directors and senior management	120-123
	B. Compensation	147-163, 227-232 (Note 28), 246-248 (Note 40)
	C. Board practices	120-146, 157-158
	D. Employees	12, 41
	E. Share ownership	147-163, 246-248 (Note 40)
7	Major Shareholders and Related Party Transactions
	A. Major shareholders	125, 271
	B. Related party transactions C. Interests of experts and counsel	183, 246-248 (Note 40), 284 (Note p) Not applicable
8	Financial Information
	A. Consolidated statements and other financial information	124, 185-285, 287-291
	B. Significant changes	127, 269 (Note 46)
9	The Offer and Listing
	A. Offer and listing details	287
	B. Plan of distribution	Not applicable
	C. Markets	287-288
	D. Selling shareholders	Not applicable
	E. Dilution	Not applicable
	F. Expenses of the issue	Not applicable
10	Additional Information
	A. Share capital	Not applicable
	B. Memorandum and Articles of Association	290-292
	C. Material contracts	127, 157, 159, 233 (Note 29)
	D. Exchange controls	295
	E. Taxation	293-294
	F. Dividends and paying assets	Not applicable
	G. Statement by experts	Not applicable
	H. Documents on display	295
	I. Subsidiary information	234-235 (Note 32)
11	Quantitative and Qualitative Disclosure about Market Risk	42-114
12	Description of Securities Other than Equity Securities
	A. Debt Securities	Not applicable


Form 20-F item number		Page and caption references in this document*

	B. Warrants and Rights	Not applicable
	C. ��Other Securities	Not applicable
	D. American Depositary Shares	296
13	Defaults, Dividends Arrearages and Delinquencies	Not applicable
14	Material Modifications to the Rights of Security Holders and Use of Proceeds	Not applicable
15	Controls and Procedures
	A. Disclosure controls and procedures	129
	B. Management’s annual report on internal control over financial reporting	128-129
	C. Attestation report of the registered public accounting firm	185
	D. Changes in internal control over financial reporting	129
16A	Audit Committee Financial Expert	141
16B	Code of Ethics	146
16C	Principal Accountant Fees and Services	127, 143 (External auditor objectivity and independence: Non-Audit Services), 207 (Note 8)
16D	Exemptions from the Listing Standards for Audit Committees	Not applicable
16E	Purchases of Equity Securities by the Issuer and Affiliated Purchasers	233 (Share Repurchase)
16F	Change in Registrant’s Certifying Accountant	Not applicable
16G	Corporate Governance	131, 146
17	Financial Statements	Not applicable (See Item 8)
18	Financial Statements	Not applicable (See Item 8)
19	Exhibits	Exhibit Index


		Business Review

2		Key performance indicators
7		Financial review
39		Citizenship

		Risk management and governance

42		Risk management
124		Directors’ report
130		Corporate governance report
147		Remuneration report

		Additional financial information

164		Risk factors
167		Additional financial disclosure

		Financial statements

184		Presentation of information
185		Independent Registered Public Accounting Firm’s report for Barclays PLC
186		Consolidated Financial Statements Barclays PLC
270		Independent Registered Public Accounting Firm’s report for Barclays Bank PLC
271		Barclays Bank PLC data

		Shareholder information

287		Shareholder information
297		Shareholder enquiries
298		Index
300		Glossary of terms


Capital KPIs

Definition	Why it’s important to the business and management
Core Tier 1 ratio

Capital requirements are part of the regulatory framework governing how banks and depository institutions are managed. Capital ratios express a bank’s capital as a percentage of its risk weighted assets. Both Core Tier 1 and Tier 1 capital resources are defined by the UK FSA. Core Tier 1 is broadly tangible shareholders’ funds less certain capital deductions from Tier 1.	The Group’s capital management activities seek to maximise shareholders’ value by prudently optimising the level and mix of its capital resources. The Group’s capital management objectives are to maintain sufficient capital resources to: ensure the financial holding company is well capitalised relative to the minimum regulatory capital requirements set by the UK FSA and US Federal Reserve; ensure locally regulated subsidiaries can meet their minimum regulatory capital requirements; support the Group’s risk appetite and economic capital requirements; and support the Group’s credit rating.	10 – 10.8% 09 – 10.0% 08 – 5.6%

	During 2010, the Group’s Core Tier 1 ratio improved 0.8% to 10.8%, largely through £3.6bn of attributable profits, demonstrating the Group’s ability to generate capital organically.
Adjusted gross leverage

Adjusted gross leverage is defined as the multiple of adjusted total tangible assets over total qualifying Tier 1 capital. Adjusted total tangible assets are total assets less derivative counterparty netting, assets under management on the balance sheet, settlement balances, goodwill and intangible assets. Tier 1 capital is defined by the UK FSA.	Barclays believes that there will be more capital and less leverage in the banking system and that lower levels of leverage are regarded as a key measure of stability going forward. This is consistent with the views of our regulators and investors.	10 – 20x 09 – 20x 08 – 28x

Adjusted gross leverage is a non-IFRS measure. More information on the ratio of total assets to total shareholders information is provided on page 104. The ratio of total assets to total shareholders equity as at 31^st December 2010, 2009 and 2008 was 24x, 24x and 43x, respectively.	In 2010, adjusted gross leverage remained stable at 20 times principally as a result of a £3.9 billion increase in Tier 1 Capital to £53.5 billion offset by the impact of a £84.6 billion increase in adjusted total tangible assets.

Returns KPIs

Definition	Why it’s important to the business and management
Return on average shareholders’ equity (RoE) is calculated as profit after tax attributable to equity holders of the parent divided by the average shareholders’ equity for the year. Shareholders’ equity is made up of share capital, retained earnings and other reserves.	These measures indicate the returns generated by the management of business based on the allocation of shareholders’ equity to each component business. Achieving target returns demonstrates the organisation’s ability to execute its strategy and align interests of management and shareholders. We allocate capital to business units based on an assumed Core Tier 1 ratio of 9% and we retain excess capital at Group Centre as a buffer.	RoE 10 – 7.2% 09 – 6.7% 08 – 14.3%

Return on average tangible equity (RoTE) is calculated as profit after tax attributable to equity holders of the parent divided by average shareholders’ equity for the year, excluding non-controlling interests, goodwill and intangible assets.	Returns lie at the heart of our capital allocation. All of our businesses except Western Europe Retail Banking and Barclays Corporate had returns on tangible equity in excess of the 2010 cost of equity of 12.5%.	RoTE 10 – 8.7% 09 – 9.0% 08 – 21.3%


Capital ratios under Basel II	2009		2008		2007
	Barclays PLC Group	Barclays Bank PLC Group	Barclays PLC Group	Barclays Bank PLC Group	Barclays PLC Group	Barclays Bank PLC Group
Capital ratios	%	%	%	%	%	%
Core Tier 1 ratio	10.0	10.1	5.6	5.6	4.7	4.5
Tier 1 ratio	13.0	13.0	8.6	8.6	7.6	7.3
Risk asset ratio	16.6	16.6	13.6	13.5	11.2	11.0
Risk weighted assets	£m	£m	£m	£m	£m	£m
Credit risk	252,054	252,054	266,912	266,912	244,474	244,469
Counterparty risk	45,450	45,450	70,902	70,902	41,203	41,203
Market risk
– Modelled – VaR	10,623	10,623	14,452	14,452	7,270	7,270
– Modelled – IRDC^aand non-VaR	5,378	5,378	7,771	7,771	5,522	5,522
– Standardised	38,525	38,525	43,149	43,149	27,020	27,020
Operational risk	30,623	30,623	30,116	30,116	28,389	28,389
Total risk weighted assets	382,653	382,653	433,302	433,302	353,878	353,873


aReturns KPIscontinued

Definition	~~Incremental Default Risk Charge.~~	Why it’s important to the business and management


Profit before tax

Profit before tax is the primary profitability measure used to assess performance. Profit before tax represents total income less impairment charges and operating expenses.		Profit before tax is a key indicator of financial performance to many of our stakeholders.	Profit before tax 10 – £6,065m 09 – £4,585m 08 – £5,136m
Cost: income ratio

Group cost: income ratio is defined as operating expenses compared to total income net of insurance claims.		This is a measure management uses to assess the productivity of the business operations. Restructuring the cost base is a key execution priority for management and includes a review of all categories of discretionary spending and an analysis of how we can run the business to ensure that costs increase at a slower rate than income.	10 – 64% 09 – 57% 08 – 63%
Loan loss rate

The loan loss rate represents the impairment charge on loans and advances as a proportion of the period end balances.		The granting of credit is one of Barclays major sources of income and its most significant risk. The loan loss rate is an indicator of the cost of granting credit. During 2010 impairment continued to improve across all our businesses with one exception, the corporate portfolio in Spain, resulting in a loan loss rate of 118bps compared to 156bps reported in 2009.	10 – 118 bps 09 – 156 bps 08 – 95 bps
Dividend

It is the Group’s policy to declare and pay dividends on a quarterly basis. In a normal year there will be three equal payments in June, September and December and a final variable payment in March.		The ability to pay dividends demonstrates the financial strength of the Group. Whilst recoginising the market’s desire for us to maintain strong capital ratios, in light of the regulatory and economic uncertainty, we have taken a prudent approach of prioritising capital retention and significantly reducing the distribution through dividends from historical levels of 50% whilst seeking to ensure that pay-outs also increase progressively from their low point in 2009.	10 – 5.5p 09 – 2.5p 08 – 11.5p



Income growth KPIs
Definition	Why it’s important to the business and management


Total income

Defined as total income net of insurance claims.	Total income is a key indicator of financial performance to many of our stakeholders and income growth a key execution priority for Barclays management. Group total income increased 8% to £31.4 billion.	10 – £31,440m 09 – £29,123m 08 – £21,199m
Income by geography

Defined as total income net of insurance claims generated in distinct geographic segments. Geographic segmental analysis is based on customer location and the definition of the countries within each region are provided in the glossary.	The goal of increasing the international diversification of our income helps to reduce risk by providing exposure to different economic cycles and is demonstrated by our ratio of non-UK to UK business income.


Geographic split of income
	2010 %	2009 %	2008 %
UK & Ireland	40	45	57
European Region	15	15	19
Americas	25	22	0
Africa	15	14	17
Asia	5	4	7

	Why it’s important to the business and management
b	~~Adjusted~~
Gross new lending to UK households and businesses

Defined as lending to UK households and those businesses with UK-based activities.		We have remained ‘open for business’ during the economic downturn, and are focused on lending responsibly to our customers and clients around the world. In 2009, we committed to make an additional £11 billion of credit available to the UK economy, and by the end of 2009, we had lent an additional £35 billion to UK households and businesses. Supporting customers in difficulty has never been more critical, but providing access to credit must be based on the ability to repay. We increased our lending across the UK to £43 billion in 2010, including £7.5 billion arising from the acquisition of Standard Life Bank. We see this as an important performance metric and have formally measured UK gross lending since 2009.	10 – £43bn 09 – £35bn 08 – n/a
Global investment in our communities

Defined as Barclays total contribution to supporting the communities where we operate.		The success and competitiveness of a business and the extent to which it contributes to and is integrated in the communities in which it operates are closely related. We are committed to maintaining investment in our communities for the ~~scope~~long-term both in good times and in bad. This performance metric demonstrates the consistency of ~~regulatory consolidation.~~our commitment over time.	10 – £55.3m 09 – £54.9m 08 – £52.2m
Colleagues involved in volunteering, regular giving and fundraising initiatives

Defined as the total number of Barclays employees taking part in volunteering, giving or fundraising activities.		Barclays community investment programme aims to engage and support colleagues around the world to get involved with our main partnerships, as well as the local causes they care about. Harnessing their energy, time and skills delivers real benefit to local communities, to their own personal development and to their engagement with Barclays.	10 –62,000 09 –58,000 08 –57,000


	Average^a for the year ended 31st December
	2009 £m	2008 £m	2007 £m
Deposits from banks
Customers in the United Kingdom	13,702	14,003	15,321
Other European Union	48,161	38,210	33,162
United States	14,757	15,925	6,656
Africa	2,218	3,110	4,452
Rest of the World	24,350	36,599	36,626
Total deposits from banks	103,188	107,847	96,217
Customer accounts
Customers in the United Kingdom	197,363	206,020	187,249
Other European Union	38,326	30,909	23,696
United States	32,218	31,719	21,908
Africa	37,009	35,692	29,855
Rest of the World	23,655	27,653	23,032
Customer accounts	328,571	331,993	285,740


20 Citizenship KPIscontinued

Definition	Why it’s important to the business and management
Group Employee Opinion Survey (EOS) – Proud to be Barclays

Employee opinions surveys are used across the organisation to understand our employees’ views and prioritise management actions in order to meet employee needs. This KPI is a calibration of different survey scores across Barclays for a question measuring sense of pride in being associated with or working for Barclays. The average scores for each year are given.	Understanding levels of employee engagement and sense of commitment to Barclays is important as there is a strong correlation between these factors and our employees’ commitment to serving the needs of our customers and clients.	10 – 83% 09 – 81% 08 – 81%
Percentage of senior managers who are female

The number of female colleagues who are working across all Barclays businesses at the senior management level as a percentage of the total senior manager population.	Diversity is important to Barclays as we believe that only through access to the most diverse pool of talent will we recruit and retain the most talented individuals to serve our customers and clients.	10 – 24% 09 – 24% 08 – 25%

	The number of females at the senior management level has remained flat demonstrating that there is still work to be done to increase the number of women reaching and retaining roles at this level of management.


	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
2009
Acceptances and endorsements	372	3	–	–	375
Guarantees and letters of credit pledged as collateral security	6,770	4,103	1,286	3,247	15,406
Securities lending arrangements^a	27,406	–	–	–	27,406
Other contingent liabilities	7,637	853	381	716	9,587
Documentary credits and other short-term trade related transactions	722	38	2	–	762
Forward asset purchases and forward deposits placed	46	–	–	–	46
Standby facilities, credit lines and other	145,916	44,004	9,794	6,753	206,467

2008
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^a	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


	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
2009
Long-term debt	80,824	31,138	12,982	28,626	153,570
Operating lease obligations	468	808	675	2,936	4,887
Purchase obligations	1,109	940	541	1,243	3,833
Total	82,401	32,886	14,198	32,805	162,290

2008
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


	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	971	5.3	6,647	2.5	2,147	1.8	1,270	1.2	11,035	2.5
Other public bodies and US Agencies	14	3.6	148	2.4	3,279	4.1	15	4.8	3,456	4.1
Other issuers	14,727	2.7	12,983	1.4	1,075	3.0	612	3.4	29,397	2.3
Total book value	15,712	2.9	19,778	1.8	6,501	3.2	1,897	1.9	43,888	2.5


	2009/2008 Change due to increase/ (decrease) in:						2008/2007 Change due to increase/ (decrease) in:						2007/2006 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	(970	)	104		(1,074	)	379		354		25		427		402		25
– in offices outside the UK	(148	)	310		(458	)	(360	)	117		(477	)	291		(1	)	292
	(1,118	)	414		(1,532	)	19		471		(452	)	718		401		317
Loans and advances to customers:
– in offices in the UK	(4,309	)	814		(5,123	)	687		2,525		(1,838	)	1,780		1,337		443
– in offices outside the UK	(339	)	1,422		(1,761	)	2,475		2,214		261		1,802		728		1,074
	(4,648	)	2,236		(6,884	)	3,162		4,739		(1,577	)	3,582		2,065		1,517
Lease receivables:
– in offices in the UK	(107	)	(27	)	(80	)	(2	)	–		(2	)	(17	)	(26	)	9
– in offices outside the UK	(20	)	92		(112	)	61		79		(18	)	96		(30	)	126
	(127	)	65		(192	)	59		79		(20	)	79		(56	)	135
Financial investments:
– in offices in the UK	(129	)	426		(555	)	(385	)	(102	)	(283	)	103		(165	)	268
– in offices outside the UK	(212	)	171		(383	)	245		(163	)	408		(378	)	32		(410	)
	(341	)	597		(938	)	(140	)	(265	)	125		(275	)	(133	)	(142	)
Reverse repurchase agreements and cash collateral on securities borrowed:
– in offices in the UK	(6,998	)	(1,564	)	(5,434	)	(876	)	(188	)	(688	)	3,508		1,865		1,643
– in offices outside the UK	(3,785	)	532		(4,317	)	(1,004	)	855		(1,859	)	414		430		(16	)
	(10,783	)	(1,032	)	(9,751	)	(1,880	)	667		(2,547	)	3,922		2,295		1,627
Trading portfolio assets:
– in offices in the UK	(1,686	)	(477	)	(1,209	)	(978	)	(616	)	(362	)	1,760		621		1,139
– in offices outside the UK	(2,349	)	(943	)	(1,406	)	2,088		3,303		(1,215	)	881		(172	)	1,053
	(4,035	)	(1,420	)	(2,615	)	1,110		2,687		(1,577	)	2,641		449		2,192
Financial assets designated at fair value:
– in offices in the UK	(503	)	(87	)	(416	)	476		53		423		479		534		(55	)
– in offices outside the UK	(111	)	174		(285	)	(287	)	(146	)	(141	)	478		357		121
	(614	)	87		(701	)	189		(93	)	282		957		891		66
Total interest receivable:
– in offices in the UK	(14,702	)	(811	)	(13,891	)	(699	)	2,026		(2,725	)	8,040		4,568		3,472
– in offices outside the UK	(6,964	)	1,758		(8,722	)	3,218		6,259		(3,041	)	3,584		1,344		2,240
	(21,666	)	947		(22,613	)	2,519		8,285		(5,766	)	11,624		5,912		5,712


	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^a £m		Barclays Wealth £m		Head Office Functions and Other Operations £m
Net interest income	2,624		1,741		2,723		1,182		743		1,300		1,598		43		504		(507	)
Net fee and commission income	1,225		926		1,271		438		232		943		3,001		1,757		802		(418	)
Principal transactions	–		(26	)	22		123		68		123		7,021		98		20		(325	)
Net premiums from insurance contracts	198		–		44		544		–		294		5		–		–		92
Other income	6		112		2		8		2		60		–		5		7		1,186
Total income	4,053		2,753		4,062		2,295		1,045		2,720		11,625		1,903		1,333		28
Net claims and benefits incurred on insurance contracts	(68	)	–		(20	)	(572	)	–		(171	)	–		–		–		–
Total income, net of insurance claims	3,985		2,753		4,042		1,723		1,045		2,549		11,625		1,903		1,333		28
Impairment charges and other credit provisions	(936	)	(974	)	(1,798	)	(667	)	(471	)	(567	)	(2,591	)	–		(51	)	(16	)
Net income	3,049		1,779		2,244		1,056		574		1,982		9,034		1,903		1,282		12
Operating expenses	(2,440	)	(1,030	)	(1,494	)	(1,113	)	(852	)	(1,469	)	(6,592	)	(1,154	)	(1,138	)	(570	)
Share of post-tax results of associates and joint ventures	3		–		8		4		–		(4	)	22		–		–		1
Profit on disposal of subsidiaries, associates and joint ventures	–		–		3		157		24		(3	)	–		(1	)	1		7
Profit on disposal of discontinued operations	–		–		–		–		–		–		–		6,331		–		–
Gain on acquisitions	–		–		–		26		–		–		–		–		–		–
Profit before tax	612		749		761		130		(254	)	506		2,464		7,079		145		(550	)

As at 31st December 2009
Total assets	105,228		75,547		30,220		64,185		11,874		45,824		1,019,120		5,406		15,095		6,430
Total liabilities	102,934		68,108		5,543		48,049		9,836		25,769		951,192		416		41,648		66,848