“In 2016 the Committee will continue to supervise the level and deployment of risk appetite, as well as the Group’s funding and capital position, as we respond to regulatory requirements and our expectations of continued volatility in external conditions.”Attendance
Dear Fellow Shareholders
Over the past year, the Board Risk Committee reviewed management’s responses to a range of external challenges. These included a slowdown in China and other emerging markets, falling oil and commodity prices, as well as some industry trends toward more aggressive lending terms in certain core markets, including UK property and international leveraged finance. Risk appetite, as well as country, sector and individual exposures, were carefully monitored to ensure that business activity and limits appropriately reflected external risks. We were pleased to see impairment remain broadly flat on 2014 levels and within planning expectations, despite increasingly challenging conditions in some markets.
A key activity for the Committee is recommending risk appetite to the Board and monitoring performance against the agreed appetite on its behalf. The context in which we set our Medium Term Plan (MTP) and risk appetite for 2015 was based on our assessment of our key markets, including risk factors arising from the near term geopolitical, macroeconomic and market environment and the potential for further conduct and litigation charges. Matters for particular focus were the UK housing market, where new mortgage regulations, a potential rise in interest rates, the growth in the buy-to-let market and ongoing high levels of household debt were expected to have an impact; continuing economic and political uncertainty in Europe; weak economic prospects for South Africa; and the potential effects of ongoing weakness in oil prices. 2015 risk appetite and risk triggers were set to position Barclays conservatively given this environment. During 2015, significant stress in emerging markets and economies became evident, underpinned by a slowing in the Chinese economy and resultant market volatility. Consequently, Barclays took early action to reduce its risk appetite to emerging markets, particularly Africa, and also remained vigilant to the potential impacts arising from a downturn in economic growth, indebtedness generally and further weakness in capital markets.
At the end of 2014, the Committee asked for a review of the Group’s process for setting risk appetite and during 2015 approved a revised methodology that takes a scenario-based approach, with stress testing as the basis of the risk appetite framework. This revised methodology was used to set risk appetite for 2016, with the Committee also approving the stress testing themes, the severity of the proposed stress and the financial constraints.
Note
a The name of the Committee changed from the Board Financial Risk Committee in June 2015
| | | Another key area of focus during 2015 was the structural reform programme, where the Committee was asked by the Group Chairman to oversee progress of the planning process, particularly with regard to structural options, their capital and liquidity implications and the potential risks for the Group, its customers and for the financial system. Now that the programme has moved into its implementation phase, the Board will directly oversee programme execution, although the Committee will continue to exercise oversight of capital and liquidity aspects, including assessing capital on a legal entity basis. From July 2015, the Committee also assumed oversight responsibility for operational risk, agreeing to focus on the financial and capital aspects of operational risk, while the Board Audit Committee oversees the control aspects.
The role of Board Risk Committee Chairman is not confined to the Committee’s regular meetings. During 2015, I continued to have significant interaction with our regulators, meeting regularly with representatives from our UK and US regulators. I held regular meetings with the Chief Risk Officer and members of his senior management team, with Barclays Treasurer and the Chief Operating Officer. I also liaised closely with the Chairman of Board Audit Committee, particularly on those matters where the remit of the two committees might overlap, including with regard to the implementation of the Enterprise Risk Management Framework and operational risk issues.
Committee performance
The Committee’s performance during 2015 was evaluated as part of the independently facilitated annual Board effectiveness review and I am happy to report that the outcomes were positive. The Committee was regarded as effective and as taking a thorough and detailed approach to its responsibilities. The main area identified for improvement was ensuring that the papers presented to the Committee strike the right balance between providing data for information and providing insight and analysis to encourage greater debate and I will be working with the Chief Risk Officer and Barclays Treasurer to address this during 2016. You can read more about the outcomes of the Board effectiveness review on pages 33 and 34.
Looking ahead
The Committee expects its areas of focus for 2016 to be guided by the ongoing level of change faced by the Group as it implements its strategy and executes the structural reform programme, with a particular focus on capital and liquidity management across legal entities. We will also continue to monitor and react to any emerging risks arising in our key markets in the UK, US and South Africa as a consequence of any macroeconomic deterioration or disruption in financial market conditions.
Tim Breedon
Chairman, Board Risk Committee
29 February 2016
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| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 19 |
Committee composition and meetings
The Committee is comprised solely of independent non-executive Directors. Following a review by the Board during 2015 of Board Committee composition, Dambisa Moyo stepped down from the Committee with effect from 31 August 2015 and Diane Schueneman joined the Committee with effect from 1 September 2015. Details of the skills and experience of the Committee members can be found in their biographies on pages3 and 4.
The Committee met seven times in 2015, with two of the meetings held in New York. Two additional meetings were held at short notice for the sole purpose of considering and approving revised risk limits in connection with specific transactions and, with the consent of the Committee Chairman, were not attended by all Committee members. The chart on page23 shows how the Committee allocated its time during 2015. Committee meetings were attended by management, including the Group Chief Executive, Group Finance Director, Chief Internal Auditor, Chief Risk Officer, Barclays Treasurer and General Counsel, as well as representatives from the businesses. Representatives from the external auditor also attended meetings.
| | | | | Member | | | Meetings attended/eligible to attend | | Tim Breedon | | | 7/7 | | Mike Ashley | | | 7/7 | | Reuben Jeffery III* | | | 5/7 | | Dambisa Moyo (to 31 August 2015)* | | | 3/5 | | Diane Schueneman (from 1 Sept 2015) | | | 2/2 | | Steve Thieke* | | | 5/7 | |
* | with the consent of the Chairman did not attend the two meetings held at short notice to consider specific transaction limits |
Committee role and responsibilities
The Committee’s responsibilities include:
§As members of the Board of Directors we are expected to attend each Board meeting and in 2016 we attended both scheduled and additional Board meetings, as disclosed in the table below. The Chairman met privately with thenon-executive Directors ahead of each scheduled Board meeting, and if, owing to exceptional circumstances, a Director was not able to attend a Board meeting they ensured that their views were made known to the Chairman in advance of the meeting. | | recommending to the Board the total level of financial and operational risk the Group is prepared to take (risk appetite) to create long-term shareholder value | |
§ | | monitoring financial and operational risk appetite, including setting limits for individual types of risk, e.g., credit, market and funding risk |
§ | | monitoring the Group’s financial and operational risk profile |
§ | | ensuring that financial and operational risk is taken into account during the due diligence phase of any strategic transaction and |
§ | | providing input from a financial and operational risk perspective into the deliberations of the Board Remuneration Committee. |
| | | | | The Committee’s terms of reference are available at
home.barclays/corporategovernance
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The Committee’s work
The significant matters addressed by the Committee during 2015 are described below:
| | | | | | | Area of focus | | Matter addressed | | Role of the Committee | | Conclusion/action taken | | | | | Risk appetite, i.e. the level of risk the Group chooses to take in pursuit of its business objectives. | | The methodology for calculating the level of risk appetite. | | § Requested a review of the Group’s risk appetite process and methodology and debated proposals from management to move to a scenario-based stress testing approach.
§ Evaluated the proposed MTP stress test, agreeing on a scenario involving a global recession from an economic slowdown in China.
§ Debated the severity of the scenario and how it would apply across the Group’s main markets of the UK, US and South Africa and how it aligned to regulatory stress tests.
| | The Committee challenged the parameters proposed by management and asked for a parameter to be linked to PBT. It also asked for early consideration to be given to the impact of IFRS 9 on the Group’s risk appetite and stress testing assumptions. This work is under way and will be reported to the Committee in the first half of 2016. Given the change in methodology, the Committee requested early sight of the design and outputs as the new risk appetite process was implemented, resulting in a workshop being held in December 2015. All non-executive Directors were invited to attend the workshop.
| | | | | Stress testing, i.e. testing whether the Group’s financial position and risk profile provide sufficient resilience to withstand the impact of severe economic stress.
| | The Group’s stress testing exercises, including scenario selection and constraints, the results and implications of stress tests, including stress tests run by the Bank of England (BoE), and regulatory feedback on the methodology and results. | | § Debated proposals from management to move to a scenario-based risk appetite setting approach and approved a change to the Group’s methodology.
§ Assessed the progress of the BoE stress test and evaluated the preliminary results, including discussing any potential areas of sensitivity.
| | The Committee approved the stress test results for submission to the BoE. It subsequently evaluated the BoE stress testing results and feedback from the BoE on the stress test. |
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Governance: Directors’ report
What we did in 2015
Board Risk Committee report
| | | | | | | Area of focus | | Matter addressed | | Role of the Committee | | Conclusion/action taken | | | | | Structural reform, i.e. the progress of structural reform, including the challenges to execution. | | The impact of structural reform on the Group’s principal risks, including the impact on capital and liquidity for individual Group legal entities and the potential overall impact on the safety and soundness of the UK financial system. | | § Debated structural reform and the impact on the capital and liquidity flight paths for individual legal entities, in particular, the prospective credit rating of Barclays Bank PLC in the structural reform structure.
§ Evaluated the respective impacts on capital, liquidity and on the general safeness and soundness of the Group of different ring fence bank (RFB) structures.
| | The Committee recognised the design and implementation challenges of the programme and supported management in proposing structures and perimeters that best ensured the safety and soundness of all elements of the Group. It requested a workshop on structural reform to provide the Committee with an in-depth view of the key challenges. The workshop was held in December 2015 and all non-executive Directors were invited to attend.
| | | | | Liquidity and funding, i.e. having sufficient financial resources available to enable the Group to meet its obligations as they fall due. | | Compliance with regulatory requirements and internal liquidity risk appetite (LRA). | | § Assessed on a regular basis liquidity performance against requirements.
§ Debated the credit ratings of Barclays PLC and Barclays Bank PLC and potential market reaction to a ratings downgrade following removal of sovereign support notching.
§ Questioned the cost of additional liquidity and asked for options to reduce the cost to be considered.
| | The Committee ensured that management had in place options to manage any impact on liquidity of a ratings downgrade. It agreed that the cost of maintaining surplus liquidity was appropriate. | | | | | Capital and leverage,
i.e., having sufficient capital resources to meet the Group’s regulatory requirements, maintain its credit rating and support growth and strategic options.
| | The flight path to achieving required regulatory and internal targets and capital and leverage ratios. | | § Debated on a regular basis, capital performance against plan, tracking the capital flight path, any challenges/headwinds and regulatory developments.
§ Evaluated options to maximise capital and capital ratios in order to meet regulatory and market expectations.
| | The Committee supported the forecast trajectory and the actions identified by management to manage the Group’s capital position. | | | | | Country risk, i.e. the levels of risk the Group is prepared to take in specific countries. | | The potential impact on the Group’s risk profile of political instability and economic weakness in South Africa, one of its main markets. | | § Debated economic conditions in South Africa and the future outlook.
§ Examined the actions already taken to manage risks, improve controls and asset quality and develop triggers for additional action in the event of further macro deterioration.
§ Monitored the impact on South Africa of the slowdown in China and the fall in commodity prices.
| | The Committee sought additional information around the actions that had been taken to manage the risk profile in South Africa, including the impact of the actions taken to date. It requested a deep dive on the risk profile of the South African business, inviting the South African business heads to present on the actions that had been taken and how the business was positioned for a further economic downturn, including the impact of a further country rating downgrade.
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| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 21 |
| | | | | | | Area of focus | | Matter addressed | | Role of the Committee | | Conclusion/action taken | | | | | Political and economic risk, i.e. the impact on the Group’s risk profile of political and economic developments and macroeconomic conditions. | | The potential impact on the Group’s risk profile of political developments, such as the UK general election and budget statement, the potential exit of countries from the Eurozone, and weakening macroeconomic conditions, such as disruption and volatility in financial markets. | | § Assessed the potential impact of the UK general election and steps that could be taken to manage any market volatility.
§ Evaluated the potential risks arising from a general macroeconomic slowdown and from financial markets disruption, including the global impact of the economic slowdown in China.
§ Assessed global consumer indebtedness indicators and the potential impact of rising consumer debt on the Group’s risk profile.
§ Debated the Group’s Eurozone exposures in the context of the potential break-up of the Eurozone in the event of a Greek exit and assessed the Group’s levels of redenomination risk in the Eurozone.
| | The Committee asked management to evaluate macroeconomic conditions and market indicators to inform the strategic plan and risk appetite proposals for 2016, so that the Group is positioned appropriately. | | | | | Retail credit risk,
i.e. UK property market, interest rate risk.
| | The potential overheating of the UK housing market, particularly in London and the South East and the Group’s risk appetite for and management of sectors such as the buy-to-let sector. | | § Debated UK property market indicators and conditions, particularly in the high loan to value (LTV) andthe buy-to-let markets and potential economic and political risks to that market.
§ Evaluated the Group’s lending criteria and its approach to assessing customers on affordability.
§ Assessed the potential impact of an increase in interest rates on customers, including how customers had been stress tested and assessed against affordability criteria.
| | The Committee encouraged management to continue to take a conservative approach to UK mortgage lending in the buy-to-let market and emphasised the need to keep risks and exposures within agreed appetite. | | | | | Specific sector risk,
i.e. the Group’s risk profile in sectors showing signs of stress, such as the oil sector.
| | The Group’s exposures to the oil and commodities sectors in light of the price weakness and volatility in these sectors during 2015. | | § Regularly assessed the Group’s exposures to the oil sector, including assessing steps taken with regard to the credit strategy for the sector, how the portfolio was performing and whether this was in line with expectations.
§ Evaluated the Group’s exposures to the commodities sector and actions taken to identify any names at risk and reduce exposures.
| | The Committee supported the actions that had been taken by management to manage the Group’s risks and exposures to the oil and commodities sectors. It requested a stress test to assess the impact of further (and longer) oil price weakness on the Group’s lending portfolio, including indirect exposure. | | | | | Operational Risk
From 1 July 2015, the Committee took responsibility for oversight of the capital and financial aspects of operational risk.
| | The Group’s operational risk capital requirements and any material changes to the Group’s operational risk profile and performance versus risk appetite. | | § Evaluated operational risk capital and debated the potential for an increase in regulatory operational capital requirements.
§ Debated whether Barclays advanced status for calculating operational risk capital should be retained.
§ Tracked operational risk key indicators via regular reports from the Head of Operational Risk.
| | The Committee focused its oversight of operational risk on the financial and capital implications, debating in particular the potential impact of regulatory operational risk requirements. |
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Governance: Directors’ report
What we did in 2015
Board Risk Committee report
| | | | | | | | | | | | | | | | | | Area of focus | | Matter addressed | | Role of the Committee | | Conclusion/action taken | | | | | | | | Risk governance,
i.e. the capability, governance and controls that the Group has over the management of risk.
| | The development of a scorecard to assist the Committee in assessing risk capability across the Group; further enhancement to the limit framework and governance of leveraged finance; the actions being taken to enhance controls and governance around risk models. | | § Requested development of a risk capability scorecard.
§ Regularly debated conditions in the leveraged finance market, tracking market indicators and the Group’s risk exposures and assessing the limit framework for leveraged finance and underwriting, including proposed changes to the framework to strengthen controls.
§ Assessed the progress of enhancements to risk models controls and governance, including the role of the Group’s Independent Validation Unit.
§ Evaluated revisions proposed to the ERMF.
| | The Committee approved the approach to the risk capability scorecard and requested a formal annual assessment of capability, with the option of an external assessment every three years. The Committee approved a revised limit framework for leveraged finance transactions and approved underwriting limits in general. The Committee concluded that good progress had been made on enhancing the controls and governance around risk models and asked management to focus on improving the quality of models and data quality further. The Committee also recommended the revised ERMF to the Board for approval.
| | | | | | | | Remuneration | | The scope of any risk adjustments to be taken into account by the Board Remuneration Committee when making remuneration decisions for 2015. | | § Evaluated the Risk function’s view of performance, which informed remuneration decisions for 2015.
| | The Committee supported the Risk function’s view of 2015 risk performance and endorsed the report that had been submitted to the Board Remuneration Committee.
The Remuneration Report on pages50 to 83 includes more detail on how risk is taken into account in remuneration decisions.
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| | | | | | | | | | | | | | | | | | | | | In addition, the Committee also covered the following matters in 2015: § regularly tracked the utilisation of risk appetite and evaluated the Group’s risk profile § evaluated the impact of the Swiss franc revaluation on the Group’s electronic trading systems and asked for any lessons learned to be applied to other electronic platforms § debated risk related matters arising from regulatory assessments and the actions needed to address any specific issues raised § approved regulatory submissions, including the Individual Capital Adequacy Assessment Process and the Individual Liquidity Adequacy Assessment § assessed and debated a report on its own performance during 2014, including considering whether its remit should be revised to cover operational risk and assessing the degree of challenge and support and value it provided to the Risk function § discussed and agreed on its own training needs, resulting in two workshops being held in 2015, one on risk appetite and one on structural reform, with a further briefing session on the impact of IFRS 9 planned for 2016 § approved amendments to its terms of reference to reflect its revised remit and to ensure they remained in line with best practice and § discussed and agreed its specific responsibilities for the oversight of operational risk, focusing on the capital and financial impacts, leaving the Board Audit Committee to oversee operational risk control issues. | | | | Board Risk Committee allocation of time (%) | | | | | | | | | | | | | | 2015 | | 2014 | | | | | | | | 1 | | Risk profile/risk appetite | | 43 | | 57 | | | | | | | (including capital and liquidity management) | | | | | | | | | 2 | | Key risk issues | | 31 | | 19 | | | | | 3 | | Internal control/risk policies | | 11 | | 11 | | | | | 4 | | Other (including remuneration and | | 15 | | 13 | | | | | | | governance issues) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Read more about Barclays’ risk management on pages 95 to | | | | | | 109 and 336 to 409 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 23 |
What we did in 2015
Board Reputation Committee reporta
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‘The Committee’s responsibilities were reshaped during 2015 to focus on three main pillars: conduct and compliance; reputation; and citizenship.’
Dear Fellow Shareholders
The Board Reputation Committee underwent a period of change during 2015, in terms of both a reassessment of Board Committee responsibilities and membership. John McFarlane succeeded Reuben Jeffery III as Chairman of the Committee in March 2015 and, following John’s appointment as Executive Chairman in July 2015, the Board asked me to assume the role of Committee Chairman, a position I held until my retirement from the Board at the end of December 2015.
The Committee’s responsibilities were reshaped during 2015 to focus on three main pillars: conduct and compliance; reputation; and citizenship. Culture and conduct are the bedrock of the organisation and, with the right culture, much of Barclays’ exposure to conduct risk can be reduced. To this end, the Committee has continued to focus on these issues, assessing progress against plans for embedding our conduct risk programme and implementing cultural change throughout the Group. We assessed deep-dive reports into conduct risk within key businesses, such as Barclays Africa and the Cards business, and evaluated the findings of a report by Air Marshal Sir David Walker, commissioned by management to give an independent view on whether we are making progress with cultural change. I am pleased to report that, although there is more to be done, progress on both has been good and there is strong commitment throughout the Group to embedding the necessary changes.
The Committee also tracked the exposure of Barclays, and the financial sector generally, to reputational risks. Reputational risk is a risk type that is constantly evolving, with potential new risks emerging while we are implementing controls to manage identified risks. Consequently, we have taken a thematic approach to identifying our key reputational risks and have ensured that we look ahead to identify emerging risks enabling us to mitigate them early. You can read more on pages25 and 26 about the significant matters addressed during the year.
| | | | Committee performance
As part of the annual Board effectiveness review the performance of the Board’s committees was considered and I am pleased to report that the Committee is considered to be effective. The Committee is relatively new and areas for improvement included continuing to refine its agenda, particularly with regard to compliance and conduct risk, and ensuring that it does not duplicate the work of other Board Committees. Please turn to the report of the Board effectiveness review on pages 33 and 34 for more details.
Looking ahead
My successor, Sir Gerry Grimstone, will be assessing the areas of focus for the Committee in 2016 and I wish him and the Committee well for the future.
Sir Michael Rake
Chairman, Board Reputation Committee until 31 December 2015
Committee composition and meetings
The Committee comprises independent non-executive Directors, with the exception of Wendy Lucas-Bull, who the Board has decided to deem as non-independent for the purposes of the UK Corporate Governance Code, owing to her position as Chairman of Barclays Africa Group Limited. During 2015, there were a number of changes to the membership of the Committee, which are set out in the table below.
The Committee met four times during 2015 and the chart on page26 shows how it allocated its time. Committee meetings were attended by management, including the Group Chief Executive, Chief Internal Auditor, Chief Risk Officer, General Counsel, Group Corporate Relations Director and the Heads of Compliance, Conduct Risk and Operational Risk, as well as representatives from the businesses and other functions.
| | | Member | | Meetings attended/eligible to attend | | | Reuben Jeffery III (Chairman and member to
31 March 2015) | | 1/1 | | | John McFarlane (Chairman from 1 April 2015 –
16 July 2015) | | 2/2 | | | Sir Michael Rake (Chairman and member from
17 July 2015 – 31 December 2015) | | 2/2 | | | Mike Ashley (to 31 August 2015) | | 2/2 | | | Tim Breedon (to 31 August 2015) | | 2/2 | | | Wendy Lucas-Bull | | 4/4 | | | Dambisa Moyo | | 4/4 | | | Diane de Saint Victor | | 4/4 | | | Sir John Sunderland (to 23 April 2015) | | 1/1 | | | Frits van Paasschen (from 1 September 2015) | | 2/2 | | | | Committee role and responsibilities
The principal purpose of the Committee is to:
§ ensure, on behalf of the Board, the efficiency of the processes for identification and management of conduct and reputational risk and
§ oversee Barclays’ Citizenship Strategy, including the management of Barclays’ economic, social and environmental contribution.
Until the end of June 2015, the Committee also had responsibility for oversight of operational risk. Following a review by the Board of its governance arrangements, responsibility for the oversight of the capital and financial aspects of operational risk was reallocated to the Board Financial Risk Committee, which was renamed the Board Risk Committee. The Board Audit Committee oversees the control aspects of operational risk.
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| | | | | | | | | | | The Committee’s terms of reference are available at
home.barclays
| Note
a Formerly called the Board Conduct, Operational and Reputational Risk Committee
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Governance: Directors’ report
What we did in 2015
Board Reputation Committee report
The Committee’s work
The significant matters addressed by the Committee during 2015 are described below:
| | | | | | | Area of focus | | Matter addressed | | Role of the Committee | | Conclusion/action taken | | | | | Conduct risk | | Progress on embedding the conduct risk management framework, focus on specific conduct risks and continued reduction of customer complaint levels. | | § Continued its monitoring of the conduct risk programme via quarterly reports from management.
§ Specifically assessed the status of the conduct risk programmes in Barclays Africa and across the Cards business.
§ Monitored regulators’ views of Barclays’ conduct risk management and reporting via updates from management.
§ Assessed progress made in reducing numbers of complaints, including those escalated to the Financial Ombudsman Service.
| | The Committee welcomed the progress made in embedding the conduct risk programme and requested more visibility of the status of specific conduct risks. It encouraged management to continue to apply lessons learned from past events to prevent similar events occurring now or in the future. It was content with the progress made in embedding conduct risk in Barclays Africa, but encouraged greater simplification of the governance structures and communication. It also encouraged management to do more to reduce the number of complaints. | | | | | Operational risk
(to July 2015)
| | The management of Barclays’ operational risk profile and exposure to significant operational risks. | | § Monitored Barclays’ operational risk profile via quarterly reports from management.
§ Evaluated management’s strategy for addressing cyber risk and monitored its progress.
§ Assessed Barclays’ exposure to technology risk and examined plans to resolve identified control issues by the end of the year.
| | The Committee focused its attention on emerging risks and those to which the Group’s exposure was increasing. It supported tactical and strategic actions proposed by management to mitigate the Group’s risks, including endorsing management’s strategy for addressing cyber risk. The Committee also satisfied itself that progress in managing technology risk was good and there was a healthy focus on embedding the right culture.
| | | | | Reputational issues | | Ensuring that Barclays anticipates, identifies and manages reputational issues that may impact it or the industry now or in the future. | | § Tracked Barclays’ exposure to reputational risks via twice-yearly management reports.
§ Examined the effectiveness of the current reputation risk framework, including assessing case studies on specific reputational matters.
| | The Committee took a thematic approach to its assessment of reputational risks and guided management in its approach to managing them. It satisfied itself as to the effectiveness of the reputation risk framework. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 25 |
| | | | | | | | | | | | | | | | | | Area of focus | | Matter addressed | | Role of the Committee | | Conclusion/action taken | | | | | | | | Cultural change | | The progress being made on embedding of cultural change. | | § Evaluated the outputs of an independent review by Air Marshal Sir David Walker.
§ Assessed an industry-wide report by the Group of Thirty (G30) into banking conduct and culture and how Barclays’ practices benchmarked against the best practices and suggestions outlined in that report.
| | The Committee endorsed Air Marshal Sir David Walker’s report, which confirmed its view that progress had been good but that there was more to do to achieve the cultural change required. It encouraged management to continue to prioritise progress on cultural change. The Committee also concluded that many of the actions Barclays had taken in response to the Salz Review recommendations had aligned its practices with those proposed in the G30 report.
| | | | | | | | Citizenship | | The delivery of the 2015 Citizenship Plan and development of a Shared Growth Plan for 2016-2018. | | § Tracked progress against the current 2015 Citizenship plan via six-monthly reports from management.
§ With the current Citizenship Plan coming to completion, evaluated the proposed Shared Growth Plan for 2016-2018.
| | The Committee noted that all targets in the 2015 Citizenship Plan had been met or exceeded, with the exception of our new and renewed household lending target, which had not been possible to achieve owing to market and trading conditions. It endorsed the 2016-2018 Shared Growth Plan, particularly the proposal to link the plan to Barclays’ core purpose and values and to focus on employability skills.
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| | | | | | | | | | | | | | | | | | | | | | | | | The Committee also covered the following matters: § assessed progress of the programme to implement enhanced controls in the Investment Bank over conflicts of interest between Barclays and third parties § evaluated outcomes of regulatory thematic reviews of conduct issues and controls § evaluated the levels of attestation by colleagues globally to The Barclays Way, the Group’s code of conduct § assessed the status of specific remediation programmes being implemented by the business | | | | Board Reputation Committee allocation of time (%) | | | | | | | | | | | | | | | 2015 | | | | 2014 | | | | | | | | | 1 | | | Citizenship | | | 6 | | | | 2 | | | | | | | | 2 | | | Reputational issues | | | 13 | | | | 7 | | | | | | | | 3 | | | Culture, conduct and compliance | | | 57 | | | | 52 | | | | | | | | 4 | | | Operational risk | | | 19 | | | | 33 | | | | | | | | 5 | | | Other | | | 6 | | | | 6 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | § provided input to the Board Remuneration Committee on conduct and reputation issues to be taken into consideration for 2015 remuneration decisions
§ tracked progress against the Compliance function’s business plan, including updates on resourcing and attrition levels
§ monitored progress of Barclays’ plans for compliance with the Volcker Rule (restrictions on proprietary trading and certain fund investments by banks operating in the US)
§ assessed and discussed a report on the Committee’s performance during 2014
§ approved revisions to its terms of reference and recommended them to the Board for approval and
§ considered and approved Group Compliance Policies.
| | | | | | Read more about Barclays’ risk management on
pages 95 to 109 and 336 to 409
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| | | 26 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Directors’ report
What we did in 2015
Board Nominations Committee reporta
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“The importance of people as a driving force in sustaining a business over the long term.”
Dear Fellow Shareholders
I have often stressed the importance of people as a driving force in sustaining a business over the long term through their expertise, innovation and commitment. This is equally true of your Board, where it is crucially important that we have strong leaders able to make tough, strategic decisions while energising colleagues and galvanising them into action. It is with this in mind that the Committee approached appointments.
During 2015 we announced the appointment of two new non-executive Directors and a new Group Chief Executive. Board Committee membership was refreshed and we also took the opportunity to review the composition and roles of the Board Committees. In addition, we considered the requirements for independent non-executive directors for the boards of our strategically significant subsidiaries, including those that will be formed as the Group implements structural reform. We continued to foster executive succession by supporting new initiatives and by directly engaging with senior executives, for example, by mentoring individual senior executives, in order to nurture high potential individuals and help build a stronger succession pipeline.
The Committee was pleased that the Board achieved its target of having 25% female representation on the Board by the end of 2015. The target has subsequently been increased to 33% by 2020. While we also achieved our aspiration to reach 23% female representation within our senior leadership population by the end of 2015, we recognise that we need to sustain our focus to attract more senior women to Barclays, and to enable women to grow their careers with us. That will ensure we reach our 2018 goal of 26% women in senior leadership roles. We remain committed to maintaining the momentum of our gender diversity programme.
Committee performance
As part of the annual Board effectiveness review, a separate exercise was conducted to assess the Committee’s performance. The assessment found that the Committee is performing effectively. Please see the report on the Board effectiveness review on pages 33 and34 for more details. I would like to thank my fellow Committee members for their hard work and support during 2015, particularly Sir Michael Rake, who chaired the Committee during the period that I was Executive Chairman, and led the search for a new Group Chief Executive.
| | | | Looking ahead
We are preparing to implement a new structure in 2016 which will enable us to prepare for structural reform, simplify the organisation and speed up execution of the individual business strategies. These changes give us the opportunity to make sure that we have the right people in senior roles and that we also take action to build strength in each of the business executive teams for the longer term.
John McFarlane
Chairman, Board Nominations Committee
29 February 2016
Committee composition and meetings
The Committee is composed solely of independent non-executive Directors. John McFarlane, as Chairman of the Board, is also Chairman of the Committee. Mike Ashley, Tim Breedon, Crawford Gillies, being the Chairmen of each of the other Board Committees, Reuben Jeffery III and Sir Gerry Grimstone, the Deputy Chairman and Senior Independent Director, are also members of the Committee. Details of the skills and experience of the Committee members can be found in their biographies on pages3 and 4.
During 2015, there were eight meetings of the Committee, including four additional meetings on Group Chief Executive succession. Attendance by members at Committee meetings is shown below. The chart on page30 shows how the Committee allocated its time during 2015.
Committee meetings were attended by the Group Chief Executive or Executive Chairman, with the HR Director, the Global Head of Leadership, Learning & Talent, the Global Head of Diversity and Inclusion and representatives from Spencer Stuart presenting on specific items.
| | | Member | | Meetings attended/eligible to attend | | | Sir David Walker (Chairman until 23 April 2015) | | 2/2 | | | John McFarlane* (Chairman from 24 April 2015 –
16 July 2015 and from 1 December 2015)* | | 4/4 | | | Sir Michael Rake (Chairman from 17 July 2015 to
1 December 2015) | | 8/8 | | | Mike Ashley | | 8/8 | | | Tim Breedon† | | 7/8 | | | Crawford Gillies (from 24 April 2015) | | 7/7 | | | Reuben Jeffery III† | | 6/7 | | | Sir John Sunderland (until 23 April 2015) | | 2/2 | | | * John McFarlane stood down as a member of the Committee during the period 17 July – 30 November 2015, when he was Executive Chairman. No Director with executive responsibilities may be a member of the Committee
† did not attend one meeting owing to prior business commitments
Note
The Chairman and the Group Chief Executive excuse themselves from meetings when the Committee focuses on the matter of succession to their roles.
Committee role and responsibilities
The principal purpose of the Committee is to:
§ support and advise the Board in ensuring that the composition of the Board and its Committees is appropriate and enables them to function effectively
§ examine the skills, experience and diversity on the Board and plan succession for key Board appointments, planning ahead to deal with upcoming retirements and to fill any expected skills gaps
§ provide oversight, at Board level, of the Group’s talent management programme and diversity and inclusion initiatives
§ agree the annual Board effectiveness review process and monitor the progress of any actions arising, and
§ keep the Board’s governance arrangements under review and make appropriate recommendations to the Board to ensure that they are consistent with best practice corporate governance standards.
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| | | | | | | | | You can find the Committee’s terms of reference at
home.barclays/corporategovernance
| Note
a The name of the Committee changed from the Board Corporate Governance and Nominations Committee in June 2015
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| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 27 |
The Committee’s work
The significant matters addressed by the Committee during 2015 are described below:
| | | | | | | Area of focus | | Matter addressed | | Role of the Committee | | Conclusion/action taken | | | | | Board appointments | | The refreshment of Board and Board Committee membership to secure individuals with the desired skills and experience needed on the Board in light of future strategic direction. | | § Conducted a search for successors to Sir Michael Rake and Antony Jenkins.
§ Evaluated a gap analysis of the skills and experience on the Board and identified the requirement for new non-executive Directors with financial services experience, and the preference to appoint more UK-based Directors given the time commitments associated with Board Committee appointments.
| | The Committee recommended the appointments of Sir Gerry Grimstone as Deputy Chairman and Senior Independent Director, Jes Staley as Group Chief Executive and Diane Schueneman as a non-executive Director.
Please refer to pages 30 and 32 for details of the Board’s approach to recruitment of new Directors and the case study of the recruitment of Jes Staley in particular.
| | | | | Board and Board Committee structure, size and composition | | The restructure of the Board and Board Committees to allow the Board to focus on the Group’s commercial and strategic performance. The optimum size of the Board, the potential impact of structural reform and the need to constitute subsidiary boards. | | § Reassessed the structure, size and composition of the Board and Board Committees, as well as the current roles and responsibilities of the Board Committees, and recommended a number of changes to the Board.
§ Requested a working plan for Board succession over the next three years.
| | The Committee agreed that the size of the Board should be reduced over time and more matters should be delegated to the principal Board Committees. The Committee agreed that non-executive Directors should normally not serve on more than two Board Committees, to avoid being over-stretched, and to reduce the Committees in size over time to a maximum of four members, while taking care to ensure appropriate cross-membership. The Committee recommended revised Board-level responsibilities for oversight of risk, including the Board re-taking overall responsibility for enterprise-wide risk, disbanding the Board Enterprise Wide Risk Committee and reallocating responsibility for oversight of the capital and financial aspects of operational risk to the Board Risk Committee.
| | | | | Succession planning and talent management | | The management of Board succession and oversight of the leadership needs of the Group to enable it to meet its strategic aims and its changing make-up resulting from the effects of structural reform. | | § Examined regular reports on succession plans and talent management of the leadership of the Group to address succession planning in the short-term and internal talent development.
§ Debated options for Directors to engage with members of the Group Executive Committee and senior management to help in nurturing high potential individuals and to support building a stronger succession pipeline.
| | The Committee agreed a proposal for Committee members to partner high potential senior management. The Committee endorsed the Group’s rapid development programme for high potential talent and agreed to support the programme by providing an insight into the role of the Board and its priorities. The Committee also endorsed the introduction of an improved talent assessment process and assessed the efficacy of the Group’s external talent acquisition process. The Committee examined the results of internal and external benchmarking exercises, including external benchmarking of senior management roles against similar roles in equivalent companies as part of the work on Group Executive Committee succession.
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| | | 28 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Directors’ report
What we did in 2015
Board Nominations Committee report
| | | | | | | Area of focus | | Matter addressed | | Role of the Committee | | Conclusion/action taken | | | | | Board effectiveness | | The 2015 Board effectiveness review of the Board and its Committees. The progress made against the actions identified in the 2014 Board effectiveness review. | | § Considered the effectiveness of the 2014 Board effectiveness review process and agreed the approach to be taken to the 2015 Board effectiveness review.
§ Regularly examined progress of the action plan arising from the outcomes of the 2014 Board effectiveness review.
| | The Committee set the criteria for conduct of the 2015 Board effectiveness review, including the appointment of a new external facilitator, Independent Board Evaluation, and agreed an action plan to address the matters arising from the 2014 Board effectiveness review.
See pages 33 and 34 for a full description of the process and outputs from the 2014 and 2015 effectiveness reviews.
| | | | | Governance implications of structural reform | | The establishment of governance principles for the Group under structural reform. | | § Scrutinised proposed governance guiding principles for the Group post-structural reform, which set out ultimate decision-making powers, while respecting the rights and responsibilities of the boards of the strategically significant subsidiaries: the ring-fence bank (RFB), Barclays Bank PLC, the US Intermediate Holding Company (IHC) and Barclays Africa Group (BAGL).
§ Discussed the potential composition of the RFB and Barclays Bank PLC boards in light of regulatory requirements.
| | The Committee endorsed and supported the governance guiding principles. The Committee provided views on the outline board and committee composition of the RFB and Barclays Bank PLC for the Board’s consideration. | | | | | Significant subsidiary board composition | | The composition of Barclays’ US IHC board and associated committees. | | § Determined the required structure and composition of the IHC board.
§ Endorsed the implementation of measures to allow potential future IHC board candidates the opportunity to build their knowledge of Barclays US businesses ahead of the formal creation of the IHC board in 2016.
| | The Committee agreed the proposed composition of the IHC board, including the appointments of Steve Thieke as chairman and Diane Schueneman as a non-executive director. It oversaw the establishment of a US Governance Review Board to allow proposed IHC board members to familiarise themselves with Barclays’ US businesses.
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| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 29 |
In addition the Committee covered the following matters:
§ | | the review of non-executive Directors’ performance, independence and time commitment as part of the Committee’s assessment of their eligibility for re-election |
§ | | consideration of a new target for Board diversity beyond the end of 2015 in the Company’s Board Diversity Policy and recommended it to the Board for approval |
§ | | updating of the Charter of Expectations and Corporate Governance in Barclays |
§ | | proposals for the 2015 Corporate Governance Report |
§ | | its annual review of the Directors’ register of interests and authorisations granted and |
§ | | changes to the Committee’s terms of reference. |
Board Nominations Committee allocation of time (%)
| | | | | | | | | | | | | | | | | | | | | | | | 2015 | | | | 2014 | | | | | 1 | | | Corporate governance matters | | | 17 | | | | 21 | | | | 2 | | | Board and Committee composition | | | 24 | | | | 20 | | | | 3 | | | Succession planning and talent (includging CEO succession) | | | 47 | | | | 43 | | | | 4 | | | Board effectiveness | | | 6 | | | | 11 | | | | 5 | | | Other | | | 6 | | | | 5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Appointment and re-election of Directors
The Committee reviews Board and Board Committee composition, including potential new non-executive Directors, at each of its meetings. In addition to seeking successors for known retirements from the Board, the Committee monitors the skills and experience the Group needs to be able to deliver its strategic aims, to govern the Group appropriately, to ensure that risks threatening performance are identified and either addressed or mitigated, and to set ‘the tone from the top’ in terms of Barclays’ corporate culture and values. In 2015, the Committee also focused on the need to identify non-executive directors to serve on the boards of the Group’s strategically significant subsidiaries.
When considering a new appointment to the Board, the Committee relies on assessments of the current and expected Board and Board Committee composition, in order to assess the timeline for appointments, and a skills matrix that identifies the core competencies, skills, experience and diversity required for the Board to function effectively, with target weightings for each attribute. These assessments are regularly updated to take account of the Group’s needs over time.
The approach to recruiting new non-executive Directors is to create an individual specification with reference to the role requirements, including time commitment, the key competencies and behaviours set out in our Charter of Expectations and the desired key skills and experience identified from the skills matrix. The curriculum vitae and references of
potential candidates are assessed by the Committee as a whole, before shortlisted candidates are interviewed by members of the Committee. For certain Board positions, the Committee seeks engagement with key shareholders and Barclays’ regulators as part of the selection process. Feedback from these parties is taken into account before any recommendation is made to the Board, which is kept informed of progress throughout the selection and recruitment process. An illustration of the rigorous process applied to appointments can be found in the case study and timeline of the process to identify Jes Staley as Group Chief Executive, which is set out on page 32.
Executive search firms MWM Consulting, Egon Zehnder International and Spencer Stuart were instructed to assist with our Director searches in 2015. None of these firms has any other connection with Barclays, other than to provide executive recruitment services. Open advertising for Board positions was not used during 2015, as the Committee believes that targeted recruitment is the optimal way of recruiting for Board positions.
Barclays announced the appointment of two new non-executive Directors during 2015: Diane Schueneman and Sir Gerry Grimstone. In addition, Barclays announced the appointment of Jes Staley as Group Chief Executive. Each of them brings valued skills and experience which contribute to the efficacy of the Board as a whole. As previously reported, Diane Schueneman brings expertise in operations and technology to the Board, which she gained in financial services organisations, as well as wide-ranging experience of implementing change and achieving turnaround in business success and profitability. Sir Gerry Grimstone, who succeeded Sir Michael Rake as Deputy Chairman and Senior Independent Director, is well known, commands great respect within the financial services industry and brings immense experience, integrity and knowledge to his roles at Barclays. Jes Staley has the leadership skills and wide-ranging experience to deliver shareholder value and to take the Group forward strategically and, in particular, possesses a good understanding of corporate and investment banking. Biographical information is provided on pages 3 and 4, with further details available online at home.barclays
Changes in the composition of the Board and the Committee’s reassessment of the structure, size and composition of the Board and its Committees resulted in a refresh of the membership of Board Committees, as well as their roles and responsibilities, during 2015. Details of the changes are included in each of the Board Committee reports.
The Directors in office at the end of 2015 were subject to an effectiveness review, as described below. Based on the results of the review, the Board accepted the view of the Committee that each Director proposed for re-election continued to be effective and that they had each demonstrated the level of commitment required in connection with their role on the Board and the needs of the business.
| | | 30 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Directors’ report
What we did in 2015
Board Nominations Committee report
Diversity statement
The Financial Reporting Council maintains that one of the ways in which constructive board debate can be encouraged is through having sufficient diversity on the board. Barclays agrees with this view and, when it adopted a Board Diversity Policy in 2012, stated the Board’s aspirational goal of achieving 25% female representation on the Board by 2015. Female representation on the Board exceeded 25% at the end of 2015, having increased during the year with the appointment of Diane Schueneman. Noting that the latest progress report onWomen on Boards from the Davies Review has suggested a target of 33% by 2020, Barclays has adopted this new target in its Board Diversity Policy.
The Committee assisted the Board in achieving its target of 25% by ensuring that this was recorded on the Board skills matrix and, in particular, that the search firms were aware of the priority. The Committee also supported a number of initiatives to grow the talent pipeline within the Group and sought opportunities to engage with female members of senior management. Diversity as a whole, including gender, was also taken into account when evaluating the effectiveness of the Board. The comprehensive brief provided to Independent Board Evaluation for this year’s review included an evaluation of boardroom dynamics and the effects of diversity. The consultant accordingly assessed the impact of diversity including gender, age, the internationality of the Directors, the breadth of experience, qualifications and skills, concluding that there was a good degree of diversity on the Board with a range of different experiences and outlooks and that the Chairman should continue to nurture inputs from all Directors to derive the benefits of this diversity.
Below Board level, Barclays met its target of 23% female representation among the Managing Director and Director population in 2015. To achieve the target, the Committee endorsed programmes to embed accountability for diversity and inclusion throughout the Group. These efforts included Balanced Scorecard aligned targets for hiring, promotion and attrition set for each business or function, expansion of diversity data to include greater focus, expanding global campaigns to raise awareness and refined communications to drive impact. More details of Barclays’ diversity and inclusion strategy may be found on pages 47 to 49.
| | | | | You can find the Board Diversity Policy at
home.barclays/corporategovernance
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Review of Board and Board Committee effectiveness
Barclays conducts an externally facilitated review of the effectiveness of the Board, Board Committees, individual Directors and the Chairman each year. For 2015, the effectiveness review was facilitated by Independent Board Evaluation, an independent external consultancy with no other connection with Barclays. The review process involved the consultant, Ffion Hague, attending certain Board and Board Committee meetings in November and December 2015 as an observer, alongside detailed interviews conducted according to a set agenda with Directors, members of the Group Executive Committee, the Company Secretary and other members of the executive and senior management. Feedback was also sought from external stakeholders. Independent Board Evaluation prepared a report for the Board on the findings from the review process, which was presented to the Board in December 2015. In addition, the Chairman was provided with a report and feedback on the performance of each of the Directors and the Senior Independent Director received a report on the Chairman. A similar process was followed for the Board Committees. Independent Board Evaluation provided feedback to each of the Committee Chairmen on the performance of each Committee. The feedback is scheduled to be discussed by each Committee in early 2016.
Having assessed the findings of the effectiveness review, the Directors were satisfied that the Board and each of its Committees operated effectively during 2015. Nonetheless, the Board identified a number of actions to help maintain and improve its effectiveness. These, together with an update on the actions taken following the 2014 review, are set out on pages 33 and 34.
Directors’ Conflicts of Interest
Barclays requires Directors to declare any potential or actual conflict of interest that could interfere with a Director’s ability to act in the best interests of the Group. The Board has adopted procedures for ensuring that its powers to authorise Directors’ conflicts operate effectively. A register of actual and potential conflicts and of any authorisation of a conflict granted by the Board is maintained by the Company Secretary and reviewed annually by the Board Nominations Committee.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 31 |
| | | | | | | | | | | | Governance in action: the appointment of
Jes Staley
Role requirements
The Committee, which has responsibility for identifying suitable candidates to join the Board, agreed the desired attributes for a successor to Antony Jenkins as Group Chief Executive (CEO). In addition to strong and motivational leadership qualities, the Committee sought candidates with significant experience of retail and/or commercial and investment banking in large scale, complex organisations and an excellent track record of delivery and credibility with regulators and internal and external stakeholders. Personal attributes sought included strategic thinking and the ability to lead and manage change, especially cultural change.
Process
The Committee directed the selection process. As the Chairman had accepted the role of Executive Chairman until a successor was in place, it was agreed that he would step down from the Committee to ensure that it remained composed of independent non-executive Directors and that I would lead the process. It was also agreed that the Committee as a whole would be involved in shortlisting and interviewing candidates and, once preferred candidates had been agreed, to involve the rest of the Board and key senior executives. Spencer Stuart, an external search consultant, was engaged to assist with the search and selection process.
Search
Having established that there were currently no potential candidates within the Group with the spread and depth of experience required for the role, the Committee examined a ‘long list’ of candidates produced as a result of the global search and received a presentation from Spencer Stuart covering the prospects for consideration. The Committee identified the most credible prospects to be contacted and invited to interview and requested that the views of the Group’s regulators on the preferred type of candidate for the role also be obtained.
I asked Committee members to consider sources for potential candidates that might be approached directly and to recommend potential candidates for the role. In addition, although John McFarlane did not take part in the selection process, he was consulted for his view and insights. I also ensured that Board members were kept up-to-date throughout the process.
Recruitment
As Jes Staley emerged as the preferred candidate and had confirmed his interest in the role, he undertook a series of interviews involving me, the Chairman and members of the Committee. He also met with the remaining members of the Board and the Group Executive Committee.
In addition to the regular communication with Directors, the Board held an additional meeting specifically to discuss the proposed appointment and to allow Directors to share their feedback on Jes Staley before approving his appointment, which was announced on 28 October 2015.
Sir Michael Rake
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| | | 32 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Directors’ report
What we did in 2015
Board Nominations Committee report
Review of Board and Board Committee effectiveness
| | | | | | | | | | | | | Board priorities
| | | | Exhibiting and upholding the Company’s values
| | | | Leveraging Board experience in support of executives
| | | | Greater awareness of Board Committee work
| | | | | | | | 2014 findings
To refine the Board’s priorities for 2015.
| | | | 2014 findings
To continue the embedding of cultural change across and deeper into the organisation and provide effective oversight of progress.
| | | | 2014 findings
To continue to build effective relationships between the Board and business and functional heads.
| | | | 2014 findings
To continue to deepen the Board’s focus on the key priorities and main issues facing each of the Board Committees and to ensure that the Board Committee structure remains appropriate and fit for purpose.
| | | | | | | | Actions taken in 2015
In 2015 the Board re-focused its time on three key themes:
§ focus on core
§ accelerate earnings growth
§ high performance ethic.
A set of execution priorities was developed for each theme and progress against these priorities was reported to the Board on a regular basis.
| | | | Actions taken in 2015
The Board Reputation Committee received reports on the progress of cultural change in 2015.
Members of senior management completed a survey on cultural change, the results of which were shared with the Board Reputation Committee.
The results of the employee opinion survey and a values survey were shared with the Board.
| | | | Actions taken in 2015
John McFarlane has, and will continue to, discuss his key priorities as Chairman with senior management.
Members of the Board Nominations Committee are mentoring high-potential senior managers.
| | | | Actions taken in 2015
The Board Committee structure was updated in 2015, following review by the Board Nominations Committee. The revised structure was approved by the Board and implemented from July 2015.
In line with prior years, all non-executive Directors may attend Board Committee meetings on request, with the agreement of the Committee Chairman. All non-executive Directors were invited to attend Board Risk Committee workshops on risk appetite and on structural reform.
| | | | | | | | 2015 findings
To ensure that the Board agenda is optimised, including time for ‘blue-sky’ discussion of major risks.
| | | | 2015 findings
No specific matters were raised during the 2015 review.
| | | | 2015 findings
To continue to ensure that all non-executive Directors have the opportunity to contribute to strategic debate.
| | | | 2015 findings
To continue to raise awareness across all Board members of the significant issues considered by Board Committees and to continue to refine the remit and scope of the Board Reputation Committee.
| | | | | | | | Actions to be taken in 2016
We will identify opportunities for more free-ranging Board discussions, including discussion of risk.
A revised set of Board objectives will be agreed in order to track progress.
| | | | Actions to be taken in 2016
No actions are proposed for 2016.
| | | | Actions to be taken in 2016
We will continue to identify ways in which the skills and experience of individual non-executive Directors may be leveraged, including partnering individual non-executive Directors with members of the Group Executive Committee.
| | | | Actions to be taken in 2016
We will provide opportunities for Board Committee Chairmen to provide more detailed briefings to non-Committee members on the work of their Committee.
We will review the role and scope of the Board Reputation Committee with its new Chairman.
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| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 33 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Improvements to the Board appointment process
| | | | Director induction
| | | | Effective handling of legacy issues
| | | | Dealing more strategically with global regulation
| | | | | | | | | | | 2014 findings
To continue to ensure that the Board has sufficient visibility of executive succession planning and the talent pipeline.
| | | | 2014 findings
To extend the new Director induction programme to involve senior executives below Group Executive Committee level and to continue to support new Board Committee Chairmen.
| | | | 2014 findings
To continue to focus on the existing priority of overseeing the resolution of legacy issues.
| | | | 2014 findings
To continue to focus the Board’s time on strategy and strategic options.
| | | | | | | | | | | Actions taken in 2015
The non-executive Directors attended a briefing on talent management and succession planning in April 2015.
The Board Nominations Committee considered Group Executive Committee succession in October 2015. In November 2015, the HR Director attended the Board meeting to provide an update on talent and succession.
| | | | Actions taken in 2015
Directors have been offered the opportunity of additional meetings with senior executives as part of their induction programmes.
| | | | Actions taken in 2015
Work has continued in 2015 to resolve historical legal and conduct risks. Several outstanding issues have been resolved in 2015.
| | | | Actions taken in 2015
Additional time was allocated to the discussion of business strategy at Board meetings in 2015. In particular, the Investment Bank and structural reform were both covered in depth.
The Group’s three strategic priorities: focus on core; accelerate earnings growth; and high performance ethic, were developed with the Board’s collective input.
Representatives from the Group’s UK and US regulators attended Board and Board Committee meetings during the year.
| | | | | | | | | | | 2015 findings
To continue to assess the skills and experience needed on the Board and to ensure that Board composition is balanced between UK and international members.
To enhance Board succession planning, particularly in respect of key roles.
| | | | 2015 findings
To enhance the Board training and induction programme, with particular focus on the training needs of Board members from outside the financial services sector.
| | | | 2015 findings
No specific matters were raised during the 2015 review.
| | | | 2015 findings
To continue to provide opportunities for Board members to provide early input to thinking on major issues and decisions.
| | | | | | | | | | | Actions to be taken in 2016
We will develop a revised Board succession plan for discussion by the Board Nominations Committee, including planning for succession to key roles, considering the optimum size of the Board and the balance of UK and overseas Directors.
We will schedule additional updates to the Board on talent management and succession planning.
| | | | Actions to be taken in 2016
We will schedule as part of the Board’s training programme for 2016 specific briefings for non-executive Directors who do not have a financial services background.
| | | | Actions to be taken in 2016
No actions are proposed for 2016.
| | | | Actions to be taken in 2016
We will continue to allocate sufficient time for Board discussion of strategic priorities and options.
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| | | 34 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Directors’ report
How we comply
Leadership
The Role of the Board
As members of the Board of Directors, we have a collective responsibility to create and deliver sustainable value for our shareholders, in a manner that is supported by the right culture, values and behaviours throughout the Group. To support our role in determining the strategic objectives and policies of the Group, there exists a well-defined Corporate Governance framework. We aim to achieve long-term and sustainable value and it is our responsibility as the Board to ensure that management effectively delivers on short-term objectives, while promoting the long-term growth of Barclays.
In addition, we have further responsibility for ensuring that management maintains both an effective system of internal control and an effective risk management and oversight process. When carrying out these responsibilities we consider the Group’s business and reputation, the materiality of risks that are inherent in the business and the relevant costs and benefits of implementing controls. The Group’s internal control system provides assurance of internal financial controls, compliance with law and regulation and effective and efficient operations.
The Board is the decision-making body for those matters that are considered of significance to the Group owing to their strategic, financial or reputational implications or consequences. To retain control of these key decisions, certain matters have been identified that only we as the Board can approve and there is in place a formal schedule of powers reserved to the Board. As Directors we must act in accordance with the Company’s constitution and only exercise powers for the purposes for which they have been conferred. A summary of the matters reserved to the Board is available at home.barclays/corporategovernance. These matters include the approval of Barclays’ strategy, interim and full year financial statements and any major acquisitions, mergers, disposals or capital expenditure.
Specific responsibilities have been delegated to Board Committees and each Committee has its own terms of reference, which are available on home.barclays/corporategovernance. Each Committee reports to, and has its terms of reference approved by, the Board and the minutes of Committee meetings are shared with the Board. The main Board Committees are the Board Audit Committee, the Board Nominations Committee, the Board Remuneration Committee, the Board Reputation Committee and the Board Risk Committee.
In addition to the principal Board Committees, the Regulatory Investigations Committee, which was formed in late 2012, focuses on providing Board-level oversight of regulatory investigations. This Committee met six times in 2015. John McFarlane is Chairman of the Committee and the other current Committee members are Mike Ashley, Sir Gerry Grimstone, Diane de Saint Victor and Jes Staley. Antony Jenkins, Sir Michael Rake, Sir John Sunderland and Sir David Walker also served on the Committee during 2015, stepping down when they left the Board.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 35 |
Attendance
In 2015 we attended both scheduled and additional Board meetings, as disclosed in the table below. The Chairman met privately with non-executive Directors ahead of scheduled Board meetings. If, owing to exceptional circumstances, a Director was not able to attend a Board meeting, he or she ensured that their views were known to the Chairman.
| | | | | | | | | | | | | | | | | | | Board attendance | | Independent | | | Scheduled meetings eligible to attend | | | | Scheduled meetings attended | | | | Additional meetings eligible to attend | | | | Additional meetings attended | | Group Chairman | | | | | | | | | | | | | | | | | | | John McFarlane | | On appointment | | | 8 | | | | 8 | | | | 2 | | | | 2 | | | | | | | | | | | | | | | | | | | | | Executive Directors | | | | | | | | | | | | | | | | | | | Tushar Morzariaa | | Executive Director | | | 8 | | | | 8 | | | | 2 | | | | 1 | | Jes Staley | | Executive Director | | | 1 | | | | 1 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | Non-executive Directors | | | | | | | | | | | | | | | | | | | Mike Ashley | | Independent | | | 8 | | | | 8 | | | | 2 | | | | 2 | | Tim Breedon | | Independent | | | 8 | | | | 8 | | | | 2 | | | | 2 | | Crawford Gillies | | Independent | | | 8 | | | | 8 | | | | 2 | | | | 2 | | Reuben Jeffery III | | Independent | | | 8 | | | | 7 | | | | 2 | | | | 2 | | Wendy Lucas-Bullb | | Non-Independent | | | 8 | | | | 8 | | | | 2 | | | | 2 | | Dambisa Moyo | | Independent | | | 8 | | | | 8 | | | | 2 | | | | 1 | | Frits van Paasschen | | Independent | | | 8 | | | | 8 | | | | 2 | | | | 2 | | Sir Michael Rake | | Deputy Chairman, Senior Independent Director | | | 8 | | | | 7 | | | | 2 | | | | 2 | | Diane de Saint Victor | | Independent | | | 8 | | | | 8 | | | | 2 | | | | 2 | | Diane Schueneman | | Independent | | | 5 | | | | 5 | | | | 1 | | | | 1 | | Steve Thieke | | Independent | | | 8 | | | | 8 | | | | 2 | | | | 2 | | | | | | | | | | | | | | | | | | | | | Former Directors | | | | | | | | | | | | | | | | | | | Sir David Walker | | On appointment | | | 3 | | | | 3 | | | | 0 | | | | 0 | | Antony Jenkins | | Executive Director | | | 4 | | | | 4 | | | | 1 | | | | 1 | | Sir John Sunderland | | Independent | | | 3 | | | | 3 | | | | 0 | | | | 0 | | | | | | | | | | | | | | | | | | | | | Secretary | | | | | | | | | | | | | | | | | | | Lawrence Dickinson | | | | | 8 | | | | 8 | | | | 2 | | | | 2 | |
Notes
a | Although eligible to attend, as an executive Director, Tushar Morzaria did not attend the additional meeting held to consider and approve the appointment of the new Group Chief Executive. |
b | Although we have reached the conclusion that all non-executive Directors exhibit independence of character and judgement, we continue to disclose that, for the purposes of the Code, Wendy Lucas-Bull was not designated as independent owing to her chairmanship of Barclays Africa Group Limited, a62%-owned subsidiary of Barclays. |
| | | 36 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Directors’ report
How we comply
Board Governance Framework
As a Board we may, under the authority of our Articles of Association and where appropriate, delegate all or any of our powers to an individual Director or to a Committee of Directors. Further information on the operations of each of the Barclays Board Committees can be found on the pages referenced above. Board Committee membership is reviewed regularly by the Board Nominations Committee.
| | | | | | | | | | | | | | | Board attendance | | Independent | | Scheduled meetings eligible to attend | | Scheduled meetings attended | | % attendance | | Additional meetings eligible to attend | | Additional meetings attended | | % attendance | Group Chairman | | | | | | | | | | | | | | | John McFarlane | | On appointment | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Executive Directors | | | | | | | | | | | | | | | Tushar Morzaria | | Executive Director | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Jes Staley | | Executive Director | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Non-executive Directors | | | | | | | | | | | | | | | Mike Ashley | | Independent | | 8 | | 8 | | 100 | | 2 | | 1 | | 50 | Roles on the Board AsExecutive andnon-executive Directors we have establishedshare the same duties and are subject to the same constraints but, in line with the principles of the Code, a clear division of responsibilities between running the Board and running the business of the Group.has been established. It is the responsibility of the Chairman to lead and manage the work of the Board, and to ensure that it operates effectively, while the responsibility for theday-to-day management of Barclays has been delegated to the Group Chief Executive.
Role profiles setting out the responsibilities of the Chairman, the Group Chief Executive, Deputy Chairman, Senior Independent Director, non-executive Directors, Executive Directors, Committee Chairmen and the Company Secretary can be found inBarclays Charter of Expectations, which is available on home.barclays/corporategovernance.Barclays Charter of Expectationsalso sets out high-performance indicators for non-executive Directors.
The Group Chief Executive is supported in this role by the Group Executive Committee, which is responsible for making and implementing operational decisions while running the Group’s day-to-day business.Committee. Further information on membership of the Group Executive Committee can be found on page 5. The Group Executive Management structure has been designed to support management’s decision-making responsibilities, aligned to personal accountability and delegated authority, while embedding risk and control in business decision-making. Effectiveness
CompositionAs a Board we have set out our expectations of each Director inBarclays’ Charter of Expectations. This includes role profiles and the behaviours and competencies required for each role on the Board, namely the Chairman, Deputy Chairman, Senior Independent Director,non-executive
Directors, executive Directors and Committee Chairmen. The Board Nominations Committee reviews theCharter of Expectations annually to ensure it remains relevant andup-to-date. It is responsible for reviewing Board composition, considering succession plans for both the Board and senior executives, selecting and appointing new Directors and considering the resultspublished on home.barclays/corporategovernance to ensure that there is complete transparency of the Board effectiveness review. For more information on the work of this Committee in 2015 please turn to page 27. Our individual biographies can be found onpages 3 and 4: these include our relevant skills and experience, Board Committee membership and any other principal appointments. Details of changes to the Board in 2015 and year to date are disclosed on page 6.standards we set for ourselves.
The Board currently comprises a Chairman, who was independent on appointment, two Executive Directors and11 non-executive Directors. In line with the Code, independent non-executive Directors form a majority of our Board. Each year we consider the independence of our non-executive Directors, using the guidance set out in the Code and behaviours determined by us as essential in order for a Director to be considered independent. These independence criteria are disclosed inCorporate Governance in Barclays, which can be viewed at home.barclays/corporategovernance. Having considered this guidance, we have determined those non-executive Directors who are standing for re-election at the 2016 AGM to be independent.
Executive Directors’ service contracts and the letters of appointment for the Chairman and non-executive Directors are available for inspection at the Company’s registered office.
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 37 |
Governance: Directors’ report How we comply Attendance | | | As members of the Board of Directors we are expected to attend each Board meeting and in 2016 we attended both scheduled and additional Board meetings, as disclosed in the table below. The Chairman met privately with thenon-executive Directors ahead of each scheduled Board meeting, and if, owing to exceptional circumstances, a Director was not able to attend a Board meeting they ensured that their views were made known to the Chairman in advance of the meeting. | | |
| | | | | | | | | | | | | | | Board attendance | | Independent | | Scheduled meetings eligible to attend | | Scheduled meetings attended | | % attendance | | Additional meetings eligible to attend | | Additional meetings attended | | % attendance | Group Chairman | | | | | | | | | | | | | | | John McFarlane | | On appointment | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Executive Directors | | | | | | | | | | | | | | | Tushar Morzaria | | Executive Director | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Jes Staley | | Executive Director | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Non-executive Directors | | | | | | | | | | | | | | | Mike Ashley | | Independent | | 8 | | 8 | | 100 | | 2 | | 1 | | 50 | Tim Breedon | | Independent | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Mary Francis | | Independent | | 2 | | 2 | | 100 | | 0 | | 0 | | n/a | Crawford Gillies | | Independent | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Sir Gerry Grimstone | | Senior Independent Director | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Reuben Jeffery III† | | Independent | | 8 | | 7 | | 88 | | 2 | | 1 | | 50 | Dambisa Moyo | | Independent | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Diane de Saint Victor† | | Independent | | 8 | | 7 | | 88 | | 2 | | 2 | | 100 | Diane Schueneman | | Independent | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Steve Thieke | | Independent | | 8 | | 8 | | 100 | | 2 | | 2 | | 100 | Former Directors | | | | | | | | | | | | | | | Wendy Lucas-Bull | | Non-independent | | 1 | | 1 | | 100 | | 1 | | 1 | | 100 | Frits van Paasschen | | Independent | | 3 | | 3 | | 100 | | 1 | | 1 | | 100 | Secretary | | | | | | | | | | | | | | | Claire Davies | | | | 1 | | 1 | | 100 | | 0 | | 0 | | n/a | Former Secretary | | | | | | | | | | | | | | | Lawrence Dickinson | | | | 7 | | 7 | | 100 | | 2 | | 2 | | 100 | † Unable to attend one scheduled meeting owing to prior commitments. | | | | | | | | | | |
| | | | | | | | | | | | | | | | | Board Committee cross-membership | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Board Audit Committee | | Board Nominations Committee | | Board Remunerations Committee | | Board Reputation Committee | | | | | Board Risk Committee | | | | 3 | | 3 | | 1 | | 1 | | | | | Board Reputation Committee | | | | 1 | | 2 | | 2 | | | | | | | Board Remuneration Committee | | | | 2 | | 2 | | | | | | | | | Board Nominations Committee | | | | 3 | | | | | | | | | | | | | | | | | | | | | | | |
| | | 38 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Effectiveness Composition of the Board In line with the requirements of the Code a majority of the Board are independentnon-executive Directors. The Board currently comprises a Chairman, who was independent on appointment, two executive Directors and tennon-executive Directors. We consider the independence of ournon-executive Directors annually, using the independence criteria set out in the Code and by reviewing performance against behaviours that we have identified as essential in order to be considered independent. The independence criteria can be found inCorporate Governance in Barclays at home.barclays/ corporategovernance. The Board Nominations Committee considers Board succession planning and regularly reviews the composition of the Board and the Board Committees to ensure that there is an appropriate balance and diversity of skills, experience, independence and knowledge. The size of the Board is not fixed and may be revised from time to time to reflect the changing needs of the business and the Board Nominations Committee will consider the balance of skills and experience of current Directors when considering a proposed appointment. Each year we carry out an annual effectiveness review in order to evaluate our performance as a Board. This evaluation includes an assessmentBoard, as well as the performance of each of the effectiveness of Board Committees and individual Directors, to ensure thatDirectors. This annual review assesses whether each of us continues to contributedischarge our respective duties and responsibilities effectively to the decision-making of the Board. Independence and the existence of any conflicts of interest areis considered as part of the effectiveness evaluation. We take the outcomes of the review into account when deciding whether individual Directors will offer themselves for election orre-election at the AGM. More information on the 2016 Board effectiveness review can be found on page 3333. Our biographies containing our relevant skills and 34.experience, Board Committee membership and other principal appointments can be found on pages 3 and 4. Details of changes to the Board in 2016 and year to date are disclosed on page43. The service contracts for the executive Directors and the letters of appointment for the Chairman andnon-executive Directors are available for inspection at our registered office. Time commitment InIt is expected that in order to effectively discharge our responsibilities non-executive Directors must commiteffectively we will each allocate sufficient time to their role. Set outour role on the Board. We are expected to attend, and to be well prepared for, all Board and Board Committee meetings, as well as making time to understand the business, meet with executives and regulators, and complete ongoing training. As stated in ourCharter of Expectations,time commitment is agreed with eachnon-executive Director on an individual basis. Disclosed below is the average expected time commitment for each the role ofnon-executive position Director and the othernon-executive positions on the Board. In practice, however,For these additional positions there is an expectation that, in order to effectively fulfil extra responsibilities, additional time commitment is agreed on an individual basis and for certain Board positions additional time commitment will often be required in order to fulfil extra responsibilities, such as those of the Deputy Chairman, Senior Independent Director and Committee Chairmen. In addition, in exceptional circumstances, we are expected to commit significantly more time than disclosed below.required.
| | | Role | | Expected time commitment | Chairman | | 80% of a full-timefull time position | Deputy Chairman | | At least 0.5 days a week | Senior Independent Director | | As required to fulfil the role | Non-executive Director | | 30-3630 days a year (membership of one Board Committee included, increasing to 40-5040 days a year if a member of two Board Committees) | Committee Chairmen | | 50-60At least 60 days (inclusive of a year (includingnon-executive Director time commitment) |
It is expected that ourThe Chairman willmust commit as muchto expend whatever time as is necessary to fulfil his duties withand, while this is expected to be equivalent to 80% of a full time position, his responsibilities to Barclays takingChairmanship of the Group and leadership of the Board has priority over other business commitments. The Chairman and non-executive DirectorsIn exceptional circumstances we are alsoall expected to allocate sufficientcommit significantly more time to understandingour work on the business, through meetings with regulators and executives and undergoing training to ensure ongoing business awareness. This time is in addition to that spent preparing for, and attending, Board and Board Committee meetings. When appropriate, a Director joining a Board Committee will be given a specific Board Committee induction programme.Board.
Induction FollowingOn appointment each Director undergoesto the Board all Directors receive a comprehensive induction that has beenwhich is tailored to the new Director’s individual requirements. The personal induction programmeschedule is designed and organised byto quickly provide the Company Secretary in consultationnew Director with the Chairman and in doing so they consider how to develop each Director’san understanding of how the Group works and the key issues that it faces. The Company Secretary consults the Chairman when designing an induction schedule, giving consideration to the particular needs of the new Director. When a Director is joining a Board Committee the schedule includes an induction to the operation of that committee.
The purposeOn completion of the induction programme isthe Director should have sufficient knowledge and understanding of the nature of the business, and the opportunities and challenges facing Barclays, to provide Directors withenable them to effectively contribute to strategic discussions and oversight of the information they need to become as effective as possible within the shortest practicable time afterGroup.
In 2016 Sir Gerry Grimstone and Mary Francis both received induction programmes on joining the Board. Typically, a new Director will meetIn line with normal practice, they met with the Company Secretary, the currentnon-executive Directors and members of the Group Executive Committee and senior management, allowing an opportunity to familiarise themselvesthe Senior Leadership Group. In addition, Sir Gerry Grimstone met with various businessesSir Michael Rake, the outgoing Deputy Chairman and discuss specific matters with senior individuals. When an induction programme is complete, in addition to understandingSenior Independent Director, and former Chairman of the Group’s business, a new Director should have a clear understanding of Barclays’ relationships with its shareholders, regulators and customers and clients.Board Reputation Committee. In 2015, John McFarlane and Diane Schueneman both received tailored induction programmes on joining the Board. Feedback was sought from both new Directors to ensure that the induction programme remains effective.
Training and development In order to ensure that our non-executive Directors have the necessary knowledge and understanding of the Group’s business to enable themcontinue to contribute effectively atto Board and Board Committee meetings theywe are regularly provided with the opportunity forto take part in ongoing training and development. As part of theour annual performance evaluation processreview with the individualChairman we discuss any particular development needs of each non-executive Director are reviewed and discussed with the Chairman. Trainingthat can be providedmet through one-to-one meetingseither formal training or meeting with senior executives, in order to receive further insight into a particular area ofsenior executive. The Company Secretary organises a formal training schedule for the year, covering both Board and Board Committee training requirements, to ensure that our insight into the Group’s business or as part of dedicated training on a particular issue identified by the Directors and the Company Secretary. Our Directors have a continuing responsibility to fulfil their duties as membersawareness of the Board and Board Committees and this is managed through the provision of focused training and development opportunities.external environment in which we operate continues after our formal induction schedules have been completed.
During 2015, non-executive Directors2016 we attended briefings on the following subjects: § | | talent managementcapital and succession planningliquidity (including regulatory targets and constraints) |
§ | | Senior Managers Regime, andthe Federal Reserve’s CCAR exercise |
§ | | operational resilience.group Resilience |
Board Committees also undertook specific training and details can be found in the respective Committee Chairmen’s reports.
During 2015, individual Directors also attended regular meetings with our regulators, external auditors and major shareholders. In addition, the Board Audit Tender Oversight Sub-Committee carried out site visits as part of the audit tender process.
The following provides more detail of a specific training session that took place in 2015.
Governance in action: training§ | | a presentation from Compliance and developmentRegulatory Relations on the regulatory expectations of Directors and the PRA’s threshold conditions |
Following the July 2015 Board meeting, the non-executive Directors attended
§ | | a briefing sessionfrom Finance and Risk on the Senior Managers Regime, ledimpact of IFRS9 |
§ | | an accounting update presented by Barclays Compliance. The Senior Managers Regime commences in March 2016 and, although only certain non-executive Directors will be in scope, there are a number of governance, reporting and conduct requirements that will apply to all Board Directors. The briefing session provided KPMG |
§ | | an overviewupdate on the implementation of the Senior Managers Regime with particular focus on the following: |
§ an introduction to ‘Reasonable Steps’, including practical examples§ the roles
| | strategic planning and responsibilities of non-executive Directors in scope§ guidance for non-executive Directors who are not in scope, and
§ the Conduct Rules (standards that will be expected of all employees in a regulated firm).
In addition, Barclays Compliance detailed the work needed in order for Barclays to be ready for implementation of the regime in early 2016. This timetable included scheduling individual briefing sessions with in-scope non-executive Directors.
In late 2015/early 2016, Mike Ashley, Tim Breedon, Crawford Gillies and Sir Gerry Grimstone each had individual meetings with Barclays Compliance in order to cover the reasonable steps that, as a result of their particular role on the Board, each of them will be expected to take under the Senior Managers Regime. The session included a review of case studies, which focused on each Director’s prescribed responsibilities under the Senior Managers Regime. The Directors were briefedcrisis management plans ahead of the meetings and provided with supporting documentation in advance. These meetings were also attended by the Company Secretary and external advisers. EU Referendum |
§ | | internal briefings on Structural Reform. |
These briefing sessions were supplemented by written material, such as a briefing note on the implementation of the Market Abuse Regulation in the UK. In addition, site visits were arranged to Barclays UK and Cards US operations, as well as the regular business visits and engagements that we may undertake. This included the attendance of our Board Audit Committee Chairman and Board Risk Committee Chairman at US IHC board committee meetings at Barclays’ offices in New York. Conflicts of interest In accordance with the Companies Act 2006 and the Articles of Association the Board has the authority to authorise conflicts of interest. Directors are required to declare any potential or actual conflicts of interest that could interfere with their ability to act in the best interests of the Group. The Company Secretary maintains a conflicts register, which is a record of actual and potential conflicts, together with any Board authorisation of the conflict. The authorisations are for an indefinite period but are reviewed annually by the Board Nominations Committee. The Board retains the power to vary or terminate the authorisation at any time.
| | | 38 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 39 |
Governance: Directors’ report How we comply Information provided to the Board AsThe Role Profile for the Chairman, as set out in the Code, the Chairman is responsibleourCharter of Expectations, confirms his responsibility for ensuring that membersof the Board receivesreceive accurate, timely and high qualityhigh-quality information. In particular, we require information about the Company’sBarclays’ performance at appropriate intervals and in an appropriate manner to enable itus to take sound decisions, monitor effectively and provide advice to promote the success of the Company. OurWorking in collaboration with the Chairman, the Company Secretary supports the Chairman inis responsible for ensuring good governance and consults Directors to ensure that good information flows betweenexist and that the Board receives the Board Committees and the senior executives. In addition to providing dedicated support for the Board, the Company Secretary maintains dialogue with our Directorsinformation it requires in order to confirm thatbe effective.
Throughout the information they require in order to fulfil their responsibilities as a member ofyear both the Board is being received. If there is a need for independentexecutive Directors and professional advice this can be sought bysenior executives keep the Board via the Company Secretary or directly, at Barclays expense. Directors expect to be kept informed of key developments in the business by boththrough regular reports and updates. These are in addition to the Executive Directors and senior management, and take seriously their responsibility to request any further explanations as required. Thepresentations that the Board and Board Committee annual forward calendarsCommittees receive as part of businesstheir formal meetings. Directors are formulatedable to ensure thatseek independent and professional advice at Barclays’ expense, if required, to enable Directors receive regular reports and presentations, in addition to periodic communications advising of any updates to the businessfulfil their obligations as members of the Company, current events and the regulatory environment.Board.
Accountability Risk management and internal control The Directors have responsibilityare responsible for ensuring that management maintainmaintains an effective system of risk management and internal control and for assessing its effectiveness. Such a system is designed to identify, evaluate and 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. Barclays is committed to operating within a strong system of internal control that enables business to be transacted and risk taken without exposing itself to unacceptable potential losses or reputational damage. Barclays has an overarching framework that sets out the Group’s approach to internal governance, (theBarclays Guide). TheBarclays Guide, which establishes the mechanisms and processes by which the Board directs the organisation, through setting the tone and expectations from the top, delegating its authority and assessing compliance. A key component of theThe Barclays Guide is theEnterprise Risk Management Framework (ERMF). The purpose of the ERMF is to identify and set minimum requirements in respect of the main risks to achieving the Group’s strategic objectives and to provide reasonable assurance that internal controls are effective. The key elements of the Group’s system of internal control, which is aligned to the recommendations ofThe Committee of Sponsoring Organizations of the Treadway Commission, Internal Control – Integrated Framework (2013 COSO), are set out in the risk control frameworks relating to each of the Group’s principalPrincipal and key risks.Key Risks. As well as incorporating our internal requirements, these reflect material Group-wide legal and regulatory requirements relating to internal control and assurance. Effectiveness of internal controls Key controls are assessed on a regular basis for both design and operating effectiveness. Issues arising out of business risk and control assessments and other internal and external sources are examined to identify pervasive themes. Where appropriate, control issues are reported to the Board Audit Committee.Committee (BAC). In addition, regular reports are made to the Board Audit CommitteeBAC by management, Barclays Internal AuditBIA and the Finance, Compliance and Legal functions covering, in particular, financial controls, compliance and other operational controls. Risk management and internal control framework The ERMF is the Group’s internal control framework.Internal Control Framework. It is refreshed annually with an assessment of operational maturity provided to the Board Audit Committee. In 2015, the Board Audit Committee receivedand has been substantially revised during 2016. The BAC receives quarterly reports onrelating to the effectiveness of the control environment: these reports coveredControl Environment covering all risks and controls including financial, operational and compliance risk. The Board Audit CommitteeBAC formally reviews the system of internal control and risk management annually. Throughout the year endingended 31 December 20152016 and to date, the Group has operated a system of internal control that provides reasonable assurance of effective 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 principal risks facing the Group in accordance with the ‘Guidance on Risk Management, Internal Control and Related Financial and Business Reporting’ published by the Financial Reporting Council. The review of the effectiveness of the system of risk management and internal control is achieved through a four-step approach which is centred on reviewing the effectiveness of theBarclays Guide and its component parts, including the ERMF.parts: 1. | Governance Risk and& Control meetings of the businessBusiness and functional executive committeesFunctional Executive Committees monitor, review and challenge the effective operation of key risk management and control processes, including the results of audits and reviews undertaken by Barclays Internal AuditBIA (which include assessments of the control environmentControl Environment and management’s control approach)Management Control Approach) and examinations and assessments undertaken by our primary regulators, on an ongoing basis as part of the system of risk management and internal control. The remediation of issues identified within the control environmentControl Environment is regularly monitored by management and the Board Audit Committee.BAC. |
2. | Testing of the Governance Risk and Control meetings held within the executive committeesExecutive Committees provides assurance that the committees are effectively overseeing the control environmentControl Environment and associated risk management and internal control processes. |
3. | The owners of the key governance processes which comprise theThe Barclays Guideundertake a review to confirm that processes have been implemented and are operating effectively.implemented. |
4. | The annual review of the system of risk management and internal control brings together the results of the activities completed in steps 1 to 3 to ensure that each of the key processes has been effectively reviewed. |
In 2015,Regular reports are made to the Board received regular reports covering risks of Group-levelGroup level significance. Over the year, theThe Board Risk Committee and the Board Reputation Committee examinedexamine reports covering the principal risks (creditPrincipal Risks (Credit Risk, Market risk, market risk, capital risk, liquidity risk, operational riskCapital Risk, Liquidity Risk, Operational Risk and conduct risk)Conduct Risk) as well as reports on risk measurement methodologies and risk appetite. Further details of risk management procedures and potential risk factors are given in the Risk Management section on pages 8786 to 93.114.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 39 |
Controls over financial reporting A framework of disclosure controls and procedures is in place to support the approval of the Group’s financial statements. The Legal and Technical Review Committee is responsible for examining the Group’s financial reports and disclosures to ensure that they have been subject to adequate verification and comply with applicable standards and legislation. The Committee reports its conclusions to the Disclosure Committee. The Disclosure Committee examines the content accuracy and toneaccuracy of the disclosures and reports its conclusions to the Board Audit Committee which debates its conclusions and provides further challenge. Finally, the Board scrutinises and approves results announcements and the Annual Report, and ensures that appropriate disclosures have been made. This governance process ensures that both management and the Board are given sufficient opportunity to debate and challenge the Group’s financial statements and other significant disclosures before they are made public. | | | 40 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
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 issued by 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; and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use or disposition of assets that could have a material effect 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 Barclays PLC Group’s and Barclays Bank PLC Group’s internal control over financial reporting as of 31 December 2015.2016. In making its assessment, management has utilised the criteria set forth by the 2013 COSO framework. Management concluded that, based on its assessment, the internal control over financial reporting was effective as of 31 December 2015.2016. Our independent registered public accounting firm has issued a report on the Barclays PLC’s internal control over financial reporting, which is set out on page 210.218. The system of internal financial and operational controls is also subject to regulatory oversight in the UK and overseas. Further information on supervision by the financial services regulators is provided under Supervision and Regulation in the Risk review section on pages 177182 to 182.189. 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 the Group’s internal control over financial reporting. Remuneration We haveThe Board has delegated responsibility tofor the Board Remuneration Committee to determineconsideration and approval of the remuneration arrangements forof the Chairman, our Executiveexecutive Directors, and other senior executives and certain other Group employees to the Board Remuneration Committee. The Board as determined bya whole, with the Committee. Additional informationnon-executive Directors abstaining, considers annually the fees paid tonon-executive Directors. Information on the activities of the Board Remuneration Committee including its membership and activities in 2015,2016 can be found on pages 70 and 71 in51 to 85 of the Directors’ remuneration report, which forms part of the corporate governance statement.
Stakeholder engagement We describe below how we engage with our stakeholders.
Investor engagement The Board is committed to promoting effective channels of communication with our shareholders and upholding good corporate governance as a means of building stronger and more engaged relationships with them. Our comprehensive investorInvestor Relations engagement initiatives helpwith the market helps us to understand theirinvestor views about Barclays, which are communicated regularly to the Board. Our shareholder communication guidelines, which underpin all investor engagement, are available on our website at home.barclays/barclays-investor-relations/corporate-governance/shareholder-communication-guidelines.html.barclays-investor-relations. Institutional investors In 2015,2016, our Investor Relations engagement with institutional investors took place throughout the year, both following our quarterly results as well as outside of the reporting cycle. This allowed the opportunity for existing and potential new investors to engage with usBarclays regularly, and promotedpromoting dialogue on longer-term strategic developments as well as abouton the recent financial performance of the Group. The Directors, in conjunction with the senior executive team and Investor Relations, participated in varied forms of engagement, including investor meetings, seminars and conferences across multiplemany geographic locations, reflecting the diverse nature of our equity and debt institutional ownership. Divisional management also presented extensively to investors, promoting greater awareness and understanding of our operational businesses and other functions.businesses. In the past year,During 2016, discussions with investors were focused on the continued execution of our strategic plan outlined in 2014,strategy, following the appointment of Jes Staley as Group Chief Executive, and the steps taken in 2015 to improve our returns to shareholders, while adapting to the changing regulatory environment and addressing legacy issues. Meetingsstrategic update announced on 1 March 2016.
Investor meetings focused on corporate governance matters also took place throughout the year, covering topics including management changes, remuneration and other AGM-related matters. Followingwith the appointment of Sir Gerry Grimstone asChairman, Senior Independent Director, on 1 January 2016,other Board representatives and the Company Secretary. We held conference calls/webcasts for our major investors were offered a meeting with him. During 2015, we held quarterly results briefings includingand anin-person presentation for the 2014our 2015 full year results announcement in March 2015, and quarterly breakfast briefings for equity and debt sellside analysts,2016, all hosted by the Group Chief Executive and Group Finance Director. In addition, the Group Finance Director held a quarterly breakfast briefing for sellside analysts, with a transcript of the discussions uploaded to our website. For fixed income investors we held conference calls at our full year and half year results, hosted by our Group Finance Director and Group Treasurer, as well as quarterly briefings for credit analysts.Treasurer.
An independent auditThe Investor Relations section of investor views took place in April 2015. Interviews with a cross-section of institutional shareholders and non-holders, were conducted on specific topics including strategy, business performance and the management team. The findings of the investor audit were presented to the Board.
To enableour website is an important communication channel that enables the effective distribution of information to all investors, transcripts of executivethe market in a clear and consistent manner. Executive management presentations, speeches wereand, where possible, webcast replays are uploaded to the investor relations section of the website, alongside associated presentation materials. In 2015, we received the UK Investor Relations Society’s award for the Best Use of Digital Communications, reinforcing the importance placed on using our website on a timely basis. In 2016, we also created an improved ‘About Barclays’ factsheet, allowing investors the opportunity to engage with the market. For example, we introducedunderstand Barclays’ strategy and key financial metrics at a glance. We also continued to provide short videos providing a summary ofsummarising the key messages in our results from our Chairman, Group Chief Executive and Group Finance Director.
| | | 40 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 41 |
Governance: Directors’ report How we comply Private shareholders Throughout 2015,During 2016, we continued to communicate with our private shareholders usingthrough our shareholder mailings. Also, shareholdersShareholders can also choose to sign up to Shareview so that they receive information about Barclays and their shareholding directly by email. On a practical level, over 60,000 shareholders did not cash their Shares Not Taken Up (SNTU) cheque following the Rights Issue in September 2013. During 2015,In 2016, we conducted acontinued the tracing process to reunite these shareholders with their SNTU monies together withand any unclaimed dividends. By the end of the year,2016, we had returned over £2.2m£1.65m to our shareholders. Inshareholders in addition weto the £2.2m returned in 2015. We also launched a special share dealing serviceSpecial Share Dealing Service in October 2015November 2016 aimed at shareholders with relatively small shareholdings for whom it might otherwise be uneconomical to deal. One option open to shareholders holding 4,000 shares or less. Shareholders couldwas to donate their sale proceeds to ShareGift if they wished. Shareholders donated nearly £130,000.ShareGift. As a result of this initiative, more than £100,000 was donated.
Our Annual General Meeting (AGM)AGM OurThe Board and the senior executive team continue to consider our AGM continues to beas a key date in the diary for the Board. It affordsdiary. The AGM provides us with our primarymain opportunity to engage with shareholders, particularly our private shareholders, on the key issues facing the Group and any questions they may have. The majorityA number of Directors, including the Chairman, were available for informal discussion either before andor after the formal business of our 2015 AGM.meeting. All resolutions proposed at the 20152016 AGM, which were considered on a poll, were passed with votes for ranging from 88.5%86% to 99.9% of the total votes cast.
The 20162017 AGM will be held on Thursday 28 April 2016wednesday 10 May 2017 at the Royal Festival Hall in London. The Notice of AGM can be found in a separate document, which is sent out at least 20 working days before the AGM and also made available at home.barclays/agm. Voting on the resolutions will again be by poll and the results will be announced via the Regulatory News Service and made available on our website on the same day. We encourage any shareholders who are unable to attend on the day to vote in advance of the meeting via home.barclays/investorrelations/vote or through Shareview (www.shareview.co.uk). Engagement timeline
| | | | | 42 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 41 | | |
Governance: Directors’ report Other statutory informationStatutory Information | | | The Directors present their report together with the audited accounts for the year ended 31 December 2016. | Other information that is relevant to the Directors’ report, together with the audited accounts for the year ended 31 December 2015. Other information that is relevant to the Directors’ Report, and which is incorporated by reference into this report, can be located as follows:
| | | | | Contents | | | Page | | | | Employee involvement | | | 44-49 | 47 | Policy concerning the employment of disabled persons | | | 48 | 49 | Financial instruments | | | 230-254 | 242 | Hedge accounting policy | | | 231 | 226 | Remuneration policy, including details of the | | 51 to 85 | remuneration of each Director and Directors’ interests in shares | | | 50-83 | | Corporate governance report | | | 2-49 | 2 to 42 | Risk review | | | 84-182 | 86 to 189 |
Disclosures required pursuant to Listing Rule 9.8.4R can be found on the following pages:
| | | | | | | | Page
| Disclosures required pursuant to Listing Rule 9.8.4R can be found on the following pages: | | Page | Long-term incentive schemes | | | 77 | 63 | Director emoluments | | | 295 | 302 | Allotment for cash of equity securities | | | 276 | 284 | Waiver of dividends | | | 42 | 43 |
The particulars of important events affecting the Company since the financial year end can be found in Note 29 Legal, competition and regulatory matters.
Profit and dividends The adjusted profit for the financial year, after taxation, was £3,713m (2014: £3,798m). Statutory profit after tax for 20152016 was £623m (2014: £845m)£2,828m (2015: £623m). The final dividend for 20152016 of3.5p2.0p per share will be paid on 5 April 20162017 to shareholders whose names are on the Register of Members at the close of business on 113 March 2016.2017. With the interim dividendsdividend totalling 3p1.0p per ordinary share, paid in June, September and December 2015,2016, the total distribution for 2015 is 6.5p (2014:2016 is3.0p (2015: 6.5p) per ordinary share. The interim and final dividends for 20152016 amounted to £1,081m (2014: £1,057m)£757m (2016: £1,081m).
The nominee companies of certain Barclays’ employeesemployee benefit trusts holding shares in Barclays in connection with the operation of the Company’s share plans have lodged evergreen dividend waivers on shares held by them that have not been allocated to employees. The total amount of dividends waived during the year ended 31 December 20152016 was £6.4m.£2.6m (2015: £6.4m). Board of Directors The names of the current Directors of Barclays PLC, along with their biographical details, are set out on pages 3 and 4 and are incorporated into this report by reference. Changes to Directors during the year are set out below. | | | | | Name | | Role | | Effective date of appointment/ resignation | Diane Schueneman
| | Non-executive Director
| | Appointed 25 June 2015
| James (Jes) Staley
| | Executive Director
| | Appointed 1 December 2015
| Sir Gerald (Gerry) Grimstone | | Non-executive Director | | Appointed 1 January 2016 | Sir John Sunderland Mary Francis | | Non-executive Director | | Retired 23 April 2015 Appointed 1 October 2016 | Sir David Walker Wendy Lucas-Bull | | Non-executive Director | | Retired 23 April 2015 1 March 2016 | Antony Jenkins Frits van Paasschen | | ExecutiveNon-executive Director
| | Resigned 16 July 2015
| Sir Michael Rake
| | Non-executive Director
| | Retired 31 December 2015 28 April 2016 |
John McFarlane succeeded Sir David Walker as Chairman of Barclays with effect from the conclusion of the Barclays PLC AGM in April 2015. John McFarlane held the position of Executive Chairman with effect from 17 July 2015 to 1 December 2015, when Jes Staley took up the position of Group Chief Executive.
| | | 42 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Directors’ report
Other statutory information
Appointment and retirement of Directors The appointment and retirement of Directors is governed by the Company’s Articles of Association (the Articles), the UK Corporate Governance Code (the Code), the Companies Act 2006 and related legislation. The Articles may only be amended by a special resolution of the shareholders. The Board has the power to appoint additional Directors or to fill a casual vacancy amongamongst the Directors. Any such Director holds office only until the next AGM and may offer himself/herself for election.re-election. The Code recommends that all directors of FTSE 350 companies should be subject to annual re-election.re-election and all Directors will stand for election orre-election at the 2017 AGM with the exception of Diane de Saint Victor and Steve Thieke. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 43 |
Governance: Directors’ report Other statutory information Directors’ indemnities Qualifying third party indemnity provisions (as defined by section 234 of the Companies Act 2006) were in force during the course of the financial year ended 31 December 20152016 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. In addition, the Company maintains Directors’ and& Officers’ Liability Insurance which gives appropriate cover for legal action brought against its Directors. Qualifying pension scheme indemnity provisions (as defined by section 235 of the Companies Act 2006) were in force during the course of the financial year ended 31 December 20152016 for the benefit of the then Directors, and at the date of this report are in force for the benefit of directors of Barclays Pension Funds Trustees Limited as Trustee of the Barclays Bank UK Retirement Fund. The directors of the Trustee are indemnified against liability incurred in connection with the Company’scompany’s activities as Trustee of the retirement fund.Barclays Bank UK Retirement Fund. Similarly, qualifying pension scheme indemnities were in force during 20152016 for the benefit of directors of Barclays Executive Schemes Trustees Limited as Trustee of Barclays Bank International Limited Zambia Staff Pension Fund (1965), Barclays Capital International Pension Scheme (No.1), Barclays Capital Funded Unapproved Retirement Benefits Scheme, and Barclays PLC Funded Unapproved Retirement Benefits Scheme. The Directorsdirectors of the Trustee are indemnified against the liability incurred in connection with the Company’scompany’s activities as Trustee of the schemes above. Political donations The Group did not give any money for political purposes in the UK, the rest of the EU or outside 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. In accordance with the US Federal Election Campaign Act, Barclays provides administrative support to a federal Political Action Committee (PAC) in the US funded by the voluntary political contributions of eligible employees. The PAC is not controlled by Barclays and all decisions regarding the amounts and recipients of contributions are directed by a steering committee comprising employees eligible to contribute to the PAC. Contributions to political organisations reported by the PAC during the calendar year 20152016 totalled $79,500 (2014: $103,000)$12,500 (2015: $79,500). Environment Barclays’ climate action programmeBarclays focuses on addressing environmental issues where we believe we have the greatest potential to make a difference. The programme focusesWe focus on managing our own carbon footprint and reducing our absolute carbon emissions,emissions; developing products and services to help enable the transition to alow-carbon economy, and managing the risks of climate change to our operations, clients, customers and society at large. We invest in improving the energy efficiency of our operations and offset the emissions remaining through the purchase of carbon credits. We also have a long-standing commitment to managing the environmental and social risks associated with our lending practices, which is embedded into our credit riskCredit Risk processes. A governance structure is in place to facilitate clear dialogue across the business and with suppliers around
issues of potential environmental and social risk. We have disclosed global greenhouse gas emissions that we are responsible for as set out by the‘The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.2013’. We provide fuller disclosure acrosson (i) financing solutions for the lower carbon economy, (ii) environmental risk management and (iii) management of our carbon emissions withinand environmental footprint in the Barclays Citizenship DataEnvironmental, Social and Governance (ESG) Supplement foundavailable on our website home.barclays/at home. barclays.com/citizenship. | | | | | | | | | | | Reporting yeara 2015 | | Reporting yeara 2014 | | Reporting yeara 2013 | | Comparison yeara 2012 | Global GHG emissionsb | | | | | | | | | Total CO2e (tonnes)b | | 701,600 | | 853,376 | | 1,036,755 | | 1,119,145 | Scope 1 CO2e emissions (tonnes)c | | 65,340 | | 49,939 | | 58,372 | | 47,904 | Scope 2 CO2e emissions (tonnes)d | | 500,086 | | 678,443 | | 791,766 | | 880,995 | Scope 3 CO2e emissions (tonnes)e | | 136,174 | | 124,993 | | 186,616 | | 190,245 | Intensity ratio | | | | | | | | | Total full time employees (FTE) | | 129,400 | | 132,300 | | 139,600 | | 139,200 | Total CO2e per FTE (tonnes) | | 5.42 | | 6.45 | | 7.43 | | 8.04 |
| | | | | | | | | | | | | | | | | | |
| Current reporting yeara 2016 | | |
| Previous reporting yearb 2015 | | |
| Previous reporting yearc 2014 | | |
| Comparison yeard
2013 |
| Global GHG emissions | | | | | | | | | | | | | | | | | Total CO2e (tonnes)e | | | 678,412 | | | | 712,916 | | | | 830,668 | | | | 968,781 | | Scope 1 CO2e emissions (tonnes)f | | | 46,571 | | | | 56,642 | | | | 49,994 | | | | 58,176 | | Scope 2 CO2e emissions (tonnes)g | | | 538,783 | | | | 520,098 | | | | 655,426 | | | | 723,993 | | Scope 3 CO2e emissions (tonnes)h | | | 93,059 | | | | 136,176 | | | | 125,248 | | | | 186,612 | | Intensity Ratioi | | | | | | | | | | | | | | | | | Total full time employees (FTE) | | | 119,300 | | | | 129,400 | | | | 132,300 | | | | 139,600 | | Total CO2e per FTE (tonnes) | | | 5.69 | | | | 5.51 | | | | 6.28 | | | | 6.94 | | Scope 2 market based emissions (tonnes)j | | | 596,198 | | | | | | | | | | | | | |
Notes a | 2015, 2014 and 2013 reporting years cover2016 Reporting Year covers Q4 from the previous year2015 and Q1, 2, 3 of the reporting year in question.2016. The carbon reporting year is not fully aligned to the financial reporting year covered by the Directors’ report. This report is produced earlier than previous carbon reporting to allow us to report within the year end financial reporting timelines. The 2012 reporting year is the full calendar year (Jan 2012 – Dec 2012). |
b | 2015 Reporting Year covers Q4 2014 and Q1, 2, 3 of 2015. |
c | 2014 Reporting Year covers Q4 2013 and Q1, 2, 3 of 2014. |
d | 2013 Reporting Year covers Q4 2012 and Q1, 2, 3 of 2013. |
e | The methodology used to calculate our CO2e emissions is the operational control approach on reporting boundaries and carbon emissions methodology as defined by the World Resources Institute/World Business Council for Sustainable Development (WRI/(WRI / WBCSD) Greenhouse Gas Protocol (GHG): A Corporate Accounting and Reporting Standard, Revised Edition. Where properties are covered by Barclays’Barclays consolidated financial statements but are leased to tenants who are invoiced for utilities, these emissions are not included in the Group GHG calculations. ForWe also capture consumption from properties where Barclays is the tenant, landlords provide Barclays with utility bills which are included in our emissions reporting.yet to be consolidated by Barclays and as such Barclays still is responsible for the utility cost. |
| § | f | Scope 1 covers direct combustion of fuels and company–company owned vehicles (from UK and South Africa only, which areis the most material contributors). Fugitive emissions reported in Scope 1 for 2013 – 2016 cover emissions from Americas, Asia-Pacific and South Africa. Scope 1 fugitive emissions excludes the UK whilst we amend our governance procedures in the UK Business travel is reported in Scope 1. |
| § | g | Scope 2 covers emissions from electricity and steam purchased for own use. Scope 2 emissions are using location based emission factors. Please see line below for Scope 2 Market Based emissions. |
| § | h | Scope 3 covers indirect emissions from business travel (global flights and ground transport) from the UK and South Africa. We have improved our coverage for car hire data and now include data from the US and India. Ground transportation data (excluding Scope 1 company cars) covers those countries where this type of transport is material and robust data is available. |
In cases where we have collected new data for previously unreported consumption, we have restated the baseline if the new data amounts to a material change greater than 1% of the total consumption. If the change is less than 1%, we have reported consumption from the point at which the data became available. If it is greater than 1%, we have restated the baseline and previous years’ figures based on actual or estimated figures. Reasons for restatements in data are due to more accurate data being available which led to replacements of estimates with actual data for 2012, 2013 and 2014.
c | Fugitive emissions reported in Scope 1 for 2015, 2014 and 2013 cover emissions from UK, Americas, Asia-Pacific and South Africa. Fugitive emission data for 2012 is not available. Business travel reported in Scope 1 covers company cars in the UK and South Africa. This covers the majority of our employees where we have retail operations with car fleets. |
d | Scope 2 carbon emissions from electricity have been calculated using location–based carbon conversion factors as defined by the GHG Protocol 2015. We are mindful of the new location and market based methodology for accounting Scope 2 electricity emissions and these emissions will be reported in future reports. |
e | Scope 3 is limited to emissions from business travel which covers global flights and ground transport from the UK and South Africa. We have improved our coverage forAfrica). From 2014 onwards car hire data and now include data fromcovers the USUSA and India. Ground transportation data (excluding Scope 1 company cars) covers only countries where this type of transport is material and data is available. |
i | Intensity ratio calculations have been calculated using location based emission factors only. |
j | Scope 2 Market Based emissions have been reported for 2016 only. |
Research and development In the ordinary course of business the Group develops new products and services in each of its business divisions. | | | 44 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Share capital Share capital structure The Company has ordinary shares in issue. The Company’s Articles also allow for the issuance of sterling, US dollar, euro and yen preference shares (preference shares). No preference shares have been issued as at 2620 February 20162017 (the latest practicable date for inclusion in this report). Ordinary shares therefore represent 100% of the total issued share | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 43 |
capital as at 31 December 20152016 and as at 2620 February 20162017 (the latest practicable date for inclusion in this report). Details of the movement in ordinary share capital during the year can be found in Note31 on page 276.284. Voting Every member who is present in person or represented at any general meeting of the Company, and who is entitled to vote, has one vote on a show of hands. Every proxy present has one vote. The proxy will have one vote for and one vote against a resolution if he/she has been instructed to vote for or against the resolution by different members or in one direction by a member while another member has permitted the proxy discretion as to how to vote. On a poll, every member who is present or represented and who is entitled to vote has one vote for every share held. In the case of joint holders, only the vote of the senior holder (as determined by order in the share register) 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 ‘excepted transfers’)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 excepted transfer of all of the relevant shares to a third party has occurred, or as the Board otherwise determines. 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 Secretary and executed by or on behalf of the transferor. Transfers of uncertificated ordinary shares shall be made in accordance with the Companies Act 2006 and CREST 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 FCA. 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 a single transferee or not more than four joint transferees (except in the case of executors or trustees of a member). In accordance with the provisions of Section 84 of the Small Business, Enterprise and Employment Act 2015, preference shares may only be issued in registered form. Preference shares shall be transferred in writing in any usual or other form approved by the Secretary and executed by or on behalf of the transferor. The Company’s registrar shall register such transfers of preference shares by making the appropriate entries in the register of preference shares. 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 amongamongst 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 (other than any class of shares then in issue ranking in priority to the relevant series 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. 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 a special resolution passed at a separate meeting of the holders of the shares of that class. The rights of shares shall not (unless expressly provided by the rights attached to such shares) be deemed varied by the creation of further shares ranking equally with them or subsequent to them. Limitations on foreign shareholders There are no restrictions imposed by the 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 tonon-residents of the UK and which limit the rights of suchnon-residents to hold or (when entitled to do so) vote the ordinary shares. Exercisability of rights under an employee share scheme 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 Sharepurchase EBT and UK Sharepurchase EBTs may vote in respect of Barclays shares held in the EBTs, but only as instructed by participants 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 EBTs. Special rights There are no persons holding securities that carry special rights with regard to the control of the Company. Major shareholdersa Major shareholders do not have different voting rights from those of other shareholders. Information provided to the Company by majorsubstantial shareholders pursuant to the FCA’s Disclosure RulesGuidance and Transparency Rules (DTRs) are published via a Regulatory Information Service and is available on the Company’s website. As at 31 December 2015,2016, the Company had been notified under Rule 5 of the DTRsDisclosure Guidance and Transparency Rules of the following holdings of voting rights in its shares. | Person interested | | Number of Barclays shares | | % of total voting rights attaching to issued share capitala | |
| Number of
Barclays shares |
| |
| % of total
voting rights attaching to issued share capitala |
| The Capital Group Companies Incb | | 1,172,090,125 | | 6.98 | | The Capital Group Companies Inc.b | | | | 1,172,090,125 | | | | 6.98 | | Qatar Holding LLCc | | 813,964,522 | | 6.65 | | | 1,017,455,690 | | | | 5.99 | | BlackRock, Inc.d | | 822,938,075 | | 5.02 | | | 922,509,972 | | | | 5.45 | | Norges Bank | | 506,870,056 | | 3.02 | | | 512,348,359 | | | | 3.03 | |
Notes a | Significant shareholders for the last 3 years are shown on page 323.331. |
b | The percentage of voting rights detailed above was calculated at the time of the relevant disclosures made in accordance with Rule 5 of the DTR.Disclosure Guidance and Transparency Rules. |
c | The Capital Group Companies Inc (CG) holds its shares via CG Management companies and funds. Part of the CG holding is held as American Depositary Receipts. |
d | Qatar Holding LLC is wholly ownedwholly-owned by Qatar Investment Authority. |
e | Total shown includes 1,408,6183,860,531 contracts for difference to which voting rights are attached. Part of the holding is held as American Depositary Receipts. On 2519 January 2016,2017, BlackRock, Inc. disclosed by way of a Schedule 13G filed with the SEC, beneficial ownership of 1,109,026,1561,054,988,420 ordinary shares of the Company as of 31 December 2015,2016, representing 6.6%6.2% of that class of shares. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 45 |
Governance: Directors’ report Other Statutory Information Between 31 December 2016 and 20 February 2017 (the latest practicable date for inclusion in this report) the Company was notified that Norges Bank now holds 508,175,594 Barclays shares, representing 2.996% of the total voting rights attached to issued share capital. Powers of Directors to issue or buy back the Company’s shares The powers of the Directors are determined by the Companies Act 2006 and the Company’s Articles. The Directors are authorised to issue and allot shares and to buy back shares subject to annual shareholder approval at the AGM. Such authorities were granted by shareholders at the 20152016 AGM. It will be proposed at the 20162017 AGM that the Directors be granted new authorities to allot and buy back shares. | | | 44 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Directors’ report
Other statutory information
Repurchase of shares The Company did not repurchase any of its ordinary shares during 2015 (2014:2016 (2015: none). As at26 20 February 20162017 (the latest practicable date for inclusion in this report) the Company had an unexpired authority to repurchase ordinary shares up to a maximum of 1,650,234,6021,681m ordinary shares. Change of control There are no significant agreements to which the Company is a party that are affected by a change of control of the Company following a takeover bid. There are no agreements between the Company and its Directors or employees providing for compensation for loss of office or employment that occurs because of a takeover bid. Going concern The Group’s business activities, and financial position, thecapital, factors likely to affect its future development and performance, and its objectives and policies in managing the financial riskrisks to which it is exposed and its capital are discussed in the Risk Management section. The Directors considered it appropriate to prepare the financial statements on a going concern basis. Disclosure of information to the auditor Each Director confirms that, so far as he/she is aware, there is no relevant audit information of which the Company’s auditors are unaware and that each Directorof the Directors has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. This confirmation is given pursuant to section 418 of the Companies Act 2006 and should be interpreted in accordance with and subject to those provisions. Directors’ responsibilities The following statement, which should be read in conjunction with the report of the independent registered public accounting firm set out on page 210,218, 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 groupGroup and individual accounts in accordance with IFRS as adopted by the EU. The accounts are required by law and IFRS to present fairly the financial position and performance 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 211216 to 305,316, and the additional information contained on pages 11186 to 182,189, 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. Having taken all the matters considered by the Board and brought to the attention of the Board during the year into account, the Directors are satisfied that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company’s position and performance, business model and strategy. Directors’ responsibility statement 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 are responsible for the maintenance and integrity of the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. The Directors have a 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. The Directors, whose names and functions are set out on pages 3 and 4, 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 the Company and the undertakings included in the consolidation taken as a whole, and
(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 the Company 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 3 to 45, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
(b) | the management report, which is incorporated in the Directors’ Report on pages 2 to 46, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face. |
By order of the Board Lawrence DickinsonClaire Davies
Company Secretary 2922 February 2016
Barclays PLC2017
Registered in England, England. Company No. 48839 | | | | | 46 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 45 | | |
GovernanceGovernance: People
People
During 2015 we have continued our work to enhance support for our colleagues in their careersCulture and to enable them to contribute to the long-term success of Barclays.
Culture, values and learningValues
We are four years into our third year ofa cultural change journey at Barclays. WeOver this period we have defined a common set of Values and Behavioursvalues and embedded them into our core people processes so thatacross the organisation, ensuring they are recognised and understood by our colleagues. Having setemployees. We recognise that fostering the tone fromright culture at Barclays is critical to our success and we have placed continued focus on the top by driving cultural changeimportance of a values based culture to the organisation. Early in 2016 conduct, culture and values was established as one of the strategic priorities for the year, and within that we have developed a culture measurement framework to manage and measure progress in embedding a values based culture across Barclays. This framework is anchored in our values and through quarterly indicators and insights we are able to assess what we are doing well and where we might need to focus attention and prioritise management action across our businesses and functions. The quarterly indicators and insights are presented to the Board Reputation Committee and the Group Executive Committee and business/ functionalshared with our senior leaders,leadership teams with a view to becoming an integral part of our regular management reporting so that we can ensure our priorities and decisions are focused in the right areas. The insights from the indicators and metrics within the culture measurement framework this year support the view that our ongoing efforts are having a positive impact in continuing to create a culture that will help us build the Barclays of the future. Your View Engagement of our employees is one of the key indicators of cultural health and we recognise the importance of listening to our colleagues and maintaining an open,two-way dialogue. The views of our colleagues shape the decisions we make, helping us create an environment in which colleagues want to work, and which in turn we believe will drive high performance. To ensure that we constantly review and reappraise to see what is working, in 2016, the annual Your View survey, our employee opinion survey, became a quarterly pulse survey excluding Africa, providing colleagues the opportunity on a more regular basis to say how it feels to work at Barclays. In the third quarter of the year, we surveyed 50% of all colleagues and the remaining 50% were surveyed in the fourth quarter. Starting from 2017, each quarter 25% of colleagues excluding Africa will be invited to take part in Your View. The Your View results have continued to measure Sustainable Engagement and this year we have deliveredbeen provided with more regular snapshots. The quarterly results were then aggregated at the end of the year into an overall annual picture of engagement. At the end of 2016 Sustainable Engagement of our colleagues has remained stable year on year at 75%. Areas of particular strength from the annual results include: colleagues feeling safe to speak up (81% favourable, up 6% points on 2015); colleagues feeling proud of the contribution Barclays makes to the community and society (88% favourable, up 3% points on 2015) and employees feeling respected regardless of their job (83% favourable, up 4% points on 2015). In addition, the commitment and discretionary effort of employees continues to be very high with 94% saying they believe they work beyond what is required of them to help Barclays succeed. Along with the insights from the quarterly indicators within the culture measurement framework, these results evidence that we continue to make strong progress in embedding a number of group-wide initiatives to embedvalues based culture across the organisational culture. bank. Leadership and Learning Our leadership development programme isand learning solutions are underpinned by our Values, and ensures all senior management are aware of,values and are enabledfocused on supporting our colleagues to role model our Valuesdevelop critical skills and Behaviours.capabilities. Both the Barclays Leadership Academy and theour Global Curriculum which providesprovide colleagues with development resources, focusedthrough a variety of formats and content. In 2016 our employees spent an average of 40 hours each on personal and behavioural skill,training through formal programmes, in addition to having access to many other informal learning opportunities that are widely available and provide a consistent approach to core and leadership development. not captured through our learning management system. We continue to assess candidate alignment to our Values and Behaviours through our recruitment and promotion processes and we also ensure new joiners attend the ‘Being Barclays’ Global Induction programme, which provides anin-depth experience of the Values and life at Barclays.Values. All colleagues are required to attest and demonstrate their understanding of expected behaviours through the Global Code of Conduct (The Barclays Way). This year a new event was launched, sponsored by the Group CEO, to begin to develop the next generation of enterprise leaders who actively contribute towards rebuilding the profession of banking through their own leadership and their influence of others. By bringing together high potential senior leaders from across our businesses and functions we seek to strengthen collaboration and an enterprise wide perspective amongst our senior leaders to deliver improved solutions and products for our customers and clients. We have continued to launch and refresh learning and leadership initiatives with particular focus on supporting the development of line managers. Examples include our Manager Excellence Programme, the iLead programme for high potential Directors, and the Senior Leadership Development programme in the Banking business. All our leadership development activities follow a common principle of leaders teaching leaders, creating opportunities for knowledge sharing across different parts of Barclays. Early careers and apprenticeships Barclays is committed to helping young people achieve their ambitions when they enter the world of work so ourwhether they are a young person entering the workplace for the first time or an experienced professional seeking to develop new skills. Barclays Early Careers proposition includes graduate, internship and apprenticeship programmes which provide structured support to young people. In 2015,and in 2016 we launched our Bolder Apprenticeship Programme, targeting long-term unemployed adultshired over the age of 24, which is the first of its kind in the UK750 interns and underlines our commitment to tackling societal issues and attracting diverse talent. 700 graduates. Since 2012 we have created over 3,000 apprenticeships. We provide pathways for progression from apprentice to graduate supported by recognised qualifications and, in doing so, help to create an internal talent pipeline. In 2015, Barclays hired The ambition in 2016 for our apprenticeship programmes was to widen accessibility and ensure our programmes are fully inclusive. We expanded our Bolder Apprenticeship Programme, targeting long-term unemployed adults over 1,000 interns, 800 graduatesthe age of 24, and we also piloted our Able to Enable Programme targeting the long-term unemployed who have created over 2,500 apprenticeships since 2013. During 2015a disability. These programmes along with our place on the UK Government’s Apprenticeship Delivery Board reflect our commitment to tackling societal issues and attracting diverse talent. Throughout 2016 we increasedhave continued to receive external recognition for our genderapprenticeship programmes. We have transformed the way we recruit for our EMEA Internship and Graduate programmes to deliver an improved candidate experience and to ensure that we are assessing candidates against the right skills and qualities. This recruitment process helps to drive diversity acrossand inclusion as students are able to demonstrate ability and potential throughout the process so that recruitment outcomes are based on performance and not on the basis of academic grades, universities attended and previous work experience. This year in the Americas we rolled out our first ‘Sophomore Springboard’ programme aimed at preparing a diverse range of students for an internship programmes by 8%in their junior year. This was the first phase of a two year strategy to 42% female representation.identify diverse talent early on. My CareerIndustrial relations
Barclays has a long-standing partnership approach to industrial relations and mentoring tool Colleague development, both personalwe value the relationships we have with over 30 trade unions, works councils and professional,staff associations around the world. Within the UK we have a formal partnership with Unite which has been a priority in 2015. We launchedplace for over 15 years and is one of the ‘My Career’ online portal which provideslongest standing partnerships in the UK. Throughout 2016, we have continued to have regular, constructive dialogue with employee representatives on a wide range of informationtopics that impact our employees in order to seek their feedback prior to implementation. Regional consultation forums have also provided a platform for bringing together and tools to help colleagues understand their potential and make informed career decisions. We recogniseengaging employee representatives on a wide range of topics that affect the importanceinterests of great mentor relationships and have deployed an online tool to match mentors and mentees based on skill sets and experience.
Wellbeing
Our new global wellbeing programme, ‘Be Well’ launched in 2015, aiming to support employee engagement and improve health and well-being. The programme includes existing health and well-being resources, as well as new investment in areas such as employee health screenings, a global speaker series and a new global portal which acts as a gateway to education materials and events.
Performance management
Colleagues are encouraged to align their objectives to business and team goals and behavioural expectations are set in relation to our Values. Performance is assessed against both ‘what’ colleagues do and ‘how’ they do it. The ‘Values in Action’ framework provides all colleagues with the tools to assess ‘what’ objectives they achieved and ‘how’ they achieved them, together with a guide on expected behaviours in line with the Values. Our global recognition plan allows colleagues to recognise the outstanding achievements of those who have demonstrated our Values, with over 188,500 colleagues receiving a Values ‘Thank You’ in 2015.employees.
Managing change Where business restructuring has beenis necessary to support the transformation of our business and cost profile,strategy, we have consulted on potential job lossesproposals with our recognised trade unions or employee representatives, as well as theforums and impacted individuals. Our aim has beenemployees, prior to implementation. In line with our Values and to ensure we treat all colleagues with respect, andwe seek to avoid compulsory redundancies wherever possible.possible and we try to find ways in which we can achieve this during consultation. We have placedcontinue to place significant emphasis on both voluntary redundancy programmes as well as internal redeployment via “Internals First”. through our ‘Internals First’ programme. Internals First supports colleagues who have been impacted by change and provides individual support to ensure that we retain talent within | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 47 |
Governance: People Barclays. Internals First is deployed in all our main locations and is managed by a dedicated team. In 2015, 9352016, over 1,000 colleagues registered for Internals First support and we redeployed 39%32% of them within Barclays. Throughout 2015,2016, colleagues have attended Internals First Careercareers and Networking Eventsnetworking events and opted for outplacement support services. During 2015, we also developed ‘Be Informed’, which is available on both desktop and mobile devices. This intuitive support site gives transparent and helpful advice for colleagues who are impacted by change, including how to manage change, further career options available to them and where to go for help and support during periods of uncertainty.
When an employee does leave Barclays as a consequence of restructuring, our commitment is to ensure that they are given the best support for the next stage in their career and life. Following an extensive review,career. To achieve this, Barclays provides a new globally consistentglobal career transition service has been implemented which offers personalised advice and support for all employees placed at risk of redundancy. We also hope to keep in touch with former colleagues through the Barclays Global Alumni Programme which provides a platform for current and former employees to connect with Barclays and one another through global networking events, monthlye-newsletters and access to career opportunities. Industrial relationsInternal Mobility
During 2016 internal mobility has been a key focus. Being able to attract and retain talented individuals, as well as provide them with the opportunity to take control of their career and development at Barclays is one of our most important ambitions. Our aim is that by supporting internal mobility across Barclays and making it simple and easy for colleagues to move internally, we are successfully retaining and developing our internal talent. To promote this and provide colleagues with opportunities to broaden their experience, the Group CEO launched ‘Apply Within’, our internal mobility programme, early in 2016. We have developed multiple tools and resources for colleagues to find new internal career opportunities and for managers to find and assess suitable internal candidates. Global careers fairs, the Barclays Mentoring Tool and enhancements to the ‘My Career’ online portal, which was launched in 2015, are part of the campaign. Thousands of colleagues have visited the ‘My Career’ portal this year to update career profiles, upload CVs and import LinkedIn profiles and our Resourcing teams have sought to match vacant roles to colleagues’ skills and aspirations. We have increased our internal recruitment percentage to 48% firm wide (excluding Africa). Wellbeing By actively supporting employees to be healthy and happy, we will deliver better outcomes for colleagues, for Barclays and for society. Our global wellbeing programme ‘Be Well’ launched in 2015 and has focused on health education, a Global Speaker Series, health risk identification, prevention and management as well as new leadership and management programmes to help line managers support colleagues. The insights developed this year through our wellbeing programme help to identify themes and areas to focus on in 2017. Performance Management Barclays approach to performance management is key to enabling the delivery of our strategy and to continue to embed a values-based culture. Colleagues align their objectives (‘what’ they will deliver) to business and team goals to support the delivery of our strategy and good customer outcomes. Behavioural expectations (‘how’ they will achieve their objectives) are set in the context of our Values. This year we have enhanced the focus on balancing the ‘what’ and the ‘how’ through the launch of our ‘Let’s talk about how’ campaign to remind colleagues that ‘how’ they achieve their objectives is just as important as ‘what’ they achieve. Both the campaign and the ‘Values in Action’ framework provide tools and resources for colleagues to bring to life the behaviours that underpin our Values and to enhance the quality of performance reviews. Our global recognition programme provides colleagues the opportunity to recognise the outstanding achievements of those who have demonstrated our Values. We continue to advocate and practisesee a partnership approach to industrial relations and valueyear on year increase in the relationships we havenumber of colleagues receiving a Values ‘Thank You’ message from a fellow colleague, with over 30 trade unions, works councils and staff associations around250,000 sent in 2016. Colleagues are also encouraged to be involved with the world. In particular,company’s performance by participating in our formal partnership with Unite since 2000 is one of the longest standing in the UK. During 2015, weall-employee share plans, which have continued to have regular, constructive dialogue with employee representatives on a wide range of topics that affect employees, facilitated through established regional consultation forums which bring together representatives from across our businesses. We are confident that through all these established core people processes and others, we have created the right landscape at Barclays to sustain the desired organisational culture. We also believe that while we have a common purpose, Values, and vision, this can mean different thingsbeen running successfully for different parts of our business and so we need to continue to shape our culture in a way that makes sense for each of our business areas. To that end, in 2015, each business CEO was tasked with driving the organisational culture for their business and we supported this by deploying business-specific training academies across the Group. This will continue into 2016.
| | | 46 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance
People
Your Viewover 10 years.
Barclays’ recognises the importance of listening to our colleagues and maintaining open, two-way dialogues between the organisation and colleagues. The views of our colleagues shape the decisions we make, helping us create an environment that colleagues want to work in, which we in turn believe will help drive high performance.
We deployed a global colleague survey, ‘Your View’ once again in 2015 to seek the views of colleagues. This year’s survey was more focused, based on the insights derived from the previous year’s survey, and asked for our colleagues’ views on a range of topics, including our Values, leadership and line management, the working environment, and citizenship. The results showed a near-universal understanding among colleagues of the Values and related behaviours (97% favourable) with 81% agreeing that role modelling the Values is central to creating the right culture at Barclays.
Compared to 2014, colleagues feel an increased sense of job accomplishment and enthusiasm, believe more strongly in Barclays’ goals, and are more likely to recommend Barclays as a place to work. Sustainable Engagement is at 75%, a 3% increase compared to 2014. This is a strong result, suggesting action taken during 2015 is having an impact, notwithstanding the continued and sustained change we have experienced. We have performed an in-depth review of the results of the survey with all senior leaders, and will continue to focus our efforts on improving employee engagement in 2016.
Barclays regularly updates employees regarding the financial and economic factors affecting the company’s performance throughout the year, using a variety of communications channels. These include CEO and senior leader email communications, line manager briefing packs, video interviews and talking points which are distributed to employees every quarter to coincide with Barclays’ financial reporting calendar. They are all designed to build awareness and understanding of Barclays’ results and the broader macroeconomic environment, and to drive dialogue around what the figures mean and how employees should respond.dialogue. We also hold a variety of events for all employees across each business division and function throughout the year, which provide employees the chance to hear directly from the CEO ExCo member or leaderand the Group Executive Committee and to ask them questions. We have also recently introduced an ‘Ask the Experts’ communication which gives perspectives from across the bank on what Barclays’ results mean and how they are received by different stakeholders such as investors, politicians and the media. stakeholders. Flagship campaigns are released to all employees each quarter, covering topics such as wellbeing, recognition and dynamic working. Each quarter, colleagues and managers receive interactive updatesworking to raise awareness of the tools being introduced to help them develop their careers at Barclays and to provide them with the opportunity to understand and engage in employee initiatives. Colleagues are also kept informed through regular intranet and email updates about the progress Barclays is making across activity such as our Diversity and Inclusion agenda,and Performance Management and annual Pay and Reward processes.Management. Employees are invited to share their opinion on what it is like to work at Barclays through regular interactive events with senior leaders. These events provide employees with the opportunity to discuss their perspective on a range of areas to help senior management understand what is working well and where we need to improve. Any changes that are implemented as a result of colleague feedback are communicated through leadership briefings and engagement initiatives at an individual business/function level. Colleagues are also encouraged to be involved with the company’s performance by participating in Barclays all-employee shareplans, which have been running successfully for over 10 years. Further details of our approach to remuneration are included in the Remuneration Report pages 53across each business and 54.function.
Diversity and inclusionInclusion Barclays’ global Diversity and Inclusion (D&I) strategy sets outestablishes objectives, initiatives and frames our plans foracross each of five core pillars: Gender, LGBT, Disability, Multicultural and Multigenerational. CentralAs an organisation we remain focussed on increasing the diversity of our employees and by continuing to each pillar is buildingfoster an inclusive culture we seek to ensure that employees of all backgrounds are treated equally and have the opportunity to be successful. In recognition of this in 2016 we have continued to develop opportunities to attract and retain a diverse pipeline of talented employees across the bank. This year we have launched new initiatives including our ‘Encore!’ Returnship Programme which offers leadership development and training opportunities to professionals who have taken a career break and are looking to re-enter the workforce. Also launched in 2016 is whyour Able to Enable apprenticeship initiative which targets the long-term unemployed who have a disability. Working with Remploy and by providing a bespoke, supportive selection process, which includes a 13 week development experience, we continuehope to provide opportunities for this population. In June we announced enhancements to our US Leave of Absence policies for Childcare and Military Leave, supporting our commitment to creating a diverse and inclusive environment through policies that help employees successfully integrate their profession and personal lives. Providing leadership development to ensure we are continuing to build leadership competency aboutan inclusive work environment is paramount to our diversity strategy and in 2016 our Unconscious Bias and have had more than 10,000 participants undertake the training. Following our 2014 programmeTraining, previously delivered to engageover 8,000 senior leaders, was deployed to our ‘Everyday Ism’s’ programme has this year opened up dialoguejunior populations with colleagues more widely focusing on stereotypes, assumptions and bias.over 1,900 attending workshops to date. An important aspect of our D&I agenda is ensuring people from all backgrounds have equal opportunity to join, and progress through, our organisation. In support of this, we have established candidate shortlist diversity goals for senior positions to provide focus during talent decisions, and ensure hiring panels are diverse to broaden assessment perspectives.
This ethos begins with our most senior roles. Having achieved the target we set ourselves in 2012 to increase Board level diversity to 25%, we have now challenged ourselves to achieve a minimum of 33% by 2020. To strengthen the pipeline, we have consecutively achieved our year on year goals towards representation of women in senior roles to 26% by 2018. We always have more to do, but are pleased when our progress towards greater inclusion is recognised. During 2015,2016, we continued to receive national and international recognition from respected organisations such as Stonewallthe Business Disability Forum in the UK, Working MotherHuman Rights Campaign in the US and Community Business in Asia have praisedfor our programmes and achievements, citing our D&I work as innovative, robust and robust.sustainable.
Gender Sustaining progress towards our Balanced Scorecard and Board Diversity goalsincreasing female representation at all levels across Barclays remains a core focus. focus of our talent management and leadership succession processes. Across our organisation and the financial services industry we hope to see more females in senior roles and we are determined to enable women to fulfil their career aspirations. As referenced in the Board Nominations Committee section on pages 29 to 35 we revised our Board Diversity Policy in 2015 to reflect our new target of minimum 33% female representation on our Board by 2020. | | | 48 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Our Board membership currently has increased31% female representation, reflecting that we are on track to four women, with one woman on Group Executive Committee. Ourmeet our 2020 target. As a founding signatory of the HM Treasury Women in Leadership Charter and supporter of the Hampton-Alexander Review we proactively set gender targets and at the end of 2016 female representation across the senior leadership population stood at 23% at24% representing the third consecutiveyear-on-year increase and progress towards our 2018 Women in Leadership goal of 26%. In line with the recommendations from the Hampton-Alexander Review, from 2017, we will publish the combined number of women on the Group Executive Committee and in the direct reports to the Executive Committee. At the end of 2015 representing a consecutive 1% increase year-on-year since 2011.2016 female representation across this population stood at 25%. We will also use the review output to inform the update of our Women are also leading countries where we operate, for example in Ireland, Brazil, Singapore, Botswana and Gibraltar.Leadership targets. At all levels our gender pipeline is strengtheninghas continued to strengthen thanks to extensive programmes which focus on building capability and fostering gender intelligence. Our internal HeForShe campaign,capacity, such as our Global Women in partnershipLeadership conference with over 5,000 colleagues participating, the ‘Encore!’ Returnship Programme and the number of female graduate hires we have made increasing from 31% in 2014 to 39% in 2016. The Barclays Women’s Initiatives Network (WiN) also provides targeted development and networking opportunities such as group mentoring, careers fairs, and events helping to connect both junior and senior colleagues from across the organisation. Recognising our efforts, we were invited to be a corporate IMPACT champion by the United Nations asksin their HeForShe campaign on gender equality. Internally we have asked colleagues to pledgeshow their support by pledging a specific commitment that will contribute to gender parity. Since launching HeForShe, 60% of new Women’s Initiative Network members have beenare male and men have also taken active rolesmany are now taking a more visible role as mentors and sponsors. Also new this year issponsors, helping to contribute towards gender diversity and greater inclusion. Staying at the vanguard of good practice requires sustained commitment and we value independent assessment that allows us to calibrate our Returnship programme which is enabling senior women who needed to pause their career, the opportunity to refresh their skills and confidence in preparation for a return to leadership roles.approach. For the eighthninth year running, we were pleased to be included in The Times Top 50 Workplaces for Women in the UK, and for the thirdfourth successive year to be named in ‘Working Mother’ 100 Best Companies in the US.
Female representation
Above shows the positive change in female representation within Barclays from 2014 (H2) to 2015 (H2)
LGBT An inclusive culture is vital for colleagues to have the freedom and choice to bring their whole selves to work, and in particular for people to be open about their sexual orientation if they choose to. Our Your View survey saw 5% of global colleagues identifying as being LGBT globally, a 1% increase since 2014.work. Enabling that culture, are our Global‘Spectrum Allies’- colleagues who are committed to inclusion and equality. By educating others and visibly supporting equality, allies help to make LGBT colleagues, friends and family feel safer and more comfortable in leading their lives. The Spectrum Allies –campaign has identified over 7,000 colleagues from every region who share our commitment toglobally as LGBT equality and who take an active roleallies in shaping an LGBT-inclusive workplace. The Allies programme is led by Spectrum, our employee network for anyone interested in LGBT matters. Since 2001, Spectrum has been an important contributor of insight and innovation and now connects colleagues across the world, with the Spectrum App providing access outside the workplace. 2016. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 47 |
‘#PrideHeroes’#nofilter’ was the theme of Pride in London 2016, which we were againproud to be the lead sponsorsheadline sponsor of in 2015.for the third consecutive year. More than 4001,100 colleagues, leaders, friends and family came together for Pride with many more joining other events acrossin London and hundreds of colleagues marched at the head of the parade in June. Events for our regionscolleagues, customers and clients took place throughout June to celebrate Pride month, and a partnership between the BUK Marketing Team and Thomson Reuters resulted in a successful social media campaign, including over 10,000 downloads of operation. A specially ‘Pride wrapped’ DLR train carried the ‘#RidewithPride’ message acrossPride in London with ATM’s up and down the UK communicating our support for LGBT equality.smartphone application, in which Barclays’ ‘nofilter’ advert was highlighted. Barclays ATM messaging also conveyed our advocacy for IDAHOBIT (International Day Against Homophobia, Biphobia and Transphobia). For and for World AIDSAids Day, £ for £ matching augmented colleague fundraising for organisations leading on the treatment and prevention of AIDS.HIV and Aids. Independent recognition reflects the sustained impact of our global work and further motivates us to continue to shape our culture so that colleagues can be themselves at work. In Singapore, we won best LGBT employee network at this year’s ALMA Awards, and Stonewall continue to name us as one of just eight ‘Star Performer’ organisations that are seen as leaders globally. Colleagues across a range of levelsRole-model colleagues were this year recognised in the Financial Times OUTstanding list of 100 LGBT business leaders, and in the Pride Power List. Awards simply serve to motivate us to continue to shape our culture so that colleagues really can bring their whole selves to work. Through the Your View survey we provide colleagues with the opportunity to identify as being LGBT, with 3% of colleagues identifying as being LGBT in 2016. Disability Our aspiration to become ‘the most accessible bank’ remains firm. Understanding where we need to focus attention is key which is why we valueProgressing our Disability Listening forums to bring together colleagues who have insightaim, this year in partnership with those who have influence to turn ideas into action. We listen to our customers too, directly and via our external partners – from RNIB to Leonard Cheshire – as partthe Lord Mayor of our continual improvement ethos. Their feedback contributed to us becoming the first bank to receive an accreditation from AbilityNet for our Mobile Banking app, reflecting its improved accessibility functionality. In another first, we successfully launched our Return on Disability Exchange Traded Notes (ETNs) on the New York Arca Stock Exchange. The ETNs are a first of a kind investment product, linked to the performance of an index developed in conjunction with The Return on Disability Group. They provide investors with exposure to US based companies that have acted to attract and serve people with disabilities, and their friends and family, as customers and employees.
Continually improving our own workplace is a steadfast aim, and is whyCity we expanded our internal campaign, ‘This Is Me’ from a UK, into the City of London to a global campaign. Originally focused onencourage other organisations to join in eliminating the stigma associated with mental health throughissues. Over 70 organisations have already signed up for ‘This Is Me’ colleagues tell their stories as to how disability touches their lives.is Me in The stories told via ‘This Is Me’ included members ofCity’. Through our Reach employee network, which connects anyone interested in disability. The inclusive culture enabled by Reach is instrumental in helping us attract people whocorporate accessibility portal, we have a disability, so that they bring their talent to us. Our apprenticeship programme is just one career route that we are ensuring is fully accessible to all.
Awardsnow made our learning on accessibility and recognition from exemplar organisations, including the Business Disability Forum, indicates that we are fast moving towards our own ‘most accessible’ ambition but we want to share learning with others. To celebrate and recognise the 25th anniversary of the American Disability Act (ADA), we partnered with the New York Mayor’s Office to host the only B2B event in the ADA calendar to stimulate thought leadership and encourage partnership. Our Your view Survey saw over 6% of colleagues identifying as having a disability globally, a 1 percentage point improvement from previous year results.inclusion available for any organisation.
We recognise ability is multi-faceted. Wegive continued to give full and fair consideration to applications from candidates who may have a disability. Our people processes ensure all colleagues can progress their careers, with comprehensive training and development including our Disability Confident eLearning, and through tailored and needs-based workplace adjustments where relevant. This year we reviewed our Workplace Adjustment process to make it simpler and easier for colleagues and our Adjustment Passport outlines colleagues’ reasonable adjustments to eliminate the need for colleagues to inform new line managers and to increase the ease of internal mobility. Employees who become disabled during their employment with us can access a full range of services and support ensuring where-ever possible, we retain their talent. Ongoing reviews ensure adjustments are updated and relevant Our efforts were recognised when Barclays achieved 98% in the Business Disability Forum’s world-renown Disability Standard – the highest ever score awarded to individual requirements, providingany organisation since the ability for colleagues to move between roles with consistent support.introduction of the Disability Standard in 2004. Multigenerational We benefit from the diverse perspectives of employees from five generations and need to ensure our workplace is inclusive for all. ‘Work’ and ‘place’ are increasingly becoming less co-joined, with shifts in technology and generational expectations requiring us to think and act differently. Dynamic Working, our signature campaign relevant to colleagues’colleagues every life stagesstage with the strapline of ‘how do your work your life’, encourages dialogue aboutis encouraging the integration of personal and professional responsibilities through smarter working. With flexibility and agility at the core, more than 12,000 line managers and their teams have participated in workshops, presentations and training to open up discussions about how work could be done differently.patterns. Multigenerational
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 49 |
Above shows the different generations working at Barclays and the percentage change over 2014 (H2) and 2015 (H2)Governance: People
As an example of our commitment to colleagues in different life stages, we are one of the eight founding members in the Equality and Human Rights Commissions (EHRC) Working Forward campaign that aims to make British workplaces the best they can be for pregnant women and working mothers. Our Working Families network is supporting the campaign by running integration workshops for returners from parental and adoption leave. The Emerge network supports colleagues early in their career or new to financial services and the multigenerational composition of our workforce. This year a global reverse mentoring programme was launched with over 200 successful reverse mentoring partnerships established. Our Bolder Apprentice Programme continues to grow and our Returnship programmes, both in the UK and US, are proving to be successful. Changing careers is anotheralso important, time, which is why our Armed Forces Transitioning, Employment and Rehabilitation (AFTER) programme also continued to seeex-military talent join our company, or be supported to gain relevant work-ready skills. OurSince the programme began in 2010 AFTER has assisted over 4,000 veterans in employment transition, we have hired nearly 400ex-military talent and over £4m has been donated to military charities to assist wounded and injured personnel in employment transition. Meanwhile, our ‘LifeSkills’ programmeprogrammes continue to prepare young people for their first steps into the world of work andwork. Working Families UK recognised Barclays for best embedded workplace flexibility through our Emerge network ensures new joiners, whatever their career stage, feel connected from the moment they arrive. Dynamic Working Campaign. In Singapore, we won the Most Empowering Company for Mums award by the National Trades Union Congress, while in the US we were included in the ‘100 Best Companies for Working Mothers’. In the UK, our approach to Talent Attractiontalent attraction was recognised by Working Mums as well as by Business In the Community who felt our apprenticeship and ‘LifeSkills’ programmes were award winning.Community. | | | 48 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance
People
Multicultural Our
Barclays global footprint covers more than 50 countries, makingmakes multicultural inclusion imperative. Fostering cross-cultural connections is enabled by Embrace our multicultural network which brings together all those who share an interest in all aspects of race, ethnicity, nationalitynetwork. Through the year Embrace has partnered with leaders and faith. Embrace took an active role in Interfaith week, when leaders hostedengaged colleagues across our global community to host discussions to gain insight and ideas foron how we can better servingserve our multicultural customers and clients, and for engaging colleagues across our global community.clients. Embrace also helped us mark important cultural and religious calendar dates throughout 20152016 such as Diwali and Eid, creating communications and events to bring to life the rich multicultural diversity of our people. Day-to-day,Day to day, this diversity is enabled by, for example, a dedicated quiet roomrooms in many of our larger sites for prayer and reflection, and by serving halal and kosher food in our canteens. Barclays Apprenticeship Programme reflects our commitment to recruit a diverse workforce. Since the programme launched in 2012, we have recruited over 3,000 apprentices who are considered NEET (Not in Education, Employment or Training). 30% identify as Black, Asian and Minority Ethnic, which is 19% higher than the national apprenticeship average of 11%. In addition, 43% of our apprentices are from a disadvantaged area, as defined by the Department of Education. Through this scheme we are making a positive impact on both youth unemployment and social mobility. Ensuring Black, Asian and Minority Ethnic (BAME) female entrepreneurs can sustain and develop their businesses has been a shared focus via our partnership with the UK Women’s Business Council, and in 20152016 we also supported the Black British Business Awards to celebrate the achievements of BAME leaders in the UK. Insight from BAME colleagues has been put into practice for our attraction and recruitment processes, including profiling available roles in jobsites dedicated to The multicultural profile of the diverse job-seeker and targeting high calibre candidates for our apprenticeship programmes. 26% of our Bolder apprentices have been from a BAME background, evidencing our engagement approach is working but we will continue to strive to ensure our workforce is representative of our communities.
Multicultural
Above shows the percentage of underrepresented populations that make up our global and regional populations. Note that underrepresented populations are defined regionally to ensure inclusionorganisation was acknowledged externally with all groupssenior leader role models recognised in the workplace
a | UK includes Asian, Mixed, Black, Other and Non-disclosed. |
b | US includes Hispanic/Latino, Asian, Mixed, Black, Other and Non-disclosed. |
c | South Africa includes African, Indian, Coloured, Other, and Non-disclosed. |
top 100 inaugural ‘UPstanding Executive Power List’ of BAME leaders in the UK and US and in the Powerlist an annual publication of Britain’s most influential people of African and African Caribbean heritage. FTEPermanent Employees by region
| | | | 2015 | | | | 2014 | | | | 2013 | | | | 2016 | | | | 2015 | | | | 2014 | | United Kingdom | | | 49,000 | | | | 48,600 | | | | 54,400 | | | | 46,400 | | | | 49,000 | | | | 48,600 | | Continental Eurpe | | | 7,400 | | | | 9,900 | | | | 9,800 | | | Continental Europe | | | | 4,700 | | | | 7,400 | | | | 9,900 | | Americas | | | 10,600 | | | | 10,900 | | | | 11,100 | | | | 9,700 | | | | 10,600 | | | | 10,900 | | Africa and Middle East | | | 43,600 | | | | 44,700 | | | | 45,800 | | | | 42,800 | | | | 43,600 | | | | 44,700 | | Asia Pacific | | | 18,000 | | | | 18,200 | | | | 18,500 | | | | 15,700 | | | | 18,800 | | | | 18,200 | | Total | | | 129,400 | | | | 132,300 | | | | 139,600 | | | | 119,300 | | | | 129,400 | | | | 132,300 | |
| | | 50 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Governance: Remuneration report Annual statement from the Chairman of the Board Remuneration Committee Summary “We remain focused on aligning our pay to performance and setting pay at a level which allows us to attract, retain and motivate, but is no more than necessary to ensure that we accelerate the delivery of shareholder value. The inherent tension between these important considerations continues to be a key component of the Committee’s deliberations.” | Remuneration Committee members Chairman Crawford Gillies Members Tim Breedon Mary Francis (from November 2016) Dambisa Moyo Steve Thieke (until March 2016) |
| | | | | Contents | | | | | | | | Page | | Annual statement | | | 51 | | New Directors’ remuneration policy – at a glance | | | 53 | | 2016 incentives | | | 55 | | Remuneration policy for all employees | | | 57 | | Directors’ remuneration policy | | | 60 | | Annual report on Directors’ remuneration | | | 73 | | Additional remuneration disclosures | | | 85 | | The tables marked ‘audited’ in the report have been audited by PricewaterhouseCoopers LLP | |
Dear Fellow Shareholders As Chairman of the Board Remuneration Committee, I am pleased to introduce the Remuneration report for 2016. I set out below the business context which influenced the major decisions taken by the Committee for the year. This year’s report also includes a new Directors’ remuneration policy, which has been updated for regulatory changes, and simplified where possible. Performance and pay We remain focused on aligning our pay to performance and setting pay at a level which allows us to attract, retain and motivate, but is no more than necessary to ensure that we accelerate the delivery of shareholder value. The inherent tension between these important considerations continues to be a key component of the Committee’s deliberations. 2016 represented a year of strong progress against our strategy. We have moved a step closer towards completing the restructuring of Barclays – a restructuring that will create a simplified bank focused on delivering long-term sustainable value for all our stakeholders. Our Core businesses are performing well, the rundown ofNon-Core businesses has accelerated and Barclays continues to explore opportunities to reduce its shareholding in BAGL to a level that would permit regulatory deconsolidation. The result will be the creation of a high performing transatlantic consumer, corporate and investment bank. Our Core businesses delivered profit before tax up materially, 60% up compared to 2015. Excluding notable items this increase was 4%, and 10% excluding the impact of changes to our deferral arrangements (further detail overleaf). Core costs of £13.4bn exceeded guidance due to changes to the deferral arrangements. Return on Tangible Equity (RoTE) in our Core businesses has increased to 8.4% in 2016 (2015: 4.8%). Excluding notable items, Core RoTE was 9.4% (2015: 11.2%). Non-Core has executed well against strategy, accelerating the rundown while preserving capital, delivering a £22bn reduction in Risk Weighted Assets. Group profit before tax for 2016 is 182% up from 2015, at £3,230m, in part driven by a material reduction in costs associated with risk and conduct events in 2016. The Group’s capital position continues to strengthen with a 2016 year end CRD IV fully loaded Common Equity Tier 1 (CET1) ratio of 12.4% (2015: 11.4%). The Committee’s deliberations on the 2016 incentive pool reflected Group performance and strategic delivery in both the Core andNon-Core businesses. We reached the decision that an overall Group incentive pool of £1,533m, down slightly from £1,544m in 2015, is appropriate notwithstanding strong 2016 delivery. This level of incentive pool also absorbs the material adverse impact of foreign exchange movements through the year, which more than offset the impact of reductions in staff numbers in the year. The Core compensation to net income (excluding notable items) ratio decreased from 34.0% in 2015 to 32.7% in 2016 excluding the impact of the deferral changes, increasing slightly to 34.7% including the impact of these changes. At a Group level, the ratio increased to 40.2% (2015: 37.7%) driven byNon-Core as it continues to be run down. Risk and conduct The Committee takes risk and conduct issues very seriously and ensures that appropriate adjustments are made at both the individual level and to the incentive pool. Individual performance management reviews assess individuals’ alignment with Barclays’ Values, which in turn impacts individual incentive decisions. Employees who exhibit Barclays’ Values, resulting in positive risk and conduct outcomes, are rewarded accordingly while those who are directly or indirectly accountable for risk and conduct issues have their remuneration adjusted downwards. This includes reductions in current year bonus and, where appropriate, reductions through the application of malus and, going forward, clawback. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 4951 |
Governance: Remuneration report Annual statement from the Chairman of the Board Remuneration Committee
‘The Committee’s priorities are to ensure that Barclays pays for sustainable performance, aligns remuneration with risk and delivers a greater proportion of the income we generate to our shareholders.’
Remuneration Committee members
Chairman
Crawford Gillies (member from 1 May 2014,
Chairman from 24 April 2015)
Sir John Sunderland (until 23 April 2015)
Members
Sir David Walker (until 23 April 2015)
Tim Breedon
Steve Thieke
Dambisa Moyo (from 1 September 2015)
| | | | | Contents
| | | Page
| | | | Annual statement | | | 50 | | At a Glance – Performance and pay | | | 52 | | Remuneration policy for all employees | | | 53 | | 2015 incentives | | | 55 | | Annual report on Directors’ remuneration | | | 59 | | Additional remuneration disclosures | | | 72 | | Directors’ remuneration policy (abridged) | | | 75 | | | | The tables marked ‘audited’ in the report have been audited by PricewaterhouseCoopers LLP
| | | | |
Dear Shareholders
I am pleasedCollective adjustments have also been made to introduce my first Remuneration report as Chairman of the Board Remuneration Committee, having taken over from Sir John Sunderland on 24 April 2015.
The Committee thought carefully about Barclays’ remuneration philosophy during 2015, and we agreed a revised, simplified statement, which articulates Barclays’ overarching approach to remuneration. This is set out in full on page 53 and is the background to our 2015 decisions.
The Committee’s priorities are to ensure that Barclays pays for sustainable performance, aligns remuneration with risk and delivers a greater proportion of the income we generate to our shareholders.
Performance and pay
The Committee’s 2015 pay decisions took full consideration of financial performance, both on an adjusted and a statutory basis, and non-financial performance including progress towards the 2018 targets within the Balanced Scorecard. The Committee also recognised the need to improve returns to shareholders and to accelerate delivery. We are committed to moving this forward in a manner that is consistent with Barclays’ Values to ensure that legacy events are not repeated.
Although there were improvements in the Core operating businesses, adjusted profit before tax was down 2% to £5,403m for 2015. Statutory profit before tax was down 8% at £2,073m. The Group’s capital position has continued to strengthen with a CRD IV fully loaded Common Equity Tier 1 (CET1) ratio of 11.4% and a leverage ratio of 4.5% at the end of the year. Cost targets have been met and Barclays Non-Core has made significant progress in reducing its risk weighted assets.
Against this background, the Group incentive pool for 2015 is again significantly lower than in prior years, down by £191m or 10% in absolute terms at £1,669m compared to the incentive pool of £1,860m for 2014. Similarly, the 2015 Investment Bank incentive pool is down 7%.
Total compensation costs are down 6%, and the compensation to adjusted net income ratio is 37.2%, down from 37.7% in 2014. Compensation to statutory net income ratio is 35.7%, down from 38.5% in 2014. The Core compensation to adjusted net income ratio is also down at 34.7% (2014: 35.7%). For a reconciliation of total incentive awards granted to the relevant income statement charge, see table on page 56.
Risk and conduct
A central feature of our remuneration philosophy is that remuneration must be aligned with risk, and with the conduct expectations of Barclays, our regulators and stakeholders. The Group incentive pool outlined above is after adjustments the Committee has made for both risk and conduct events. In addition to specific material risk and conduct events, we also adjusted the incentive pooland to take account of an overall assessment of a wide range of future risks including conduct,non-financial factors that can support the delivery of a strong risk management and conduct culture and other factors including reputation, impact on customers, markets and other stakeholders.
Changes to deferral arrangements Under existing incentive deferral arrangements, there is a limited relationship betweenin-year performance costs booked and changes in the incentive pool. This is a result of high overall levels of deferral, as well as the way that the costs of those deferrals have been recognised in our accounts. The effect of this is that if we chose – for example – to reduce the incentive pool in a given year due to underperformance, there would be limited impact on costs for the year in question. This lack ofin-year flexibility on such an important cost line is not ideal. From 2016, a change in the recognition timing of deferral costs, together with a harmonisation of deferral levels across the Group will result in improvements to the Group’s operational flexibility going into 2017 and beyond. These changes are described in further detail on page 56. New remuneration policy for 2017 We will be seeking shareholder approval for a new Directors’ remuneration policy (DRP) at the 2017 AGM. The new policy adopts, where possible, a more simplified and transparent approach to remuneration and is more closely aligned to Barclays’ remuneration philosophy. Changes in the policy also address recent regulatory developments in particular the requirement to defer bonuses and Long Term Incentive Plan (LTIP) awards for a period of up to seven years. We have also introduced a robust processnew requirement for considering riskexecutive Directors to hold shares for two years post-termination. The Committee was supportive of an even more simplified approach than that proposed, but the Committee concluded that while this alternative was attractive, there was not yet sufficient clarity on major shareholders’ expectations for us to propose such a change at the present time. The proposed changes to the DRP have been discussed with a number of our larger shareholders and conduct issues as partinstitutional shareholder bodies, and overall they are broadly supportive of individual performance management reviews with outcomes reflected in individual incentive decisions. Individuals who are directly or indirectly accountable for risk and conduct events have had their remuneration adjusted as appropriate. This includes reductions in current year bonus levels and reductions in vesting amountsthe changes. An ‘at a glance’ summary of deferred awards through the application of malus. Further detailsnew policy can be found on page 56.pages 53 and 54 of this report and the full policy is set out on pages 60 to 72. Key remuneration decisions for executive Directors 2015 saw a change in Group Chief Executive. AllBased on the performance of the associated remuneration decisions were made in accordance with the Directors’ remuneration policy approved by our shareholders at the 2014 Annual General Meeting (AGM).
We announced on 28 October 2015 that Jes Staley was to become Group Chief Executive with effect from 1 December 2015. He was appointed on a salary of £1,200,000 and Role Based Pay of £1,150,000 commensurate with market pay levels. He was not eligible for a 2015 bonus or a grant under the 2016-2018 long term incentive plan (LTIP) cycle. The Committee approved the grant of a share ‘buy-out’ award to compensate him for an unvested share award granted to him by a previous employer which was forfeited as a result of him joining Barclays.
| | | 50 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
Annual statement from the Chairman of the Board Remuneration Committee
The award was made on terms aligned to the forfeited award. Jes Staley satisfied, at the date of joining, the executive Directors’ shareholding requirement of four times salary through his personal purchase of 2,790,000 Barclays shares.
During the four month period between Antony Jenkins’ departure as Group Chief Executive and Jes Staley starting in the role, John McFarlane served as Executive Chairman. He indicated to the Committee that he did not wish his remuneration to be increased during that time, and therefore his fee remained unchanged for the period during which he served as Executive Chairman.
The Committee also approved compensation arrangements on Antony Jenkins’ departure as Group Chief Executive during the year. Further details can be found on page 68.
Bonuses for both of the executive Directors in role at the start of 2015 were determined against the financial, Balanced Scorecard and personalperformance measures set at the beginning of the year. Theyear, the Committee approved a pro-rated2016 bonus award of £505,000£1,318,000 (60% of maximum) for Antony Jenkins. A 2015 bonus awardJes Staley and £854,000 (61% of £701,000 was approvedmaximum) for Tushar Morzaria. Tushar Morzaria took on significantly increased executive responsibilities in the second half of 2015 and we regard this bonus as fully deserved in recognition of his strong performance. Further details of the Committee’s 20152016 decisions for the executive Directors are set out on pages 5973 and 74. 70% of Jes Staley’s annual bonus and 60% of Tushar Morzaria’s annual bonus have been deferred in shares. The period over which variable remuneration has been deferred has increased to 61.seven years. Unvested variable remuneration is subject to malus during the vesting period. All variable remuneration awarded to the executive Directors is also subject to clawback for a period of up to 10 years.
DuringThe Committee has agreed that Jes Staley’s Fixed Pay will be unchanged for 2017 at £2,350,000 (2016: salary £1,200,000 and Role Based Pay (RBP) £1,150,000). The Committee has agreed that Tushar Morzaria’s Fixed Pay will be increased to £1,650,000 for 2017 (2016: salary £800,000 and RBP £750,000). In considering the year, we also reviewedappropriate level of Tushar Morzaria’s Total fixed pay (Fixed Pay plus Pension), the Committee took account of the time he has been in role without any increase (over three years), his strong performance and importance to the organisation, and industry market rates for the role. The Committee concluded that an increase of 5.7%, being less than the cumulative increase paid to UK employees over the same period, was warranted but agreed that the executive Directors would not be eligible for any further increase in the next three years (i.e. during the new policy period).
From 2017, Barclays is evolving from the existing Balanced Scorecard approach to one which better reflects progress towards our strategic goals. While many of the performance measures remain consistent with the Balanced Scorecard, the new Performance Measurement Framework allows for a more holistic assessment and broadens our approach to strategicnon-financial measures while retaining a balance of ourkey financial performance measures. The framework has been incorporated into the measures for the 2017 annual bonus and LTIP with effect from the 2017 award. Financial measures will guide 60% of the maximum opportunity for the 2017 annual bonus, and 70% of the maximum opportunity for the 2017 LTIP award. Agenda for 2017 The Committee will continue to ensure they are appropriate givenfocus on ensuring that remuneration is aligned to the delivery of our strategy and alignsustainable shareholder returns. The Committee will also continue to monitor the interestscompetitiveness of executive Directorsour remuneration in the light of recent regulatory changes by the PRA, FCA and shareholders. We have changed the financial measures and given them an increased weighting of 70% for the award to be granted in 2016 and added a comprehensive Risk Scorecard as the new risk measure which will focus on Barclays’ management of principal risks (including Conduct Risk). Before formal approval, we engaged with shareholders on these changes. Tushar Morzaria is the only participant in this LTIP cycle. Further details are set out on pages 62 and 63. Regulatory developments
The volume and pace of regulatory change has continued during 2015.
The PRA made revisions to the Remuneration part of its Rulebook (formerly the UK Remuneration Code) which apply from 1 January 2016. These include the seven, five and three year ‘tiered’ deferral requirements for Senior Managers and different categories of Material Risk Taker (MRT) respectively, and the potential extension of the clawback period to 10 years for Senior Managers (under certain circumstances).EBA. These changes which apply globally to Barclays as a UK-headquartered bank, further emphasisehave compounded the competitive disadvantagesdisadvantage for UK based global firms attributable to the lack of a global level regulatory ‘playing field’.
Further revisionsWe will also continue to progress further our agenda to address pay inequality, further details on page 58, which is in line with the Remuneration part ofproposals in the PRA Rulebook are expected during 2016 as a consequence of the European Banking Authority’s (EBA) final GuidelinesGovernment’s Green Paper on sound remuneration policies.Corporate Governance Reform. The most significant changes include a prohibitionCommittee welcomes this Green Paper and supports its intent to strengthen accountability over executive pay. We have provided our views on the payment of dividends on deferred sharesproposals via an industry response and an increase to a one year (from six months) holding period for incentive awards delivered in shares to the large majority of MRTs. The Guidelines apply from 1 January 2017. The application of the Guidelines to UK firms, once confirmed by the PRA and FCA, will contribute to changes to our Directors’ remuneration policy in 2017.
Agenda for 2016
In line with legal requirements, we will be seeking shareholder approval for our Directors’ remuneration policy at the 2017 AGM. As a Committee we will review our remuneration policy to ensure that future arrangements are fully aligned to our strategy to accelerate delivery to shareholders in a manner consistent with Barclays’ Values and also to meet new regulatory requirements. This will be developedmonitor developments over the coming months and we will engage constructively with shareholders and regulators as we do so.months.
Our Remuneration report We have provided an ‘At a glance’ summary of 2015 performance and pay on the next page. The Annual report on Directors’ remuneration provides further details.
The report has been prepared in accordance with the remuneration disclosures required by the Large andMedium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. TheWe are seeking shareholder approval at the 2017 AGM for our new DRP, the Remuneration report (other than the part containing the Directors’DRP) and revisions to the Barclays LTIP in response to changes in regulatory requirements. Further details can be found in the 2017 AGM Notice of Meeting. I am grateful for the feedback received from our larger shareholders on our remuneration policy)proposals and value the insight the discussions provide. I hope you will be subject to an advisory vote by shareholderssupport these resolutions at the 20162017 AGM. On behalf of the Board
Crawford Gillies Chairman, Board Remuneration Committee 2922 February 2016
| | | 51 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
At a Glance – Performance and pay
How did we perform and pay in 2015?
The Committee’s 2015 pay decisions took full consideration of financial and non-financial performance. Statutory profit before tax decreased between 2014 and 2015 by 8%, while the absolute reduction in the Group incentive pool was 10%.
Since 2010 the Group incentive pool has declined steadily, from £3,484m in 2010 to £1,669m in 2015 – a decrease of more than 50% over five years. Over the same period, Group statutory profit before tax is down 65%.
| | | Group incentive pool
| | |
| | |
How much were executive Directors paid in 2015?
All of the Committee’s 2015 decisions in relation to executive Directors’ remuneration were made within the parameters of the Directors’ remuneration policy which was approved at the 2014 AGM.
| | | | | | | | | | | | | | | | | | | | |
| Antony Jenkinsa
£000 | |
| Tushar Morzaria
£000 |
| | | Jes Staleyb £000 | | | | | 2015 | | | 2014 | | | 2015 | | | | 2014 | | | | 2015 | | Fixed Pay | | | | | | | | | | | | | | | | | | | Salary | | | 598 | | | 1,100 | | | 800 | | | | 800 | | | | 100 | | Role Based Pay (RBP) | | | 516 | | | 950 | | | 750 | | | | 750 | | | | 96 | | Benefits | | | 89 | | | 100 | | | 82 | | | | 95 | | | | 48 | | Pension | | | 197 | | | 363 | | | 200 | | | | 200 | | | | 33 | | Variable pay | | | | | | | | | | | | | | | | | | | Annual Bonusc | | | 505 | | | 1,100 | | | 701 | | | | 900 | | | | – | | LTIPd | | | 1,494 | | | 1,854 | | | – | | | | – | | | | – | | Total pay | | | 3,399 | | | 5,467 | | | 2,533 | | | | 2,745 | | | | 277 | |
Notes
a | The 2015 figures for Antony Jenkins relate to the period to 16 July 2015 when he ceased to be a Director, save in the case of the LTIP which relates to the whole period pursuant to the LTIP rules. In accordance with his contractual entitlements, Antony Jenkins will receive salary, RBP, benefits and pension, in instalments, until 7 July 2016 subject to mitigation. Full details of his leaving arrangements can be found on page 68. |
b | The 2015 figures for Jes Staley relate to the period from 1 December 2015 when he joined the Board as Group Chief Executive. On joining Barclays, Jes Staley was granted a share award of 896,450 Barclays shares to compensate him for an unvested share award granted to him by JP Morgan. The award will be delivered on 14 March 2016 in line with the vesting date of the original JP Morgan award. |
c | 2015 bonus awards reflect the formulaic outcome of 2015 performance against the financial measures and the Committee’s assessment of progress towards the Balanced Scorecard targets. These resulted in a total of 22.1% (out of 50% maximum) and 15% (out of 35%) of the maximum bonus being payable respectively. Personal objectives were assessed by the Committee on an individual basis. |
d | Over the 2013-2015 LTIP performance period, a return on risk weighted assets (RoRWA) of 0.21% and a loan loss rate (LLR) of 53 bps resulted in nil (out of 50%) outcome for RoRWA and 30% (out of 30%) for LLR. The Balanced Scorecard assessment was 9% (out of 20%). Therefore 39% of the maximum number of shares will be considered for release in March 2016, subject to an additional two year holding period. |
How will executive Directors’ pay be structured?
2016 Fixed pay
| | | | | | | | | | | | | | | | Salary £000 | | | | RBP £000 | | | | Pension £000 | | Jes Staley | | | 1,200 | | | | 1,150 | | | | 396 | | Tushar Morzaria | | | 800 | | | | 750 | | | | 200 | |
Salary, RBP, pension and benefits are unchanged from 2015.
| | | | | | | Variable pay | | | | | | | 2016 Annual Bonus | | | | | | | Maximum 80% of fixed pay | | | | | | | 2016 performance measures and weighting:
| | | | | | | Financial
| | | | | | | Adjusted profit before tax
| | | 20% | | | | CET1 ratio
| | | 20% | | | | Adjusted costs
| | | 10% | | | | | | | | | | 50% | Balanced Scorecard
| | | | | | 35% | Personal objectives
| | | | | | 15% |
| | | | | | | 2016-2018 Long term incentive plan | | | | | | | Maximum 120% of fixed pay | | | | | | | 2016-2018 cycle performance measures and weighting:
| Financial
| | | | | | | Adjusted return on tangible equity (subject to CET1 ratio underpin)
| | | 25% | | | | CET1 ratio
| | | 25% | | | | Cost: income ratio
| | | 20% | | | | | | | | | | 70% | Balanced Scorecard
| | | | | | 15% | Risk Scorecard(new Risk measure which will focus on Barclays’ management of principal risks, including Conduct Risk) | | | | | | 15% |
Tushar Morzaria is the only participant in the 2016-2018 LTIP cycle.2017
| | | 52 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Governance: Remuneration report New Directors’ remuneration policy – at a glance Introduction Barclays’ new DRP is subject to shareholder approval at the 2017 AGM on 10 May 2017 and, if approved, is intended to apply immediately, for three years to the date of the 2020 AGM. What were the key factors taken into account when determining the new DRP? The Committee considered the Barclays’ remuneration philosophy (adopted in 2015), regulatory developments and its experience of operating the prior DRP when designing the new DRP. | | | | | | | | | Inputs | | Outcomes | | | | | Alignment with Barclays’ remuneration philosophy | | § Attract and retain talent needed to deliver Barclays’ strategy | | | | | | | § Align pay with investor interests | | | | | | | § Reward sustainable performance | | | | | | | § Support Barclays’ Values and culture | | | | | | | § Align with risk appetite, risk exposure and conduct expectations | | | | | | | § Be clear, transparent and as simple as possible | | | | | Regulatory developments | | § Longer deferral periods: | | | | | | | – 7 yearpro-rata, from year 3 for PRA Senior Managers (including executive Directors) | | | | | | | – Extension of clawback periods from 7 to 10 years for PRA Senior Managers (including executive Directors) | | | | | | | § Applies for first time for 2017 performance year: | | | | | | | – Prohibition on dividend equivalents on deferred shares | | | | | | | – Increase to one year (from 6 months) holding period for awards delivered in shares | | | | | | | – Requirement that LTIP grants are based on performance over prior year as well as forward-looking performance period | | | | | What are the key changes to the DRP? | | | | | | | Key changes | | | | | | | Fixed pay | | § ‘Fixed Pay’ introduced, replacing salary and RBP | | | | | | | § Fixed Pay delivered 50% in cash and 50% in shares (subject to 5 year holding period liftingpro-rata) | | | | | | | § Fixed Pay will not change during the policy period for either of the current executive Directors | | | | | | | § Pension allowance retained at current levels, but limited to 10% of Fixed Pay for new hires | | | | | Variable pay | | § Bonus and LTIP combined for regulatory deferral purposes | | | | | Performance measures | | § Bonus: Financial measures³ 60% | | | | | | | § LTIP: Financial measures³ 70% | | | | | Delivery | | § Any bonus deferral vests in equal tranches between the third and seventh anniversary of award | | | | | | | § LTIP performance is tested at end of 3 year performance period and vests in equal tranches between the third and seventh anniversary of award | | | | | Shareholding requirement | | § Requirement increased to 200% of Total fixed pay (i.e. Fixed Pay plus Pension) within 5 years from their respective date of appointment (from 400% of salary to equivalent of 457% of salary for CEO) | | | | | | | § New requirement to hold shares worth 100% of Total fixed pay (orpro-rata thereof) for 2 years post-termination | | | | | Employment contracts | | § For new hires, asymmetry for notice periods removed i.e. 6 months from the Company and 6 months from the Director (from 12 months from the Company and 6 months from the Director) | | |
| | | | | Full details of the changes to the DRP can be found on page 65. The full DRP is set out on pages 60 to 72. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 53 |
Governance: Remuneration report New Directors’ remuneration policy – at a glance How will the new DRP be implemented? The following charts illustrate how the vesting profiles of maximum total compensation for the Group CEO would change from the current policy to the new policy. All share awards are subject to additional holding periods following vesting, during which shares may not be sold or transferred. Subject to shareholder approval of the new DRP, the proposed DRP will apply from the 2017 performance year. How will the executive Directors’ remuneration be structured in 2017? | | | | | | | | | Total fixed pay | | | | | | | | | | |
| Fixed Pay £000 | | |
| Pension £000 | | Jes Staley | | | 2,350 | | | | 396 | | Tushar Morzaria | | | 1,650 | | | | 200 | |
| | | | | | | | | | | | | Annual bonus | | | | | | | LTIP | | | | Maximum 80% of Total fixed pay | | | | | | | | Maximum 120% of Total fixed pay | | | | | 2017 Performance measures and weighting: | | | | | | | | 2017-2019 cycle performance measures and weighting: | | | | | Profit before tax excluding notable items | | | 22.5% | | | | | RoTE excluding notable items | | | 25% | | CET1 ratio | | | 22.5% | | | | | CET1 ratio as at 31.12.19 | | | 25% | | Cost:Income ratio excluding notable items | | | 15.0% | | | | | Cost:Income ratio excluding notable items | | | 20% | | Strategic/non-financial | | | 20.0% | | | | | Strategic/non-financial | | | 15% | | Personal objectives | | | 20.0% | | | | | Risk Scorecard | | | 15% | |
| | | 54 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Governance: Remuneration report 2016 incentives | This section provides details of how the 2016 total incentive award decisions were made. |
2016 pay and performance headlines The key performance considerations which the Committee took into account in making its remuneration decisions for 2016 are highlighted below: § | | Group profit before tax was up 182% at £3,230m (2015: £1,146m) |
§ | | Group CET1 ratio was up to 12.4% (2015: 11.4%) |
§ | | Core profit before tax was up 60% from 2015 at £6,016m. Excluding notable items Core profit before tax was up 4% to £6,436m (2015: £6,191m), and up 10% excluding the impact of deferral changes made in 2016 |
§ | | RoTE in our Core businesses increased to 8.4% in 2016 (2015: 4.8%). Excluding notable items, Core RoTE was 9.4% (2015: 11.2%) |
§ | | strong execution of the rundown ofNon-Core resulting in a reduction in Risk Weighted Assets of £22bn. |
The pay outcomes and decisions can be summarised as follows: § | | total compensation costs increased 2% to £7,445m (2015: £7,301m) including the impact of the deferral changes. Excluding this impact compensation costs were down 3% |
§ | | total incentive awards granted were slightly down at £1,533m (2015: £1,544m) |
§ | | the level of incentive pool absorbs the material adverse impact of foreign exchange movements through the year which more than offset the impact of reductions in staff numbers in the year |
§ | | the Core compensation to net income ratio improved to (excluding notable items) 32.7% (2015: 34.0%) excluding the impact of deferral changes, increasing slightly to 34.7% including the impact of these changes |
§ | | Group compensation to net income ratio (excluding notable items) was 40.2% (2015: 37.7%) driven byNon-Core income reduction as it runs down |
§ | | Corporate and Investment Bank (CIB) front office incentive awards were also slightly down at £875m (2015: £884m). Excluding the impact of deferral changes made in 2016, CIB compensation to net income ratio (excluding notable items) was 39.2% (2015: 40.3%) |
§ | | there has been continued strong differentiation on the basis of individual performance to allow the Group to more effectively manage compensation costs. |
2016 total incentive award decisions The Committee’s 2016 incentives decisions took full consideration of financial andnon-financial performance and also the material repositioning of incentives undertaken since 2010. Since 2010, the Group incentive pool has declined steadily, from £3,484m in 2010 to £1,533m in 2016 – a decrease of 56% over six years. Notes a. | Part of the reduction in incentive pools in 2014 was due to the introduction of RBP. |
b. | The 2015 Group incentive pool has been restated from £1,669m to reflect the treatment of Africa Banking as a discontinued operation. The 2010 – 2014 Group incentive pools have not been restated. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 55 |
Governance: Remuneration report 2016 incentives Total incentive awards granted – current year | | | | | | | | | | | | | | | | Barclays Group | | | | | | | |
| Year ended 31.12.16
£m |
| |
| Year ended 31.12.15
£m |
| | | % change | | Incentive awards granted | | | | | | | | | | | | | Bonus pool | | | 1,459 | | | | 1,453 | | | | 0 | | Commissions and other incentivesa | | | 74 | | | | 91 | | | | 19 | | Total incentive awards granted | | | 1,533 | | | | 1,544 | | | | 1 | | | | | | Proportion of bonus pool that is deferred % | | | 30 | | | | 46 | | | | | | | | | | Reconciliation of incentive awards granted to income statement charge: | | | | | | | | | | | | | Less: deferred bonuses granted but not charged in current year | | | (300 | ) | | | (665 | ) | | | 55 | | Add: current year charges for deferred bonuses from previous years | | | 690 | | | | 856 | | | | 19 | | Otherb | | | (26 | ) | | | 26 | | | | | | Income statement charge for performance costsc | | | 1,897 | | | | 1,761 | | | | (8 | ) | | | | | Total compensation costsd,e | | | 7,445 | | | | 7,301 | | | | (2 | ) | Total compensation costs before the impact of deferral changesd,e | | | 7,050 | | | | 7,301 | | | | 3 | |
Notes a | Awards included in 2015 as commitments are now reflected in Bonus pool for consistency with 2016. |
b | Difference between incentive awards granted and Income Statement charge for commissions and other incentives. |
c | Includes the £395m impact of changes to deferral arrangements. |
d | 2015 total compensation costs have been adjusted to exclude the impact of a £429m gain on valuation of a component of the defined benefit liability. |
e | In addition £212m of Group compensation (2015: £236m) was capitalised as internally generated software. |
Changes to deferral arrangements From 2016 onwards, costs in relation to deferred bonuses are expensed from the performance year in respect of which they are granted. Approximately 33% of deferred bonus costs will be taken in the year of performance, being the year prior to granting (previously 0%). This acceleration of future cost immediately improves the link betweenin-year performance costs and the size of the incentive pool. The relationship betweenin-year performance costs and changes in the incentive pool will be further improved through a change to harmonise the deferral approach for all staff across the Group, creating internal consistency. Historically, we have applied deferral levels significantly higher than those required by our regulators for bonus payments made specifically to senior staff in our Investment Bank, making them defer 100% of incentive awards over at least three years, with nothing paid at all in the year in which the performance is delivered. This meant that any change to the Investment Bank pool in incentive awards to those staff had limited impact on thein-year performance costs recognised in our accounts. This approach also put us out of step with peer practice where deferral levels are typically lower. Our new Group deferral approach ensures that all staff will defer at least what is required by our regulators, while all of our highest paid staff will continue to defer more than is required to preserve the strong alignment to future Group performance. This change means that any change in incentive awards will now have a direct and immediate impact on performance costs for the year when the charge is made. The alignment of deferral levels across the Group also helps from a global competitive perspective given the differences in approach being adopted by the different regulatory regimes. The differences have widened given the recent changes in the UK e.g. the increase in deferral duration to seven years for PRA Senior Managers and to five years for many other MRTs (from three years previously). Harmonising our deferral approach makes the delivery less uncompetitive outside the UK while importantly maintaining our responsibility to all our stakeholders. Impact of deferral changes | | | | | | | | | | | | Barclays Group | | Barclays Group | |
| Year ended 31.12.16
% |
| |
| Year ended 31.12.15
% |
| Compensation costs as a % of net income (excluding notable items) | | | | | | | | | Before impact of deferral changes | | | 38.1 | | | | 37.7 | | After impact of deferral changes | | | 40.2 | | | | 37.7 | | | | | Barclays Core | | | % | | | | % | | Compensation costs as a % of net income (excluding notable items) | | | | | | | | | Before impact of deferral changes | | | 32.7 | | | | 34.0 | | After impact of deferral changes | | | 34.7 | | | | 34.0 | |
| | | 56 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Governance: Remuneration report Remuneration policy for all employees This section sets out Barclays’ remuneration policy for all employees, explaining the philosophy underlying the structure of remuneration packages, and how this links remuneration to the achievement of sustained high performance and long-term value creation.
| This section sets out Barclays’ remuneration policy for all employees, explaining the philosophy underlying the structure of remuneration packages, and how this links remuneration to the achievement of sustained high performance and long-term value creation. |
Remuneration philosophy In October 2015, the Committee formally adopted a revised, simplified remuneration philosophy which articulates Barclays’ overarching remuneration approach and is set out below. | | | Barclays’ Remunerationremuneration philosophy | | | Attract and retain talent needed to deliver Barclays’ strategy | | Long termLong-term success depends on the talent of our employees. This means attracting and retaining an appropriate range of talent to deliver against our strategy, and paying the right amount for that talent
| Align pay with investor interests | | Ensure employees’ interests are aligned with those of investors (equity and debt holders), both in structure and the appropriate balance of returns | Reward sustainable performance | | Sustainable performance means making a positive contribution to stakeholders, in both the short and longer term, playing a valuable role in society | Support Barclays’ Values and culture | | Results must be achieved in a manner consistent with our Values. Our Values and culture should drive the way that business is conducted | Align with risk appetite, risk exposure and conduct expectations | | Designed to reward employees for achieving results in line with the Bank’s risk appetite and conduct expectations | Be clear, transparent and as simple as possible | | All employees and stakeholders should understand how we reward our employees. Remuneration structures should be as simple as possible so that everyone can understand how they work and the behaviours they reward |
RemunerationCulture and performanceremuneration
Barclays’ remuneration philosophy links remuneration to achieving sustained high performance and creating long-term value. Our remuneration philosophy applies to all employees globally across Barclays and aims to reinforce our belief that effective performance management is critical to enabling the wholedelivery of Barclays. It ensures that all employeesour business strategy in line with our Values. Employees who adhere to the Barclays’ Values and contribute to Barclays’ success are aligned with and support the achievement of Barclays’ Group priorities.rewarded accordingly. This is achieved by linking remuneration to a broadbasing performance assessment of performance, based on expectedclear standards of delivery and behaviour, which are discussedand starts with employees at the start of, and throughout, the performance year. Under the Barclays’ performance management approach, employees are encouraged to align each ofaligning their objectives (‘what’ they will deliver) to business and team goals in order to support the delivery of the business strategy and behaviouralgood customer outcomes. Behavioural expectations (‘how’ people will achieve their objectives) are set in relation tothe context of our Values. This ensures that clear expectations are set for not only ‘what’ employees are expected to deliver, but also ‘how’ they are expected to go about it. Individual performance is then evaluatedassessed against both the ‘what’ (performance against objectives) and the ‘how’ (demonstration of our Values). This evaluation takes into account various factors including: § | | performance against agreed objectives (both financial and non-financial) and core job responsibilities |
§ | | adherence to relevant risk policies and procedures and control frameworks |
§ | | behaviour in line with Barclays’ Values |
§ | | colleague and stakeholder feedback |
§ | | input from the Risk and Compliance functions where there are concerns about the behaviour of any individuals or the risk of the business undertaken. |
There is no specific weighting between the financial andnon-financial considerations for employees because all of them criteria. Other factors are important to the determination ofalso taken into consideration within the overall performance assessment.assessment, including core job responsibilities, behaviours towards risk and control, colleague and stakeholder feedback as well as input from the Risk and Compliance functions, where appropriate.
LinkingThrough our performance management approach we emphasise the equal importance of both ‘what’ an individual has delivered as well as ‘how’ they have achieved this, encouraging balanced consideration of each dimension. Both of these elements are assessed and rated independently of each other. In 2016 we eliminated the requirement to have an overall rating which should allow for more robust and reflective conversations between managers and team members on the individual components of performance.
A key part of the performance management philosophy promotes ongoing quality dialogue throughout the year. This helps manage performance messages effectively and allows for more timely recognition as well as appropriate coaching and support where needed. By linking individual performance assessment and remuneration decisions to both the Barclays’ business strategy and our Values and, in this way promotes the delivery of sustainable individual and business performance, and establishesturn, to remuneration decisions, a clear alignment between what we are striving to achieve, how we go about this, and ultimately, how we recognise this in individual financial terms is achieved. Risk, conduct and remuneration Another key feature of our remuneration philosophy is the alignment of remuneration with our risk appetite and with the conduct expectations of Barclays, our regulators and stakeholders. The Committee takes risk and conduct events very seriously and ensures that there are appropriate adjustments to individual remuneration and, where necessary, the incentive pool. The Remuneration Review Panel, which reports to the Committee, supports the Committee in this process. The Panel is chaired by the Chief Risk Officer and includes senior representatives from the key control functions of Risk, Compliance, Internal Audit, Legal and HR as well as the CEOs of Barclays UK and Barclays International. It sets the policy and Barclays’processes for assessing compensation adjustments for risk and conduct events. We have robust processes for considering risk and conduct as part of individual performance management processes with outcomes reflected in individual remuneration decisions. Line managers have primary accountability for ensuring the risk and conduct issues are considered when assessing performance and making remuneration decisions. In addition, there is a secondary review by the control functions for individuals involved in significant failures of risk management, conduct issues, regulatory actions or other major incidents which impact either the Group or business to ensure these issues are also considered. When considering individual responsibility, a variety of factors are taken into account such as whether an individual was directly responsible or whether the individual, by virtue of seniority, could be deemed indirectly responsible, including staff who drive the Group’s culture and set its strategy. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 5357 |
Governance: Remuneration report Remuneration policy for all employees Actions which may be taken where risk management and conduct falls below required standards include: | | | Adjustment | | Current year annual bonuses are adjusted downwards where individuals are found to be responsible (either directly or indirectly) in a risk or misconduct event. | Malus | | Deferred unvested bonuses from prior years are subject to malus provisions which enable the Committee to reduce the vesting level of deferred bonuses (including to nil) at its discretion. Events which may lead the Committee to do this include, but are not limited to, employee misconduct or a material failure of risk management. | Clawback | | Clawback applies to any variable remuneration awarded to a PRA Material Risk Taker (MRT) on or after 1 January 2015 in respect of years for which they are a MRT. Barclays may apply clawback if, at any time during the seven year period from the date on which variable remuneration is awarded to a MRT: (i) there is reasonable evidence of employee misbehaviour or material error, and/or (ii) the firm or the business unit suffers a material failure of risk management, taking account of the individual’s proximity to and responsibility for that incident. Clawback may be extended to 10 years for PRA Senior Managers where there are outstanding internal or regulatory investigations at the end of the 7 year clawback period. |
Where possible, an adjustment will be made to current year annual bonus, before the application of malus and then clawback. In addition to reductions to individuals’ bonuses, the Committee considers and makes collective adjustments to the incentive pool for specific material risk and conduct events. In 2016, the impact of these collective adjustments, resulting from both the direct financial impact on performance and the additional adjustments applied by the Committee, is a reduction of £150m. We have also adjusted the incentive pool to take account of an assessment of a wide range of future risks including conduct, non-financial factors that can support the delivery of a strong risk environment, control and conduct culture and other factors including reputation, impact on customers, markets and other stakeholders. Remuneration structurelevels The remuneration structure for employees is aligned with that for executive Directors, set out in detail in the Directors’ remuneration policy which was approved by shareholders at the 2014 AGM. A full copy of the policy can be found on the Barclays PLC website. An abridged version is at pages 75 to 83 of this Report.
Employees receive salary, pension and other benefits and are eligible to be considered for an annual bonus. Employees in some customer-facing businesses participate in incentive plans including plans based on a balanced scorecard of performance which has good customer outcomes at its centre. The plans also recognise how results have been achieved in line with Barclays’ Values. Some senior employees receive Role Based Pay (RBP). Remuneration of PRA Material Risk Takers (MRTs) is subject to the 2:1 maximum ratio of variable to fixed pay. A total of 1,523 (2014: 1,277) individuals were MRTs in 2015.
Barclays is a long standinglong-standing supporter of the Living Wage. As an accredited Living Wage employer, Barclays commits to ensure that all permanent UK employees and those UK employees of third party contractors who provide services to us at our sites, are paid at least the current London or UK Living Wage. This is a commitment which we have also extended to all our UK employed apprentices. Barclays is also fully committed to addressing pay inequality. Barclays’ work in this area is illustrated by recent union pay deals and the repositioning of the incentive pools over recent years. Over the past few years, we have consciously redirected the bonus pool funding, providing proportionally more to junior employees. For UK employees, average Total Compensation (fixed pay plus bonus) for Managing Directors has reduced materially since 2010 (broadly in line with the reduction in the incentive pool). Over the same period, junior populations have been protected and have seen small increases in Total Compensation despite a challenging business environment. Similarly, salaries have been consciously increased for those within lower corporate grades within the UK. The UK pay deal which was in place for the 2014-2016 period providednon-management populations (primarily outside of the Investment Bank) with a 7.5% merit increase over the three-year period. A new three-year pay deal with Unite was reached in January 2017 which commits for thenon-management population to a 7.5% merit increase over the 2017-2019 period and also commits to a minimum increase of 10% for the most junior graded employees. Remuneration structure The remuneration structure for employees is closely aligned with that for executive Directors, set out in detail in the DRP which is at pages 60 to 72 of this report and for which shareholder approval is being sought at the 2017 AGM. The primary exception being that the executive Directors participate in the Barclays’ LTIP. Employees receive salary, pension and other benefits and are eligible to be considered for an annual bonus. Employees in some customer-facing businesses participate in formulaic incentive plans including plans which have good customer outcomes as the primary performance measure. The plans also recognise how results have been achieved in line with Barclays’ Values. Some senior employees also receive RBP. For executive Directors, under the new DRP, salary and RBP are replaced by Fixed Pay. Remuneration of MRTs is subject to the 2:1 maximum ratio of variable to total fixed pay. A total of 1,561 (2015: 1,523) individuals were MRTs in 2016. The remuneration of employees engaged in control functions is determined independently from the business they support and within the parameters of the incentive pool allocated to them by the Committee. | | | 58 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Fixed remuneration | | | Salary | | Salaries reflect individuals’ skills and experience and are reviewed annually in the context of annual performance assessment. They are increased where justified by role change, increased responsibility or a change in the latest availableappropriate market data. rate. Salaries may also be increased in line with local statutory requirements and in line with union and works council commitments. | Role Based Pay (RBP) | | A small number of senior employees receive a class of fixed pay called RBP to recognise the seniority, breadth and depth of their role. | Pension and benefits | | The provision of a competitive package of benefits is important to attracting and retaining the talented staff needed to deliver Barclays’ strategy. Employees have access to a range of country specific company fundedcountry-specific company-funded benefits, including pension schemes, healthcare, life assurance and BarclaysBarclays’ share plans as well as other voluntary employee funded benefits. The cost of providing these benefits is defined and controlled. Gracechurch Services Corporation is used to employ US nationals seconded overseas allowing them to retain eligibility to US benefits. |
Variable remuneration | | | Annual bonus | | Annual bonuses incentivise and reward the achievement of Group, business and individual objectives, and reward employees for demonstrating individual behaviours in line with Barclays’ Values. | | | | | | The ability to recognise performance through variable remuneration enables the Group to control its cost base flexibly and to react to events and market circumstances. Bonuses remain a key feature of remuneration practice in the highly competitive and mobile market for talent in the financial services sector. The Committee is careful to control the proportion of variable to fixed remuneration paid to individuals. | | | From 2016, the typical deferral structures are: |
| | | | | | | | | | | | | For MRTs: | | | | Fornon-MRTs: | | | Incentive award | | Amount deferred | | | | Bonus deferral levels are significantly in excess of PRA requirements.Incentive award
| | Amount deferred | | | < £500,000 | | 40% of total award | | | | Up to £65,000 | | 0% | | | £500,000 to £1,000,000 | | 60% of total award | | | | > £65,000 | | Graduated level of deferral | | | ³ £1,000,000 | | 60% up to £1,000,000 The typical deferral structures include:100% above £1,000,000
| | | | | | |
| | | | | | | | | | | | | | | | | | | For MRTs: | | | | For non-MRTs: | | | | For Managing Directors in the Investment Bank: | | | Incentive award | | Amount deferred | | | | Incentive award | | Amount deferred | | | | Incentive award | | Amount deferred | | | < £500,000 | | 40% | | | | Up to £65,000 | | 0% | | | | All values | | 100% | | | ³ £500,000 | | 60% | | | | > £65,000 | | Graduated level of deferral | | | | |
| | | | | Deferred bonuses are generally delivered in equal portions as deferred cash under the Cash Value Plan (CVP) and deferred shares under the Share Value Plan (SVP), each typically vesting in annual tranches over three years subject to the rules of the deferred cash and share plans (as amended from time to time) and continued service. From 2016, deferred bonuses are subject to either a 3, 5 or 7 year deferral period in line with regulatory requirements. | Share plans | | Alignment of senior employees with shareholders is achieved through deferral of incentive pay. We also encourage wider employee shareholding through theall-employee share plans. 82% of the global employee population (excluding Africa) is eligible to participate. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 59 |
Governance: Remuneration report Directors’ remuneration policy | This section sets out the proposed new Barclays’ forward-looking remuneration policy for Directors, which has evolved from the existing policy and explains each element of remuneration and how it operates. The policy described in this section is intended to apply for three years beginning on the date of the 2017 AGM, subject to shareholder approval. The existing policy can be found on pages 100 to 110 of the 2013 Annual Report or at home.barclays/annualreport. |
Remuneration policy for executive Directors | | | | | Element and purpose | | Operation | | Maximum value and performance measures | A. Fixed pay | | | | | Fixed Pay To reward skills and experience appropriate for the breadth and depth of the role and to provide the basis for a competitive remuneration package | | Fixed Pay is determined with reference to market practice and historical market data (on which the Committee receives independent advice), and reflects the individual’s experience and role. Executive Directors’ total compensation is benchmarked against comparable roles in the following banks: Bank of America, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JP Morgan Chase & Co, Lloyds, Morgan Stanley, Standard Chartered and UBS. The Committee may amend the list of comparator companies to ensure it remains relevant to Barclays or if circumstances make this necessary (for example, as a result of takeovers or mergers). 50% of Fixed Pay is delivered in cash (paid monthly), and 50% is delivered in shares. The shares are delivered quarterly and are subject to a holding period with restrictions lifting over five years (20% each year). As the executive Directors beneficially own the shares, they will be entitled to any dividends paid on those shares. Malus and clawback provisions do not apply to Fixed Pay. | | Fixed Pay for executive Directors is set within the benchmark range determined by the Committee taking into account their experience and performance. The maximum Fixed Pay is £2,350,000 for Jes Staley (Group Chief Executive) and £1,650,000 for Tushar Morzaria (Group Finance Director). These amounts are fixed and will not change during the policy period for these individuals. There are no performance measures. | Pension To enable executive Directors to build long-term retirement savings | | Executive Directors receive an annual cash allowance in lieu of participation in a pension arrangement. | | The maximum annual cash allowance is £396,000 for Jes Staley (Group Chief Executive) and £200,000 for Tushar Morzaria (Group Finance Director). These amounts are fixed and will not change during the policy period for these individuals. | Benefits To provide a competitive and cost effective benefits package appropriate to the role and location | | Executive Directors’ benefits provision includes, but is not restricted to, private medical cover, annual health check, life and ill health income protection, car cash allowance, and use of a Company vehicle and driver when required for business purposes. In addition to the above, if an executive Director were to relocate, additional support would be provided for a defined and limited period of time in line with Barclays’ general employee mobility policy including, but not restricted to, the provision of temporary accommodation, tax advice, home leave related costs, payment of removal costs and relocation flights for the executive Director, spouse and children. Barclays will pay the executive Director’s tax on the relocation costs but will not tax equalise and will also not pay the tax on any other employment income. | | The maximum value of the benefit is determined by the nature of the benefit itself and costs of provision may depend on external factors, e.g. insurance costs. |
| | | 60 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Remuneration policy for executive Directorscontinued | | | | | Element and purpose | | Operation | | Maximum value and performance measures | B. Variable pay | | | | | Annual bonus To reward delivery of short-term financial targets set each year, the individual performance of the executive Directors in achieving those targets, and their contribution to delivering Barclays’ strategic objectives Delivery in part in shares with a holding period increases alignment with shareholders. Deferred bonuses encourage longer term focus and retention | | Determination of annual bonus Individual bonuses are discretionary and decisions are based on the Committee’s judgement of executive Directors’ performance in the year, measured against Group and personal objectives. Delivery structure Annual bonuses are delivered as a combination of cash and shares, a proportion of which may be deferred and/or subject to a holding period. Deferral proportions and vesting profiles will be structured so that, in combination with any LTIP award, the proportion of variable pay that is deferred is no less than that required by regulations. Deferred bonuses are granted by the Committee (or an authorisedsub-committee) at its discretion, subject to the relevant plan rules as amended from time to time. Dividend equivalents, in the form of additional shares, are payable on the vested deferred bonus shares, equal to the dividends paid or payable between the award date and the relevant release date. If dividend equivalents are not permissible under regulations, the number of deferred bonus shares to be awarded will be based on a share price discounted by reference to an expected dividend yield over the vesting period. In such circumstances, the Committee has discretion to reduce (not increase) the number of shares that vest if actual dividends paid over the period are materially lower than the original dividend assumption. A notional discount may be applied to the deferred bonus awards for the purposes of calculating the 2:1 cap to the extent this is permitted by regulations (currently a discount is permitted on up to 25% of variable pay where the conditions for applying such a discount are met). Operation of risk and conduct adjustment, malus and clawback Any bonus awarded will reflect appropriate consideration in relation to Group risk and conduct events. Individual bonus decisions may also reflect appropriate reductions in relation to specific risk and conduct events. Any bonus is also subject to malus and clawback provisions. The malus provisions enable the Committee to reduce the amount of unvested bonus (including to nil) prior to the unvested bonus vesting in specified circumstances, including, but not limited to: § a participant deliberately misleading Barclays, the market and/or shareholders in relation to the financial performance of the Barclays Group § a participant causing harm to Barclays’ reputation or where his/her actions have amounted to misconduct, incompetence or negligence § a material restatement of the financial statements of the Barclays Group or any subsidiary, or the Group or any business unit suffering a material downturn in its financial performance § a material failure of risk management in the Barclays Group § a significant deterioration in the financial health of the Barclays Group | | The maximum annual bonus opportunity is 80% of Total fixed pay. For these purposes Total fixed pay is Fixed Pay plus Pension. The performance measures by which any executive Director’s bonus is assessed include financial andnon-financial measures which also include risk-related measures and personal objectives. In making its assessment of any bonus, the Committee will consider financial factors to guide at least 60% of the bonus opportunity. Any bonus is discretionary and any amount may be awarded from zero to the maximum value. The Committee has the discretion to vary the measures and their respective weightings within each category. The measures and weightings will be disclosed annually as part of the Annual report on Directors’ remuneration. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 61 |
Governance: Remuneration report Directors’ remuneration policy Remuneration policy for executive Directorscontinued | | | | | Element and purpose | | Operation | | Maximum value and performance measures | B. Variable pay continued | | | | | | | The clawback provisions enable amounts to be recovered after they have vested (for a period of seven years from grant/ten years in specified circumstances e.g. where a relevant investigation is ongoing at the end of the initial seven year period) in circumstances where (i) a participant’s actions or omissions have amounted to misbehaviour and material error and/or (ii) Barclays or the relevant business unit has suffered a material failure of risk management. Timing of receipt Non-deferred cash components of any bonus are paid following the performance year to which they relate, normally in March.Non-deferred share bonuses are also awarded normally in March and are subject to a holding period (after the payment of tax) in line with regulations and with release no faster than permitted by regulations (currently minimum of six months, increasing to one year for the 2017 performance year). Deferred share bonuses are structured so that no deferred shares vest faster than permitted by regulations (currently in five equal tranches with the first vesting on or around the third anniversary of grant and the last tranche vesting on or around the seventh anniversary of grant). Vesting is also subject to the provisions of the plan rules including employment and the malus and clawback provisions (as explained above). Any shares that vest are subject to an additional holding period (after payment of tax) in line with regulations and with release no faster than permitted by regulations (currently minimum of six months, increasing to one year for the 2017 performance year). | | |
| | | 62 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Remuneration policy for executive Directorscontinued | | | | | Element and purpose | | Operation | | Maximum value and performance measures | B. Variable pay continued | | | | | Long Term Incentive Plan (LTIP) award To reward execution of Barclays’ strategy over a multi-year period Long-term performance measurement, deferral and holding periods encourage a long-term view and align executive Directors’ interests with those of shareholders. Malus and clawback provisions discourage excessive risk-taking and inappropriate behaviours | | Determination of LTIP award LTIP awards are made by the Committee following discussion of recommendations made by the Chairman (for the Group Chief Executive’s LTIP award) and by the Group Chief Executive (for other executive Directors’ LTIP awards) based on satisfactory performance over the prior year. Delivery structure LTIP awards are granted subject to the plan rules and are satisfied in Barclays’ shares (although they may be satisfied in other instruments as may be required by regulation). LTIP awards are structured so that when combined with the annual bonus the proportion of variable pay that is deferred is no less than that required by regulations. For each award, forward-looking performance measures are set at grant and there is no retesting allowed of those conditions. The Committee has, within the parameters set out opposite, the flexibility to vary the weighting of performance measures and calibration for each award prior to its grant. The Committee has discretion, and in line with the plan rules approved by shareholders, in exceptional circumstances to amend targets, measures, or the number of awards if an event happens (for example, a major transaction) that, in the opinion of the Committee, causes the original targets or measures to be no longer appropriate or such adjustment to be reasonable. The Committee also has the discretion to reduce the vesting of any award, including to nil, if it deems that the outcome is not consistent with performance delivered. Dividend equivalents, in the form of additional shares, are payable on the vested deferred shares, equal to the dividends paid or payable between the award date and the relevant release date. If dividend equivalents are not permissible under regulations, the number of shares to be awarded will be based on a share price discounted by reference to an expected dividend yield over the vesting period. In such circumstances, the Committee has discretion to reduce (not increase) the number of shares that vest if actual dividends paid over the period are materially lower than the original dividend assumption. A notional discount may be applied to LTIP awards for the purposes of calculating the 2:1 cap to the extent this is permitted by regulations (currently a discount is permitted on up to 25% of variable pay where the conditions for applying such a discount are met). Operation of malus and clawback The achievement of performance measures determines the extent to which LTIP awards will vest. Awards are also subject to malus during the vesting period and clawback for a period of seven years (10 years in specific circumstances) from the date of award which enables the Committee to reduce the vesting level of awards (including to nil). This is explained further in the annual bonus paragraphs above. Timing of receipt Barclays LTIP awards are structured so that no award vests before the third anniversary of grant and an award vests no faster than permitted by regulations (currently in five equal tranches with the first tranche vesting on or around the third anniversary of grant and the last tranche vesting on or around the seventh anniversary of the grant date). Any shares that vest are subject to an additional holding period (after payment of tax) in line with regulations, with restrictions lifting no faster than permitted by regulations (currently minimum of six months, increasing to one year for the 2017 performance year). | | The maximum annual LTIP award is 120% of Total fixed pay. For these purposes Total fixed pay is Fixed Pay plus Pension. Vesting is dependent on performance measures and service. Forward-looking performance measures will be based on financial performance and other long-term strategic measures. The Committee has discretion to change the weightings but financial measures will be at least 70% of the total opportunity. Measures and weightings will be set in advance of each grant. The threshold and maximum level of performance for each financial performance measure will be disclosed annually as part of the Annual report on Directors’ remuneration. Straight-line vesting applies between threshold and maximum for the financial measures and weightings with no more than 25% vesting at threshold performance. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 63 |
Governance: Remuneration report Directors’ remuneration policy Remuneration policy for executive Directorscontinued | | | | | Element and purpose | | Operation | | Maximum value and performance measures | C. Other | | | | | | | | All employee share plans To provide an opportunity for executive Directors to voluntarily invest in the Company through UK HMRC employee tax advantaged share schemes | | Executive Directors are entitled to participate in: (i) Barclays Sharesave under which they can make monthly savings over a period of three or five years linked to the grant of an option over Barclays’ shares which can be at a discount of up to 20% on the share price set at the start. (ii) Barclays Sharepurchase under which they can make contributions (monthly or lump sum) out ofpre-tax pay (if based in the United Kingdom) which are used to acquire Barclays’ shares. | | (i) Savings between £5 and the maximum set by Barclays (which will be no more than the HMRC maximum) per month. There are no performance measures. (ii) Contributions of between £10 and the maximum set by Barclays (which will be no more than the HMRC maximum) per tax year which Barclays may match up to HMRC maximum (current match is £600). There are no performance measures. | | | | Previous legacy awards To honour existing awards and payments | | Awards granted and/or payments agreed at a time where a previous policy, approved by shareholders, was in place, may be released and/or paid in accordance with such previous policy notwithstanding that such awards and/or payments may not be in line with the new policy described above. | | In line with existing arrangements. | | | | Shareholding requirement To further enhance the alignment of shareholders’ and executive Directors’ interests in long-term value creation | | Executive Directors must build up a shareholding of 200% of Total fixed pay (i.e. Fixed Pay plus Pension) within five years from the date of appointment as executive Director. They have a reasonable period to build up to this requirement again if it is not met because of a significant share price depreciation. Executive Directors must also continue to hold a shareholding for two years post-termination as follows: (i) if the executive Director has been employed for more than five years: 100% of Total fixed pay; or (ii) if the executive Director has been employed for less than five years: either (a) grow their holding to thepro-rated requirement if thepro-rated requirement has not been met. Directors would only be allowed to sell shares to pay for tax liabilities which crystallise when deferred awards vest on or after termination; or (b) if thepro-rated requirement has been exceeded, executive Directors would be allowed to sell shares above this requirement and also sell shares to pay for tax liabilities which crystallise when deferred awards vest on or after termination. Shares that count towards the requirement are beneficially owned shares including any vested share awards subject only to holding periods (including vested LTIPs, vested deferred share bonuses, Fixed Pay shares, and RBP shares). Shares from unvested deferred share bonuses and unvested LTIPs do not count towards the requirement. | | Barclays’ shares worth a minimum of 200% of Total fixed pay must be held within five years plus a shareholding of 100% of Total fixed pay (orpro-rata thereof) for two years post termination. | | | | Outside appointments To encourage self-development and allow for the introduction of external insight and practice | | Executive Directors may accept onenon-executive Director board appointment in another listed company. The Chairman’s approval must be sought before accepting an appointment. Fees may be retained by the executive Director. Neither of the executive Directors currently hold an outside appointment. | | Not applicable. |
| | | 64 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Notes to the table on pages 60 to 64 Performance measures and targets The Committee select financial performance measures which are fundamental to delivery against the Bank’s strategy and are considered to be the most important financial measures used by the executive Directors to oversee the direction of the business. Thenon-financial performance measures and sources of data are chosen to represent key indicators of sustainable performance that are robustly monitored and reported on to management. The measures are determined in consultation with major shareholders. Financial targets are set to be stretching but achievable and are aligned to enhancing shareholder value. In respect of the LTIP, the financial measures, weightings and targets will be disclosed at the start of the relevant performance period. In respect of the annual bonus, the financial measures and weightings will be disclosed at the start of the relevant performance year. The Committee is of the opinion that the financial targets for the annual bonus are commercially sensitive in respect of the Company and that it would be detrimental to disclose details at the start of the relevant performance year. Performance against the targets will be disclosed at the end of the relevant peformance year in that year’s remuneration report, subject to commercial sensitivity no longer remaining. The existing Balanced Scorecard has evolved into a ‘Performance Measurement’ framework which better reflects progress towards our strategic andnon-financial goals. Enhancements to the available sources of management information and reporting, ranging from internal dashboards to external third party measures, allows for a more holistic view of sustainable business performance, rather than focusing on a few narrowly defined targets. The evaluation will focus on key performance measures (many continuing from the Balanced Scorecard), with a detailed retrospective disclosure on progress throughout the period against each category, together with supporting rationale for payments. Changes in remuneration policy for 2017 The following table provides a summary of the changes to the DRP for 2017: | | | | | | | | | Element | | Change | | Rationale for change | | | | | | Fixed Pay | | § | | Consolidate salary and RBP into a single ‘Fixed Pay’ element (delivered 50% in cash and 50% in shares subject to a 5 year holding period liftingpro-rata). | | § | | Simplicity, transparency. | | | | | | | | § | | Fixed Pay will not change during the policy period for either of the current executive Directors. | | | | | | | | | | Pension | | § | | Continue pension allowance as a separate allowance: | | § | | Supports simplified approach to fixed pay. | | | | | | | | | | – for existing executive Directors, amount unchanged but fixed for the duration of this policy | | | | | | | | | | | | | | – for new hires, pension allowance limited to 10% of Fixed Pay. | | | | | | | | | | Variable pay | | § | | Combine annual bonus and LTIP for deferral purposes, while retaining maximum variable at 200% of Total fixed pay and 60:40 split between maximum LTIP and annual bonus. | | § | | Mitigates the global competitive impact of longer deferral periods and holding periods under the PRA Remuneration Rules and the EBA Guidelines on sound remuneration policies | | | | | | | | § | | Performance measures | | § | | Simplicity, transparency. | | | | | | | | | | – Bonus: financial performance measures at least 60%. | | | | | | | | | | | | | | – LTIP: financial performance measures at least 70%. | | | | | | | | | | | | § | | Dividends | | § | | Recreates shareholder alignment lost through regulatory dividend prohibition. | | | | | – Where regulatory constraints prevent dividend alignment, use discounted share price to calculate number of shares under award. | | | | | | | | | | | | | – Committee has discretion to reduce the number of shares that vest if actual dividends paid are materially lower than original dividend assumption. | | | | | | | | | | Shareholding requirement | | § | | Increase requirement to 200% of Total fixed pay (i.e. Fixed Pay plus Pension) from 400% of Salary. | | § | | Longer and stronger shareholder alignment (equivalent to 457% of salary for CEO). | | | | | | | | § | | Introduce shareholding requirement of 2 years post | | | | | | | | | termination of 100% of Total fixed pay (orpro-rata thereof). | | | | | | | | | | Employment contracts | | § | | For new hires, 6 months’ notice from the Company and 6 months’ notice from the executive Director. | | § | | Remove asymmetry for notice periods. | | | | | | § | | Alignment between the employee and the | | | | | | | | | Company. | | | | | | Leavers | | § | | Apply eligible leaver treatment to deferred bonus and LTIP awards from 5 years (except for termination for gross misconduct). Ability to apply malus for the full vesting period maintained. | | § | | Partially mitigates the global competitive impact of longer deferral periods (increasing from 3 years to 7 years) and holding periods under the PRA Remuneration Rules and the EBA Guidelines respectively. | | | | | | | | | | | | | | | | | | | | | | | | § | | Pro-ration of LTIP for eligible leavers retained but based on 4 year performance period, i.e. includes assessment period prior to grant. | | § | | Alignment to the EBA Guidelines for performance assessment prior to award. | | | | | | | | | | | | | | | | | | § | | Clawback extended to 10 years in specific circumstances. | | | | | | | | | | | | |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 65 |
Governance: Remuneration report Directors’ remuneration policy Differences between the remuneration policy of the executive Directors and the policy for all employees of the Barclays Group The structure of remuneration packages for executive Directors is closely aligned with that for the broader employee population. Employees receive salary, pension and benefits and are eligible to be considered for a bonus and to participate inall-employee share plans. The broader employee population typically does not have a contractual limit on the quantum of remuneration and does not receive RBP which is paid only to some, but not all, MRTs and other senior employees. Under the new DRP, executive Directors do not receive RBP. As with executive Directors, variable pay for the broader employee population is performance based. Variable pay for executive Directors and the broader employee population are subject to deferral requirements. Executive Directors and other MRTs are subject to deferral at a minimum rate of 40% (for variable pay of less than £500,000) or 60% (for variable pay between £500,000 and £1,000,000) or 60% up to £1,000,000 and 100% above £1,000,000 (for variable pay of more than £1,000,000). Fornon-MRTs, bonuses in excess of £65,000 are currently subject to a graduated level of deferral. The terms of deferred bonus awards for executive Directors and the wider employee population are broadly the same, in particular the vesting of all deferred bonuses (subject to service and malus conditions). The broader employee population does not currently participate in the Barclays LTIP. How shareholder views and broader employee pay are taken into account by the Committee in setting policy and making remuneration decisions We recognise that remuneration is an area of particular interest to shareholders and that in setting and considering changes to remuneration it is critical that we listen to and take into account their views. Accordingly, a series of meetings are held each year with major shareholders and shareholder representative groups. The Committee Chairman attends these meetings, accompanied by senior Barclays’ employees (including the Group Reward and Performance Director and the Company Secretary). The Committee notes that shareholder views on some matters are not always unanimous, but values the insight and engagement that these interactions provide, including the expression of sometimes different views. This engagement is meaningful and helpful to the Committee in its work and contributes directly to the decisions made by the Committee. Shareholders’ feedback has been incorporated into the new DRP. The Committee takes account of the pay and employment conditions of the broader employee base when it considers the remuneration of the executive Directors. The Committee receives and reviews analyses of summary remuneration proposals for employees across all of the Group’s businesses. When the Committee considers executive Directors’ remuneration, it therefore makes that consideration in the context of a detailed understanding of remuneration for the broader employee population to ensure consistency throughout the Group. | | | 66 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Executive Directors’ policy on recruitment Barclays operates in a highly specialised sector and many of its competitors for talent are outside of the United Kingdom. The Committee’s approach to remuneration on recruitment is to pay no more than is necessary to attract the best candidates to the role. Approval of the remuneration packages offered on appointment to any new executive Director is a specific requirement of the Committee’s Terms of Reference. The terms of such packages must be approved by the Committee in consultation with the Chairman and (except for the terms of his own remuneration) the Group Chief Executive. Any new executive Director’s package would include the same elements as those of the existing executive Directors, as shown below. | | | | | Element of remuneration | | Commentary | | Maximum value | | | | Fixed Pay | | Determined by experience, market practice, market conditions and ability to recruit. | | As determined by the Committee with reference to these factors. Fixed Pay will only exceed amounts paid to current executive Directors, as considered reasonable by the Committee, by reference to these factors. If on appointment Fixed Pay is equal to or greater than maximum stated for the relevant role in the policy (for current executive Director), no changes are allowed over the policy period. If on appointment Fixed Pay is at a level below the maximum stated for the relevant role in the policy (for current executive Director), the Committee retains the discretion to realign Fixed Pay over a transitional period which may mean that annual Fixed Pay increases for the new appointee are required up to such maximum amounts. | | | | Pension | | In line with policy. | | 10% of Fixed Pay. | | | | Benefits | | In line with policy. | | In line with policy. | | | | Annual Bonus | | In line with policy. | | 80% of Total fixed pay. | | | | Long Term Incentive Plan | | In line with policy. | | 120% of Total fixed pay. | | | | Buy-out | | The Committee can consider buying out forfeited bonus opportunity or incentive awards that the new executive Director has forfeited as a result of accepting the appointment with Barclays, subject to proof of forfeiture where applicable. | | The value of any buy-out is not included within the maximum incentive levels above since it relates to a buy-out of forfeited bonus opportunity or incentive awards from a previous employer. | | | | | | As required by the PRA Remuneration Rules, any award made to compensate for forfeited remuneration from the new executive Director’s previous employment may not be more generous than, and must mirror as far as possible the expected value, timing and form of delivery of, the terms of the forfeited remuneration and must be in the best long-term interests of Barclays. Barclays’ deferral policy shall however apply as a minimum to anybuy-out of annual bonus opportunity. | | |
Where a senior executive is promoted to the Board, his or her existing contractual commitments agreed prior to his or her appointment may still be honoured in accordance with the terms of the relevant commitment including vesting of anypre-existing deferred bonus or long-term incentive awards. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 67 |
Governance: Remuneration report Directors’ remuneration policy Executive Directors policy on payment for loss of office (including or following a takeover) The Committee’s approach to payments in the event of termination is to take account of the individual circumstances including the reason for termination, individual performance, contractual obligations and the terms of the deferred bonus plans and LTIPs in which the executive Director participates. Provisions relating to executive Directors’ termination | | | | | Standard provision | | Policy | | Details | | | | Notice periods in executive Directors’ service contracts | | For existing executive Directors. twelve months’ notice from the Company and six months’ notice from the executive Director. For new executive Director hires, six months’ notice from the Company and six months’ notice from the executive Director. | | Executive Directors may be required to work during the notice period or may be placed on garden leave or, if not required to work the full notice period, may be provided with pay in lieu of notice (subject to mitigation where relevant). | | | | Pay during notice period or payment in lieu of notice per service contracts | | Fixed Pay payable and continuation of pension and other contractual benefits while an employee during notice period. | | Fixed Pay delivered in cash is payable in phased instalments (or lump sum) and subject to mitigation if paid in instalments and executive Director obtains alternative employment during the notice period or while on garden leave. Fixed Pay delivered in shares is delivered on the next quarterly delivery date and ispro-rated for the number of days from the start of the relevant quarter to the termination date. Where Barclays elects to terminate the employment with immediate effect by making a payment in lieu of notice, the executive Director will not receive any shares that would otherwise have been payable during the period for which the payment in lieu is made (unless required otherwise by regulations or local law). In the event of termination for gross misconduct neither notice nor payment in lieu of notice is given. | | | | Treatment of annual bonus on termination | | No automatic entitlement to bonus on termination, but may be considered at the Committee’s discretion,pro-rated for service, and subject to performance measures being met. No bonus would be payable in the case of gross misconduct or resignation. | | | | | | Treatment of unvested deferred bonus awards | | In the case of death or if the executive Director is an ‘eligible leaver’ the executive Director would continue to be eligible to be considered for unvested portions of deferred awards, subject to the rules of the relevant plan, unless the Committee determines otherwise in exceptional circumstances. ‘Eligible leaver’ is defined as leaving due to injury, disability or ill health, retirement, redundancy, the business or company which employs the executive Director ceasing to be part of the Group or the employer terminating employment, other than in circumstances which amount to gross misconduct or dismissal for cause. In addition, the Committee will apply its discretion to treat resignation on or after the fifth anniversary of the date of grant as ‘eligible leaver’ status. Outstanding deferred bonus awards would lapse if the executive Director leaves by reason of resignation prior to fifth anniversary, is terminated for gross misconduct or cause, or is otherwise not designated an ‘eligible leaver’. Deferred bonusesawards are subject to malus provisions which enable the Committee to reduce the vesting level of deferred bonuses (including to nil) at its discretion. Events which may leadand once vested are subject to clawback provisions (as described above). In the event of a takeover or other major corporate event, the Committee has absolute discretion to do this include, but are not limited to, employee misconductdetermine whether all outstanding awards would vest early or a material failurewhether they should continue in the same or revised form following the change of risk management.control. The Committee may also determine that participants may exchange existing awards for awards over shares in an acquiring company with the agreement of that company. | | | | | | Clawback applies to any variable remuneration awarded to a MRT on or after 1 January 2015 in respect of years for which they are a MRT. Barclays may apply clawback if, at any time during the seven year period from the date on which variable remuneration is awarded to a MRT: (i) there is reasonable evidence of employee misbehaviour or material error, and/or (ii) the firm or the business unit suffers a material failure of risk management, taking account of the individual’s proximity to and responsibility for that incident.
| Share plans
| | AlignmentIn an ‘eligible leaver’ situation, deferred bonus awards may be considered for release in full on the scheduled release dates unless the Committee determines otherwise in exceptional circumstances. After release, the shares are subject to an additional holding period in line with regulations (currently minimum of senior employees with shareholders is achieved through deferral of incentive pay intosix months, increasing to one year for the SVP. We also encourage wider employee shareholding through the all employee share plans. 82% of the global employee population (excluding Africa) are eligible to participate. 2017 performance year). |
| | | 5468 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Governance: Remuneration report
2015 incentives
This section provides details of how 2015 total incentive award decisions were made.
2015 pay and performance headlines
The key performance considerations which the Committee took into account in making its remuneration decisions for 2015 are highlighted below:
§ | | Group adjusted profit before tax was down 2% to £5,403m (2014: £5,502m) while the Investment Bank adjusted profit before tax was up 17% at £1,611m (2014: £1,377m) |
§ | | Group statutory profit before tax was down 8% at £2,073m (2014: £2,256m) |
§ | | the CET1 ratio was up to 11.4% (2014: 10.3%) |
§ | | the leverage ratio was up to 4.5% (2014: 3.7%) |
§ | | Balanced Scorecard – progress has been made against the Balanced Scorecard in respect of 2018 targets. |
The pay outcomes and decisions can be summarised as follows:
§ | | the Group compensation to adjusted net income ratio improved to 37.2% (2014: 37.7%). The Core compensation to adjusted net income ratio also improved to 34.7% (2014: 35.7%) |
§ | | the Group compensation to statutory net income ratio improved to 35.7% (2014: 38.5%) |
§ | | total compensation costs decreased 6% to £8,339m (2014: £8,891m). Total compensation costs in the Investment Bank were down 5% at £3,423m (2014: £3,620m) |
§ | | total incentive awards granted were £1,669m, down 10% on 2014. Investment Bank incentive awards granted were £976m, down 7% on 2014 |
§ | | there has been strong differentiation on the basis of individual performance to allow the Group to more effectively manage compensation costs |
§ | | average value of incentive awards granted per Group employee is £12,900 (2014: £14,100) and the average value of incentive awards granted per Investment Bank employee is £46,500 (2014: £51,400) |
§ | | levels of bonus deferral continue to significantly exceed the minimum requirements in the Remuneration part of the PRA Rulebook and are expected to remain among the highest deferral levels globally. 2015 bonuses awarded to Managing Directors in the Investment Bank were again 100% deferred. |
2015 pay – Questions and answers
How do you justify a 2015 incentive pool of £1,669m?
The Committee remains focused on aligning pay to performance and setting pay at a level which is no more than necessary but is motivational to ensure that we accelerate the delivery of shareholder value.
In line with our financial performance, the final 2015 incentive pool at £1,669m is down 10% on 2014.
The following chart illustrates the reduction in variable remuneration over the period from 2010.
Barclays incentive pools
Notes
Provisions relating to executive Directors’ terminationcontinued a | 2013 Investment Bank incentive pool | | | | Standard provision | | Policy | | Details | | | | Treatment of unvested awards under the LTIP | | In the case of death or if the executive Director is an ‘eligible leaver’ the executive Director would continue to be entitled to be considered for an award. ‘Eligible leaver’ is defined as leaving due to injury, disability or ill health, retirement, redundancy, the business or company which employs the executive Director ceasing to be part of the Group or for any other reason if the Committee decides at its discretion. In addition, the Committee will apply its discretion to treat resignation on or after the fifth anniversary of the date of grant as ‘eligible leaver’ status. Outstanding unvested awards under the LTIP would lapse if the executive Director leaves by reason of resignation prior to fifth anniversary, is terminated for gross misconduct, or is otherwise not designated an ‘eligible leaver’. Awards are subject to malus provisions which enable the Committee to reduce the vesting level of awards (including to nil) and once vested, awards are subject to clawback provisions (as described above). In the event of a takeover or other major corporate event (but excluding an internal reorganisation of the Group), the Committee has been restated from £1,574mabsolute discretion to determine whether all outstanding awards vest subject to the achievement of any performance conditions. The Committee has discretion to apply apro-rata reduction to reflect the business reorganisation. The 2010, 2011 and 2012 Investment Bank incentive pools have not been restated. |
b | Partunexpired part of the reductionvesting period. The Committee may also determine that participants may exchange awards for awards over shares in incentive poolsan acquiring company with the agreement of that company. In the event of an internal reorganisation, the Committee may determine that outstanding awards will be exchanged for equivalent awards in 2014 was dueanother company. | | In an ‘eligible leaver’ situation, awards may be considered for release on the scheduled release dates,pro-rated for time (over the whole performance period, including the assessment period prior to grant for awards granted on or after 10 May 2017) and performance, subject to the introductionCommittee’s discretion to determine otherwise in exceptional circumstances, in accordance with the plan rules, as amended from time to time. After release, the shares (net of Role Based Pay.deductions for tax) are subject to an additional holding period (currently minimum of six months, increasing to one year for the 2017 performance year). |
c | For a reconciliation | | Repatriation | | Except in the case of total incentive awards grantedgross misconduct or resignation, where an executive Director has been relocated at the commencement of employment, the Company may pay for the executive Director’s repatriation costs in line with Barclays’ general employee mobility policy including temporary accommodation, payment of removal costs and relocation flights for the executive Director, spouse and children. The Company will pay the executive Director’s tax on the relocation costs but will not tax equalise and will also not pay tax on his or her other income relating to the relevant income statement charge, see tabletermination of employment. | | | | | | Other | | Except in the case of gross misconduct or resignation, the Company may pay for the executive Director’s legal fees and tax advice relating to the termination of employment and provide outplacement services. The Company may pay the executive Director’s tax on page 56.these particular costs. | | |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 5569 |
Governance: Remuneration report Directors’ remuneration policy What have you doneIllustrative scenarios for executive Directors’ remuneration
The charts below show the potential value of the current executive Directors’ 2017 total remuneration under the new DRP in termsthree scenarios: ‘Minimum’ (i.e. Fixed Pay, Pension and benefits), ‘Maximum’ (i.e. Fixed Pay, Pension and benefits and the maximum variable pay that may be awarded) and‘Mid-point’ (i.e. Fixed Pay, Pension and benefits and 50% of conduct adjustments in 2015?the maximum variable pay that may be awarded). For the purposes of these charts, the value of benefits is based on an estimated annual value for 2017. The scenarios do not reflect share price movement between award and vesting. A key featuresignificant proportion of our revisedthe potential remuneration philosophyof the executive Directors is the alignment of remuneration with risk appetite and with the conduct expectations of Barclays, our regulators and stakeholders. The Committee takes risk and conduct events very seriously and ensures that there are appropriate adjustments to individual remuneration and, where necessary, the incentive pool. The Remuneration Review Panel, which reports to the Committee, supports the Committee in this process. The Panel is chaired by the Chief Risk Officer and includes senior representatives from the key control functions of Risk, Compliance, Internal Audit, Legal and HR. It sets the policy and processesvariable and is responsible for assessingtherefore performance-related. It is also subject to deferral, additional holiding periods, malus and recommending to the Committee compensation adjustments for risk and conduct events.
We have a robust process for considering risk and conduct as part of individual performance management reviews with outcomes reflected in individual incentive decisions. When considering individual responsibility, a variety of factors are taken into account such as:clawback.
| | | | | §Total remuneration opportunity:Group Chief Executive (£000)
| | whether the individual was solely responsible for the event or whether others were also responsible, if not directly involved, |
§ | | whether the individual was aware (or could reasonably have been expected to be aware) of the failure,Total remuneration opportunity:Group Finance Director (£000) |
| § | | whether the individual took or missed opportunities to take adequate steps to address the failure, and |
§ | | whether the individual, by virtue of seniority, could be deemed indirectly responsible, including staff who drive the Group’s culture and set its strategy. |
Individuals who were directly or indirectly accountableIn the above illustrative scenarios, benefits include regular contractual benefits. Additional ad hoc benefits may arise, for an event have had their remuneration adjusted as appropriate. This includes reductionsexample, overseas relocation of executive Directors, but will always be provided in current year bonus levels and reductions in vesting amounts of deferred awards through the application of malus. In addition, a number of employees have been terminated for responsibility and accountability for risk and conduct events resolved during the year. The Committee fully acknowledges the impact such risk and conduct events have on shareholders and believes it is wholly appropriate that this should be reflected in incentive decisions for those whose performance and conduct falls short of Barclays’ standards.
The Committee recognises that conduct events continue to weigh on Group performance, impacting profitability and returns, so in addition to reductions to individuals’ incentive outcomes, material adjustments have also been made to the incentive pool for conduct. These included, but were not limited to, the settlement reachedline with the New York State Department of Financial Services in respect of its investigation into electronic trading of Foreign Exchange, the settlements reached with the US Securities and Exchange Commission and New York State Attorney General in respect of those agencies’ investigations relating to the operation of LX (an alternative trading system), and the settlement reached with the FCA following an investigation into whether Barclays carried out the appropriate due diligence in connection with a transaction it executed in 2012.
The Committee also made a further adjustment in respect of the settlements reached with a number of authorities in May 2015 in relation to investigations into certain sales and trading practices in the Foreign Exchange market and the setting of the US Dollar ISDAFIX benchmark, over and above the substantial adjustments made in 2014 as part of the Committee’s prudent approach towards incentive funding. The Committee took a similar prudent approach in determining 2015 incentive funding.
The overall impact on the incentive pool resulting from both the direct financial impact on performance and the additional adjustments applied by the Committee is a reduction in excess of £600m.
We have also, in addition to the adjustment for specific risk and conduct issues, adjusted the incentive pool to take account of an overall assessment of a wide range of future risks (including Conduct), non-financial factors that can support the delivery of a strong conduct culture and other factors including reputation, impact on customers, markets and other stakeholders.
Total incentive awards granted – current year and deferred (audited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays Group | | | | | | | | | | | | Investment Bank | | | | | | | | | Year ended 31.12.15 £m | | |
| Year ended 31.12.14
£m |
| | | % change | | | | Year ended 31.12.15 £m | | |
| Year ended 31.12.14
£m |
| | | % change | | Total current year bonus | | | 839 | | | | 885 | | | | 5 | | | | 367 | | | | 381 | | | | 4 | | Total deferred bonus | | | 661 | | | | 757 | | | | 13 | | | | 579 | | | | 634 | | | | 9 | | Bonus pool | | | 1,500 | | | | 1,642 | | | | 9 | | | | 946 | | | | 1,015 | | | | 7 | | Commissions, commitments and other incentives | | | 169 | | | | 218 | | | | 22 | | | | 30 | | | | 38 | | | | 21 | | Total incentive awards granted | | | 1,669 | | | | 1,860 | | | | 10 | | | | 976 | | | | 1,053 | | | | 7 | | | | | | | | | Proportion of bonus that is deferred | | | 44% | | | | 46% | | | | | | | | 61% | | | | 62% | | | | | | Total employees (full time equivalent) | | | 129,400 | | | | 132,300 | | | | 2 | | | | 21,000 | | | | 20,500 | | | | (2 | ) | Average bonus per employee | | | £12,900 | | | | £14,100 | | | | 9 | | | | £46,500 | | | | £51,400 | | | | 10 | |
Deferral levels vary according to the incentive award quantum. With reductions in incentive award levels, this has reduced the proportion of the bonus that is deferred.
Deferred bonuses are delivered, subject to the rules, and only once an employee meets certain conditions, including continued service. This creates a timing difference between the communication of the bonus pool and the charges that appear in the income statement which are reconciled in the table below:
Reconciliation of total incentive awards granted to income statement charge (audited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays Group | | | | | | | | Investment Bank | | | | | | | | | | | | | Year ended 31.12.15 £m | | |
| Year ended 31.12.14
£m |
| | | % change | | |
| Year ended 31.12.15
£m |
| | | Year ended 31.12.14 £m | | | | % change | | Total incentive awards for 2015 | | | 1,669 | | | | 1,860 | | | | 10 | | | | 976 | | | | 1,053 | | | | 7 | | Less: deferred bonuses awarded in 2015 | | | (661 | ) | | | (757 | ) | | | 13 | | | | (579 | ) | | | (634 | ) | | | 9 | | Add: current year charges for deferred bonuses from previous years | | | 874 | | | | 1,067 | | | | 18 | | | | 736 | | | | 854 | | | | 14 | | Othera | | | 2 | | | | (108 | ) | | | | | | | 51 | | | | 12 | | | | | | Income statement charge for performance costs | | | 1,884 | | | | 2,062 | | | | 9 | | | | 1,184 | | | | 1,285 | | | | 8 | |
Note
a Difference between incentive awards granted and income statement charge for commissions, commitments and other incentivesDRP.
| | | 5670 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Governance: Remuneration report
2015 incentives
§ | | Employees only become eligible to receive payment from a deferred bonus once all of the relevant conditions have been fulfilled, including the provision of services to the Group. |
Remuneration policy fornon-executive Directors This section provides details of the remuneration policy for the Chairman andnon-executive Directors. § | | | | | Element and purpose | | The income statement charge for performance costsOperation | | Maximum value | Fees Reflect individual responsibilities and membership of Board Committees and are set to attractnon-executive Directors who have relevant skills and experience to oversee the implementation of our strategy Fees are set at a level which reflects the chargerole, responsibilities and time commitment which are expected from the Chairman, Deputy Chairman andnon-executive Directors | | The Chairman and Deputy Chairman are paid anall-inclusive fee for employees’ actual servicesall Board responsibilities. The Chairman has a minimum time commitment equivalent to at least 80% of a full-time role. The othernon-executive Directors receive a basic Board fee, with additional fees payable where individuals serve as a member or Chairman of a Committee of the Board. Fees are reviewed each year by the Board as a whole. £30,000 (Chairman: £100,000) after tax and national insurance contributions per annum of eachnon-executive Director’s basic fee is used to purchase Barclays’ shares which are retained on thenon-executive Director’s behalf until they retire from the Board. Somenon-executive Directors may also receive fees as directors of subsidiary companies of Barclays PLC. In the case of certain subsidiary appointments, such additional remuneration is approved by the Board Nominations Committee. | | Fees are reviewed against those fornon-executive Directors in companies of similar size and complexity. Other than in exceptional circumstances, fees will not increase by more than 20% above the current fee levels during this policy period (basic fees last increased in 2011). | Benefits | | The Chairman is provided with private medical cover subject to the Group duringterms of the relevant calendar year (including where those services fulfil conditions attachedBarclays’ scheme rules from time to previously deferred bonuses). It doestime, and is provided with the use of a Company vehicle and driver when required for business purposes. Benefits which are minor in nature and in any event do not include charges for deferred bonuses where conditions haveexceed a cost of £500 may be provided tonon-executive Directors in specific circumstances. Non-executive Directors are not been met. | eligible to join Barclays’ pension plans. §Expenses
| | As a consequence, the 2015 incentive awards granted decreased 10% compared to 2014, while the income statement chargeThe Chairman andnon-executive Directors are reimbursed for performance costs decreasedany reasonable and appropriate expenses incurred for business reasons. Any tax that arises on these reimbursed expenses is paid by 9%. |
Income statement charge (audited)Barclays.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays Group | | | | Investment Bank | | | | | Year ended 31.12.15 £m | | |
| Year ended 31.12.14
£m |
| | | % change | | |
| Year ended 31.12.15
£m |
| | | Year ended 31.12.14 £m | | | | % change | | Deferred bonus charge | | | 874 | | | | 1,067 | | | | 18 | | | | 736 | | | | 854 | | | | 14 | | Current year bonus charges | | | 839 | | | | 885 | | | | 5 | | | | 367 | | | | 381 | | | | 4 | | Commissions, commitments and other incentives | | | 171 | | | | 110 | | | | (55) | | | | 81 | | | | 50 | | | | (62) | | Performance costs | | | 1,884 | | | | 2,062 | | | | 9 | | | | 1,184 | | | | 1,285 | | | | 8 | | Salariesa | | | 4,954 | | | | 4,998 | | | | 1 | | | | 1,847 | | | | 1,749 | | | | (6) | | Social security costs | | | 594 | | | | 659 | | | | 10 | | | | 248 | | | | 268 | | | | 7 | | Post retirement benefitsbc | | | 545 | | | | 624 | | | | 13 | | | | 112 | | | | 120 | | | | 7 | | Allowances and trading incentives | | | 147 | | | | 170 | | | | 14 | | | | 56 | | | �� | 64 | | | | 13 | | Other compensation costs | | | 215 | | | | 378 | | | | 43 | | | | (24) | | | | 134 | | | | | | Total compensation costsd | | | 8,339 | | | | 8,891 | | | | 6 | | | | 3,423 | | | | 3,620 | | | | 5 | | Other resourcing costs | | | | | | | | | | | | | | | | | | | | | | | | | Outsourcing | | | 1,034 | | | | 1,055 | | | | 2 | | | | 15 | | | | 9 | | | | (67) | | Redundancy and restructuring | | | 134 | | | | 358 | | | | 63 | | | | 84 | | | | 239 | | | | 65 | | Temporary staff costs | | | 697 | | | | 530 | | | | (32) | | | | 248 | | | | 176 | | | | (41) | | Other | | | 185 | | | | 171 | | | | (8) | | | | 51 | | | | 42 | | | | (22) | | Total other resourcing costs | | | 2,050 | | | | 2,114 | | | | 3 | | | | 398 | | | | 466 | | | | 15 | | Total staff costs | | | 10,389 | | | | 11,005 | | | | 6 | | | | 3,821 | | | | 4,086 | | | | 6 | | | | | | | | | | | | | | | | | | | | | | | | | | | Compensation as % of adjusted net income | | | 37.2% | | | | 37.7% | | | | | | | | 45.5% | | | | 47.6% | | | | | | Compensation as % of statutory net income | | | 35.7% | | | | 38.5% | | | | | | | | 45.5% | | | | 47.6% | | | | | | Compensation as % of adjusted income | | | 34.0% | | | | 34.6% | | | | | | | | 45.2% | | | | 47.7% | | | | | | Compensation as % of statutory income | | | 32.8% | | | | 35.2% | | | | | | | | 45.2% | | | | 47.7% | | | | | |
Notes
a | Salaries include Role Based Pay and fixed pay allowances. |
b | Post retirement benefits charge includes £246m (2014: £242m) in respect of defined contribution schemes and £(130)m credit (2014: £382m) in respect of defined benefit schemes. |
c | 2015 post-retirement benefits have been adjusted to exclude the impact of a £429m (2014: nil) gain on valuation of a component of the defined benefit liability. Including the gain would result in a compensation: adjusted net income ratio of 35.3% and a compensation: adjusted income ratio of 32.3%. The aforementioned gain is already included in the statutory ratios. |
d | In addition, £236m of Group compensation (2014: £250m) was capitalised as internally generated software. |
§Bonus and share plans
| | Total staff costs decreased 6%The Chairman is required to £10,389m, principally reflectingbe eligible to participate in HMRC employee tax advantaged share schemes, due to his 80% of a 9% decreasefull-role time commitment, but has opted not to participate. The Chairman is not eligible to participate in performance costsany other Barclays’ cash, share or long-term incentive plans. All othernon-executive Directors are not eligible to participate in Barclays’ cash, share or long-term incentive plans. | Notice and a 63% decrease in redundancy and restructuring charges. |
termination provisions § | | Performance costs decreased 9%, reflectingEachnon-executive Director’s appointment is for an initial six year term, renewable at Barclays’ discretion for a 18% decreasesingle term of three years thereafter and subject to annualre-election by shareholders. Notice period Chairman: twelve months from the Company (six months from the Chairman).Non-executive Directors: six months from the Company (six months from thenon-executive Director). Termination payment policy The Chairman’s appointment may be terminated by Barclays on 12 months’ notice or immediately in which case 12 months’ fees and contractual benefits are payable in instalments at the chargestimes they would have been received had the appointment continued, but subject to mitigation if he or she were to obtain alternative employment. There are similar termination provisions for deferred bonuses,non-executive Directors based on 6 months’ fees. No continuing payments of fees (or benefits) are due if a 5% decrease innon-executive Director is notre-elected by shareholders at the bonus charge partially offset by an increase in other performance charges.Barclays AGM. |
§ | | Redundancy and restructuring charges decreased 63% to £134m, predominantly due to the non-recurrence of the 2014 restructuring costs in the Investment Bank. |
Deferred bonuses awarded are expected toIn accordance with the policy table above, any new Chairman and Deputy Chairman would be charged to the income statementpaid anall-inclusive fee only and any newnon-executive Director would be paid a basic fee for their appointment as anon-executive Director, plus fees for their participation on and/or chairing of any Board committees, time apportioned in the years outlined in the table that follows.first year as necessary. Nosign-on payments are offered tonon-executive Directors.
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 5771 |
��Governance: Remuneration report
Directors’ remuneration policy YearService contracts and letters of appointment
All executive Directors have a service contract whereas allnon-executive Directors have a letter of appointment. Copies of the service contracts and letters of appointment respectively are available for inspection at the Company’s registered office. The dates of the current Directors’ service contracts and letters of appointment are shown in which income statement charge is expected to be taken for deferred bonuses awarded to dateathe table below. | | | | | | | | | | | | | | | | | | | Actual | | | Expectedb | | | | | Year ended 31.12.14 £m | | | | Year ended 31.12.15 £m | | | | Year ended 31.12.16 £m | | | | 2017 and beyond £m | | Barclays Group | | | | | | | | | | | | | | | | | Deferred bonuses from 2012 and earlier bonus pools | | | 488 | | | | 117 | | | | 13 | | | | – | | Deferred bonuses from 2013 bonus pool | | | 579 | | | | 293 | | | | 111 | | | | 17 | | Deferred bonuses from 2014 bonus pool | | | – | | | | 464 | | | | 194 | | | | 100 | | Deferred bonuses from 2015 bonus pool | | | – | | | | – | | | | 370 | | | | 247 | | Income statement charge for deferred bonuses | | | 1,067 | | | | 874 | | | | 688 | | | | 364 | | | | | | | Investment Bank | | | | | | | | | | | | | | | | | Deferred bonuses from 2012 and earlier bonus pools | | | 398 | | | | 101 | | | | 11 | | | | – | | Deferred bonuses from 2013 bonus pool | | | 456 | | | | 239 | | | | 93 | | | | 13 | | Deferred bonuses from 2014 bonus pool | | | – | | | | 396 | | | | 167 | | | | 80 | | Deferred bonuses from 2015 bonus pool | | | – | | | | – | | | | 341 | | | | 217 | | Income statement charge for deferred bonuses | | | 854 | | | | 736 | | | | 612 | | | | 310 | |
| | | | | | | Bonus pool component | | Expected grant date | | Expected payment date(s)c | | Year(s) in which income statement charge arisesd | Current year cash bonus | | § March 2016
| | § March 2016
| | § 2015
| Current year share bonus | | § March 2016
| | § March 2016
| | § 2015
| Deferred cash bonus | | § March 2016
| | § March 2017 (33.3%)
| | § 2016 (48%)
| | | | | § March 2018 (33.3%)
| | § 2017 (35%)
| | | | | § March 2019 (33.3%)
| | § 2018 (15%)
| | | | | | | § 2019 (2%)
| Deferred share bonus | | § March 2016
| | § March 2017 (33.3%)
| | § 2016 (48%)
| | | | | § March 2018 (33.3%)
| | § 2017 (35%)
| | | | | § March 2019 (33.3%)
| | § 2018 (15%)
| | | | | | | § 2019 (2%)
|
Notes
a | The actual amount charged and payments made are subject to all conditions being met prior to the expected payment date and will vary compared with the above expectation. In addition, employees receiving a deferred cash bonus may be awarded a service credit of 10% of the initial value of the award at the time that the final instalment is made, subject to continued employment. Dividend equivalent shares may also be awarded under SVP awards. |
b | Does not include the impact of grants which will be made in 2016 and 2017. |
c | Share awards may be subject to an additional holding period. |
d | The income statement charge is based on the period over which conditions are met. |
| | | 58 | | Effective date | Chairman | | | John McFarlane | | 1 January 2015(non-executive Director), 24 April 2015 (Chairman) | Executive Directors | | | Jes Staley | | 1 December 2015 | Tushar Morzaria | | 15 October 2013 | Non-executive Directors | | | Michael Ashley | | 18 September 2013 | Tim Breedon | | 1 November 2012 | Mary Francis | | 1 October 2016 | Crawford Gillies | | 1 May 2014 | Sir Gerry Grimstone | | 1 January 2016 | Reuben Jeffery III | | 16 July 2009 | Dambisa Moyo | | 1 May 2010 | Diane de Saint Victor | | 1 March 2013 | Diane Schueneman | | 25 June 2015 | Steve Thieke | | 7 January 2014 |
All Directors are put forward forre-election at each AGM, unless they have indicated that they will not seekre-election at the AGM. Discretion In addition to the various operational discretions that the Committee can exercise in the performance of its duties (including those discretions set out in the Company’s share plans), the Committee reserves the right to make either minor or administrative amendments to the policy to benefit its operation or to make more material amendments in order to comply with new laws, regulations and/or regulatory guidance. The Committee would only exercise this right if it believed it was in the best interests of the Company to do so and where it is not possible, practicable or proportionate to seek or await shareholder approval in General Meeting. | | | 72 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Governance: Remuneration report Annual report on Directors’ remuneration This section explains how our Directors’ remuneration policy was implemented during 2015.
| This section explains how our Directors’ remuneration policy was implemented during 2016. |
Executive Directors Executive Directors: Single total figure for 20152016 remuneration (audited) The following table shows a single total figure for 20152016 remuneration in respect of qualifying service for each executive Director together with comparative figures for 2014.2015. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Salary
£000 |
| | | Role Based Pay £000 | | | | Taxable benefits £000 | | | | | Annual bonus £000 | | |
| LTIP
£000 |
| |
| Pension
£000 |
| | Total £000 | | | | | 2015 | | | | 2014 | | | | 2015 | | | | 2014 | | | | 2015 | | | | 2014 | | | | | | | 2015 | | | | | 2014 | | | | 2015 | | | | 2014 | | | | 2015 | | | | 2014 | | | | | 2015 | | | | | 2014 | | Antony Jenkinsa | | | 598 | | | | 1,100 | | | | 516 | | | | 950 | | | | 89 | | | | 100 | | | | | | | 505 | | | | | 1,100 | | | | 1,494 | | | | 1,854 | | | | 197 | | | | 363 | | | | | 3,399 | | | | | 5,467 | | Tushar Morzaria | | | 800 | | | | 800 | | | | 750 | | | | 750 | | | | 82 | | | | 95 | | | | | | | 701 | | | | | 900 | | | | – | | | | – | | | | 200 | | | | 200 | | | | | 2,533 | | | | | 2,745 | | Jes Staleyb | | | 100 | | | | – | | | | 96 | | | | – | | | | 48 | | | | – | | | | | | | – | | | | | – | | | | – | | | | – | | | | 33 | | | | – | | | | | 277 | | | | | – | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Salary
£000 |
| |
| Role Based Pay
£000 |
| |
| Taxable benefits
£000 |
| | | | Annual bonus £000 | | |
| LTIP
£000 |
| |
| Pension
£000 |
| | £000 Total | | | | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | | | | | | 2016 | | | | | 2015 | | | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | | | | 2016 | | | | | 2015 | | Jes Staleya | | | 1,200 | | | | 100 | | | | 1,150 | | | | 96 | | | | 169 | | | | 48 | | | | | | | 1,318 | | | | | – | | | | – | | | | – | | | | 396 | | | | 33 | | | | | 4,233 | | | | | 277 | | Tushar Morzaria | | | 800 | | | | 800 | | | | 750 | | | | 750 | | | | 44 | | | | 82 | | | | | | | 854 | | | | | 701 | | | | 1,008 | | | | – | | | | 200 | | | | 200 | | | | | 3,656 | | | | | 2,533 | |
NotesNote
a | The 2015 figures for Antony Jenkins relate to the period to 16 July 2015 when he ceased to be a Director, save in the case of the LTIP which relates to the whole performance period. Details of his leaving arrangements are provided on page 68. |
b | The 2015 figures for Jes Staley relate to the period from 1 December 2015 when he joined the Board as Group Chief Executive. |
John McFarlane was appointed Executive Chairman from 17 July 2015 pending the appointment of a new Group Chief Executive. At his request, he received no increase in fees. Details of his fees are provided on page 67. John McFarlane is not eligible to participate in Barclays’ cash, share or long-term incentive plans or pension plans.
Additional information in respect of each element of pay for the executive Directors (audited) Salary Jes Staley commenced employment as Group Chief Executive on 1 December 2015 onhas been paid a salary of £1,200,000 per annum.annum since his appointment to the Group Chief Executive role on 1 December 2015. Tushar Morzaria was paid a salary of £800,000 per annum as Group Finance Director. Antony Jenkins was paid a salary of £1,100,000 per annum. Role Based Pay (RBP) Executive Directors receivereceived RBP which iswas delivered quarterly in shares, subject to a holding period with restrictions lifting over five years (20% each year). The value shown is of shares at the date awarded. Taxable benefits Taxable benefits include private medical cover, life and ill health income protection, tax advice, relocation, home leave related costs, car allowance, the use of a company vehicle and driver when required for business purposes and other benefits that are considered minor in nature. Annual bonus Annual bonuses are discretionary and are typically awarded in Q1 following the financial year to which they relate. The 2015 bonus awards reflect the Committee’s assessmentCommittee considered each of the extent to whichexecutive Directors’ performance against the executive Directors achieved their Financialfinancial (50% weighting) and Balanced Scorecard (35% weighting) performance measures andwhich had been set to reflect strategic priorities for 2016. Performance against their individual personal objectives (15% weighting). More information is assessed on an individual basis. 2016 annual bonus outcomes Financial (50% weighting) The approach taken to assessing financial performance against each of the financial measures is based on a straight-line outcome between 25% for threshold performance and 100% applicable to each measure for achievement of maximum performance. The formulaic outcome from 2016 performance against the financial measures gave a total of 29% out of 50% being payable attributable to those measures. A summary of the assessment is provided in the following table. | | | | | | | | | | | Financial performance measure | | Weighting | | Threshold 25% | | Maximum 100% | | 2016 Actual | | 2016 Outcome | Profit before tax (excluding notable items) | | 20% | | £3.45bn | | £4.20bn | | £3.65bn | | 9% | Costs (excluding notable items) | | 10% | | £14.6bn | | £13.7bn | | £15.3bn | | 0% | CET1 ratio | | 20% | | 11.1% | | 11.6% | | 12.4% | | 20% | Total Financial | | 50% | | | | | | | | 29% |
When reflecting upon the appropriate 2016 bonus, the Committee considered the impact of the deferral changes on the formulaic outcomes against the financial measures. In particular, the Committee noted that while the decision to accelerate the deferral charges would improve the Group’s operational flexibility going into 2017 and beyond, it would also lead to a lower 2016 bonus outcome than could have been justified absent the changes. However, on balance, the Committee felt that the overall outcomes were appropriate particularly given theon-going focus to rebalance towards improving shareholder returns. Balanced Scorecard (35% weighting) Progress in relation to each of the 5Cs of the Balanced Scorecard was assessed by the Committee. The Committee took a similar approach as for 2015 i.e. based on a three-point scale in relation to each measure, with 0% to 2% for ‘below’ target, 3% or 4% for a ‘met’ target, and 5% to 7% for ‘above’ target progress against a particular Balanced Scorecard component. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 73 |
Governance: Remuneration report Annual report on Directors’ remuneration Based on this approach to assessing performance against 2016 Balanced Scorecard milestones, the Committee agreed a 18% outcome out of a maximum of 35%. A summary of the assessment is provided in the following table. | | | | | | | | | | | | | | | | | Balanced Scorecard – 5 Cs | | | Weighting | | | Metric | |
| 2016
Target |
| |
| 2016 Actual | | | 2016 Outcome out of maximum 7% for each ‘C’ | Customer and Client | | | 7% | | | PCB, Barclaycard and Africa Banking weighted average ranking of RNPS v peer sets Client Franchise Risk | | | 4th | | | | 4th | | | 4% | | | | | | | | | | | | | | | | | | | | | | | | | 6th | | | | 5th | | | | Colleague | | | 7% | | | Sustained engagement of colleagues’ score | | | 77-79% | | | | 75% | | | 3% | | | | | | | % women in senior leadership | | | 24% | | | | 24% | | | | Citizenship | | | 7% | | | Citizenship Plan – initiatives on track or ahead | | | Plan targets | | | | 8/10 | | �� | 5% | Conduct | | | 7% | | | Conduct Reputation (YouGov Survey) | | | 5.5-5.6/10 | | | | 5.4/10 | | | 2% | Companyb | | | 7% | | | Return on tangible equityc | | | 4.8% | | | | 4.4% | | | | | | | | | | Cost:Income ratioc | | | 70% | | | | 72% | | | 4% | | | | | | | CET1 ratio | | | 11.3% | | | | 12.4% | | | | Total Balanced Scorecard | | | 35% | | | | | | | | | | | | | 18% |
Note a | Company metrics have been updated to reflect the 1 March 2016 strategy announcement. |
b | Excluding notable items. |
c | Cost: Income ratio expressed as total operating expenses of the Group, including Africa, divided by the total income of these businesses. |
Individual outcomes including assessment of personal objectives Performance against each of the executive Directors’ individual personal objectives (15% weighting overall) was assessed by the Committee on an individual basis. (i) Jes Staley A summary of the assessment for Jes Staley against his specific performance measures andis provided in the outcomes for the 2015 bonuses isfollowing table. | | | | | | | | | Performance measure | | | | | Weighting | | | Outcome | Financial | | See table on page 73 | | | 50% | | | 29% | Balanced Scorecard – 5Cs | | See table above | | | 35% | | | 18% | Personal objectives | | Judgemental assessment – see below | | | 15% | | | 13% | Total | | | | | 100% | | | 60% | Final outcome approved by the Remuneration Committee | | | | | | 60% |
The Committee assessed Jes Staley’s performance against his 2016 personal objectives (as set out on pages 60page 97 of the 2015 Annual Report) and 61.concluded that Jes Staley had delivered a very strong performance throughout the year. By the end of 2016, a clear new strategy was not eligiblefirmly embedded and a new Core organisational structure consistent with structural reform has been implemented. The Core businesses have performed well, delivering improved profitability and cost income efficiency. At the same time significant progress has been made in exiting theNon-Core businesses. Jes Staley has demonstrated strong leadership, strengthened the management team and has instilled a more effective performance ethic and culture within the organisation. Given his strong personal performance, the Committee judged that 13% of a maximum of 15% attributable to individual objectives was appropriate. In aggregate, the performance assessment for a 2015 bonus. Jes Staley resulted in an overall formulaic outcome of 60% of each executive Director’s 2015maximum bonus will beopportunity being achieved. The resulting 2016 bonus is £1,318,000 of which 70% is deferred in the form of a share award under the Share Value Plan vesting over three yearsand will vest in five equal tranches from the third to seventh anniversary (subject to the rules of the Share Value Plan as amended from tiem to time). (ii) Tushar Morzaria A summary of the assessment for Tushar Morzaria against his specific performance measures is provided in the following table. | | | | | | | | | Performance measure | | | | | Weighting | | | Outcome | Financial | | See table on page 73 | | | 50% | | | 29% | Balanced Scorecard – 5Cs | | See table above | | | 35% | | | 18% | Personal objectives | | Judgemental assessment – see below | | | 15% | | | 14% | Total | | | | | 100% | | | 61% | Final outcome approved by the Remuneration Committee | | | | | | 61% |
The Committee assessed Tushar Morzaria’s performance against his 2016 personal objectives (as set out on page 97 of the 2015 Annual Report) and concluded that Tushar Morzaria had delivered an outstanding performance in 2016. In doing so, the Committee noted the role provided by Tushar Morzaria in reshaping the business and in particular, recognised his contribution in the significant progress in exitingNon-Core, resulting in a reduction of 22bn in Risk Weighted Assets and his focus in delivering an organisation with onea significantly higher CET1 ratio and lower Cost:Income ratio. In doing so, it was also noted that Tushar Morzaria has continued to develop very strong working relationships with shareholders, investors and regulators, while also improving the performance delivery within the Finance Functions. Given his exceptional personal performance during 2016, the Committee judged that 14% of a maximum 15% attributable to individual objectives was appropriate. In aggregate, the performance assessment for Tushar Morzaria resulted in an overall formulaic outcome of 61% of maximum bonus opportunity being achieved. The resulting 2016 bonus is £854,000 of which 60% is deferred under the Share Value Plan and will vest in five equal tranches from the third vesting each year. 20% will be paid in cash and 20% delivered in shares. to seventh anniversary (subject to the rules of the Share Value Plan as amended from time to time). All shares (whether deferred or not deferred)not) are subject to a further six month holding period from the point of release. 20152016 bonuses are subject to clawback provisions and, additionally, unvested deferred 20152016 bonuses are subject to malus provisions which enable the Committee to reduce the vesting level of deferred bonuses (including to nil). | | | 74 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
LTIP The LTIP amount included in Antony Jenkins’ 2015Tushar Morzaria’s 2016 single total figure is the value of the amount scheduled to be released in relation to the LTIP award granted in 20132014 in respect of performance period 2013-2015.2014-2016 (by reference to Q4 average share price). As Tushar Morzaria and Jes Staley werewas not participantsa participant in this cycle, the LTIP figure in the single figure table is shown as zero for them.him. Release is dependent on, amongstamong other things, performance over the period from 1 January 20132014 to 31 December 2015.2016. Straight line vesting applied between the threshold and maximum points in respect of the RoRWA and loan loss rate measures. The performance achieved against the performance targets is as follows. | | | | | | | | | | | Performance measure | | Weighting | | Threshold | | Maximum vesting | | Actual | | % of award vesting | Return on risk weighted assets (RoRWA) | | 50% | | 13% of award vests for average annual RoRWA of 1.1% | | Average annual RoRWA of 1.6% | | 0.21% | | 0% | Loan loss rate | | 30% | | 10% of award vests for average annual loan loss rate of 75bps | | Average annual loan loss rate of 60bps or below | | 53bps | | 30% | Balanced Scorecard | | 20% | | Performance against the Balanced Scorecard was assessed by the Committee to determine the percentage of the award that may vest between 0% and 20%. Each of the 5Cs in the Balanced Scorecard has equal weighting. | | See below | | 9% | Total | | | | | | | | | | 39% |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 59 |
| | | | | | | | | | | | | | | Performance measure | | | Weighting | | | Threshold | | Maximum vesting | | | Actual | | | % of award vesting | Return on risk weighted assets (RoRWA) | | | 50% | | | 23% of award vests for average annual RoRWA of 1.08% | | Average annual RoRWA of 1.52% | | | 0.33% | | | 0% | Loan loss rate | | | 20% | | | 7% of award vests for average annual loan loss rate of 70bps | | Average annual loan loss rate of 55bps or below | | | 50bps | | | 20% | Balanced Scorecard | | | 30% | | | Performance against the Balanced Scorecard was assessed by the Committee to determine the percentage of the award that may vest between 0% and 30%. Each of the 5Cs in the Balanced Scorecard has equal weighting. | | | See below | | | 14% | Total | | | | | | | | | | | | 34% |
A summary of the Committee’s assessment against the Balanced Scorecard performance measure over the three year performance period is provided below. | | | | | | | Category | | Performance | | Vesting out of maximum 4%6% for each ‘C’ | Customer and Client | | The Customer and Client | | § | | Relationship metrics remained stable atNet Promoter Score performance against peers was 4th place as a strong performance in corporate banking, combined with improvements in Barclaycardduring the period. Across key product categories, notably UK and Barclays current accounts was offset by the impact of reshaping the Wealth business and competitive challenges in South Africa. The UK credit cards, Barclays’ scores have improved with more customers advocating our brands. | | 3% | | | § | | Client Franchise Rank remained stable at 5th placerank throughout the period, a positive result given the shift in challenging market conditions.strategy to focus on geographies and businesses of strength in the Investment Bank. | | 2% | Colleague | | There has been continued advancement towards Barclays’ 2018 gender goal of 26% women§
| | Continued improvement in the female representation across our senior leadership, roles;rising from 22% in 2014 to 24% at 23% by the end of 2015.Sustained Engagement is currently 75%, a positive result in light of the on-going change the organisation has experienced in 2015. Further work is required to achieve the 2018 target.
| | 2% | Citizenship | | In Citizenship Plan, 10 out of 11 metrics on target shows Barclays is having a positive impact on the communities in which it operates, with lending to households the only initiative to lose momentum primarily as a result of market and trading conditions.2016. | | 3% | | | § | | Colleague engagement improved from 72% in 2014 to 75% overall in 2016, a positive result in the light of the change the organisation has undergone over the period. | | | Citizenship | | § | | Continuing on from the successful Citizenship Plan, which closed 2015 with 10 out of 11 initiatives on or ahead of target, Barclays Group (ex Africa) exceeded objectives on all 6 initiatives in the first year of the Shared Growth Ambition. | | 4% | | | § | | Africa also delivered strong performance on investment in education and SME financing, both of which were on track for 2016. Two objectives wereoff-track due to external challenges which impacted the delivery of planned employability and financial inclusion interventions (although foundations are now established which will enable strong 2017 momentum). | | | Conduct | | While § | | Conduct reputation, as measured by the YouGov survey, improvedremained at or below 5.4 over the period. | | 1% | | | § | | However, new conduct items and costs have reduced. | | | Company | | § | | The CET1 ratio has strengthened significantly over the period, to 12.4% at the Committee nevertheless determined that, by reference to the material conduct events that crystallised during the performance period, nil vesting was appropriate.end of 2016. | | 0%3% | Company | | There has been a significant strengthening in the CET1 ratio, which is ahead of 2018 target, however there is plenty of work to do to deliver an acceptable return to shareholders, with adjusted RoE slightly down on 2014.§ | | 2%However, returns excluding notable items (both RoE and RoTE) were below target through much of the period. | | | Total | | | | | | 9%14% |
The LTIP award is also subject to a discretionary underpin whereby the Committee must be satisfied with the underlying financial health of the Group based on profit before tax. The Committee was satisfied that this underpin was met, and accordingly determined that the award should be considered for release to the extent of 39%34% of the maximum number of shares under the total award. The shares are scheduled to be released in March 2016.2017. After release, the shares are subject to an additional two year holding period. Pension Executive Directors are paid cash in lieu of pension contributions. This is market practiceThe cash allowance in 2016 was 33% of salary for senior executives in comparable roles. 2015 Annual bonus outcomes
The Committee considered eachJes Staley and 25% of the eligible executive Directors’ performance against the financial and non-financial measures which had been set to reflect the strategic prioritiessalary for 2015. Performance against their individual personal objectives (15% weighting overall) is assessed on an individual basis. The Committee may exercise its discretion to amend the formulaic outcome of assessment against the targets.
Financial (50% weighting)
The approach taken to assessing financial performance against each of the financial measures is based on a straight line outcome between 25% for threshold performance and 100% applicable to each measure for achievement of maximum performance.
The formulaic outcome from 2015 performance against the financial measures gave a total of 22.1% out of 50% being payable attributable to those measures. A summary of the assessment is provided in the following table.
| | | | | | | | | | | | | | | | | | | | | | | Financial performance measure | | | Weighting | | | | | | Threshold 25% | | | | Maximum 100% | | | | 2015 Actual | | | | 2015 Outcome | | Adjusted profit before tax | | | 20% | | | | | | £5,801m | | | | £7,022m | | | | £5,403m | | | | 0.0% | | Adjusted costs (ex CTA) | | | 10% | | | | | | £16,780m | | | | £15,182m | | | | £16,205m | | | | 5.2% | | CET1 ratio | | | 10% | | | | | | 10.47% | | | | 11.34% | | | | 11.4% | | | | 10.0% | | Leverage ratio | | | 10% | | | | | | 4.17% | | | | 4.72% | | | | 4.5% | | | | 6.9% | | Total Financial | | | 50% | | | | | | | | | | | | | | | | | | 22.1% | |
| | | 60 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
Annual report on Directors’ remuneration
Balanced Scorecard (35% weighting)
Progress in relation to each of the five ‘Cs’ of the Balanced Scorecard was assessedTushar Morzaria. No other benefits were received by the Committee. The Committee took an approach based on a three-point scale in relation to each measure, with 0% to 3% for ‘below’ target, 4% or 5% for a ‘met’ target, and 6% or 7% for ‘above’ target progress against a particular Balanced Scorecard component.
Based on this approach to assessing performance against 2015 Balanced Scorecard milestones, the Committee agreed a 15% outcome out of a maximum of 35%. A summary of the assessment is provided in the following table.
| | | | | | | | | | | | | | | | | | | Balanced Scorecard – 5 Cs | | | Weighting | | | Metric | | | 2015 Target | | | | 2015 Actual | | | 2015 Assessment by the Committee | | 2015 Outcome out of maximum 7% for each ‘C’ | Customer and Client | | | 7% | | | PCB, Barclaycard and Africa Banking weighted average ranking of Relationship Net Promoter Score v peer sets Client Franchise Risk | | | 4th | | | | 4th | | | Met target | | 4.0% | | | | | | | | | | | | | | | | | | | | | | | | | | | 5th | | | | 5th | | | Met target | | | Colleague | | | 7% | | | Sustained engagement of colleagues’ score | | | 82-88% | | | | 75% | | | Below target | | | | | | | | | % women in senior leadership | | | 23% | | | | 23% | | | Met target | | 2.0% | Citizenship | | | 7% | | | Citizenship Plan – initiatives | | | 11/11 | | | | 10/11 | | | Below target | | 3.0% | Conduct | | | 7% | | | Conduct Reputation (You Gov Survey) | | | 5.6/10 | | | | 5.4/10 | | | Below target | | 3.0% | Company | | | 7% | | | Adjusted return on equity | | | 5.9% | | | | 4.9% | | | Below target | | | | | | | | | CET1 ratio | | | 11.0% | | | | 11.4% | | | Above target | | 3.0% | Total Balanced Scorecard | | | 35% | | | | | | | | | | | | | | | 15.0% |
Individual outcomes including assessment of personal objectives
Performance against each of the executive Directors’ individual personal objectives (15% weighting overall) was assessed by the Committee on an individual basis.
(i) Antony Jenkins
A summary of the assessment for Antony Jenkins against his specific performance measures is provided in the following table.
| | | | | | | | | | | Performance measure | | | | | | | Weighting | | | Outcome | Financial | | See table on page 60 | | | | | 50% | | | 22.1% | Balanced Scorecard – 5Cs | | See table above | | | | | 35% | | | 15.0% | Personal objectives | | Judgemental assessment – see below | | | | | 15% | | | 11.0% | Total | | | | | | | 100% | | | 48.1% | Final outcome approved by the Remuneration Committee | | | | | | | | 48.1% |
The Committee determined at the time of his departure that he would remain eligible for a pro rated 2015 bonus for the part of the year in which he was Group Chief Executive, subject to an assessment post year end of the relevant performance measures and the general discretion of the Committee. Although it was deemed the appropriate time forDirectors from any Barclays to change Group Chief Executive in mid-2015, the Committee recognised that during the first half of the year Antony Jenkins showed full commitment to continuing to embed a customer and client focused culture backed by the Barclays’ Values and to delivering on financial commitments with particular focus on capital accretion, reducing costs and continuing the run-down of Non-Core. He was also responsible for ensuring that the Conduct Risk Framework was embedded into the business. Given Antony Jenkins’ overall personal performance in the first half of the year, the Committee judged that 11% of a maximum of 15% was appropriate.
In aggregate, the performance assessment resulted in an overall formulaic outcome of 48.1% of maximum bonus opportunity being achieved. The resulting 2015 bonus, pro rated for service, is £505,000.
(ii) Tushar Morzaria
A summary of the assessment for Tushar Morzaria against his specific performance measures is provided in the following table.
| | | | | | | | | | | Performance measure | | | | | | | Weighting | | | Outcome | Financial | | See table on page 60 | | | | | 50% | | | 22.1% | Balanced Scorecard – 5Cs | | See table above | | | | | 35% | | | 15.0% | Personal objectives | | Judgemental assessment – see below | | | | | 15% | | | 13.0% | Total | | | | | | | 100% | | | 50.1% | Final outcome approved by the Remuneration Committee | | | | | | | | 50.1% |
The Committee concluded that Tushar Morzaria had delivered a strong personal performance throughout the year, and noted that during the second half of the year (pending Jes Staley’s arrival) this was achieved while discharging considerably increased executive responsibilities. During 2015, Tushar Morzaria continued to drive transformational change, encouraging focus on the simplification of the operating model, including improved process and technology. He managed external relationships very effectively, in particular with shareholders, investors and regulators. He personally worked hard on improving colleague engagement and diversity and actively participated in supporting and promoting Barclays’ Citizenship agenda. He has managed risk effectively and embedded a positive risk culture. He has also fully embedded the Conduct Risk Framework into the activities of Group Finance, Tax and Treasury. The Committee, in particular, recognised Tushar Morzaria’s role in the significant improvement in the Bank’s capital position and in driving further focus on close and effective cost management during 2015. Given this strong personal performance, the Committee judged that 13% of a maximum of 15% attributable to individual objectives was appropriate.
As a result, the formulaic outcome for Tushar Morzaria would be 50.1% of maximum bonus opportunity. The resulting 2015 bonus is £701,000.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 61 |
pension plans. Executive Directors: other LTIP awards The Directors’ remuneration reporting regulations require inclusion in the single total figure of only the value of the LTIP awards whose last year of performance ends in the relevant financial year and whose vesting outcome is known. For 2015,2016, this is the award to Antony JenkinsTushar Morzaria under the 2013-20152014-2016 LTIP cycle and further details are set out on page 59.75. This section sets out other LTIP cycles in which the executive Directors participate, the outcome of which remains dependent on future performance. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 75 |
Governance: Remuneration report Annual report on Directors’ remuneration LTIP awards to be granted during 20162017 The Committee decided to make an award under the 2016-20182017-2019 LTIP cycle to Jes Staley and Tushar Morzaria with a face value at grant of 120% of histheir respective Total fixed pay at 31 December 2015. Jes Staley is not eligible for a grant under the 2016-2018 LTIP cycle.2016. The 2016-20182017-2019 LTIP award will be subject to the following forward-looking performance measures. | | | | | | | Performance measure | | Weighting | | Threshold | | Maximum vesting | Adjusted returnReturn on tangible
equity (RoTE) excluding notable items | | 25% | | 6.25% of award vests for average adjusted RoTE excluding notable items of 7.5% | | average adjustedAverage RoTE excluding notable items of 10.0%9.5% | CET1 ratio as at 31 December 2019 | | 25% | | CET1CETI ratio must remain at or above an acceptable level for any of this element to vest. The threshold will be reviewed and set annually based on market conditions and regulatory requirements (11% as aton 31 December 2016).2017) 6.25% of award vests for CET1 ratio 100 basis points above the mandatory distribution restrictions hurdle (MDRH) | | CET1 ratio 200 basis points above the MDRH | Cost:Income ratio excluding notable items | | 20% | | 5% of award vests for average Cost:Income ratio of 63% | | Average Cost:Income ratio of 58% | Risk Scorecard | | 15% | | The Risk Scorecard captures a range of risks and is aligned with the annual incentive risk adjustment framework agreed with the PRA. The current framework measures performance against three broad categories – Capital and Liquidity, Control Environment and Conduct – using a combination of quantitative and qualitative metrics. The framework may be updated from time to time in line with the Group’s risk strategy. Specific targets within each of the categories are deemed to be commercially sensitive. Retrospective disclosure of performance will be made in the 2019 Remuneration report. | Strategic / Non-financial measures | | 15% | | § The existing Balanced Scorecard has evolved into a ‘Performance Measurement’ framework in line with the objective of delivering a simplified Barclays through the strategic actions announced in March 2016. The evaluation will focus on key performance measures (many continuing from the Balanced Scorecard), with a detailed retrospective narrative on progress throughout the period against each category. | | | | | § Performance against theStrategic/Non-financial Measures will be assessed by the Committee to determine the percentage of the award that may vest between 0% and 15%. The measures are organised around 3 main categories: Customer & Client, Colleague and Citizenship. Each of the three main categories has equal weighting. Measures will likely include, but not be limited to, the following: | | | | | – Customer & Client: NPS for consumer businesses, Client rankings and market shares for the Corporate and Investment Bank, complaints performance and volume of lending provided to customers and clients. | | | | | – Colleague: Diversity and Inclusion statistics (including women in senior leadership), Employee sustainable engagement survey scores and conduct and culture measures. | | | | | – Citizenship: Delivery against our Shared Growth Ambition, Colleague engagement in Citizenship activities and external benchmarks and surveys. |
Straight line vesting applies between the threshold and maximum points in respect of the financial measures. The award is subject to a discretionary underpin by which the Committee must be satisfied with the underlying financial health of the Group. Outstanding LTIP awards (i) LTIP awards granted during 2015 The performance measures for the awards made under the 2015-2017 LTIP cycle are shown below. | | | | | | | Performance measure | | Weighting | | Threshold | | Maximum vesting | Net generated equitya | | 30% | | 7.5% of award vests for Net Generated Equity of £1,363m | | Net Generated Equity of £1,844m | Core return on risk weighted assets (RoRWA) excluding own credit | | 20% | | 5% of award vests for average annual Core RoRWA of 1.34% | | Average annual Core RoRWA of 1.81% | Non-Core drag on return on equity (RoE) excluding notable items | | 10% | | 2.5% of award vests forNon-Core drag on RoE of –4.02% | | Non-Core drag on RoE of –2.97% | Loan loss rate | | 10% | | 2.5% of award vests for average annual loan loss rate of 70bps | | Average annual loan loss rate of 55bps or below | Balanced Scorecard | | 30% | | Performance against the Balanced Scorecard is assessed by the Committee to determine the percentage of the award that may vest between 0% and 30%. Each of the 5Cs in the Balanced Scorecard has equal weighting. The targets within each of the 5Cs are deemed to be commercially sensitive. However, retrospective disclosure of the targets and performance against them will be made in the 2017 Remuneration report subject to commercial sensitivity no longer remaining. |
Note a | Net generated equity is a metric which converts changes in the CET1 ratio into an absolute capital equivalent measure. For remuneration purposes, net generated equity will exclude inorganic actions such as rights issues, as determined by the Committee. |
Straight line vesting applies between the threshold and maximum points in respect of the financial and risk measures. The award is subject to a discretionary underpin by which the Committee must be satisfied with the underlying financial health of the Group. | | | 76 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
(ii) LTIP awards granted during 2016 An award was made to Tushar Morzaria on 14 March 2016 under the 2016-2018 LTIP cycle at a share price on the date of grant of £1.6535, in accordance with our Directors’ remuneration policy. This is the price used to calculate the face value below. Jes Staley was not eligible for a grant under the 2016-2018 LTIP cycle. | | | | | | | | | | | | | | | | | | |
| % of fixed pay | | |
| Number of shares | | |
| Face value at grant | | |
| Performance period | | Tushar Morzaria | | | 120% | | | | 1,270,033 | | | | £2,100,000 | | | | 2016-2018 | |
The performance measures for the 2016-2018 LTIP awards are as follows: | | | | | | | Performance measure | | Weighting | | Threshold | | Maximum vesting | Return on tangible equity (RoTE) excluding notable items | | 25% | | 6.25% of award vests for average RoTE of 7.5% | | Average RoTE of 10.0% | | | | CET1 ratio must remain at or above an acceptable level for any of this element to vest. | | | | | The threshold will be reviewed and set annually based on market conditions and regulatory requirements (11% on 31 December 2017) | CET1 ratio as at 31 December 2018 | | 25% | | 6.25% of award vests for CET1 ratio of 11.6% | | CET1 ratio of 12.7% | | | | | | | | | | | | | | | | | Cost:incomeIncome ratio excluding notable items | | 20% | | 5% of award vests for average cost:income Cost:Income ratio of 66% | | average cost:incomeAverage Cost:Income ratio of 58% | Risk Scorecard | | 15% | | Performance against the Risk Scorecard is assessed by the Committee, with input from the Group Risk function, Board Risk Committee and Board Reputation Committee as appropriate, to determine the percentage of the award that may vest between 0% and 15%. The Risk Scorecard measures performance against three broad categories – Risk Profile (including Conduct), Control Environment and Risk Capability – using a combination of quantitative and qualitative metrics. Specific targets within each of the categories are deemed to be commercially sensitive. Retrospective disclosure of performance will be made in the 2018 Remuneration report subject to commercial sensitivity no longer remaining. | Balanced Scorecard | | 15% | | Performance against the Balanced Scorecard is assessed by the Committee to determine the percentage of the award that may vest between 0% and 15%. Each of the 5Cs in the Balanced Scorecard has equal weighting. Assessment will be made against progress towards the 2018 targets. |
Straight line vesting applies between the threshold and maximum points in respect of the financial measures. The award is subject to a discretionary underpin by which the Committee must be satisfied with the underlying financial health of the Group.
Outstanding LTIP awards
(i) LTIP awards granted during 2014
The performance measures for the awards made under the 2014-2016 LTIP cycle are shown below.
| | | | | | | Performance measure | | Weighting | | Threshold | | Maximum vesting | Return on risk weighted assets (RoRWA) | | 50% | | 23% of award vests for average annual RoRWA of 1.08% | | Average annual RoRWA of 1.52% | Loan loss rate | | 20% | | 7% of award vests for average annual loan loss rate of 70bps | | Average annual loan loss rate of 55bps or below | Balanced Scorecard | | 30% | | Performance against the Balanced Scorecard is assessed by the Committee to determine the percentage of the award that may vest between 0% and 30%. Each of the 5Cs in the Balanced Scorecard has equal weighting. The targets within each of the 5Cs are deemed to be commercially sensitive. However, retrospective disclosure of the targets and performance against them will be made in the 2016 Remuneration report subject to commercial sensitivity no longer remaining. |
Straight line vesting applies between the threshold and maximum points in respect of the RoRWA and loan loss rate measures. If the Committee is satisfied with the underlying financial health of the Group based on profit before tax, depending on the extent of its satisfaction, the percentage of Barclays shares that may be considered for release by the Committee under the RoRWA measure can be increased or decreased by 10% of the total award, subject always to a maximum of 50% of the award. Performance outcome will be determined at the end of the performance period. For Antony Jenkins, the resulting number of shares will then be pro-rated to his termination date.
(ii) LTIP awards granted during 2015
Awards were made on 16 March 2015 under the 2015-2017 LTIP cycle at a share price on the date of grant of £2.535, in accordance with our remuneration policy to the executive Directors. This is the price used to calculate the face value below.
| | | | | | | | | | | | | | | | | | | | % of fixed pay | | | | Number of shares | | | | Face value at grant | | | | Performance period | | Antony Jenkins | | | 120% | | | | 1,142,248 | | | | £2,895,599 | | | | 2015-2017 | | Tushar Morzaria | | | 120% | | | | 828,402 | | | | £2,099,999 | | | | 2015-2017 | |
| | | 62 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
Annual report on Directors’ remuneration
The performance measures for the 2015-2017 LTIP awards are as follows:
| | | | | | | Performance measure
| | Weighting | | Threshold | | Maximum vesting | Net generated equitya
| | 30% | | 7.5% of award vests for Net Generated Equity of £1,363m | | Net Generated Equity of £1,844m | Core return on risk weighted assets (RoRWA) excluding own credit
| | 20% | | 5% of award vests for average annual Core RoRWA of 1.34% | | Average annual Core RoRWA of 1.81% | Non-Core drag on adjusted return on equity (RoE)
| | 10% | | 2.5% of award vests for Non-Core drag on adjusted RoE of –4.02% | | Non-Core drag on adjusted RoE of –2.97% | Loan loss rate
| | 10% | | 2.5% of award vests for average annual loan loss rate of 70bps | | Average annual loan loss rate of 55bps or below | Balanced Scorecard
| | 30% | | Performance against the Balanced Scorecard is assessed by the Committee to determine the percentage of the award that may vest between 0% and 30%. Each of the 5Cs in the Balanced Scorecard has equal weighting. The targets within each of the 5Cs are deemed to be commercially sensitive. However, retrospective disclosure of the targets and performance against them will be made in the 2017 Remuneration report subject to commercial sensitivity no longer remaining. |
Note
a | Net generated equity is a metric which converts changes in the CET1 ratio into an absolute capital equivalent measure. For remuneration purposes, Net generated equity will exclude inorganic actions such as rights issues, as determined by the Committee. |
Straight line vesting applies between the threshold and maximum points in respect of the financial and risk measures. The award is subject to a discretionary underpin by which the Committee must be satisfied with the underlying financial health of the Group. For Antony Jenkins, the resulting number of shares will then be pro-rated to his termination date.
Executive Directors: pension (audited)
Jes Staley and Tushar Morzaria receive cash in lieu of pension. The 2015 cash in lieu of pension shown below for Jes Staley is for the period 1 December 2015 to 31 December 2015.
Antony Jenkins left the UK pension scheme in April 2012, and then started receiving cash in lieu of pension. He has benefits in both the final salary 1964 section and in the cash balance Afterwork section. The accrued pension shown below relates to his 1964 section pension only. The other pension entries relate to his benefits in both sections. Antony Jenkins ceased to be an executive Director on 16 July 2015. The 2015 cash in lieu of pension shown below is for the period 1 January 2015 to 16 July 2015.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Accrued pension at 31 December 2015
£000 |
| | | Increase in value of accrued pension over year net of inflation £000 | | |
| Normal retirement
date |
| | | Pension value in 2015 from DB Scheme £000 | | | | 2015 Cash in lieu of pension £000 | | | | 2015 Total £000 | | Antony Jenkins | | | 4 | | | | 0 | | | | 11 July 2021 | | | | 0 | | | | 197 | | | | 197 | | Tushar Morzaria | | | – | | | | – | | | | | | | | – | | | | 200 | | | | 200 | | Jes Staley | | | – | | | | – | | | | | | | | – | | | | 33 | | | | 33 | |
Executive Directors: Statement of implementation of remuneration policy in 20162017 The introduction ofexecutive Directors’ package for 2017, in line with the new deferral and LTIP requirements in the Remuneration part of the PRA Rulebook and EBA Guidelines will require some structural changes as to how the approved Directors’ remuneration policyDRP, will be implemented in 2016. It is therefore our intent to consult with shareholders over proposed changes once formulated. This section explains howeffect from the approved Directors’ remuneration policy would be implemented in 2016 under the current framework.2017 AGM as follows: | | | | | | | | | | | Jes Staley | | Tushar Morzaria | | | | Comments | SalaryFixed Pay | | £1,200,0002,350,000 | | £800,0001,650,000 | | ‘Fixed Pay’ replaces Salary and Role Based Pay. Fixed Pay delivered 50% in cash and 50% in shares (subject to 5 year holding period lifting pro rata) No change in ‘Fixed Pay’ from 2016 for Jes Staley Fixed Pay has increased to £1,650k from £1,550k for Tushar Morzaria | Pension | | £396,000 | | £200,000 | | No change from 2015.2016 | RBPMaximum Bonus | | £1,150,00080% of Total Fixed Paya | | £750,00080% of Total Fixed Paya | | | | Delivered quarterly in shares subject to a holding period with restrictions lifting over five years. No change from 2015.Total variable opportunity unchanged Bonus and LTIP combined for regulatory deferral purposes | Pension | | 33% of salary | | 25% of salary | | | | Fixed cash allowance in lieu of participation in pension plan. No change from 2015. | Maximum bonus
| | 80% of fixed pay
| | 80% of fixed pay
| | | | Variable remuneration for the executive Directors is delivered through bonus and LTIP, both of which are currently deferred over three years. Variable remuneration for the 2016 performance year will be delivered in line with the requirements of the Remuneration part of the PRA Rulebook, including the vesting requirements. Awards under the LTIP will be delivered in shares. The performance and holding periods will be determined before the awards are made in Q1 2017. Vesting will be dependent on performance over the performance period and subject to a further holding period after vesting. | Maximum LTIP | | 120% of fixed payTotal Fixed Paya | | 120% of fixed pay | | | | | | | | | | | | | | | | | | | | | | | | | | | Total Fixed Paya | |
Note: a | Total Fixed Pay is defined as Fixed Pay plus Pension |
In considering the appropriate level of Tushar Morzaria’s Total fixed pay (Fixed Pay plus Pension), the Committee took account of the time he has been in role without any increase (over three years), his strong performance and importance to the organisation, and industry market rates for the role. The Committee concluded that an increase of 5.7%, being less than the increase paid to UK employees over the same period, was warranted but agreed that the executive Directors would not be eligible for any further increase in the next three years (i.e. during the new policy period). | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 6377 |
Governance: Remuneration report Annual report on Directors’ remuneration Total Fixed Pay
The Directors’ remuneration policy sets out the policy on RBP for executive Directors. Following the EBA Guidelines, published in December 2015, and despite the formal power to reduce RBP in the Directors’ remuneration policy, the Committee has agreed, as they also did in 2015, that total fixed pay (salary and RBP elements) will not be reduced in 2016. The Committee will review the structure of RBP in light of the change in regulation and any changes will be reflected in the Directors’ remuneration policy which will be presented to shareholders for approval at the 2017 AGM.
Clawback and malus Clawback applies to any variable remuneration awarded to the executive Directors on or after 1 January 2015. Barclays may apply clawback if at any time during the seven year period from the date on which any variable remuneration is awarded: (i) there is reasonable evidence of individual misbehaviour or material error, and/or (ii) the firm suffers a material failure of risk management, taking account of the individual’s proximity to, and responsibility for, that incident. For variable remuneration awards granted to executive Directors in respect of 2016 onwards, the clawback period may be extended to 10 years in circumstances where the Company or a regulatory authority has commenced an investigation which could potentially lead to the application of clawback.
As set out in the Directors’ remuneration policy, malusMalus provisions will continue to apply to unvested deferred awards.
Deferral A seven7 year deferral period (with no vesting prior to the third anniversary of award, and vesting no faster than on a pro rata basisin equal tranches between the third and seventh year), will apply to any 2017 deferred variable remuneration awarded to the executive Directors in respect of the 2016 performance year onwards.Directors. 20162017 Annual bonus performance measures
Performance measures with appropriately stretching targets have been selected to cover a range of financial andnon-financial goals that support the key strategic objectives of the Company. The performance measures and weightings are shown below. | | | Financial (50%(60% weighting) | | § Adjusted profit before tax (20% weighting)
| | | § Adjusted costs (10% weighting)
| A performance target range has been set for each financial measure. | | § Profit before tax excluding notable items (22.5% weighting) § Cost:Income ratio excluding notable items (15% weighting) §CET1 ratio (20%(22.5% weighting) | Balanced Scorecard (35%Strategic/Non-financial (20% weighting)
| | Progress towards the five year§ The existing Balanced Scorecard targetshas evolved into a ‘Performance Measurement’ framework in line with the objective of delivering a simplified Barclays through the strategic actions announced in March 2016. Enhancements to the available sources of management information and reporting, ranging from internal dashboards to external third party measures, allows for a more holistic view of sustainable business performance, rather than focusing on a few narrowly defined targets. The evaluation will focus on key performance measures (many continuing from the Balanced Scorecard), with a detailed retrospective narrative on progress throughout the period against each category.
§ Performance against theStrategic/Non-financial Measures will be assessed by the Committee atto determine the year end.percentage of the award that may vest between 0% and 20%. The measures are organised around 3 main categories: Customer & Client, Colleague and Citizenship. Each of the 5Csthree main categories has equal weighting. Measures will likely include, but not be limited to, the following: – Customer & Client: NPS for consumer businesses, Client rankings and market shares for the Corporate and Investment Bank, complaints performance and volume of lending provided to customers and clients. – Colleague: Diversity and Inclusion statistics (including women in the Balanced Scorecard will have equal weightingsenior leadership), Employee sustainable engagement survey scores and conduct and culture measures. – Citizenship: Delivery against our Shared Growth Ambition, Colleague engagement in Citizenship activities and external benchmarks and surveys. | Personal (15%(20% weighting) | | The executive Directors have the following joint personal objectives for 2016:2017: | | | § structure the business effectively, ensuring it is focused on a sustainable core proposition with a simpler performing portfolio, with the majority of restructuring completed in 2016
| | | § make significant progress in exiting Non-Core by the end of 2016
| | | § deliverDeliver on 2017 financial commitments with particular focus onincluding continued improvement in costRoTE, the Cost:Income ratio and productivity, as evidenced by an improved profit and a lower cost:income ratiocontinuedbuild-up of our capital base (CET1 ratio) | | | § manageExitNon-Core and ensure successful reintegration of remaining assets / businesses into Core § Achieve the sell-down of Barclays Africa Group Ltd to obtain regulatory deconsolidation § Ensure successful implementation of the 2017 Structural Reform programme, including creation of the Service Company and establishment of subsidiary Boards for Barclays UK and Barclays InternationaI § Identify and implement as far as possible in 2017 a structural solution to ensure continued access to the single market in Europe § Manage risk and conductcontrol effectively and make significantcontinued progress in ensuring thatresolving legacy events are both resolved expedientlyconduct and not repeated.litigation matters. | | | | | In addition, individual personal objectives for 20162017 are as follows: Jes Staley: | | | § implement the new management structure to support structural reform, including a new operating model designed to improve efficiency | | | § make substantiveMake continued progress towards a higherhigh performing culture in line with our Values while also strengthening employee engagement at all levels
| | | § foster an externally focused and customer-centric culture.
| | | | | Tushar Morzaria: | | | § demonstrateImprove customer and client satisfaction while reducing the number of overall complaints § Strengthen succession planning pipeline for Group and Business Unit/Functional Executive Committees and continue to improve percentage of women in senior leadership positions. Tushar Morzaria: § Demonstrate effective management of external relationships and reputation | | | § Continue to strengthen theteam performance, ethictalent pipeline and employee engagement in Group Finance, Tax and Treasury, while also improving productivity.Treasury. |
Detailed calibration of the Financial and Balanced ScorecardStrategic targets is commercially sensitive and it is not appropriate to disclose this information externally on a prospective basis. Disclosure of achievement against the targets will be made in the 20162017 Annual Report subject to the targets no longer being commercially sensitive. The Committee may exercise its discretion to amend the formulaic outcome of assessment against the targets. Any exercise of discretion will be disclosed and explained. | | | 6478 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Governance: Remuneration report
Annual report on Directors’ remuneration
Illustrative scenarios for executive Directors’ remuneration
The charts below show the potential value of the executive Directors’ 2016 remuneration in three scenarios: ‘Minimum’ (i.e. fixed pay only), ‘Maximum’ (i.e. fixed pay and the maximum variable pay that may be awarded) and ‘Mid-point’ (i.e. fixed pay and 50% of the maximum variable pay that may be awarded). For the purposes of these charts, the value of benefits is based on an estimated annual value. The scenarios do not reflect share price movement between award and vesting. LTIP is included at face value; the amount received and included in the single total figure for remuneration will depend on performance over the performance period.
A significant proportion of the potential remuneration of the executive Directors is variable and is therefore performance related. It is also subject to deferral, malus and clawback.
| | | | | Total remuneration opportunity:Group Chief Executive (£000)
| | | | Total remuneration opportunity:Group Finance Director (£000)
| | | | | |
In the above illustrative scenarios, benefits include regular contractual benefits. Additional ad hoc benefits may arise, for example, overseas relocation of executive Directors, but will always be provided in line with the Directors’ remuneration policy.
Performance graph and table The performance graph below illustrates the performance of Barclays over the financial years from 2009 to 20152016 in terms of total shareholder return compared with that of the companies comprising the FTSE 100 index. The index has been selected because it represents a cross-section of leading UK companies.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 65 |
In addition, the table below provides a summary of the total remuneration of the relevant Group Chief Executive over the same period as the previous graph. For the purpose of calculating the value of the remuneration of the Group Chief Executive, data has been collated on a basis consistent with the ‘single figure’ methodology. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | | | 2009 | | | | 2010 | | | | 2011 | | | | 2012 | | | | 2012 | | | | 2013 | | | | 2014 | | |
| 2015
|
| | | 2015 | | | | 2015 | | Group Chief Executive | | | John Varley | | | | John Varley | | | | Bob Diamond | | | | Bob Diamonda | | | | Antony Jenkinsb | | | | Antony Jenkins | | | | Antony Jenkins | | |
| Antony
Jenkinsb |
| |
| John
McFarlanec |
| | | Jes Staleyd | | Group Chief Executive single figure of total remuneration £000s | | | 2,050 | | | | 4,567 | | | | 11,070e | | | | 1,892 | | | | 529 | | | | 1,602 | | | | 5,467f | | | | 3,399 | | | | 305 | | | | 277 | | Annual bonus against maximum opportunity % | | | 0% | | | | 100% | | | | 80% | | | | 0% | | | | 0% | | | | 0% | | | | 57% | | | | 48% | | | | N/A | | | | N/A | | Long-term incentive vesting against maximum opportunity % | | | 50% | | | | 16% | | | | N/Af | | | | 0% | | | | N/Ag | | | | N/Ag | | | | 30% | | | | 39% | | | | N/Ag | | | | N/Ag | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year | | | 2009 | | | | 2010 | | | | 2011 | | | | 2012 | | | | 2012 | | | | 2013 | | | | 2014 | | | | 2015 | | | | 2015 | | | | 2015 | | | | 2016 | | Group Chief Executive | | | John Varley | | | | John Varley | | | | Bob Diamond | | | | Bob Diamonda | | | | Antony Jenkinsb | | | | Antony Jenkins | | | | Antony Jenkins | | | | Antony Jenkinsb | | | | John McFarlanec | | | | Jes Staleyd | | | | Jes Staley | | Group Chief Executive single figure of total remuneration £000s | | | 2,050 | | | | 4,567 | | | | 11,070e | | | | 1,892 | | | | 529 | | | | 1,602 | | | | 5,467f | | | | 3,399 | | | | 305 | | | | 277 | | | | 4,233 | | Annual bonus against maximum opportunity % | | | 0% | | | | 100% | | | | 80% | | | | 0% | | | | 0% | | | | 0% | | | | 57% | | | | 48% | | | | N/A | | | | N/A | | | | 60% | | Long-term incentive vesting against maximum opportunity % | | | 50% | | | | 16% | | | | N/Ag | | | | 0% | | | | N/Ag | | | | N/Ag | | | | 30% | | | | 39% | | | | N/Ag | | | | N/Ag | | | | N/Ag | |
Notes a | Bob Diamond left the Board on 3 July 2012. |
b | Antony Jenkins became Group Chief Executive on 30 August 2012 and left the Board on 16 July 2015. |
c | John McFarlane was Executive Chairman from 17 July 2015 to 30 November 2015. His fees, which remained unchanged, have beenpro-rated for his time in the position. He was not eligible to receive a bonus or LTIP. |
d | Jes Staley became Group Chief Executive on 1 December 2015. |
e | This figure includes £5,745k tax equalisation as set out in the 2011 Remuneration report. Bob Diamond was tax equalised on tax above the UK rate where that could not be offset by a double tax treaty. |
f | Antony Jenkins’ 2014 pay is higher than in earlier years since he declined a bonus in 2012 and 2013 and did not have LTIP vesting in those years. |
g | Not a participant in a long-term incentive award which vested in the period. |
Percentage change in Group Chief Executive’s remuneration The table below shows how the percentage change in the Group Chief Executive’s salary, benefits and bonus between 20142015 and 20152016 compares with the percentage change in the average of each of those components of pay for UK based employees. | | | | Salary | | | | Role Based Pay | | | Benefits | | Annual bonus | | | Fixed Pay | | | | Benefits | | | | Annual bonus | | Group Chief Executivea | | | 0.0% | | | | 0.0% | | | 20.0%b | | (15.6%) | | | 0% | | | | 118%b | | | | N/Ac | | Average based on UK employeesc | | | 3.0% | | | | 12.2%d | | | 0.0% | | (8.0%) | | Average based on UK employeesd | | | | 3.6% | | | | No change | | | | (0.1)% | |
Notes a | The 2015 figures for the Group Chief Executive are based on formerthe Group Chief Executive, Antony Jenkins,Jes Staley, and are annualised in order to provide a meaningful comparison of the year on year change in remuneration for the Group Chief Executive and UK based employees. |
b | The percentage changeincrease in benefits for the Group Chief Executive represents an increasearises primarily as a result of relocation provided in the cost to Barclays of existing benefits. There was no change in actual benefit provision to the former2016. |
c | The Group Chief Executive from 2014 todid not receive an annual bonus in 2015. |
cd | Certain populations were excluded to enable a meaningful like for like comparison. |
d | The majority of the increase was due to the introduction of Role Based Pay to certain populations, including new MRTs required to comply with PRA/EBA requirements. |
We have chosen UK based employees as the comparator group as it is the most representative group for pay structure comparisons. Relative importance of spend on pay A year on year comparison of the relative importance of payGroup compensation costs and distributions to shareholders is shown below. 2015 Group compensation costs have reduced by 6% and dividends to shareholders have increased 2% from 2014. Note a | | | | | 2015 Group Compensation Costs (£m) | | | | Dividendscompensation costs have been adjusted to Shareholders (£m) | | | | | exclude the impact of £429m gain on valuation of a component of the defined benefit liability. |
| | | 66 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 79 |
Governance: Remuneration report Annual report on Directors’ remuneration Chairman andnon-executive Directors Chairman and non-executive Directors
Remuneration fornon-executive Directors reflects their responsibilities and time commitment and the level of fees paid tonon-executive Directors of comparable major UK companies. Chairman andnon-executive Directors: Single total figure for 20152016 fees (audited) | | | | Fees | | | | Benefits | | | | Total | | | | Fees | | | | Benefits | | | | Total | | | | | 2015 £000 | | | | 2014 £000 | | | | 2015 £000 | | | | 2014 £000 | | | | 2015 £000 | | | | 2014 £000 | | |
| 2016
£000 |
| |
| 2015
£000 |
| |
| 2016
£000 |
| |
| 2015
£000 |
| |
| 2016
£000 |
| |
| 2015
£000 |
| Chairman | | | | | | | | | | | | | | | | | | | | | | | | | John McFarlanea | | | 628 | | | | – | | | | 11 | | | | – | | | | 639 | | | | – | | | | 800 | | | | 628 | | | | 1 | | | | 11 | | | | 801 | | | | 639 | | Sir David Walkerb | | | 285 | | | | 750 | | | | 6 | | | | 19 | | | | 291 | | | | 769 | | | | – | | | | 285 | | | | – | | | | 6 | | | | – | | | | 291 | | Non-executive Directors | | | | | | | | | | | | | | | | | | | | | | | | | Mike Ashley | | | 207 | | | | 213 | | | | – | | | | – | | | | 207 | | | | 213 | | | | 207 | | | | 207 | | | | – | | | | – | | | | 207 | | | | 207 | | Tim Breedon | | | 232 | | | | 240 | | | | – | | | | – | | | | 232 | | | | 240 | | | | 220 | | | | 232 | | | | – | | | | – | | | | 220 | | | | 232 | | Crawford Gilliesc | | | 178 | | | | 91 | | | | – | | | | – | | | | 178 | | | | 91 | | | Mary Francisc | | | | 29 | | | | – | | | | – | | | | – | | | | 29 | | | | – | | Crawford Gillies | | | | 195 | | | | 178 | | | | – | | | | – | | | | 195 | | | | 178 | | Sir Gerry Grimstoned | | | | 250 | | | | – | | | | – | | | | – | | | | 250 | | | | – | | Reuben Jeffery III | | | 135 | | | | 160 | | | | – | | | | – | | | | 135 | | | | 160 | | | | 120 | | | | 135 | | | | – | | | | – | | | | 120 | | | | 135 | | Wendy Lucas-Bulld | | | 358 | | | | 367 | | | | – | | | | – | | | | 358 | | | | 367 | | | Wendy Lucas-Bulle | | | | 64 | | | | 358 | | | | – | | | | – | | | | 64 | | | | 358 | | Dambisa Moyo | | | 152 | | | | 151 | | | | – | | | | – | | | | 152 | | | | 151 | | | | 135 | | | | 152 | | | | – | | | | – | | | | 135 | | | | 152 | | Frits van Paasschen | | | 88 | | | | 80 | | | | – | | | | – | | | | 88 | | | | 80 | | | Sir Michael Rakee | | | 250 | | | | 250 | | | | – | | | | – | | | | 250 | | | | 250 | | | Frits van Paasschenf | | | | 35 | | | | 88 | | | | – | | | | – | | | | 35 | | | | 88 | | Diane de Saint Victor | | | 135 | | | | 135 | | | | – | | | | – | | | | 135 | | | | 135 | | | | 118 | | | | 135 | | | | – | | | | – | | | | 118 | | | | 135 | | Diane Schuenemanfk | | | 74 | | | | – | | | | – | | | | – | | | | 74 | | | | – | | | Sir John Sunderlandg | | | 60 | | | | 190 | | | | – | | | | – | | | | 60 | | | | 190 | | | Steve Thiekehk | | | 184 | | | | 131 | | | | – | | | | – | | | | 184 | | | | 131 | | | Fulvio Contii | | | – | | | | 37 | | | | – | | | | – | | | | – | | | | 37 | | | Simon Fraserj | | | – | | | | 47 | | | | – | | | | – | | | | – | | | | 47 | | | Diane Schuenemangh | | | | 232 | | | | 74 | | | | – | | | | – | | | | 232 | | | | 74 | | Steve Thiekeh | | | | 221 | | | | 184 | | | | – | | | | – | | | | 221 | | | | 184 | | Sir Michael Rakei | | | | – | | | | 250 | | | | – | | | | – | | | | – | | | | 250 | | Sir John Sunderlandj | | | | – | | | | 60 | | | | – | | | | – | | | | – | | | | 60 | | Total | | | 2,966 | | | | 2,842 | | | | 17 | | | | 19 | | | | 2,983 | | | | 2,861 | | | | 2,626 | | | | 2,966 | | | | 1 | | | | 17 | | | | 2,627 | | | | 2,983 | |
Non-executive Directors are reimbursed expenses that are incurred for business reasons. Any tax that arises on these reimbursed expenses is paid by Barclays. The Chairman is provided with private medical cover and the use of a company vehicle and driver when required for business purposes. Notes a | John McFarlane joined the Board as anon-executive Director with effect from 1 January 2015 and as Chairman from 24 April 2015. The 2015 total includesnon-executive Director fees of £78,000 for the period from 1 January 2015 to 24 April 2015. |
b | Sir David Walker retired from the Board with effect from 23 April 2015. |
c | Crawford GilliesMary Francis joined the Board as anon-executive Director with effect from 1 May 2014.October 2016. |
d | The 2014 figure has been updated toSir Gerry Grimstone joined the Board as anon-executive Director from 1 January 2016 and succeeded Sir Michael Rake as Senior Independent Director and Deputy Chairman with effect from 1 January 2016. |
e | Wendy Lucas-Bull retired from the Board with effect from 1 March 2016. Figures include fees received by Wendy Lucas-Bull for her role as Chairman of Barclays Africa Group Limited. The 2015 figure includes fees received by her in 2015 for that role. |
ef | Sir Michael RakeFrits van Paasschen retired from the Board with effect from 31 December 2015.28 April 2016. |
fg | Diane Schueneman joined the Board as anon-executive Director with effect from 25 June 2015. |
g | Sir John Sunderland retired from the Board with effect from 23 April 2015. |
h | Steve Thieke joined the Board as a non-executive Director with effect from 7 January 2014. |
i | Fulvio Conti retired from the Board with effect from 24 April 2014. |
j | Simon Fraser retired from the Board with effect from 24 April 2014. |
k | Diane Schueneman and Steve Thieke both served in 20152016 on the US Governance Review Board, which iswas an advisory board set up as the forerunner of the board of our US intermediate holding company which will bewas established during 2016. They each subsequently joined the board of the US intermediate holding company on its formation. The 2015 figures for Diane Schueneman and Steve Thieke includeincluded fees of $37,500 and $75,000 respectively for thesetheir roles respectively.on the US Governance Review Board. The 2016 figures include fees of $138,000 and $150,000 respectively for their roles on the US Governance Review Board and the board of the US intermediate holding company. In addition, Steve Thieke waived fees of $63,000. |
i | Sir Michael Rake retired from the Board with effect from 31 December 2015. |
j | Sir John Sunderland retired from the Board with effect from 23 April 2015. |
Chairman andnon-executive Directors: Statement of implementation of remuneration policy in 20162017 20162017 fees, subject to annual review in line with policy, for the Chairman andnon-executive Directors are shown below.
| | | | 1 January 2016 £000 | | | | 1 January 2015 £000 | | | | Percentage Increase | | |
| 1 January 2017
£000 |
| |
| 1 January 2016
£000 |
| |
| Percentage
Increase |
| Chairmana | | | 800b | | | | 750 | | | | – | | | | 800 | | | | 800 | | | | 0 | | Deputy Chairmana | | | 250 | | | | 250 | | | | 0 | | | | 250 | | | | 250 | | | | 0 | | Board member | | | 80 | | | | 80 | | | | 0 | | | | 80 | | | | 80 | | | | 0 | | Additional responsibilities | | | | | | | | | | | | | Senior Independent Director | | | 30 | | | | 30 | | | | 0 | | | | 30 | | | | 30 | | | | 0 | | Chairman of Board Audit or Board Remuneration Committee | | | 70 | | | | 70 | | | | 0 | | | | 70 | | | | 70 | | | | 0 | | Chairman of Board Risk Committee | | | 60 | | | | 60 | | | | 0 | | | | 70 | | | | 60 | | | | 17 | | Chairman of Board Reputation Committee | | | 50 | | | | 50 | | | | 0 | | | | 50 | | | | 50 | | | | 0 | | Membership of Board Audit or Board Remuneration Committee | | | 30 | | | | 30 | | | | 0 | | | | 30 | | | | 30 | | | | 0 | | Membership of Board Reputation or Board Risk Committee | | | 25 | | | | 25 | | | | 0 | | | | 25 | | | | 25 | | | | 0 | | Membership of Board Nominations Committee | | | 15 | | | | 15 | | | | 0 | | | | 15 | | | | 15 | | | | 0 | |
Notes a | The Chairman and Deputy Chairman do not receive any other additional responsibility fees in addition to the Chairman and Deputy Chairman fees respectively. |
b | John McFarlaneThe basic fee payable tonon-executive Directors was appointedlast increased in May 2011. Some revisions have been made to the additional fees payable to Board Committee Chairman on 24 April 2015 on fees of £800,000.to reflect time commitment and responsibilities. |
| | | | | 80 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 67 | | |
Payments to former Directors Former Group Chief Executive: Antony Jenkins Antony Jenkins ceasedcontinued to be Group Chief Executive on 16 July 2015. In accordance with his contractual entitlements, Antony Jenkins will receive base salary, RBP, benefits and pension allowance until 7 July 2016 (the Termination Date). These payments are being made in instalments and are subjectFull details of his eligibility to mitigationvariable pay were disclosed in the event that Antony Jenkins brings his termination date forward. The Committee carefully considered2015 Directors’ Remuneration report (page 101 of the circumstances of Antony Jenkins’ departure, taking into account his contribution in bringing the Group to a much stronger position during a difficult period for the Group. Against that background, the Committee agreed to exercise its discretion to treat Antony Jenkins as an eligible leaver for the purposes of his variable pay in accordance with the Directors’ remuneration policy approved by shareholders at the 2014 AGM. The Committee agreed that:
§ | | Antony Jenkins would remain eligible for an annual bonus in respect of 2015, pro-rated to 16 July 2015 |
§ | | Antony Jenkins’ 260,355 deferred shares will be considered for release in full on the scheduled release dates. After release, the shares will be subject to an additional 6 month holding period |
§ | | the unvested LTIP awards granted to Antony Jenkins in 2014 and 2015 will be considered for release on the scheduled release dates subject to achievement of the applicable performance measures and time pro-rated to the Termination Date. The maximum number of shares (subject to the achievement of the applicable performance measures) after reduction for time pro-rating are LTIP 2014-2016: 1,418,805 shares and LTIP 2015-2017: 475,937 shares. After vesting, the shares will be subject to an additional two year holding period |
§ | | all outstanding unvested deferred awards are subject to malus provisions |
The Company has paid £106k in respect of outplacement services and legal costs in connection with Antony Jenkins’ termination of employment in line with the approved Directors’ remuneration policy on terminations.2015 Annual Report).
Former Group Finance Director: Chris Lucas In 2015,2016, Chris Lucas continued to be eligible to receive life assurance cover, private medical cover and payments under the Executive Income Protection Plan (EIPP). Full details of his eligibility under the EIPP were disclosed in the 2013 Directors’ Remuneration report (page 91115 of the 2013 Form 20-F)Annual Report). Chris Lucas did not receive any other payment or benefit in 2015. Other policy information
Outside appointments
During the period while he was Executive Chairman, John McFarlane retained fees in respect of external directorships at Westfield Corporation Limited of $62k and at Old Oak Holdings Limited of £37k.2016.
Directors’ shareholdings and share interests Executive Directors’ shareholdings and share interests (audited) The chart below shows the value of Barclays’ shares held beneficially by Jes Staley and Tushar Morzaria as at 2621 February 20162017 that count towards the shareholding requirement of, as a minimum, Barclays’ shares worth four times salary. The current executive Directors have five years from their respective date of appointment to meet this requirement. At close of business on 2621 February 2016,2017, the market value of Barclays ordinary shares was £1.6910. Jes Staley (£000)
Tushar Morzaria (£000)
| | | 68 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
Annual report on Directors’ remuneration£2,375m.
Interests in Barclays PLC Shares (audited) The table below shows shares owned beneficially by all the Directors and shares over which executive Directors hold awards which are subject to either deferral terms or performance measures. The shares shown below, that are subject to performance measures, are based on the maximum number of shares that may be released (before pro-rating for Antony Jenkins). Interests in Barclays PLC shares (audited)released.
| | | | | | | | |
| Total as at 31 December
2015 (or date |
| | | | | | | | | | | | | | | | | | | Unvested | | | | | | | | Unvested | | |
| Total as at
31 December 2016 (or date of retirement from the Board, if earlier) |
| | | | | | Owned outright | | | | Subject to performance measures | | | | Not subject to performance measures | | | | of retirement from the Board, if earlier) | | | | Total as at 26 February 2016 | | | | Owned outright | | | | Subject to performance measures | | |
| Not subject to
performance measures |
| |
| Total as at 21 February 2017 | | Executive Directors | | | | | | | | | | | | | | | | | | | | | Antony Jenkinsa | | | 5,540,236 | | | | 4,579,983 | | | | 260,355 | | | | 10,380,574 | | | | – | | | Jes Staley | | | | 4,243,848 | | | | – | | | | – | | | | 4,243,848 | | | | 4,243,848 | | Tushar Morzaria | | | 931,310 | | | | 2,204,213 | | | | 741,829 | | | | 3,877,352 | | | | 3,877,352 | | | | 1,466,204 | | | | 3,474,246 | | | | 578,391 | | | | 5,518,841 | | | | 5,518,841 | | Jes Staleyb | | | 2,812,997 | | | | – | | | | 896,450 | | | | 3,709,447 | | | | 3,709,447 | | | Chairman | | | | | | | | | | | | | | | | | | | | | John McFarlanec | | | 11,995 | | | | – | | | | – | | | | 11,995 | | | | 11,995 | | | Sir David Walkerd | | | 151,455 | | | | – | | | | – | | | | 151,455 | | | | – | | | John McFarlane | | | | 46,852 | | | | – | | | | – | | | | 46,852 | | | | 46,852 | | Non-executive Directors | | | | | | | | | | | | | | | | | | | | | Mike Ashley | | | 23,547 | | | | – | | | | – | | | | 23,547 | | | | 23,547 | | | | 65,290 | | | | – | | | | – | | | | 65,290 | | | | 65,290 | | Tim Breedon | | | 19,196 | | | | – | | | | – | | | | 19,196 | | | | 19,196 | | | | 29,755 | | | | – | | | | – | | | | 29,755 | | | | 29,755 | | Mary Francisa | | | | 7,600 | | | | – | | | | – | | | | 7,600 | | | | 7,600 | | Crawford Gillies | | | 58,856 | | | | – | | | | – | | | | 58,856 | | | | 58,856 | | | | 70,208 | | | | – | | | | – | | | | 70,208 | | | | 70,208 | | Sir Gerry Grimstone | | | | 103,288 | | | | – | | | | – | | | | 103,288 | | | | 103,288 | | Reuben Jeffery III | | | 184,988 | | | | – | | | | – | | | | 184,988 | | | | 184,988 | | | | 200,196 | | | | – | | | | – | | | | 200,196 | | | | 200,196 | | Wendy Lucas-Bull | | | 14,672 | | | | – | | | | – | | | | 14,672 | | | | 14,672 | | | Wendy Lucas-Bullb | | | | 15,672 | | | | – | | | | – | | | | 15,672 | | | | – | | Dambisa Moyo | | | 40,696 | | | | – | | | | – | | | | 40,696 | | | | 40,696 | | | | 51,192 | | | | – | | | | – | | | | 51,192 | | | | 51,192 | | Frits van Paasschen | | | 17,184 | | | | – | | | | – | | | | 17,184 | | | | 17,184 | | | Sir Michael Rakee | | | 75,670 | | | | – | | | | – | | | | 75,670 | | | | – | | | Frits van Paasschenc | | | | 23,681 | | | | – | | | | – | | | | 23,681 | | | | – | | Diane de Saint Victor | | | 21,579 | | | | – | | | | – | | | | 21,579 | | | | 21,579 | | | | 36,691 | | | | – | | | | – | | | | 36,691 | | | | 36,691 | | Diane Schuenemanf | | | 2,000 | | | | – | | | | – | | | | 2,000 | | | | 2,000 | | | Sir John Sunderlandg | | | 139,081 | | | | – | | | | – | | | | 139,081 | | | | – | | | Diane Schueneman | | | | 16,004 | | | | – | | | | – | | | | 16,004 | | | | 16,004 | | Steve Thieke | | | 23,123 | | | | – | | | | – | | | | 23,123 | | | | 23,123 | | | | 55,073 | | | | – | | | | – | | | | 55,073 | | | | 55,073 | | Sir Gerry Grimstoneh | | | – | | | | – | | | | – | | | | – | | | | 97,045 | | |
Notes a | Antony Jenkins left the Board with effect from 16 July 2015. |
b | Jes StaleyMary Francis joined the Board as Group Chief Executive with effect from 1 December 2015. |
c | John McFarlane joined the Board as anon-executive Director with effect from 1 January 2015 and as Chairman with effect from 24 April 2015. He was Executive Chairman from 17 July 2015 to 30 November 2015.October 2016. |
db | Sir David WalkerWendy Lucas-Bull retired from the Board as anon-executive Director with effect from 23 April 2015.1 March 2016. |
ec | Sir Michael RakeFrits van Paasschen retired from the Board with effect from 31 December 2015. |
f | Diane Schueneman joined the Board as anon-executive Director with effect from 25 June 2015. |
g | Sir John Sunderland retired from the Board with effect from 2328 April 2015. |
h | Sir Gerry Grimstone joined the Board as Senior Independent Director and Deputy Chairman with effect from 1 January 2016. On appointment, he held 97,045 Barclays PLC shares. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 6981 |
Governance: Remuneration report Annual report on Directors’ remuneration Barclays Board Remuneration Committee The Board Remuneration Committee is responsible for overseeing Barclays’ remuneration as described in more detail below. Terms of Reference The role of the Committee is to: § | | set the overarching principles and parameters of remuneration policy across the Group;Group |
§ | | consider and approve the remuneration arrangements of (i) the Chairman, (ii) the executive Directors, (iii) members of the Barclays Group Executive Committee and any other senior executives specified by the Committee from time to time, and those(iv) all other Group employees whose total annual compensation exceeds an amount determined by the Committee from time to time (currently £2m or more)£2m) |
§ | | exercise oversight for remuneration issues. |
The Committee considers all aspects of the design and operation of remuneration policy to ensure a coherent approach is taken in respect of all employees. In discharging this responsibility the Committee seeks to ensure that the policy assesses, among other things, the impact of pay arrangements on culture and all elements of risk management. The Committee also considersapproves incentive pools for all major businesses and approves buy-outs of forfeited rights for new hires of £2m or more, and packages on termination where the total discretionary value is £1m or more. Itfunctions, regularly reviews the policy relating to all remuneration plans including pensions,design and provision of retirement benefits, and considers and approves measures designed to promote the alignment of the interests of shareholders and employees. ItThe Committee and its members work as necessary with other Board Committees, and is also responsible for the selectionauthorised to select and appointment ofappoint its independent remuneration adviser.own advisers as required. The Terms of Reference can be found at home.barclays/corporategovernance or from the Company Secretary on request. Chairman and members The Chairman and members of the Committee are as follows: § | | Crawford Gillies, Committee member since 1 May 2014 and Chairman since 24 April 2015 |
§ | | Tim Breedon, Committee member since 1 December 2012 |
§ | | Steve Thieke,Mary Francis, Committee member since 6 February 20141 November 2016 |
§ | | Dambisa Moyo, Committee member since 1 September 20152015. |
Former Chairman and membersmember Members whoSteve Thieke left the Committee during 2015 were as follows:on 1 March 2016 having been a Committee member since 6 February 2014.
§ | | Sir John Sunderland, Committee member since 1 July 2005 and Committee Chairman from 24 July 2012 to 23 April 2015 |
§ | | Sir David Walker, Committee member from 1 September 2012 to 23 April 2015 |
All current members are considered independent by the Board. Remuneration Committee attendance in 20152016 | | | | Number of meetings eligible to attend | | | | Number of meetings attended | | |
| Number of meetings eligible to attend | | |
| Number of meetings attended | | Crawford Gillies | | | 7 | | | | 7 | | | | 9 | | | | 9 | | Tim Breedon | | | 7 | | | | 7 | | | | 9 | | | | 8 | | Mary Francis | | | | 2 | | | | 2 | | Dambisa Moyo | | | | 9 | | | | 9 | | Steve Thieke | | | 7 | | | | 7 | | | | 3 | | | | 3 | | Dambisa Moyo | | | 4 | | | | 4 | | | Sir John Sunderland | | | 1 | | | | 1 | | | Sir David Walker | | | 1 | | | | 1 | | |
The performance of the Committee is reviewed each year as part of the Board Effectiveness Review. The December 20152016 review concluded that Board members have full confidence in the effectiveness and thoroughness of the Committee. Full details of the Board Effectiveness review can be found on pages 33 and 34.page 33. Advisers to the Remuneration Committee During 2015,Until February 2016, the Committee was advised by Towers Watson (now known as Willis Towers Watson. The Committee is satisfied that the advice provided by Willis Towers Watson to the Committee is independent.was independent and objective. Willis Towers Watson is a signatory to, and its appointment as adviser to the Committee iswas conditional on adherence to, the voluntary UK Code of Conduct for executive remuneration consultants.
Towers Watson’s work in 2015 included advisingDuring the rest of 2016, the Committee and providingdecided not to engage an independent adviser but Willis Towers Watson continued to provide the latestCommittee with market data on compensation and trends when considering incentive levels and remuneration packages. A representative from Towers Watson attends Committee meetings. When requested by the Committee, Towers Watson is available to advise and meet with the Committee members separate from management.
Fees for the Committee work arewere charged on a time/cost basis and Willis Towers Watson was paid a total of £195,000£48,000 (excluding VAT) in fees for its advice to the Committee in 20152016 relating to the executive Directors (either exclusively or along with other employees within the Committee’s Terms of Reference). Willis Towers Watson also provides pensions advice, advice on health and benefits provision, assistance and technology support for employee surveys and performance management, and remuneration data to the Group. Willis Towers Watson also provides pensions advice and administration services to the Barclays Bank UK Retirement Fund. The Committee regularly reviews the objectivity and independence of the advice it receives from Towers Watson.
In the course of its deliberations, the Committee also considers the views of the Group Chief Executive, Group Human Resources Director and the Group Reward and Performance Director. The Group Finance Director and Chief Risk Officer provide regular updates on Group and business financial performance and the Group’s risk profile respectively. No Barclays‘Barclays’ employee or Director participates in discussions with, or decisions of, the Committee relating to his or her own remuneration. No other advisers provided significant services to the Committee in the year. | | | 7082 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Governance: Remuneration report
Annual report on Directors’ remuneration
Remuneration Committee activities in 20152016 The following provides a summary of the Committee’s activities during 20152016 and at the January and February 20162017 meetings when 2015at which 2016 remuneration decisions were finalised. | | | | | | | | | Meeting | | Fixed and variable pay issues | | Governance, risk and other matters | February 2015January 2016
| | § | | 2015 incentive funding proposals | | § | | Finance and Risk updates | February 2016 (Two meetings) | | § | | Approved executive Directors’ and senior executives’ 20152016 fixed pay | | § §
§
§
| | Risk adjustment and malus review
Approved 20142015 Remuneration report | | Review of 2014 reward communications strategy
§ | | Approved 2016 executive Directors’ annual bonus performance measures | | § | | Finance and Risk updates including ex ante risk adjustment | | § | | Approved Group fixed pay budgets for 2016 | | § | | Appointment of Committee independent adviser | | | § | | Approved 2015 executive Directors’ annual bonus performance measures
| | | | | §
| | Approved group salary and RBP budgets for 2015
| | | | | §
| | Approved final 20142015 incentive funding | | § | | Updates on headcount and employee attrition | | | § | | Approved proposals for executive Directors’ and senior executives’ 20142015 bonuses and 20152016 LTIP awards for executive Directors | | | | | § May 2015
| | § | | 2015 early incentive funding projections
| | §
| | Consideration of the outcomes of the 2014 Board Committees’2015 Committee effectiveness review | June 2016 | | § | | Barclays’ deferral approach | | § | | Review of Directors’ remuneration policy | | | § | | Impact of corporate restructuring on executive Director and Group Executive Committee members’ remuneration | | § | | Update on Structural Reform | July 2016 | | | | | | § | | Update on EBA consultation on draft revisedReview of Barclays broader remuneration guidelines
| | | | | | | §
| | Employee compensation adjustment reviewphilosophy
| | | | | | | § | | Barclays’ remuneration approach review
| July 2015
| | | | | | §
| | Review of Committee activity and Terms of ReferenceDirectors’ remuneration policy | | | | | | | §September 2016
(joint meeting with Nominations Committee) | | Consideration of process for appointment of Committee’s independent adviser from April 2016
| | | | | | | § | | Update on July 2014 PRA consultationApproved Tim Throsby’s appointment and resulting changes to the Remuneration part of the PRA Rulebookremuneration arrangements
| | | | | | | §October 2016
| | Scope of remuneration philosophy review
| | | | | | | § | | Review of Directors’ remuneration policy | §November 2016
| | Employee compensation adjustment review
| October 2015§
| | §2016 incentive funding projections including risk adjustments
| | Approved Jes Staley’s remuneration arrangements§
§ § § | | §Annual review of Committee Terms of Reference
| | Remuneration philosophy review
| (Two meetings)
| | | | | | | | | November 2015
| | §
| | 2015 incentive funding projections
| | §
| | Finance and Risk updates including ex ante risk adjustment Updates on headcount and employee attrition 2016 payround shareholder engagement planning | | | § | | 20162017 LTIP performance measures
| | §
| | Updates on headcount and attrition
| | | | | | | §
| | 2015 payround shareholder engagement planning
| | | | | | | §
| | Employee compensation adjustment review
| December 2015
| | §
| | Initial considerations on senior executives’ 2016 fixed pay
| | §
| | Review of draft 2015 Remuneration report
| | | §
| | 2015 incentive funding proposals and initial proposals for senior executives’ 2015 bonuses
| | §
§
| | Finance and Risk updates including ex ante risk adjustment
Updates on headcount and attrition
| | | | | | | | JanuaryDecember 2016
| | § | | Initial considerations on senior executives’ 2016 bonuses and 2017 fixed pay | | § § § | | Review of draft Directors’ remuneration policy Finance and Risk updates Updates on headcount and employee attrition | | | § | | 2017 LTIP performance measures | | | | | § | | 2016 incentive funding proposals including risk adjustments | | | §January 2017
| | 2015 incentive funding proposals§
| | 2016 incentive funding proposals including risk adjustments | | § | | Finance and Risk updates | | | § | | 2016 bonus proposals for senior executives | | | | | | | § | | Barclays’ deferral approach | | | | | February 20162017 (Two meetings)
| | § | | Approved executive Directors’ and senior executives’ 20162017 fixed pay | | §
§ § § | | Approved 20152016 Remuneration report Finance and Risk updates including ex ante risk adjustment Appointment of Committee independent adviser
Updates on headcount and employee attrition | | | § | | Approved 20162017 executive Directors’ annual bonus performance measures | | | | | § | | Approved Group fixed pay budgets for 20162017 | | | | | § | | Approved final 20152016 incentive funding including risk adjustments | | | | | § | | Approved proposals for executive Directors’ and senior executives’ 20152016 bonuses and 20162017 LTIP awards for executive Directors | | | | |
Regular items: market and stakeholder updates including PRA/FCA, US Federal Reserve and other regulatory matters; updates from Remuneration Review Panel meetings; operation of the Committee’s Control Framework on hiring, retention and termination; and LTIP performance updates. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 83 |
Governance: Remuneration report Annual report on Directors’ remuneration Statement of voting at Annual General Meeting The table below shows the voting result in respect of our remuneration arrangements at the AGM held on 2328 April 20152016 and the last policy vote at the AGM held on 24 April 2014: | | | For
% of votes cast Number | | Against
% of votes cast Number | | Withheld
Number | | For
% of votes cast Number | | Against
% of votes cast Number | | Withheld
Number | Advisory vote on the 2014 Remuneration report | | 97.50% | | 2.50% | | | | Advisory vote on the 2015 Remuneration report | | | 93.60% | | 6.40% | | | | | 11,385,216,004 | | 291,926,107 | | 63,613,057 | | 11,351,168,552 | | 776,042,467 | | 83,768,745 | Binding vote on the Directors’ remuneration policy | | 93.21% | | 6.79% | | | | 93.21% | | 6.79% | | | | | 9,936,116,114 | | 723,914,712 | | 154,598,278 | | 9,936,116,114 | | 723,914,712 | | 154,598,278 |
| | | | | 84 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 71 | | |
Governance: Remuneration report Additional remuneration disclosures | This section contains voluntary disclosures about levels of remuneration for our eight most highly paid senior executive officers, levels of remuneration of employees in the Barclays Group and outstanding share plan and LTIP awards for our executive Directors. |
This section contains voluntary disclosures about levels of remuneration for our eight most highly paid senior executive officers and levels of remuneration of employees in the Barclays Group.
20152016 total remuneration of the eight highest paid senior executive officers below Board level
The table below shows remuneration for the eight highest paid senior executive officers below Board level who were Key Management Personnel in 2015.2016. Eight highest paid senior executive officers below Board level | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1
2015 £000 |
| |
| 2
2015 £000 |
| |
| 3
2015 £000 |
| |
| 4
2015 £000 |
| |
| 5
2015 £000 |
| |
| 6
2015 £000 |
| |
| 7
2015 £000 |
| |
| 8
2015 £000 |
| Fixed Pay (salary and RBP) | | | 3,150 | | | | 1,500 | | | | 1,700 | | | | 1,300 | | | | 2,050 | | | | 1,192 | | | | 878 | | | | 661 | | Current year cash bonus | | | – | | | | 600 | | | | 320 | | | | 320 | | | | 100 | | | | 140 | | | | 180 | | | | 204 | | Current year share bonus | | | – | | | | 600 | | | | 320 | | | | 320 | | | | 100 | | | | 140 | | | | 180 | | | | 204 | | Deferred cash bonus | | | 3,150 | | | | 900 | | | | 480 | | | | 480 | | | | 150 | | | | 210 | | | | 270 | | | | 306 | | Deferred share bonus | | | 3,150 | | | | 900 | | | | 480 | | | | 480 | | | | 150 | | | | 210 | | | | 270 | | | | 306 | | Total remuneration | | | 9,450 | | | | 4,500 | | | | 3,300 | | | | 2,900 | | | | 2,550 | | | | 1,892 | | | | 1,778 | | | | 1,681 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1
2016 £000 |
| |
| 2
2016 £000 |
| |
| 3
2016 £000 |
| |
| 4
2016 £000 |
| |
| 5
2016 £000 |
| |
| 6
2016 £000 |
| |
| 7
2016 £000 |
| |
| 8
2016 £000 |
| Fixed Pay (salary and RBP) | | | 1,813 | | | | 1,500 | | | | 1,974 | | | | 1,925 | | | | 1,250 | | | | 1,300 | | | | 1,170 | | | | 1,049 | | Current year cash bonus | | | 200 | | | | 200 | | | | 200 | | | | 200 | | | | 200 | | | | 190 | | | | 198 | | | | 105 | | Current year share bonus | | | 200 | | | | 200 | | | | 200 | | | | 200 | | | | 200 | | | | 190 | | | | 198 | | | | 105 | | Deferred cash bonus | | | 2,233 | | | | 1,125 | | | | 813 | | | | 825 | | | | 375 | | | | 285 | | | | 297 | | | | 158 | | Deferred share bonus | | | 2,233 | | | | 1,125 | | | | 813 | | | | 825 | | | | 375 | | | | 285 | | | | 297 | | | | 158 | | Total remuneration | | | 6,679 | | | | 4,150 | | | | 4,000 | | | | 3,975 | | | | 2,400 | | | | 2,250 | | | | 2,160 | | | | 1,575 | |
Total remuneration of the employees in the Barclays Group The table below shows the number of employees in the Barclays Group in 20142015 and 20152016 in bands by reference to total remuneration. Total remuneration comprises salary, RBP, other allowances, bonus and the value at award of LTIP awards. Total remuneration of the employees in the Barclays Group | | | | | | | | | | | | Number of employees | | | | | | | Number of employees | | | | 2016 | | | | 2015 | | | | 2015 | | Remuneration band | | | 2015 | | | | 2014 | | | | | | Constant currency | | | | Actual | | £0 to £25,000 | | | 71,886 | | | | 72,262 | | | | 33,989 | | | | 38,457 | | | | 39,720 | | £25,001 to £50,000 | | | 31,804 | | | | 33,760 | | | | 22,927 | | | | 25,220 | | | | 25,153 | | £50,001 to £100,000 | | | 21,196 | | | | 20,491 | | | | 17,063 | | | | 18,869 | | | | 18,885 | | £100,001 to £250,000 | | | 9,903 | | | | 9,000 | | | | 9,098 | | | | 10,047 | | | | 9,210 | | £250,001 to £500,000 | | | 2,266 | | | | 2,323 | | | £250,001, to £500,000 | | | | 2,093 | | | | 2,367 | | | | 2,181 | | £500,001 to £1,000,000 | | | 761 | | | | 871 | | | | 771 | | | | 879 | | | | 740 | | £1,000,001 to £2,500,000 | | | 268 | | | | 301 | | | | 307 | | | | 309 | | | | 264 | | £2,500,001 to £5,000,000 | | | 50 | | | | 55 | | | | 46 | | | | 51 | | | | 50 | | Above £5m | | | 5 | | | | 3 | | | | 11 | | | | 9 | | | | 5 | |
Barclays is a global business. Of those employees earning above £1m in total remuneration for 20152016 in the table above, 55%63% are based in the US, 34%32% in the UK, and 11%5% in the rest of the world. The number of employees paid above £1m has reduced from 359is slightly down year on year on a constant currency basis (364 in 2014 to 3232016 vs. 369 in 2015. | | | 72 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
Additional remuneration disclosures
2015). Outstanding share plan and long-term incentive planLTIP awards (audited) | Plan | | | Number of shares under award at 1 January 2015 (maximum) | | | | Number of shares awarded in year (maximum) | | | | Market price on award date | | | | Number of shares released | | | | Market price on release date | | | | Number of shares under award at 1 January 2016 (maximum) | | |
| Number of shares awarded
in year (maximum) |
| | | Market price on award date | | | | Number of shares released | | | | Market price on release date | | | | Number of shares under award at 31 December 2016 (maximum) | | | | Value of release £000 | | | | End of performance period or first scheduled release date | | | | Last scheduled release date | | Antony Jenkins | | | | | | | | | | | | Barclays LTIP 2012-2014 | | | 1,139,217 | | | | – | | | | £1.81 | | | | 332,286 | | | | £2.67 | | | Barclays LTIP 2012-2014 | | | 1,371,280 | | | | – | | | | £1.86 | | | | 400,030 | | | | £2.67 | | | Barclays LTIP 2013-2015 | | | 1,545,995 | | | | – | | | | £3.06 | | | | – | | | | – | | | Barclays LTIP 2014-2016 | | | 1,891,740 | | | | – | | | | £2.31 | | | | – | | | | – | | | Barclays LTIP 2015-2017 | | | – | | | | 1,142,248 | | | | £2.54 | | | | – | | | | – | | | Share Value Plan 2012 | | | 332,377 | | | | – | | | | £2.53 | | | | 332,377 | | | | £2.54 | | | Share Value Plan 2012 | | | 1,079,970 | | | | – | | | | £1.86 | | | | 1,079,970 | | | | £2.54 | | | Jes Staley | | | | | | | | | | | | | | | | | | | | Share Value Plan 2015 | | | – | | | | 260,355 | | | | £2.54 | | | | – | | | | – | | | | 896,450 | | | | – | | | | £2.34 | | | | 896,450 | | | | £1.65 | | | | – | | | | 1,479 | | | | – | | | | – | | | Tushar Morzaria | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays LTIP 2014-2016 | | | 1,375,811 | | | | – | | | | £2.31 | | | | – | | | | – | | | | 1,375,811 | | | | – | | | | £2.31 | | | | – | | | | – | | | | 1,375,811 | | | | – | | | | 31/12/2016 | | | | 08/03/2017 | | Barclays LTIP 2015-2017 | | | – | | | | 828,402 | | | | £2.54 | | | | – | | | | – | | | | 828,402 | | | | – | | | | £2.54 | | | | – | | | | – | | | | 828,402 | | | | – | | | | 31/12/2017 | | | | 05/03/2018 | | Barclays LTIP 2016-2018 | | | | – | | | | 1,270,033 | | | | £1.65 | | | | – | | | | – | | | | 1,270,033 | | | | – | | | | 31/12/2018 | | | | 04/03/2019 | | Share Value Plan 2013 | | | 733,877 | | | | – | | | | £2.51 | | | | 411,437 | | | | £2.54 | | | | 322,440 | | | | – | | | | £2.51 | | | | 243,616 | | | | £1.65 | | | | 78,824 | | | | 402 | | | | 17/03/2014 | | | | 05/03/2018 | | Share Value Plan 2014 | | | 309,557 | | | | – | | | | £2.31 | | | | 103,185 | | | | £2.54 | | | | 206,372 | | | | – | | | | £2.31 | | | | 103,186 | | | | £1.65 | | | | 103,186 | | | | 170 | | | | 16/03/2015 | | | | 08/03/2017 | | Share Value Plan 2015 | | | – | | | | 213,017 | | | | £2.54 | | | | – | | | | – | | | | 213,017 | | | | – | | | | £2.54 | | | | 71,005 | | | | £1.65 | | | | 142,012 | | | | 117 | | | | 14/03/2016 | | | | 05/03/2018 | | | Jes Staley | | | | | | | | | | | | Share Value Plan 2015 | | | – | | | | 896,450 | | | | £2.34 | | | | – | | | | – | | | The interests shown in the table above are the maximum number of Barclays’ shares that may be received under each plan (before pro-rating for Antony Jenkins). Executive Directors do not pay for any share plan or long-term incentive plan awards. Antony Jenkins received 178,527 dividend shares from Share Value Plan (SVP) and LTIP awards and Tushar Morzaria received 19,669 dividend shares from SVP awards released in 2015. The SVP 2015 award granted to Jes Staley was made in respect of awards he forfeited as a result of accepting employment at Barclays. This award was made in line with the Barclays’ recruitment policy and was made on no more favourable terms than those forfeited awards. Outstanding Cash Value Plan (CVP) awards (audited) | | | Plan | | | | | |
| Value under award at 1 January 2015 (maximum)
£000 |
| | | Value paid in year £000 | | |
| Value under award at 31 December 2015
((maximum) £000 |
| | Antony Jenkins | | | | | | | | | | | | Cash Value Plan 2012 | | | | | | | 750 | | | | 750 | | | | – | | | Share Value Plan 2016 | | | | – | | | | 254,369 | | | | £1.65 | | | | – | | | | – | | | | 254,369 | | | | – | | | | 06/03/2017 | | | | 04/03/2019 | |
A ‘service credit’ was added, onThe interests shown in the final vesting date, totable above are the thirdmaximum number of Barclays’ shares that may be received under each plan. Executive Directors do not pay for any share plan or LTIP awards. No shares lapsed during 2016.
Jes Staley received 19,846 dividend equivalent shares from SVP awards released in 2016 and final vesting amount which, for the award shown, was 10% of the original award amount. Antony JenkinsTushar Morzaria received the CVP award as part of his 2011 bonus, which was awarded27,503 dividend equivalent shares from SVP awards released in respect of performance in his role as CEO of Retail and Business Banking.2016. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 7385 |
| | | | | | | | | | | | | Number of shares lapsed in 2015 | | Number of shares under award at 31 December 2015 (maximum) | | Value of release £000 | | End of performance period or first scheduled release date | | Last scheduled release date | | | | | | | | | 806,931 | | – | | 887 | | – | | – | | | 971,250 | | – | | 1,068 | | – | | – | | | – | | 1,545,995 | | – | | 31/12/2015 | | 14/03/2016 | | | – | | 1,891,740 | | – | | 31/12/2016 | | 06/03/2017 | | | – | | 1,142,248 | | – | | 31/12/2017 | | 05/03/2018 | | | – | | – | | 844 | | – | | – | | | – | | – | | 2,743 | | – | | – | | | – | | 260,355 | | – | | 14/03/2016 | | 05/03/2018 | | | | | | | | | – | | 1,375,811 | | – | | 31/12/2016 | | 06/03/2017 | | | – | | 828,402 | | – | | 31/12/2017 | | 05/03/2018 | | | – | | 322,440 | | 1,045 | | 17/03/2014 | | 05/03/2018 | | | – | | 206,372 | | 262 | | 16/03/2015 | | 06/03/2017 | | | – | | 213,017 | | – | | 14/03/2016 | | 05/03/2018 | | | | | | | | | – | | 896,450 | | – | | 14/03/2016 | | 14/03/2016 |
| | | 74 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-FRisk review | | |
Governance: Remuneration report
Directors’ remuneration policy (abridged)
Barclays’ forward looking remuneration policy for Directors was approved at the 2014 AGM held on 24 April 2014 and applies for three years from that date. The full policy can be found on pages 76 to 86 of the 2013 Form20-F or at home.barclays/annualreport.
This section sets out an abridged version of the Directors’ remuneration policy and is provided for information only.
This remuneration policy sets out the framework for how the Committee’s remuneration strategy will be executed for the Directors over the three years beginning on the date of the 2014 AGM. This is to be achieved by having a remuneration policy that seeks to:
§ | | provide an appropriate and competitive mix of fixed and variable pay which, through its short and long-term components, incentivises management and is aligned to shareholders; |
§ | | provide direct line of sight with Barclays’ strategy through the incentive programmes; and |
§ | | comply with and adapt to the changing regulatory landscape. |
Remuneration policy for executive Directors
| | | | | Element and purpose | | Operation | | Maximum value and performance measures | A. Fixed pay
| | | | | Salary
To reward skills and experience appropriate for the role and provide the basis for a competitive remuneration package
| | Salaries are determined with reference to market practice and market data (on which the Committee receives independent advice), and reflect individual experience and role.
Executive Directors’ salaries are benchmarked against comparable roles in the following banks: Bank of America, BBVA, BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, HSBC, JP Morgan, Lloyds, Morgan Stanley, RBS, Santander, Société Générale, Standard Chartered and UBS. The Committee may amend the list of comparator companies to ensure it remains relevant to Barclays or if circumstances make this necessary (for example, as a result of takeovers or mergers).
Salaries are reviewed annually and any changes are effective from 1 April in the financial year.
| | Salaries for executive Directors are set at a point within the benchmark range determined by the Committee taking into account their experience and performance. Increases for the current executive Directors over the policy period will be no more than local market employee increases other than in exceptional circumstances where the Committee judges that an increase is needed to bring an executive Director’s salary into line with that of our competitors. In such circumstances Barclays would consult with its major shareholders.
| Role Based Pay
To enable competitive remuneration opportunity in recognition of the breadth and depth of the role
| | Paid quarterly in shares which are subject to a holding period with restrictions lifting over five years (20% each year). As the executive Directors beneficially own the shares, they will be entitled to any dividends paid on those shares.
RBP will be reviewed and fixed annually and may be reduced or increased in certain circumstances. Any changes are effective from 1 January in the relevant financial year.
| | The maximum RBP for executive Directors is set at £950,000 for the Group Chief Executive, Antony Jenkins, and £750,000 for the Group Finance Director, Tushar Morzaria. It is not pensionable (except where required under local law). These amounts may be reduced but are at the maxima and may not be increased above this level.
There are no performance measures.
| Pension
To enable executive Directors to build long-term retirement savings
| | Executive Directors receive an annual cash allowance in lieu of participation in a pension arrangement.
| | The maximum annual cash allowance is 33% of salary for the Group Chief Executive and 25% of salary for the Group Finance Director and any other executive Director.
| Benefits
To provide a competitive and cost effective benefits package appropriate to role and location
| | Executive Directors’ benefits provision includes private medical cover, annual health check, life and ill health income protection, tax advice, car cash allowance, and use of a company vehicle and driver when required for business purposes.
Additional benefits may be offered that are minor in nature or are normal market practice in a country to which an executive Director relocates or from which an executive Director is recruited.
In addition to the above, if an executive Director were to relocate, additional support would be provided for a defined and limited period of time in line with Barclays’ general employee mobility policy including provision of temporary accommodation, payment of removal costs and relocation flights. Barclays will pay the executive Director’s tax on the relocation costs but will not tax equalise and will also not pay the tax on his or her other employment income.
| | The maximum value of the benefit is determined by the nature of the benefit itself and costs of provision may depend on external factors, e.g. insurance costs.
|
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 75 |
Remuneration policy for executive Directors continued
| | | | | Element and purpose | | Operation | | Maximum value and performance measures | B. Variable Pay
| | | | | Annual bonus
To reward delivery of short-term financial targets set each year, the individual performance of the executive Directors in achieving those targets, and their contribution to delivering Barclays’ strategic objectives
While financial objectives are important, the Balanced Scorecard (which also includes Group financial targets) plays a significant role in bonus determination, to ensure alignment with Barclays’ strategy
Deferred bonuses encourage long-term focus and retention. Delivery substantially or fully in shares with a holding period increases alignment with shareholders. Deferred bonuses are granted by the Committee (or an authorised sub-committee) at its discretion, subject to the relevant plan rules
| | Determination of annual bonus
Individual bonuses are discretionary and decisions are based on the Committee’s judgement of executive Directors’ performance in the year, measured against Group and personal objectives.
Delivery structure
Executive Directors are Code Staff and their bonuses are therefore subject to deferral of at least the level applicable to all Code Staff, currently 40% (for bonuses of no more than £500,000) or 60% (for bonuses of more than £500,000). The Committee may choose to defer a greater proportion of any bonus awarded to an executive Director than the minimum required by the PRA Remuneration Code. At least half the non-deferred bonus is delivered in shares or share-linked instruments.
Deferred bonuses for executive Directors may be delivered in a combination of shares or other deferral instruments.
Participants may, at the Committee’s discretion, also receive the benefit of any dividends paid between the award date and the relevant release date in the form of dividend shares.
Operationmanagement of risk and conduct adjustment and malus
Any bonus awarded will reflect appropriate reductions madeis a critical underpinning to incentive pools in relation to risk events. Individual bonus decisions may also reflect appropriate reductions in relation to specific risk and conduct events.
All unvested deferred bonuses are subject to malus provisions which enable the Committee to reduce the vesting level of deferred bonuses (including to nil) for any reason. These include, but are not limited to:
§ A participant deliberately misleading Barclays, the market and/or shareholders in relation to the financial performance of the Barclays Group
§ A participant causing harm to Barclays’ reputation or where his/her actions have amounted to misconduct, incompetence or negligence
§ A material restatement of the financial statements of the Barclays Group or the Group or any business unit suffering a material down turn in its financial performance
§ A material failure of risk management in the Barclays Group
§ A significant deterioration in the financial health of the Barclays Group
Timing of receipt
Non-deferred cash components of any bonus are paid following the performance year to which they relate, normally in February. Non-deferred share bonuses are awarded normally in March and are subject to a six-month holding period.
Deferred share bonuses normally vest in three equal portions over a minimum three-year period, subject to the provisions of the plan rules including continued employment and the malus provisions (as explained above). Should the deferred awards vest, the shares are subject to an additional six-month holding period (after payment of tax).
| | The maximum annual bonus opportunity is 80% of fixed pay.
The performance measures by which any executive Director bonuses are assessed include Group, business and personal measures, both financial and non-financial. Financial measures may include, but are not restricted to such measures as net income, adjusted profit before tax, return on equity, CET1 ratio and return on risk weighted assets. Non-financial measures are based on the Balanced Scorecard. Personal objectives may include key initiatives relating to the role of the Director or in support of Barclays’ strategic objectives. The Balanced Scorecard may be updated from time to time in line with the Group’s strategy. In making its assessment of any bonus, the Committee will consider financial factors to guide 50% of the bonus opportunity, the Balanced Scorecard 35%, and personal objectives 15%. Any bonus is discretionary and any amount may be awarded from zero to the maximum value.
|
| | | 76 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
Directors’ remuneration policy (abridged)
Remuneration policy for executive Directors continued
| | | | | Element and purpose | | Operation | | Maximum value and performance measures | B. Variable Pay continued
| | | | | Long Term Incentive Plan (LTIP) award
To reward execution of Barclays’ strategystrategy. The material risks and growth in shareholder value over a multi-year period
Long-term performance measurement, holding periods and the malus provisions discourage excessive risk-taking and inappropriate behaviours, encourage a long-term view and align executive Directors’ interests with those of shareholders
Performance measures balance incentivising management to deliver strong risk-adjusted financial returns, and delivery of strategic progress as measured by the Balanced Scorecard. Delivery in shares with a further two-year holding period increases alignment with shareholders
| | Determination of LTIP award
LTIP awards are made by the Committee following discussion of recommendations made by the Chairman (foruncertainties the Group Chief Executive’s LTIP award)faces across its business and by the Group Chief Executive (for other executive Directors’ LTIP awards).
Delivery structure
LTIP awardsportfolios are granted subject to the plan rules and are satisfied in Barclays’ shares (although they may be satisfied in other instruments as may be required by regulation).
For each award, performance measures are set at grant and there is no retesting allowedkey areas of those conditions. The Committee has, within the parameters set out opposite, the flexibility to vary the weighting of performance measures and calibration for each award prior to its grant.
The Committee has discretion, and in line with the plan rules approved by shareholders, in exceptional circumstances to amend targets, measures, or number of awards if an event happens (for example, a major transaction) that, in the opinion of the Committee, causes the original targets or measures to be no longer appropriate or such adjustment to be reasonable. The Committee also has the discretion to reduce the vesting of any award if it deems that the outcome is not consistent with performance delivered, including to zero.
Participants may, at the Committee’s discretion, also receive the benefit of any dividends paid between the award date and the relevant release date in the form of dividend equivalents (cash or securities).
Operation of risk adjustment and malus
The achievement of performance measures determines the extent to which LTIP awards will vest. Awards are also subject to malus provisions (as explained in the Annual bonus paragraphs above) which enable the Committee to reduce the vesting level of awards (including to nil).
Timing of receipt
Barclays LTIP awards have a five-year period in total from grant to when all restrictions are lifted. This will include a minimum three-year vesting period and an additional two-year holding period once vested (after payment of tax)
| | The maximum annual LTIP award is 120% of fixed pay.
Vesting is dependent on performance measures and service.
Following determination of the financial measures applicable to an LTIP cycle, if the Committee is satisfied with the underlying financial health of the Barclays Group (based on profit before tax) it may, at its discretion, adjust the percentage of shares considered for release up or down by up to 10% (subject to the maximum % for the award calibrated against financial performance measures).
Performance measures will be based on financial performance (e.g. measured on return on risk weighted assets), risk metrics (e.g. measured by loan loss rate) and the Balanced Scorecard which also includes financial measures. The Committee has discretion to change the weightings but financial measures will be at least 50% and the Balanced Scorecard will be a maximum of 30%. The threshold level of performance for each performance measure will be disclosed annually as part of the implementation of remuneration report.
Straight line vesting applies between threshold and maximum for the financial and risk measures.
|
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 77 |
Remuneration policy for executive Directors continued
| | | | | Element and purpose | | Operation | | Maximum value and performance measures | C. Other
| | | | | | | | All employee share plans
To provide an opportunity for Directors to voluntarily invest in the Company
| | Executive Directors are entitled to participate in:
(i) Barclays Sharesave under which they can make monthly savings over a period of three or five years linked to the grant of an option over Barclays’ shares which can be at a discount of up to 20% on the share price set at the start.
(ii) Barclays Sharepurchase under which they can make contributions (monthly or lump sum) out of pre-tax pay (if based in the United Kingdom) which are used to acquire Barclays’ shares.
| | (i) Savings between £5 and the maximum set by Barclays (which will be no more than the HMRC maximum) per month. There are no performance measures.
(ii)Contributions of between £10 and the maximum set by Barclays (which will be no more than the HMRC maximum) per tax year which Barclays may match up to HMRC maximum (current match is £600). There are no performance measures.
| | | | Previous buy out awardsmanagement focus. | | Tushar Morzaria currently holds an unvested buy-out award under the Barclays Joiners Share Value Plan which was granted to him in respect of awards he forfeited as a result of accepting employment at Barclays. This award was made in line with the Barclays’ recruitment policy.
| | The award was no more generous than and mirrored as far as possible the expected value and timing of vesting of the forfeited awards granted by JP Morgan.
| | | | Shareholding requirement
To further enhance the alignment of shareholders’ and executive Directors’ interests in long-term value creation
| | Executive Directors must build up a shareholding of 400% of salary over five years from the later of: (i) the introduction of the new requirement in 2013; and (ii) the date of appointment as executive Director. They have a reasonable period to build up to this requirement again if it is not met because of a share price fall.
Shares that count towards the requirement are beneficially owned shares including any vested share awards subject only to holding periods (including vested LTIPs, vested deferred share bonuses and RBP shares). Shares from unvested deferred share bonuses and unvested LTIPs do not count towards the requirement.
| | Barclays’ shares worth a minimum of 400% of salary must be held within five years. | | | | Outside appointments
To encourageself-development and allow for the introduction of external insight and practice
| | Executive Directors may accept one board appointment in another listed company.
Chairman’s approval must be sought before accepting appointment. Fees may be retained by the executive Director. None of the executive Directors currently hold an outside appointment.
| | Not applicable. |
| | | 78 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
Directors’ remuneration policy (abridged)
Notes to the table on pages 75 to 78:
Performance measures and targets
The Committee selected the relevant financial and risk based performance measures because they are key to the bank’s strategy and are important measures used by the executive Directors to oversee the direction of the business. The Balanced Scorecard has been selected as it demonstrates the performance and progress of Barclays as measured across the following dimensions (5Cs): Customers & Clients, Colleagues, Citizenship, Conduct and Company. Each of the 5Cs in the Balanced Scorecard will have equal weighting. All targets are set to be stretching but achievable and aligned to enhancing shareholder value.
The Committee is of the opinion that the performance targets for the annual bonus and Balanced Scorecard element of the LTIP are commercially sensitive in respect of the Company and that it would be detrimental to the interests of the Company to disclose them before the start of the relevant performance period. The performance against those measures will be disclosed after the end of the relevant financial year in that year’s remuneration report subject to the sensitivity no longer remaining.
Differences between the remuneration policy of the executive Directors and the policy for all employees of the Barclays Group
The structure of total remuneration packages for executive Directors and for the broader employee population is similar. Employees receive salary, pension and benefits and are eligible to be considered for a bonus and to participate in all employee share plans. The broader employee population typically does not have a contractual limit on the quantum of their remuneration and does not receive RBP which is paid only to some, but not all, Code Staff. Executive Director RBP is determined on a similar basis to other Code Staff.
The Committee approaches any salary increases for executive Directors by benchmarking against market data for named banks. Incremental annual salary increases remain more common among employees at less senior levels.
As with executive Directors, bonuses for the broader employee population are performance based. Bonuses for executive Directors and the broader employee population are subject to deferral requirements. Executive Directors and other Code Staff are subject to deferral at a minimum rate of 40% (for bonuses of no more than £500,000) or 60% (for bonuses of more than £500,000) but the Committee may choose to operate higher deferral rates. For non-Code Staff, bonuses in excess of £65,000 are subject to a graduated level of deferral. The terms of deferred bonus awards for executive Directors and the wider employee population are broadly the same, in particular the vesting of all deferred bonuses (subject to service and malus conditions).
The broader employee population is not eligible to participate in the Barclays LTIP.
How shareholder views and broader employee pay are taken into account by the Committee in setting policy and making remuneration decisions
We recognise that remuneration is an area of particular interest to shareholders and that in setting and considering changes to remuneration it is critical that we listen to and take into account their views. Accordingly, a series of meetings are held each year with major shareholders and shareholder representative groups (including the Association of British Insurers, National Association of Pension Funds and ISS). The Committee Chairman attends these meetings, accompanied by senior Barclays’ employees (including the Reward and Performance Director and the Company Secretary). The Committee notes that shareholder views on some matters are not always unanimous, but values the insight and engagement that these interactions and the expression of sometimes different views provide. This engagement is meaningful and helpful to the Committee in its work and contributes directly to the decisions made by the Committee.
The Committee takes account of the pay and employment conditions of the broader employee base when it considers the remuneration of the executive Directors. The Committee receives and reviews analysis of remuneration proposals for employees across all of the Group’s businesses. This includes analysis by corporate grade and by performance rating and information on proposed bonuses and salary increases across the employee population and individual proposals for Code Staff and highly paid individuals. When the Committee considers executive Director remuneration, it therefore makes that consideration in the context of a detailed understanding of remuneration for the broader employee population and uses the all employee data to compare remuneration and ensure consistency throughout the Group. Employees are not consulted directly on the Directors’ remuneration policy.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 79 |
Executive Directors’ policy on recruitment
| | | | | Element of remuneration | | Commentary | | Maximum value | | | | Salary | | Determined by market conditions, market practice and ability to recruit.
For a newly appointed executive Director, whether through external recruitment or internal promotion, if their salary is at a level below the desired market level, the Committee retains the discretion to realign their salary over a transitional period which may mean that annualised salary increases for the new appointee are higher than that set out in the salary section of the remuneration policy. | | In line with policy. | | | | Role Based Pay | | Determined by role, market practice and ability to recruit. Percentage may decrease or increase in certain circumstances subject to maximum value.
| | 100% of salary. | | | | Benefits | | In line with policy.
| | In line with policy. | | | | Pension | | In line with policy. | | 33% of salary (Group Chief Executive), 25% of salary (Group Finance Director) and 25% if another executive Director is appointed.
| | | | Annual Bonus | | In line with policy. | | 80% of fixed pay. | | | | Long Term Incentive Plan | | In line with policy. | | 120% of fixed pay. | | | | Buy out | | The Committee can consider buying out forfeited bonus opportunity or incentive awards that the new executive Director has forfeited as a result of accepting the appointment with Barclays, subject to proof of forfeiture where applicable.
As required by the PRA Remuneration Code, any award made to compensate for forfeited remuneration from the new executive Director’s previous employment may not be more generous than, and must mirror as far as possible the expected value, timing and form of delivery, the terms of the forfeited remuneration and must be in the best long-term interests of Barclays. Barclays deferral policy shall however apply as a minimum to any buy out of annual bonus opportunity.
| | The value of any buy out is not included within the maximum incentive levels above since it relates to a buy out of forfeited bonus opportunity or incentive awards from a previous employer. |
Where a senior executive is promoted to the Board, his or her existing contractual commitments agreed prior to his or her appointment may still be honoured in accordance with the terms of the relevant commitment including vesting of any pre-existing deferred bonus or long-term incentive awards.
| | | 80 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
Directors’ remuneration policy (abridged)
Executive Directors’ policy on payment for loss of office (including a takeover)
The Committee’s approach to payments in the event of termination is to take account of the individual circumstances including the reason for termination, individual performance, contractual obligations and the terms of the deferred bonus plans and long-term incentive plans in which the executive Director participates.
| | | | | Standard provision | | Policy | | Details | | | | Notice periods in executive Directors’ service contracts | | 12 months’ notice from the Company.
6 months’ notice from the executive Director.
| | Executive Directors may be required to work during the notice period or may be placed on garden leave or if not required to work the full notice period may be provided with pay in lieu of notice (subject to mitigation where relevant).
| | | | Pay during notice period or payment in lieu of notice per service contracts | | 12 months’ salary payable and continuation of pension and other contractual benefits while an employee. | | Payable in phased instalments (or lump sum) and subject to mitigation if paid in instalments and executive Director obtains alternative employment during the notice period or while on garden leave.
In the event of termination for gross misconduct neither notice nor payment in lieu of notice is given.
| | | | Treatment of Role Based Pay | | Ceases to be payable from the executive Director’s termination date. Therefore, RBP will be paid during any notice period and/or garden leave, but not where Barclays elects to make a payment in lieu of notice (unless otherwise required by local law). | | Shares to be delivered on the next quarterly delivery date shall be pro rated for the number of days from the start of the relevant quarter to the termination date. Where Barclays elects to terminate the employment with immediate effect by making a payment in lieu of notice, the executive Director will not receive any shares that would otherwise have accrued during the period for which the payment in lieu is made (unless required otherwise by local law).
| | | | Treatment of annual bonus on termination | | No automatic entitlement to bonus on termination, but may be considered at the Committee’s discretion and subject to performance measures being met and pro rated for service. No bonus would be payable in the case of gross misconduct or resignation.
| | | | | | Treatment of unvested deferred bonus awards | | Outstanding deferred bonus awards would lapse if the executive Director leaves by reason of resignation or termination for gross misconduct. However in the case of death or if the Director is an ‘eligible leaver’ defined as leaving due to injury, disability or ill health, retirement, redundancy, the business or company which employs the executive Director ceasing to be part of the Group or in circumstances where Barclays terminates the employment (other than in cases of cause or gross misconduct), he or she would continue to be eligible to be considered for unvested portions of deferred awards, subject to the rules of the relevant plan unless the Committee determines otherwise in exceptional circumstances. Deferred awards are subject to malus provisions which enable the Committee to reduce the vesting level of deferred bonuses (including to nil).
In the event of a takeover or other major corporate event, the Committee has absolute discretion to determine whether all outstanding awards would vest early or whether they should continue in the same or revised form following the change of control. The Committee may also determine that participants may exchange existing awards for awards over shares in an acquiring company with the agreement of that company.
| | In an eligible leaver situation, deferred bonus awards may be considered for release in full on the scheduled release date unless the Committee determines otherwise in exceptional circumstances. After release, the awards may be subject to an additional holding period of six months. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 81 |
Executive Directors’ policy on payment for loss of office (including a takeover) continued
| | | | | Standard provision
| | Policy | | Details | | | | Treatment of unvested
awards under the LTIP | | Outstanding unvested awards under the LTIP would lapse if the executive Director leaves by reason of resignation or termination for gross misconduct. However, in line with the plan rules approved by shareholders, in the case of death or if the Director is an ‘eligible leaver’ defined as leaving due to injury, disability or ill health, retirement, redundancy, the business or company which employs the executive Director ceasing to be part of the Group (or for any other reason if the Committee decides at its discretion), he or she would continue to be entitled to be considered for an award. Awards are also subject to malus provisions which enable the Committee to reduce the vesting level of awards (including to nil).
In the event of a takeover or other major corporate event (but excluding an internal reorganisation of the Group), the Committee has absolute discretion to determine whether all outstanding awards vest subject to the achievement of any performance conditions. The Committee has discretion to apply a pro rata reduction to reflect the unexpired part of the vesting period. The Committee may also determine that participants may exchange awards for awards over shares in an acquiring company with the agreement of that company. In the event of an internal reorganisation, the Committee may determine that outstanding awards will be exchanged for equivalent awards in another company.
| | In an eligible leaver situation, awards may be considered for release on the scheduled release date, pro rated for time and performance, subject to the Committee’s discretion to determine otherwise in exceptional circumstances. After release, the shares (net of deductions for tax) are subject to an additional holding period of two years. | | | | Repatriation | | Except in a case of gross misconduct or resignation, where a Director has been relocated at the commencement of employment, the Company may pay for the Director’s repatriation costs in line with Barclays’ general employee mobility policy including temporary accommodation, payment of removal costs and relocation flights. The company will pay the executive Director’s tax on the relocation costs but will not tax equalise and will also not pay tax on his or her other income relating to the termination of employment.
| | | | | | Other | | Except in a case of gross misconduct or resignation, the Company may pay for the executive Director’s legal fees and tax advice relating to the termination of employment and provide outplacement services. The Company may pay the executive Director’s tax on these particular costs.
| | |
| | | 82 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Governance: Remuneration report
Directors’ remuneration policy (abridged)
Remuneration policy for non-executive Directors
| | | Element and purpose | | Operation | | | Fees
Reflect individual responsibilities and membership of Board Committees and are set to attract non-executive Directors who have relevant skills and experience to oversee the implementationdetailed breakdown of our strategy
| | The Chairman and Deputy Chairman are paid an all-inclusive fee for all Board responsibilities. The Chairman has a minimum time commitment equivalentRisk Management approach please see pages 98 to at least 80% of a full-time role. The other non-executive Directors receive a basic Board fee, with additional fees payable where individuals serve as a member or Chairman of a Committee of the Board.
Fees are reviewed each year by the Board as a whole against those for non-executive Directors in companies of similar scale and complexity. Fees were last increased in May 2011.
The first £30,000 (Chairman: first £100,000) after tax and national insurance contributions of each non- executive Director’s basic fee is used to purchase Barclays’ shares which are retained on the non-executive Director’s behalf until they retire from the Board.
| | | Benefits
For Chairman only
| | The Chairman is provided with private medical cover subject to the terms of the Barclays scheme rules from time to time, and is provided with the use of a Company vehicle and driver when required for business purposes.
No other n on-executive Director receives any benefits from Barclays. Non-executive Directors are not eligible to join Barclays’ pension plans.
| | | Bonus and share plans | | Non-executive Directors are not eligible to participate in Barclays cash, share or long-term incentive plans.
| | | Notice and termination provisions | | Each non-executive Director’s appointment is for an initial six year term, renewable for a single term of three years thereafter and subject to annual re-election by shareholders.
Notice period:
Chairman: 12 months from the Company (six months from the Chairman). Non-executive Directors: six months from the Company (six months from the Non-executive Director).
Termination payment policy
The Chairman’s appointment may be terminated by Barclays on 12 months’ notice or immediately in which case 12 months’ fees and contractual benefits are payable in instalments at the times they would have been received had the appointment continued, but subject to mitigation if they were to obtain alternative employment. There are similar termination provisions for non-executive Directors based on six months’ fees. No continuing payments of fees (or benefits) are due if a non-executive Director is not re-elected by shareholders at the Barclays Annual General Meeting. 114. |
In accordance with the policy table above, any new Chairman and Deputy Chairman would be paid an all-inclusive fee only and any new non-executive Director would be paid a basic fee for their appointment as a Director, plus fees for their participation on and/or chairing of any Board committees, time apportioned in the first year as necessary. No sign-on payments are offered to non-executive Directors.
Discretion
In addition to the various operational discretions that the Committee can exercise in the performance of its duties (including those discretions set out in the Company’s share plans), the Committee reserves the right to make either minor or administrative amendments to the policy to benefit its operation or to make more material amendments in order to comply with new laws, regulations and/or regulatory guidance. The Committee would only exercise this right if it believed it was in the best interests of the Company to do so and where it is not possible, practicable or proportionate to seek or await shareholder approval in General Meeting.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 83 |
Risk review
Contents
The management of risk plays a central role in the execution of Barclays’ strategy and insight into the level of risk across businesses and portfolios and the material risks and uncertainties the Group face are key areas of management focus.
For a more detailed breakdown of our Risk performance and Risk management contents please see pages 336-409.
| | | | | | | | | | | | | | | Page | | Material existing and emerging risks | | | | Annual Report | Insight into the level of risk across our business and portfolios, the material existing and emerging risks and uncertainties we face and the key areas of management focus. | | § | | Material existing and emerging risks potentially impacting more than one Principal Risk | | 89 | | § | | Credit risk | | | 87 | 91 | | § | | Market risk | | | 88 | 93 | | § | | FundingTreasury and capital risk | | | 88 | 93 | | § | | Operational risk | | 94 | 89 | § | | Model risk | | 95 | | § | | Conduct risk | | | 91 | 95 | | § | | Reputation risk | | 96 | | Material existing and emerging risks potentially impacting more than one Principal§
| | Legal risk | | | 92 | 96 | Risk management | | | | | | | | | Overview of Barclays’ approach to risk management. A detailed overview together with more specific information on policies that the Group determines to be of particular significance in the current operating environment can be found in Barclays PLC 2016 Pillar 3 Report or at Barclays.com. | | § | | Risk management strategy | | | 95 | | | § | | Governance structure | | | 95 | | | § | | Risk governance and assigning responsibilities | | | 97 | | | § | | Principal risks and Key risks | | | 98 | | | § | | Credit risk management | | 101 | 99 | § | | Management of credit risk mitigation techniques and counterparty credit risk | | 102 | | § | | Market risk management | | | 101 | | | § | | Funding risk management | | | 103 | | | § | | Capital risk managementManagement of securitisation exposures | | | 103 | n/a | | § | | LiquidityTreasury and capital risk management | | | 105 | 104 | | § | | Operational risk management | | | 106 | 109 | | § | | Model risk management | | 111 | | § | | Conduct risk management | | 112 | | § | | Reputation risk management | | 113 | | Conduct§
| | Legal risk management | | | 108 | 114 | Risk performance | | | | | | | | | Credit risk: | | § | | Credit risk overview | | 118 | The risk of suffering financial loss should the Group’s customers, clients or market counterparties fail to fulfil their contractual obligations to the Group.obligations. | | § | | Credit risk overview and summary of performance | | | 112 | | | § | | Analysis of the balance sheet | | | 112 | 118 | | § | | MaximumAnalysis of maximum exposure and collateral and other credit enhancement held
| | | 113 | 119 | | § | | The Group’s approach to manage and represent credit quality | | | 115 | | | § | | Loans and advances to customers and banks | | | 117 | 121 | | § | | Analysis of the concentration of credit risk | | | 118 | 123 | | § | | Group exposuresExposure to specificEurozone countries and industries | | 124 | 119 | § | | Loans and advances to customers and banks | | 127 | | § | | Analysis of specific portfolios and asset types | | | 122 | | | § | | Analysis of loans on concession programmes | | | 131 | 128 | | § | | Analysis of problem loans | | | 134 | 132 | | § | | Forebearance | | 134 | | § | | Impairment | | | 137 | 138 | Market risk: | | § | | Market risk overview and measures in the Group | | 143 | The risk of a reduction to earnings or capital due to volatility of the trading book positions or as a consequence of running aan inability to hedge the banking book balance sheet and liquidity pools.sheet. | | § | | Market risk overview, measures in the Group and summary of
performance | | | 139 | | | | | | | | | | § | | Balance sheet view of trading and banking books | | | 140 | 144 | | § | | Traded market risk | | | 141 | 145 | | § | | Business scenario stresses | | | 142 | 146 | | § | | Review of regulatory measures | | | 142 | 146 | | § | | Non-tradedCapital requirements for market risk | | n/a | 143 | § | | Non-traded market risk | | 147 | | § | | Economic capital | | 148 | | § | | Foreign exchange risk | | | 145 | 149 | | | § | | Pension risk review | | | 146§ | | Pension risk review | | 150 | Funding risk – Capital: | | § | | Capital risk overview and regulatory minimum capital and leverage requirements | | 154 | The risk that the Group is unable to maintain appropriate capital ratios. | | § | | Insurance risk review
Capital resources | | | 147 | | Funding risk – Capital:
The risk that the Group has insufficient capital resources.
| | § | | Capital risk overview and summary of performance | | | 149 | 155 | | § | | Regulatory minimum capital and leverage requirementsRisk weighted assets | | | 149 | | | § | | Capital resources | | | 150 | 157 | | § | | Leverage ratio requirementsand exposures | | | 153 | 158 | Funding risk – Liquidity: | | § | | Liquidity risk overview and stress testing | | 161 | The risk that the Group,firm, although solvent, either does not have sufficient financial resources available to enable it to meet its obligations as they fall due, or can secure such resources only at excessive cost. | | § | | §Liquidity pool | | Liquidity risk overview and summary of performance | | | 155 | | | § | | Liquidity risk stress testing | | | 155 | | | § | | Liquidity pool | | | 158 | 163 | | § | | Funding structure and funding relationships | | 164 | 159 | § | | Deposit funding | | 165 | | § | | Wholesale funding Group | | | 160 | 166 | | § | | Term financing | | | 162 | 168 | | § | | Encumbrance | | | 162 | 168 | | § | | Credit ratings | | | 166 | 172 | | § | | Liquidity management at Barclays AfricaBAGL Group Limited | | | 167 | 173 | | | § | | Contractual maturity of financial assets and liabilities | | | 167 | 173 |
| | | 8486 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review
Contents
| | | | | | | Risk performance continued | | | | | | Page Annual Report | Risk performance continued | | | | | | | | | | | Operational risk: Any instance where there is a potentialThe risk of direct or actual impact to the Groupindirect impacts resulting from human factors, inadequate or failed internal processes people,and systems or from an external event. The impacts to the Group can be financial, including losses or an unexpected financial gain, as well as non-financial such as customer detriment, reputational or regulatory consequences.events.
| | §
§
| | Operational risk overview and summary § Summary of performance in the period Operational§ Operation risk profile
| | 173
173179
179 179 | | | | | | | | | | | Conduct risk: The risk that detriment is caused to our customers, clients, counterparties or the GroupBarclays and its employees because of inappropriate judgement in the execution of our business activities. | | §
§
§
§
§ | | §Conduct risk overview Reputation risk
§Summary of performance Salz recommendations
§Conduct reputation measure | | 175
175181
175181
176
176181
| | | | | 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. | | § | | Supervision of the Group | | 177182 | | § Global regulatory developments | | Global regulatory developments | | 177183 | | § Regulation in the EU and UK | | Influence of European legislation | | 178183 | | § Regulation in the United States | | EU developments | | 178186 | | § Regulatory developments in the US | | Regulation in the UK | | 179187 | | § Structural reform developments | | Resolution of UK banking groups | | 179 | | § | | Structural reform of banking groups | | 180 | | § | | Compensation schemes | | 180 | | § | | Regulation in the US | | 181 | | § | | Regulation in Africa
| | 182188 |
The Pillar 3 report of Barclays published on 1 March 2016 contains additional information on Barclays’ risk as well as capital management. Readers may access the complete Pillar 3 report at the Barclays investor relations web site. The Pillar 3 report is not incorporated by reference into and is not part of the 2015 20-F.
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 8587 |
Risk review Material existing and emerging risks Analysis of material existing and emerging risks This section describes the material risks to which senior management is currently focused on andpay particular attention, which they believe could cause the Group’s future results of the Group’s operations, financial condition and prospects to differ materially from current expectations. | | | | | | | | | For more information about the major risk policies which underlie risk exposures, see the consolidated policy-based qualitative information in the Barclays PLC 2015 Pillar 3 Report. A summary of this information may also be found in this report in the Risk management section between pages 33697 to 409.114. |
| | | 8688 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review
Material existing and emerging risks Material existing and emerging risks to the Group’s future performance This section describes the material risks to which senior management payspay particular attention, which they believe could cause the future results of the Group’s operations, financial condition and prospects to differ materially from current expectations. These expectations include the ability to pay dividends, maintain appropriate levels of capital and meet capital and leverage ratio targets, and achieve stated commitments. In addition, risks relating to the Group that are not currently known, or that are currently deemed immaterial, may individually or cumulatively have the potential to materially affect the future results of the Group’s operations, financial condition and prospects. Material risks and their impact are described below in two sections: i) risks which senior management believesbelieve are likely to impact a singleaffect more than one Principal Risk; and ii) risks which senior management believesbelieve are likely to affect more than oneimpact a single Principal Risk. Certain risks below have been classified as an ‘emerging risk’, whichAn emerging risk is a risk that has the potential to have a significant detrimental effect on the Group’s performance, but currently the outcome and the time horizon for the crystallisation of its possible impact is more uncertain and more difficult to predict than for other risk factors that are not identified as emerging risks. A revised ERMF was approved by the Board in December 2016. This includes a revised risk taxonomy comprising eight Principal Risks (Model Risk, Reputation Risk and Legal Risk were not previously classified as Principal Risks). Additional detail on ERMF and Principal Risks may be found on pages 98. More informationAdditional detail on the management of risks may be found in Barclays’ Approach to Managing Risk in the Barclays PLC 20152016 Pillar 3 Report.
Material existing and emerging risks potentially impacting more than one Principal Risk i) Structural reform The UK Financial Services (Banking Reform) Act 2013 (the UK Banking Reform Act) and associated secondary legislation and regulatory rules, require all UK deposit-taking banks with over £25bn of deposits (from individuals and small businesses) to separate certain day-to-day banking activities (e.g. deposit-taking) offered to retail and smaller business customers from other wholesale and investment banking services. Through the creation of Barclays’ ring-fenced bank, the Group will ensure that core deposits placed within the European Economic Area (EEA) are ring-fenced to meet the requirements of the legislation by 2019. The implementation of these changes involves a number of risks which include: § | | The Group must restructure its intra-group and external capital, funding and liquidity arrangements to meet regulatory requirements and support business needs. The changes will impact the sources of funding available to the different entities, including preventing the non ring-fenced bank’s access to certain categories of deposit funding. These changes may result in higher funding costs. |
§ | | The changes to the Group structure may negatively impact the assessment made by credit rating agencies and creditors. The risk profile and key risk drivers of the ring-fenced bank and the non ring-fenced bank will be specific to the activities and risk profile of each entity. As a result different Group entities are likely to be assessed differently and this may result in differences in credit ratings. Changes to the credit assessment at the Group or individual entity level, including the potential for ratings downgrades and ratings differences across entities, could impact access and cost of certain sources of funding. |
§ | | Implementation of ring-fencing introduces a number of execution risks. Technology change could result in outages or operational errors. Legal challenge to the ring-fence transfer scheme may delay the transfer of assets and liabilities to the ring-fenced bank. In particular, the setup of the Group Service Company as a separate legal entity servicing both trading entities (i.e. ring-fenced bank and non ring-fenced bank) will require a number of intra-group service level agreements to be established and agreed between the Group Service Company and the trading entities and will require the Group to set up a new approach to manage, fund and deliver the activities that will be provided by this entity. Delayed delivery could increase reputational risk or result in regulatory non-compliance. Uncertain customer preference (for placement in the ring-fenced or non ring-fenced bank) may result in changes to design and implementation plans. |
§ | | At the European level, structural reform regulation is still being developed as highlighted by the European Union proposal issued in November 2016 for Intermediate Holding Companies. The impact of final rules on Barclays’ businesses is still to be assessed once European regulation is finalised. Final rules will need to be considered alongside EU Referendum implications. The implementation date for these proposals will depend on the date on which any final legislation is agreed. |
§ | | There is a risk that Barclays does not meet regulatory requirements across the new structure. Failure to meet these requirements may have an adverse impact on the Group’s profitability, operating flexibility, flexibility of deployment of capital and funding, return on equity, ability to pay dividends, credit ratings, and/or financial condition. |
ii) Business conditions, general economy and geopolitical issues The Group’s performance could be adversely affected in relation to more than one Principal Risk by a weak or deteriorating global economy or political instability. These factors may also occur in one or more of the Group’s main countries of operation. The Group offers a broad range of services including to retail, institutional and government customers, in a large number of countries. The breadth of these operations means that deterioration in the economic environment, or an increase in political instability in countries where the Group is active, or in any other systemically important economy, could adversely affect the Group’s performance and prospects. For the Group, a deterioration of conditions in its key markets could affect performance in a number of ways including, for example: (i) deteriorating business, consumer or investor confidence leading to reduced levels of client activity, or indirectly, a material adverse impact on GDP growth in significant markets and therefore on Group performance; (ii) higher levels of default rates and impairment; (iii) mark to market losses in trading portfolios resulting from changes in factors such as credit ratings, share prices and solvency of counterparties; and (iv) lower levels of fixed asset investment and productivity growth overall. Global growth is expected to remain modest in 2017, with low singledigit growth in advanced economies alongside a slowdown in emerging markets. This moderate economic performance, lower commodity prices and increased geopolitical tensions mean that the distribution of risks to global economic activity continues to be biased to the downside. Commodity prices, particularly oil prices, remain depressed, but could fall further if growth in demand remains weak or supply takes longer than expected to adjust. At the same time, countries with high reliance on commodity-related earnings have already experienced a tightening of financial conditions. A sustained period of low prices risks triggering further financial distress, default and contagion, for our customers, their suppliers and local communities, and resulting losses for Barclays. Moreover, sentiment towards emerging markets as a whole continues to be driven in large part by developments in China, where there is significant concern around the ability of authorities to manage growth whilst transitioning towards services. A stronger than expected slowdown could result if authorities fail to appropriately manage the end of the investment andcredit-led boom, while the consequences from a faster slowdown would flow through both financial and trade channels into other economies, and affect commodity markets. Whilst tightening of monetary policy by the US Federal Reserve was not as pronounced as expected during 2016, a moderate increase in activity is expected during 2017, the increasing divergence of policies between major advanced economies risks triggering further financial market volatility. Changes to interest rate expectations could ignite further volatility and US Dollar appreciation, particularly if the US Federal Reserve were to increase interest rates faster than markets currently expect. Emerging markets have already seen growth slow following increased .capital outflows, but growth may slow further if tighter US interest rate policy drives further reallocation of capital. In several countries, reversals of capital inflows, as well as fiscal austerity, have already caused deterioration in political stability. This could be exacerbated by a renewed rise in asset price volatility or sustained pressure on government finances. In addition, geopolitical tensions in some areas of the world, including the Middle East and Eastern Europe are already acute, and are at risk of further deterioration. In the US, the policy platform of the new administration is expected to be clarified during the early part of 2017. There is the possibility of significant changes in policy in sectors including trade, healthcare and commodities which may have an impact on associated Barclays’ portfolios. Proposed policy changes (includingtax-cuts and significant infrastructure spending) are likely to result in higher global growth, | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 89 |
Risk review Material existing and emerging risks Material existing and emerging risks to the Group’s future performance further reinforcing the move towards global reflation. Political change may increase uncertainty as to regulatory trends, both in the US and the EU. In the UK, the vote in favour of leaving the EU has given rise to political uncertainty with attendant consequences for investment and confidence. See vi) EU Referendum on page 91. iii) Change and execution risk The Group continues to drive changes to its functional capabilities and operating environment in order to allow the business to exploit emerging and digital technologies, and improve customer experience whilst also embedding enhanced regulatory requirements, strategic realignment, and business model changes. The complexity, increasing pace, and volume of changes underway simultaneously mean there is heightened execution risk and potential for change not being delivered to plan. Failure to adequately manage this risk could result in extended outages and disruption, financial loss, customer detriment, legal liability, potential regulatory censure and reputational damage. iv) Risks arising from regulation of the financial services industry The financial services industry continues to be the focus of significant regulatory change and scrutiny which may adversely affect the Group’s business, financial performance, capital and risk management strategies. For further information on regulations affecting the Group, including significant regulatory developments, please see the section on Supervision and Regulation on page 182. a) Regulatory change The Group, in common with much of the financial services industry, remains subject to significant levels of regulatory change and increasing scrutiny in many of the countries in which it operates (including, in particular, the UK and the US). This has led to a more intensive approach to supervision and oversight, increased expectations and enhanced requirements. As a result, regulatory risk will remain a focus for senior management and consume significant levels of business resources. Furthermore, this more intensive approach and the enhanced requirements, uncertainty and extent of international regulatory coordination as enhanced supervisory standards are developed and implemented may adversely affect the Group’s business, capital and risk management strategies and/or may result in the Group deciding to modify its legal entity structure, capital and funding structures and business mix, or to exit certain business activities altogether or not to expand in areas despite otherwise attractive potential. b) Changes in prudential requirements, including changes to CRD IV The Group’s results and ability to conduct its business may be negatively affected by changes or additions to supervisory and prudential expectations, including in relation to any minimum requirements for own funds and eligible liabilities, leverage or liquidity requirements, applicable buffers and/oradd-ons to such minimum requirements and RWA calculation methodologies all as may be set by international, EU or national authorities from time to time (including, for example, through changes being proposed to the CRD IV framework). Changes to or additional supervisory and prudential expectations, either individually or in aggregate, may lead to unexpected enhanced requirements in relation to the Group’s capital, leverage, liquidity and funding ratios or alter the way such ratios are calculated. This may result in, amongst other things, a need for further management actions to meet the changed requirements, such as: increasing capital or liquidity resources, reducing leverage and risk weighted assets; modifying legal entity structure (including with regard to issuance and deployment of capital and funding for the Group); changing the Group’s business mix or exiting other businesses; and/or undertaking other actions to strengthen the Group’s position. See Treasury and Capital Risk on page 104 and Supervision and Regulation on page 184 for more information. c) Market infrastructure reforms Financial market infrastructure is subject to extensive and increasing regulation in many of the Group’s markets. The derivatives market has been the subject of particular focus across the G20 countries, requiring the clearing of standardised derivatives and the mandatory margining ofnon-cleared derivatives. More broadly, the recast Markets in Financial Instruments Directive in Europe (MiFID II) will fundamentally change the framework for market infrastructure, the Benchmarks Regulation will regulate the use of benchmarks in the EU, and regulation governing Central Securities Depositories will increase the requirements upon participants in the financial markets. It is possible that these additional regulations, and the related expenses and requirements, will increase the cost of and therefore impact willingness of participation in the financial markets. d) Recovery and resolution planning In recent years, there has been a strong regulatory focus on ‘resolvability’ from regulators globally, and Barclays continues to work with the relevant authorities to identify and address potential impediments to the Group’s resolvability. As part of this work, the Group is required to submit formal Recovery and Resolution Plan (RRP) submissions to UK, US and South African regulators describing Barclays’ strategy for recovery and rapid and orderly resolution. These submissions are evaluated by regulators on the basis of both qualitative and quantitative metrics, the specifics of which may become more rigorous over time. Should the relevant authorities in any jurisdiction ultimately determine that a resolution plan were not credible or would not facilitate an orderly resolution, Barclays or its subsidiaries could be made subject to more stringent capital, leverage or liquidity requirements, or restrictions on growth, activities or operations. The potential structural changes that may be required to address such a determination may negatively impact the financial or competitive position or results of operations of the Group, as well as increase the risk that the Group would be unable to maintain appropriate prudential ratios or be restricted from making intra group or external capital contributions. e) Stress testing The Group and certain of its members are subject to supervisory stress testing exercises in a number of jurisdictions. These exercises currently include the programmes of the BoE, the EBA, the FDIC, the FRB and the SARB. These exercises are designed to assess the resilience of banks to adverse economic or financial developments and ensure that they have robust, forward-looking capital and liquidity management processes that account for the risks associated with their business profile. Assessment by regulators is on both a quantitative and qualitative basis, the latter focusing on the Group’s or certain of its members’ business model, data provision, stress testing capability and internal management processes and controls. The stress testing requirements to which the Group and its members are subject are becoming increasingly stringent, including in the US where the newlysub-consolidated operations and the IHC will be stress-tested and examined under the FRB’s annual CCAR programme for the first time in 2017. Failure to meet requirements of regulatory stress tests, or the failure by regulators to approve the stress test results and capital plans of the Group, could result in the Group being required to enhance its capital position, limit capital distributions or position capital in specific subsidiaries. For more information on stress testing, please see Supervision and Regulation on page 184. v) Regulatory action in the event of a bank failure As described under ‘Supervision of the Group, Regulation in the EU and UK, Recovery and Resolution developments’ on page 183 UK resolution authorities have the right under certain circumstances to intervene in the Group pursuant to the stabilisation and resolution powers granted to them under the Banking Act and other applicable legislation. | | | 90 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
If any of the powers conferred on the BoE were to be exercised, or there were an increased risk of exercise, in respect of the Group or any entity within the Group, this might result in a material adverse effect on the rights or interests of shareholders and creditors including holders of debt securities and could have a material adverse effect on the market price of shares and other securities issued by the Group. Such effects could include losses of shareholdings or associated rights including, the dilution of percentage ownership of the Group’s share capital, and may result in creditors, including debt holders, losing all or a part of the value of their investment in the Group’s issued securities. vi) EU referendum The UK held a referendum on 23 June 2016 on whether it should remain a member of the EU. This resulted in a vote in favour of leaving the EU. The result of the referendum means that the long-term nature of the UK’s relationship with the EU is unclear and there is uncertainty as to the nature and timing of any agreement with the EU on the terms of exit. In the interim, there is a risk of uncertainty for both the UK and the EU, which could adversely affect the economy of the UK and the other economies in which we operate. The potential risks associated with an exit from the EU have been carefully considered by the Board and include: Market risk § | | Potential for continued market volatility (notably FX and interest rates) given political uncertainty which could affect the value of Trading Book positions. |
Credit risk § | | Increased risk of a UK recession with lower growth, higher unemployment and falling UK house prices. This would likely negatively impact a number of Barclays’ portfolios, notably: higher Loan to Value home loans, UK unsecured lending including cards and Commercial Real Estate exposures. |
Operational risk § | | Changes to current EU “Passporting” rights: the UK’s withdrawal from the EU may result in the loss of cross-border market access rights which would require Barclays to make alternative licensing arrangements in EU jurisdictions in which Barclays continues to operate. |
§ | | Uncertainty over UK’s future approach to EU freedom of movement will impact Barclays’ access to the EU talent pool, decisions on hiring from the EU of critical roles and rights to work of current Barclaysnon-UK EU citizens located in the UK and UK citizens located in the EU. |
Legal risk § | | The legal framework within which Barclays operates could change and become more uncertain as the UK takes steps to replace or repeal certain laws currently in force, which are based on EU legislation and regulation. Certainty of existing contracts, enforceability of legal obligations and uncertainty around the outcome of disputes may be affected until the impacts of the loss of the current jurisdictional arrangements between UK and EU courts and the universal enforceability of judgements across the EU, are fully known (including the status of existing EU case law). |
Treasury and capital risk § | | Potential for credit spread widening and reduced investor appetite for Barclays debt issuance, which could negatively impact the cost of and/or access to funding. Potential for continued market volatility could affect interest rate risk in the banking book, as well as securities held by Barclays for liquidity purposes. |
§ | | Changes in the long-term outlook for UK interest rates might also adversely affect UK Pension IAS19 liabilities. |
vii) Impairment The introduction of the impairment requirements of IFRS 9 Financial Instruments, due to be implemented on 1 January 2018, is expected to result in higher impairment loss allowances that are recognised earlier, on a more forward looking basis and on a broader scope of financial instruments than is the case under IAS 39. Measurement will involve increased complexity, judgement and is expected to have a material financial impact and impairment charges will tend to be more volatile. Unsecured products with longer expected lives, such as revolving credit cards, are expected to be most impacted. The capital treatment on the increased reserves is the subject of ongoing discussion with regulators and across the industry, but there is potential for significant adverse impact on regulatory capital ratios. In addition, the move from incurred to expected credit losses has the potential to impact the Group’s performance under stressed economic conditions or regulatory stress tests. For more information please refer to Note 1 Significant Accounting Policies on pages 226 to 230. Barclays has a jointly accountable risk and finance implementation and governance programme with representation from all impacted departments. During 2016, work continued on the design and build of impairment models, systems, processes, governance, controls and data collection and continues to be refined during 2017. During 2017, there is a planned parallel run which includes continued model, process and output validation, testing, calibration and analysis. There will be three different layers of impairment committees. In addition to the existing Group and Business level committees, Legal Entity committees for Barclays UK and Barclays International will also be in place. Committees will be chaired by the Chief Risk Officer (CRO), with joint accountability by both CROs and Chief Financial Officers (CFOs) for signing off the results. The new IFRS 9 impairment committee structure, with underlying key controls, is expected to be in operation from Q2 2017. There will also be a Scenarios Management Committee to review and approve the scenario process. The scope of review will include the scenarios and scenario narratives, the core set of macroeconomic variables and any management overlays. The Scenario Management Committee will attest that the scenarios adequately account for thenon-linearity and asymmetry of the loss distribution. Reported results and key messages will be communicated to the Board Audit Committee and Risk Executive Committee, who will have oversight roles and provide challenge of key assumptions, including the basis of the scenarios adopted. Material existing and emerging risks by Principal Risk Credit risk The financial conditionrisk of loss to the Group’sfirm from the failure of clients, customers clients andor counterparties, including governmentssovereigns, to fully honour their obligations to the firm, including the whole and timely payment of principal, interest, collateral and other financial institutions, could adversely affect the Group.receivables. The Group may suffer financial loss if any of its customers, clients or market counterparties fails to fulfil their contractual obligations to the Group. The Group may also suffer loss when the value of its investment in the financial instruments of an entity falls as a result of that entity’s credit rating being downgraded. In addition, the Group may incur significant unrealised gains or losses due to changes in the Group’s credit spreads or those of third parties, as these changes affect the fair value of the Group’s derivative instruments, debt securities that the Group holds or issues, and loans held at fair value. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 91 |
Risk review Material existing and emerging risks Material existing and emerging risks to the Group’s future performance i) Deterioration in political and economic environment The Group’s performance is at risk from deterioration in the political and economic environment (see also ‘Business conditions, general economy and political environmentgeopolitical issues’ on pages89) which may result from a number of uncertainties, including the following: a) Specific regions Political instability, economic uncertainty or deflation in regions in which the Group operates could weaken growth prospects and have an adverse impactAdverse impacts on customers’ ability to service debt and somay result in result in higher impairment charges for the Group. These include:
China (emerging risk)United Kingdom
EconomicFollowing the EU referendum on 23 June 2016 (see EU Referendum on page91), the UK may experience a period of political and economic uncertainty throughout the negotiation period during which exit options are hard to fully and accurately predict. The initial impact has been the depreciation of Sterling resulting in higher costs for companies exposed to imports and a more favourable environment for exporters. Rising domestic costs resulting from higher import prices may impact household incomes and the affordability of consumer loans and home loans. In turn this may affect businesses dependent on consumers for revenue. There has also been a reduction in activity in both commercial and residential real estate markets which has the potential to impact value.
United States A significant proportion of the Group’s portfolio is located in the US, including a major credit card portfolio and a range of corporate and investment banking exposures. Stress in the US economy, weakening GDP, rising unemployment and/or an increase in interest rates could lead to increased levels of impairment. Emerging Markets Slower growth in China continues to affect a number of emerging economies, particularly those with high fiscal deficits and those reliant on short-term external financing and/or material reliance on commodity exports. Their vulnerability has been further impacted by the fall, and sustained volatility in oil prices, the strong US dollar and the winding down of quantitative easing policies by some central banks. The impact on the Group may vary depending on the vulnerabilities present in each country, but the impact may result in increased impairment charges through sovereign defaults, or the inability or unwillingness of clients and counterparties in that country to meet their debt obligations. South Africa The negative economic outlook in South Africa continues, with a challenging domestic and external environment. Recenteconomic environment and ongoing political events including changes to leaders in the Finance Ministry have added to the domestic challenges.uncertainty. Real GDP growth remains low as a result of decliningresulting in these domestic and global demand, in particular China, prices for key mineral exports, a downturn in tourism, persistent power shortages and slowing house price growth.factors impacting credit quality across our portfolios. In the retail sector, concerns remain over the level of consumer indebtedness and affordability, particularly as the slowdown in China impacts the mining sector with job losses increasing. Emerging market turmoil has added further pressure on the Rand, which has continued to depreciate against major currencies. The decline in the economic outlook may impact a range of industry sectors in the corporate portfolio, with clients with higher leverage being impacted most.interest rates rise.
b) Interest rate rises, including as a result of slowing of monetary stimulus, could impact consumer debt affordability and corporate profitability To the extent that central banks increase interest rates in certain developed markets, particularly in our main markets, the UK and the US, they are expected to be small and gradual in scale during 2016,2017, albeit following differing timetables. The first of theseRecent increases in interest rates occurred in the US with a quarter point0.25% rise in December 2015. While an increase2015 and the same rise in December 2016. Whilst further increases may support Group income, any sharperfuture interest rate increases, if larger or more frequent than expected changesexpectations, could cause stress in the loan portfolio and underwriting activity of the Group,Group. This would be particularly in relationapplicable tonon-investment grade lending, leading to the possibility of the Group incurring higher impairment. Higher credit losses and a requirement to increase the Group’s level ofdriving an increased impairment allowance would most notably occur in the Group’simpact retail unsecured and secured portfolios as a result of a reduction in recoverability and value of the Group’s assets, coupled with a decline in collateral values. Interest rate increases in developed markets may also negatively impact emerging economies, as capital flows to mature markets to take advantage of the higher returns and strengthening economic fundamentals. ii) Specific sectors The Group is subject to risks arising from changes in credit quality and recovery rate of loans and advances due from borrowers and counterparties in a specific portfolio. Any deterioration in credit quality could lead to lower recoverability and higher impairment in a specific sector. The following provides examples ofare areas of uncertainties to the Group’s portfolio which could have a material impact on performance. a) UK property With UK property representing the mosta significant portion of the overall PCBUK Corporate and Retail credit exposure, the Group is at risk from a fall in property prices in both the residential and commercial sectors in the UK. Strong house price growth in London and the South East of the UK, fuelled by foreign investment, strong buy to letbuy-to-let (BTL) demand and subdued housing supply, has resulted in affordability levels reaching record levels; averagemetrics becoming stretched. Average house prices as at the end of 20152016 were more than seven7.9 times average earnings. A fall However, the recent EU referendum has had a negative impact on home loan applications due to the increased uncertainty in the UK housing market, with ongoing concerns regarding the potential for falling house prices, particularly in London and the South EastEast. Further, a weakening economy would impact the home loan portfolio as costs rise off the back of higher interest rates and customers are impacted by inflationary affordability pressures. Potential losses would likely be most pronounced in the UK, wouldhigher Loan to Value (LTV) segments as falling house prices lead to higher impairment and negative capital impact as loss given default (LGD) rates increase. Potential losses would likely be most pronounced in the higher loan to value (LTV) segments. The proposal on BTL properties announced by the UK Chancellor of the Exchequer in 2015, changing both the level of tax relief on rental income and increasing levels of stamp duty from April 2016, may cause some dislocation in the BTL market. Possible impacts include a reduced appetite in the BTL market and an influx of properties for sale causing downward pricing pressure, as well as reduced affordability as increased tax liabilities reduce net retail yields. As a consequence this may lead to an increase in BTL defaults at a time when market values may be suppressed, with the potential that, while the Group carefully manages such exposures, it may experience increased credit losses and impairment from loans with high LTV ratios.
b) Natural Resources (emerging risk)resources TheDespite limited recovery in oil and commodities prices, the risk of losses and increased impairment is more pronounced where leverage is higher, or in sectors currently subject to strain, notably oil and gas, mining and metals and commodities. Sustained oil price depression from its recent high continues and is driven by ongoing global excess supply. While theThe positioning of these portfolios is relatively defensive and focuses on investment grade customers or collateralised positions, very severepositions. Continued stress in this market does have the potential to significantlyfurther increase credit losses and impairment.impairment where a decline in the value of oil impacts both customer revenue and the value of our underlying collateral.
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c) Large single name losses The Group has large individual exposures to single name counterparties. The default of such counterparties could have a significant impact on the carrying value of these assets. In addition, where such counterparty risk has been mitigated by taking collateral, credit risk may remain high if the collateral held cannot be realised, or has to be liquidated at prices which are insufficient to recover the full amount of the loan or derivative exposure. Any such defaults could have a material adverse effect on the Group’s results due to, for example, increased credit losses and higher impairment charges. d) Leverage Financefinance underwriting The Group takes on significantsub-investment grade underwriting exposure, including single name risk, particularly focused in the US and Europe and to a lesser extent in South Africa and other regions.Europe. The Group is exposed to credit events and market volatility during the underwriting period. Any adverse events during this period may potentially result in loss for the Group or an increased capital requirement should there be a need to hold the exposure for an extended period. | | | 92 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Market risk The Group’s financial position may be adversely affected byrisk of loss arising from potential adverse changes in both the levelvalue of the firm’s assets and volatility ofliabilities from fluctuation in market variables including, but not limited to, interest rates, foreign exchange, equity prices, leading to lower revenues, or reduced capital:commodity prices, credit spreads, implied volatilities and asset correlations. i) Concerns of majorIncreased uncertainty across global markets from such factors as an unexpected slowdown in global economic growth, sudden changes in monetary policy, and quantitative easing programmes,unexpected foreign exchange movements or slowdownvolatility, especially if accompanied by a significant deterioration in emerging market economies spilling over to global marketsthe depth of marketplace liquidity (emerging risk).
The trading business model is focused on client facilitation in wholesale financial markets, involvingranging from underwriting of debt and equity on behalf of issuers, to acting as a market making activities,maker in exchange-traded and over the counter products, to providing risk management solutions and execution.solutions. The Group’s trading business is generally adversely exposed to a rapid unwindingprolonged period of quantitative easing programmes and deterioration inelevated asset price volatility, particularly if it negatively affects the macro environment driven by concerns in global growth. An extremely high leveldepth of volatility in asset pricesmarketplace liquidity. Such a scenario could affect market liquidity and cause excess market volatility, impactingimpact the Group’s ability to execute client trades and may also result in lower client flow-driven income and/or market-based losses on its existing portfolio losses.of market risks. These can include having to absorb higher hedging costs from rebalancing risks that need to be managed dynamically as market levels and their associated volatilities change. A suddenTreasury and capital risk
The risk that the Group may not achieve its business plans because of the availability of planned liquidity, a shortfall in capital or a mismatch in the interest rate exposures of its assets and liabilities. The Group may not be able to achieve its business plans due to: i) being unable to maintain appropriate capital ratios; ii) being unable to meet its obligations as they fall due; iii) rating agency downgrades; iv) adverse volatilitychanges in interest or foreign currency exchange rates on capital ratios; v) negative interest rates; and vi) adverse movements in the pension fund. i) Inability to maintain appropriate prudential ratios Should the Group be unable to maintain or achieve appropriate capital ratios this could lead to: an inability to support business activity; a failure to meet regulatory capital requirements including any additional capitaladd-ons or the requirements set for regulatory stress tests; increased cost of funding due to deterioration in investor appetite or credit ratings; restrictions on distributions including the ability to meet dividend targets; and/or the need to take additional measures to strengthen the Group’s capital or leverage position. While the requirements in CRD IV are now in force in the UK, further changes to regulatory capital requirements could occur, whether as a result of (i) further changes to EU legislation (for example, expected implementation of Bank of International Settlements (BIS) regulatory update recommendations through CRD V, etc); (ii) relevant binding regulatory technical standards updates by the European Banking Authority (EBA); (iii) changes to UK legislation; (iv) changes to PRA rules; (v) additional capital requirements through Financial Policy Committee (FPC) recommendations; or (vi) changes to International Financial Reporting Standards (IFRS). Such changes, either individually and/or in aggregate, may lead to further unexpected additional requirements in relation to the Group’s regulatory capital. For example, during 2016, the European Commission proposed substantial changes to the CRD IV framework (including CRR) in line with internationally-agreed standards. These include changes to the regulatory definition of trading activity, standardised and advanced RWA calculation methodologies for market risk and new standardised RWA rules for counterparty credit risk. The proposal also includesphase-in arrangements for the regulatory capital impact of IFRS9 and the ongoing interaction of IFRS9 with the regulatory framework. The Basel Committee has continued its post-crisis work on RWA and leverage reform. Further standards are expected during the course of 2017 on RWAs for credit risk and operational risk, limitations on the use of internal models for RWA purposes and possible floors based on standardised RWAs. The implementation timeframe for these changes is not yet certain. Additional prudential requirements may also arise from other regulatory reforms, including UK, EU and US proposals on bank structural reform and current proposals for ‘Minimum Requirement for own funds and Eligible Liabilities (MREL) under the EU Bank Recovery and Resolution Directive (BRRD). Included within these reforms are the Bank of England’s latest responses to consultation and statement of policy on MREL requirements for UK banks which were published in November 2016 and which remain subject to further changes. Many of the expected regulatory proposals are still subject to finalisation, with calibration and timing of implementation still to be determined, and there is potential for the impacts to detrimentallybe different from those originally expected when in final form. Overall, it is likely that these changes in law and regulation will have an impact on the Group as they are likely, when implemented, to require changes to the legal entity structure of the Group and how businesses are capitalised and funded. Any such increased prudential requirements may also constrain the Group’s planned activities, require balance sheet reductions and could increase the Group’s costs, impact the Group’s income from non-trading activity. Thisearnings and restrict the Group’s ability to pay dividends. Moreover, if combined with a period of market dislocation or when there is becausesignificant competition for the type of funding that the Group has exposureneeds, it may be more difficult and/or costly to non-traded interest rateincrease the Group’s capital resources.
ii) Inability to manage liquidity and funding risk arising fromeffectively Failure to manage its liquidity and funding risk effectively may result in the provisionGroup either not having sufficient financial resources to meet its payment obligations as they fall due or, although solvent, only being able to meet these obligations at excessive cost. This could cause the Group to fail to meet regulatory liquidity standards, be unable to supportday-to-day banking activities, or no longer be a going concern. iii) Credit rating changes and the impact on funding costs A credit rating assesses the creditworthiness of retailthe Group, its subsidiaries and wholesale non-traded banking productsbranches, and services,is based on reviews of a broad range of business and financial attributes including productsrisk management processes and procedures, capital strength, asset quality, earnings, funding, liquidity, accounting and governance. Any adverse event to one or more of these attributes may lead to a downgrade, which do not havein turn could result in contractual outflows to meet contractual requirements on existing contracts. Furthermore, outflows related to a defined maturity datemultiple-notch credit rating downgrade are included in the LRA stress scenarios and have an interest ratea portion of the liquidity pool is held against this risk. There is a risk that does not change in line with base rate movements, e.g. current accounts. The level and volatility of interest rates canany potential downgrades could impact the Group’s net interest margin, which isperformance should borrowing cost and liquidity change significantly versus expectations or the interest rate spread earned between lending and borrowing costs. The potential for future volatility and margin changes remains in key areas such ascredit spreads of the Group be negatively affected. For further information please refer to Credit Ratings in the UK benchmark interest rate to the extent such volatility and marginLiquidity Risk Performance section on page 172. iv) Adverse changes are not fully addressed by hedging programmes.in foreign exchange rates on capital ratios The Group is also athas capital resources, risk from movementsweighted assets and leverage exposures denominated in foreign currencies. Changes in foreign currency exchange rates as thesemay adversely impact the sterlingSterling equivalent value of these items. As a result, the Group’s regulatory capital ratios are sensitive to foreign currency denominated assetsmovements, and any failure to appropriately manage the Group’s balance sheet to take account of foreign currency movements could result in the banking book, exposing it to currency translation risk.an adverse impact on regulatory capital and leverage ratios. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 93 |
Risk review Material existing and emerging risks ii)Material existing and emerging risks to the Group’s future performance
v) Negative interest rates A fall in interest rates leading to an environment with negative nominal interest rates would adversely impact Group profitability as retail and corporate business income would decrease due to margin compression. This is because the significant reduction in asset income would not be offset by a reduction in cost in liabilities due to the presence of a floor in our customer deposit and savings rates which are typically set at positive level of rates. vi) Adverse movements in the pension fund Adverse movements between pension assets and liabilities for defined benefit pension schemes could contribute to a pension deficit. The liabilities discount rate is a key driver and, in accordance with International Financial Reporting Standards (IAS 19), is derived from the yields of high quality corporate bonds (deemed to be those with AA ratings) and consequently includes exposure to both risk-free yields and credit spreads. Therefore, the Group’s defined benefits scheme valuation would be adversely affected by a prolonged fall in the discount rate or a persistent low rate and/or credit spread environment. Inflation is another significant risk driver to the pension fund, as the liabilities are adversely impacted by an increase in long termlong-term inflation expectation.expectations. However in the long term, inflation and rates risk tend to be negatively correlated and therefore partially offset each other. FundingOperational risk
The abilityrisk of the Group to achieve its business plans may be adversely impacted if it does not effectively manage its capital (including leverage), liquidity and other regulatory requirements. The Group may not be able to achieve its business plans due to: i) being unable to maintain appropriate capital ratios; ii) being unable to meet its obligations as they fall due; iii) rating agency methodology changes resulting in ratings downgrades; and iv) adverse changes in foreign exchange rates on capital ratios.
i) Inability to maintain appropriate prudential ratios
Should the Group be unable to maintain or achieve appropriate capital ratios this could lead to: an inability to support business activity; a failure to meet regulatory capital requirements including the requirements of regulator set stress tests; increased cost of funding due to deterioration in credit ratings; restrictions on distributions including the ability to meet dividend targets; and/or the need to take additional measures to strengthen the Group’s capital or leverage position. While the requirements in CRD IV are now in force in the UK, further changes to capital requirements could occur, whether as a result of (i) further changes to EU legislation by EU legislators (for example, implementation of Bank of International Settlements (BIS) regulatory update recommendations), (ii) relevant binding regulatory technical standards updates by the European Banking Authority (EBA), (iii) changes to UK legislation by the UK government, (iv) changes to PRA rules by the PRA, or (v) additional capital requirements through Financial Policy Committee (FPC) recommendations. Such changes, either individually and/or in aggregate, may lead to further unexpected additional requirements in relationloss to the Group’s regulatory capital.
Additional prudential requirements may also arisefirm from other regulatory reforms, including UK, EU and the US proposals on bank structural reform and current proposals for ‘Minimum Requirement for own funds and Eligible Liabilities (MREL) under the EU Bank Recovery and Resolution Directive (BRRD). Included within these reforms are the BoE proposals on MREL requirements for UK banks which were published in December 2015. The BoE stated its intentions to communicate MREL requirements to UK banks during 2016. Many of the proposals are still subject to finalisation and implementation and may have a different impact when in final form. The impact of these proposals is still being assessed. Overall, it is likely that these changes in law and regulation will have an impact on the Group as they are likely, when implemented, to require changes to the legal entity structure of the Group and how businesses are capitalised and funded. Any such increased prudential requirements may also constrain the Group’s planned activities, lead to forced asset sales and balance sheet reductions and could increase the Group’s costs, impact on the Group’s earnings and restrict the Group’s ability to pay dividends. Moreover, during periods of market dislocation, as currently seen, or when there is significant competition for the type of funding that the Group needs, increasing the Group’s capital resources in order to meet targets may prove more difficult and/or costly.
ii) Inability to manage liquidity and funding risk effectively
Failure to manage its liquidity and funding risk effectively may result in the Group either not having sufficient financial resources to meet its payment obligations as they fall due or, although solvent, only being able to meet these obligations at excessive cost. This could cause the Group to fail to meet regulatory liquidity standards, be unable to support day-to-day banking activities, or no longer be a going concern.
iii) Credit rating changes and the impact on funding costs
A credit rating assesses the creditworthiness of the Group, its subsidiaries and branches and is based on reviews of a broad range of business and financial attributes including risk management processes and procedures, capital strength, earnings, funding, liquidity, accounting and governance. Any adverse event to one or more of these attributes may lead to a downgrade, which in turn could result in contractual outflows to meet contractual requirements on existing contracts.
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Risk review
Material existing and emerging risks
Material existing and emerging risks to the Group’s future performance
Furthermore, outflows related to a multiple notch credit rating downgrade are included in the LRA stress scenarios and a portion of the liquidity pool held against this risk. There is a risk that any potential downgrades could impact the Group’s performance should borrowing costs and liquidity change significantly versus expectations.
For further information, please refer to Credit Ratings in the Liquidity Risk Performance section on page 166.
iv) Adverse changes in foreign exchange rates on capital ratios
The Group has capital resources and risk weighted assets denominated in foreign currencies. Therefore changes in foreign currency exchange rates may adversely impact 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 currency movements, and a failure to appropriately manage the Group’s balance sheet to take account of foreign currency movements could result in an adverse impact on regulatory capital ratios. The impact is difficult to predict with any accuracy, but it may have a material adverse effect on the Group if capital and leverage ratios fall below required levels.
Operational risk
The operational risk profile of the Group may change as a result of human factors, inadequate or failed internal processes andor systems, human factors or due to external events.events (for example fraud) where the root cause is not due to credit or market risks.
The Group is exposed to many types of operational risk. This includes:These include: fraudulent and other internal and external criminal activities; breakdowns in processes, controls or procedures (or their inadequacy relative to the size and scope of the Group’s business); systems failures or an attempt by an external party to make a service or supporting technological infrastructure unavailable to its intended users, known as a denial of service attack; and the risk of geopolitical cyber threat activity which destabilises or destroys the Group’s information technology, or critical technological infrastructure the Group depends upon but does not control. The Group is also subject to the risk of business disruption arising from events wholly or partially beyond its control, for example natural disasters, acts of terrorism, epidemics and transport or utility failures, which may give rise to losses or reductions in service to customers and/or economic loss to the Group. All of these risks are also applicable where the Group relies on outside suppliers or vendors to provide services to it and its customers. The operational risks that the Group is exposed to could change rapidly and there is no guarantee that the Group’s processes, controls, procedures and systems are sufficient to address, or could adapt promptly to, such changing risks to avoid the risk of loss. i) Cyber attacks (emerging risk)risk The risk posed by cyber attacks continues to grow.is growing, with financial institutions being a primary target of increasingly capable cyber crime groups, as demonstrated by sophisticated targeted attacks against global payment networks throughout 2016. The proliferationincreased maturity of online marketplaces tradingfor criminal services and stolen data has reduced barriers ofto entry for criminals perpetrating financial attacks which carry high reward and low risk of law enforcement prosecution. The cyber threat increases the inherent risk to perpetrate cyber attacks, while at the same time increasing motivation. Attacker capabilities continue to evolve as demonstrated by a marked increase in denial of service attacks, and increased sophistication of targeted fraud attacks by organised criminal networks. We face a growing threat to our informationGroup’s data (whether it is held by usthe Group or in ourits supply chain), to the integrity of our financial transactions, and to the availability of our services. All of these necessitate a broad intelligence and response capability.
Given the level of increasing global sophistication and scope of potential cyber attacks, future attacks may lead to significant breaches of security which jeopardise the sensitive information and financial transactions of the Group, its clients, counterparties orand customers, or cause disruptionand to systems performing critical functions.the availability of the Group’s services. Failure to adequately manage cyber threatsthis risk, and to continually review and update processes, in response to new threats could result in increased fraud losses, inability to perform critical economic functions, customer detriment, potential regulatory censure and penalty, legal liability and reputational damage.
ii) Infrastructure and technology resilience AsThe failure of the dependency on digital channelsGroup’s and otherits suppliers’ technology infrastructures remain a material risk driver for the Group. The increased use of technologies grows, the impact of technology issues can becometo support business strategy, and customer and client demand, means any failures will be felt more materialimmediately and immediate. This is also the casewith greater impact.
Failure to adequately manage resilience in many other industries and organisations but particularly impactful in the banking sector. The Group’s technology,our technologies, real-estate, and supplier infrastructure is critical to the operation of its businessesbusiness and to the delivery of products and services to customers and clients and to meet our market integrity obligations. Sustainedsuppliers’ processes, may result in disruption to services provided by Barclays, either directly or through third parties,normal service which could have ain turn result in significant impactcustomer detriment, cost to customers and to the Group’s reputation and may also lead to potentially large costs to rectify the issue and reimburse losses incurred by our customers, as well as possiblepotential regulatory censure or penalty, and penalties.reputational damage.
iii) Ability to hire and retain appropriately qualified employees The Group requires a diverse mix of highly skilled and qualified colleagues to deliver its strategy and so is dependent on attracting and retaining appropriately qualified and experienced individuals. BarclaysBarclays’ ability to attract and retain such talent is impacted by a range of external and internal factors. External regulatory changesregulation such as the introduction of the Individual Accountability Regime and the required deferral and claw back provisions of our compensation arrangements may make Barclays a less attractive proposition relative to both our international competitors and other industries. Similarly, meeting the requirementsimpact of structural reform may increase the competitiveness inplanned exit of the market for talent. Internally, restructuring of our businesses and functions, and an increased focus on costs may allUK from the EU could potentially have an impact on employee engagementour ability to hire and retention.retain key employees. Failure to attract or prevent the departure of appropriately qualified employees who are dedicated to overseeing and managing current and future regulatory standards and expectations, or who have the necessary skills required to deliver the Group strategy, could negatively impact our financial performance, control environment, and level of employee engagement.engagement and may result in disruption to service which could in turn lead to customer detriment and reputational damage. iv) Losses due to additional tax chargesTax risk The Group is subjectrequired to comply with the domestic and international tax laws inand practice of all countries in which it operates, including tax laws adopted at the EU level, andhas business operations. There is impacted by a number of double taxation agreements between countries. There is risk that the Group could suffer losses due to additional tax charges, other financial costs or reputational damage due toas a rangeresult of possible factors. This includes a failurefailing to comply with such laws and practice or correctly assessby failing to manage its tax affairs in an appropriate manner. The Group also faces emerging risks from domestic and international tax developments. For example, the applicationOECD’s Base Erosion and Profit Shifting (‘BEPS’) project, and the implementation of relevant taxits recommendations into domestic law a failurein countries around the world, has the potential to deal with tax authorities in a timely and effective manner or an incorrect calculation of tax estimates for reported and forecast tax numbers. Such charges, orsignificantly increase the conduct of any dispute with a relevant tax authority, could lead to adverse publicity, reputational damage and potentially to costs materially exceeding current provisions, which could have an adverse effectcompliance burden on the Group’s operations, financial conditionsGroup, as well as to increase the incidence of double taxation on the Group as a result of different countries adopting different interpretations and prospects.approaches to the BEPS recommendations. v) Critical accounting estimates and judgements The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management to exercise judgement in applying relevant accounting policies. The key areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the consolidated and individual financial statements include provisions for conduct and legal, competition and regulatory matters, fair value of financial instruments, credit impairment charges for amortised cost assets, impairment and valuation of available for sale investments, calculation of current and deferred tax and accounting for pensions and post-retirements benefits. There is a risk that if the judgement exercised, or the estimates or assumptions used, subsequently turn out to be incorrect, this could result in significant loss to the Group, beyond what was anticipated or provided for. | | | 94 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
As part of the assets in theNon-Core business, the Group holds a UK portfolio of generally longer termlonger-term loans to counterparties in ESHLAEducation, Social Housing and Local Authorities (ESHLA) sectors, which are measured on a fair value basis. The valuation of this portfolio is subject to substantial uncertainty due to the long datedlong-dated nature of the portfolios, the lack of a secondary market in the relevant loans and unobservable loan spreads. As a result of these factors, the Group may be required to revise the fair values of these portfolios to reflect, among other things, changes in valuation methodologies due to | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 89 |
changes in industry valuation practices and as further market evidence is obtained in connection with theNon-Core asset rundownrun-off and exit process. For further information refer to Note 18 Fair value of assets and liabilitiesfinancial instruments of the Group’s consolidated financial statements. The further development of standards and interpretations under IFRS could also significantly impact the financial results, condition and prospects of the Group. vi) Outsourcing The introductionGroup depends on suppliers for the provision of many of our services, though the Group continues to be accountable for risk arising from the actions of such suppliers. Failure to monitor and control our suppliers could potentially lead to client information, or our critical infrastructures and services, not being adequately protected. The dependency on suppliers andsub-contracting of outsourced services introduces concentration risk where the failure of specific suppliers could have an impact on our ability to continue to provide services that are material to the Group. Failure to adequately manage outsourcing risk could result in increased losses, inability to perform critical economic functions, customer detriment, potential regulatory censure and penalty, legal liability and reputational damage. vii) Data quality The quality of the impairment requirementsdata used in models across Barclays has a material impact on the accuracy and completeness of IFRS 9 Financial Instruments will resultour risk and financial metrics. The evolution of complex modelling underpinning risk decisions, forecasting and capital calculations, demands greater precision in impairment being recognised earlier than is the case under IAS 39 because it requires expected lossesour data. Failure to be recognised before the loss event arises. Measurement will involve increased complexity and judgement including estimation of probabilities of defaults, losses given default, a range of unbiased future economic scenarios, estimation of expected lives, estimation of exposures at default and assessing increases in credit risk. It is expected tomanage data standards accordingly may have a material financial impact, but it will not be practical to disclose reliable financial impact estimates untiladverse effect on the implementation programme is further advanced.quality of our risk management. For more information please referviii) Operational precision and payments
The risk of material errors in operational processes, including payments, are exacerbated during the present period of significant levels of structural and regulatory change, the evolving technology landscape, and a transition to Note 1 Significant accounting policiesdigital channel capabilities. Material operational or payment errors could disadvantage our customers, clients or counterparties and could result in regulatory censure and penalties, legal liability and reputational damage. Model risk The risk of the potential adverse consequences from financial assessments or decisions based on pagesincorrect or misused model outputs and reports.218 Barclays uses models to 220.support a broad range of business and risk management activities, including informing business decisions and strategies, measuring and limiting risk, valuing exposures, conducting stress testing, assessing capital adequacy, supporting new business acceptance and risk/reward evaluation, managing client assets, or meeting reporting requirements. Models are imperfect and incomplete representations of reality, and so they may be subject to errors affecting the accuracy of their outputs. Models may also be misused. Model errors or misuse may result in the Group making inappropriate business decisions and being subject to financial loss, regulatory risk, reputational risk and/or inadequate capital reporting. Conduct risk The risk of detriment to customers, clients, market integrity, competition or Barclays from the inappropriate supply of financial services, including instances of wilful or negligent misconduct. Barclays is committed to ensuring that positive customer and client outcomes and protecting market integrity are integral to the way the firm operates. This includes taking reasonable steps to ensure our culture and strategy are appropriately aligned to these objectives; our products and services are reasonably designed and delivered to meet the needs of our customers and clients, as well as maintaining the fair and orderly operation of the markets in which we do business. Certain other risks referenced herein may result in detriment to customers, clients and market integrity if not managed effectively. These include but are not limited to: cyber risk; infrastructure and technology resilience; ability to hire and retain qualified people; outsourcing; data quality; operational precision and payments; regulatory change; structural reform; change and execution risk; and the exit of the UK from the EU. i) Execution of strategic divestment inNon-Core businesses As Barclays executes strategic decisions to exit products, businesses or countries, the firm must consider and mitigate any potential detriment to customers, clients and market integrity. There is a risk some customers and clients may have reduced market access and a limited choice of alternative providers, or transitions to alternate providers could cause disruptions. There is also a risk the firm’s strategic divestments may impact market liquidity or result in adverse pricing movements. In connection with any country exits, there is a risk that any ongoing cross-border activities into those countries are not conducted in accordance with local laws and regulations. The crystallisation of any of these risks could cause detriment to customers, clients and market integrity, as well as regulatory sanctions, financial loss and reputational damage. ii) Product governance and sales practices Effective product governance, including design, approval and periodic review of products, and appropriate controls over various internal and third-party sales channels are critical to ensuring positive outcomes for customers and clients. In particular, Barclays must ensure that its remuneration practices and performance management framework are designed to prevent conflicts of interest and inappropriate sales incentives. Failure of product governance and sales controls could result in the sale of products and services that fail to meet the needs of, or are unsuitable for, customers and clients, regulatory sanctions, financial loss and reputational damage. iii) Trading controls and benchmark submissions Maintaining controls over trading activities and benchmark submissions is critical to ensuring the trust of our customers, clients and other market participants. These controls must be designed to ensure compliance with all applicable regulatory requirements, as well as to prevent market manipulation, unauthorised trading and inadvertent errors. A failure of these controls could result in detriment to customers and clients, disruptions to market integrity, regulatory sanctions, financial loss and reputational damage. The risk of failure could be enhanced by the changes necessary to address various new regulations, including but not limited to the Markets in Financial Instruments Directive II. iv) Financial Crime The management of Financial Crime remains a key area of regulatory focus. Delivering a robust control environment to ensure that the Bank effectively manages the risks of Money Laundering, Terrorist Financing, Sanctions and Bribery and Corruption protects the Bank, its customers and its employees, as well as society at large, from the negative effects of financial crime. Failure to maintain an effective control environment may lead to regulatory sanctions, financial loss and reputational damage. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 95 |
Risk review Material existing and emerging risks Material existing and emerging risks to the Group’s future performance v) Data protection and privacy The proper handling of data and protection of data privacy is critical to developing trust and sustaining long-term relationships with our customers and clients. Inadequate protection of data (including data held and managed by third party suppliers) could lead to security compromise, data loss, financial loss and other potential detriment to our customers and clients, as well as regulatory sanctions, financial loss and reputational damage. The risk of failure could be enhanced by the changes necessary to address various new regulations, including but not limited to the EU Data Protection Initiative. vi) Regulatory focus on culture and accountability Various regulators around the world have emphasised the importance of culture and personal accountability in helping to ensure appropriate conduct and drive positive outcomes for customers, clients and markets integrity. Regulatory changes such as the new UK Senior Managers Regime and Conduct Rules coming into effect in 2017, along with similar regulations in other jurisdictions, will require Barclays to enhance its organisational and operational governance to evidence its effective management of culture and accountability. Failure to meet these new requirements and expectations may lead to regulatory sanctions, financial loss and reputational damage. Reputation risk The risk that an action, transaction, investment or event will reduce trust in the firm’s integrity and competence by clients, counterparties, investors, regulators, employees or the public. Climate change, human rights and support for the defence sector Any one transaction, investment or event that, in the perception of key stakeholders reduces their trust in the firm’s integrity and competence, may have the potential to give rise to risk to Barclays reputation. Barclays’ association with sensitive sectors is often an area of concern for stakeholders and the following topics have been of particular interest: Fossil fuels: As the Paris agreement on CO2 emissions comes into force, banks are coming under increased pressure from civil society, shareholders and potentially national governments regarding the management and disclosure of their climate risks and opportunities, including the activities of certain sections of their client base; Human Trafficking: The UK Modern Slavery Act came into force in October 2015 and with the scrutiny of global business investments rising, the risks of association with human rights violations are growing within the banking sector, through the perceived indirect involvement in human rights abuses committed by clients and customers. Campaigners have been seeking to hold all parties in the value chain to account for environmental and human rights violations where they occur; and Defence Sector: Supporting the manufacture and export of military and riot control goods and services continues to require significant review internally in order to ensure compliance with all relevant requirements and to avoid reputational damage. Legal competition andrisk The risk of loss or imposition of penalties, damages or fines from the failure of the firm to meet its legal obligations including regulatory mattersor contractual requirements. Legal disputes, regulatory investigations, fines and other sanctions relating to conduct of business and financial crimebreaches of legislation and/or regulations may negatively affect the Group’s results, reputation and ability to conduct its business. The Group conducts diverse activities in a highly regulated global market and therefore is therefore exposed to the risk of fines and other sanctions relating to the conduct of its business. In recent years authorities have increasingly investigated past practices, vigorously pursued alleged breaches and imposed heavy penalties on financial services firms. This trend is expected to continue. In relation to financial crime, aA breach of applicable legislation and/or regulations could result in the Group or its staff being subject to criminal prosecution, regulatory censure, fines and other sanctions in the jurisdictions in which it operates, particularly in the UK and the US. Where clients, customers or other third parties are harmed by the Group’s conduct, this may also give rise to legal proceedings, including class actions. Other legal disputes may also arise between the Group and third parties relating to matters such as breaches, enforcement of legal rights or obligations arising under contracts, statutes or common law. Adverse findings in any such matters may result in the Group being liable to third parties seeking damages, or may result in the Group’s rights not being enforced as intended. Details of material legal, competition and regulatory matters to which the Group is currently exposed are set out in Note29 Legal,legal, competition and regulatory matters. In addition to those material ongoing matters specifically described in Note 29, the Group is engaged in various other legal proceedings in the UK and US and a number of other overseas jurisdictions which arise in the ordinary course of business. The Group is also subject to requests for information, investigations and other reviews by regulators, governmental and other public bodies in connection with business activities in which the Group is or has been engaged. The Group is keeping all relevant agencies briefed as appropriate in relation to these matters on an ongoing basis. In light of the uncertainties involved in legal, competition and regulatory matters, there can be no assurance that the outcome of a particular matter or matters will not be material to the Group’s results of operations or cash flow for a particular period, depending on, amongamongst other things, the amount of the loss resulting from the matter(s) and the amount of income otherwise reported for the period. The outcome of material, legal, competition and regulatory matters, both those to which the Group is currently exposed and any others which may arise in the future, is difficult to predict. However, it is likely that in connection with any such matters the Group willmay incur significant expense, regardless of the ultimate outcome, and any such matters could expose the Group to any of the following: substantial monetary damages and/or fines; remediation of affected customers and clients; other penalties and injunctive relief; additional litigation; criminal prosecution in certain circumstances; the loss of any existing agreed protection from prosecution; regulatory restrictions on the Group’s business operations including the withdrawal of authorisations; increased regulatory compliance requirements; suspension of operations; public reprimands; loss of significant assets or business; a negative effect on the Group’s reputation; loss of investor confidence and/or dismissal or resignation of key individuals. In January 2017, Barclays PLC was sentenced to serve three years of probation from the date of the sentencing order in accordance with the terms of its May 2015 plea agreement with the DOJ. During the term of probation Barclays PLC must, amongst other things, (i) commit no crime whatsoever in violation of the federal laws of the United States, (ii) implement and continue to implement a compliance programme designed to prevent and detect the conduct that gave rise to the plea agreement and (iii) strengthen its compliance and internal controls as required by relevant regulatory or enforcement agencies. Potential consequences of breaching the plea agreement include the imposition of additional terms and conditions on the Group, an extension of the agreement, or the criminal prosecution of Barclays PLC, which could, in turn, entail further financial penalties and collateral consequences and have a material adverse effect on the Group’s business, operating results or financial position. There is also a risk that the outcome of any legal, competition or regulatory matters in which the Group is involved may give rise to changes in law or regulation as part of a wider response by relevant law makers and regulators. An adverseA decision in any one matter, either against the Group or another financial institution facing similar claims, could lead to further claims against the Group. vii) Risks arising from regulation of the financial services industry
The financial services industry continues to be the focus of significant regulatory change and scrutiny which may adversely affect the Group’s business, financial performance, capital and risk management strategies. For further information on regulations affecting the Group, including significant regulatory developments, see the section on Supervision and Regulation.
a) Regulatory change
The Group, in common with much of the financial services industry, remains subject to significant levels of regulatory change and increasing scrutiny in many of the countries in which it operates (including, in particular, the UK and the US). This has led to a more intensive approach to supervision and oversight, increased expectations and enhanced requirements. As a result, regulatory risk will remain a focus for senior management and consume significant levels of business resources. Furthermore, this more intensive approach and the enhanced requirements, uncertainty and extent of international regulatory coordination as enhanced supervisory standards are developed and implemented may adversely affect the Group’s business, capital and risk management strategies and/or may result in the Group deciding to modify its legal entity structure, capital and funding structures and business mix, or to exit certain business activities altogether or not to expand in areas despite otherwise attractive potential.
b) Changes in prudential requirements, including changes to CRD IV
The Group’s results and ability to conduct its business may be negatively affected by changes to, or additional supervisory expectations.
In July 2015, the Financial Policy Committee (FPC) of the BoE published a policy statement directing the PRA to require all major UK banks and building societies to hold enough Tier 1 capital to satisfy a minimum leverage ratio of 3% and a countercyclical leverage ratio buffer of 35% of the institution-specific countercyclical capital buffer rate. The FPC also directed that UK G-SIBs and domestically systemically important banks should meet a supplementary leverage buffer ratio of 35% of corresponding risk-weighted capital buffer rates. The PRA published a policy statement, finalised rules and a supervisory statement implementing the FPC’s directions in December 2015 and the new leverage ratio framework came into force on 1 January 2016.
In January 2016, the BCBS endorsed a new market risk framework, including rules made as a result of its fundamental review of the trading book, which will take effect in 2019. Barclays continues to monitor the potential effects on its capital position arising from these rules and from (i) revisions to the BCBS’s standardised rules for credit risk, counterparty credit risk, CVA volatility risk and operational risk; and (ii) the BCBS considering the position regarding the limitation of the use of internal models in certain areas (for example, removing the Advanced Measurement Approach for operational risk) and applying RWA floors based on the standardised approaches.
Changes to, or additional supervisory expectations, in relation to capital and/or leverage ratio requirements either individually or in aggregate, may lead to unexpected enhanced requirements in relation to the Group’s capital, leverage, liquidity and funding ratios or alter the way such ratios are calculated. This may result in a need for further management actions to meet the changed requirements, such as: increasing capital or liquidity resources, reducing leverage and risk weighted assets; modifying legal entity structure (including with regard to issuance and deployment of capital and funding for the Group); changing the Group’s business mix or exiting other businesses; and/or undertaking other actions to strengthen the Group’s position.
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Risk review Material existing and emerging risksRisk management
Material existing and emerging risks to the Group’s future performance
c) Market infrastructure reforms
The derivatives markets are subject to extensive and increasing regulation in many of the Group’s markets, including, in particular, Europe pursuant to the European Market Infrastructure Regulation (EMIR) and in the US under the Dodd Frank Wall Street Reform and Consumer Protection Act of 2010 (DFA). Certain of these increased regulatory requirements have already come into force, with further provisions expected to become effective in stages, including through a new recast version of the Markets in Financial Instruments Directive and a new regulation (the Markets in Financial Instruments Regulation) in Europe.
It is possible that additional regulations, and the related expenses and requirements, will increase the cost of and restrict participation in the derivatives markets, thereby increasing the costs of engaging in hedging or other transactions and reducing liquidity and the use of the derivatives markets.
Changes in regulation of the derivatives markets could adversely affect the business of the Group and its affiliates in these markets and could make it more difficult and expensive to conduct hedging and trading activities, which could in turn reduce the demand for swap dealer and similar services of the Group and its subsidiaries. In addition, as a result of these increased costs, the new regulation of the derivatives markets may also result in the Group deciding to reduce its activity in these markets.
d) Recovery and resolution planning
There continues to be a strong regulatory focus on ‘resolvability’ from regulators, particularly in the UK, the US and South Africa. The Group made its first formal Recovery and Resolution Plan (RRP) submissions to the UK and US regulators in mid-2012 and made its first Recovery Plan submission to the South African regulators in 2013. Barclays continues to work with the relevant authorities to identify and address potential impediments to the Group’s ‘resolvability’.
In the UK, RRP work is considered part of continuing supervision. Removal of potential impediments to an orderly resolution of the Group or one or more of its subsidiaries is considered as part of the BoE and PRA’s supervisory strategy for each firm, and the PRA can require firms to make significant changes in order to enhance resolvability. Barclays provides the PRA with a Recovery Plan annually and with a Resolution Pack every other year.
In the US, Barclays is one of several systemically important banks required to file resolution plans with the Board of Governors of the Federal Reserve System (Federal Reserve) and the Federal Deposit Insurance Corporation (FDIC) (collectively, the Agencies) under provisions of the DFA. Pursuant to the resolution plan regulation in the US, a joint determination by the Agencies that a resolution plan is not credible or would not facilitate an orderly resolution under the US Bankruptcy Code may result in a bank being made subject to more stringent capital, leverage, or liquidity requirements, or restrictions on growth, activities or operations in the US.
Additionally, there are further resolution-related proposals in the US, such as the Federal Reserve’s proposed regulation requiring internal total loss absorbing capital (TLAC) for Barclays’ US Intermediate Holding Company (IHC) that will be established during 2016, and increased record keeping and reporting requirements for obligations under qualified financial contracts (QFC proposal) that may, depending on final rules, materially increase the operational and financing costs of Barclays’ US operations.
In South Africa, the South African Treasury and the South Africa Reserve Bank are considering material new legislation and regulation to adopt a resolution and depositor guarantee scheme in alignment with FSB principles. Barclays Africa Group Limited (BAGL) and its primary subsidiary Absa Bank Limited, will be subject to these schemes when they are adopted. It is not clear what shape these schemes will take, or when the schemes will be adopted, but current proposals for a funded deposit insurance scheme and for operational continuity may result in material increases in operational and financing costs for the BAGL group.
While the Group believes that it is making good progress in reducing potential impediments to resolution, should the relevant authorities ultimately determine that the Group or any significant subsidiary could
not be resolved in an orderly manner, the impact of potential structural changes that may be required to address such a determination (whether in connection with RRP or other structural reform initiatives) may impact capital, liquidity and leverage ratios, as well as the overall profitability of the Group, for example, due to duplicated infrastructure costs, lost cross-rate revenues and/or additional funding costs.
viii) Regulatory action in the event of a bank failure
The EU Bank Recovery and Resolution Directive (BRRD) contains provisions similar to the Banking Act on a European level, many of which augment and increase the powers which national regulators are required to have in the event of a bank failure.
The UK Banking Act 2009, as amended (the Banking Act) provides for a regime to allow the BoE (or, in certain circumstances, HM Treasury) to resolve failing banks in the UK. Under the Banking Act, these authorities are given powers to make share transfer orders and property transfer orders. Amendments introduced by the Banking Reform Act gave the BoE statutory bail-in power from 1 January 2015. This power enables the BoE to recapitalise a failed institution by allocating losses to its shareholders and unsecured creditors. It also allows the BoE to cancel liabilities or modify the terms of contracts for the purposes of reducing or deferring the liabilities of the bank under resolution, and gives it the power to convert liabilities into another form (e.g. equity). In addition to the bail-in power, relevant UK resolution authorities are granted additional powers under the Banking Act including powers to direct the sale or transfer of a relevant financial institution or all or part of its business in certain circumstances. Further, parallel developments such as the implementation in the UK of the FSB’s TLAC requirements may result in increased risks that a bank would become subject to resolution authority requirements by regulators seeking to comply with international standards in this area. Please see Funding risk, inability to maintain appropriate prudential ratios on page 88.
If any of these powers were to be exercised, or there is an increased risk of exercise, in respect of the Group or any entity within the Group, this might result in a material adverse effect on the rights or interests of shareholders and creditors including holders of debt securities and/or could have a material adverse effect on the market price of shares and other securities issued by the Group. Such effects could include losses of shareholdings/associated rights including, the dilution of percentage ownership of the Group’s share capital, and may result in creditors, including debt holders, losing all or a part of their investment in the Group’s securities.
Conduct risk
Barclays is committed to Group-wide changes to business practices, governance and mindset and behaviours so that good customer outcomes and protecting market integrity are integral to the way Barclays operates. Improving our reputation will demonstrate to customers that in Barclays they have a partner they can trust. Conduct risk is the risk that detriment is caused to the Group’s customers, clients, counterparties or the Group itself because of inappropriate judgement in the execution of our business activities.
During 2015 potential customer impact and reputation risk inherent in varied emerging risks has been managed across the Group and escalated to senior management for discussion. These risks will remain prevalent in 2016 and beyond and the most significant of these include:
i) Organisational change
The Group is at risk of not being able to meet customer and regulatory expectations due to a failure to appropriately manage the: i) complexity in business practice, processes and systems; ii) challenges faced in product suitability, automation and portfolio-level risk monitoring; iii) resilience of its technology; and, iv) execution strategy, including the failure to fulfil the high level of operational precision required for effective execution in order to deliver positive customer outcomes.
ii) Legacy issues
Barclays remains at risk from the potential outcomes of a number of investigations relating to our past conduct. While we are continuing to embed cultural change and improved governance, many stakeholders
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will remain sceptical and so until there is clear and sustained evidence of consistent cultural and behavioural change, the risk to Barclays’ reputation will remain. Barclays continues to work to rebuild customer trust and market confidence impacted by legacy issues.
For further information in respect of such investigations and related litigation and discussion of the associated uncertainties, please see the Legal, competition and regulatory matters note on page 261.
iii) Market integrity
There are potential risks arising from conflicts of interest, including those related to the benchmark submission process. While primarily relevant to the Investment Bank, these potential risks may also impact the corporate and retail customer base. The Group may be adversely affected if it fails to mitigate the risk of individuals making such inappropriate judgement by the enhancing of operating models, and effective identification and management of conflicts of interest, controls and supervisory oversight.
iv) Financial crime
The Group, as a global financial services firm, is exposed to the risks associated with money laundering, terrorist financing, bribery and corruption and sanctions. As a result, the Group may be adversely affected if it fails to effectively mitigate the risk that its employees or third parties facilitate, or that its products and services are used to facilitate financial crime.
Any one, or combination, of the above risks could have significant impact on the Group’s reputation and may also lead to potentially large costs to both rectify this issue and reimburse losses incurred by customers and regulatory censure and penalties.
Material existing and emerging risks potentially impacting more than one Principal Risk
i) Structural reform (emerging risk)
The UK Financial Services (Banking Reform) Act 2013 (the UK Banking Reform Act) and associated secondary legislation and regulatory rules, require the separation of the Group’s UK and EEA retail and SME deposit taking activities into a legally, operationally and economically separate and independent entity and restrict the types of activity such an entity may conduct (so-called ‘ring fencing’).
The PRA issued a policy statement (PS10/15) in May 2015 setting up legal structures and governance requirements that the UK regulator considers as ‘near-final’. A PRA Consultation was issued in October 2015 relating to post ring fencing prudential requirements and intra-group arrangements among other matters. PRA final rules are expected in 2016. UK ring fencing rules will become binding from January 2019 and Barclays has an internal structural reform programme to implement the changes required by these new regulations (alongside other group structural requirements applicable to or in the course of development for the Group both in the UK and other jurisdictions in which the Group has operations – such as the proposed move towards a single point of entry (Holding Company) resolution model under the BoE’s preferred resolution strategy and the requirement under section 165 of the DFA to create a US intermediate holding company (IHC) to hold the Group’s US banking and non-banking subsidiaries) and to evaluate the Group’s strategic options in light of all current and proposed global structural reform initiatives. Changes resulting from this work will have a material impact in the way the Group operates in the future through increased cost and complexity associated with changes required by ring fencing laws and regulations. Specifically, in order to comply with the UK Banking Reform Act and the DFA, it is proposed that:
§ | | Barclays will create a new UK banking entity which will serve as the ring fenced bank (RFB). It is expected to serve retail and small business customers as well as UK Wealth and credit card customers |
§ | | Barclays Bank PLC (BBPLC) is expected to serve corporate, institutional and investment banking clients and will also serve international Wealth and credit card customers; it is also expected to house both the Corporate Banking payments and Barclaycard merchant acquiring businesses |
§ | | many of the Group’s US businesses (including Barclays Bank Delaware and Barclays Capital Inc., the Group’s US broker-dealer subsidiary) will be organised under an IHC |
§ | | the Group will establish a number of service companies in order to support its revised operating entity structure. |
Implementation of these changes involves a number of risks related to both the revised Group entity structure and also the process of transition to that revised Group structure. Those risks include the following:
§ | | the establishment and ongoing management of the RFB and BBPLC as separate entities will require the Group to evaluate and restructure its intra-group and external capital, funding and liquidity arrangements to ensure they continue to meet regulatory requirements and support business needs. The changes required by ring fencing will in particular impact the sources of funding available to the different entities, including restricting BBPLC’s access to certain categories of deposit funding |
§ | | while the Group will seek to manage the changes to business mix and capital, funding and liquidity resources so as to maintain robust credit ratings for each of its key operating entities, the restructuring required by ring fencing is complex and untested, and there is a risk that the changes may negatively impact the assessment made by credit rating agencies, creditors and other stakeholders of the credit strength of the different entities on a standalone basis. Adverse changes to the credit assessment, including the potential for ratings downgrades, could in turn make it more difficult and costly for the Group’s entities to obtain certain sources of funding |
§ | | the Financial Services and Markets Act 2000 (Banking Reform) (Pensions) Regulations 2015 provide that, after 1 January 2026, ring fence banks cannot be or become liable for pension schemes outside of the ring fence. To comply with the regulations, the Group will need to decide which Group entities will participate in the Barclays Bank UK Retirement Fund (UKRF) from 2026, and reach a mutually satisfactory position with the UKRF Trustee regarding past service liabilities. The Group is currently discussing a variety of options with the UKRF Trustee, and engaging with the PRA and the UK Pensions Regulator |
§ | | execution risk associated with moving a material number of customer accounts and contracts from one legal entity to another and in particular the risk of legal challenge to the ring-fenced transfer scheme that will be used in order to transfer certain assets and liabilities from BBPLC to the RFB |
§ | | customer impacts derived from operational changes related to, for example, the reorganisation of sort codes. In addition, uncertain and potentially varying customer preference in terms of being served by the RFB or BBPLC may increase the execution risk associated with ring fencing; customers may also be impacted by reduced flexibility to provide products through a single entity interface |
§ | | at the European level, the draft Bank Structural Reform Regulation contains powers restricting proprietary trading and, if certain conditions are met, for the mandated separation of core retail banking activity from certain trading activities save where a bank is already subject to a national regime which provides for the separation of such activities in a manner compatible with the regulation. The regulation is currently in draft form and no single version (including the scope of any national derogation) has yet been agreed by the Council of Ministers, the European Commission and the European Parliament. The implementation date for these proposals will depend on the date on which any final legislation is agreed. Accordingly, the potential impact on the Group remains unclear. |
These, and other regulatory changes and the resulting actions taken to address such regulatory changes, may have an adverse impact on the Group’s profitability, operating flexibility, flexibility of deployment of capital and funding, return on equity, ability to pay dividends, credit ratings, and/or financial condition.
ii) Business conditions, general economy and geopolitical issues
The Group’s performance could be adversely affected in relation to more than one Principal Risk by a weak or deteriorating global economy or political instability. These factors may also occur in one or more of the Group’s main countries of operation.
The Group offers a broad range of services to retail, institutional and government customers, in a large number of countries. The breadth of
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Risk review
Material existing and emerging risks
Material existing and emerging risks to the Group’s future performance
these operations means that deterioration in the economic environment, or an increase in political instability in countries where it is active, or any other systemically important economy, could adversely affect the Group’s performance.
Global growth is expected to remain modest, with low single digit growth in advanced economies alongside a slowdown in emerging markets. This moderate economic performance, lower commodity prices and increased geopolitical tensions mean that the distribution of risks to global economic activity continues to be biased to the downside.
As the US Federal Reserve embarks on monetary policy tightening, the increasing divergence of policies between major advanced economies risks triggering further financial market volatility. The sharp change in value of the US dollar during 2015 reflected this and, has played a major role in driving asset price volatility and capital reallocation as markets adjusted. Changes to interest rate expectations risk igniting further volatility and US dollar appreciation, particularly if the US Federal Reserve were to increase rates faster than markets currently expect.
Emerging markets have already seen growth slow following increased capital outflows, but a deeper slowdown in growth could emerge if tighter US interest rate policy drives further reallocation of capital. Moreover, sentiment towards emerging markets as a whole continues to be driven in large part by developments in China, where there is significant concern around the ability of authorities to manage the growth transition towards services. A stronger than expected slowdown could result if authorities fail to appropriately manage the end of the investment and credit-led boom, while the consequences from a faster slowdown would flow through both financial and trade channels into other economies, and affect commodity markets.
Commodity prices, particularly oil prices, have already fallen significantly, but could fall further if demand growth remains weak or supply takes longer than expected to adjust. At the same time, countries with high reliance on commodity related earnings have already experienced a tightening of financial conditions. A sustained period of low prices risks triggering further financial distress, default and contagion.
In several countries, reversals of capital inflows, as well as fiscal austerity, have already caused deterioration in political stability. This could be exacerbated by a renewed rise in asset price volatility or sustained pressure on government finances. In addition, geopolitical tensions in some areas of the world, including the Middle East and Eastern Europe are already acute, and are at risk of further deterioration.
While in Europe, risks of stagnation, entrenched deflation and a Eurozone break up have diminished, they remain a risk.
In the UK, the referendum on EU membership gives rise to some political uncertainty and raises the possibility of a disruptive and uncertain exit from the EU, with attendant consequences for investment and confidence. Following the referendum in June 2016, in the event that there is a vote in favour of leaving the EU, a period of negotiation is likely, widely anticipated to be around two years, with unpredictable implications on market conditions.
A drop in business or consumer confidence related to the aforementioned risks may have a material impact on GDP growth in one or more significant markets and therefore Group performance. At the same time, even if output in most advanced economies does grow, it would also be likely to advance at a slower pace than seen in the pre-crisis period. Growth potential could be further eroded by the low levels of fixed asset investment and productivity growth.
For the Group, a deterioration of conditions in its key markets could affect performance in a number of ways including, for example: (i) deteriorating business, consumer or investor confidence leading to reduced levels of client activity; (ii) higher levels of default rates and impairment; and (iii) mark to market losses in trading portfolios resulting from changes in credit ratings, share prices and solvency of counterparties.
iii) Business change/execution (emerging risk)
As Barclays moves towards a single point of entry (Holding Company) resolution model and implementation of the structural reform programme execution, the expected level of structural and strategic change to be implemented over the medium term will be disruptive and is likely to increase funding and operational risks for the Group and could impact its revenues and businesses. These changes will include: the creation and rundown of Non-Core; the delivery against an extensive agenda of operational and technology control and infrastructure improvements; and, planned cost reductions. Execution may be adversely impacted by external factors (such as a significant global macroeconomic downturn or further significant and unexpected regulatory change in countries in which the Group operates) and/or internal factors (such as availability of appropriately skilled resources or resolution of legacy issues). Moreover, progress in regard to Barclays’ strategic plans is unlikely to be uniform or linear and progress on certain targets may be achieved more slowly than others.
If any of the risks outlined above were to occur, singly or in aggregate, they could have a material adverse effect on the Group’s business, results of operations and financial condition.
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Risk review
Risk management
| | | An overview of Barclays’ approach to risk management | | | | | Page | Barclays’ risk management strategy | | | Introduction | | 95 98 | Enterprise Risk Management Framework | | 98 | Principal Risks | | 98 | Risk management strategyAppetite for the Principals Risks | | 95 98 | Governance structureRoles and responsibilities in the management of risk | | 95
| Risk governance and assigning responsibilities | | 97 98 | Principal and Key risksBarclays’ Risk Culture
| | 98100
| Credit risk management | | | Overview | | 99101 | Organisation and structure | | 99101 | Roles and responsibilities | | 100102 | Credit risk mitigation | | 100102 | Market risk management | | | Overview | | 101 | Organisation and structure | | 102 | Roles and responsibilities
| | 102 | Funding and capital risk management
| | | Overview | | 103 | Organisation and structure | | 103 | Roles and responsibilities | | 103 | LiquidityTreasury and capital risk management
| | | Overview | | 105104 | Organisation and structure | | 104 | Liquidity risk | | 105 | Capital risk | | 106 | LiquidityInterest rate risk managementin the banking book
| | 105108 | Operational risk management | | | Overview | | 106109 | Organisation and structure | | 106109 | Roles and responsibilities | | 107110 | Model risk management | | | Overview | | 111 | Organisation and structure | | 111 | Roles and responsibilities | | 111 | Conduct risk management | | | Overview | | 108112 | Organisation and structure | | 108112 | Roles and responsibilities | | 112 | Reputation risk management | | | Overview | | 113 | Organisation and structure | | 113 | Roles and responsibilities | | 113 | Legal risk management | | | Overview | | 114 | Organisation and structure | | 114 | Roles and responsibilities | | 108114 |
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| | For a more detailed breakdown on our Riskrisk review and Riskrisk management contents please see pages 117 and 118. 86 to 87. More detailed information on how Barclays manages these risks can be found in Barclays PLC 20152016 Pillar 3 Report. |
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Risk review
Risk management
A more comprehensive overview, together with more specific information on Group policies, can be found in Barclays PLC 2015 Pillar 3 Report or at home.barclays/annualreport
Introduction
This section outlines the Group’s strategy for managing risk and how risk culture has been developed to ensure that there is a set of objectives and practices which are shared across the Group. It provides details of the Group’s governance, specific information on policies that the Group determines to be of particular significance in the current operating environment, committee structures and how responsibilities are assigned.
Risk management strategy
The Group has clear risk management objectives and a well established strategy to deliver them through core risk management processes.
At a strategic level, the Group’s risk management objectives are to:
§ | | identify the Group’s significant risks |
§ | | formulate the Group’s risk appetite and ensure that the business profile and plans are consistent with it |
§ | | optimise risk/return decisions by taking them as closely as possible to the business, while establishing strong and independent review and challenge structures |
§ | | ensure that business growth plans are properly supported by effective risk infrastructure |
§ | | manage the risk profile to ensure that specific financial deliverables remain achievable under a range of adverse business conditions |
§ | | help executives improve the control and coordination of risk taking across the business. |
A key element in the setting of clear management objectives is the ERMF, which sets out key activities, tools, techniques and organisational arrangements so that material risks facing the Group are identified and understood, and that appropriate responses are in place to protect Barclays and prevent detriment to its customers, employees or community. This will help the Group meet its goals, and enhance its ability to respond to new opportunities.
The ERMF covers those risks incurred by the Group that were foreseeable, continuous and material enough to merit establishing specific Group-wide control frameworks. These are known as Principal and Key Risks. See Principal and Key Risks on page 98 for more information.
The aim of the risk management process is to provide a structured, practical and easily understood set of three steps, Evaluate, Respond and Monitor (the E-R-M process), that enables management to identify and assess risks, determine the appropriate risk response, and then monitor the effectiveness of the response and changes to the risk profile.
1. Evaluate: risk evaluation must be carried out by those individuals, teams and departments who manage the underlying operational or business process, and so are best placed to identify and assess the potential risks, and also include those responsible for delivering the objectives under review.
2. Respond: the appropriate risk response effectively and efficiently ensures that risks are kept within appetite, which is the level of risk that the Group is prepared to accept while pursuing its business strategy. There are three types of response: i) accept the risk but take necessary mitigating actions such as use of risk controls; ii) stop the existing activity/do not start the proposed activity; or iii) continue the activity but transfer risks to another party via the use of insurance.
Barclays risk management strategy
3. Monitor: once risks have been identified and measured, and controls put in place, progress towards objectives must be tracked. Monitoring must be ongoing and can prompt re-evaluation of the risks and/or changes in responses. Monitoring must be carried out proactively. In addition to ‘reporting’, it includes ensuring risks are maintained within risk appetite, and checking that controls are functioning as intended and remain fit for purpose.
The process is orientated around material risks impacting delivery of objectives, and is used to promote an efficient and effective approach to risk management. This three step risk management process:
§ | | can be applied to every objective at every level in the bank, both top-down or bottom-up |
§ | | is embedded into the business decision making process |
§ | | guides the Group’s response to changes in the external or internal environment in which existing activities are conducted |
§ | | involves all staff and all three lines of defence (see pages 97). |
Governance structure
Risk exists when the outcome of taking a particular decision or course of action is uncertain and could potentially impact whether, or how well, the Group delivers on its objectives.
The Group faces risks throughout its business, every day, in everything it does. Some risks are taken after appropriate consideration – such as lending money to a customer. Other risks may arise from unintended consequences of internal actions, for example an IT system failure or poor sales practices. Finally, some risks are the result of events outside the Group but which impact its business – such as major exposure through trading or lending to a market counterparty which later fails.
All employees must play their part in the Group’s risk management, regardless of position, function or location. All employees are required to be familiar with risk management policies that are relevant to their activities, know how to escalate actual or potential risk issues, and have a role appropriate level of awareness of the ERMF (see Risk governance and assigning responsibilities for more information on page 97), risk management process and governance arrangements.
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Risk review Risk management Barclays’ risk management strategy Introduction Barclays engages in activities which entail risk taking, every day, throughout its business. This section introduces these risks, and outlines key governance arrangements for managing them. These include roles and responsibilities, frameworks, policies and standards, assurance and lessons learned processes. The Group’s approach to fostering a strong Risk Culture is also described. Enterprise Risk Management Framework (ERMF) The Group has clear risk management objectives and a strategy to deliver them through core risk management processes. The ERMF sets the strategic direction by defining clear standards, objectives and responsibilities for all areas of Barclays. It supports the CEO and CRO in embedding effective risk management and a strong Risk Culture. The ERMF sets out: § | | Principal Risks faced by the Group |
§ | | Risk Appetite requirements |
§ | | Roles and responsibilities for risk management |
§ | | Risk Committee structure. |
A revised ERMF was approved by the Board in December 2016. This includes a revised risk taxonomy comprising eight Principal Risks. Credit, market, funding, operational and conduct risks have been aligned to this new taxonomy and the management of these risks has not materially changed. Model risk, reputation risk and legal risk are newly classified as Principal Risks in the latest version of the ERMF, reflecting the heightened importance of these risk types in the current environment. IIn 2016, Model risk was managed in accordance with dedicated policies linked to the ERMF. These policies supplemented the key risk control frameworks underlying the financial risk types and applied to all businesses and functions in which financial risks were incurred or managed. Reputation risk was considered as part of conduct risk and legal risk was included as a sub-risk type under operational risk. In this Annual Report, the Risk Management sections (pages 97 to 114) follow the new Principal Risk taxonomy of eight risks, reflecting our current approach to risk management. The Risk Performance sections (pages 116-181) follow the Principal Risk taxonomy (of five risks) which prevailed during 2016. Information on reputation risk performance in 2016 is included as part of the conduct risk section. Information on legal risk management in 2016 can be found in the Material Existing and Emerging Risks section (page 89), the Supervision and Regulation section (page 182) and Note 29 to the Financial Statements (page 280). The definition of the Three Lines of Defence and associated responsibilities were also revised. The ERMF also contains a revised governance structure, including new Group and Business Risk committees, with representation from the first and second lines of defence. Principal Risks The ERMF identifies Principal Risks and sets out responsibilities and risk management standards. Note that Legal, Reputation and Model risks are Principal Risks from January 2017 following Board approval in December 2016. Financial Principal Risks: § | | Credit risk: The risk of loss to the firm from the failure of clients, customers or counterparties, including sovereigns, to fully honour their obligations to the firm, including the whole and timely payment of principal, interest, collateral and other receivables |
§ | | Market risk: The risk of loss arising from potential adverse changes in the value of the firm’s assets and liabilities from fluctuation in market variables including, but not limited to, interest rates, foreign exchange, equity prices, commodity prices, credit spreads, implied volatilities and asset correlations |
§ | | Treasury and capital risk: This comprises: |
– Liquidity risk: The risk that the firm is unable to meet its contractual or contingent obligations or that it does not have the appropriate amount, tenor and composition of funding and liquidity to support its assets – Capital risk: The risk that the firm has an insufficient level or composition of capital to support its normal business activities and to meet its regulatory capital requirements under normal operating environments or stressed conditions (both actual and as defined for internal planning or regulatory testing purposes). This includes the risk from the firm’s pension plans – Interest rate risk in the banking book: The risk that the firm is exposed to capital or income volatility because of a mismatch between the interest rate exposures of its(non-traded) assets and liabilities Non-Financial Principal Risks: § | | Operational risk: The risk of loss to the firm from inadequate or failed processes or systems, human factors or due to external events (for example fraud) where the root cause is not due to credit or market risks. |
§ | | Model risk: The risk of the potential adverse consequences from financial assessments or decisions based on incorrect or misused model outputs and reports. |
§ | | Reputation risk: The risk that an action, transaction, investment or event will reduce trust in the firm’s integrity and competence by clients, counterparties, investors, regulators, employees or the public. |
§ | | Conduct risk: The risk of detriment to customers, clients, market integrity, competition or Barclays from the inappropriate supply of financial services, including instances of wilful or negligent misconduct. |
§ | | Legal risk: The risk of loss or imposition of penalties, damages or fines from the failure of the firm to meet its legal obligations including regulatory or contractual requirements. |
Risk Appetite for the Principal Risks Risk Appetite is defined as the level of risk which the firm is prepared to accept in the conduct of its activities. The Risk Appetite of the firm: § | | specifies the level of risk we are willing to take and why, to enable specific risk taking activities |
§ | | considers all Principal Risks individually and, where appropriate, in aggregate |
§ | | communicates the acceptable level of risk for different risk types; this may be expressed in financial ornon-financial terms, and is measured and effectively monitored |
§ | | describes agreed parameters for the firm’s performance under varying levels of financial stress with respect to profitability |
§ | | is considered in key decision-making processes, including business planning, mergers and acquisitions, new product approvals and business change initiatives. |
Risk Appetite is approved and disseminated across legal entities and businesses, including by use of Mandate and Scale limits to enable and control specific activities that have material concentration risk implications for the firm. These limits also help reduce the likelihood and size ofone-off losses. The Risk Appetite must be formally reviewed on at least an annual frequency in conjunction with the Medium Term Planning (MTP) process and approved by the Board. Roles and responsibilities in the management of risk – the Three Lines of Defence All colleagues have a responsibility to contribute to the risk management of the Group. These responsibilities are set out in the “Three Lines of Defence”. In 2016 these definitions were simplified. Regardless of their function, all teams who manage processes in the firm are responsible for designing, implementing, remediating, monitoring and testing the controls for those processes. First Line of Defence: The First Line comprises all employees engaged in the revenue generating and client facing areas of the firm and all associated support | | | 98 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Board oversight
functions, including Finance, Treasury, Technology and flow of risk related information
Furthermore, from March 2016 members ofOperations, Human Resources etc. Employees in the Board, Executive Committee and a limited number of specified senior individuals will be subject to additional rules included within the Senior Managers Regime (SMR), which clarifies their accountability and responsibilities. Members of the SMRfirst line are held to four additional specific rules of conduct in which they must:responsible for:
1.§ | take reasonable steps | identifying all the risks in the activities in which they are engaged, and developing appropriate policies, standards and controls to ensure that the Group is effectively controlledgovern their activities |
2.§ | take reasonable steps to ensure that | operating within any and all limits which the Group compliesRisk and Compliance functions establish in connection with relevant regulatory requirements and standardsthe Risk Appetite of the firm |
3.§ | take reasonable steps | escalating risk events to ensure that any delegated responsibilities are to the appropriate individualsenior managers and that the delegated responsibilities are effectively dischargedRisk and Compliance. |
Internal controls are critical to running a cost-effective and stable business. To ensure these controls remain strong, sustainable, and efficient the new strategic position of Chief Controls Officer has been created. The Chief Controls Office will help to maintain and enhance an effective and consistent control framework across the organisation. 4. | disclose appropriately any information to the FCA or PRA, which they would reasonably expect to be made aware of. |
The First Line must establish their own policies and controls (subject to the Controls Framework of the firm), particularly with respect to operational activities, and require their colleagues to manage all controls to specified tolerances. These control-related activities are also considered First Line and are permitted so long as they are within any applicable limits established by Risk or Compliance. All activities in the first line are subject to oversight from the relevant parts of the second and third lines. Second Line of Defence: Employees of Risk and Compliance comprise the Second Line of Defence. The role of the Second Line is to establish the limits, rules and constraints under which first line activities shall be performed, consistent with the Risk Appetite of the firm, and to monitor the performance of the First Line against these limits and constraints. The Second Line may not establish limits for all First Line activities, especially those related to Operational Risk. The controls for these will ordinarily be established by Controls Officers operating within the Controls Framework of the firm, under the oversight of the Second Line. The Second Line can also undertake certain additional activities if, in the judgement of the Group CRO, this will reduce the firm’s exposure to risk. Third Line of Defence: Employees of Internal Audit comprise the Third Line of Defence. They provide independent assurance to the Board and Executive Management over the effectiveness of governance, risk management and control over current, systemic and evolving risks. The Legal department does not sit in any of the three lines, but supports them all. The Legal department is, however, subject to oversight from Risk and Compliance, with respect to Operational and Conduct risks. Roles and responsibilities in the management of risk – risk committees Business Risk Committees consider risk matters relevant to their business, and escalate as required to the Group Risk Committee (GRC), whose Chairman in turn escalates to Board Committees and the Board. There are three key board-level forumsfive Board-level fora which review and monitor risk across the Group. These are: theThe main Board, itself; the Board Risk Committee, the Board Audit Committee, the Board Reputation Committee and the Board ReputationRemuneration Committee. The Chairman of each Committee prepares a statement each year on the committee’s activities, which is included in this report from page 6 to 28. The Board One of the Board’s (Board of Directors of Barclays PLC) responsibilities is the approval of risk appetite,Risk Appetite (see the Risk Management and Strategy section on page 98), which is the level of risk the Group chooses to take in pursuit of its business objectives. The Chief Risk OfficerGroup CRO (GCRO) 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).ERMF. It oversees the management of the most significant risks through regular review of risk exposures and related key controls.exposures. Executive management responsibilities relating to this are set out in the ERMF. The Board Risk Committee (BRC) The BRC monitors the Group’s risk profile against the agreed financial 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 ChairChairman of the BRC prepares a report for the next meeting of the Board. All members are non-executiveindependent executive directors. The Group Finance Director (GFD) and the Chief Risk Officer (CRO)GCRO attend each meeting as a matter of course. The BRC also considers the Group’s risk appetite statement for operational risk and evaluates the Group’s operational risk profile and operational risk monitoring. The BRC receives regular and comprehensive reports on risk methodology,methodologies, the effectiveness of the risk management framework, and the Group’s risk profile, including the key issues affecting each business portfolio and forward risk trends. The Committee also commissionsin-depth analyses of significant risk topics, which are presented by the CRO or senior risk managers in the businesses. The Chair of the Committee prepares a statement each year on its activities. The Board Audit Committee (BAC)
The BAC receives regular reports on the effectiveness of internal control systems, quarterly reports on material control issues of significance, quarterly papers on accounting judgements (including impairment). It also receives 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 Chairman of the BAC also sits on the BRC.
The Board Reputation Committee (RepCo) The RepCo reviews management’s recommendations on conduct and reputational risk and the effectiveness of the processes by which the Group identifies and manages these risks. It also reviews and monitors the effectiveness of Barclays’ Citizenship strategy, including the management of Barclays’ economic, social and environmental contribution. In addition, the Board Audit and Board Remuneration Committees receive regular risk reports to assist them in the undertaking of their | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 99 |
Risk review Risk management Barclays’ risk management strategy duties. The Board Audit Committee (BAC) The BAC receives regular reports on the effectiveness of internal control systems, quarterly reports on material control issues of significance, and quarterly papers on accounting judgements (including impairment). It also receives a quarterly 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 Chairman of the BAC also sits on the BRC. The Board Remuneration Committee (RemCo) The RemCo receives a detailed report on risk management performance from the BRC, regular updates on the risk profile and proposals for the on anex-ante andex-post risk adjustments to variable remuneration. These inputs are considered in the setting of performance incentives. Summaries of the relevant business, professional and risk management experience of the Directors of the Board are presented in the Board of Directors section on pages 3 to 4. Barclays’ Risk Culture Barclays defines Risk Culture as “norms, attitudes and 4.behaviours related to risk awareness, risk taking and risk management”. At Barclays this is reflected in how we identify, escalate and manage risk matters. Our Code of Conduct – the Barclays Way Globally, all colleagues must attest to the “Barclays Way”, our Code of Conduct, and all frameworks, policies and standards applicable to their roles. The termsCode of Conduct outlines the Purpose and Values which govern our Barclays Way of working across our business globally. It constitutes a reference point covering all aspects of colleagues’ working relationships, specifically (but not exclusively) with other Barclays employees, customers and additional details on membershipclients, governments and activities for eachregulators, business partners, suppliers, competitors and the broader community. Definition of Risk Culture and its determinants We review our culture through the lens of four “determinants”, associated with desired outcomes: § | | Management and governance: Consistent tone from the top; responsibilities are clear to enable identification and challenge |
§ | | Motivation and incentives: The right behaviours are rewarded and modelled |
§ | | Competence and effectiveness: Colleagues are enabled to identify, coordinate, escalate and address risk and control matters |
§ | | Integrity: Colleagues are willing to meet their risk management responsibilities; colleagues escalate issues on a timely basis. |
Management and governance Leaders must demonstrate through their everyday behaviours the importance of strong risk management and ensure that their teams have sufficient resource and capability to manage the risk environment. The simplification of the principalThree Lines of Defence, as well as the reorganisation of business and risk committees with First and Second Lines of defence representation, promote ownership and accountabilities for risk management. Motivation and incentives Barclays seeks to ensure that compensation and promotion decisions take account of risk behaviours. Management of risk and control is assessed as part of the annual performance appraisal process for all colleagues globally. Positive risk management behaviours will be rewarded and considered as part of promotion decisions, particularly to Managing Director. Competence and effectiveness A risk capability scorecard was developed for the Board Committees are availableRisk Committee to monitor and measure capability, and to identify any areas for improvement. Barclays has also appointed a Chief Risk Officer for Treasury and Capital and a Head of Model Risk Management. Integrity The “Being Barclays” global induction supports new colleagues in understanding how risk management culture and practices support how the Group does business and the link to Barclays’ values. The Leadership Curriculum covers building, sustaining and supporting a trustworthy organisation and is offered to colleagues globally. The continued promotion and reinforcement of Barclays’ Values, as well as the Barclays Way was reflected in the near-perfect rate of completion of related training by employees. Messages and communications from the Corporate Governance section at: home.barclays/corporategovernance. The CRO managesChief Risk Officer emphasise the independent Risk function and chairs the Financial Risk Committees (FRC) and the Operational Risk Review Forum (ORRF), which monitor the Group’s financial and non-financialimportance of early escalation of risk profile relative to agreed risk appetite.
The Group Treasurer heads the Treasury function and chairs the Treasury Committee which manages the Group’s liquidity, maturity transformation and structural interest rate exposure through the setting of policies and controls, monitors the Group’s liquidity and interest rate maturity mismatch, monitors usage of regulatory and economic capital, and has oversight of the Group’s capital plan.
The Head of Compliance chairs the Conduct and Reputational Risk Committee (CRRC) which assesses the quality of the application of the Reputation and Conduct Risk Control Frameworks. It also recommends conduct risk appetite, sets policies to ensure consistent adherence to that appetite, and reviews known and emerging reputational and conduct related risks to consider if action is required.issues.
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Risk review Risk management Risk governance and assigning responsibilities
Responsibility for risk management resides at all levels of the Group, from the Board and the Executive Committee down through the organisation to each business manager and risk specialist. These responsibilities are distributed so that risk/return decisions are taken at the most appropriate level, as close as possible to the business, and are subject to robust and effective review and challenge. Responsibilities for effective review and challenge also reside at all levels.
The ERMF articulates a clear, consistent, comprehensive and effective approach for the management of all risks in the Group and creates the context for setting standards and establishing the right practices throughout the Group. The ERMF sets out a philosophy and approach that is applicable to the whole bank, all colleagues and to all types of risk. It sets out the key activities required for all employees to operate Barclays risk and control environment, with specific requirements for key individuals, including the CRO and CEO, and the overall governance framework designed to support its effective operation. See Risk Culture in Barclays PLC 2015 Pillar 3 Report for more information.
The ERMF supports risk management and control by ensuring that there is a:
§ | | sustainable and consistent implementation of the three lines of defence across all businesses and functions |
§ | | clear segregation of activities and duties performed by colleagues across the Group |
§ | | framework for the management of Principal Risks |
§ | | consistent application of Barclays’ risk appetite across all Principal Risks |
§ | | clear and simple policy hierarchy. |
Three lines of defence
The enterprise risk management process is the ‘defence’, and organising businesses and functions into three ‘lines’ enhances the E-R-M process by formalising independence and challenge, while still promoting collaboration and the flow of information between all areas. The three lines of defence operating model enables the Group to separate risk management activities:
First line: manage operational and business processes; design, implement, operate, test and remediate controls.
First line activities are characterised by:
§ | | ownership of and direct responsibility for the Group’s returns or elements of Barclays’ results |
§ | | ownership of major operations, systems and processes fundamental to the operation of the bank |
§ | | direct linkage of objective setting, performance assessment and reward to financial performance. |
Second line: oversee and challenge the first line and provide second line risk management activity.
Second line activities are characterised by:
§ | | oversight, monitoring and challenge of the first line of defence activities |
§ | | design, ownership or operation of Key Risk Control Frameworks impacting the activities of the first line of defence |
§ | | operation of certain second line risk management activities (e.g. financial rescue of a firm) |
§ | | no direct linkage of objective setting, performance assessment and reward to revenue (measures related to mitigation of losses and balancing risk and reward are permissible). |
Third line: provide assurance that the E-R-M process is fit for purpose, and that it is being carried out as intended.
Third line activities are characterised by:
§ | | providing independent and timely assurance to the Board and Executive Management over the effectiveness of governance, risk management and control. |
Following the annual review, in 2016, we have further refined the three lines of defence model by clarifying that responsibilities for risk management and control are defined in relation to the activities individuals undertake as part of their role. The three key activities are: ‘Setting Policy and Conformance’ (second line); ‘Managing Operational or Business Process’ (first and second line); and ‘Providing Independent Assurance’ (third line). Second and third line activities have not changed, however we have emphasised the key responsibilities of the first line, which includes colleagues’ responsibility for understanding and owning the process end to end, and designing, operating, testing and remediating appropriate controls to manage those risks. Performed appropriately and by all colleagues, together these responsibilities will drive a stronger risk and control environment at Barclays, benefitting our customers, clients, shareholders and regulators.
Reporting and control
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Principal and Key Risks
Principal Risks comprise individual Key Risks to allow for more granular analysis. As at 31 December 2015, the five Principal Risks were: i) Credit; ii) Market; iii) Funding; iv) Operational; and v) Conduct. Since the beginning of 2015, Reputation Risk has been recognised as a Key Risk within Conduct Risk given their close alignment and the fact that as separate Principal Risks they had a common Principal Risk Officer.
Risk management responsibilities for Principal and Key Risks are set out in the ERMF. The ERMF creates clear ownership and accountability; ensures the Group’s most significant risk exposures are understood and managed in accordance with agreed risk appetite and risk tolerances; and ensures regular reporting of risk exposures and control effectiveness.
For each Key Risk, the Key Risk Officer is responsible for developing a risk appetite statement and overseeing and managing the risk in line with the ERMF. This includes the documentation, communication and maintenance of a Key Risk Control Framework which sets out, for every business across the firm, the mandated control requirements in managing exposures to that Key Risk. These control requirements are given further specification, according to the business or risk type, to provide a complete and appropriate system of internal control.
Business and Function Heads are responsible for obtaining ongoing assurance that the key controls they have put in place to manage the risks to their business objectives are operating effectively. Reviews are undertaken on a six-monthly basis and support the regulatory requirement for the Group to make an annual statement about its system of internal controls. At the business level, executive management hold specific Business Risk Oversight Meetings to monitor all Principal Risks.
Key Risk Officers report their assessments of the risk exposure and control effectiveness to Group-level oversight committees and their assessments form the basis of the reports that go to the:
Board Risk Committee:
§ | | Financial Risk Committee has oversight of Credit and Market Risks |
§ | | Treasury Committee has oversight of Funding Risk |
§ | | Operational Risk Review Forum has oversight of the risk profile of all Operational Risk types. |
Board Reputation Committee:
§ | | Conduct and Reputation Risk Committee has oversight of Conduct and Reputation Risks. |
The following sections provide an overview of each of the five Principal Risks, and details of the structure and organisation of the relevant management function and its roles and responsibilities, including how the impact of the risk to the Group may be minimised.
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Risk review
Risk management
Credit risk management | Credit risk | The risk of loss to the firm from the failure of clients, customers or counterparties, including sovereigns, to fully honour their obligations to the firm, including the whole and timely payment of principal, interest, collateral and other receivables. |
Credit risk
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.
Overview The granting of credit is one of the Group’s major sources of income and, as a Principal 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 with clients. Other sources of credit risk arise from trading activities, including: debt securities, settlement balances with market counterparties,counterparties; available for sale assets and reverse repurchase agreements (reverse repos).agreements. Credit risk management objectives are to: § | | maintain a framework of controls to ensure credit risk taking is based on sound credit risk management principles |
§ | | 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 |
§ | | control and plan credit risk taking in line with external stakeholder expectations and avoiding undesirable concentrations |
§ | | monitor credit risk and adherence to agreed controls |
§ | | ensure that risk-reward objectives are met.met |
More information of the reporting of credit risk can be found in Barclays PLC 2015 Pillar 3 Report.
| | | | | More information of the reporting of credit risk can be found in Barclays PLC 2016 Pillar 3 Report. |
Organisation and structure Wholesale and retail portfolios are managed separately to reflect the differing nature of the assets; wholesale balances tend to be larger in value and are managed on an individual basis, while retail balances are larger in number but smaller in value and are, therefore, managed on a homogenous portfolio basis. Credit risk management responsibilities have been structured so that decisions are taken as close as possible to the business, while ensuring robust review and challenge of performance, risk infrastructure and strategic plans. The credit risk management teams in each business are accountable to the relevant Business Credit Risk Officer (BCRO)CRO who, in turn, reports to the Group CRO. Board oversight and flow of risk related information Organisation and structure
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Risk review Risk management Credit risk management Roles and responsibilities The responsibilities of the credit risk management teams in the businesses, the sanctioning team and other shared services include: sanctioning new credit agreements (principally wholesale); setting policies for approval of transactions (principally retail); setting risk appetite; monitoring risk against limits and other parameters; maintaining robust processes, data gathering, quality, storage and reporting methods for effective credit risk management; performing effective turnaround and workout scenarios for wholesale portfolios via dedicated restructuring and recoveries teams; maintaining robust collections and recovery processes/units for retail portfolios; and review and validation of credit risk measurement models. For wholesale portfolios, credit risk approval is undertaken by experienced credit risk professionals operating within a clearly defined delegated authority framework, with only the most senior credit officers entrusted with the higher levels of delegated authority. The largest credit exposures, which are outside the Risk Sanctioning Unit or Risk Distribution Committee authority require the support of the Group Senior Credit Officer (GSCO), the Group’s most senior credit risk sanctioner. For exposures in excess of the GSCO’s authority, approval by Group CRO is required. In the wholesale portfolios, credit risk managers are organised in sanctioning teams by geography, industry and/or product. The role of the Central Risk function is to provide Group-wide direction, oversight and challenge of credit risk taking.risk-taking. Central Risk sets the Credit Risk Control Framework, which provides the structure within which credit risk is managed, together with supporting credit risk policies. Credit risk mitigation The Group employs a range of techniques and strategies to actively mitigate the counterparty credit risks. These can broadly be divided into three types: netting and set-off; collateral; and Netting andset-off Netting and set-off
In most jurisdictions in which the Group operates, credit risk exposures can be reduced by applying netting andset-off. In exposure terms, this credit risk mitigation technique has the largest overall impact on net exposure to derivative transactions, compared with other risk mitigation techniques. For derivative transactions, the Group’s normal practice is to enter into standard master agreements with counterparties (e.g. ISDAs). These master agreements typically allow for netting of credit risk exposure to a counterparty resulting from a derivative transactiontransactions against the Group’s obligations to the counterparty in the event of default, and so produce a lower net credit exposure. These agreements may also reduce settlement exposure (e.g. for foreign exchange transactions) by allowing payments on the same day in the same currency to beset-off against one another. Collateral The Group has the ability to call on collateral in the event of default of the counterparty, comprising: § | | home loans: a fixed charge over residential property in the form of houses, flats and other dwellings |
§ | | wholesale lending: a fixed charge over commercial property and other physical assets, in various forms |
§ | | other retail lending: includes charges over motor vehicles and other physical assets, second lien charges over residential property, and finance lease receivables |
§ | | derivatives: the Group also often seeks to enter into a margin agreement (e.g. Credit Support Annex (CSA))CSA) with counterparties with which the Group has master netting agreements in place |
§ | | reverse repurchase agreements: collateral typically comprises highly liquid securities which have been legally transferred to the Group subject to an agreement to return them for a fixed price |
§ | | financial guarantees and similaroff-balance sheet commitments: cash collateral may be held against these arrangements. |
Risk transfer A range of instruments including guarantees, credit insurance, credit derivatives and securitisationsecuritisations can be used to transfer credit risk from one counterparty to another. These mitigate credit risk in two main ways: § | | if the risk is transferred to a counterparty which is more credit worthy than the original counterparty, then overall credit risk is reduced |
§ | | where recourse to the first counterparty remains, both counterparties must default before a loss materialises. This is less likely than the default of either counterparty individually so credit risk is reduced. |
Detailed policies are in place to ensure that credit risk mitigation is appropriately recognised and recorded and more information can be found in the Barclays PLC 20152016 Pillar 3 Report. | | | 100102 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk management Market risk management | Market risk | The risk of loss arising from potential adverse changes in the value of the firm’s assets and liabilities from fluctuation in market variables including, but not limited to, interest rates, foreign exchange, equity prices, commodity prices, credit spreads, implied volatilities and asset correlations |
Overview Market risk The risk of a reduction to earnings or capital due to volatility of trading book positions or as a consequence of running a banking book balance sheet and liquidity pools.
Overview
Traded market risk
Traded marketMarket risk arises primarily as a result of client facilitation in wholesale markets, involving market making activities, risk management solutions and execution of syndications. Upon execution of a trade with a client, the Group will look to hedge against the risk of the trade moving in an adverse direction. Mismatches between client transactions and hedges result in market risk due to changes in asset prices.
Non-tradedMarket risk in the businesses resides primarily in Barclays International, Group Treasury andNon-Core. These businesses have the mandate to incur market riskrisk.
Banking book operations generate non-tradedMarket risk oversight and challenge is provided by business committees and Group committees, including the Market Risk Committee.
Roles and responsibilities The objectives of market risk primarily through interest rate risk arising from the sensitivity of net interest margins due to changes in interest rates. The principal banking businesses engage in internal derivative trades with Treasury to manage their interest rate risk to within its defined risk appetite. However, the businesses remain susceptible to market risk from four key sources:management are to: § | | prepayment risk: balance run-off may be faster or slower than expected, due to customer behaviour in response to general economic conditions or interest rates. This can lead to a mismatch between the actual balance of productsunderstand and the hedges executed with Treasury based on initial expectationscontrol market risk by robust measurement, limit setting, reporting and oversight |
§ | | recruitment risk: the volume of newfacilitate business may be lower or higher than expected, requiring the business to unwind or execute hedging transactions with Treasury at different rates than expectedgrowth within a controlled and transparent risk management framework |
§ | | residualensure that market risk and margin compression: the business may retain a small element of interest rate risk to facilitate the day-to-day management of customer business. Additionally, in the current low rate environment, deposits on whichbusinesses is controlled according to the Group sets the interest rate are exposed to margin compression. This is because for any further fall in base rate the Group must absorb an increasing amount of the rate move in its marginallocated appetite |
§ | | lagsupport theNon-Core strategy of asset reductions by ensuring that market risk remains within agreed risk appetite. |
To ensure the above objectives are met, a well-established governance structure is in place to manage these risks consistent with the ERMF. See page 98 on risk management strategy, governance and risk culture. The BRC recommends market risk appetite to the Board for their approval. The Market Risk Principal Risk Officer (MRPRO) is responsible for the Market Risk Control Framework and, under delegated authority from the CRO, agrees with the BCROs a limit framework within the context of the approved market risk appetite. Across the Group, market risk oversight and challenge is provided by business committees, Group committees, including the Market Risk Committee. The Market Risk Committee approves and makes recommendations concerning the Group-wide market risk profile. This includes overseeing the operation of the Market Risk Framework and associated standards and policies; reviewing arising market or regulatory issues, limits and utilisation; and risk appetite levels to the Board. The Committee is chaired by the MRPRO and attendees include the business heads of market risk, business aligned market risk managers and Internal Audit. The head of each business is accountable for all market risks associated with its activities, while the head of the market risk team covering each business is responsible for implementing the risk control framework for market risk. More information on market risk management can be found in Barclays PLC 2016 Pillar 3 Report. Organisation and structure | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 103 |
Risk review Risk management Treasury and capital risk management | Treasury and capital risk The risk that the Group may not achieve its business plans because of the availability of planned liquidity, a shortfall in capital or a mismatch in the interest rate exposures of its assets and liabilities. The Treasury and Capital Risk function is an independent risk function with responsibility for oversight of the following risks: ∎ Liquidity risk:The risk that the firm is unable to meet its contractual or contingent obligations or that it does not have the appropriate amount, tenor and composition of funding and liquidity to support its assets ∎ Capital risk:The risk that the firm has an insufficient level or composition of capital to support its normal business activities and to meet its regulatory capital requirements under normal operating environments or stressed conditions (both actual and as defined for internal planning or regulatory testing purposes). This includes the risk from the firm’s pension plans ∎ Interest rate risk in the banking book: The risk that the firm is exposed to capital or income volatility because of being unable to re-price products immediately after a change inmismatch between the interest rates due to mandatory notification periods. This is highly prevalent in managed rates saving products (e.g. Every Day Saver) where customers must be informed in writingrate exposures of any planned reduction in their savings rate.its(non-traded) assets and liabilities. |
Overview Barclays Treasury manages treasury and capital risk on aday-to-day basis with the Treasury Committee acting as the principal management body. To ensure effective oversight and segregation of duties and in line with the ERMF, the Treasury and Capital Risk function is responsible for oversight of key capital and liquidity risk management activities. To ensure effective oversight and segregation of duties and in line with the ERMF, the Treasury and Capital Risk function is responsible for oversight of key capital, liquidity,non-traded market risk (NTMR) and pension risk management activities. The following describes the structure and governance associated with the risk types within the Treasury and Capital Risk function. Organisation and structure | | | 104 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Liquidity risk management Overview The efficient management of liquidity is essential to the Group in retaining the confidence of the financial markets and ensuring that the business is sustainable. There is a control framework in place for managing liquidity risk and this is designed to meet the following objectives: § | | to maintain liquidity resources that are sufficient in amount and quality and a funding profile that is appropriate to meet the liquidity risk appetite as expressed by the Board |
§ | | to maintain market confidence in the Group’s name. |
This is achieved via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring. Together, these meet internal and regulatory requirements. Roles and responsibilities The Treasury and Capital Risk function is responsible for the management and governance of the liquidity risk mandate defined by the Board. Treasury has the primary responsibility for managing liquidity risk within the set risk appetite. Liquidity risk management A control framework is in place for Liquidity Risk under which the Treasury function operates. The control framework describes liquidity risk management processes, associated policies and controls that the Group has implemented to manage liquidity risk within the Liquidity Risk Appetite (LRA) and is subject to annual review. The Board sets the LRA over Group stress tests and is represented as the level of risk the Group chooses to take in pursuit of its business objectives and in meeting its regulatory obligations. The approved LRA is implemented in line with the control framework and policy for liquidity risk Control framework Barclays has a comprehensive control framework for managing the Group’s liquidity risk. It is designed to deliver the appropriate term and structure of funding consistent with the LRA set by the Board. The control framework incorporates a range of ongoing business management tools to monitor, limit and stress test the Group’s balance sheet and contingent liabilities and a Contingency Funding Plan. Limit setting and transfer pricing are tools that are designed to control the level of liquidity risk taken and drive the appropriate mix of funds. Together, these tools reduce the likelihood that a liquidity stress event could lead to an inability to meet the Group’s obligations as they fall due. The stress tests assess the potential contractual and contingent stress outflows under a range of scenarios, which are then used to determine the size of the liquidity pool that is immediately available to meet anticipated outflows if a stress occurs. The Group maintains a Contingency Funding Plan which details how liquidity stress events of varying severity would be managed. Since the precise nature of any stress event cannot be known in advance, the plans are designed to be flexible to the nature and severity of the stress event and provide a menu of options that can be drawn upon as required. Barclays also maintains Recovery Plans which consider actions to generate additional liquidity in order to facilitate recovery in a severe stress. Risk Appetite and planning Barclays has established a LRA over Group stress tests and is represented as the level of liquidity risk the Group chooses to take in pursuit of its business objectives and in meeting its regulatory obligations. The key expression of the liquidity risk is through stress tests. It is measured with reference to the liquidity pool compared to anticipated stressed net contractual and contingent outflows for each of five stress scenarios. Barclays has defined both internal short-term and long-term LRA stress test metrics. The LRA for internal stress tests is approved by the Board. The LRA is reviewed on a continuous basis and is subject to formal review at least annually as part of the Individual Liquidity Adequacy Assessment Process (ILAAP). The stress outflows are used to determine the size of the Group Liquidity Pool, which represents those resources immediately available to meet outflows in a stress. In addition to the liquidity pool, the control framework and policy provides for other management actions, including generating liquidity from other liquid assets on the Group’s balance sheet in order to meet additional stress outflows, or to preserve or restore the Liquidity Pool in the event of a liquidity stress. Liquidity limits Barclays manages limits on a variety of on- andoff-balance sheet exposures, a sample of which is shown in the table below. These limits serve to control the overall extent and composition of liquidity risk taken by managing exposure to the cash outflows. Early warning indicators Barclays monitors a range of market indicators for early signs of liquidity risk either in the market or specific to Barclays, a sample of which are shown in the table below. These are designed to immediately identify the emergence of increased liquidity risk to maximise the time available to execute appropriate mitigating actions. Early warning indicators are used as part of the assessment of whether to invoke the Group’s Contingency Funding Plan (CFP). Contingency funding plan and recovery and resolution planning Barclays maintains a CFP which is designed to provide a framework where a liquidity stress could be effectively managed. The CFP is proportionate to the nature, scale and complexity of the business and is tested to ensure that it is operationally robust. The CFP details the circumstances in which the plan could be invoked, including as a result of adverse movements in liquidity early warning indicators. As part of the plan, the Barclays Treasurer has established a | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 105 |
Risk review Risk management Treasury and capital risk management Liquidity Management Committee (LMC). On invocation of the CFP by the Executive Committee, the LMC would meet to identify the likely impact of the event on the Group and determine the appropriate response for the nature and severity of the stress. The CFP provides a communication plan and includes management actions to respond to liquidity stresses of varying severity. This could include monetising the liquidity pool, slowing the extension of credit, increasing the tenor of funding and securitising or selling assets. Capital risk management Overview Capital risk is managed through ongoing monitoring and management of the capital position, regular stress testing and a robust capital governance framework. Organisation and structure The management of capital risk is integral to the Group’s approach to financial stability and sustainability management, and is embedded in the way businesses and legal entities operate. Capital risk management is underpinned by a control framework and policy. The capital management strategy, outlined in the Group and legal entity capital plans, is developed in alignment with the control framework and policy for capital risk, and is implemented consistently in order to deliver on the Group’s objectives. The Board approves the Group capital plan, internal and regulatory stress tests, and the Group recovery plan. The Treasury Committee is responsible for monitoring and managing capital risk in line with the Group’s capital management objectives, capital plan and risk frameworks. The Board Risk Committee reviews the risk profile, and annually reviews risk appetite and the impact of stress scenarios on the Group capital plan/forecast in order to agree the Group’s projected capital adequacy. Local management ensures compliance with an entity’s minimum regulatory capital requirements by reporting to local Asset and Liability Committees with oversight by the Group’s Treasury Committee, as required. Roles and responsibilities Treasury has the primary responsibility for managing and monitoring capital and reports to the Group Finance Director. The Treasury and Capital Risk function contains a Capital Risk Oversight team, and is an independent risk function that reports to the Group CRO and is responsible for oversight of capital risk. Capital risk management The Group’s capital management strategy is driven by the strategic aims of the Group and the risk appetite set by the Board. The Group’s objectives are achieved through well embedded capital management practices. Capital planning and allocation The Group assesses its capital requirements on multiple bases, with the Group’s capital plan set in consideration of the Group’s risk profile and appetite, strategic and performance objectives, regulatory requirements, and market and internal factors, including the results of stress testing. The capital plan is managed on atop-down andbottom-up basis through both short-term and medium-term financial planning cycles, and is developed with the objective of ensuring that the Group maintains an adequate level of capital to support its capital requirements. The PRA determines the regulatory capital requirements for the consolidated Group. Under these regulatory frameworks, capital requirements are set in consideration of the level of risk that the firm is exposed to and the factors above, and are measured through both risk-based RWAs and leverage-based metrics. An internal assessment of the Bank’s capital adequacy is undertaken through the Internal Capital Adequacy Assessment Process (ICAAP) and is used to inform the capital requirements of the firm. | | | 106 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
The Group expects to meet the minimum requirements for capital and leverage both during the transition period and upon full implementation, and also holds an internal buffer sized according to the firm’s assessment of capital risk. Through the capital planning process, capital allocations are approved by the Group Executive Committee, taking into consideration the risk appetite and strategic aims of the Group. Regulated legal entities are, at a minimum, capitalised to meet their current and forecast regulatory and business requirements. Monitoring and reporting Capital is managed and monitored to ensure that Barclays’ capital plans remain appropriate and that risks to the plans are considered. Limits are in place to support alignment with the capital plan and adherence to regulatory requirements, and are monitored through appropriately governed forums. Capital risks against firm-specific and macroeconomic early warning indicators are monitored and reported to the Treasury Committee, with clear escalation channels to senior management. This enables a consistent and objective approach to monitoring the capital outlook against the capital plan, and supports the early identification when outlooks deteriorate. Capital management information is readily available to support the Senior Management’s strategic andday-to-day business decision making. Stress testing and risk mitigation Internal Group-wide stress testing is undertaken to quantify and understand the impact of sensitivities on the capital plan and capital ratios arising from stressed macroeconomic conditions. Recent economic, market and peer institution stresses are used to inform the assumptions developed for internal stress tests and to assess the effectiveness of mitigation strategies. The Group also undertakes stress tests prescribed by the BoE and EBA, and legal entities undertake stress tests prescribed by their local regulators. These stress tests inform decisions on the size and quality of the internal capital buffer required and the results are incorporated into the Group capital plan to ensure adequacy of capital under normal and severe, but plausible stressed conditions. Actions are identified as part of the stress tests that can be taken to mitigate the risks that may arise in the event of material adverse changes in the current economic and business outlook. As an additional layer of protection, the Group Recovery Plan defines the actions and implementation strategies available to the Group to increase or preserve capital resources in the situation that a stress occurs that is more severe than anticipated. Transferability of capital Surplus capital held in Group entities is required 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. This approach provides optimal flexibility on the redeployment of capital across legal entities. Pre and post the implementation of ring-fencing, capital is managed for the Group as a whole as well as its operating subsidiaries to ensure fungibility and redeployment of capital while meeting relevant internal and regulatory targets at entity levels. Foreign exchange risk The Group has capital resources and RWAs denominated in foreign currencies. Changes in foreign exchange rates result in changes in the Sterling equivalent value of foreign currency denominated capital resources and RWAs. As a result, the Group’s regulatory capital ratios are sensitive to foreign currency movements. The Group’s capital ratio management 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 CET1, Tier 1 and Total capital resources to foreign currency RWAs the same as the Group’s consolidated capital ratios. The Group’s investments in foreign currency subsidiaries and branches, to the extent that they are not hedged for foreign exchange movements, translate into GBP upon consolidation creating CET1 capital resources sensitive to foreign currency movements. Changes in the GBP value of the investments due to foreign currency movements are captured in the currency translation reserve, resulting in a movement in CET1 capital. To create foreign currency Tier 1 and Total Capital resources additional to the CET1 capital resources, the Group issues debt capital innon-Sterling currencies, where possible. This is primarily achieved through the issuance of debt capital from Barclays PLC or Barclays Bank PLC in US Dollar and Euro, but can also be achieved by subsidiaries issuing capital in local currencies. Pension risk The Group 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 principally through investments. Pension risk arises because the estimated market value of the pension fund assets might decline; investment returns might reduce; or the estimated value of the pension liabilities might increase as a result of changes to the market process. The Group monitors the market risks arising from its defined benefit pension schemes and works with the Trustees to address shortfalls. In these circumstances, the Group could be required or might choose to make extra contributions to the pension fund. The Group’s main defined benefit scheme was closed to new entrants in 2012. Insurance risk
Insurance risk is managed within Africa Banking, where four categories of insurance risk are recognised: short-term insurance underwriting risk, life insurance underwriting risk, life insurance mismatch risk, and life and insurance investment risk.
Insurance risk arises when:
§ | | aggregate insurance premiums received from policyholders under a portfolio of insurance contracts are inadequate to cover the claims arising from those policies and the expenses associated with the management of the portfolio of policies and claims |
§ | | premiums are not invested to adequately match the duration, timing and size of expected claims |
§ | | unexpected fluctuations in claims arise or excessive exposure (e.g. in individual or aggregate exposures) relative to capacity is retained in the entity. |
Insurance entities also incur market risk (on the investment of accumulated premiums and shareholder capital), credit risk (counterparty exposure on investments and reinsurance transactions), liquidity risk and operational risk from their investments and financial operations.
Organisation and structure
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Overview of the business market risk control structure
Organisation and structure
Traded market risk in the businesses resides primarily in the Investment Bank, Treasury, Africa Banking and Non-Core. These businesses have the mandate to incur traded market risk. Non-traded market risk is mostly incurred in PCB, Barclaycard and Treasury.
Market risk oversight and challenge is provided by business committees, Group committees, including the Market Risk Committee and Group Market Risk. The chart above gives an overview of the business control structure.
Roles and responsibilities
The objectives of market risk management are to:
§ | | understand and control market risk by robust measurement, limit setting, reporting and oversight |
§ | | facilitate business growth within a controlled and transparent risk management framework |
§ | | ensure that traded market risk in the businesses is controlled according to the allocated appetite |
§ | | control non-traded market risk in line with approved appetite |
§ | | control insurance risk in line with approved appetite |
§ | | support the Non-Core strategy of asset reductions by ensuring that market risk remains within agreed risk appetite. |
To ensure the above objectives are met, a well-established governance structure is in place to manage these risks consistent with the ERMF (evaluate-respond-monitor). See page 95 on risk management strategy, governance and risk culture.
More information on market risk management can be found in Barclays PLC 2015 Pillar 3 Report.
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Risk review
Risk management
Funding and capital risk management
Funding risk
The ability of the Group to achieve its business plans may be adversely impacted if it does not effectively manage its capital (including leverage) and liquidity ratios. Group Treasury manage funding risk on a day-to-day basis with the Group Treasury Committee acting as the key governance forum.
Organisation and structure
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 US 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 at each level where prudential capital requirements are applied |
| § | | support its credit rating. A weaker credit rating would increase the Group’s cost of funds |
| § | | support its growth and strategic options. |
Overview
Organisation and structure
Capital management is integral to the Group’s approach to financial stability and sustainability management and is therefore embedded in the way businesses and legal entities operate. Capital demand and supply is actively managed on a centralised basis, at a business level, at a local entity level and on a regional basis taking into account the regulatory, economic and commercial environment in which Barclays operates.
Roles and responsibilities
The Group’s capital management strategy is driven by the strategic aims of the Group and the Risk Appetite set by the Board. The Group’s objectives are achieved through well embedded capital management practices.
Capital planning
Capital forecasts are managed on a top-down and bottom-up basis through both short term (one year) and medium term (three to five years) financial planning cycles. Barclays’ capital plans are developed with the objective of maintaining capital that is adequate in quantity and quality to support the Group’s risk profile, regulatory and business needs. As a result, the Group holds a diversified capital base that provides strong loss absorbing capacity and optimised returns.
Barclays’ capital forecasts are continually monitored against relevant internal target capital ratios to ensure they remain appropriate, and consider risks to the plan including possible future regulatory changes.
Local management ensures compliance with an entity’s minimum regulatory capital requirements by reporting to local Asset and Liability Committees with oversight by the Group’s Treasury Committee, as required.
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Risk review Risk management Treasury and capital risk management Interest rate risk in the banking book management
Regulatory requirementsOverview
Capital planning is setBanking book operations generatenon-traded market risk, primarily through interest rate risk arising from the sensitivity of net interest margins to changes in consideration of minimum regulatory requirementsinterest rates. To manage interest rate risk within its defined risk appetite, the principal banking businesses engage in all jurisdictions in whichinternal derivative trades with Treasury. However, the Group operates. Group regulatory capital requirements are determined bybusinesses remain susceptible to market risk from six key sources:
§ | | direct risk: the mismatch between therun-off of product balances and the associated interest rate hedge, given that the balance sheet is held static |
§ | | structural risk: the impact of the rate shock on the rolling hedge replenishment rate onnon-maturity products, given that the balance sheet is held static |
§ | | prepayment risk: balancerun-off may be faster or slower than expected, due to customer behaviour in response to general economic conditions or interest rates. This can lead to a mismatch between the actual balance of products and the hedges executed with Treasury based on initial expectations |
§ | | recruitment risk: the volume of new business may be lower or higher than expected, requiring the business to unwindpre-hedging or execute hedging transactions with Treasury at different rates than expected |
§ | | residual risk and margin compression: the business may retain a small element of interest rate risk to facilitate the day-to-day management of customer business. Additionally, in the current low interest rate environment, deposits on which the Group sets the interest rate are exposed to margin compression. This is because for any further fall in base rates the Group must absorb an increasing amount of the rate move in its margin |
§ | | lag risk: the risk of being unable tore-price products immediately after a change in interest rates due to both mandatory notification periods and operational constraints in large volume mailings. This is highly prevalent in managed rates savings product (e.g. Everyday Saver) where customers must be informed in writing of any planned reduction in their savings rates. |
Non-traded market risk also arises from the PRA. Under these regulatory frameworks, capital requirements are set in consideration of the level of risk that the firm is exposed toLiquidity Buffer investment portfolio, which is measured through bothmanaged to a defined risk weighted assets (RWAs) and leverage.
Capital held to support the level of risk identified is set in consideration of minimum ratio requirements and internal buffers. Capital requirements are set in accordance with the firm’s level of risk.
Governance
The Group and legal entity capital plans are underpinned by the Capital Risk Framework, which includes capital management policies and practices approved by the Principal Risk Officer. These plans are implemented consistently in order to deliver on the Group objectives.
The Board approves the Group capital plan, stress tests and recovery plan. The Treasury Committee manages compliance with the Group’s capital management objectives. The Committee reviews actual and forecast capital demand and resources on a bi-monthly basis. The Board Risk Committee annually reviews risk appetite and then analyses the impacts of stress scenarios on the Group capital forecast in order to understand and manage the Group’s projected capital adequacy.
Monitoring and managing capital
Capital is monitored and managed on an ongoing basis through:
Stress testing: internal group-wide stress testing is undertaken to quantify and understand the impact of sensitivities on the capital plan and capital ratios arising from stressed macroeconomic conditions. Actual recent economic, market and regulatory scenarios are used to inform the assumptions of the stress tests and assess the effectiveness of mitigation strategies.
The Group also undertakes stress tests prescribed by the BoE and EBA. Legal entities undertake stress tests prescribed by their local regulators. These stress tests inform decisions on the size and quality of capital buffer required and the results are incorporated into the Group capital plan to ensure adequacy of capital under normal and severe, but plausible, stressed conditions.
Risk mitigation: as part of the stress testing process, actions are identified that should be taken to mitigate the risks that could ariseappetite. Investments in the event of material adverseliquidity buffer are generally subject to available for sale accounting rules; changes in the current economic and business outlook.
As an additional layervalue of protection,these assets impact capital via the Barclays Recovery Plan defines the actions and implementation strategies available for the Group to increase or preserve capital resourcessale reserve.
Roles and responsibilities The Treasury Market Risk team: § | | provides risk management oversight and monitoring of all traded andnon-traded market risk in Treasury, which specifically includes risk management of the liquidity buffer, funding activities, asset and liability management hedging, residual interest rate risk from the hedge accounting solution and foreign exchange translation hedging |
§ | | sets and monitors risk limits to ensurenon-traded market risk taken in Treasury and the customer banking book adheres to agreed risk appetite. |
The Interest Rate Risk in the event that stress events are more extreme than anticipated.Banking Book team: Senior management awareness and transparency: Treasury works closely with Risk, businesses and legal entities to support a proactive approach to identifying sources of capital ratio volatilities which are considered in the Group’s capital plan. Capital risks against firm-specific and macroeconomic early warning indicators are monitored and reported to the Treasury Committee, associated with clear escalation channels to senior management.
§ | | assesses interest rate risk in the banking book, particularly as it relates to customer banking book and Treasury |
Capital management information is readily available at all times to support the Executive Management’s strategic and day-to-day business decision making, as may be required.
§ | | acts as review and challenge of the First Line’s risk management practices and decisions including the hedging activity performed by Treasury on behalf of the business |
The Group submits its Board approved ICAAP document to the PRA on an annual basis, which forms the basis of the Individual Capital Guidance (ICG) set by the PRA.
Capital allocation:capital allocations are approved by the Group Executive Committee and monitored by the Treasury Committee, taking into consideration the risk appetite, growth and strategic aims of the Group. Regulated legal entities are, at a minimum, allocated adequate capital to meet their current and forecast regulatory and business requirements.
Transferability of capital: the Group’s policy is for surplus capital held in Group entities to be repatriated to BBPLC in the form of dividends and/or capital repatriation, subject to local regulatory requirements, exchange controls and tax implications. This approach provides optimal flexibility on the re-deployment of capital across legal entities. The Group is not aware of any material impediments to the prompt transfer of capital resources, in line with the above policy, or repayment of intra-Group liabilities when due.
More information on capital risk management can be found in pages 402 to 403.
§ | | acts as review and challenge for the behavioural assumptions used in hedging and transfer pricing. |
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Risk review Risk management FundingOperational risk – Liquiditymanagement
Liquidity risk
The risk that the Group, although solvent, either does not have sufficient financial resources available to enable it to meet its obligations as they fall due, or can secure such resources only at excessive cost. This also results in a firm’s inability to meet regulatory liquidity requirements. This risk is inherent in all banking operations and can be affected by a wide range of Group-specific and market-wide events.
Overview
The Board has formally recognised a series of risks that are continuously present in Barclays and materially impact the achievement of Barclays objectives, one of which is Funding risk. Liquidity risk is recognised as a key risk within Funding risk. The efficient management of liquidity is essential to the Group in retaining the confidence of the financial markets and ensuring that the business is sustainable. Liquidity risk is managed through the Liquidity Risk Management Framework (the Liquidity Framework) which is designed to meet the following objectives:
§ | | to maintain liquidity resources that are sufficient in amount and quality and a funding profile that is appropriate to meet the liquidity risk appetite (LRA) as expressed by the Board |
§ | | to maintain market confidence in the Group’s name. |
This is achieved via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring. Together, these meet internal and regulatory requirements.
Organisation and structure
Barclays Treasury operates a centralised governance control process that covers all of the Group’s liquidity risk management activities. As per the ERMF, the Key Risk Officer (KRO) approves the Key Risk Control Framework for Liquidity Risk (Key Risk Control Framework) under which the Treasury function operates. The KRO is in the Risk function. The Key Risk Control Framework is subject to annual review. The Key Risk Control Framework describes liquidity policies and controls that the Group has implemented to manage liquidity risk within the LRA and is subject to annual review.
The Board sets the LRA, over Group stress tests, being the level of risk the Group chooses to take in pursuit of its business objectives and in meeting its regulatory obligations. The approved LRA is implemented and managed by the Treasury Committee through the Key Risk Control Framework.
Liquidity risk management
Barclays has a comprehensive Key Risk Control Framework for managing the Group’s liquidity risk. The Key Risk Control Framework describes liquidity policies and controls that the Group has implemented to manage liquidity risk within the LRA. The Key Risk Control Framework is designed to deliver the appropriate term and structure of funding consistent with the LRA set by the Board.
Liquidity is monitored and managed on an ongoing basis through:
Group Stress test risk appetite and planning: Established Group stress test LRA together with the appropriate limits for the management of liquidity risk. This is the level of liquidity risk the Group chooses to take in pursuit of its business objectives and in meeting its regulatory obligations.
Liquidity limits: Management of limits on a variety of on and off-balance sheet exposures and these serve to control the overall extent and composition of liquidity risk taken by managing exposure to the cash outflows.
Internal pricing and incentives: Active management of the composition and duration of the balance sheet and of contingent liquidity risk through the transfer of liquidity premium directly to the business.
Early warning indicators: Monitoring of a range of market indicators for early signs of liquidity risk in the market or specific to Barclays. These are designed to immediately identify the emergence of increased liquidity risk to maximise the time available to execute appropriate mitigating actions.
Contingency Funding Plan: Maintenance of a Contingency Funding Plan (CFP) which is designed to provide a framework where a liquidity stress could be effectively managed. The CFP provides a communication plan and includes management actions to respond to liquidity stresses of varying severity.
RRP: In accordance with the requirements of the PRA Rulebook: Recovery and Resolution, Barclays has developed a Group Recovery Plan. The key objectives are to provide the Group with a range of options to ensure the viability of the firm in a stress, set consistent early warning indicators to identify when the Recovery Plan should be invoked and to enable the Group to be adequately prepared to respond to stressed conditions. The Group continues to work with the authorities on RRP, including identifying and addressing any impediments to resolvability.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 105Operational risk The risk of loss to the firm from inadequate or failed processes or systems, human factors or due to external events (for example fraud) where the root cause is not due to credit or market risks. |
Risk review
Risk management
Operational risk management
Operational risk
Any instance where there is a potential or actual impact to the Group resulting from inadequate or failed internal processes, people, systems, or from an external event. The impacts to the Group can be financial, including losses or an unexpected financial gain, as well as non-financial such as customer detriment, reputational or regulatory consequences.
Overview The management of operational risk has two key objectives: § | | minimise the impact of losses suffered, both in the normal course of business (small losses) and from extreme events (large losses) |
§ | | improve the effective management of the Group and strengthen its brand and external reputation. |
The Group is committed to the management and measurement of operational risk and was granted a waiver by the FSA (now the PRA) 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 requirements using AMA (93%(94% of capital requirements); however, in specific areas,, except for small parts of the organisation acquired since the original permission (6% of capital requirements) using the Basic Indicator Approach (7%) is applied.(BIA). The Group works to benchmark its internal operational risk management and measurement practices with peer banks and to drive the further development of advanced techniques. The Group is committed to operating within a strong system of internal controlcontrols that enables business to be transacted and risk taken without exposing the Group to unacceptable potential losses or reputational damage.damages. The Group has an overarching framework that sets out the approach to internal governance. This guide establishes the mechanisms and processes by which the Board directs the organisation, through setting the tone and expectations from the top, delegating authority and monitoring compliance. Organisation and structure Operational riskRisk comprises a number of specific Key Risksrisks defined as follows:follow: § | | external supplier: inadequate selection and ongoing management of external suppliers |
§ | | financial crime: failure to comply with anti-money laundering, anti-bribery, anti-corruption and sanctions policies. In early January 2016, the oversight of financial crime was transferred to Group Compliance |
§ | | financial reporting:reporting misstatement or omission within external financial or regulatory reporting |
§ | | fraud:dishonest behaviour with the intent to make a gain or cause a loss to others |
§ | | information: inadequate protection of the Group’s information in accordance with its value and sensitivity |
§ | | legal: payments process:failure to identify and manage legal risksin operation of payments processes |
§ | | payments process: failure in operation of payments processes |
§ | | people:inadequate people capabilities, and/or performance/reward structures, and/or inappropriate behaviours |
§ | | premises and security:unavailability of premises (to meet business demand) and/or safe working environments, and inadequate protection of physical assets, employees and customers against external threats |
§ | | taxation:failure to comply with tax laws and practice which could lead to financial penalties, additional tax charges or reputational damagedamages |
§ | | technology (including cyber security):failure to develop and deploy secure, stable and reliable technology solutions which includes risk of loss or detriment to Barclays’the Group’s business and customers as a result of actions committed or facilitated through the use of networked information systems |
§ | | transaction operations:failure in the management of critical transaction processes. |
In order to ensure complete coverage of the potential adverse impacts on the Group arising from operational risk, the operational risk taxonomy extends beyond the operational key risks listed above to cover areas included within conduct risk. For more information on conduct risk please see pages 108 and 109.page 112. These risks may result in financial and/ornon-financial impacts including legal/regulatory breaches or reputational damage.damages. ReportingOrganisation and controlstructure
| | | 106 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 109 |
Risk review Risk management Operational risk management Roles and responsibilities 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. The operational risk profile and control environment is reviewed by business unit management through specific meetings which cover governance, risk and control. Businesses are required to report their operational risks on both a regular and an event drivenevent-driven basis. The reports include a profile of the material risks that may threaten the achievement of their objectives and the effectiveness of key controls, material control issues, operational risk events and a review of scenarios. The Group Head of Operational Risk as Principal Risk Officer, 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. Operational risk management acts in a second lineSecond Line of defenceDefence capacity, and is responsible for implementation of the framework and monitoring operational risk events and risk exposuresexposures. Key indicators (KIs) allow the Group to monitor its operational risk profile and material control issues.alert management when risk levels exceed acceptable ranges or risk appetite levels and drive timely decision making and actions. Through attendance at Business Unit Governance, Risk and Controlsbusiness GRC meetings, itoperational risk management provides specific risk input into the issues highlighted and the overall risk profile of the business. Operational risk issues escalated from these meetings are considered by the Group Principal Risk Officer through the second lineSecond Line of defenceDefence review meetings, which also consider material control issues and their effective remediation.meetings. Depending on their nature, the outputs of these meetings are presented to the BRC or the BAC. Specific reports are prepared by businesses, Key Risk Officers and Group Operational Risk on a regular basis for ORRF, BRC and BAC.
Risk and control self-assessments and key indicators The Group identifies and assesses all material risks within each business and evaluates the key controls in place to mitigate those risks. Managers in the businesses use self-assessment techniques to identify risks, evaluate the effectiveness of key controls in place and assess whether the risks are being effectively managed within business risk appetite.managed. The businesses are then able to make decisions on what action, if any, is required to reduce the level of risk to the Group. These risk assessments are monitored on a regular basis to ensure that each business continually understands the risks it faces. Key Indicators (KIs) are metrics which allow the Group to monitor its operational risk profile. KIs include measurable thresholds that reflect the risk appetite of the business and are monitored to alert management when risk levels exceed acceptable ranges or risk appetite levels and drive timely decision making and actions.
| | | 110 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Risk review Risk management Model risk management | Model risk The risk of the potential adverse consequences from financial assessment or decisions based on incorrect or misused model outputs and reports. |
Overview Barclays uses models to support a broad range of activities, including informing business decisions and strategies, measuring and limiting risk, valuing exposures, conducting stress testing, assessing capital adequacy, managing client assets, and meeting reporting requirements. Because models are imperfect and incomplete representations of reality, they may be subject to errors affecting the accuracy of their output. Model errors can result in inappropriate business decisions being made, financial loss, regulatory risk, reputational risk and/or inadequate capital reporting. Models may also be misused, for instance applied to products that they were not intended for, or not adjusted, where fundamental changes to their environment would justifyre-evaluating their core assumptions. Errors and misuse are the primary sources of model risk. Robust model risk management is crucial to ensuring that model risk is assessed and managed within a defined risk appetite. Strong model risk culture, appropriate technology environment, and adequate focus on understanding and resolving model limitations are crucial components. Organisation and structure Barclays allocates substantial resources to identify and record models and their usage, document and monitor the performance of models, validate models and ensure that model limitations are adequately addressed. Barclays has a dedicated Model Risk Management (MRM) function that consists of two main units: the Independent Validation Unit (IVU), responsible for model validation and approval, and Model Governance and Controls (MGC), covering model risk governance, controls and reporting, including ownership of model risk policy. The model risk policy prescribes Group-wide, end to end requirements for the identification, measurement and management of model risk, covering model documentation, development, implementation, monitoring, annual review, independent validation and approval, change and reporting processes. The Policy is supported by global Standards covering model inventory, documentation, validation, complexity and materiality, testing and monitoring, overlays, as well as vendor models and CCAR benchmarking. Barclays is continuously enhancing model risk management. MRM reports to the Group Chief Risk Officer and operates a global framework. Implementation of best practice standards is a central objective of the Group. Large new model development programmes are currently in motion to implement the model requirements of UK structural reform, CCAR, FRTB and IFRS9. Roles and responsibilities The key model risk management activities include: § | | ensuring that models are correctly identified across all relevant areas of the firm, and recorded in the Group Models Database (GMD), the Group-wide model inventory. The heads of the relevant areas (typically, the Business Chief Risk Officers, Business Chief Executive Officers, the Treasurer, the Chief Financial Officer) annually attest to the completeness and accuracy of the model inventory. MGC undertakes regular conformance reviews on the model inventory. These activities are detailed in the Model Inventory, Workflow and Taxonomy Standard |
§ | | ensuring that every model has a model owner who is accountable for the model. The model owner must sign off models prior to submission to IVU for validation. The model owner works with the relevant technical teams (model developers, implementation, monitoring, data services, regulatory) to ensure that the model presented to IVU is and remains fit for purpose, in accordance with the Model Documentation Standard, and the Model Testing, Monitoring and Annual Review Standard |
§ | | ensuring that every model is subject to validation and approval by IVU, prior to being implemented and on a continual basis, in accordance with the Model Validation and Approval Standard. The level of review and challenge applied by IVU is tailored to the materiality and complexity of each model. Validation includes a review of the model assumptions, conceptual soundness, data, design, performance testing, compliance with external requirements if applicable, as well as any limitations, proposed remediation and overlays with supporting rationale. Material model changes are subject to prioritised validation and approval |
§ | | specific Standards cover model risk management activities relating to CCAR benchmarking and challenger modelling, model overlays, vendor models, and model complexity and materiality. |
Organisation and structure | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 107111 |
Risk review Risk management Conduct risk management | Conduct risk The risk of detriment to customers, clients, market integrity, competition or Barclays from the inappropriate supply of financial services, including instances of wilful or negligent misconduct. |
Conduct risk
The risk that detriment is caused to customers, clients, counterparties or the Group because of inappropriate judgement in the execution of our business activities.
Overview The Group defines, manages and mitigates conduct risk with the goalgoals of providing goodpositive customer and client outcomes and protecting market integrity. This includes taking reasonable steps to ensure our culture and strategy are appropriately aligned to these goals; our products and services are reasonably designed and delivered to meet the needs of our customers and clients as well as promoting the fair and orderly operation of the markets in which we do business. As part of the Enterprise Risk Management Framework (ERMF) refresh (page 98), Reputation risk has been designated as a Principal Risk and Financial Crime has been designated as a Risk Category under Conduct Risk. Organisation and structure The Group has defined seven Key Risks that are the main sub risk types to Conduct Risk: § | | our products or services do not meet customers’ needs or have the potential to cause customer detriment |
§ | | the way we design and undertake transaction services has the potential to cause customer detriment |
§ | | the way we design or undertake customer servicing has the potential to cause customer detriment |
§ | | our strategy or business model has the potential to cause customer detriment |
§ | | our governance arrangements or culture has the potential to cause customer detriment |
§ | | we fail to obtain and maintain relevant regulatory authorisations, permissions and licence requirements |
§ | | damage to Barclays’ reputation is caused during the conduct of our business. |
Organisation and structure
The Conduct and Reputation Risk Committee (CRRC) derives its authority from(GRC) is the Barclays Group Head of Compliance. The purpose of the CRRC is to reviewmost senior Executive body responsible for reviewing and monitormonitoring the effectiveness of Barclays’ management of Conduct and Reputation Risk. In addition, specific committees monitor conduct risk and the control environment at the business level.risk.
Roles and responsibilities The Conduct Risk Principal Risk Framework (PRF) comprises a number of elements that allow the Group to manage and measure its conduct risk profile. The PRF is implemented vertically across the Group:Group through an organisational structure that requires all businesses to implement and operate their own conduct risk frameworks that meet the requirements within the ERMF. § | | vertically, through an organisational structure that requires all businesses to implement and operate their own conduct risk framework that meets the requirements detailed within the ERMF |
§ | | horizontally, with Group Key Risk Officers (KROs) required to monitor information relevant to their Key Risk from each element of the Conduct Risk PRF. |
The primary responsibility for managing conduct risk and compliance with control requirements sits with the business where the risk arises. The Conduct Risk Accountable Executive for each business is responsible for ensuring the implementation of, and adherence to the PRF. The Conduct Principal RiskGroup Chief Compliance Officer is responsible for owning and maintaining an appropriate Group-wide Conduct Risk PRF and for overseeing Group-wide Conduct Riskconduct risk management. Businesses are required to report their conduct risks on both a quarterly and an event drivenevent-driven basis. The quarterly reports detail the conduct risks inherent within the business strategy and include forward looking horizon scanning analysis as well as backward looking evidence-based indicators from both internal and external sources. For details please refer to the Risk Review, Conduct Risk Performance section of this report (page 175). Business level reports are reviewed within Compliance. Compliance then creates Group level reports for consideration by CRRC and RepCo. The Group periodically assesses its management of conduct risk through independent audits and addresses issues identified.
Event-driven reporting consists of any risks or issues that breach certain thresholds for severity and probability. Any such risks or issues must be promptly escalated to the business and the appropriate KRO.
In 2015 Reputation Risk was re-designated as a Key Risk under the Conduct Risk Principal Risk. The Reputation Key Risk Framework outlines the processes and actions required of the business. These include regular and forward looking reviews of current and emerging reputation risks so that a topical and comprehensive reputation risk profile of the organisation can be maintained.on page 180.
Organisation and structure
| | | 108112 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk management ConductReputation risk management
| Reputation risk The risk that an action, transaction, investment or event will reduce trust in the firm’s integrity and competence by clients, counterparties, investors, regulators, employees or the public. |
Reputation risk is the riskOverview
A reduction of damage to the Group’s brand arising from any association, action or inaction which is perceived by stakeholders (e.g. customers, clients, colleagues, shareholders, regulators, opinion formers) to be inappropriate or unethical. Damage to the Group’s brandtrust in Barclays’ integrity and consequent erosion of our reputation reducescompetence may reduce the attractiveness of the GroupBarclays to stakeholders and maycould lead to negative publicity, loss of revenue, regulatory or legislative action, loss of existing and potential client business, reduced workforce morale and difficulties in recruiting talent. Ultimately it may destroy shareholder value. With effect from 2017, Reputation risk may arise in many different ways,has been redesignated as a Principal Risk within the Enterprise Risk Management Framework. Organisation and structure The Group Risk Committee (GRC) is the most senior Executive body responsible for example:reviewing and monitoring the effectiveness of Barclays’ management of Reputation risk. Roles and responsibilities § | | failure to act in good faith and in accordance with the Group’s values and code of conduct |
§ | | failure (real or perceived) to comply with the law or regulation, or association (real or implied) with illegal activity |
§ | | failures in corporate governance, management or technical systems |
§ | | failure to comply with internal standards and policies |
§ | | association with controversial sectors or clients |
§ | | association with controversial transactions, projects, countries or governments |
§ | | association with controversial business decisions, including but not restricted to, decisions relating to: products (in particular new products), delivery channels, promotions/advertising, acquisitions, branch representation, sourcing/supply chain relationships, staff locations, treatment of financial transactions |
§ | | association with poor employment practices. |
In each case, the risk may arise from failureThe Chief Compliance Officer is accountable for ensuring that a Reputation Principal Risk Framework and policies are developed and that they are subject to comply with either stated norms, which are likely to change over time, so an assessment of reputation risk cannot be static. If not managed effectively, stakeholder expectations of responsible corporate behaviour will not be met.limits, monitored, reported on and escalated, as required.
Reputation risk may also ariseis by nature pervasive and cause damagecan be difficult to quantify, requiring more subjective judgement than many other risks. The Reputation Principal Risk Framework sets out what is required to ensure Reputation risk is managed effectively and consistently across the bank. The primary responsibility for identifying and managing Reputation risk and adherence to the Group’s image, through associationcontrol requirements sits with clients, their transactions or their projects if these are perceived by external stakeholdersthe business and support functions where the risk arises. Each business is required to be environmentally damaging. Whereoperate within established Reputation risk appetite and to submit quarterly reports to the Group is financing infrastructure projectsReputation Management team, highlighting their most significant current and potential Reputation risks and issues and how they are being managed. These reports are a key internal source of information for the quarterly Reputation risk reports which have potentially adverse environmental impacts, the Group’s Client Assessment and Aggregation policy and supporting Environmental and Social Risk Standard will apply. This policy identifies the circumstances in whichare prepared for the Group requires due diligence to include assessment of specialist environmental reports. These reports will include consideration of a wide range ofRisk Committee and the project’s potential impacts including on air, waterBoard Reputation Committee. Organisation and land quality, on biodiversity issues, on locally affected communities, including any material upstream and downstream impacts, and working conditions together with employee and community health and safety. Adherence to the Environmental and Social Risk Standard is the mechanism by which Barclays fulfils the requirements of the Equator Principles. These Principles are an internationally recognised framework for environmental due diligence in project finance. Barclays was one of four banks which collaborated in developing the Principles, ahead of their launch in 2003 with 10 adopting banks. There are now more than 80 banks worldwide which have adopted the Equator Principles (see www.equator-principles.com). structure | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 109113 |
Risk review Risk management Legal risk | Legal risk The risk of loss or imposition of penalties, damages or fines from the failure of the firm to meet its legal obligations including regulatory or contractual requirements. |
Overview With effect from 2017, Legal risk, which was previously a Key Risk under operational risk, has beenre-designated as a Principal Risk within the Enterprise Risk Management Framework. The Legal Risk Framework prescribes Group-wide requirements for the identification, measurement and management of Legal risk, covering assessment, risk appetite, key indicators and governance. The Group General Counsel (GCC) is the Legal Principal Risk Officer and owns the Legal Risk Framework and the associated legal policies. Legal risk is defined by the five respective Legal Policies: § | | Contractual arrangements – failure to have enforceable contracts in place or for contracts to be enforceable as intended |
§ | | Litigation management– failure to adequately manage litigation involving Barclays as either claimant or defendant |
§ | | Intellectual property (IP)– failure to protect the Group’s IP assets or Barclays infringing IP rights of third parties |
§ | | Competition/antitrust law– failure to follow competition/antitrust law or failure to manage relationships with competition and antitrust authorities |
§ | | Use of law firms– failure to control instruction of an external law firm. |
Group-wide and Business/Function specific Standards may be put in place to support the implementation of the legal policies. The standards are aligned to one of the policies and are implemented by Businesses/ Functions. Organisation and structure The Group Risk Committee (GRC) is the most senior executive body responsible for reviewing and monitoring the effectiveness of Barclays’ management of Legal risk. Escalation paths from this forum exist to the Board of Barclays PLC. Roles and responsibilities The Legal Risk Framework sets out what is required to ensure Legal risk is managed effectively and consistently across the bank. The primary responsibility for managing Legal risk and adherence to the control requirements sits with the business where the risk arises. On behalf of the businesses, the aligned General Counsel or Legal Senior Management, will undertake Legal risk appetite assessments and provide advice and guidance on Legal risk management. The Legal risk assessment includes both quantitative and qualitative criteria including: § | | Knowledge of Legal risk material control issues or weaknesses |
§ | | Emerging risks resulting from upcoming changes in the control environment, systems, or internal organisational structures |
§ | | Potential implications on Barclays of forthcoming changes in the external legal and regulatory environment and/or prevailing decisions from courts and enforcing authorities as they relate to defined legal risks. |
The Legal Principal Risk Officer is responsible for owning and maintaining an appropriate Legal Risk Framework and for overseeing Group-wide legal risk management. Organisation and structure | | | 114 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Risk review Risk performance Maintaining our risk profile at an acceptable and appropriate level is essential to ensure our continued performance. This section provides a review of the performance of the Group in 20152016 for each of the five Principal Risks in operation throughout the year, which are credit, market, funding, operational, and conduct risk. Please refer to the Risk Management section (pages97 to 114) for an overview of the changes to Barclays’ Principal Risk taxonomy in December 2016. | | | | | | | | | | | | Page | | | | | | | | | | Credit risk | | | 111
| 116 | | | Market risk | | | 138 141 | | | | | | Funding risk – capital risk | | | 148 152 | | | | | | Funding risk – liquidity risk | | | 154 159 | | | | | | Operational risk | | | 172 178 | | | | | | Conduct risk | | | 174 180 | | | | | |
| | | | | For a more detailedcomprehensive breakdown on our Risk review and Risk management contents please see pages 84-8586 to 87. |
| | | 110 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 115 |
Risk review Risk performance Credit risk Analysis of credit risk Credit risk is the risk of the Group suffering financial loss should any of its customers, clients, or market counterparties fail to fulfil their contractual obligations to the Group. This section details the Group’s credit risk profile and provides information on the Group’s exposure to loans and advances to customer and banks, maximum exposures with collateral held and net impairment charges raised in the year. It provides information on balances that are categorised as credit risk loans, balances in forbearance, as well as exposure to and performance metrics for specific portfolios and asset types. Key metrics Key metricsCredit impairment charges in 2016 were 35% higher than 2015:
| § | | Credit impairment charges in 2015 were 2% lower than 2014: |
+£32m 608m Group Core Loan impairment broadly stableincreased reflecting benign economic conditions ina higher charge following the management review of the UK and US cards portfolio impairment modelling and a number of single name exposures. +£30m 555m Retail Core PerformanceIncreased charges primarily due to a charge following the review of UK and US cards portfolio impairment modelling.
Underlying performance across key portfolios has remained stable and broadly within expectations +£2m 63m Wholesale Core Performance benefiting from economic conditionsIncreased charges reflecting limited range of single name exposures.
-£10m Non-Core Decreased charges reflecting lower charges in the UKEuropean businesses. – Net Loans and US markets offsetadvances to customers and banks decreased by impact of stress2% in Oil and Gas portfolios2016 -£139m Non-Core– The loan loss rate rose to 53bps
Lower charge reflects sale of Spanish business and higher recoveries in Portugal
| | | 116 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
| | | | | | | §Summary of Contents | | NetPage | | | § Credit risk overview and summary of performance § Analysis of the balance sheet § The Group’s maximum exposure and collateral and other credit enhancements held § The Group’s approach to manage and represent credit quality – Asset credit quality – Debt securities – Balance sheet credit quality | | 118 118 119 121 121 121 122 | | Credit risk represents a significant risk to the Group and mainly arises from exposure to wholesale and retail loans and advances together with the counterparty credit risk arising from derivative contracts entered into with clients. This section provides a macro view of the Group’s credit exposures. | § Analysis of the concentration of credit risk – Geographic concentrations – Group exposures to specific countries – Industrial concentrations | | 123 123 124 125 | | The Group reviews and monitors risk concentrations in a variety of ways to ensure the continuation of a diversified portfolio operating within agreed appetites. This sections outlines performance against key concentration risks at a macro Group level. | § Loans and advances to customers and banks decreased by 6% in 2015. |
| § Analysis of specific portfolios and asset types – Secured home loans – Credit cards, overdrafts, and unsecured loans – Exposure to UK Commercial Real Estate | | 127 128 128 129 131 | | In addition to Group-wide concentrations, Credit Risk monitors exposure performance across a range of specific portfolios where the risk profile is considered to be heightened. This section provides a more detailed analysis of these exposures and notes on how certain aspects of the risk profile are mitigated on an ongoing basis. | § Analysis of problem loans – Age analysis of loans and advances that are past due but not impaired – Analysis of loans and advances assessed as impaired – Potential credit risk loans – Impaired loans – Forbearance | | 132 132 133 132 134 134 | | The loan loss rate was stable at 47bps.Group monitors exposures to assets where there is a heightened likelihood of default and assets where an actual default has occurred. This section outlines the exposure to assets that have been classified as impaired analysing the exposures between business units and by key product types. The Group, from time to time, agrees to the suspension of certain aspects of customer/client credit agreements, generally during temporary periods of financial difficulties where the Group is confident that the customer/client will be able to remedy the suspension. During this time, customer/client assets are separately monitored to ensure that remedies are completed. This section outlines the Group’s current exposure to assets with this treatment. | § Impairment – Impairment allowances – Management adjustments to models for impairment § Analysis of debt securities § Analysis of derivatives | | 138 138 138 139 139 | | The Group holds impairment provisions on the balance sheet as a result of the raising of a charge against profit for incurred losses in the lending book. An impairment allowance may either be identified or unidentified and individual or collective. This section outlines the movements in allowance for impairment by asset class exposure, material management adjustments to model output, analysis of debt securities and derivatives. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 111117 |
Risk review Risk performance Credit risk Credit risk is the risk of the Group suffering financial loss should any of its customers, clients or market counterparties fails to fulfil their contractual obligations to the Group.
All disclosures in this section (pages 112-137) are unaudited unless otherwise stated
| 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. All disclosures in this section (pages 118 to 120) are unaudited unless otherwise stated. Disclosures for 2016 exclude BAGL balances which are now recognised as held for sale, comparative tables for 2015 include BAGL balances unless otherwise stated. |
Overview Credit risk represents a significant risk to the Group and mainly arises from exposure to wholesale and retail loans and advances together with the counterparty credit risk arising from derivative contracts entered into with clients. A summary of performance may be found below. This section provides an analysis of areas of particular interest or potentially of higher risk, including: i) balance sheet, including the maximum exposure, and collateral, and loans and advances; ii) areas of concentrations, including the Eurozone;concentration; iii) exposure to and performance metrics for specific portfolios and assets types, including home loans, credit cards and UK commercial real estate; iv) exposure and performance of loans on concession programmes, including forbearance; v) problem loans, including credit risk loans (CRLs); and vi) impairment, including impairment stock and management adjustments to model outputs. The topics covered in this section may be found in the credit risk section of the contents on page 84. Please see risk management section on pages 94-109101 to 102 for details of governance, policies and procedures.
Summary of performance in the period Credit impairment charges increased £0.6bn to £2.4bn including a £0.3bn charge in 2015 fell 2% to £2.1bn which principally reflectedQ316 following the benign economic conditions inmanagement review of the UK and US and effective risk management, includingcards portfolio impairment modelling. Overall, this resulted in an 11bps increase in the strengthening ofloan loss rate to 53bps. Credit Risk Loans (CRLs) remained stable at £6.5bn (2015: £6.4bn) with the Retail Impairment Policy. These supported generally stable delinquency rates inGroup’s CRL coverage ratio increasing to 71% (2015: 65%) mainly within retail and lower default rates in wholesale where large single names were limited in number and focused on the Oil and Gas sector. The level of CRL reduced to £7.8bn principally due to a reduction in Non-Core and Personal and Corporate Banking. The coverage ratios for home loans, unsecured retail portfolios and corporate loans remain broadly in line with expected severity rates for these types of portfolios.
NetTotal loans and advances net of impairment decreased by £11.4bn to customers£449.5bn driven by a £31bn decrease due to the reclassification of BAGL balances to held for sale and banks reduced 6% to £440.6bn reflecting a decrease£9bn from the exit of other assets in Non-Core businesses, Investment Bank and Africa BankingNon-Core. This was offset by increaseslending growth of £20bn and a net £9bn increase in Personalsettlement and Corporate Banking.
The loan loss rate was broadly stable at 47bps (2014: 46bps).cash collateral balances.
Analysis of the balance sheetBalance Sheet The Group’s maximum exposure and collateral and other credit enhancements held
Basis of preparation The following tables present a reconciliation between the Group’s maximum exposure and its net exposure to credit risk; reflecting the financial effects of collateral, credit enhancements and other actions taken to mitigate the Group’s exposure. For financial assets recognised on the balance sheet, maximum exposure to credit risk represents the balance sheet carrying value after allowance for impairment. Foroff-balance sheet guarantees, the maximum exposure is the maximum amount that the Group 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 is the full amount of the committed facilities. This and subsequent analyses of credit risk include only financial assets subject to credit risk. They exclude other financial assets not subject to credit risk, mainly equity securities held for trading, as available for sale or designated at fair value, and traded commodities. Assets designated at fair value in respect of linked liabilities to customers under investment contracts have also 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 not result in a loss to the Group. Foroff-balance sheet exposures certain contingent liabilities not subject to credit risk such as performance guarantees are excluded. Both on- andoff-balance sheet exposures for 2016 exclude BAGL balances now held for sale. Comparative tables for 2015 include BAGL balances unless stated otherwise. The Group mitigates the credit risk to which it is exposed through netting andset-off, collateral and risk transfer. Further detail on the Group’s policies to each of these forms of credit enhancement is presented on pages 100.in the Barclays Pillar 3 Report. Overview As at 31 December 2015,2016, the Group’s net exposure to credit risk after taking into account netting andset-off, collateral and risk transfer decreasedincreased 6% to £701.4bn,£740.7bn, reflecting a decreasean increase in maximum exposure of 14%3% and a reductionan increase in the level of mitigation held by 21%of 1%. Overall, the extent to which the Group holds mitigation against its total exposure reduced slightly toremained stable at 47% (2015: 48% (2014: 53%). Of the remaining exposure left unmitigated, a significant portion relates to cash held at central banks, available for salefinancial investment debt securities issued by governments, cash collateral and settlement balances, all of which are considered lower risk. Trading portfolio liability positions, which to a significant extent economically hedge trading portfolio assets but which are not held specifically for risk management purposes, are excluded from the analysis. The credit quality of counterparties to derivative, available for salefinancial investments and wholesale loan assets are predominantly investment grade. Further analysis on the credit quality of assets is presented on pages 115-116.121 to 122. Where collateral has been obtained in the event of default, the Group does not, as a rule, use such assets for its own operations and they are usually sold on a timely basis. The carrying value of assets held by the Group as at 31 December 2015,2016, as a result of the enforcement of collateral, was £69m (2014: £161m)£16m (2015: £69m). | | | 112118 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review
Risk performance
Credit risk
| | | | | | | | | | | | | | | | | | | | | | | | | Maximum exposure and effects of collateral and other credit enhancements (audited) | | | | | Maximum | | | | Netting | | | | Collateral | | | | Risk | | | | Net | | | | | exposure | | | | and set-off | | | | Cash | | | | Non-cash | | | | transfer | | | | exposure | | As at 31 December 2015 | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 49,711 | | | | – | | | | – | | | | – | | | | – | | | | 49,711 | | Items in the course of collection from other banks | | | 1,011 | | | | – | | | | – | | | | – | | | | – | | | | 1,011 | | Trading portfolio assets: | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities | | | 45,576 | | | | – | | | | – | | | | – | | | | – | | | | 45,576 | | Traded loans | | | 2,474 | | | | – | | | | – | | | | (607) | | | | (1) | | | | 1,866 | | Total trading portfolio assets | | | 48,050 | | | | – | | | | – | | | | (607) | | | | (1) | | | | 47,442 | | Financial assets designated at fair value: | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances | | | 17,913 | | | | – | | | | (21) | | | | (5,850) | | | | (515) | | | | 11,527 | | Debt securities | | | 1,383 | | | | – | | | | – | | | | – | | | | – | | | | 1,383 | | Reverse repurchase agreementsa | | | 49,513 | | | | – | | | | (315) | | | | (49,027) | | | | – | | | | 171 | | Other financial assets | | | 375 | | | | – | | | | – | | | | – | | | | – | | | | 375 | | Total financial assets designated at fair value | | | 69,184 | | | | – | | | | (336) | | | | (54,877) | | | | (515) | | | | 13,456 | | Derivative financial instruments | | | 327,709 | | | | (259,582) | | | | (34,918) | | | | (7,484) | | | | (5,529) | | | | 20,196 | | Loans and advances to banks | | | 41,349 | | | | – | | | | (4) | | | | (4,072) | | | | (64) | | | | 37,209 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 155,863 | | | | – | | | | (221) | | | | (154,355) | | | | (634) | | | | 653 | | Credit cards, unsecured and other retail lending | | | 67,840 | | | | (12) | | | | (1,076) | | | | (14,512) | | | | (1,761) | | | | 50,479 | | Corporate loans | | | 175,514 | | | | (8,399) | | | | (593) | | | | (45,788) | | | | (4,401) | | | | 116,333 | | Total loans and advances to customers | | | 399,217 | | | | (8,411) | | | | (1,890) | | | | (214,655) | | | | (6,796) | | | | 167,465 | | Reverse repurchase agreements and other similar secured lending | | | 28,187 | | | | – | | | | (166) | | | | (27,619) | | | | – | | | | 402 | | Available for sale debt securities | | | 89,278 | | | | – | | | | – | | | | (832) | | | | (811) | | | | 87,635 | | Other assets | | | 1,410 | | | | – | | | | – | | | | – | | | | – | | | | 1,410 | | Total on-balance sheet | | | 1,055,106 | | | | (267,993) | | | | (37,314) | | | | (310,146) | | | | (13,716) | | | | 425,937 | | | | | | | | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 20,576 | | | | – | | | | (604) | | | | (1,408) | | | | (104) | | | | 18,460 | | Documentary credits and other short-term trade-related transactions | | | 845 | | | | – | | | | (33) | | | | (57) | | | | (3) | | | | 752 | | Forward starting reverse repurchase agreementsb | | | 93 | | | | – | | | | – | | | | (91) | | | | – | | | | 2 | | Standby facilities, credit lines and other commitments | | | 281,369 | | | | – | | | | (313) | | | | (24,156) | | | | (662) | | | | 256,238 | | Total off-balance sheet | | | 302,883 | | | | – | | | | (950) | | | | (25,712) | | | | (769) | | | | 275,452 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,357,989 | | | | (267,993) | | | | (38,264) | | | | (335,858) | | | | (14,485) | | | | 701,389 | |
Notes
a | During 2015, new reverse repurchase agreements and other similar secured lending in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
b | Forward starting reverse repurchase agreements were previously disclosed as loan commitments. Following the business designation of reverse repurchase and repurchase agreements at fair value through profit and loss, new forward starting reverse repurchase agreements are within the scope of IAS 39 and are recognised as derivatives on the balance sheet. |
| | | | | | | | | | | | | | | | | | | | | | | | | Maximum exposure and effects of collateral and other credit enhancements (audited) | | | | | Maximum | | | | Netting | | | | Collateral | | | | Risk | | | | Net | | | | | exposure | | | | and set-off | | | | Cash | | | | Non-cash | | | | transfer | | | | exposure | | As at 31 December 2016 | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 102,353 | | | | – | | | | – | | | | – | | | | – | | | | 102,353 | | Items in the course of collection from other banks | | | 1,467 | | | | – | | | | – | | | | – | | | | – | | | | 1,467 | | Trading portfolio assets: | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities | | | 38,789 | | | | – | | | | – | | | | – | | | | – | | | | 38,789 | | Traded loans | | | 2,975 | | | | – | | | | – | | | | (270 | ) | | | – | | | | 2,705 | | Total trading portfolio assets | | | 41,764 | | | | – | | | | – | | | | (270 | ) | | | – | | | | 41,494 | | Financial assets designated at fair value: | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances | | | 10,519 | | | | – | | | | (17 | ) | | | (4,107 | ) | | | (432 | ) | | | 5,963 | | Debt securities | | | 70 | | | | – | | | | – | | | | – | | | | – | | | | 70 | | Reverse repurchase agreements | | | 63,162 | | | | – | | | | (688 | ) | | | (62,233 | ) | | | – | | | | 241 | | Other financial assets | | | 262 | | | | – | | | | – | | | | – | | | | – | | | | 262 | | Total financial assets designated at fair value | | | 74,013 | | | | – | | | | (705 | ) | | | (66,340 | ) | | | (432 | ) | | | 6,536 | | Derivative financial instruments | | | 346,626 | | | | (273,602 | ) | | | (41,641 | ) | | | (8,282 | ) | | | (5,205 | ) | | | 17,896 | | Loans and advances to banks | | | 43,251 | | | | – | | | | (4 | ) | | | (4,896 | ) | | | (22 | ) | | | 38,329 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 144,765 | | | | – | | | | (184 | ) | | | (143,912 | ) | | | – | | | | 669 | | Credit cards, unsecured and other retail lending | | | 57,808 | | | | – | | | | (235 | ) | | | (5,258 | ) | | | (95 | ) | | | 52,220 | | Corporate loans | | | 190,211 | | | | (8,622 | ) | | | (320 | ) | | | (52,029 | ) | | | (5,087 | ) | | | 124,153 | | Total loans and advances to customers | | | 392,784 | | | | (8,622 | ) | | | (739 | ) | | | (201,199 | ) | | | (5,182 | ) | | | 177,042 | | Reverse repurchase agreements and other similar secured lending | | | 13,454 | | | | – | | | | (79 | ) | | | (13,242 | ) | | | – | | | | 133 | | Financial investments - debt securities | | | 62,879 | | | | – | | | | – | | | | (533 | ) | | | (1,286 | ) | | | 61,060 | | Other assets | | | 1,205 | | | | – | | | | – | | | | – | | | | – | | | | 1,205 | | Totalon-balance sheet | | | 1,079,796 | | | | (282,224 | ) | | | (43,168 | ) | | | (294,762 | ) | | | (12,127 | ) | | | 447,515 | | | | | | | | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Contingent Liabilities | | | 19,908 | | | | – | | | | (247 | ) | | | (1,403 | ) | | | (130 | ) | | | 18,128 | | Documentary credits and other short-term trade-related transactions | | | 1,005 | | | | – | | | | (24 | ) | | | (18 | ) | | | (3 | ) | | | 960 | | Forward starting reverse repurchase agreements | | | 24 | | | | – | | | | – | | | | (24 | ) | | | – | | | | – | | Standby facilities, credit lines and other commitments | | | 302,657 | | | | – | | | | (321 | ) | | | (26,524 | ) | | | (1,704 | ) | | | 274,108 | | Totaloff-balance sheet | | | 323,594 | | | | – | | | | (592 | ) | | | (27,969 | ) | | | (1,837 | ) | | | 293,196 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,403,390 | | | | (282,224 | ) | | | (43,760 | ) | | | (322,731 | ) | | | (13,964 | ) | | | 740,711 | |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 113119 |
Risk review Risk performance Credit risk | | | | | | | | | | | | | | | | | | | | | | | | | Maximum exposure and effects of collateral and other credit enhancements (audited) | | | | | Maximum | | | | Netting | | | | Collateral | | | | Risk | | | | Net | | | | | exposure | | | | andset-off | | | | Cash | | | | Non-cash | | | | transfer | | | | exposure | | As at 31 December 2015 | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 49,711 | | | | – | | | | – | | | | – | | | | – | | | | 49,711 | | Items in the course of collection from other banks | | | 1,011 | | | | – | | | | – | | | | – | | | | – | | | | 1,011 | | Trading portfolio assets: | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities | | | 45,576 | | | | – | | | | – | | | | – | | | | – | | | | 45,576 | | Traded loans | | | 2,474 | | | | – | | | | – | | | | (607 | ) | | | (1 | ) | | | 1,866 | | Total trading portfolio assets | | | 48,050 | | | | – | | | | – | | | | (607 | ) | | | (1 | ) | | | 47,442 | | Financial assets designated at fair value: | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances | | | 17,913 | | | | – | | | | (21 | ) | | | (5,850 | ) | | | (515 | ) | | | 11,527 | | Debt securities | | | 1,383 | | | | – | | | | – | | | | – | | | | – | | | | 1,383 | | Reverse repurchase agreements | | | 49,513 | | | | – | | | | (315 | ) | | | (49,027 | ) | | | – | | | | 171 | | Other financial assets | | | 375 | | | | – | | | | – | | | | – | | | | – | | | | 375 | | Total financial assets designated at fair value | | | 69,184 | | | | – | | | | (336 | ) | | | (54,877 | ) | | | (515 | ) | | | 13,456 | | Derivative financial instruments | | | 327,709 | | | | (259,582 | ) | | | (34,918 | ) | | | (7,484 | ) | | | (5,529 | ) | | | 20,196 | | Loans and advances to banks | | | 41,349 | | | | – | | | | (4 | ) | | | (4,072 | ) | | | (64 | ) | | | 37,209 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 155,863 | | | | – | | | | (221 | ) | | | (154,355 | ) | | | (634 | ) | | | 653 | | Credit cards, unsecured and other retail lending | | | 67,840 | | | | (12 | ) | | | (1,076 | ) | | | (14,512 | ) | | | (1,761 | ) | | | 50,479 | | Corporate loans | | | 175,514 | | | | (8,399 | ) | | | (593 | ) | | | (45,788 | ) | | | (4,401 | ) | | | 116,333 | | Total loans and advances to customers | | | 399,217 | | | | (8,411 | ) | | | (1,890 | ) | | | (214,655 | ) | | | (6,796 | ) | | | 167,465 | | Reverse repurchase agreements and other similar secured lending | | | 28,187 | | | | – | | | | (166 | ) | | | (27,619 | ) | | | – | | | | 402 | | Financial investments - debt securities | | | 89,278 | | | | – | | | | – | | | | (832 | ) | | | (811 | ) | | | 87,635 | | Other assets | | | 1,410 | | | | – | | | | – | | | | – | | | | – | | | | 1,410 | | Totalon-balance sheet | | | 1,055,106 | | | | (267,993 | ) | | | (37,314 | ) | | | (310,146 | ) | | | (13,716 | ) | | | 425,937 | | | | | | | | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 20,576 | | | | – | | | | (604 | ) | | | (1,408 | ) | | | (104 | ) | | | 18,460 | | Documentary credits and other short-term trade-related transactions | | | 845 | | | | – | | | | (33 | ) | | | (57 | ) | | | (3 | ) | | | 752 | | Forward starting reverse repurchase agreements | | | 93 | | | | – | | | | – | | | | (91 | ) | | | – | | | | 2 | | Standby facilities, credit lines and other commitments | | | 281,369 | | | | – | | | | (313 | ) | | | (24,156 | ) | | | (662 | ) | | | 256,238 | | Totaloff-balance sheet | | | 302,883 | | | | – | | | | (950 | ) | | | (25,712 | ) | | | (769 | ) | | | 275,452 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,357,989 | | | | (267,993 | ) | | | (38,264 | ) | | | (335,858 | ) | | | (14,485 | ) | | | 701,389 | |
| | | 120 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
| | | | | | | | | | | | | | | | | | | | | | | | | Maximum exposure and effects of collateral and other credit enhancements (audited) | | | | | Maximum | | | | Netting | | | | Collateral | | | | Risk | | | | Net | | | | | exposure | | | | and set-off | | | | Cash | | | | Non-cash | | | | transfer | | | | exposure | | As at 31 December 2014 | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 39,695 | | | | – | | | | – | | | | – | | | | – | | | | 39,695 | | Items in the course of collection from other banks | | | 1,210 | | | | – | | | | – | | | | – | | | | – | | | | 1,210 | | Trading portfolio assets: | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities | | | 65,997 | | | | – | | | | – | | | | – | | | | – | | | | 65,997 | | Traded loans | | | 2,693 | | | | – | | | | – | | | | – | | | | – | | | | 2,693 | | Total trading portfolio assets | | | 68,690 | | | | – | | | | – | | | | – | | | | – | | | | 68,690 | | Financial assets designated at fair value: | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances | | | 20,198 | | | | – | | | | (48) | | | | (6,657) | | | | (291) | | | | 13,202 | | Debt securities | | | 4,448 | | | | – | | | | – | | | | – | | | | – | | | | 4,448 | | Reverse repurchase agreements | | | 5,236 | | | | – | | | | – | | | | (4,803) | | | | – | | | | 433 | | Other financial assets | | | 469 | | | | – | | | | – | | | | – | | | | – | | | | 469 | | Total financial assets designated at fair value | | | 30,351 | | | | – | | | | (48) | | | | (11,460) | | | | (291) | | | | 18,552 | | Derivative financial instruments | | | 439,909 | | | | (353,631) | | | | (44,047) | | | | (8,231) | | | | (6,653) | | | | 27,347 | | Loans and advances to banks | | | 42,111 | | | | (1,012) | | | | – | | | | (3,858) | | | | (176) | | | | 37,065 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 166,974 | | | | – | | | | (274) | | | | (164,389) | | | | (815) | | | | 1,496 | | Credit cards, unsecured and other retail lending | | | 69,022 | | | | – | | | | (954) | | | | (16,433) | | | | (1,896) | | | | 49,739 | | Corporate loans | | | 191,771 | | | | (9,162) | | | | (620) | | | | (40,201) | | | | (5,122) | | | | 136,666 | | Total loans and advances to customers | | | 427,767 | | | | (9,162) | | | | (1,848) | | | | (221,023) | | | | (7,833) | | | | 187,901 | | Reverse repurchase agreements and other similar secured lending | | | 131,753 | | | | – | | | | – | | | | (130,135) | | | | – | | | | 1,618 | | Available for sale debt securities | | | 85,539 | | | | – | | | | – | | | | (938) | | | | (432) | | | | 84,169 | | Other assets | | | 1,680 | | | | – | | | | – | | | | – | | | | – | | | | 1,680 | | Total on-balance sheet | | | 1,268,705 | | | | (363,805) | | | | (45,943) | | | | (375,645) | | | | (15,385) | | | | 467,927 | | | | | | | | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 21,263 | | | | – | | | | (781) | | | | (848) | | | | (270) | | | | 19,364 | | Documentary credits and other short-term trade-related transactions | | | 1,091 | | | | – | | | | (6) | | | | (8) | | | | (3) | | | | 1,074 | | Forward starting reverse repurchase agreements | | | 13,856 | | | | – | | | | – | | | | (13,841) | | | | – | | | | 15 | | Standby facilities, credit lines and other commitments | | | 276,315 | | | | – | | | | (457) | | | | (17,385) | | | | (793) | | | | 257,680 | | Total off-balance sheet | | | 312,525 | | | | – | | | | (1,244) | | | | (32,082) | | | | (1,066) | | | | 278,133 | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 1,581,230 | | | | (363,805) | | | | (47,187) | | | | (407,727) | | | | (16,451) | | | | 746,060 | |
| | | 114 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Risk review
Risk performance
Credit risk
The Group’s approach to managingmanagement and representingrepresentation of credit quality Asset credit quality All loans and advances are categorised as either ‘neither past due nor impaired’, ‘past due but not impaired’, or ‘past due and impaired’, which includes restructured loans. For the purposes of the disclosures in the balance sheet credit quality section below and the analysis of loans and advances and impairment section (page 117)138): § | | 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 neither past due nor impaired consist predominantly of wholesale and retail loans that are performing. These loans, although unimpaired may carry an unidentified impairment |
§ | | loans that area loan is considered past due but not impaired consist predominantlyand classified as Higher risk when the borrower has failed to make a payment when due under the terms of wholesale loans that are past due but individually assessed as not being impaired. These loans, although individually assessed as unimpaired, may carry an unidentified impairment provisionthe loan contract |
§ | | impaired loans thaton forbearance programmes, as defined on page 134, are individually assessed consist predominantly of wholesale loans that are past due and for which an individual allowance has been raisedcategorised as Higher risk |
§ | | the impairment allowance includes allowances against financial assets that have been individually impaired loans that are collectively assessed consist predominantly of retail loans that are one day or more past due for which aand those subject to collective allowance is raised. Wholesale loans that are past due, individually assessed as unimpaired, but which carry an unidentified impairment provision, are excluded from this category.impairment. |
Home loans, unsecured loans and credit card receivables that are subject to forbearance in the retail portfolios are included in the collectively assessed impaired loans column in the tables in the analysis of loans and advances and impairment section (page 117). Included within wholesale loans that are designated as neither past due nor impaired is a portion of loans that have been subject to forbearance or similar strategies as part of the Group’s ongoing relationship with clients. The loans will have an internal rating reflective of the level of risk to which the Group is exposed, bearing in mind the circumstances of the forbearance, the overall performance and prospects of the client. Loans on forbearance programmes will typically, but not always, attract a higher risk rating than similar loans which are not. A portion of wholesale loans under forbearance is included in the past due but not impaired column, although not all loans subject to forbearance are necessarily impaired or past due. Where wholesale loans under forbearance have been impaired, these form part of individually assessed impaired loans.
The Group uses the following internal measures to determine credit quality for loans that are performing: | | | | | | | | | | | | | Default Grade | |
| Retail lending
Probability of
default |
| |
| Wholesale lending Probability of default | | |
| Credit Quality
descriptionDescription | | 1-3 | | | 0.0-0.60% | | | | 0.0-0.05% | | | | Strong | | 4-5 | | | | | | | 0.05-0.15% | | | | | | 6-8 | | | | | | | 0.15-0.30% | | | | | | 9-11 | | | | | | | 0.30-0.60% | | | | | | 12-14 | | | 0.60-10.00% | | | | 0.60-2.15% | | | | Satisfactory | | 15-19 | | | | | | | 2.15-11.35% | | | | | | 20-21 | | | 10.00%+ | 20 - 21 | | | 11.35%+ | | | | Higher risk | |
For retail clients, a range of analytical tools is used to derive the probability of default of clients at inception and on an ongoing basis. For loans that are performing, these descriptions can be summarised as follows: Strong:there is a very high likelihood of the asset being recovered in full. Satisfactory:while 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 higherstrong or high 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 deterioration, mortgageshome loans with a high loan to value, 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 the value of collateral or security provided. However, the borrower or counterparty is continuing to make payments when due and is expected to settle all outstanding amounts of principal and interest. Loans that are past due are monitored closely, with impairment allowances raised as appropriate and in line with the Group’s impairment policies. These loans are all considered higherHigher risk for the purpose of this analysis of credit quality. Debt securities For assets held at fair value, the carrying value on the balance sheet will include, 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 & Poor’s, Fitch or Moody’s. Where such ratings are not available or are not current, the Group will use its own internal ratings for the securities. Balance sheet credit quality The following tables present the credit quality of Group assets exposed to credit risk. Overview As at 31 December 2015,2016, the ratio of the Group’s assets classified as strong remained broadly stable at 86% (2015: 85% (2014: 84%) of total assets exposed to credit risk. Traded assets remained mostly investment grade with the following proportions being categorised as strong: 96% (2014: 94%) of total derivative financial instruments, 95% (2014: 91%) of debt securities held for trading and 99% (2014: 98%) of debt securities held as available for sale. The credit quality of counterparties to reverse repurchase agreements held at amortised cost, and designated at fair value categorised as strong was 83% (2014: 78%). The credit risk of these assets is significantly reduced as balances are largely collateralised.
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 115121 |
Risk review Risk performance Credit risk In the loan portfolios, 89% of home loans (2014: 86%) to customers are measured as strong. The majority of credit card, unsecured and other retail lending remained satisfactory, reflecting the unsecured nature of a significant proportion of the balance, comprising 76% (2014: 71%) of the total. The credit quality profile of the Group’s wholesale lending remained stable with counterparties rated strong at 72% (2014: 72%).
Further analysis of debt securities by issuer and issuer type and netting and collateral arrangements on derivative financial instruments is presented on pages 129139 and 130140 respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance sheet credit quality (audited) | | | |
| Strong (including investment grade)
£m |
| | | Satisfactory (BB+ to B) £m | | |
| Higher risk (B- and below)
£m |
| | | Maximum exposure to credit risk £m | | |
| Strong (including investment grade)
% |
| |
| Satisfactory (BB+ to B)
% |
| |
| Higher risk (B-and below)
% |
| |
| Maximum exposure to credit risk
% |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 49,711 | | | | – | | | | – | | | | 49,711 | | | | 100 | | | | 0 | | | | 0 | | | | 100 | | Items in the course of collection from other banks | | | 922 | | | | 62 | | | | 27 | | | | 1,011 | | | | 91 | | | | 6 | | | | 3 | | | | 100 | | Trading portfolio assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities | | | 43,118 | | | | 2,217 | | | | 241 | | | | 45,576 | | | | 95 | | | | 5 | | | | 0 | | | | 100 | | Traded loans | | | 329 | | | | 1,880 | | | | 265 | | | | 2,474 | | | | 13 | | | | 76 | | | | 11 | | | | 100 | | Total trading portfolio assets | | | 43,447 | | | | 4,097 | | | | 506 | | | | 48,050 | | | | 90 | | | | 9 | | | | 1 | | | | 100 | | Financial assets designated at fair value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances | | | 16,751 | | | | 790 | | | | 372 | | | | 17,913 | | | | 94 | | | | 4 | | | | 2 | | | | 100 | | Debt securities | | | 1,378 | | | | 3 | | | | 2 | | | | 1,383 | | | | 100 | | | | 0 | | | | 0 | | | | 100 | | Reverse repurchase agreements and other similar secured lendinga | | | 41,145 | | | | 8,352 | | | | 16 | | | | 49,513 | | | | 83 | | | | 17 | | | | 0 | | | | 100 | | Other financial assets | | | 313 | | | | 62 | | | | – | | | | 375 | | | | 83 | | | | 17 | | | | 0 | | | | 100 | | Total financial assets designated at fair value | | | 59,587 | | | | 9,207 | | | | 390 | | | | 69,184 | | | | 86 | | | | 13 | | | | 1 | | | | 100 | | Derivative financial instruments | | | 313,114 | | | | 13,270 | | | | 1,325 | | | | 327,709 | | | | 96 | | | | 4 | | | | 0 | | | | 100 | | Loans and advances to banks | | | 39,059 | | | | 1,163 | | | | 1,127 | | | | 41,349 | | | | 94 | | | | 3 | | | | 3 | | | | 100 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 139,252 | | | | 9,704 | | | | 6,907 | | | | 155,863 | | | | 89 | | | | 6 | | | | 5 | | | | 100 | | Credit cards, unsecured and other retail lending | | | 12,347 | | | | 51,294 | | | | 4,199 | | | | 67,840 | | | | 18 | | | | 76 | | | | 6 | | | | 100 | | Corporate loans | | | 125,743 | | | | 39,600 | | | | 10,171 | | | | 175,514 | | | | 72 | | | | 22 | | | | 6 | | | | 100 | | Total loans and advances to customers | | | 277,342 | | | | 100,598 | | | | 21,277 | | | | 399,217 | | | | 70 | | | | 25 | | | | 5 | | | | 100 | | Reverse repurchase agreements and other similar secured lending | | | 23,040 | | | | 5,147 | | | | – | | | | 28,187 | | | | 82 | | | | 18 | | | | 0 | | | | 100 | | Available for sale debt securities | | | 88,536 | | | | 632 | | | | 110 | | | | 89,278 | | | | 99 | | | | 1 | | | | 0 | | | | 100 | | Other assets | | | 1,142 | | | | 233 | | | | 35 | | | | 1,410 | | | | 81 | | | | 17 | | | | 2 | | | | 100 | | Total assets | | | 895,900 | | | | 134,409 | | | | 24,797 | | | | 1,055,106 | | | | 85 | | | | 13 | | | | 2 | | | | 100 | | As at 31 December 2014 | | | | | | | | | | | �� | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 39,695 | | | | – | | | | – | | | | 39,695 | | | | 100 | | | | 0 | | | | 0 | | | | 100 | | Items in the course of collection from other banks | | | 1,134 | | | | 47 | | | | 29 | | | | 1,210 | | | | 94 | | | | 4 | | | | 2 | | | | 100 | | Trading portfolio assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities | | | 60,290 | | | | 5,202 | | | | 505 | | | | 65,997 | | | | 91 | | | | 8 | | | | 1 | | | | 100 | | Traded loans | | | 446 | | | | 1,935 | | | | 312 | | | | 2,693 | | | | 16 | | | | 72 | | | | 12 | | | | 100 | | Total trading portfolio assets | | | 60,736 | | | | 7,137 | | | | 817 | | | | 68,690 | | | | 89 | | | | 10 | | | | 1 | | | | 100 | | Financial assets designated at fair value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances | | | 18,544 | | | | 844 | | | | 810 | | | | 20,198 | | | | 92 | | | | 4 | | | | 4 | | | | 100 | | Debt securities | | | 4,316 | | | | 130 | | | | 2 | | | | 4,448 | | | | 97 | | | | 3 | | | | 0 | | | | 100 | | Reverse repurchase agreements and other similar secured lending | | | 4,876 | | | | 346 | | | | 14 | | | | 5,236 | | | | 93 | | | | 7 | | | | 0 | | | | 100 | | Other financial assets | | | 269 | | | | 168 | | | | 32 | | | | 469 | | | | 57 | | | | 36 | | | | 7 | | | | 100 | | Total financial assets designated at fair value | | | 28,005 | | | | 1,488 | | | | 858 | | | | 30,351 | | | | 92 | | | | 5 | | | | 3 | | | | 100 | | Derivative financial instruments | | | 414,980 | | | | 24,387 | | | | 542 | | | | 439,909 | | | | 94 | | | | 6 | | | | 0 | | | | 100 | | Loans and advances to banks | | | 39,453 | | | | 1,651 | | | | 1,007 | | | | 42,111 | | | | 94 | | | | 4 | | | | 2 | | | | 100 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 143,700 | | | | 13,900 | | | | 9,374 | | | | 166,974 | | | | 86 | | | | 8 | | | | 6 | | | | 100 | | Credit cards, unsecured and other retail lending | | | 15,369 | | | | 49,255 | | | | 4,398 | | | | 69,022 | | | | 23 | | | | 71 | | | | 6 | | | | 100 | | Corporate loans | | | 137,102 | | | | 42,483 | | | | 12,186 | | | | 191,771 | | | | 72 | | | | 22 | | | | 6 | | | | 100 | | Total loans and advances to customers | | | 296,171 | | | | 105,638 | | | | 25,958 | | | | 427,767 | | | | 69 | | | | 25 | | | | 6 | | | | 100 | | Reverse repurchase agreements and other similar secured lending | | | 102,609 | | | | 29,142 | | | | 2 | | | | 131,753 | | | | 78 | | | | 22 | | | | 0 | | | | 100 | | Available for sale debt securities | | | 84,405 | | | | 498 | | | | 636 | | | | 85,539 | | | | 98 | | | | 1 | | | | 1 | | | | 100 | | Other assets | | | 1,336 | | | | 282 | | | | 62 | | | | 1,680 | | | | 79 | | | | 17 | | | | 4 | | | | 100 | | Total assets | | | 1,068,524 | | | | 170,270 | | | | 29,911 | | | | 1,268,705 | | | | 84 | | | | 13 | | | | 3 | | | | 100 | |
Note
a | During 2015, new reverse repurchase agreements and other similar secured lending in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance sheet credit quality (audited) | | As at 31 December 2016 | |
| Strong (including investment grade)
£m |
| |
| Satisfactory (BB+ to B)
£m |
| |
| Higher risk (B- and below)
£m |
| |
| Maximum exposure to credit risk £m | | |
| Strong (including investment grade)
% |
| |
| Satisfactory (BB+ to B)
% |
| |
| Higher risk (B- and below)
% |
| |
| Maximum exposure to credit risk
% |
| Cash and balances at central banks | | | 102,353 | | | | – | | | | – | | | | 102,353 | | | | 100 | | | | – | | | | – | | | | 100 | | Items in the course of collection from other banks | | | 1,328 | | | | 130 | | | | 9 | | | | 1,467 | | | | 91 | | | | 9 | | | | – | | | | 100 | | Trading portfolio assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities | | | 37,037 | | | | 1,344 | | | | 408 | | | | 38,789 | | | | 96 | | | | 3 | | | | 1 | | | | 100 | | Traded loans | | | 594 | | | | 1,977 | | | | 404 | | | | 2,975 | | | | 20 | | | | 66 | | | | 14 | | | | 100 | | Total trading portfolio assets | | | 37,631 | | | | 3,321 | | | | 812 | | | | 41,764 | | | | 90 | | | | 8 | | | | 2 | | | | 100 | | Financial assets designated at fair value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances | | | 9,692 | | | | 533 | | | | 294 | | | | 10,519 | | | | 92 | | | | 5 | | | | 3 | | | | 100 | | Debt securities | | | 59 | | | | 11 | | | | – | | | | 70 | | | | 84 | | | | 16 | | | | – | | | | 100 | | Reverse repurchase agreements | | | 53,151 | | | | 9,999 | | | | 12 | | | | 63,162 | | | | 84 | | | | 16 | | | | – | | | | 100 | | Other financial assets | | | 244 | | | | 18 | | | | – | | | | 262 | | | | 93 | | | | 7 | | | | – | | | | 100 | | Total financial assets designated at fair value | | | 63,146 | | | | 10,561 | | | | 306 | | | | 74,013 | | | | 85 | | | | 14 | | | | 1 | | | | 100 | | Derivative financial instruments | | | 330,737 | | | | 14,963 | | | | 926 | | | | 346,626 | | | | 95 | | | | 5 | | | | – | | | | 100 | | Loans and advances to banks | | | 39,159 | | | | 3,830 | | | | 262 | | | | 43,251 | | | | 91 | | | | 9 | | | | – | | | | 100 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 136,922 | | | | 2,589 | | | | 5,254 | | | | 144,765 | | | | 95 | | | | 1 | | | | 4 | | | | 100 | | Credit cards, unsecured and other retail lending | | | 5,343 | | | | 50,685 | | | | 1,780 | | | | 57,808 | | | | 9 | | | | 88 | | | | 3 | | | | 100 | | Corporate loans | | | 140,414 | | | | 37,170 | | | | 12,627 | | | | 190,211 | | | | 74 | | | | 19 | | | | 7 | | | | 100 | | Total loans and advances to customers | | | 282,679 | | | | 90,444 | | | | 19,661 | | | | 392,784 | | | | 72 | | | | 23 | | | | 5 | | | | 100 | | Reverse repurchase agreements and other similar secured lending | | | 9,364 | | | | 4,090 | | | | – | | | | 13,454 | | | | 70 | | | | 30 | | | | – | | | | 100 | | Financial investments – debt securities | | | 62,842 | | | | 30 | | | | 7 | | | | 62,879 | | | | 100 | | | | – | | | | – | | | | 100 | | Other assets | | | 1,085 | | | | 117 | | | | 3 | | | | 1,205 | | | | 90 | | | | 10 | | | | – | | | | 100 | | Total assets | | | 930,324 | | | | 127,486 | | | | 21,986 | | | | 1,079,796 | | | | 86 | | | | 12 | | | | 2 | | | | 100 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance sheet credit quality (audited) | | As at 31 December 2015 | |
| Strong (including investment grade)
£m |
| |
| Satisfactory (BB+ to B)
£m |
| |
| Higher risk (B- and below)
£m |
| |
| Maximum exposure to credit risk
£m |
| |
| Strong (including investment grade)
% |
| |
| Satisfactory (BB+ to B)
% |
| |
| Higher risk (B- and below)
% |
| |
| Maximum exposure to credit risk
% |
| Cash and balances at central banks | | | 49,711 | | | | – | | | | – | | | | 49,711 | | | | 100 | | | | – | | | | – | | | | 100 | | Items in the course of collection from other banks | | | 922 | | | | 62 | | | | 27 | | | | 1,011 | | | | 91 | | | | 6 | | | | 3 | | | | 100 | | Trading portfolio assets: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Debt securities | | | 43,118 | | | | 2,217 | | | | 241 | | | | 45,576 | | | | 95 | | | | 5 | | | | – | | | | 100 | | Traded loans | | | 329 | | | | 1,880 | | | | 265 | | | | 2,474 | | | | 13 | | | | 76 | | | | 11 | | | | 100 | | Total trading portfolio assets | | | 43,447 | | | | 4,097 | | | | 506 | | | | 48,050 | | | | 90 | | | | 9 | | | | 1 | | | | 100 | | Financial assets designated at fair value: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances | | | 16,751 | | | | 790 | | | | 372 | | | | 17,913 | | | | 94 | | | | 4 | | | | 2 | | | | 100 | | Debt securities | | | 1,378 | | | | 3 | | | | 2 | | | | 1,383 | | | | 100 | | | | – | | | | – | | | | 100 | | Reverse repurchase agreements | | | 41,145 | | | | 8,352 | | | | 16 | | | | 49,513 | | | | 83 | | | | 17 | | | | – | | | | 100 | | Other financial assets | | | 313 | | | | 62 | | | | – | | | | 375 | | | | 83 | | | | 17 | | | | – | | | | 100 | | Total financial assets designated at fair value | | | 59,587 | | | | 9,207 | | | | 390 | | | | 69,184 | | | | 86 | | | | 13 | | | | 1 | | | | 100 | | Derivative financial instruments | | | 313,114 | | | | 13,270 | | | | 1,325 | | | | 327,709 | | | | 96 | | | | 4 | | | | – | | | | 100 | | Loans and advances to banks | | | 39,059 | | | | 1,163 | | | | 1,127 | | | | 41,349 | | | | 94 | | | | 3 | | | | 3 | | | | 100 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 139,252 | | | | 9,704 | | | | 6,907 | | | | 155,863 | | | | 89 | | | | 6 | | | | 5 | | | | 100 | | Credit cards, unsecured and other retail lending | | | 12,347 | | | | 51,294 | | | | 4,199 | | | | 67,840 | | | | 18 | | | | 76 | | | | 6 | | | | 100 | | Corporate loans | | | 125,743 | | | | 39,600 | | | | 10,171 | | | | 175,514 | | | | 72 | | | | 22 | | | | 6 | | | | 100 | | Total loans and advances to customers | | | 277,342 | | | | 100,598 | | | | 21,277 | | | | 399,217 | | | | 70 | | | | 25 | | | | 5 | | | | 100 | | Reverse repurchase agreements and other similar secured lending | | | 23,040 | | | | 5,147 | | | | – | | | | 28,187 | | | | 82 | | | | 18 | | | | – | | | | 100 | | Financial investments – debt securities | | | 88,536 | | | | 632 | | | | 110 | | | | 89,278 | | | | 99 | | | | 1 | | | | – | | | | 100 | | Other assets | | | 1,142 | | | | 233 | | | | 35 | | | | 1,410 | | | | 81 | | | | 17 | | | | 2 | | | | 100 | | Total assets | | | 895,900 | | | | 134,409 | | | | 24,797 | | | | 1,055,106 | | | | 85 | | | | 13 | | | | 2 | | | | 100 | |
| | | 116122 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review
Risk performance
Credit risk
As the principal source of credit risk to the Group, loans and advances to customers and banks is analysed in detail below:
Loans and advances to customers and banks
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of loans and advances and impairment to customers and banks | | | |
| Gross
L&A £m |
| | | Impairment allowance £m | | | | L&A net of impairment £m | | |
| Credit risk loans
£m |
| |
| CRLs % of gross L&A
% |
| | | Loan impairment chargesa £m | | |
| Loan loss rates
bps |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personal & Corporate Banking | | | 137,212 | | | | 713 | | | | 136,499 | | | | 1,591 | | | | 1.2 | | | | 199 | | | | 15 | | Africa Banking | | | 17,412 | | | | 539 | | | | 16,873 | | | | 859 | | | | 4.9 | | | | 273 | | | | 157 | | Barclaycard | | | 43,346 | | | | 1,835 | | | | 41,511 | | | | 1,601 | | | | 3.7 | | | | 1,251 | | | | 289 | | Barclays Core | | | 197,970 | | | | 3,087 | | | | 194,883 | | | | 4,051 | | | | 2.0 | | | | 1,723 | | | | 87 | | Barclays Non-Core | | | 11,610 | | | | 369 | | | | 11,241 | | | | 845 | | | | 7.3 | | | | 85 | | | | 73 | | Total Group Retail | | | 209,580 | | | | 3,456 | | | | 206,124 | | | | 4,896 | | | | 2.3 | | | | 1,808 | | | | 86 | | Investment Bank | | | 92,321 | | | | 83 | | | | 92,238 | | | | 241 | | | | 0.3 | | | | 47 | | | | 5 | | Personal & Corporate Banking | | | 87,855 | | | | 914 | | | | 86,941 | | | | 1,794 | | | | 2.0 | | | | 182 | | | | 21 | | Africa Banking | | | 14,955 | | | | 235 | | | | 14,720 | | | | 541 | | | | 3.6 | | | | 80 | | | | 53 | | Head Office and Other Operations | | | 5,922 | | | | – | | | | 5,922 | | | | – | | | | – | | | | – | | | | – | | Barclays Core | | | 201,053 | | | | 1,232 | | | | 199,821 | | | | 2,576 | | | | 1.3 | | | | 309 | | | | 15 | | Barclays Non-Core | | | 34,854 | | | | 233 | | | | 34,621 | | | | 345 | | | | 1.0 | | | | (20 | ) | | | (6 | ) | Total Group Wholesale | | | 235,907 | | | | 1,465 | | | | 234,442 | | | | 2,921 | | | | 1.2 | | | | 289 | | | | 12 | | Group Total | | | 445,487 | | | | 4,921 | | | | 440,566 | | | | 7,817 | | | | 1.8 | | | | 2,097 | | | | 47 | | Traded loans | | | 2,474 | | | | n/a | | | | 2,474 | | | | | | | | | | | | | | | | | | Loans and advances designated at fair value | | | 17,913 | | | | n/a | | | | 17,913 | | | | | | | | | | | | | | | | | | Loans and advances held at fair value | | | 20,387 | | | | n/a | | | | 20,387 | | | | | | | | | | | | | | | | | | Total loans and advances | | | 465,874 | | | | 4,921 | | | | 460,953 | | | | | | | | | | | | | | | | | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personal & Corporate Bankingb,c | | | 136,544 | | | | 766 | | | | 135,778 | | | | 1,733 | | | | 1.3 | | | | 215 | | | | 16 | | Africa Banking | | | 21,334 | | | | 681 | | | | 20,653 | | | | 1,093 | | | | 5.1 | | | | 295 | | | | 138 | | Barclaycard | | | 38,376 | | | | 1,815 | | | | 36,561 | | | | 1,765 | | | | 4.6 | | | | 1,183 | | | | 308 | | Barclays Core | | | 196,254 | | | | 3,262 | | | | 192,992 | | | | 4,591 | | | | 2.3 | | | | 1,693 | | | | 86 | | Barclays Non-Core | | | 20,259 | | | | 428 | | | | 19,831 | | | | 1,209 | | | | 6.0 | | | | 151 | | | | 75 | | Total Group Retail | | | 216,513 | | | | 3,690 | | | | 212,823 | | | | 5,800 | | | | 2.7 | | | | 1,844 | | | | 85 | | Investment Bank | | | 106,377 | | | | 44 | | | | 106,333 | | | | 71 | | | | 0.1 | | | | (14) | | | | (1) | | Personal & Corporate Bankingb | | | 88,192 | | | | 873 | | | | 87,319 | | | | 2,112 | | | | 2.4 | | | | 267 | | | | 30 | | Africa Banking | | | 16,312 | | | | 246 | | | | 16,066 | | | | 665 | | | | 4.1 | | | | 54 | | | | 33 | | Head Office and Other Operations | | | 3,240 | | | | – | | | | 3,240 | | | | – | | | | – | | | | – | | | | – | | Barclays Core | | | 214,121 | | | | 1,163 | | | | 212,958 | | | | 2,848 | | | | 1.3 | | | | 307 | | | | 14 | | Barclays Non-Core | | | 44,699 | | | | 602 | | | | 44,097 | | | | 841 | | | | 1.9 | | | | 53 | | | | 12 | | Total Group Wholesale | | | 258,820 | | | | 1,765 | | | | 257,055 | | | | 3,689 | | | | 1.4 | | | | 360 | | | | 14 | | Group Total | | | 475,333 | | | | 5,455 | | | | 469,878 | | | | 9,489 | | | | 2.0 | | | | 2,204 | | | | 46 | | Traded loans | | | 2,693 | | | | n/a | | | | 2,693 | | | | | | | | | | | | | | | | | | Loans and advances designated at fair value | | | 20,198 | | | | n/a | | | | 20,198 | | | | | | | | | | | | | | | | | | Loans and advances held at fair value | | | 22,891 | | | | n/a | | | | 22,891 | | | | | | | | | | | | | | | | | | Total loans and advances | | | 498,224 | | | | 5,455 | | | | 492,769 | | | | | | | | | | | | | | | | | |
Loans and advances at amortised cost net of impairment decreased to £440.6bn (2014: £469.9bn):
§ | | Non-Core decreased £18.1bn to £45.9bn driven by reclassification of Portuguese and Italian loans now held for sale and a reduction in Europe Retail driven by a run-off of assets |
§ | | Investment Bank decreased by £14.1bn to £92.2bn reflecting a decrease in cash collateral balances and a decrease in settlement balances as a result of reduced trading volumes |
§ | | Barclaycard increased by £5.0bn to £41.5bn as a result of business growth across the portfolio. |
CRLs decreased £1.7bn to £7.8bn primarily due to a reduction of £0.9bn in Non-Core relating to the reclassification of the Portuguese business as held for sale and improved economic conditions for Corporate portfolios.
Loan impairment charges improved 5% to £2,097m, with a loan loss rate of 47bps (2014: 46bps). This reflected higher recoveries in Europe and the sale of the Spanish business in Non-Core, lower impairments in PCB due to the benign economic environment in the UK resulting in lower default rates and charges, partially offset by increased impairment in Barclaycard driven by growth in the business and updates to impairment model methodologies. Loan loss rates for Africa Banking increased reflecting lower year-end loans and advances balances due to Rand depreciation.
Notes
a | Excluding impairment charges on available for sale investments and reverse repurchase agreements. |
b | UK Business Banking has been reclassified from Retail to Wholesale in line with how the business is now managed. 2014 figures have been revised to reflect this, with net loans and advances of £8.4bn, credit risk loans of £482m and impairment charges of £48m reclassified to Wholesale. |
c | 2014 PCB Credit Risk Loans have been revised by £151m to align the methodology for determining arrears categories with other Home Finance risk disclosures. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 117 |
| | | | | | | | | | | | | | | | | Analysis of gross loans and advances by product | | | | | Home Loans £m | | |
| Credit cards, unsecured and other
retail lending £m |
| |
| Corporate
Loans £m |
| |
| Group Total
£m |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | Personal & Corporate Banking | | | 135,380 | | | | 21,026 | | | | 68,661 | | | | 225,067 | | Africa Banking | | | 10,368 | | | | 7,633 | | | | 14,366 | | | | 32,367 | | Barclaycard | | | – | | | | 41,559 | | | | 1,787 | | | | 43,346 | | Investment Bank | | | – | | | | – | | | | 92,321 | | | | 92,321 | | Head Office and Other Operations | | | – | | | | – | | | | 5,922 | | | | 5,922 | | Total Core | | | 145,748 | | | | 70,218 | | | | 183,057 | | | | 399,023 | | Barclays Non-Core | | | 10,633 | | | | 1,016 | | | | 34,815 | | | | 46,464 | | Group Total | | | 156,381 | | | | 71,234 | | | | 217,872 | | | | 445,487 | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | Personal & Corporate Banking | | | 136,022 | | | | 23,837 | | | | 64,877 | | | | 224,736 | | Africa Banking | | | 12,959 | | | | 8,375 | | | | 16,312 | | | | 37,646 | | Barclaycard | | | – | | | | 38,376 | | | | – | | | | 38,376 | | Investment Bank | | | – | | | | – | | | | 106,377 | | | | 106,377 | | Head Office and Other Operations | | | – | | | | – | | | | 3,240 | | | | 3,240 | | Total Core | | | 148,981 | | | | 70,588 | | | | 190,806 | | | | 410,375 | | Barclays Non-Core | | | 18,540 | | | | 1,779 | | | | 44,639 | | | | 64,958 | | Group Total | | | 167,521 | | | | 72,367 | | | | 235,445 | | | | 475,333 | |
Analysis of the concentration 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 Group implements limits on concentrations in order to mitigate the risk. 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. Further detail on the Group’s policies with regard to managing concentration risk is presented on page 126 of the Barclays PLC 2015 Pillar 3 Report.370. Geographic concentrations As at 31 December 2015,2016, the geographic concentration of the Group’s assets remained broadly consistent with 2014. 40% (2014: 38%) of the exposure2015. Exposure is concentrated in the UK 31% (2014: 31%41% (2015: 40%), in the Americas 33% (2015: 31%) and Europe 21% (2015: 20% (2014: 22%). The decrease of £58bn in Europe.Africa and the Middle East is due to the reclassification of BAGL balances now held for sale. Information on exposures to selected Eurozone countries is presented on page 119.124. | | | | | | | | | | | | | | | | | | | | | | | | | Credit risk concentrations by geography (audited) | | As at 31 December 2015 | | | United Kingdom £m | | |
| Europe
£m |
| | | Americas £m | | | | Africa and Middle East £m | | |
| Asia
£m |
| |
| Total
£m |
| On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 14,061 | | | | 19,094 | | | | 13,288 | | | | 2,055 | | | | 1,213 | | | | 49,711 | | Items in the course of collection from other banks | | | 543 | | | | 72 | | | | – | | | | 396 | | | | – | | | | 1,011 | | Trading portfolio assets | | | 7,150 | | | | 10,012 | | | | 23,641 | | | | 2,111 | | | | 5,136 | | | | 48,050 | | Financial assets designated at fair value | | | 22,991 | | | | 5,562 | | | | 35,910 | | | | 3,039 | | | | 1,682 | | | | 69,184 | | Derivative financial instruments | | | 99,658 | | | | 103,498 | | | | 101,592 | | | | 3,054 | | | | 19,907 | | | | 327,709 | | Loans and advances to banks | | | 10,733 | | | | 9,918 | | | | 13,078 | | | | 2,900 | | | | 4,720 | | | | 41,349 | | Loans and advances to customers | | | 239,086 | | | | 47,372 | | | | 69,803 | | | | 33,461 | | | | 9,495 | | | | 399,217 | | Reverse repurchase agreements and other similar secured lendinga | | | 5,905 | | | | 4,361 | | | | 15,684 | | | | 915 | | | | 1,322 | | | | 28,187 | | Available for sale debt securities | | | 20,509 | | | | 40,344 | | | | 20,520 | | | | 3,999 | | | | 3,906 | | | | 89,278 | | Other assets | | | 868 | | | | 4 | | | | 131 | | | | 314 | | | | 93 | | | | 1,410 | | Total on-balance sheet | | | 421,504 | | | | 240,237 | | | | 293,647 | | | | 52,244 | | | | 47,474 | | | | 1,055,106 | | | | | | | | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 9,543 | | | | 3,020 | | | | 5,047 | | | | 2,505 | | | | 461 | | | | 20,576 | | Documentary credits and other short-term trade-related transactions | | | 594 | | | | 58 | | | | – | | | | 193 | | | | – | | | | 845 | | Forward starting reverse repurchase agreementsb | | | 9 | | | | 5 | | | | 65 | | | | – | | | | 14 | | | | 93 | | Standby facilities, credit lines and other commitments | | | 104,797 | | | | 34,370 | | | | 125,456 | | | | 13,600 | | | | 3,146 | | | | 281,369 | | Total off-balance sheet | | | 114,943 | | | | 37,453 | | | | 130,568 | | | | 16,298 | | | | 3,621 | | | | 302,883 | | Total | | | 536,447 | | | | 277,690 | | | | 424,215 | | | | 68,542 | | | | 51,095 | | | | 1,357,989 | |
Note
a | During 2015, new reverse repurchase agreements and other similar secured lending in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
b | Forward starting reverse repurchase agreements were previously disclosed as loan commitments. Following the business designation of reverse repurchase and repurchase agreements at fair value through profit and loss, new forward starting reverse repurchase agreements are within the scope of IAS 39 and are recognised as derivatives on the balance sheet. |
| | | | | | | | | | | | | | | | | | | | | | | | | Credit risk concentrations by geography (audited) | | As at 31 December 2016 | |
| United Kingdom
£m |
| |
| Europe
£m |
| |
| Americas
£m |
| |
| Africa and Middle East £m | | |
| Asia
£m |
| |
| Total
£m |
| On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 30,485 | | | | 40,439 | | | | 24,859 | | | | 77 | | | | 6,493 | | | | 102,353 | | Items in the course of collection from other banks | | | 969 | | | | 498 | | | | – | | | | – | | | | – | | | | 1,467 | | Trading portfolio assets | | | 8,981 | | | | 9,171 | | | | 19,848 | | | | 435 | | | | 3,329 | | | | 41,764 | | Financial assets designated at fair value | | | 25,821 | | | | 10,244 | | | | 33,181 | | | | 733 | | | | 4,034 | | | | 74,013 | | Derivative financial instruments | | | 108,559 | | | | 107,337 | | | | 105,129 | | | | 1,493 | | | | 24,108 | | | | 346,626 | | Loans and advances to banks | | | 7,458 | | | | 12,674 | | | | 16,894 | | | | 1,778 | | | | 4,447 | | | | 43,251 | | Loans and advances to customers | | | 253,752 | | | | 47,050 | | | | 81,045 | | | | 3,089 | | | | 7,848 | | | | 392,784 | | Reverse repurchase agreements and other similar secured lending | | | 218 | | | | 309 | | | | 11,439 | | | | 92 | | | | 1,396 | | | | 13,454 | | Financial Investments - debt securities | | | 18,126 | | | | 27,763 | | | | 12,030 | | | | 251 | | | | 4,709 | | | | 62,879 | | Other assets | | | 987 | | | | – | | | | 137 | | | | 10 | | | | 71 | | | | 1,205 | | Totalon-balance sheet | | | 455,356 | | | �� | 255,485 | | | | 304,562 | | | | 7,958 | | | | 56,435 | | | | 1,079,796 | | | | | | | | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 8,268 | | | | 3,275 | | | | 6,910 | | | | 702 | | | | 753 | | | | 19,908 | | Documentary credits and other short-term trade related transactions | | | 915 | | | | 9 | | | | – | | | | 40 | | | | 41 | | | | 1,005 | | Forward starting reverse repurchase agreements | | | 14 | | | | 1 | | | | 5 | | | | 2 | | | | 2 | | | | 24 | | Standby facilities, credit lines and other commitments | | | 106,413 | | | | 35,475 | | | | 156,072 | | | | 1,692 | | | | 3,005 | | | | 302,657 | | Totaloff-balance sheet | | | 115,610 | | | | 38,760 | | | | 162,987 | | | | 2,436 | | | | 3,801 | | | | 323,594 | | Total | | | 570,966 | | | | 294,245 | | | | 467,549 | | | | 10,394 | | | | 60,236 | | | | 1,403,390 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Credit risk concentrations by geography (audited) | | As at 31 December 2015 | |
| United Kingdom
£m |
| |
| Europe
£m |
| |
| Americas £m | | |
| Africa and Middle East
£m |
| |
| Asia
£m |
| |
| Total
£m |
| On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 14,061 | | | | 19,094 | | | | 13,288 | | | | 2,055 | | | | 1,213 | | | | 49,711 | | Items in the course of collection from other banks | | | 543 | | | | 72 | | | | – | | | | 396 | | | | – | | | | 1,011 | | Trading portfolio assets | | | 7,150 | | | | 10,012 | | | | 23,641 | | | | 2,111 | | | | 5,136 | | | | 48,050 | | Financial assets designated at fair value | | | 22,991 | | | | 5,562 | | | | 35,910 | | | | 3,039 | | | | 1,682 | | | | 69,184 | | Derivative financial instruments | | | 99,658 | | | | 103,498 | | | | 101,592 | | | | 3,054 | | | | 19,907 | | | | 327,709 | | Loans and advances to banks | | | 10,733 | | | | 9,918 | | | | 13,078 | | | | 2,900 | | | | 4,720 | | | | 41,349 | | Loans and advances to customers | | | 239,086 | | | | 47,372 | | | | 69,803 | | | | 33,461 | | | | 9,495 | | | | 399,217 | | Reverse repurchase agreements and other similar secured lending | | | 5,905 | | | | 4,361 | | | | 15,684 | | | | 915 | | | | 1,322 | | | | 28,187 | | Financial investments - debt securities | | | 20,509 | | | | 40,344 | | | | 20,520 | | | | 3,999 | | | | 3,906 | | | | 89,278 | | Other assets | | | 868 | | | | 4 | | | | 131 | | | | 314 | | | | 93 | | | | 1,410 | | Totalon-balance sheet | | | 421,504 | | | | 240,237 | | | | 293,647 | | | | 52,244 | | | | 47,474 | | | | 1,055,106 | | | | | | | | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 9,543 | | | | 3,020 | | | | 5,047 | | | | 2,505 | | | | 461 | | | | 20,576 | | Documentary credits and other short-term trade related transactions | | | 594 | | | | 58 | | | | – | | | | 193 | | | | – | | | | 845 | | Forward starting reverse repurchase agreements | | | 9 | | | | 5 | | | | 65 | | | | – | | | | 14 | | | | 93 | | Standby facilities, credit lines and other commitments | | | 104,797 | | | | 34,370 | | | | 125,456 | | | | 13,600 | | | | 3,146 | | | | 281,369 | | Totaloff-balance sheet | | | 114,943 | | | | 37,453 | | | | 130,568 | | | | 16,298 | | | | 3,621 | | | | 302,883 | | Total | | | 536,447 | | | | 277,690 | | | | 424,215 | | | | 68,542 | | | | 51,095 | | | | 1,357,989 | |
| | | 118 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 123 |
Risk review Risk performance Credit risk | | | | | | | | | | | | | | | | | | | | | | | | | Credit risk concentrations by geography (audited) | | As at 31 December 2014 | | | United Kingdom £m | | |
| Europe
£m |
| | | Americas £m | | | | Africa and Middle East £m | | |
| Asia
£m |
| |
| Total
£m |
| On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 13,770 | | | | 12,224 | | | | 9,365 | | | | 2,161 | | | | 2,175 | | | | 39,695 | | Items in the course of collection from other banks | | | 644 | | | | 158 | | | | – | | | | 408 | | | | – | | | | 1,210 | | Trading portfolio assets | | | 12,921 | | | | 15,638 | | | | 31,061 | | | | 2,498 | | | | 6,572 | | | | 68,690 | | Financial assets designated at fair value | | | 21,274 | | | | 1,591 | | | | 3,986 | | | | 2,999 | | | | 501 | | | | 30,351 | | Derivative financial instruments | | | 133,400 | | | | 147,421 | | | | 129,771 | | | | 2,332 | | | | 26,985 | | | | 439,909 | | Loans and advances to banks | | | 7,472 | | | | 12,793 | | | | 13,227 | | | | 3,250 | | | | 5,369 | | | | 42,111 | | Loans and advances to customers | | | 241,543 | | | | 60,018 | | | | 76,561 | | | | 39,241 | | | | 10,404 | | | | 427,767 | | Reverse repurchase agreements and other similar secured lending | | | 20,551 | | | | 22,655 | | | | 81,368 | | | | 928 | | | | 6,251 | | | | 131,753 | | Available for sale debt securities | | | 22,888 | | | | 33,368 | | | | 22,846 | | | | 4,770 | | | | 1,667 | | | | 85,539 | | Other assets | | | 837 | | | | – | | | | 232 | | | | 483 | | | | 128 | | | | 1,680 | | Total on-balance sheet | | | 475,300 | | | | 305,866 | | | | 368,417 | | | | 59,070 | | | | 60,052 | | | | 1,268,705 | | | | | | | | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | Acceptances, endorsements and other contingent liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 10,222 | | | | 2,542 | | | | 5,517 | | | | 2,757 | | | | 225 | | | | 21,263 | | Documentary credits and other short-term trade-related transactions | | | 851 | | | | 36 | | | | – | | | | 186 | | | | 18 | | | | 1,091 | | Forward starting reverse repurchase agreements | | | 4,462 | | | | 5,936 | | | | 701 | | | | 2 | | | | 2,755 | | | | 13,856 | | Standby facilities, credit lines and other commitments | | | 108,025 | | | | 34,886 | | | | 116,343 | | | | 14,911 | | | | 2,150 | | | | 276,315 | | Total off-balance sheet | | | 123,560 | | | | 43,400 | | | | 122,561 | | | | 17,856 | | | | 5,148 | | | | 312,525 | | Total | | | 598,860 | | | | 349,266 | | | | 490,978 | | | | 76,926 | | | | 65,200 | | | | 1,581,230 | |
Group exposuresExposures to specificEurozone countries (audited)
The following table shows Barclays most significant current exposure (above £4bn neton-balance sheet exposure) to Eurozone countries. Basis of preparation The Group recognisespresents the direct balance sheet exposure to credit and market risk resulting from the ongoing volatility in the Eurozone and continues to monitor events closely while taking coordinated steps to mitigate the risks associatedby country, with the challenging economic environment. These contingency plans have been reviewedtotals reflecting allowance for impairment, netting and refreshed to ensure they remain effective. The following table shows Barclays’ exposure to specific Eurozone countries monitored internally as being higher risk and thus being the subject of particular management focus. The basis of preparation is consistent with that described in the 2014 Form 20-F.cash collateral held where appropriate.
The net on-balance sheet exposure providesincludes: § | | Loans and advances held at amortised cost, net of impairment. Settlement balances and cash collateral are excluded from this analysis |
§ | | Trading assets and liabilities are presented by issuer type on a net basis. Where liability positions exceed asset positions by issuer type, exposures are presented as nil |
§ | | Derivative assets and liabilities are presented by counterparty type on a net basis. Cash collateral held is then added to give a net credit exposure. Where liability positions and collateral held exceed asset positions by counterparty type, exposures are presented as nil |
§ | | Financial investments – debt securities principally relating to investments in government bonds and other debt securities |
§ | | Other assets held for sale. Businesses held for sale with European exposures are included within the Financial institutions category |
The analysis excludes financial assets not subject to credit risk § | | Equity securities held for trading, as financial investments or designated at fair value, and traded commodities |
§ | | Reverse repurchase agreements measured at amortised cost and at fair value which are materially fully collateralised |
Gross exposure reflects total exposures before the most appropriate measureeffects of economic hedging by way of trading portfolio liabilities, derivative liabilities and cash collateral, but after taking into account impairment allowances and IFRS netting. The Italian home loans of £9.7bn (2015: £9.5bn) are secured on residential property with average balance weighted marked to market LTVs of 61.8% (2015: 60.6%) and CRL coverage of 36% (2015: 31%). 90 days arrear and grosscharge-off rates remained stable at 1.2% (2015: 1.2%) and 0.8% (2015: 0.7%) respectively. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net exposure by country and counterparty | | | |
| Sovereign
£m |
| |
| Financial institutions
£m |
| |
| Corporate
£m |
| |
| Home loans
£m |
| |
| Other retail lending
£m |
| |
| Net on-balance sheet exposure
£m |
| |
| Gross on-balance sheet exposure
£m |
| |
| Contingent liabilities and
commitments £m |
| As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Italy | | | 2,668 | | | | 299 | | | | 763 | | | | 9,741 | | | | 331 | | | | 13,802 | | | | 18,580 | | | | 2,835 | | Germany | | | 5,250 | | | | 3,399 | | | | 1,379 | | | | 8 | | | | 2,967 | | | | 13,003 | | | | 47,964 | | | | 13,362 | | France | | | 3,708 | | | | 6,886 | | | | 1,160 | | | | 736 | | | | 139 | | | | 12,629 | | | | 41,056 | | | | 6,565 | | Ireland | | | 6 | | | | 2,230 | | | | 1,855 | | | | 30 | | | | 9 | | | | 4,130 | | | | 6,474 | | | | 2,735 | | Total | | | 11,632 | | | | 12,814 | | | | 5,157 | | | | 10,515 | | | | 3,446 | | | | 43,564 | | | | 114,074 | | | | 25,497 | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Italy | | | 1,708 | | | | 2,283 | | | | 1,039 | | | | 9,505 | | | | 675 | | | | 15,210 | | | | 20,586 | | | | 2,701 | | Germany | | | 7,494 | | | | 3,621 | | | | 1,602 | | | | 9 | | | | 2,313 | | | | 15,039 | | | | 50,930 | | | | 8,029 | | France | | | 7,426 | | | | 4,967 | | | | 805 | | | | 1,472 | | | | 152 | | | | 14,822 | | | | 43,427 | | | | 7,436 | | Ireland | | | 9 | | | | 2,824 | | | | 1,282 | | | | 37 | | | | 51 | | | | 4,203 | | | | 7,454 | | | | 2,673 | | Total | | | 16,637 | | | | 13,695 | | | | 4,728 | | | | 11,023 | | | | 3,191 | | | | 49,274 | | | | 122,397 | | | | 20,839 | |
| | | 124 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Industry concentrations The concentration of the credit risk to which the Group is exposed. The gross exposure is also presented below, alongside off-balance sheet contingent liabilities and commitments. During 2015, the Group’s net on-balance sheet exposures to Spain, Italy, Portugal, Ireland, Cyprus and Greece decreasedassets by £17.2bn to £26.1bn primarily due to a £13.4bn reduction in Spain following the sale of the Spanish business. The £7.0bn decrease in residential mortgages relates predominantly to Portuguese and Italian loans reclassified to held for sale within the Financial institutions category.
industry remained broadly consistent year on year. As at 31 December 2015,2016, total assets concentrated towards banks and other financial institutions was 43% (2015: 42%), predominantly within derivative financial instruments. The proportion of the local net funding deficit in Italy was€3.8bn (2014:€9.9bn)overall balance concentrated towards governments and the deficit in Portugal was€1.4bn (2014:€1.9bn)central banks remained stable at 14% (2015: 12%) and home loans at 11% (2015: 12%). The net funding surplus in Spain was€0.2bn (2014:€4.3bn). | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net exposure by country and counterparty (audited) | | | | | Sovereign £m | | | | Financial institutions £m | | | | Corporate £m | | | | Residential mortgages £m | | |
| Other retail lending
£m |
| |
| Net
on-balance sheet exposure £m |
| | | Gross on-balance sheet exposure £m | | | | Contingent liabilities and commitments £m | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Spain | | | 90 | | | | 623 | | | | 1,176 | | | | 7 | | | | 311 | | | | 2,207 | | | | 7,944 | | | | 2,073 | | Italy | | | 1,708 | | | | 2,283 | | | | 1,039 | | | | 9,505 | | | | 675 | | | | 15,210 | | | | 20,586 | | | | 2,701 | | Portugal | | | 87 | | | | 3,346 | | | | 152 | | | | 6 | | | | 700 | | | | 4,291 | | | | 4,555 | | | | 1,299 | | Ireland | | | 9 | | | | 2,824 | | | | 1,282 | | | | 37 | | | | 51 | | | | 4,203 | | | | 7,454 | | | | 2,673 | | Cyprus | | | 29 | | | | 6 | | | | 59 | | | | 16 | | | | 46 | | | | 156 | | | | 391 | | | | 1 | | Greece | | | 1 | | | | 3 | | | | 14 | | | | 4 | | | | 3 | | | | 25 | | | | 975 | | | | – | | Total | | | 1,924 | | | | 9,085 | | | | 3,722 | | | | 9,575 | | | | 1,786 | | | | 26,092 | | | | 41,905 | | | | 8,747 | | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Spain | | | 108 | | | | 14,043 | | | | 1,149 | | | | 12 | | | | 248 | | | | 15,560 | | | | 24,873 | | | | 2,863 | | Italy | | | 1,716 | | | | 485 | | | | 1,128 | | | | 13,530 | | | | 1,114 | | | | 17,973 | | | | 25,967 | | | | 3,033 | | Portugal | | | 105 | | | | 7 | | | | 531 | | | | 2,995 | | | | 1,207 | | | | 4,845 | | | | 5,050 | | | | 1,631 | | Ireland | | | 37 | | | | 3,175 | | | | 1,453 | | | | 43 | | | | 50 | | | | 4,758 | | | | 9,445 | | | | 2,070 | | Cyprus | | | 28 | | | | 12 | | | | 61 | | | | 6 | | | | 16 | | | | 123 | | | | 707 | | | | 26 | | Greece | | | 1 | | | | 11 | | | | 15 | | | | – | | | | – | | | | 27 | | | | 1,279 | | | | – | | Total | | | 1,995 | | | | 17,733 | | | | 4,337 | | | | 16,586 | | | | 2,635 | | | | 43,286 | | | | 67,321 | | | | 9,623 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Credit risk concentrations by industry (audited) | | As at 31 December 2016 | |
| Banks
£m |
| |
| Other financial insti- tutions
£m |
| |
| Manu- facturing
£m |
| |
| Const- ruction and property
£m |
| |
| Govern- ment and central bank
£m |
| |
| Energy and water
£m |
| |
| Wholesale and retail distribu- tion and leisure
£m |
| |
| Business and other services £m | | |
| Home loans
£m |
| |
| Cards, unsecured loans and other personal lending
£m |
| |
| Other
£m |
| |
| Total
£m |
| On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | – | | | | – | | | | – | | | | – | | | | 102,353 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 102,353 | | Items in the course of collection from other banks | | | 1,467 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,467 | | Trading portfolio assets | | | 2,231 | | | | 7,998 | | | | 1,625 | | | | 565 | | | | 21,047 | | | | 3,733 | | | | 324 | | | | 2,972 | | | | 257 | | | | – | | | | 1,012 | | | | 41,764 | | Financial assets designated at fair value | | | 14,714 | | | | 49,783 | | | | 3 | | | | 5,699 | | | | 856 | | | | 5 | | | | 33 | | | | 2,811 | | | | 33 | | | | 2 | | | | 74 | | | | 74,013 | | Derivative financial instruments | | | 182,664 | | | | 139,066 | | | | 2,913 | | | | 3,488 | | | | 6,547 | | | | 4,585 | | | | 810 | | | | 3,392 | | | | – | | | | – | | | | 3,161 | | | | 346,626 | | Loans and advances to banks | | | 38,932 | | | | – | | | | – | | | | – | | | | 4,319 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 43,251 | | Loans and advances to customers | | | – | | | | 91,812 | | | | 12,337 | | | | 24,200 | | | | 12,028 | | | | 7,384 | | | | 12,967 | | | | 21,838 | | | | 144,765 | | | | 56,730 | | | | 8,723 | | | | 392,784 | | Reverse repurchase agreements and other similar secured lending | | | 2,596 | | | | 10,568 | | | | – | | | | 38 | | | | 252 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 13,454 | | Financial investments - debt securities | | | 12,842 | | | | 4,877 | | | | – | | | | – | | | | 44,263 | | | | – | | | | 43 | | | | 807 | | | | – | | | | – | | | | 47 | | | | 62,879 | | Other assets | | | 975 | | | | 205 | | | | – | | | | – | | | | 25 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,205 | | Totalon-balance sheet | | | 256,421 | | | | 304,309 | | | | 16,878 | | | | 33,990 | | | | 191,690 | | | | 15,707 | | | | 14,177 | | | | 31,820 | | | | 145,055 | | | | 56,732 | | | | 13,017 | | | | 1,079,796 | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 1,484 | | | | 4,232 | | | | 3,387 | | | | 707 | | | | 8 | | | | 2,649 | | | | 1,032 | | | | 4,847 | | | | 40 | | | | 531 | | | | 991 | | | | 19,908 | | Documentary credits and other short-term trade related transactions | | | 433 | | | | – | | | | 377 | | | | – | | | | – | | | | – | | | | 157 | | | | 38 | | | | – | | | | – | | | | – | | | | 1,005 | | Forward starting reverse repurchase agreements | | | 5 | | | | 19 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 24 | | Standby facilities, credit lines and other commitments | | | 1,016 | | | | 29,310 | | | | 38,829 | | | | 11,876 | | | | 400 | | | | 29,699 | | | | 14,741 | | | | 26,359 | | | | 9,610 | | | | 126,708 | | | | 14,109 | | | | 302,657 | | Totaloff-balance sheet | | | 2,938 | | | | 33,561 | | | | 42,593 | | | | 12,583 | | | | 408 | | | | 32,348 | | | | 15,930 | | | | 31,244 | | | | 9,650 | | | | 127,239 | | | | 15,100 | | | | 323,594 | | Total | | | 259,359 | | | | 337,870 | | | | 59,471 | | | | 46,573 | | | | 192,098 | | | | 48,055 | | | | 30,107 | | | | 63,064 | | | | 154,705 | | | | 183,971 | | | | 28,117 | | | | 1,403,390 | |
Other country risks being closely monitored include exposures to Russiathe oil and China. gas sector. Neton-balance sheet exposure to Russiathe oil and gas sector was £4.2bn (2015: £4.4bn), with contingent liabilities and commitments to this sector of £1.4bn (2014: £1.9bn) largely consists of retail loans and advances of £1.0bn (2014: £0.6bn)£16.0bn (2015: £13.8bn). Impairment charges were £94m (2015: £106m). The retail loans and advances are predominantly secured against property inratio of the UK and southGroup’s net total exposures classified as strong or satisfactory was 93% (2015: 97%) of France. Grossthe total net exposure to Russia was £2.5bn (2014: £3.8bn) including derivative assets with financial institutions. The gross exposure is mitigated by offsetting derivative liabilities.credit risk to this sector. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 119 |
Net exposure to China of £3.7bn (2014: £4.8bn) largely consists of loans and advances (mainly cash collateral and settlement balances) to sovereign of £1.4bn (2014: £1.7bn) and financial institutions of £1.1bn (2014: £1.4bn). The gross exposure to China excluding offsetting derivative liabilities was £3.9bn (2014: £5.0bn).
Industrial concentrations (audited)
As at 31 December 2015, the industrial concentration of the Group’s assets remained broadly consistent year on year. 42% (2014: 49%) of total assets were concentrated towards banks and other financial institutions, predominantly within derivative financial instruments which decreased during the year. The proportion of the overall balance concentrated towards governments and central banks remained stable at 12% (2014: 11%) and home loans at 12% (2014: 12%).
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Credit risk concentrations by industry (audited) | | As at 31 December 2015 | |
| Banks
£m |
| | | Other financial insti- tutions £m | | | | Manu- facturing £m | | | | Const- ruction and property £m | | |
| Govern- ment and central bank
£m |
| |
| Energy and
water £m |
| |
| Wholesale and retail distribu- tion and leisure
£m |
| | | Business and other services £m | | |
| Home loans
£m |
| |
| Cards, unsecured loans and other personal lending
£m |
| |
| Other
£m |
| |
| Total
£m |
| On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | – | | | | – | | | | – | | | | – | | | | 49,711 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 49,711 | | Items in the course of collection from other banks | | | 1,011 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,011 | | Trading portfolio assets | | | 1,897 | | | | 11,826 | | | | 970 | | | | 538 | | | | 25,797 | | | | 2,554 | | | | 315 | | | | 2,727 | | | | 550 | | | | – | | | | 876 | | | | 48,050 | | Financial assets designated at fair value | | | 14,015 | | | | 35,109 | | | | 104 | | | | 8,642 | | | | 7,380 | | | | 33 | | | | 191 | | | | 3,402 | | | | 229 | | | | – | | | | 79 | | | | 69,184 | | Derivative financial instruments | | | 185,782 | | | | 114,727 | | | | 2,701 | | | | 2,940 | | | | 6,113 | | | | 4,538 | | | | 1,063 | | | | 5,346 | | | | – | | | | – | | | | 4,499 | | | | 327,709 | | Loans and advances to banks | | | 36,829 | | | | – | | | | – | | | | – | | | | 4,520 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 41,349 | | Loans and advances to customers | | | – | | | | 80,729 | | | | 12,297 | | | | 23,519 | | | | 5,940 | | | | 7,743 | | | | 13,830 | | | | 25,728 | | | | 155,863 | | | | 60,162 | | | | 13,406 | | | | 399,217 | | Reverse repurchase agreements and other similar secured lendinga | | | 8,676 | | | | 18,022 | | | | – | | | | 1,011 | | | | 305 | | | | – | | | | 35 | | | | 138 | | | | – | | | | – | | | | – | | | | 28,187 | | Available for sale debt securities | | | 9,745 | | | | 6,114 | | | | 68 | | | | 43 | | | | 67,645 | | | | 182 | | | | 107 | | | | 5,134 | | | | – | | | | – | | | | 240 | | | | 89,278 | | Other assets | | | 312 | | | | 1,077 | | | | – | | | | – | | | | 20 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1 | | | | 1,410 | | Total on-balance sheet | | | 258,267 | | | | 267,604 | | | | 16,140 | | | | 36,693 | | | | 167,431 | | | | 15,050 | | | | 15,541 | | | | 42,475 | | | | 156,642 | | | | 60,162 | | | | 19,101 | | | | 1,055,106 | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 1,152 | | | | 4,698 | | | | 3,142 | | | | 958 | | | | 9 | | | | 3,073 | | | | 1,301 | | | | 4,645 | | | | 100 | | | | 548 | | | | 950 | | | | 20,576 | | Documentary credits and other short-term trade-related transactions | | | 378 | | | | 17 | | | | 142 | | | | 1 | | | | – | | | | 3 | | | | 129 | | | | 50 | | | �� | – | | | | 123 | | | | 2 | | | | 845 | | Forward starting reverse repurchase agreementsb | | | 78 | | | | 15 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 93 | | Standby facilities, credit lines and other commitments | | | 946 | | | | 31,152 | | | | 35,865 | | | | 11,337 | | | | 871 | | | | 26,217 | | | | 15,054 | | | | 23,180 | | | | 11,708 | | | | 111,988 | | | | 13,051 | | | | 281,369 | | Total off-balance sheet | | | 2,554 | | | | 35,882 | | | | 39,149 | | | | 12,296 | | | | 880 | | | | 29,293 | | | | 16,484 | | | | 27,875 | | | | 11,808 | | | | 112,659 | | | | 14,003 | | | | 302,883 | | Total | | | 260,821 | | | | 303,486 | | | | 55,289 | | | | 48,989 | | | | 168,311 | | | | 44,343 | | | | 32,025 | | | | 70,350 | | | | 168,450 | | | | 172,821 | | | | 33,104 | | | | 1,357,989 | |
Net on-balance sheet exposure to the Oil and Gas sector was £4.4bn (2014: £5.8bn), with contingent liabilities and commitments to this sector of £13.8bn (2014: £12.5bn). Impairment charges were £106m (2014: £1m). The ratio of the Group’s total net exposures classified as strong or satisfactory was 97% (2014: 99%) of the total net exposure to credit risk in this sector.
If average oil prices remained at $30 per barrel throughout 2016, estimated additional impairment of approximately £250m would result. If average oil prices were to reduce to $25 per barrel throughout 2016, estimated additional impairment of approximately £450m would result.
Note
a | During 2015, new reverse repurchase agreements and other similar secured lending in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
b | Forward starting reverse repurchase agreements were previously disclosed as loan commitments. Following the business designation of reverse repurchase and repurchase agreements at fair value through profit and loss, new forward starting reverse repurchase agreements are within the scope of IAS 39 and recognised as derivatives on the balance sheet. |
| | | 120 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | 125 |
Risk review Risk performance Credit risk | Credit risk concentrations by industry (audited) | Credit risk concentrations by industry (audited) | | | | | | | | | | | | | | | | | | | | Credit risk concentrations by industry (audited) | | | | | | | | | | | | | | | | | | | | As at 31 December 2014 | |
| Banks
£m |
| | | Other financial insti- tutions £m | | | | Manu- facturing £m | | | | Const- ruction and property £m | | |
| Govern- ment and central bank
£m |
| |
| Energy and
water £m |
| |
| Wholesale and retail distribu- tion 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 31 December 2015 | | |
| Banks
£m |
| |
| Other financial insti- tutions
£m |
| |
| Manu- facturing
£m |
| |
| Const- ruction and property
£m |
| |
| Govern- ment and central bank
£m |
| |
| Energy and water
£m |
| |
| Wholesale and retail distribu- tion and leisure
£m |
| |
| Business and other services
£m |
| |
| Home loans
£m |
| |
| Cards, unsecured loans and other personal lending
£m |
| |
| Other
£m |
| |
| Total
£m |
| On-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | – | | | | – | | | | – | | | | – | | | | 39,695 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 39,695 | | | | – | | | | – | | | | – | | | | – | | | | 49,711 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 49,711 | | Items in the course of collection from other banks | | | 1,210 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,210 | | | | 1,011 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,011 | | Trading portfolio assets | | | 2,894 | | | | 17,718 | | | | 1,466 | | | | 593 | | | | 39,201 | | | | 2,745 | | | | 385 | | | | 2,751 | | | | – | | | | – | | | | 937 | | | | 68,690 | | | | 1,897 | | | | 11,826 | | | | 970 | | | | 538 | | | | 25,797 | | | | 2,554 | | | | 315 | | | | 2,727 | | | | 550 | | | | – | | | | 876 | | | | 48,050 | | Financial assets designated at fair value | | | 5,113 | | | | 1,548 | | | | 70 | | | | 9,358 | | | | 10,378 | | | | 73 | | | | 207 | | | | 3,127 | | | | 393 | | | | – | | | | 84 | | | | 30,351 | | | | 14,015 | | | | 35,109 | | | | 104 | | | | 8,642 | | | | 7,380 | | | | 33 | | | | 191 | | | | 3,402 | | | | 229 | | | | – | | | | 79 | | | | 69,184 | | Derivative financial instruments | | | 257,463 | | | | 149,050 | | | | 2,519 | | | | 3,454 | | | | 7,691 | | | | 7,794 | | | | 1,510 | | | | 6,227 | | | | – | | | | – | | | | 4,201 | | | | 439,909 | | | | 185,782 | | | | 114,727 | | | | 2,701 | | | | 2,940 | | | | 6,113 | | | | 4,538 | | | | 1,063 | | | | 5,346 | | | | – | | | | – | | | | 4,499 | | | | 327,709 | | Loans and advances to banks | | | 40,265 | | | | – | | | | – | | | | – | | | | 1,846 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 42,111 | | | | 36,829 | | | | – | | | | – | | | | – | | | | 4,520 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 41,349 | | Loans and advances to customers | | | – | | | | 103,388 | | | | 11,647 | | | | 22,842 | | | | 7,115 | | | | 8,536 | | | | 13,339 | | | | 22,372 | | | | 166,974 | | | | 58,914 | | | | 12,640 | | | | 427,767 | | | | – | | | | 80,729 | | | | 12,297 | | | | 23,519 | | | | 5,940 | | | | 7,743 | | | | 13,830 | | | | 25,728 | | | | 155,863 | | | | 60,162 | | | | 13,406 | | | | 399,217 | | Reverse repurchase agreements and other similar secured lending | | | 38,946 | | | | 86,588 | | | | – | | | | 4,845 | | | | 739 | | | | – | | | | 24 | | | | 611 | | | | – | | | | – | | | | – | | | | 131,753 | | | | 8,676 | | | | 18,022 | | | | – | | | | 1,011 | | | | 305 | | | | – | | | | 35 | | | | 138 | | | | – | | | | – | | | | – | | | | 28,187 | | Available for sale debt securities | | | 11,122 | | | | 8,365 | | | | 68 | | | | 45 | | | | 61,341 | | | | 194 | | | | 27 | | | | 4,084 | | | | – | | | | – | | | | 293 | | | | 85,539 | | | Financial investments - debt securities | | | | 9,745 | | | | 6,114 | | | | 68 | | | | 43 | | | | 67,645 | | | | 182 | | | | 107 | | | | 5,134 | | | | – | | | | – | | | | 240 | | | | 89,278 | | Other assets | | | 635 | | | | 995 | | | | – | | | | 14 | | | | 24 | | | | – | | | | – | | | | 12 | | | | – | | | | – | | | | – | | | | 1,680 | | | | 312 | | | | 1,077 | | | | – | | | | – | | | | 20 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1 | | | | 1,410 | | Total on-balance sheet | | | 357,648 | | | | 367,652 | | | | 15,770 | | | | 41,151 | | | | 168,030 | | | | 19,342 | | | | 15,492 | | | | 39,184 | | | | 167,367 | | | | 58,914 | | | | 18,155 | | | | 1,268,705 | | | | 258,267 | | | | 267,604 | | | | 16,140 | | | | 36,693 | | | | 167,431 | | | | 15,050 | | | | 15,541 | | | | 42,475 | | | | 156,642 | | | | 60,162 | | | | 19,101 | | | | 1,055,106 | | Off-balance sheet: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 1,159 | | | | 5,177 | | | | 2,709 | | | | 698 | | | | – | | | | 2,757 | | | | 1,157 | | | | 6,496 | | | | 45 | | | | 191 | | | | 874 | | | | 21,263 | | | | 1,152 | | | | 4,698 | | | | 3,142 | | | | 958 | | | | 9 | | | | 3,073 | | | | 1,301 | | | | 4,645 | | | | 100 | | | | 548 | | | | 950 | | | | 20,576 | | Documentary credits and other short-term trade-related transactions | | | 470 | | | | 12 | | | | 197 | | | | 14 | | | | – | | | | 1 | | | | 218 | | | | 62 | | | | 55 | | | | 28 | | | | 34 | | | | 1,091 | | | Documentary credits and other short-term trade related transactions | | | | 378 | | | | 17 | | | | 142 | | | | 1 | | | | – | | | | 3 | | | | 129 | | | | 50 | | | | – | | | | 123 | | | | 2 | | | | 845 | | Forward starting reverse repurchase agreements | | | 2,128 | | | | 11,724 | | | | – | | | | – | | | | 4 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 13,856 | | | | 78 | | | | 15 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 93 | | Standby facilities, credit lines and other commitments | | | 2,643 | | | | 29,645 | | | | 28,589 | | | | 11,449 | | | | 2,400 | | | | 24,830 | | | | 12,771 | | | | 24,534 | | | | 16,119 | | | | 110,091 | | | | 13,244 | | | | 276,315 | | | | 946 | | | | 31,152 | | | | 35,865 | | | | 11,337 | | | | 871 | | | | 26,217 | | | | 15,054 | | | | 23,180 | | | | 11,708 | | | | 111,988 | | | | 13,051 | | | | 281,369 | | Total off-balance sheet | | | 6,400 | | | | 46,558 | | | | 31,495 | | | | 12,161 | | | | 2,404 | | | | 27,588 | | | | 14,146 | | | | 31,092 | | | | 16,219 | | | | 110,310 | | | | 14,152 | | | | 312,525 | | | | 2,554 | | | | 35,882 | | | | 39,149 | | | | 12,296 | | | | 880 | | | | 29,293 | | | | 16,484 | | | | 27,875 | | | | 11,808 | | | | 112,659 | | | | 14,003 | | | | 302,883 | | Total | | | 364,048 | | | | 414,210 | | | | 47,265 | | | | 53,312 | | | | 170,434 | | | | 46,930 | | | | 29,638 | | | | 70,276 | | | | 183,586 | | | | 169,224 | | | | 32,307 | | | | 1,581,230 | | | | 260,821 | | | | 303,486 | | | | 55,289 | | | | 48,989 | | | | 168,311 | | | | 44,343 | | | | 32,025 | | | | 70,350 | | | | 168,450 | | | | 172,821 | | | | 33,104 | | | | 1,357,989 | |
| | | 126 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
As the principal source of credit risk to the Group, loans and advances to customers and banks is analysed in detail below: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of loans and advances and impairment to customers and banks | | As at 31 December 2016 | |
| Gross
L&A £m |
| |
| Impairment
allowance £m |
| |
| L&A net of impairment
£m |
| |
| Credit risk loans
£m |
| |
| CRLs % of gross L&A
% |
| |
| Loan impairment chargesa
£m |
| |
| Loan loss rates
bps |
| Barclays UK | | | 155,729 | | | | 1,519 | | | | 154,210 | | | | 2,044 | | | | 1.3 | | | | 866 | | | | 56 | | Barclays International | | | 33,485 | | | | 1,492 | | | | 31,993 | | | | 1,249 | | | | 3.7 | | | | 1,085 | | | | 324 | | Barclays Core | | | 189,214 | | | | 3,011 | | | | 186,203 | | | | 3,293 | | | | 1.7 | | | | 1,951 | | | | 103 | | BarclaysNon-Core | | | 10,319 | | | | 385 | | | | 9,934 | | | | 838 | | | | 8.1 | | | | 102 | | | | 99 | | Total Group retail | | | 199,533 | | | | 3,396 | | | | 196,137 | | | | 4,131 | | | | 2.1 | | | | 2,053 | | | | 103 | | Barclays UK | | | 15,204 | | | | 282 | | | | 14,922 | | | | 591 | | | | 3.9 | | | | 30 | | | | 20 | | Barclays International | | | 180,102 | | | | 748 | | | | 179,354 | | | | 1,470 | | | | 0.8 | | | | 258 | | | | 14 | | Barclays Core | | | 199,716 | | | | 1,030 | | | | 198,686 | | | | 2,061 | | | | 1.0 | | | | 288 | | | | 14 | | BarclaysNon-Core | | | 41,406 | | | | 194 | | | | 41,212 | | | | 299 | | | | 0.7 | | | | 11 | | | | 3 | | Total Group wholesale | | | 241,122 | | | | 1,224 | | | | 239,898 | | | | 2,360 | | | | 1.0 | | | | 299 | | | | 12 | | Total loans and advances at amortised cost | | | 440,655 | | | | 4,620 | | | | 436,035 | | | | 6,491 | | | | 1.5 | | | | 2,352 | | | | 53 | | Traded loans | | | 2,975 | | | | n/a | | | | 2,975 | | | | n/a | | | | | | | | | | | | | | Loans and advances designated at fair value | | | 10,519 | | | | n/a | | | | 10,519 | | | | n/a | | | | | | | | | | | | | | Loans and advances held at fair value | | | 13,494 | | | | n/a | | | | 13,494 | | | | n/a | | | | | | | | | | | | | | Total loans and advances | | | 454,149 | | | | 4,620 | | | | 449,529 | | | | 6,491 | | | | | | | | | | | | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | 153,539 | | | | 1,556 | | | | 151,983 | | | | 2,238 | | | | 1.5 | | | | 682 | | | | 44 | | Barclays International | | | 26,041 | | | | 896 | | | | 25,145 | | | | 863 | | | | 3.3 | | | | 714 | | | | 274 | | Head Office | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Barclays Core | | | 179,580 | | | | 2,452 | | | | 177,128 | | | | 3,101 | | | | 1.7 | | | | 1,396 | | | | 78 | | BarclaysNon-Core | | | 12,588 | | | | 465 | | | | 12,123 | | | | 936 | | | | 7.4 | | | | 139 | | | | 110 | | Total Group retail | | | 192,168 | | | | 2,917 | | | | 189,251 | | | | 4,037 | | | | 2.1 | | | | 1,535 | | | | 80 | | Barclays UK | | | 16,400 | | | | 312 | | | | 16,088 | | | | 636 | | | | 3.9 | | | | 24 | | | | 15 | | Barclays International | | | 159,776 | | | | 617 | | | | 159,159 | | | | 1,331 | | | | 0.8 | | | | 201 | | | | 13 | | Head Office | | | 5,767 | | | | – | | | | 5,767 | | | | – | | | | – | | | | – | | | | – | | Barclays Core | | | 181,943 | | | | 929 | | | | 181,014 | | | | 1,967 | | | | 1.1 | | | | 225 | | | | 12 | | BarclaysNon-Core | | | 39,979 | | | | 336 | | | | 39,643 | | | | 441 | | | | 1.1 | | | | (16 | ) | | | (4 | ) | Total Group wholesale | | | 221,922 | | | | 1,265 | | | | 220,657 | | | | 2,408 | | | | 1.1 | | | | 209 | | | | 9 | | Total loans and advances at amortised costb | | | 414,090 | | | | 4,182 | | | | 409,908 | | | | 6,445 | | | | 1.6 | | | | 1,744 | | | | 42 | | BAGL loans and advances at amortised cost | | | 31,397 | | | | 739 | | | | 30,658 | | | | 1,372 | | | | | | | | | | | | | | Traded loans | | | 2,474 | | | | n/a | | | | 2,474 | | | | n/a | | | | | | | | | | | | | | Loans and advances designated at fair value | | | 17,913 | | | | n/a | | | | 17,913 | | | | n/a | | | | | | | | | | | | | | Loans and advances held at fair value | | | 20,387 | | | | n/a | | | | 20,387 | | | | n/a | | | | | | | | | | | | | | Total loans and advances | | | 465,874 | | | | 4,921 | | | | 460,953 | | | | 7,817 | | | | | | | | | | | | | |
Total loans and advances decreased by £11.4bn to £449.5bn driven by a £31bn decrease due to the reclassification of BAGL balances to held for sale and £9bn from the exit of other assets inNon-Core. This was offset by lending of £20bn driven by volume growth and foreign currency movements due to the appreciation of average US Dollar and Euro against Sterling. There was also a net £9bn increase in settlement and cash collateral balances. Credit risk loans (CRLs) and the ratio of CRLs to gross loans and advances excluding BAGL balances now held for sale remained stable at £6.5bn (2015: £6.4bn) and 1.5% (2015: 1.6%) respectively. Loan impairment charges increased £0.6bn to £2.4bn primarily due to increased charges following the management review of impairment modelling for UK and US cards portfolios and the impairment of a number of single name exposures. Overall, this resulted in an 11bps increase in the loan loss rate to 53bps. Notes a | Excluding impairment charges on available for sale investments and reverse repurchase agreements. |
b | Excluding BAGL balances now held for sale. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 121127 |
Risk review Risk performance Credit risk Analysis of specific portfolios and asset types This section provides an analysis of principal portfolios and businesses in the retail and wholesale segments. In particular, home loans, credit cards, overdrafts and unsecured loans are covered for retail segments whilesegments. In addition, this section details exposures in Investment Bank and PCB including watch list analysis are covered for wholesale segments. In general, benign economic conditions in theto UK and US aided better performance in 2015. South African portfolios were resilient despite challenging market conditions with economic growth being affected by weak manufacturing and low commodity prices.commercial real estate.
Secured home loans TotalThe UK home loans to retail customersportfolio comprises first lien home loans and accounts for 98%a (2015: 98%) of £156bn (2014: £161bn) represented 75% (2014: 72%the Group’s Core home loan balances and 91% (2015: 90%) of the Group’s total retailhome loan balances. The reduction in balances was principally driven by: PortugueseItaly home loans and partaccounts for 100% (2015: 91%) of the ItalianGroup’sNon-Core home loans portfolio being redesignated as held for sale;loan balances and South African home loans due to the depreciation7% (2015: 7%) of the Rand.
The two principal portfolios listed below account for 88% ofGroup’s total home loans in the Group’s retail portfolios, and comprise first lien mortgages.loan balances.
| | | | | | | | | | | | | | | | | | | | | | | | | Home loans principal portfolios | | | | | Gross loans and advances £m | | |
| >90 day arrears
% |
| |
| Non- performing proportion of outstanding balances
% |
| |
| Gross charge-off rates
% |
| |
| Recoveries proportion of outstanding balances
% |
| |
| Recoveries impairment coverage ratio
% |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | PCB – UK | | | 127,750 | | | | 0.2 | | | | 0.7 | | | | 0.3 | | | | 0.4 | | | | 10.1 | | Africa Banking – South Africa | | | 9,180 | | | | 0.9 | | | | 4.0 | | | | 1.6 | | | | 3.2 | | | | 26.4 | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | PCB – UK | | | 126,668 | | | | 0.2 | | | | 0.6 | | | | 0.4 | | | | 0.4 | | | | 8.3 | | Africa Banking – South Africa | | | 11,513 | | | | 0.7 | | | | 4.8 | | | | 1.9 | | | | 4.1 | | | | 31.1 | |
| | | | | | | | | Home loans principal portfoliosb | | | | | Barclays UK | | As at 31 December | | | 2016 | | | | 2015 | | Gross loans and advances (£m) | | | 129,136 | | | | 127,750 | | >90 day arrears, excluding recovery book (%) | | | 0.2 | | | | 0.2 | | Non-performing proportion of outstanding balances (%) | | | 0.6 | | | | 0.7 | | Annualised grosscharge-off rates (%) | | | 0.3 | | | | 0.3 | | Recovery book proportion of outstanding balances (%) | | | 0.4 | | | | 0.4 | | Recovery book impairment coverage ratio (%) | | | 9.1 | | | | 10.1 | |
PCB –Barclays UK:Portfolio performance remained steady reflecting the continuing low base rate environment, house price appreciation and benignsteady economic conditions.Non-performing proportion of outstanding balances and recovery book impairment coverage reduced due to a reduction in repossession stock.
Within the UK home loans portfolio: § | | owner-occupied interest onlyinterest-only home loans comprised 31% (2015: 32% (2014: 33%) of total balances. The average balance weighted LTV on these loans reduced to 41.7% (2015: 44.7% (2014: 48.7%), as house prices have improved across core regions, and >90 day arrears excluding recovery book remained broadly steady at 0.2% (2014: 0.1%(2015: 0.2%) |
§ | | buy-to-let home loans comprised 9% (2014: 8%(2015: 9%) of total balances. The average balance weighted LTV reduced to 52.6% (2015: 54.6% (2014: 57.6%), and >90 day arrears remained steady atexcluding recovery book reduced to 0.1% (2015: 0.2% (2014: 0.1%). |
The recoveries impairment coverage increased to 10.1% (2014: 8.3%). In 2015, management adjustments to impairment allowances were better aligned to appropriate segments of the portfolio, resulting in a reduction of the impairment allocated to the recoveries book. The overall impairment coverage of the total home loans portfolio remained unchanged.
Africa Banking – South Africa:Gross loans and advances reduced by 20%, primarily driven by the depreciation of the Rand and repayments on the existing book. The improvement in the charge-off rates to 1.6% (2014: 1.9%) resulted from the focus on collections strategies and reduced rolls through delinquency cycles.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans principal portfolios – distribution of balances by LTVc | | | |
| Distribution of balances | | |
| Impairment coverage
ratio |
| |
| Non-performing proportion of outstanding balances | | |
| Non-performing balances impairment coverage ratio | | |
| Recovery book proportion of outstanding balances | | |
| Recovery book impairment coverage ratio | | As at 31 December | |
| 2016
% |
| |
| 2015
% |
| |
| 2016
% |
| |
| 2015
% |
| |
| 2016
% |
| |
| 2015
% |
| |
| 2016
% |
| |
| 2015
% |
| |
| 2016
% |
| |
| 2015
% |
| |
| 2016
% |
| |
| 2015
% |
| Barclays UK | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | <=75% | | | 91.8 | | | | 92.1 | | | | 0.1 | | | | 0.1 | | | | 0.6 | | | | 0.6 | | | | 4.2 | | | | 4.7 | | | | 0.4 | | | | 0.4 | | | | 5.9 | | | | 6.8 | | >75% and <=80% | | | 3.5 | | | | 3.4 | | | | 0.2 | | | | 0.2 | | | | 0.6 | | | | 1.0 | | | | 17.1 | | | | 13.5 | | | | 0.4 | | | | 0.8 | | | | 22.1 | | | | 15.7 | | >80% and <=85% | | | 2.1 | | | | 2.1 | | | | 0.2 | | | | 0.3 | | | | 0.8 | | | | 1.0 | | | | 20.4 | | | | 16.7 | | | | 0.6 | | | | 0.7 | | | | 25.0 | | | | 21.4 | | >85% and <=90% | | | 1.3 | | | | 1.4 | | | | 0.3 | | | | 0.3 | | | | 0.7 | | | | 1.3 | | | | 23.0 | | | | 15.7 | | | | 0.6 | | | | 1.0 | | | | 25.4 | | | | 17.8 | | >90% and <=95% | | | 0.8 | | | | 0.6 | | | | 0.4 | | | | 0.6 | | | | 1.1 | | | | 1.8 | | | | 28.3 | | | | 25.7 | | | | 0.8 | | | | 1.5 | | | | 33.7 | | | | 28.2 | | >95% and <=100% | | | 0.3 | | | | 0.2 | | | | 0.7 | | | | 1.3 | | | | 1.9 | | | | 4.0 | | | | 23.4 | | | | 25.4 | | | | 1.5 | | | | 3.5 | | | | 27.0 | | | | 27.9 | | >100% | | | 0.2 | | | | 0.2 | | | | 3.1 | | | | 3.4 | | | | 5.7 | | | | 7.0 | | | | 38.6 | | | | 35.6 | | | | 5.0 | | | | 5.6 | | | | 40.9 | | | | 41.2 | |
| | | 122 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
| | | | | | | | | Home loans principal portfolios – Average LTV | | | | | | | | | | | | Barclays UK | | As at 31 December | | | 2016 | | | | 2015 | | Portfolio marked to market LTV (%): | | | | | | | | | Balance weighted | | | 47.7 | | | | 49.2 | | Valuation weighted | | | 35.6 | | | | 37.3 | | Performing balances (%): | | | | | | | | | Balance weighted | | | 47.3 | | | | 48.8 | | Valuation weighted | | | 35.5 | | | | 37.3 | | Non-performing balances (%): | | | | | | | | | Balance weighted | | | 52.5 | | | | 56.5 | | Valuation weighted | | | 41.7 | | | | 45.1 | | For >100% LTVs: | | | | | | | | | Balances (£m) | | | 239 | | | | 310 | | Marked to market collateral (£m) | | | 210 | | | | 260 | | Average LTV: balance weighted (%) | | | 118.4 | | | | 123.0 | | Average LTV: valuation weighted (%) | | | 113.1 | | | | 118.5 | | % of balances in recovery book | | | 5.0 | | | | 5.6 | |
Risk review
Risk performance
Credit risk
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans principal portfolios – distribution of balances by LTVa | | | | | Distribution of balances | | | | Impairment coverage ratio | | | | Non-performing proportion of outstanding balances | | | | Non-performing balances impairment coverage ratio | | | | Recoveries proportion of outstanding balances | | | | Recoveries impairment coverage ratio | | As at 31 December | | | 2015 % | | | | 2014 % | | |
| 2015
% |
| |
| 2014
% |
| |
| 2015
% |
| |
| 2014
% |
| |
| 2015
% |
| |
| 2014
% |
| |
| 2015
% |
| |
| 2014
% |
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| 2015
% |
| |
| 2014
% |
| PCB UK | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | <=75% | | | 92.1 | | | | 90.2 | | | | 0.1 | | | | – | | | | 0.6 | | | | 0.6 | | | | 4.7 | | | | 2.8 | | | | 0.4 | | | | 0.3 | | | | 6.8 | | | | 4.6 | | >75% and <=80% | | | 3.4 | | | | 4.2 | | | | 0.2 | | | | 0.2 | | | | 1.0 | | | | 1.2 | | | | 13.5 | | | | 6.9 | | | | 0.8 | | | | 0.8 | | | | 15.7 | | | | 9.2 | | >80% and <=85% | | | 2.1 | | | | 2.3 | | | | 0.3 | | | | 0.2 | | | | 1.0 | | | | 1.4 | | | | 16.7 | | | | 8.9 | | | | 0.7 | | | | 0.9 | | | | 21.4 | | | | 11.3 | | >85% and <=90% | | | 1.4 | | | | 1.4 | | | | 0.3 | | | | 0.4 | | | | 1.3 | | | | 1.7 | | | | 15.7 | | | | 13.0 | | | | 1.0 | | | | 1.3 | | | | 17.8 | | | | 15.9 | | >90% and <=95% | | | 0.6 | | | | 1.0 | | | | 0.6 | | | | 0.4 | | | | 1.8 | | | | 1.9 | | | | 25.7 | | | | 13.7 | | | | 1.5 | | | | 1.3 | | | | 28.2 | | | | 17.8 | | >95% and <=100% | | | 0.2 | | | | 0.4 | | | | 1.3 | | | | 1.0 | | | | 4.0 | | | | 2.9 | | | | 25.4 | | | | 21.4 | | | | 3.5 | | | | 2.2 | | | | 27.9 | | | | 26.4 | | >100% | | | 0.2 | | | | 0.5 | | | | 3.4 | | | | 2.4 | | | | 7.0 | | | | 6.0 | | | | 35.6 | | | | 28.6 | | | | 5.6 | | | | 4.3 | | | | 41.2 | | | | 36.1 | | Africa Banking – | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | South Africa | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | <=75% | | | 76.1 | | | | 74.6 | | | | 0.7 | | | | 0.7 | | | | 0.6 | | | | 0.5 | | | | 13.6 | | | | 16.2 | | | | 1.8 | | | | 1.9 | | | | 17.9 | | | | 20.4 | | >75% and <=80% | | | 6.8 | | | | 7.7 | | | | 1.6 | | | | 1.5 | | | | 1.0 | | | | 0.9 | | | | 18.4 | | | | 20.0 | | | | 3.3 | | | | 3.0 | | | | 21.4 | | | | 23.5 | | >80% and <=85% | | | 5.3 | | | | 5.9 | | | | 1.9 | | | | 2.0 | | | | 1.0 | | | | 1.1 | | | | 19.2 | | | | 21.1 | | | | 3.5 | | | | 4.2 | | | | 21.1 | | | | 23.7 | | >85% and <=90% | | | 3.8 | | | | 4.3 | | | | 2.3 | | | | 2.5 | | | | 0.9 | | | | 1.0 | | | | 20.2 | | | | 22.3 | | | | 4.8 | | | | 5.1 | | | | 21.8 | | | | 24.3 | | >90% and <=95% | | | 2.6 | | | | 2.5 | | | | 3.7 | | | | 4.3 | | | | 1.2 | | | | 1.4 | | | | 23.8 | | | | 26.3 | | | | 5.9 | | | | 8.7 | | | | 24.2 | | | | 27.6 | | >95% and <=100% | | | 1.8 | | | | 1.5 | | | | 4.8 | | | | 5.4 | | | | 1.3 | | | | 1.5 | | | | 25.6 | | | | 23.4 | | | | 7.8 | | | | 11.6 | | | | 26.0 | | | | 24.1 | | >100% | | | 2.8 | | | | 3.5 | | | | 14.1 | | | | 16.4 | | | | 1.9 | | | | 1.9 | | | | 29.7 | | | | 32.5 | | | | 26.7 | | | | 37.1 | | | | 29.7 | | | | 32.9 | |
| | | | | | | | | | | | | | | | | Home loans principal portfolios – Average LTV | | | | | | | | | | | | | | | | | | | | PCB – UK | | | | Africa Banking – South Africa | | As at 31 December | |
| 2015
% |
| |
| 2014
% |
| |
| 2015
% |
| |
| 2014
% |
| Portfolio marked to market LTV (%): | | | | | | | | | | | | | | | | | Balance weighted | | | 49.2 | | | | 51.6 | | | | 58.4 | | | | 59.9 | | Valuation weighted | | | 37.3 | | | | 39.8 | | | | 39.1 | | | | 40.2 | | Performing balances (%): | | | | | | | | | | | | | | | | | Balance weighted | | | 48.8 | | | | 51.5 | | | | 57.5 | | | | 58.6 | | Valuation weighted | | | 37.3 | | | | 39.7 | | | | 38.6 | | | | 39.5 | | Non-performing balances (%): | | | | | | | | | | | | | | | | | Balance weighted | | | 56.5 | | | | 62.1 | | | | 79.3 | | | | 87.0 | | Valuation weighted | | | 45.1 | | | | 49.8 | | | | 59.3 | | | | 64.7 | | For >100% LTVs: | | | | | | | | | | | | | | | | | Balances (£m) | | | 310 | | | | 641 | | | | 257 | | | | 390 | | Marked to market collateral (£m) | | | 260 | | | | 558 | | | | 218 | | | | 324 | | Average LTV: balance weighted (%) | | | 123.0 | | | | 120.9 | | | | 121.1 | | | | 124.2 | | Average LTV: valuation weighted (%) | | | 118.5 | | | | 114.8 | | | | 117.7 | | | | 120.3 | | % of balances in recoveries | | | 5.6 | | | | 4.4 | | | | 26.6 | | | | 37.1 | |
Balance weighted LTV in the UK reduced to 49.2% (2014: 51.6%) due to an increase in average house prices, particularly in London and the South East. The overall non-performing impairment coverage in the UK remained flat year on year but increased across LTV ranges, due to granular alignment of management adjustments across portfolio segments.
PCB – UK: The house price appreciation resulted in a 52% reduction in home loans that have LTV >100% to £310m (2014: £641m).
Africa Banking – South Africa: Balances with >100% LTV reduced 34% to £257m (2014: £390m), primarily due to a reduction in the size of the recovery book as older and higher risk loans were written off, in addition to the depreciation of the Rand.
| | | | | | | | | | | | | | | | | Home loans principal portfolios – new lending | | | | | | | | | | | | | | | | | | | | PCB – UK | | | | Africa Banking – South Africa | | As at 31 December | | | 2015 | | | | 2014 | | | | 2015 | | | | 2014 | | New bookings (£m) | | | 18,812 | | | | 20,349 | | | | 1,621 | | | | 1,590 | | New mortgages proportion above 85% LTV (%) | | | 8.2 | | | | 6.6 | | | | 40.8 | | | | 33.5 | | Average LTV on new mortgages: balance weighted (%) | | | 63.9 | | | | 64.8 | | | | 75.7 | | | | 74.8 | | Average LTV on new mortgages: valuation weighted (%) | | | 55.0 | | | | 57.0 | | | | 66.9 | | | | 65.4 | |
PCB – UK:New lending during 2015 reduced by 8%, reflecting an unchanged risk profile against heightened market activity in the prime residential segment.
Africa Banking – South Africa:The proportion of new home loans with LTV above 85% increased to 40.8% (2014: 33.5%) due to a revised strategy which allowed a greater proportion of higher LTV loans to be booked for lower risk customers.
NoteNotes
a | Remaining balance includes Wealth portfolio. |
b | Gross loans and advances include loans and advances to customers and banks. Risk metrics based on exposures to customers only. |
c | Portfolio marked to market based on the most updated valuation including recoveriesrecovery book balances. Updated valuations reflect the application of the latest house price index available in the country as at 31 December 2015.2016. |
| | | | | 128 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 123 | | |
| | | | | | | | | Exposure to interest only owner-occupied home loans excluding part and part interest only (P&P IO)a | | | | | | | | | As at 31 December | | | 2015 | | | | 2014 | | Interest only balances, excluding P&P IO (£m) | | | 33,901 | | | | 35,328 | | Interest only home loans maturity years (£m): | | | | | | | | | 2016 | | | 703 | | | | 864 | | 2017 | | | 1,043 | | | | 1,180 | | 2018 | | | 1,131 | | | | 1,249 | | 2019 | | | 1,080 | | | | 1,195 | | 2020 | | | 1,090 | | | | 1,176 | | 2021-2025 | | | 7,359 | | | | 7,632 | | Post 2025 | | | 21,155 | | | | 21,104 | | | | | Total Impairment coverage (bps) | | | 11 | | | | 8 | | | | | Marked to market LTV: total balances (%) | | | | | | | | | Balance weighted | | | 44.7 | | | | 48.7 | | Valuation weighted | | | 34.7 | | | | 37.6 | | For >100% LTVs: (£m) | | | | | | | | | Balances | | | 178 | | | | 349 | | Marked to market collateral | | | 150 | | | | 302 | | | | | Overview of performing portfolio | | | | | | | | | Performing balances (£m) | | | 33,690 | | | | 35,155 | | Marked to market LTV: performing balances (%) | | | | | | | | | Balance weighted | | | 44.6 | | | | 48.6 | | Valuation weighted | | | 34.6 | | | | 37.5 | | | | | Overview of non-performing portfolio | | | | | | | | | Non-performing balances (£m) | | | 211 | | | | 173 | | Non-performing proportion of interest only balances excluding P&P IO (%) | | | 0.6 | | | | 0.5 | | Marked to market LTV: non-performing balances (%) | | | | | | | | | Balance weighted | | | 61.4 | | | | 66.2 | | Valuation weighted | | | 49.8 | | | | 54.1 | |
Interest only mortgages account for £50bn (2014: £51bn) of the total balance of £128bn (2014: £127bn) of UK home loans. This comprised £40bn (2014: £42bn) to owner-occupied customers, and £10bn (2014: £9bn) to buy-to-let customers.
Of the £40bn exposure to owner-occupied customers, £34bn (2014: £35bn) was interest only, with the remaining £6bn (2014: £7bn) representing the interest only component of part and part mortgages.
The average balanceBalance weighted LTV for interest only owner-occupied balances reduced to 44.7% (2014: 48.7%) as property prices appreciated. The increase in impairment coverage to 11bps (2014: 8bps) was due to (i) enhancements in methodology, where management adjustments to impairment allowances were allocated on a more granular basis to their appropriate segments; and (ii) a broadening of the high risk definition used on interest only mortgages. The overall impairment coverage of the total home loans portfolio remained unchanged.
Exposures to mortgage current accounts (MCA) reserves
The MCA reserve is a secured overdraft facility previously available to home loan customers in the UK on either a fully amortising or interest only mortgage loan, which allows them to borrow against the equity in their home. It permits draw-down up to an agreed available limit on a separate but connected account to the main mortgage loan facility. The balance drawn must be repaid on redemption of the mortgage.
Of the total 917k home loan customers in the UK, 442k have MCA reserves, with total reserve limits of £11.3bn (2014: £17.9bn).
| | | | | | | | | As at 31 December | | | 2015 | | | | 2014 | | Total outstanding of home loans with MCA reserve balances (£bn) | | | 53.6 | | | | 62.2 | | As a proportion of outstanding UK home loan balances (%) | | | 42.0 | | | | 49.1 | | Home loan customers with active reserves (000s) | | | 442 | | | | 505 | | Total reserve limits (£bn) | | | 11.3 | | | | 17.9 | | Utilisation rate (%) | | | 48.9 | | | | 32.3 | | Utilisation (£bn) | | | 5.5 | | | | 5.8 | | Marked to market LTV: balance weighted (%) | | | 43.7 | | | | 47.7 | |
Total outstanding balances which are an aggregate of the mortgage account and the drawn reserve, reduced 14% to £53.6bn (2014: £62.2bn), during the period reflecting paydowns in the main mortgage account.
Reduction in portfolio reserve limits to £11.3bn (2014: £17.9bn) is due to an active limit management programme, combined with natural mortgage redemptions from the existing book during the period. As a result, the utilisation rate increased to 48.9% (2014: 32.3%). MCA balances have remained broadly stable at £5.5bn (2014: £5.8bn), while the average balance weighted LTV reduced to 43.7% (2014: 47.7% (2015: 49.2%) due to an increase in average house prices and repayment on the main mortgage loan.across core regions.
Although the product has been withdrawn from sale, existing customers can continueThe house price appreciation resulted in a 23% reduction in home loans that have LTV >100% to draw against their available reserves.
Note
a | A part and part home loan is a product in which part of the loan is interest only and part is amortising. Analysis excludes the interest only portion of the part and part book which contributes £6.2bn (2014: £6.6bn) to the total owner occupied interest only balance of the £40.1bn (2014: £41.9bn)£239m (2015: £310m). The total exposure on part and part book is £9.9bn (2014, £9.8bn) and represents 8% of total UK home loans portfolio. |
| | | 124 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Risk review
Risk performance
| | | | | | | | | Home loans principal portfolios – new lending | | | | | | | | | | | | Barclays UK | | As at 31 December | | | 2016 | | | | 2015 | | New home loan bookings (£m) | | | 19,885 | | | | 18,812 | | New home loans proportion above 85% LTV (%) | | | 8.6 | | | | 8.2 | | Average LTV on new home loans: balance weighted (%) | | | 63.4 | | | | 63.9 | | Average LTV on new home loans: valuation weighted (%) | | | 54.4 | | | | 55.0 | |
CreditBarclays UK:New lending in 2016 increased by 6%, reflecting a steady risk profile against the backdrop of heightened market activity. Average balance weighted LTV on new lending remained broadly stable at 63.4% (2015: 63.9%).
Credit cards overdrafts, and unsecured loans The principal portfolios listed below accounted for 91% (2014: 88%94% (2015: 92%) of the Group’s total credit cards overdrafts and unsecured loans. | | | | | | | | | | | | | | | | | | | | | | | | | Principal portfolios | | | Gross loans and advances £m | | |
| 30 day arrears, excluding recoveries
% |
| |
| 90 day arrears, excluding recoveries
% |
| |
| Gross charge-off rates
% |
| |
| Recoveries proportion of outstanding balances
% |
| |
| Recoveries impairment coverage ratio
% |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | Barclaycard | | | | | | | | | | | | | | | | | | | | | | | | | UK cardsa | | | 18,502 | | | | 2.3 | | | | 1.2 | | | | 5.2 | | | | 3.6 | | | | 82.6 | | US cardsa | | | 16,699 | | | | 2.2 | | | | 1.1 | | | | 3.9 | | | | 2.0 | | | | 84.8 | | Barclays Partner Finance | | | 3,986 | | | | 1.5 | | | | 0.6 | | | | 2.4 | | | | 2.5 | | | | 85.2 | | Germany cards | | | 1,419 | | | | 2.3 | | | | 1.0 | | | | 3.8 | | | | 2.7 | | | | 81.2 | | Personal & Corporate Banking | | | | | | | | | | | | | | | | | | | | | | | | | UK personal loans | | | 5,476 | | | | 1.9 | | | | 0.8 | | | | 3.0 | | | | 7.5 | | | | 73.9 | | Africa Banking | | | | | | | | | | | | | | | | | | | | | | | | | South Africa cards | | | 1,886 | | | | 8.5 | | | | 5.0 | | | | 8.4 | | | | 7.4 | | | | 72.6 | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | Barclaycard | | | | | | | | | | | | | | | | | | | | | | | | | UK cardsa | | | 17,447 | | | | 2.5 | | | | 1.2 | | | | 4.3 | | | | 4.9 | | | | 87.6 | | US cardsa | | | 14,005 | | | | 2.1 | | | | 1.0 | | | | 3.7 | | | | 1.8 | | | | 87.1 | | Barclays Partner Finance | | | 3,399 | | | | 1.5 | | | | 0.7 | | | | 2.4 | | | | 2.7 | | | | 76.8 | | Germany cards | | | 1,355 | | | | 2.5 | | | | 1.1 | | | | 3.8 | | | | 3.4 | | | | 82.8 | | Personal & Corporate Banking | | | | | | | | | | | | | | | | | | | | | | | | | UK personal loans | | | 4,953 | | | | 2.0 | | | | 0.9 | | | | 3.4 | | | | 10.0 | | | | 76.3 | | Africa Banking | | | | | | | | | | | | | | | | | | | | | | | | | South Africa cards | | | 2,364 | | | | 8.1 | | | | 4.6 | | | | 7.6 | | | | 5.9 | | | | 75.7 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Credit cards and unsecured loans principal portfolios | | | |
| Gross loans and advances£m | a | |
| 30 day arrears, excluding recovery book
% |
| |
| 90 day arrears, excluding recovery book
% |
| |
| Annualised gross charge-off rates
% |
| |
| Recovery book proportion of outstanding balances
% |
| |
| Recovery book impairment coverage ratio
% |
| As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | | | | | | | | | | | | | | | | | | | | | | | UK cardsb | | | 17,833 | | | | 1.9 | | | | 0.9 | | | | 5.5 | | | | 3.0 | | | | 83.8 | | UK personal loans | | | 6,076 | | | | 2.1 | | | | 0.9 | | | | 3.1 | | | | 4.7 | | | | 77.2 | | Barclays International | | | | | | | | | | | | | | | | | | | | | | | | | US cardsb | | | 23,915 | | | | 2.6 | | | | 1.3 | | | | 4.5 | | | | 2.4 | | | | 83.6 | | Barclays Partner Finance | | | 4,041 | | | | 1.5 | | | | 0.6 | | | | 2.5 | | | | 2.6 | | | | 81.5 | | Germany cards | | | 1,812 | | | | 2.6 | | | | 1.0 | | | | 3.7 | | | | 2.7 | | | | 79.0 | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | | | | | | | | | | | | | | | | | | | | | | | UK cardsb | | | 18,502 | | | | 2.3 | | | | 1.2 | | | | 5.2 | | | | 3.6 | | | | 82.6 | | UK personal loans | | | 5,476 | | | | 1.9 | | | | 0.8 | | | | 3.0 | | | | 7.5 | | | | 73.9 | | Barclays International | | | | | | | | | | | | | | | | | | | | | | | | | US cardsb | | | 16,699 | | | | 2.2 | | | | 1.1 | | | | 3.9 | | | | 2.0 | | | | 84.8 | | Barclays Partner Financec | | | 3,986 | | | | 1.5 | | | | 0.6 | | | | 2.4 | | | | 2.5 | | | | 82.2 | | Germany cards | | | 1,419 | | | | 2.3 | | | | 1.0 | | | | 3.8 | | | | 2.7 | | | | 81.2 | |
UK cards: In 2015, both early and late stage arrears remained stable within UK cards. The increase in charge-off rate and the reduction in recoveries as a proportion of outstanding was due to the acceleration of delinquent accounts to charge-off prior to debt sale. The decrease in recovery coverage ratio was driven by enhancements to impairment methodology, which took into account the improvement in recoveries and the impact of debt sales. US cards:Gross loans and advances decreased 4% to £17.8bn primarily due to reduced loans and advances to banks. Annualised grosscharge-off rates increased 19%due to £16.7bn (2014: £14bn) principally driven by increased new business volumes. Arrearsaccelerated asset sales in the latter half of the year and acceleratedcharge-off rates remained broadly in line with 2014. of informal arrangements stock. The decrease in recoveriesrecovery book impairment coverage ratio was due to enhancements to impairment methodology and improvements in recovery expectation.increased reflecting the impact of increased flow intocharge-off.
UK personal loans: Arrears30 day arrears increased to 2.1% (2015: 1.9%) and charge-off rates fell despite a 11%90 day arrears increased to 0.9% (2015: 0.8%) partially driven by portfolio growth and an increased level of operational delinquency from new customer acquisitions. The recovery book proportion of outstanding balances reduced to 4.7% (2015: 7.5%) due to an asset sale that also resulted in grossan increase in the recovery book impairment coverage ratio to 77.2% (2015: 73.9%). US cards:Gross loans and advances increased 43% to £23.9bn due to portfolio growth, new acquisitions and reflectedappreciation of USD against GBP. Increased arrears andcharge-off rate were driven by a change in portfolio mix, volume growth and the benign economic conditions in the UK.appreciation of average USD against GBP. Barclays Partner Finance: Gross loans and advances increased 17% to £4.0bn (2014: £3.4bn). Portfolio arrears andcharge-off rates remained broadly steady in 2015. The recoveries impairment coverage ratio increased following a management adjustment for the secured motor segment (portfolio started in 2012), which took into account changes to expected recoveries performance as the portfolio matured.during 2016. Germany cards: The decrease in recoveries proportion of outstanding balances wasLoans and advances were 28% higher mainly due to writea combination of the appreciation of EUR against GBP and portfolio growth. 90 day arrears and charge off of legacy accounts previously held in recoveries until system migration activities were concluded. South Africa cards: The increased arrears reflected bookings growth in 2015 in line with business strategy and weaker economic conditions. The gross charge-off rate andrates remained stable, while the recoveries proportion of outstanding balances percentage increased during 2015 due to additional charge-off in the Edcon portfolio as it was aligned with the Group’s charge-off policy.recovery book coverage ratio reduced slightly reflecting favourable recovery expectations.
Note
Notes a | Gross loans and advances include loans and advances to customers and banks. Risk metrics based on exposures to customers. |
b | For UK and US cards, outstanding recoveriesrecovery book balances for acquired portfolios recognised at fair value (which have no related impairment allowance) have been excluded from the recoveriesrecovery book impairment coverage ratio. Losses have been recognised where related to additional spend from acquired accounts in the period post acquisition. |
c | 2015 figures for recovery book coverage ratio restated from 85.2% to 82.2% to reflect more granular allocation of management adjustments to the recovery book. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 125129 |
Risk review Risk performance Credit risk Wholesale loans and advances at amortised cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of wholesale loans and advances at amortised cost | | | |
| Gross
L&A £m |
| |
| Impairment allowance
£m |
| |
| L&A net of impairment
£m |
| |
| Credit risk loans
£m |
| |
| CRLs % of gross L&A
% |
| |
| Loan impairment charges
£m |
| |
| Loan loss rates
bps |
| As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Banks | | | 35,979 | | | | – | | | | 35,979 | | | | – | | | | – | | | | – | | | | – | | Other financial institutions | | | 91,673 | | | | 14 | | | | 91,659 | | | | 89 | | | | 0.1 | | | | 6 | | | | 1 | | Manufacturing | | | 12,373 | | | | 130 | | | | 12,243 | | | | 226 | | | | 1.8 | | | | 37 | | | | 30 | | Construction | | | 3,418 | | | | 40 | | | | 3,378 | | | | 58 | | | | 1.7 | | | | 5 | | | | 15 | | Property | | | 20,541 | | | | 137 | | | | 20,404 | | | | 464 | | | | 2.3 | | | | 27 | | | | 13 | | Government and central bank | | | 15,847 | | | | – | | | | 15,847 | | | | – | | | | – | | | | – | | | | – | | Energy and water | | | 7,569 | | | | 181 | | | | 7,388 | | | | 348 | | | | 4.6 | | | | 102 | | | | 135 | | Wholesale and retail distribution and leisure | | | 12,995 | | | | 169 | | | | 12,826 | | | | 258 | | | | 2.0 | | | | 38 | | | | 29 | | Business and other services | | | 21,210 | | | | 284 | | | | 20,926 | | | | 331 | | | | 1.6 | | | | 54 | | | | 25 | | Home loansa | | | 5,497 | | | | 48 | | | | 5,449 | | | | 190 | | | | 3.5 | | | | 9 | | | | 16 | | Cards, unsecured loans and other personal lendinga | | | 5,329 | | | | 129 | | | | 5,200 | | | | 207 | | | | 3.9 | | | | 6 | | | | 11 | | Other | | | 8,691 | | | | 92 | | | | 8,599 | | | | 189 | | | | 2.2 | | | | 15 | | | | 17 | | Total wholesale loans and advances at amortised cost | | | 241,122 | | | | 1,224 | | | | 239,898 | | | | 2,360 | | | | 1.0 | | | | 299 | | | | 12 | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Banks | | | 32,824 | | | | – | | | | 32,824 | | | | – | | | | – | | | | – | | | | – | | Other financial institutions | | | 78,766 | | | | 28 | | | | 78,738 | | | | 63 | | | | 0.1 | | | | 4 | | | | 1 | | Manufacturing | | | 10,107 | | | | 114 | | | | 9,993 | | | | 183 | | | | 1.8 | | | | 17 | | | | 17 | | Construction | | | 3,358 | | | | 44 | | | | 3,314 | | | | 54 | | | | 1.6 | | | | 4 | | | | 12 | | Property | | | 18,444 | | | | 217 | | | | 18,227 | | | | 713 | | | | 3.9 | | | | 34 | | | | 18 | | Government and central bank | | | 9,686 | | | | – | | | | 9,686 | | | | – | | | | – | | | | – | | | | – | | Energy and water | | | 7,370 | | | | 120 | | | | 7,250 | | | | 296 | | | | 4.0 | | | | 101 | | | | 137 | | Wholesale and retail distribution and leisure | | | 12,542 | | | | 195 | | | | 12,347 | | | | 287 | | | | 2.3 | | | | 7 | | | | 6 | | Business and other services | | | 23,403 | | | | 261 | | | | 23,142 | | | | 341 | | | | 1.5 | | | | 23 | | | | 10 | | Home loansa | | | 5,769 | | | | 26 | | | | 5,743 | | | | 159 | | | | 2.8 | | | | – | | | | – | | Cards, unsecured loans and other personal lendinga | | | 8,894 | | | | 107 | | | | 8,787 | | | | 166 | | | | 1.9 | | | | 2 | | | | 2 | | Other | | | 10,759 | | | | 153 | | | | 10,606 | | | | 146 | | | | 1.4 | | | | 17 | | | | 16 | | Total wholesale loans and advances at amortised cost | | | 221,922 | | | | 1,265 | | | | 220,657 | | | | 2,408 | | | | 1.1 | | | | 209 | | | | 9 | | BAGL loans and advances at amortised cost | | | 13,985 | | | | 200 | | | | 13,785 | | | | 513 | | | | 3.7 | | | | | | | | | | Total wholesale loans and advances at amortised cost | | | 235,907 | | | | 1,465 | | | | 234,442 | | | | 2,921 | | | | 1.2 | | | | | | | | | |
Excluding BAGL balances: § | | Wholesale loans and advances increased by £19bn to £241bn (2015: £222bn) due to increased lending of £11bn driven by volume growth and foreign currency movements due to the appreciation of average US Dollar and Euro against Sterling, £8bn due to the reclassification of ESHLA loans now recognised at amortised cost and a net £9bn increase in settlement and cash collateral balances, offset by £9bn from the exit of assets inNon-Core. |
§ | | CRLs remained stable at £2.4bn (2015: £2.4bn). |
§ | | Loan impairment charges increased to £299m (2015: £209m) from a number of single name exposures. The loan loss rates increased to 12bps (2015: 9bps). |
Note a | Included in the above analysis are Wealth and Private Banking exposures measured on an individual customer exposure basis. |
| | | 130 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Exposure to UK Commercial Real Estatecommercial real estate (CRE) The UK CRE portfolio includes property investment, development, trading and house builders but excludes social housing and contractors. | UK CRE summary | | | | | | | | | 2015 | | | | 2014 | | | UK CRE summarya | | | | | | As at 31 December | | | | | | 2016 | | | | 2015 | | UK CRE loans and advances (£m) | | | 11,617 | | | | 11,681 | | | 11,227 | | | | 10,690 | | Past due balances (£m) | | | 183 | | | | 393 | | | 83 | | | | 152 | | Balances past due as % of UK CRE balances (%) | | | 1.6 | | | | 3.4 | | | 0.7 | | | | 1.4 | | Impairment allowances (£m) | | | 99 | | | | 100 | | | 58 | | | | 79 | | Past due coverage ratio (%) | | | 54.1 | | | | 25.7 | | | 69.9 | | | | 52.0 | | Total collateral (£m)a | | | 27,062 | | | | 25,205 | | | Total collateral (£m) | | | 23,225 | | | | 21,858 | | | Twelve months ended 31 December | | | | | | | | | Impairment charge (£m) | | | 4 | | | | 23 | | | Impairment (credit)/charge (£m) | | | (2) | | | | 3 | |
| Maturity analysis of exposure to UK CRE | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contractual maturity of UK CRE loans and advances at amortised cost | | | | | | Contractual maturity of UK CRE loans and advances at amortised cost | | | | | | As at 31 December | | | Past due balances £m | | | | Not more than six months £m | | | | Over six months but not more than one year £m | | | | Over one year but not more than two years £m | | | | Over two years but not more than five years £m | | | | Over five years but not more than ten years £m | | | | Over ten years £m | | | | Total loans & advances £m | | |
| Past due balances
£m |
| |
| Not more than six months
£m |
| |
| Over six months but not more than one year
£m |
| |
| Over one year but not more than two years
£m |
| |
| Over two years but not more than five years
£m |
| |
| Over five years but not more than ten years
£m |
| |
| Over ten years
£m |
| |
| Total loans and advances
£m |
| 2016 | | | | 83 | | | | 774 | | | | 668 | | | | 1,200 | | | | 6,318 | | | | 700 | | | | 1,484 | | | | 11,227 | | | 2015 | | | 183 | | | | 801 | | | | 751 | | | | 941 | | | | 5,779 | | | | 1,076 | | | | 2,087 | | | | 11,617 | | | | 152 | | | | 784 | | | | 744 | | | | 929 | | | | 5,678 | | | | 852 | | | | 1,551 | | | | 10,690 | | | 2014 | | | 393 | | | | 838 | | | | 839 | | | | 1,287 | | | | 4,161 | | | | 1,939 | | | | 2,224 | | | | 11,681 | | |
Total loans and advances at amortised cost remained broadly stable at £11.6bn (2014: £11.7bn) with growth limitedexposure to high quality assets. The total collateral increased by 7% to £27.1bn. The UK CRE businesses operate to specific lending criteria and the portfolio of assets is continually monitored through a range of mandates and limits. The improvement in the past due coverage ratio in 2015 was driven by the sale of three unimpairedcommercial real estate loans.following the 2015 restatement rose moderately from £10.7bn to £11.2bn primarily in medium-term deals. Past due balances fell to £83m from £152m due to favourable recovery activity and a selective approach to new deals in this sector.
| UK CRE LTV analysis | | | | | | | | | | | | | | | | | | | | | | | | Balances | | | Balances as proportion of total | | | | Collateral held | | | | Balances | | |
| Balances as proportion
of total |
| As at 31 December | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2015
% |
| |
| 2014
% |
| |
| 2015
£m |
| |
| 2014
£m |
| |
| 2016 £m | | |
| 2015 £m | | |
| 2016 £m | | |
| 2015 £m | | Group | | | | | | | | | | | | | | | | | | | | | <=100% | | | 9,045 | | | | 9,011 | | | | 78 | | | | 78 | | | | 26,927 | | | | 25,036 | | | <=75% | | | | 7,884 | | | | 7,208 | | | | 70 | | | | 68 | | >75% and <=100% | | | | 102 | | | | 244 | | | | 1 | | | | 2 | | >100% and <=125% | | | 119 | | | | 149 | | | | 1 | | | | 1 | | | | 106 | | | | 138 | | | | 15 | | | | 109 | | | | – | | | | 1 | | >125% | | | 47 | | | | 167 | | | | – | | | | 1 | | | | 29 | | | | 31 | | | | 60 | | | | 18 | | | | 1 | | | | – | | Unassessed balancesb | | | 1,636 | | | | 1,748 | | | | 14 | | | | 15 | | | | – | | | | – | | | | 2,286 | | | | 2,370 | | | | 20 | | | | 22 | | Unsecured balances | | | 770 | | | | 606 | | | | 7 | | | | 5 | | | | – | | | | – | | | Unsecured balancesc | | | | 880 | | | | 741 | | | | 8 | | | | 7 | | Total | | | 11,617 | | | | 11,681 | | | | 100 | | | | 100 | | | | 27,062 | | | | 25,205 | | | | 11,227 | | | | 10,690 | | | | 100 | | | | 100 | |
Portfolio LTVs have reduced due to appreciating commercial property values. Unsecured balances primarily relate to working capital facilities granted to CRE companies.
Notes a | Based on the most recent valuation assessment.assessment, 2015 year end numbers have been restated following closer alignment of industry classifications between corporate banking and business lending. |
b | Corporate Banking balances under £1m. |
c | | | 126 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Risk review
Risk performance
Credit risk
Investment Bank
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of loans and advances at amortised cost | | | | | | | | | | | | | | | | | | | | | | | | | Gross L&A £m | | | | Impairment allowance £m | | | | L&A net of impairment £m | | |
| Credit risk loans
£m |
| |
| CRLs % of gross L&A
% |
| | | Loan impairment charges £m | | |
| Loan loss rates
bps |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances to banks | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interbank lending | | | 10,174 | | | | – | | | | 10,174 | | | | – | | | | – | | | | – | | | | – | | Cash collateral and settlement balances | | | 7,259 | | | | – | | | | 7,259 | | | | – | | | | – | | | | – | | | | – | | Loans and advances to customers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wholesale lending | | | 31,451 | | | | 83 | | | | 31,368 | | | | 241 | | | | 0.8 | | | | 47 | | | | 15 | | Cash collateral and settlement balances | | | 43,437 | | | | – | | | | 43,437 | | | | – | | | | – | | | | – | | | | – | | Total | | | 92,321 | | | | 83 | | | | 92,238 | | | | 241 | | | | 0.3 | | | | 47 | | | | 5 | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances to banks | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interbank lending | | | 10,275 | | | | – | | | | 10,275 | | | | – | | | | – | | | | (3) | | | | (3) | | Cash collateral and settlement balances | | | 9,626 | | | | – | | | | 9,626 | | | | – | | | | – | | | | – | | | | – | | Loans and advances to customers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wholesale lending | | | 28,436 | | | | 44 | | | | 28,392 | | | | 71 | | | | 0.2 | | | | (11) | | | | (4) | | Cash collateral and settlement balances | | | 58,040 | | | | – | | | | 58,040 | | | | – | | | | – | | | | – | | | | – | | Total | | | 106,377 | | | | 44 | | | | 106,333 | | | | 71 | | | | 0.1 | | | | (14) | | | | (1) | |
Non-Core Wholesale
The table below details Non-Core loans and advances which form part of the Wholesale risk portfolio.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of loans and advances at amortised cost | | | | | | | | | | | | | | | | | | | | | | | | | Gross L&A £m | | | | Impairment allowance £m | | | | L&A net of impairment £m | | |
| Credit risk loans
£m |
| |
| CRLs % of gross L&A
% |
| | | Loan impairment charges £m | | |
| Loan loss rates
bps |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances to banks | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interbank lending | | | 258 | | | | – | | | | 258 | | | | – | | | | – | | | | (7) | | | | (271) | | Cash collateral and settlement balances | | | 10,131 | | | | – | | | | 10,131 | | | | – | | | | – | | | | – | | | | – | | Loans and advances to customers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wholesale lending | | | 5,277 | | | | 233 | | | | 5,044 | | | | 345 | | | | 6.5 | | | | (13) | | | | (25) | | Cash collateral and settlement balances | | | 19,188 | | | | – | | | | 19,188 | | | | – | | | | – | | | | – | | | | – | | Total | | | 34,854 | | | | 233 | | | | 34,621 | | | | 345 | | | | 1.0 | | | | (20) | | | | (6) | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances to banks | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interbank lending | | | 373 | | | | – | | | | 373 | | | | – | | | | – | | | | – | | | | – | | Cash collateral and settlement balances | | | 11,622 | | | | – | | | | 11,622 | | | | – | | | | – | | | | – | | | | – | | Loans and advances to customers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Wholesale lending | | | 8,978 | | | | 602 | | | | 8,376 | | | | 841 | | | | 9.4 | | | | 53 | | | | 59 | | Cash collateral and settlement balances | | | 23,726 | | | | – | | | | 23,726 | | | | – | | | | – | | | | – | | | | – | | Total | | | 44,699 | | | | 602 | | | | 44,097 | | | | 841 | | | | 1.9 | | | | 53 | | | | 12 | |
Wholesale lending decreased £3.7bn to £5.3bn driven by the reclassification of Portuguese loans now held for sale and rundown of legacy loan portfolios. Wholesale loans predominantlyUnsecured balances primarily relate to capital equipment loans, legacy Collateralised Loan Obligations (CLO) and legacy Collateralised Debt Obligations (CDO).
Loan impairment charges improved £73m to a release of £20m reflecting higher recoveries in Europe and the sale of the Spanish business.
CRLs decreased to £345m (2014: £841m) as a result of the reclassification of Portuguese loans now held for sale and continued rundown of the Non-Core Investment Bank portfolio.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 127 |
Wholesale Personal and Corporate Banking
The table below details Personal and Corporate Banking loans and advances which form part of the Wholesale risk portfolio.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of loans and advances at amortised cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross L&A £m | | | | Impairment allowance £m | | | | L&A net of impairment £m | | |
| Credit risk loans
£m |
| |
| CRLs % of gross L&A
% |
| | | Loan impairment charges £m | | |
| Loan loss rates
bps |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Banks | | | 3,593 | | | | – | | | | 3,593 | | | | – | | | | – | | | | – | | | | – | | Other financial institutions | | | 6,321 | | | | 16 | | | | 6,305 | | | | 46 | | | | 0.7 | | | | 2 | | | | 3 | | Manufacturing | | | 6,762 | | | | 37 | | | | 6,725 | | | | 51 | | | | 0.8 | | | | 2 | | | | 3 | | Construction | | | 3,267 | | | | 38 | | | | 3,229 | | | | 47 | | | | 1.4 | | | | 1 | | | | 3 | | Property | | | 15,309 | | | | 166 | | | | 15,143 | | | | 645 | | | | 4.2 | | | | 2 | | | | 1 | | Government and central bank | | | 1,304 | | | | – | | | | 1,304 | | | | – | | | | – | | | | – | | | | – | | Energy and water | | | 2,216 | | | | 79 | | | | 2,137 | | | | 103 | | | | 4.6 | | | | 82 | | | | 370 | | Wholesale and retail distribution and leisure | | | 11,333 | | | | 165 | | | | 11,168 | | | | 261 | | | | 2.3 | | | | (8 | ) | | | (7 | ) | Business and other services | | | 16,536 | | | | 223 | | | | 16,313 | | | | 271 | | | | 1.6 | | | | 54 | | | | 33 | | Home loansa | | | 5,730 | | | | 20 | | | | 5,710 | | | | 142 | | | | 2.5 | | | | – | | | | – | | Cards, unsecured loans and other personal lendinga | | | 8,714 | | | | 1 | | | | 8,713 | | | | 14 | | | | 0.2 | | | | 4 | | | | 5 | | Other | | | 6,770 | | | | 169 | | | | 6,601 | | | | 214 | | | | 3.2 | | | | 43 | | | | 64 | | Total | | | 87,855 | | | | 914 | | | | 86,941 | | | | 1,794 | | | | 2.0 | | | | 182 | | | | 21 | | | | | | | | | | As at 31 December 2014b | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Banks | | | 5,507 | | | | – | | | | 5,507 | | | | – | | | | – | | | | 1 | | | | 2 | | Other financial institutions | | | 5,357 | | | | 13 | | | | 5,344 | | | | 85 | | | | 1.6 | | | | 26 | | | | 49 | | Manufacturing | | | 7,174 | | | | 47 | | | | 7,127 | | | | 106 | | | | 1.5 | | | | – | | | | – | | Construction | | | 3,094 | | | | 40 | | | | 3,054 | | | | 58 | | | | 1.9 | | | | 7 | | | | 21 | | Property | | | 15,480 | | | | 194 | | | | 15,286 | | | | 833 | | | | 5.4 | | | | 36 | | | | 23 | | Government and central bank | | | 1,187 | | | | – | | | | 1,187 | | | | – | | | | – | | | | – | | | | – | | Energy and water | | | 1,950 | | | | 2 | | | | 1,948 | | | | 2 | | | | 0.1 | | | | 3 | | | | 16 | | Wholesale and retail distribution and leisure | | | 10,928 | | | | 175 | | | | 10,753 | | | | 342 | | | | 3.1 | | | | 56 | | | | 52 | | Business and other services | | | 14,160 | | | | 177 | | | | 13,983 | | | | 344 | | | | 2.4 | | | | 54 | | | | 38 | | Home loansa | | | 6,864 | | | | 36 | | | | 6,828 | | | | 96 | | | | 1.4 | | | | 34 | | | | 50 | | Cards, unsecured loans and other personal lending | | | 9,628 | | | | 60 | | | | 9,568 | | | | 16 | | | | 0.2 | | | | 22 | | | | 23 | | Other | | | 6,863 | | | | 129 | | | | 6,734 | | | | 229 | | | | 3.3 | | | | 28 | | | | 40 | | Total | | | 88,192 | | | | 873 | | | | 87,319 | | | | 2,111 | | | | 2.4 | | | | 267 | | | | 30 | |
Wholesale PCB loans and advances and CRLs remained broadly stable at £87.9bn (2014: £88.2bn) and £1.8bn (2014: £2.1bn) respectively.
Loan impairment charges improved 32% to £182m due to the benign economic environment in the UK. This led to a decrease in the loan loss rate to 21bps (2014: 30bps).
Analysis of Wholesale balances on watch list
Wholesale accounts that are deemed to contain heightened levels of risk are recorded on a graded watch list comprising four categories graded in line with the perceived severity of the risk attached to the lending, and its probability of default:
§ | | Category 1: a temporary classification for performing obligors who exhibit some unsatisfactory features |
§ | | Category 2: performing obligors where some doubt exists, but the belief is that the obligor can meet obligations over the short term |
§ | | Category 3: obligors where definite concern exists with well defined weaknesses and failure in the short term could arise should further deterioration occur |
§ | | Category 4: non-performing obligors, insolvent or regulatory default. High risk of loss. |
Notes
a | Included in the above analysis are Wealth and Investment Management exposures measured on an individual customer exposure basis. |
b | UK Business Banking has been reclassified from Retail to Wholesale in line with how the business is now managed. 2014 figures have been restatedworking capital facilities agreed to reflect this, with net loans and advances of £8.4bn, credit risk loans of £482m and impairment charges of £48m being reclassified to Wholesale. |
| | | 128 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Risk review
Risk performance
Credit risk
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Watch list rating of wholesale balancesa | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Watch list 1 | | | | Watch list 2 | | | | Watch list 3 | | | | Watch list 4 | | | | Total | | As at 31 December | | | 2015 £m | | | | 2014 £m | | | | 2015 £m | | | | 2014 £m | | | | 2015 £m | | | | 2014 £m | | | | 2015 £m | | | | 2014 £m | | | | 2015 £m | | | | 2014 £m | | Energy and Water | | | 1,247 | | | | 160 | | | | 314 | | | | 1,011 | | | | 447 | | | | 480 | | | | 285 | | | | 49 | | | | 2,293 | | | | 1,700 | | Manufacturing | | | 928 | | | | 483 | | | | 539 | | | | 347 | | | | 138 | | | | 162 | | | | 267 | | | | 395 | | | | 1,872 | | | | 1,387 | | Agriculture, Forestry, Fishing & Miscellaneous Activities | | | 425 | | | | 277 | | | | 496 | | | | 517 | | | | 544 | | | | 324 | | | | 275 | | | | 445 | | | | 1,740 | | | | 1,563 | | Wholesale and Retail, Distribution and Leisure | | | 626 | | | | 249 | | | | 582 | | | | 939 | | | | 272 | | | | 388 | | | | 260 | | | | 536 | | | | 1,740 | | | | 2,112 | | Property | | | 424 | | | | 513 | | | | 410 | | | | 600 | | | | 378 | | | | 1,458 | | | | 498 | | | | 1,212 | | | | 1,710 | | | | 3,782 | | Business and Other Services | | | 220 | | | | 241 | | | | 516 | | | | 583 | | | | 639 | | | | 214 | | | | 149 | | | | 157 | | | | 1,524 | | | | 1,196 | | Transport | | | 86 | | | | 98 | | | | 121 | | | | 148 | | | | 208 | | | | 285 | | | | 98 | | | | 111 | | | | 513 | | | | 641 | | Construction | | | 65 | | | | 47 | | | | 175 | | | | 131 | | | | 108 | | | | 136 | | | | 84 | | | | 147 | | | | 432 | | | | 461 | | Financial Institutions/Services | | | (59 | ) | | | 29 | | | | 69 | | | | 391 | | | | 62 | | | | 345 | | | | 302 | | | | 325 | | | | 374 | | | | 1,090 | | Other | | | 53 | | | | 75 | | | | 69 | | | | 91 | | | | 119 | | | | 72 | | | | 88 | | | | 29 | | | | 329 | | | | 268 | | Total | | | 4,015 | | | | 2,172 | | | | 3,291 | | | | 4,758 | | | | 2,915 | | | | 3,865 | | | | 2,306 | | | | 3,405 | | | | 12,527 | | | | 14,200 | | As a percentage of total balances | | | 32% | | | | 15% | | | | 26% | | | | 34% | | | | 23% | | | | 27% | | | | 19% | | | | 24% | | | | 100% | | | | 100% | |
Total watch list balances fell by 12% to £12.5bn principally reflecting the sale of the corporate business in Spain.
Total watch list balances to energy and water increased by 35% to £2,293m (2014: £1,700m), reflecting the increased stress in the oil and gas sector as a result of the oil price. Watch list balances in manufacturing increased due to increased stress in the automotive sector.
Analysis of debt securities
Debt securities include government securities held as part of the Group’s treasury management portfolio for liquidity and regulatory purposes, and are for use on a continuing basis in the activities of the Group.
The following tables provide an analysis of debt securities held by the Group for trading and investment purposes by issuer type, and where the Group held government securities exceeding 10% of shareholders’ equity.
Further information on the credit quality of debt securities is presented on pages 115 to 116. Further disclosure on sovereign exposures to selected Eurozone countries is presented on page 119.
| | | | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | | | | 2015 | | | | 2014 | | As at 31 December | | | £m | | | | % | | | | £m | | | | % | | Of which issued by: | | | | | | | | | | | | | | | | | Governments and other public bodies | | | 96,537 | | | | 70.9 | | | | 106,292 | | | | 68.1 | | Corporate and other issuers | | | 26,166 | | | | 19.2 | | | | 29,557 | | | | 19.0 | | US agency | | | 8,927 | | | | 6.6 | | | | 11,460 | | | | 7.3 | | Mortgage and asset backed securities | | | 4,009 | | | | 2.9 | | | | 8,396 | | | | 5.4 | | Bank and building society certificates of deposit | | | 598 | | | | 0.4 | | | | 279 | | | | 0.2 | | Total | | | 136,237 | | | | 100.0 | | | | 155,984 | | | | 100.0 | | | | | | | | | | | | | | | | | | | Government securities | | | | | | | | | | | | | | | | | As at 31 December | | | | | | | | | |
| 2015
Fair value £m |
| |
| 2014
Fair value £m |
| US | | | | | | | | | | | 26,119 | | | | 32,096 | | UK | | | | | | | | | | | 22,372 | | | | 28,938 | | France | | | | | | | | | | | 8,874 | | | | 6,259 | | Germany | | | | | | | | | | | 6,619 | | | | 7,801 | |
Note
a | Balances represent on-balance sheet exposures and comprise PCB, Barclays Africa, Non-Core and Investment Bank.CRE companies. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 129 |
Analysis of derivatives (audited)
The tables below set out the fair value 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2015 | | | | 2014 | | As at 31 December | | | Balance sheet assets £m | | |
| Counterparty netting
£m |
| | | Net exposure £m | | | | Balance sheet assets £m | | |
| Counterparty netting
£m |
| | | Net exposure £m | | Foreign exchange | | | 54,936 | | | | 40,301 | | | | 14,635 | | | | 74,470 | | | | 58,153 | | | | 16,317 | | Interest rate | | | 231,426 | | | | 190,513 | | | | 40,913 | | | | 309,946 | | | | 253,820 | | | | 56,126 | | Credit derivatives | | | 18,181 | | | | 14,110 | | | | 4,071 | | | | 23,507 | | | | 19,829 | | | | 3,678 | | Equity and stock index | | | 13,799 | | | | 8,358 | | | | 5,441 | | | | 14,844 | | | | 10,523 | | | | 4,321 | | Commodity derivatives | | | 9,367 | | | | 6,300 | | | | 3,067 | | | | 17,142 | | | | 11,306 | | | | 5,836 | | Total derivative assets | | | 327,709 | | | | 259,582 | | | | 68,127 | | | | 439,909 | | | | 353,631 | | | | 86,278 | | Cash collateral held | | | | | | | | | | | 34,918 | | | | | | | | | | | | 44,047 | | Net exposure less collateral | | | | | | | | | | | 33,209 | | | | | | | | | | | | 42,231 | |
Derivative asset exposures would be £295bn (2014: £398bn) lower than reported under IFRS if netting were permitted for assets and liabilities with the same counterparty, or for which the Group holds cash collateral. Similarly, derivative liabilities would be £295bn (2014: £397bn) lower reflecting counterparty netting and collateral placed. In addition, non-cash collateral of £7bn (2014: £8bn) was held in respect of derivative assets. The Group received collateral from clients in support of over the counter derivative transactions. These transactions are generally undertaken under International Swaps and Derivative Association (ISDA) agreements governed by either UK or New York law.
Exposure relating to derivatives, repurchase agreements, reverse repurchase agreements, stock borrowing and loan transactions is calculated using internal PRA 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).
The table below sets out the fair value and notional amounts of Over the Counter (OTC) derivative instruments by type of collateral arrangement.
| | | | | | | | | | | | | | | | | | | | | | | | | Derivatives by collateral arrangement | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2015 | | | | 2014 | | | |
| Notional contract amount
£m |
| | | Fair value | | |
| Notional contract amount
£m |
| | | Fair value | | | | |
| Assets
£m |
| |
| Liabilities
£m |
| | |
| Assets
£m |
| |
| Liabilities
£m |
| Unilateral in favour of Barclays | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange | | | 15,645 | | | | 242 | | | | (308 | ) | | | 15,067 | | | | 191 | | | | (158 | ) | Interest rate | | | 4,365 | | | | 846 | | | | (65 | ) | | | 5,826 | | | | 940 | | | | (72 | ) | Credit derivatives | | | 277 | | | | 2 | | | | (7 | ) | | | 226 | | | | 3 | | | | (4 | ) | Equity and stock index | | | 303 | | | | 4 | | | | (146 | ) | | | 310 | | | | 3 | | | | (8 | ) | Commodity derivatives | | | 905 | | | | 150 | | | | (30 | ) | | | 2,455 | | | | 158 | | | | (120 | ) | Total unilateral in favour of Barclays | | | 21,495 | | | | 1,244 | | | | (556 | ) | | | 23,884 | | | | 1,295 | | | | (362 | ) | Unilateral in favour of counterparty | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange | | | 50,343 | | | | 810 | | | | (2,107 | ) | | | 24,861 | | | | 681 | | | | (2,713 | ) | Interest rate | | | 121,231 | | | | 4,436 | | | | (6,981 | ) | | | 138,396 | | | | 6,073 | | | | (8,751 | ) | Credit derivatives | | | 140 | | | | 3 | | | | (1 | ) | | | 403 | | | | 6 | | | | (19 | ) | Equity and stock index | | | 827 | | | | 100 | | | | (83 | ) | | | 1,100 | | | | 133 | | | | (137 | ) | Commodity derivatives | | | 74 | | | | – | | | | (3 | ) | | | 2,881 | | | | 359 | | | | (138 | ) | Total unilateral in favour of counterparty | | | 172,615 | | | | 5,349 | | | | (9,175 | ) | | | 167,641 | | | | 7,252 | | | | (11,758 | ) | Bilateral arrangement | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange | | | 2,878,125 | | | | 46,831 | | | | (50,899 | ) | | | 3,350,366 | | | | 67,496 | | | | (70,919 | ) | Interest rate | | | 7,315,345 | | | | 197,900 | | | | (188,293 | ) | | | 9,032,753 | | | | 263,812 | | | | (256,697 | ) | Credit derivatives | | | 663,090 | | | | 13,617 | | | | (11,985 | ) | | | 887,041 | | | | 18,290 | | | | (17,002 | ) | Equity and stock index | | | 144,108 | | | | 4,991 | | | | (8,297 | ) | | | 162,615 | | | | 6,033 | | | | (10,498 | ) | Commodity derivatives | | | 36,794 | | | | 3,164 | | | | (3,104 | ) | | | 68,400 | | | | 6,254 | | | | (6,377 | ) | Total bilateral arrangement | | | 11,037,462 | | | | 266,503 | | | | (262,578 | ) | | | 13,501,175 | | | | 361,885 | | | | (361,493 | ) | Uncollateralised derivatives | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange | | | 271,819 | | | | 7,008 | | | | (5,424 | ) | | | 303,341 | | | | 6,028 | | | | (5,452 | ) | Interest rate | | | 193,565 | | | | 6,091 | | | | (2,907 | ) | | | 199,615 | | | | 8,572 | | | | (3,524 | ) | Credit derivatives | | | 7,881 | | | | 467 | | | | (700 | ) | | | 8,716 | | | | 565 | | | | (800 | ) | Equity and stock index | | | 6,672 | | | | 2,204 | | | | (3,075 | ) | | | 5,789 | | | | 2,115 | | | | (2,406 | ) | Commodity derivatives | | | 13,347 | | | | 1,733 | | | | (1,667 | ) | | | 26,099 | | | | 2,806 | | | | (2,766 | ) | Total uncollateralised derivatives | | | 493,284 | | | | 17,503 | | | | (13,773 | ) | | | 543,560 | | | | 20,086 | | | | (14,948 | ) | Total OTC derivative assets/(liabilities) | | | 11,724,856 | | | | 290,599 | | | | (286,082 | ) | | | 14,236,260 | | | | 390,518 | | | | (388,561 | ) |
| | | 130 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | 131 |
Risk review Risk performance Credit risk Analysis of loans on concession programmes
Re-age activity
Re-age is applicable only to revolving products where a minimum due payment is required. Re-age refers to returning of a delinquent account to up to date status without collecting the full arrears (principal, interest and fees).
The following are the principal portfolios in which re-age activity occurs.
| | | | | | | | | | | | | | | | | | | | | | | | | Principal portfolios – core portfolios | | | | | | | | | | | | | | | | New re-ages in the year | | | | New re-ages as proportion of total outstanding | | |
| 30 day arrears at
12 months since re-age |
| As at 31 December | | | 2015 £m | | | | 2014 £m | | |
| 2015
% |
| |
| 2014
% |
| |
| 2015
% |
| |
| 2014
% |
| UK cards | | | 117 | | | | 163 | | | | 0.7 | | | | 1.0 | | | | 40.5 | | | | 43.4 | | US cards | | | 36 | | | | 31 | | | | 0.2 | | | | 0.2 | | | | 47.2 | | | | 46.8 | | UK cards: The reduction of new to re-ages in the year is due to changes in operational and qualification criteria resulting in reduced volume of accounts qualifying for re-age. Enhanced criteria has also led to lower 30 day arrears at 12 months after re-age. US cards: The increase in new to re-ages is in line with portfolio growth, the ratio as a proportion of total outstanding remained stable at 0.2%. Re-age activity in South Africa and Europe card portfolios are not considered to be material. For further detail on policy relating to the re-ageing of loans, please refer to page 368. Forbearance | | Analysis of forbearance programmes | | | | | | | | | | | | | | | | Balances | | | | Impairment allowance | | | | Impairment coverage | | As at 31 December | | | 2015 £m | | | | 2014 £m | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2015
% |
| |
| 2014
% |
| Personal and Corporate Bankinga | | | 589 | | | | 931 | | | | 33 | | | | 63 | | | | 5.6 | | | | 6.8 | | Africa Banking | | | 209 | | | | 299 | | | | 29 | | | | 45 | | | | 13.8 | | | | 15.1 | | Barclaycard | | | 729 | | | | 972 | | | | 247 | | | | 394 | | | | 33.9 | | | | 40.5 | | Barclays Core | | | 1,527 | | | | 2,202 | | | | 309 | | | | 502 | | | | 20.2 | | | | 22.8 | | Barclays Non-Core | | | 246 | | | | 419 | | | | 20 | | | | 49 | | | | 8.3 | | | | 11.7 | | Total retail | | | 1,773 | | | | 2,621 | | | | 329 | | | | 551 | | | | 18.5 | | | | 21.0 | | Investment Bank | | | 210 | | | | 106 | | | | 4 | | | | 10 | | | | 2.1 | | | | 9.4 | | Personal and Corporate Banking | | | 1,764 | | | | 1,590 | | | | 253 | | | | 225 | | | | 14.3 | | | | 14.2 | | Africa Banking | | | 228 | | | | 132 | | | | 17 | | | | 7 | | | | 7.5 | | | | 5.3 | | Barclays Core | | | 2,202 | | | | 1,828 | | | | 274 | | | | 242 | | | | 12.4 | | | | 13.2 | | Barclays Non-Core | | | 230 | | | | 651 | | | | 117 | | | | 271 | | | | 50.7 | | | | 41.6 | | Total wholesale | | | 2,432 | | | | 2,479 | | | | 391 | | | | 513 | | | | 16.1 | | | | 20.7 | | Group total | | | 4,205 | | | | 5,100 | | | | 720 | | | | 1,064 | | | | 17.1 | | | | 20.9 | |
Balances on forbearance programmes reduced 18% to £4.2bn (2014: £5.1bn) driven primarily by; (i) fewer customers requiring forbearance as macroeconomic conditions improved; and (ii) the ongoing impact of enhanced qualification criteria. The decrease in impairment coverage to 17.1% (2014: 20.9%) reflected coverage reduction across both the wholesale and retail portfolios.
Retail balances on forbearance reduced by 32% to £1.8bn and reflected a decrease across all businesses.
§ | | PCB:Migration of Business Banking from Retail to Corporate amounting to £239m. |
§ | | Barclaycard:Primarily due to multiple asset sales through the year and updated entry criteria for forbearance programmes, which reduced inflows in the UK cards portfolio. |
§ | | Africa Banking:Updated qualifying criteria in South African home loans and depreciation of the Rand. |
Wholesale balances on forbearance reduced by 2% to £2.4bn as the removal of assets following the sale of the Spanish corporate business was partially offset by the migration of Business Banking forborne assets into the UK Corporate Bank. Excluding these movements, the overall level of forborne balances was broadly stable.
See over for more information on these portfolios.
Note
a | The forbearance definition has been tightened during the year based on observed performance to more accurately reflect signs of financial distress. As a result an element of the MCA population has been reclassified as high risk instead of forbearance. 2014 forbearance balances have been restated for a like for like comparison. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 131 |
Retail forbearance programmes
Forbearance on the Group’s principal retail portfolios in the UK, US and South Africa is presented below. The principal portfolios listed below account for 70% (2014: 83%) of total retail forbearance balances.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of key portfolios in forbearance programmes | | | | Balances on forbearance programmes | | | Marked | | | Marked | | | Impairment | | | | | | | | | | | | | Of which: | | | to market | | | to market | | | allowances | | | Total | | | | | | | | | | | | | Past due of which: | | | LTV of | | | LTV of | | | marked | | | balances on | | | | | | | | | | | | | | | | | | | forbearance | | | forbearance | | | against | | | forbearance | | | | | | | % of gross | | | | | | | | | 91 or more | | | balances: | | | balances: | | | balances on | | | programmes | | | | | | | loans and | | | | | | 1-90 days | | | days past | | | balance | | | valuation | | | forbearance | | | coverage | | | | Total | | | advances | | | Up-to-date | | | past due | | | due | | | weighted | | | weighted | | | programmes | | | ratio | | | | | £m | | | | % | | | | £m | | | | £m | | | | £m | | | | % | | | | % | | | | £m | | | | % | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PCB – UKa | | | 445 | | | | 0.3 | | | | 211 | | | | 177 | | | | 57 | | | | 48.0 | | | | 34.1 | | | | 4 | | | | 0.8 | | Africa Banking – South Africa | | | 125 | | | | 1.3 | | | | 50 | | | | 64 | | | | 11 | | | | 67.5 | | | | 53.6 | | | | 7 | | | | 5.5 | | Credit cards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | UK | | | 448 | | | | 2.4 | | | | 414 | | | | 31 | | | | 3 | | | | n/a | | | | n/a | | | | 159 | | | | 35.5 | | US | | | 133 | | | | 0.8 | | | | 92 | | | | 30 | | | | 11 | | | | n/a | | | | n/a | | | | 30 | | | | 22.7 | | Unsecured loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | UK | | | 85 | | | | 1.6 | | | | 59 | | | | 22 | | | | 3 | | | | n/a | | | | n/a | | | | 21 | | | | 24.6 | | | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | PCB – UK | | | 522 | | | | 0.4 | | | | 257 | | | | 206 | | | | 59 | | | | 52.1 | | | | 36.8 | | | | 3 | | | | 0.6 | | Africa Banking – South Africa | | | 207 | | | | 1.8 | | | | 95 | | | | 99 | | | | 13 | | | | 71.1 | | | | 57.4 | | | | 13 | | | | 6.5 | | Credit cards | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | UK | | | 724 | | | | 4.3 | | | | 679 | | | | 41 | | | | 4 | | | | n/a | | | | n/a | | | | 324 | | | | 44.8 | | US | | | 98 | | | | 0.7 | | | | 67 | | | | 22 | | | | 9 | | | | n/a | | | | n/a | | | | 22 | | | | 22.1 | | Unsecured loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | UK | | | 121 | | | | 2.4 | | | | 83 | | | | 33 | | | | 5 | | | | n/a | | | | n/a | | | | 25 | | | | 20.9 | |
Loans in forbearance in the principal home loans portfolios decreased 22% to £570m (2014: £729m).
§ | | PCB – UK (home loans): Balances under forbearance decreased 15% to £445m, principally due to an update to the entry criteria, and fewer customers requiring forbearance in a stable macroeconomic environment. Total past due balances reduced 12% to £234m in line with falling total balances under forbearance. |
§ | | Africa Banking – South Africa (home loans): Reduction in forbearance balances to £125m (2014: £207m) was due to enhanced qualification criteria which resulted in a more appropriate and sustainable programme for customers, and depreciation of the Rand. |
Forbearance balances on principal credit cards, overdrafts and unsecured loan portfolios decreased by 29% to £666m.
§ | | UK Cards: The reduction in forbearance balances was driven by the implementation of enhanced qualification criteria and asset sales. Balances in arrears and coverage ratio reduced in line with balance reduction. |
§ | | US Cards: The increase in balances on forbearance programmes was in line with asset growth on the US portfolio. Balances in arrears remained low as a proportion of the total and coverage was stable. |
| | | | | | | | | | | | | | | | | Forbearance by type | | | | | Home loans – Barclays Core portfolios | | | | | UK | | | | South Africa | | As at 31 December | | | 2015 £m | | | | 2014 £m | | | | 2015 £m | | | | 2014 £m | | Interest only conversion | | | 94 | | | | 100 | | | | – | | | | – | | Interest rate reduction | | | – | | | | – | | | | 1 | | | | 1 | | Payment concession | | | 103 | | | | 106 | | | | 97 | | | | 161 | | Term extension | | | 248 | | | | 316 | | | | 28 | | | | 45 | | Total | | | 445 | | | | 522 | | | | 125 | | | | 207 | |
Note
a | The forbearance definition has been tightened during the year based on observed performance to more accurately reflect signs of financial distress. As a result, an element of the MCA population has been reclassified as high-risk instead of forbearance. 2014 forbearance balances have been restated for a like for like comparison. (2014 MCA balances: £1.3bn). |
| | | 132 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Risk review
Risk performance
Credit risk
| | | | | | | | | | | | | | | | | | | | | | | | | Forbearance by type | | | | | | | | | | | | | | | | | | | | | | | | | | | | Credit cards and unsecured loans – Barclays Core portfolios | | | | | UK cards | | | | US cards | | | | UK personal loans | | As at 31 December | | | 2015 £m | | | | 2014 £m | | |
| 2015
£m |
| | | 2014 £m | | | | 2015 £m | | | | 2014 £m | | Payment concession | | | 21 | | | | 31 | | | | – | | | | – | | | | – | | | | – | | Term extension | | | – | | | | – | | | | – | | | | – | | | | 6 | | | | 28 | | Fully amortising | | | – | | | | – | | | | 69 | | | | 58 | | | �� | 79 | | | | 93 | | Repayment plana | | | 427 | | | | 693 | | | | 64 | | | | 40 | | | | – | | | | – | | Total | | | 448 | | | | 724 | | | | 133 | | | | 98 | | | | 85 | | | | 121 | |
Payment concessions reduced to £21m (2014: £31m) in UK cards following its withdrawal from forbearance offering in 2014.
Repayment plan balances in UK cards decreased to £427m (2014: £693m) driven by a debt sale and the continued reduction in new repayment plan volumes, following the implementation of enhanced qualification criteria in 2012.
Wholesale forbearance programmes
The tables below detail balance information for wholesale forbearance cases.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of wholesale balances in forbearance programmes | | | | | | | | | | | | | | | | | | | | | | | | Balances on forbearance programmes | | | Impairment | | | | | | | | | | | | | Of which: | | | allowances | | | Total | | | | | Total balances £m | | | | % of gross loans and advances % | | | | Performing balances £m | | | | Impaired up-to-date balances £m | | | | Balances between 1 and 90 days past due £m | | | | Balances 91 days or more past due £m | | |
| marked
against balances on forbearance programmes £m |
| |
| balances on
forbearance programmes coverage ratio % |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment Bank | | | 210 | | | | 0.2 | | | | 81 | | | | – | | | | 100 | | | | 29 | | | | 4 | | | | 2.1 | | Personal & Corporate Banking | | | 1,764 | | | | 2.0 | | | | 578 | | | | 661 | | | | 93 | | | | 432 | | | | 253 | | | | 14.3 | | Africa Banking | | | 228 | | | | 1.5 | | | | 103 | | | | 4 | | | | – | | | | 121 | | | | 17 | | | | 7.5 | | Total Barclays Core | | | 2,202 | | | | 1.1 | | | | 762 | | | | 665 | | | | 193 | | | | 582 | | | | 274 | | | | 12.4 | | | | | | | | | | | Barclays Non-Core | | | 229 | | | | 0.7 | | | | 38 | | | | 103 | | | | 2 | | | | 87 | | | | 117 | | | | 50.7 | | Group | | | 2,431 | | | | 1.0 | | | | 800 | | | | 768 | | | | 195 | | | | 669 | | | | 391 | | | | 16.1 | | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment Bank | | | 106 | | | | 0.1 | | | | 52 | | | | – | | | | 22 | | | | 32 | | | | 10 | | | | 9.4 | | Personal & Corporate Banking | | | 1,590 | | | | 2.0 | | | | 574 | | | | 587 | | | | 38 | | | | 391 | | | | 225 | | | | 14.1 | | Africa Banking | | | 132 | | | | 0.8 | | | | 30 | | | | 47 | | | | 13 | | | | 42 | | | | 7 | | | | 5.0 | | Total Barclays Core | | | 1,828 | | | | 0.9 | | | | 656 | | | | 634 | | | | 73 | | | | 465 | | | | 242 | | | | 13.2 | | | | | | | | | | | Barclays Non-Core | | | 651 | | | | 1.5 | | | | 36 | | | | 336 | | | | 41 | | | | 238 | | | | 271 | | | | 41.6 | | Group | | | 2,479 | | | | 1.0 | | | | 692 | | | | 970 | | | | 114 | | | | 703 | | | | 513 | | | | 20.7 | |
| | | | | | | | | | | | | | | | | Wholesale forbearance reporting split by exposure class | | | | | | | | | | | | | | | | | | | | Corporate £m | | | | Personal and trusts £m | | | | Other £m | | | | Total £m | | As at 31 December 2015 | | | | | | | | | | | | | | | | | Restructure: reduced contractual cash flows | | | 158 | | | | – | | | | – | | | | 158 | | Restructure: maturity date extension | | | 716 | | | | 24 | | | | 62 | | | | 801 | | Restructure: changed cash flow profile (other than extension) | | | 317 | | | | 1 | | | | – | | | | 318 | | Restructure: payment other than cash | | | 12 | | | | – | | | | – | | | | 12 | | Change in security | | | 7 | | | | 1 | | | | – | | | | 8 | | Adjustments or non-enforcement of covenants | | | 295 | | | | 92 | | | | – | | | | 387 | | Other (e.g. capital repayment holiday; restructure pending) | | | 538 | | | | 208 | | | | – | | | | 746 | | Total | | | 2,043 | | | | 326 | | | | 62 | | | | 2,431 | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | Restructure: reduced contractual cash flows | | | 180 | | | | – | | | | – | | | | 180 | | Restructure: maturity date extension | | | 600 | | | | 79 | | | | 4 | | | | 683 | | Restructure: changed cash flow profile (other than extension) | | | 335 | | | | 25 | | | | 4 | | | | 364 | | Restructure: payment other than cash | | | 7 | | | | 9 | | | | – | | | | 16 | | Change in security | | | 17 | | | | – | | | | – | | | | 17 | | Adjustments or non-enforcement of covenants | | | 383 | | | | 53 | | | | – | | | | 436 | | Other (e.g. capital repayment holiday; restructure pending) | | | 607 | | | | 175 | | | | 1 | | | | 783 | | Total | | | 2,129 | | | | 341 | | | | 9 | | | | 2,479 | |
Note
a | Repayment plan represents a reduction to the minimum payment due requirements and interest rate. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 133 |
| | | | | | | | | | | | | | | | | | | Wholesale forbearance reporting split by business unit | | | | | | | | | | | | | | | | | | | | | | Personal & Corporate Banking £m | | |
| Investment Bank
£m |
| |
| Africa Banking
£m |
| |
| Barclays Non-Core
£m |
| | Total £m | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | Restructure: reduced contractual cash flows | | | 131 | | | | – | | | | 4 | | | | 23 | | | 158 | Restructure: maturity date extension | | | 370 | | | | 162 | | | | 153 | | | | 116 | | | 801 | Restructure: changed cash flow profile (other than extension) | | | 248 | | | | 2 | | | | 68 | | | | – | | | 318 | Restructure: payment other than cash | | | 1 | | | | 11 | | | | – | | | | – | | | 12 | Change in security | | | 8 | | | | – | | | | – | | | | – | | | 8 | Adjustments or non-enforcements of covenants | | | 338 | | | | 2 | | | | – | | | | 47 | | | 387 | Other (e.g. capital repayment holiday; restructure pending) | | | 668 | | | | 33 | | | | 3 | | | | 43 | | | 747 | Total | | | 1,764 | | | | 210 | | | | 228 | | | | 229 | | | 2,431 | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | Restructure: reduced contractual cash flows | | | 125 | | | | – | | | | 1 | | | | 54 | | | 181 | Restructure: maturity date extension | | | 314 | | | | 72 | | | | 78 | | | | 219 | | | 683 | Restructure: changed cash flow profile (other than extension) | | | 178 | | | | 2 | | | | 49 | | | | 135 | | | 364 | Restructure: payment other than cash | | | 13 | | | | – | | | | – | | | | 3 | | | 16 | Change in security | | | 11 | | | | – | | | | – | | | | 6 | | | 17 | Adjustments or non-enforcements of covenants | | | 329 | | | | – | | | | – | | | | 107 | | | 436 | Other (e.g. capital repayment holiday; restructure pending) | | | 620 | | | | 32 | | | | 4 | | | | 127 | | | 783 | Total | | | 1,589 | | | | 106 | | | | 134 | | | | 651 | | | 2,479 |
Wholesale forbearance decreased 2% to £2.4bn with an impairment coverage ratio of 16.1% (2014: 20.7%). Personal & Corporate Banking accounted for the largest portion with 73% (2014: 64%) of total balances held as forbearance.
Overall forbearance balances in Core portfolios rose by 20% to £2.2bn, driven primarily by the migration of forborne Business Banking assets into the PCB UK Corporate Banking portfolio from PCB Retail.
Non-Core balances remain focused on the European corporate portfolios and reduced by 65% to £230m following the sale of the Spanish corporate business.
| | | | | Wholesale forbearance flows in 2015a | | | | | | |
| Balance
£m
|
| As at 1 January 2015 | | | 2,479 | | Added to forbearanceb | | | 1,302 | | Removed from forbearance (credit improvement) | | | (190 | ) | Fully or partially repaid and other movementsc | | | (936 | ) | Written off/moved to recoveries | | | (224 | ) | As at 31 December 2015 | | | 2,431 | |
Analysis of problem loans Impaired loans and loansLoans that are past due or assessed as impaired within this section are reflected in the balance sheet credit quality tables on page 116122 as being Higher Risk.
Age analysis of loans and advances that are past due but not impaired (audited) The following table presents an age analysis of loans and advances that are past due but not impaired. Loans that are past due but not impaired consist predominantly of wholesale loans that are past due but individually assessed as not being impaired. These loans although individually assessed as unimpaired, may carry an unidentified impairment provision. | Loans and advances past due but not 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 |
| As at 31 December 2016 | | | | | | | | | | | | | | Loans and advances designated at fair value | | | | 29 | | | | 8 | | | | 18 | | | | – | | | | 16 | | | | 71 | | Home loans | | | | 1 | | | | – | | | | – | | | | 33 | | | | 31 | | | | 65 | | Credit cards, unsecured and other retail lending | | | | 2 | | | | – | | | | 2 | | | | 11 | | | | 77 | | | | 92 | | Corporate loans | | | | 6,962 | | | | 1,235 | | | | 149 | | | | 178 | | | | 354 | | | | 8,878 | | Total | | | | 6,994 | | | | 1,243 | | | | 169 | | | | 222 | | | | 478 | | | | 9,106 | | | | | 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 | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances designated at fair value | | | 70 | | | | 14 | | | | – | | | | – | | | | 209 | | | | 293 | | | | 70 | | | | 14 | | | | – | | | | – | | | | 209 | | | | 293 | | Home loans | | | 22 | | | | 8 | | | | 6 | | | | 24 | | | | 80 | | | | 140 | | | | 22 | | | | 8 | | | | 6 | | | | 24 | | | | 80 | | | | 140 | | Credit cards, unsecured and other retail lending | | | 288 | | | | 14 | | | | 15 | | | | 93 | | | | 120 | | | | 530 | | | | 288 | | | | 14 | | | | 15 | �� | | | 93 | | | | 120 | | | | 530 | | Corporate loans | | | 5,862 | | | | 897 | | | | 207 | | | | 226 | | | | 280 | | | | 7,472 | | | | 5,862 | | | | 897 | | | | 207 | | | | 226 | | | | 280 | | | | 7,472 | | Total | | | 6,242 | | | | 933 | | | | 228 | | | | 343 | | | | 689 | | | | 8,435 | | | | 6,242 | | | | 933 | | | | 228 | | | | 343 | | | | 689 | | | | 8,435 | | | As at 31 December 2014 | | | | | | | | | | | | | | Loans and advances designated at fair value | | | 594 | | | | 48 | | | | 1 | | | | – | | | | 33 | | | | 676 | | | Home loans | | | 46 | | | | 6 | | | | 17 | | | | 135 | | | | 230 | | | | 434 | | | Credit cards, unsecured and other retail lending | | | 64 | | | | 29 | | | | 14 | | | | 139 | | | | 194 | | | | 440 | | | Corporate loansd | | | 5,251 | | | | 630 | | | | 874 | | | | 190 | | | | 387 | | | | 7,332 | | | Total | | | 5,955 | | | | 713 | | | | 906 | | | | 464 | | | | 844 | | | | 8,882 | | |
NotesCorporate loans past due up to 1 month increased £1.1bn to £7.0bn primarily driven by the appreciation of average USD against GBP.
a | Refer to sustainability of loans under forbearance in Barclays PLC 2015 Pillar 3 Report for more information. |
b | Includes £239m transitioned to wholesale forbearance categories within the UK SME Businesses previously in Retail. |
c | Includes £321m removed following the sale of the Non-Core Business in Spain. |
d | Corporate loan balances past due up to 1 month have been revised down by £1,953m to better reflect the ageing of the loans. |
Analysis of loans and advances assessed as impaired (audited) The following table presents an analysis of loans and advances into those collectively or individually assessed as impaired. The table includes an age analysis for loans and advances collectively assessed as impaired. Loans that are collectively assessed as impaired consist predominantly of retail loans that are one day or more past due for which a collective allowance is raised. Wholesale loans that are past due, individually assessed as unimpaired, but which carry an unidentified impairment provision, are excluded from this category. Loans that are individually assessed as impaired consist predominantly of wholesale loans that are past due and for which an individual allowance has been raised. Home loans, unsecured loans and credit card receivables that are subject to forbearance in the retail portfolios are included within the collectively assessed for impairment category. Where wholesale loans under forbearance have been impaired, these form part of individually assessed impaired loans. | | | | | | | | | | | | | | | | | | | | | | | | | | | Loans and advances assessed as 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 collectively assessed £m | | Individually assessed for impairment £m | |
| Total
£m |
| As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 2,866 | | | | 795 | | | | 201 | | | | 298 | | | 452 | | 4,612 | | 820 | | | 5,432 | | Credit cards, unsecured and other retail lending | | | 1,135 | | | | 354 | | | | 250 | | | | 516 | | | 1,702 | | 3,957 | | 492 | | | 4,449 | | Corporate loans | | | 288 | | | | 53 | | | | 35 | | | | 72 | | | 131 | | 579 | | 1,580 | | | 2,159 | | Total | | | 4,289 | | | | 1,202 | | | | 486 | | | | 886 | | | 2,285 | | 9,148 | | 2,892 | | | 12,040 | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 3,672 | | | | 1,036 | | | | 278 | | | | 364 | | | 812 | | 6,162 | | 648 | | | 6,810 | | Credit cards, unsecured and other retail lending | | | 1,241 | | | | 691 | | | | 284 | | | | 541 | | | 1,792 | | 4,549 | | 964 | | | 5,513 | | Corporate loans | | | 251 | | | | 76 | | | | 45 | | | | 76 | | | 96 | | 544 | | 1,786 | | | 2,330 | | Total | | | 5,164 | | | | 1,803 | | | | 607 | | | | 981 | | | 2,700 | | 11,255 | | 3,398 | | | 14,653 | |
The decrease in loans collectively assessed as impaired to £9.1bn (2015: £11.3bn) predominantly relates to BAGL balances now held for sale. | | | 134132 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review
Risk performance
Credit risk
Impaired loans
The following table represents an analysis of impaired loans in line with the disclosure requirements from the Enhanced Disclosure Taskforce. For further information on definitions of impaired loans refer to the identifying potential credit risk loans section of Barclays PLC 2015 Pillar 3 Report.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Movement in impaired loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At beginning of year
£m |
| |
| Classified as impaired
during the year £m |
| |
| Transferred to not impaired during the year
£m |
| |
| Repayments
£m |
| |
| Amounts
written off £m |
| | | Acquisitions and disposals £m | | | | Exchange and other adjustmentsa £m | | | | Balance at 31 December £m | | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 1,503 | | | | 602 | | | | (192 | ) | | | (272 | ) | | | (97 | ) | | | – | | | | (207 | ) | | | 1,337 | | Credit cards, unsecured and other retail lending | | | 2,613 | | | | 2,226 | | | | (112 | ) | | | (269 | ) | | | (1,873 | ) | | | – | | | | (385 | ) | | | 2,200 | | Corporate loans | | | 2,683 | | | | 1,032 | | | | (558 | ) | | | (208 | ) | | | (333 | ) | | | (43 | ) | | | (475 | ) | | | 2,098 | | Total impaired loans | | | 6,799 | | | | 3,860 | | | | (862 | ) | | | (749 | ) | | | (2,303 | ) | | | (43 | ) | | | (1,067 | ) | | | 5,635 | | | | | | | | | | | 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 1,983 | | | | 762 | | | | (352 | ) | | | (412 | ) | | | (161 | ) | | | – | | | | (317 | ) | | | 1,503 | | Credit cards, unsecured and other retail lending | | | 3,385 | | | | 2,089 | | | | (108 | ) | | | (361 | ) | | | (1,885 | ) | | | – | | | | (507 | ) | | | 2,613 | | Corporate loans | | | 5,142 | | | | 1,167 | | | | (729 | ) | | | (658 | ) | | | (1,211 | ) | | | – | | | | (1,028 | ) | | | 2,683 | | Total impaired loans | | | 10,510 | | | | 4,018 | | | | (1,189 | ) | | | (1,431 | ) | | | (3,257 | ) | | | – | | | | (1,852 | ) | | | 6,799 | | For information on restructured loans refer to disclosures on forbearance on pages 131 to 134. Analysis of loans and advances assessed as impaired (audited) The following table presents an age analysis of loans and advances collectively impaired and total individually impaired loans. | | Loans and advances assessed as 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 |
| | | Individually assessed for impairment £m | | |
| Total
£m |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 3,672 | | | | 1,036 | | | | 278 | | | | 364 | | | | 812 | | | | 6,162 | | | | 648 | | | | 6,810 | | Credit cards, unsecured and other retail lending | | | 1,241 | | | | 691 | | | | 284 | | | | 541 | | | | 1,792 | | | | 4,549 | | | | 964 | | | | 5,513 | | Corporate loans | | | 251 | | | | 76 | | | | 45 | | | | 76 | | | | 96 | | | | 544 | | | | 1,786 | | | | 2,330 | | Total | | | 5,164 | | | | 1,803 | | | | 607 | | | | 981 | | | | 2,700 | | | | 11,255 | | | | 3,398 | | | | 14,653 | | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 5,155 | | | | 1,424 | | | | 335 | | | | 470 | | | | 1,050 | | | | 8,434 | | | | 455 | | | | 8,889 | | Credit cards, unsecured and other retail lending | | | 1,196 | | | | 738 | | | | 299 | | | | 532 | | | | 2,225 | | | | 4,990 | | | | 800 | | | | 5,790 | | Corporate loans | | | 284 | | | | 30 | | | | 24 | | | | 25 | | | | 148 | | | | 511 | | | | 2,679 | | | | 3,190 | | Total | | | 6,635 | | | | 2,192 | | | | 658 | | | | 1,027 | | | | 3,423 | | | | 13,935 | | | | 3,934 | | | | 17,869 | |
The decrease in collectively impaired loans to £11.3bn (2014: £13.9bn) predominantly relates to home loans within the past due up to 1 month category. MCA forbearance balances previously allocated into this category (2014 MCA balances: £1.3bn) no longer form part of the forbearance programme nor collectively assessed for impairment.
Note
a | Exchange and other adjustments includes the reclassification of the Portuguese loans now held for sale and the Spanish loans held for sale in 2014. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 135 |
Potential credit risk loans (PCRLs) and coverage ratios The Group reports potentially and actually impaired loans as PCRLs. PCRLs comprise two categories of loans: credit risk loans (CRLs) and potential problem loans (PPLs). For further information on definitions CRLs comprise three classes of CRLs and PPLs refer to the identifying potential credit risk loans section of the Barclays PLC 2015 Pillar 3 Report.loans: | | | | | | | | | | | | | | | | | | | | | | | | | Potential credit risk loans and coverage ratios by business | | | | | | | | | | | | | | | | | | | | | | | | | | | | CRLs | | | | PPLs | | | | PCRLs | | As at 31 December | |
| 2015
£m |
| |
| 2014
£m |
| | | 2015 £m | | | | 2014 £m | | | | 2015 £m | | |
| 2014
£m |
| Personal & Corporate Bankinga | | | 1,591 | | | | 1,733 | | | | 263 | | | | 264 | | | | 1,854 | | | | 1,997 | | Africa Banking | | | 859 | | | | 1,093 | | | | 154 | | | | 161 | | | | 1,013 | | | | 1,254 | | Barclaycard | | | 1,601 | | | | 1,765 | | | | 249 | | | | 227 | | | | 1,850 | | | | 1,992 | | Barclays Core | | | 4,051 | | | | 4,591 | | | | 666 | | | | 652 | | | | 4,717 | | | | 5,243 | | Barclays Non-Core | | | 845 | | | | 1,209 | | | | 13 | | | | 26 | | | | 858 | | | | 1,234 | | Total Group retail | | | 4,896 | | | | 5,800 | | | | 679 | | | | 678 | | | | 5,575 | | | | 6,477 | | Investment Bank | | | 241 | | | | 71 | | | | 450 | | | | 107 | | | | 691 | | | | 178 | | Personal & Corporate Bankinga | | | 1,794 | | | | 2,112 | | | | 567 | | | | 614 | | | | 2,361 | | | | 2,726 | | Africa Banking | | | 541 | | | | 665 | | | | 245 | | | | 94 | | | | 786 | | | | 759 | | Barclays Core | | | 2,576 | | | | 2,848 | | | | 1,262 | | | | 815 | | | | 3,838 | | | | 3,663 | | Barclays Non-Core | | | 345 | | | | 841 | | | | 109 | | | | 119 | | | | 454 | | | | 960 | | Total Group wholesale | | | 2,921 | | | | 3,689 | | | | 1,371 | | | | 934 | | | | 4,292 | | | | 4,623 | | Group total | | | 7,817 | | | | 9,489 | | | | 2,050 | | | | 1,612 | | | | 9,867 | | | | 11,100 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Impairment allowance | | | | CRL coverage | | | | PCRL coverage | | As at 31 December | |
| 2015
£m |
| |
| 2014
£m |
| | | 2015 % | | | | 2014 % | | | | 2015 % | | |
| 2014
% |
| Personal & Corporate Bankinga,b | | | 713 | | | | 766 | | | | 44.8 | | | | 44.2 | | | | 38.5 | | | | 38.4 | | Africa Banking | | | 539 | | | | 681 | | | | 62.7 | | | | 62.3 | | | | 53.2 | | | | 54.3 | | Barclaycard | | | 1,835 | | | | 1,815 | | | | 114.6 | | | | 102.8 | | | | 99.2 | | | | 91.1 | | Barclays Core | | | 3,087 | | | | 3,262 | | | | 76.2 | | | | 71.1 | | | | 65.4 | | | | 62.2 | | Barclays Non-Core | | | 369 | | | | 428 | | | | 43.7 | | | | 35.4 | | | | 43.0 | | | | 34.7 | | Total Group retail | | | 3,456 | | | | 3,690 | | | | 70.6 | | | | 63.6 | | | | 62.0 | | | | 57.0 | | Investment Bank | | | 83 | | | | 44 | | | | 34.4 | | | | 62.0 | | | | 12.0 | | | | 24.7 | | Personal & Corporate Bankinga | | | 914 | | | | 873 | | | | 50.9 | | | | 41.3 | | | | 38.7 | | | | 32.0 | | Africa Banking | | | 235 | | | | 246 | | | | 43.4 | | | | 37.0 | | | | 29.9 | | | | 32.4 | | Barclays Core | | | 1,232 | | | | 1,163 | | | | 47.8 | | | | 40.8 | | | | 32.1 | | | | 31.7 | | Barclays Non-Core | | | 233 | | | | 602 | | | | 67.5 | | | | 71.6 | | | | 51.3 | | | | 62.7 | | Total Group wholesale | | | 1,465 | | | | 1,765 | | | | 50.2 | | | | 47.8 | | | | 34.1 | | | | 38.2 | | Group total | | | 4,921 | | | | 5,455 | | | | 63.0 | | | | 57.5 | | | | 49.9 | | | | 49.1 | |
§ | | impaired loans: comprises loans where an individually identified impairment allowance has been raised. This category also includes all retail loans that have been transferred to a recovery book. See page 134 for further analysis of impaired loans |
§ | | accruing past due 90 days or more: comprises loans that are 90 days or more past due with respect to principal or interest |
§ | | 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. For information on restructured loans refer to disclosures on forbearance on pages 134 to 137. |
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 wholesale loan on a watchlist deteriorates to the highest category, or a retail loan deteriorates to delinquency cycle 2 (typically when past due 60 to 90 days), consideration is given to including it within the PPL category. | | | | | | | | | | | | | | | | | | | | | | | | | Potential credit risk loans and coverage ratios by business | | | | | | | | | | | | | | | | | | | | | | | | | | | | CRLs | | | | PPLs | | | | PCRLs | | As at 31 December | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| Barclays UK | | | 2,044 | | | | 2,238 | | | | 310 | | | | 382 | | | | 2,354 | | | | 2,620 | | Barclays International | | | 1,249 | | | | 863 | | | | 192 | | | | 117 | | | | 1,441 | | | | 980 | | Barclays Core | | | 3,293 | | | | 3,101 | | | | 502 | | | | 499 | | | | 3,795 | | | | 3,600 | | BarclaysNon-Core | | | 838 | | | | 936 | | | | 11 | | | | 26 | | | | 849 | | | | 962 | | Total retail | | | 4,131 | | | | 4,037 | | | | 513 | | | | 525 | | | | 4,644 | | | | 4,562 | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | 591 | | | | 637 | | | | 94 | | | | 127 | | | | 685 | | | | 764 | | Barclays International | | | 1,470 | | | | 1,330 | | | | 1,530 | | | | 877 | | | | 3,000 | | | | 2,207 | | Barclays Core | | | 2,061 | | | | 1,967 | | | | 1,624 | | | | 1,004 | | | | 3,685 | | | | 2,971 | | BarclaysNon-Core | | | 299 | | | | 441 | | | | 59 | | | | 122 | | | | 358 | | | | 563 | | Total wholesale | | | 2,360 | | | | 2,408 | | | | 1,683 | | | | 1,126 | | | | 4,043 | | | | 3,534 | | Total retail and wholesale | | | 6,491 | | | | 6,445 | | | | 2,196 | | | | 1,651 | | | | 8,687 | | | | 8,096 | | BAGL | | | – | | | | 1,372 | | | | – | | | | 399 | | | | – | | | | 1,771 | | Group total | | | 6,491 | | | | 7,817 | | | | 2,196 | | | | 2,050 | | | | 8,687 | | | | 9,867 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Impairment allowance | | | | CRL coverage | | | | PCRL coverage | | As at 31 December | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016 % | | |
| 2015 % | | |
| 2016 % | | |
| 2015 % | | Barclays UK | | | 1,519 | | | | 1,556 | | | | 74.3 | | | | 69.5 | | | | 64.5 | | | | 59.4 | | Barclays International | | | 1,492 | | | | 897 | | | | 119.5 | | | | 103.9 | | | | 103.5 | | | | 91.5 | | Barclays Core | | | 3,011 | | | | 2,453 | | | | 91.4 | | | | 79.1 | | | | 79.3 | | | | 68.1 | | BarclaysNon-Core | | | 385 | | | | 464 | | | | 45.9 | | | | 49.6 | | | | 45.3 | | | | 48.2 | | Total retail | | | 3,396 | | | | 2,917 | | | | 82.2 | | | | 72.3 | | | | 73.1 | | | | 63.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | 282 | | | | 312 | | | | 47.7 | | | | 49.0 | | | | 41.2 | | | | 40.8 | | Barclays International | | | 748 | | | | 617 | | | | 50.9 | | | | 46.4 | | | | 24.9 | | | | 28.0 | | Barclays Core | | | 1,030 | | | | 929 | | | | 50.0 | | | | 47.2 | | | | 28.0 | | | | 31.3 | | BarclaysNon-Core | | | 194 | | | | 336 | | | | 64.9 | | | | 76.2 | | | | 54.2 | | | | 59.7 | | Total wholesale | | | 1,224 | | | | 1,265 | | | | 51.9 | | | | 52.5 | | | | 30.3 | | | | 35.8 | | Total retail and wholesale | | | 4,620 | | | | 4,182 | | | | 71.2 | | | | 64.9 | | | | 53.2 | | | | 51.7 | | BAGL | | | – | | | | 739 | | | | – | | | | 53.9 | | | | – | | | | 41.7 | | Group total | | | 4,620 | | | | 4,921 | | | | 71.2 | | | | 63.0 | | | | 53.2 | | | | 49.9 | |
§ | | Excluding BAGL balances, CRLs decreased 17.6% to £7.8bn,remained stable at £6.5bn (2015: £6.4bn) with the Group’s CRL coverage ratio increasing to 63.0% (2014: 57.5%71% (2015: 65%). mainly within retail portfolios. |
§ | | CRLs inThe CRL coverage ratio for retail portfolios have decreased 15.6%increased to £4.9bn. This is82% (2015: 72%) primarily driven by Non-Core as a resultdue to increased impairment allowances following the management review of the sale of the Portuguese businessUK and rundown of assets in Europe. Another driver of the decrease is the Africa retail portfolios reducing as a result of improved recoveries. Retail CRL coverage increased to 70.6% (2014: 63.6%), due to the decrease in the retail CRL portfolio.US cards portfolio impairment modelling. |
§ | | Wholesale CRL portfolios decreased by 20.8%PPLs increased to £2.9bn. This is£2.2bn (2015: £1.7bn) primarily within Barclays International wholesale portfolios. The increase was driven by reductions in Non-Core asexposures within the Corporate and Investment bank across a resultnumber of the sale of the Portuguese corporate loansindustries. |
| | | | | Barclays PLC and continued rundown of the Non-Core InvestmentBarclays Bank portfolio; and within PCBPLC 2016 Annual Report on Form 20-F | 133 |
Risk review Risk performance Credit risk Impaired loans The following table represents an analysis of impaired loans in line with the disclosure recommended by the Enhanced Disclosure Taskforce. Impaired loans are a subcomponent of CRLs (defined on page 133) and comprise loans where an individually identified impairment allowance has been raised. This category also includes all retail loans that have been transferred to a recovery book. For the majority of products, transfer to a recovery book occurs for loans that are past due over 6 months unless a forbearance agreement is agreed. Earlier transfer points may occur depending on specific circumstances. Impaired loans may include loans that are still performing, fully collateralised loans or where indebtedness has already been written down to the expected realisable value. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Movement in impaired loans | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| At beginning of year
£m |
| |
| Classified as impaired during
the year £m |
| |
| Transferred to not impaired during
the year £m |
| |
| Repayments £m | | |
| Amounts written off £m | | |
| Acquisitions and disposals £m | | |
| Exchange and other adjustments£m | a | |
| Balance at 31 December £m | | 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 1,337 | | | | 308 | | | | (150 | ) | | | (171 | ) | | | (19 | ) | | | – | | | | (165 | ) | | | 1,140 | | Credit cards, unsecured and other retail lending | | | 2,200 | | | | 1,761 | | | | (17 | ) | | | (136 | ) | | | (1,605 | ) | | | (92 | ) | | | (407 | ) | | | 1,704 | | Corporate loans | | | 2,098 | | | | 984 | | | | (427 | ) | | | (220 | ) | | | (331 | ) | | | (15 | ) | | | (319 | ) | | | 1,770 | | Total impaired loans | | | 5,635 | | | | 3,053 | | | | (594 | ) | | | (527 | ) | | | (1,955 | ) | | | (107 | ) | | | (891 | ) | | | 4,614 | | | | | | | | | | | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 1,503 | | | | 602 | | | | (192 | ) | | | (272 | ) | | | (97 | ) | | | – | | | | (207 | ) | | | 1,337 | | Credit cards, unsecured and other retail lending | | | 2,613 | | | | 2,226 | | | | (112 | ) | | | (269 | ) | | | (1,873 | ) | | | – | | | | (385 | ) | | | 2,200 | | Corporate loans | | | 2,683 | | | | 1,032 | | | | (558 | ) | | | (208 | ) | | | (333 | ) | | | (43 | ) | | | (475 | ) | | | 2,098 | | Total impaired loans | | | 6,799 | | | | 3,860 | | | | (862 | ) | | | (749 | ) | | | (2,303 | ) | | | (43 | ) | | | (1,067 | ) | | | 5,635 | | | | | | | | | | Forbearance | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Forbearance measures consist of concessions towards a debtor that is experiencing or about to experience difficulties in meeting their financial commitments (“financial difficulties”). | | Analysis of forbearance programmes | | | | | | | | | | | | | Balances | | | | Impairment allowance | | | | Impairment coverage | | As at 31 December | | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016
% |
| |
| 2015
% |
| Barclays UK | | | | | | | | | | | 926 | | | | 1,036 | | | | 237 | | | | 191 | | | | 25.6 | | | | 18.4 | | Barclays International | | | | | | | | | | | 243 | | | | 185 | | | | 57 | | | | 46 | | | | 23.5 | | | | 24.9 | | Barclays Core | | | | | | | | | | | 1,169 | | | | 1,221 | | | | 294 | | | | 237 | | | | 25.1 | | | | 19.4 | | BarclaysNon-Core | | | | | | | | | | | 211 | | | | 247 | | | | 9 | | | | 20 | | | | 4.3 | | | | 8.1 | | Total retail | | | | | | | | | | | 1,380 | | | | 1,468 | | | | 303 | | | | 257 | | | | 22.0 | | | | 17.5 | | Barclays UK | | | | | | | | | | | 589 | | | | 412 | | | | 62 | | | | 32 | | | | 10.5 | | | | 7.8 | | Barclays International | | | | | | | | | | | 2,044 | | | | 1,333 | | | | 257 | | | | 196 | | | | 12.6 | | | | 14.7 | | Barclays Core | | | | | | | | | | | 2,633 | | | | 1,745 | | | | 319 | | | | 228 | | | | 12.1 | | | | 13.1 | | BarclaysNon-Core | | | | | | | | | | | 269 | | | | 459 | | | | 50 | | | | 146 | | | | 18.5 | | | | 31.8 | | Total wholesale | | | | | | | | | | | 2,902 | | | | 2,204 | | | | 369 | | | | 374 | | | | 12.7 | | | | 17.0 | | Group totalb | | | | | | | | | | | 4,282 | | | | 3,672 | | | | 672 | | | | 631 | | | | 15.7 | | | | 17.2 | |
Balances on forbearance programmes increased 17% driven by an increase in forborne loans in Barclays International. Retail balances on forbearance programmes reduced 6% to £1.4bn and reflected a decrease in Barclays UK and BarclaysNon-Core offset by an increase in Barclays International portfolios. § | | Barclays UK: The reduction was driven by UK cards portfolio, where balances on forbearance plans are lower due to the improved economic environment. Investment Bank CRLs increased £170m to £241m predominantly relating toapplication of an updated entry criteria, as well as asset sales. |
§ | | Barclays International: The increase in US cards forbearance was in line with portfolio growth and appreciation of the Oil and Gas sector. Wholesale CRL coverage increased to 50.2% (2014: 47.8%), driven by the decrease in CRLs in 2015.US Dollar against Sterling. |
Wholesale balances on forbearance increased by 32% to £2.9bn due to an increase in the Barclays Core portfolio where forbearance programmes increased mainly in performing segments of the corporate portfolio due to a change in methodology, extending the previously narrow scope of forbearance in relation to adjustment onnon-enforcement of convenants. This change has been applied consistently across the corporate portfolio with the increase primarily at the higher end of the corporate portfolio where there is a greater tendency for exposure to be under covenants. Notes a | UK Business Banking has been reclassified from RetailExchange and other adjustments for 2016 includes the reclassification of £1,015m related to Wholesale in line with howBAGL balances now held for sale offset by currency movements due to the business is now managed.appreciation of average US Dollar and Euro against Sterling. |
b | 2014 PCB CRLs, PPLsExcludes BAGL balances now held for sale. |
| | | 134 | Barclays PLC and PCRLsBarclays Bank PLC 2016 Annual Report on Form 20-F | | |
Retail forbearance programmes Forbearance on the Group’s principal retail portfolios in the US and UK is presented below. The principal portfolios listed below account for 73% (2015: 76%) of total retail forbearance balances. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of key portfolios in forbearance programmes | | | | Balances on forbearance programmes | | | Marked | | | Marked | | | Impairment | | | | | | | | | | | | | Of which: | | | to market | | | to market | | | allowances | | | Total | | | | | | | | | | | | | Past due of which: | | | LTV of | | | LTV of | | | marked | | | balances on | | | | | | | | | | | | | | | | | | | forbearance | | | forbearance | | | against | | | forbearance | | | | | | | % of gross | | | | | | | | | 91 or | | | balances: | | | balances: | | | balances on | | | programmes | | | | | | | loans and | | | | | | 1-90 days | | | more days | | | balance | | | valuation | | | forbearance | | | coverage | | | | Total | | | advances | | | Up-to-date | | | past due | | | past due | | | weighted | | | weighted | | | programmes | | | ratio | | | | | £m | | | | % | | | | £m | | | | £m | | | | £m | | | | % | | | | % | | | | £m | | | | % | | As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | UK home loans | | | 390 | | | | 0.3 | | | | 188 | | | | 149 | | | | 53 | | | | 44.7 | | | | 31.3 | | | | 3 | | | | 0.8 | | UK cards | | | 337 | | | | 1.9 | | | | 255 | | | | 59 | | | | 23 | | | | n/a | | | | n/a | | | | 185 | | | | 54.9 | | UK personal loans | | | 94 | | | | 1.5 | | | | 58 | | | | 26 | | | | 10 | | | | n/a | | | | n/a | | | | 38 | | | | 40.4 | | Barclays International | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | US cards | | | 186 | | | | 0.8 | | | | 139 | | | | 35 | | | | 12 | | | | n/a | | | | n/a | | | | 38 | | | | 20.4 | | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | UK home loans | | | 445 | | | | 0.3 | | | | 211 | | | | 177 | | | | 57 | | | | 48.0 | | | | 34.1 | | | | 4 | | | | 0.8 | | UK cards | | | 448 | | | | 2.4 | | | | 414 | | | | 31 | | | | 3 | | | | n/a | | | | n/a | | | | 159 | | | | 35.5 | | UK personal loans | | | 85 | | | | 1.6 | | | | 60 | | | | 22 | | | | 3 | | | | n/a | | | | n/a | | | | 21 | | | | 24.6 | | Barclays International | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | US cards | | | 133 | | | | 0.8 | | | | 92 | | | | 30 | | | | 11 | | | | n/a | | | | n/a | | | | 30 | | | | 22.7 | |
§ | | UK home loans:Balances under forbearance decreased by 12% to £390m, principally due to fewer customers requiring forbearance in a stable macroeconomic environment. Total past due balances reduced by 14% to £202m in line with falling total balances under forbearance. |
§ | | UK cards:Balances on forbearance plans have been revised by £151m, £121m and £273m respectivelyreduced due to an updated entry criteria, as well as asset sales. The forbearance impairment coverage ratio has increased due to implementation of updated impairment methodology. |
§ | | UK personal loans:Increased forbearance coverage ratio reflects the changes in methodology to align methodologywith the impairment policy. |
§ | | US cards: Balances are higher in line with portfolio growth while the balances in arrears remain stable.Past-due balances as a proportion of total balances have reduced, which reflects in the lower forbearance impairment coverage ratio. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 135 |
Risk review Risk performance Credit risk | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Forbearance by type | | | | | Barclays UK | | | | | | Barclays International | | | | | UK home loans | | | | UK cards | | | | UK personal loans | | | | | | US cards | | As at 31 December | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| | | |
| 2016
£m |
| |
| 2015
£m |
| Payment concession | | | 96 | | | | 103 | | | | 45 | | | | 21 | | | | – | | | | – | | | | | | – | | | | – | | Interest only conversion | | | 84 | | | | 94 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | Term extension | | | 210 | | | | 248 | | | | – | | | | – | | | | 16 | | | | 6 | | | | | | – | | | | – | | Fully amortising | | | – | | | | – | | | | – | | | | – | | | | 65 | | | | 79 | | | | | | 97 | | | | 69 | | Repayment plana | | | – | | | | – | | | | 218 | | | | 427 | | | | 13 | | | | – | | | | | | 89 | | | | 64 | | Interest rate concession | | | – | | | | – | | | | 74 | | | | – | | | | – | | | | – | | | | | | – | | | | – | | Total | | | 390 | | | | 445 | | | | 337 | | | | 448 | | | | 94 | | | | 85 | | | | | | 186 | | | | 133 | | | Payment concessions in UK cards increased to £45m (2015: £21m), including an additional £31m identified in second half of the year following a review of policy adherence. These balances have been appropriately provisioned. | | | Repayment plan balances in UK cards decreased to £218m (2015: £427m) driven by an asset sale and the continued reduction in new repayment plan volumes. Following review of policy adherence, additional interest rate concession for UK cards (£74m) and repayment plan for UK personal loans (£13m) were identified in the year. | | | Wholesale forbearance programmes | | The tables below detail balance information for wholesale forbearance cases. | | Analysis of wholesale balances in forbearance programmesb | | | | | | | | | | | | | | | | | | | | | | | | | | Balances on forbearance programmes | | | | | Impairment | | | | | | | | | | | | | Of which: | | | | | allowances | | | Total | | | |
| Total balances £m | | |
| % of gross loans and advances % | | |
| Performing balances £m | | |
| Impaired up-to-date balances £m | | |
| Balances between 1 and 90 days past due £m | | |
| Balances 91 days or more past due £m | | | | |
| marked against balances on forbearance programmes £m | | |
| balances on forbearance programmes coverage ratio
% |
| As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | 589 | | | | 3.9 | | | | 187 | | | | 93 | | | | 78 | | | | 231 | | | | | | 62 | | | | 10.5 | | Barclays International | | | 2,044 | | | | 1.1 | | | | 1,285 | | | | 567 | | | | 33 | | | | 159 | | | | | | 257 | | | | 12.6 | | Total Barclays Core | | | 2,633 | | | | 1.3 | | | | 1,472 | | | | 660 | | | | 111 | | | | 390 | | | | | | 319 | | | | 12.1 | | | | | | | | | | | | BarclaysNon-Core | | | 269 | | | | 0.6 | | | | 57 | | | | 44 | | | | 25 | | | | 143 | | | | | | 50 | | | | 18.6 | | Total | | | 2,902 | | | | 1.2 | | | | 1,529 | | | | 704 | | | | 136 | | | | 533 | | | | | | 369 | | | | 12.7 | | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | 412 | | | | 2.5 | | | | 153 | | | | 48 | | | | 30 | | | | 181 | | | | | | 32 | | | | 7.8 | | Barclays International | | | 1,333 | | | | 0.8 | | | | 614 | | | | 423 | | | | 61 | | | | 235 | | | | | | 196 | | | | 14.7 | | Total Barclays Core | | | 1,745 | | | | 1.0 | | | | 767 | | | | 471 | | | | 91 | | | | 416 | | | | | | 228 | | | | 13.1 | | | | | | | | | | | | BarclaysNon-Core | | | 459 | | | | 1.1 | | | | 118 | | | | 101 | | | | 5 | | | | 235 | | | | | | 146 | | | | 31.8 | | Total | | | 2,204 | | | | 1.0 | | | | 885 | | | | 572 | | | | 96 | | | | 651 | | | | | | 374 | | | | 17.0 | |
Notes a | Repayment plan represents a reduction to the minimum payment due requirements and interest rate. |
b | 2015 figures restated due to restructuring of portfolio from Barclays International to Non-Core Figures exclude BAGL balances now held for determining arrears categories with other Home Finance risk disclosures.sale. |
| | | 136 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
| | | | | | | | | | | | | | | | | Wholesale forbearance reporting split by exposure class | | | | | | | | | | | | | | | | | | |
| Corporate £m | | |
| Personal and trusts
£m |
| |
| Other
£m |
| |
| Total £m | | As at 31 December 2016 | | | | | | | | | | | | | | | | | Restructure: reduced contractual cash flows | | | 32 | | | | – | | | | – | | | | 32 | | Restructure: maturity date extension | | | 411 | | | | 107 | | | | – | | | | 518 | | Restructure: changed cash flow profile (other than extension) | | | 346 | | | | 1 | | | | – | | | | 347 | | Restructure: payment other than cash | | | 10 | | | | – | | | | – | | | | 10 | | Change in security | | | 7 | | | | – | | | | – | | | | 7 | | Adjustments ornon-enforcement of covenants | | | 1,242 | | | | 155 | | | | – | | | | 1,397 | | Other (e.g. capital repayment holiday; restructure pending) | | | 438 | | | | 153 | | | | – | | | | 591 | | Total | | | 2,486 | | | | 416 | | | | – | | | | 2,902 | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | Restructure: reduced contractual cash flows | | | 155 | | | | – | | | | – | | | | 155 | | Restructure: maturity date extension | | | 563 | | | | 23 | | | | 62 | | | | 648 | | Restructure: changed cash flow profile (other than extension) | | | 250 | | | | 1 | | | | – | | | | 251 | | Restructure: payment other than cash | | | 12 | | | | – | | | | – | | | | 12 | | Change in security | | | 7 | | | | 1 | | | | – | | | | 8 | | Adjustments ornon-enforcement of covenants | | | 295 | | | | 92 | | | | – | | | | 387 | | Other (e.g. capital repayment holiday; restructure pending) | | | 535 | | | | 208 | | | | – | | | | 743 | | Total | | | 1,817 | | | | 325 | | | | 62 | | | | 2,204 | | | | | | | | | | | | | | | | | | | Wholesale forbearance reporting split by business unit | | | | | | | | | | | | | | | | | | |
| Barclays UK £m | | |
| Barclays International £m | | |
| Barclays Non-Core £m | | |
| Total £m | | As at 31 December 2016 | | | | | | | | | | | | | | | | | Restructure: reduced contractual cash flows | | | 3 | | | | 29 | | | | – | | | | 32 | | Restructure: maturity date extension | | | 114 | | | | 316 | | | | 88 | | | | 518 | | Restructure: changed cash flow profile (other than extension) | | | 180 | | | | 164 | | | | 3 | | | | 347 | | Restructure: payment other than cash | | | – | | | | 10 | | | | – | | | | 10 | | Change in security | | | 1 | | | | 6 | | | | – | | | | 7 | | Adjustments ornon-enforcements of covenants | | | 132 | | | | 1,212 | | | | 53 | | | | 1,397 | | Other (e.g. capital repayment holiday; restructure pending) | | | 159 | | | | 307 | | | | 125 | | | | 591 | | Total | | | 589 | | | | 2,044 | | | | 269 | | | | 2,902 | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | Restructure: reduced contractual cash flows | | | 1 | | | | 130 | | | | 24 | | | | 155 | | Restructure: maturity date extension | | | 77 | | | | 287 | | | | 284 | | | | 648 | | Restructure: changed cash flow profile (other than extension) | | | 51 | | | | 199 | | | | 1 | | | | 251 | | Restructure: payment other than cash | | | – | | | | 12 | | | | – | | | | 12 | | Change in security | | | 1 | | | | 7 | | | | – | | | | 8 | | Adjustments ornon-enforcements of covenants | | | 71 | | | | 260 | | | | 56 | | | | 387 | | Other (e.g. capital repayment holiday; restructure pending) | | | 211 | | | | 438 | | | | 94 | | | | 743 | | Total | | | 412 | | | | 1,333 | | | | 459 | | | | 2,204 | | | | | | | | | | | | | | | | | | | Wholesale forbearance flows in 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | £m | | As at 1 January 2016 | | | | | | | | | | | | | | | 2,204 | | Added to forbearance | | | | | | | | | | | | | | | 1,811 | | Removed from forbearance (credit improvement) | | | | | | | | | | | | | | | (383 | ) | Fully or partially repaid and other movements | | | | | | | | | | | | | | | (442 | ) | Written off/moved to recovery book | | | | | | | | | | | | | | | (288 | ) | As at 31 December 2016 | | | | | | | | | | | | | | | 2,902 | |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 137 |
Risk review Risk performance Credit risk Impairment Impairment allowances Impairment allowances decreased 10%6% to £4,921m£4,620m primarily within Non-Core as a result ofdue to the reclassification of impairments held against the Portuguese loansBAGL balances now held for sale.sale, partially offset by the impact of a management review of impairment modelling within the credit cards portfolios and increases within Barclays International due to volume growth, the appreciation of average US Dollar and Euro against Sterling and increased impairment for a number of single name exposures. | Movements in allowance for impairment by asset class (audited) | Movements in allowance for impairment by asset class (audited) | | 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 adjustmentsa £m | | |
| Amounts written off
£m |
| |
| Recoveries
£m |
| |
| Amounts charged to income statement
£m |
| |
| Balance at 31 December
£m |
| 2016 | | | | | | | | | | | | | | | | | | Home loans | | | 518 | | | (3 | ) | | (5 | ) | | (108 | ) | | (23 | ) | | | – | | | 88 | | | 467 | | Credit cards, unsecured and other retail lending | | | 3,394 | | | (2 | ) | | (70 | ) | | (709 | ) | | (1,806 | ) | | 296 | | | 1,957 | | | 3,060 | | Corporate loans | | | 1,009 | | | | – | | | | – | | | 81 | | | (364 | ) | | 69 | | | 298 | | | 1,093 | | Total impairment allowance | | | 4,921 | | | (5 | ) | | (75 | ) | | (736 | ) | | (2,193 | ) | | 365 | | | 2,343 | | | 4,620 | | | |
| At beginning of year
£m |
| | | Acquisitions and disposals £m | | | | Unwind of discount £m | | | | Exchange and other adjustmentsa £m | | | | Amounts written off £m | | | | Recoveries £m | | | | Amounts charged to income statement £m | | | | Balance at 31 December £m | | | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Home loans | | | 547 | | | | – | | | | (32) | | | | (64) | | | | (94) | | | | 7 | | | | 154 | | | | 518 | | | | 547 | | | | – | | | | (32 | ) | | | (64 | ) | | | (94 | ) | | | 7 | | | | 154 | | | | 518 | | Credit cards, unsecured and other retail lending | | | 3,345 | | | | – | | | | (105) | | | | (170) | | | | (1,848) | | | | 301 | | | | 1,871 | | | | 3,394 | | | | 3,345 | | | | – | | | | (105 | ) | | | (170 | ) | | | (1,848 | ) | | | 301 | | | | 1,871 | | | | 3,394 | | Corporate loans | | | 1,563 | | | | – | | | | (12) | | | | (383) | | | | (335) | | | | 92 | | | | 84 | | | | 1,009 | | | | 1,563 | | | | – | | | | (12 | ) | | | (383 | ) | | | (335 | ) | | | 92 | | | | 84 | | | | 1,009 | | Total impairment allowance | | | 5,455 | | | | – | | | | (149) | | | | (617) | | | | (2,277) | | | | 400 | | | | 2,109 | | | | 4,921 | | | | 5,455 | | | | – | | | | (149 | ) | | | (617 | ) | | | (2,277 | ) | | | 400 | | | | 2,109 | | | | 4,921 | | | 2014 | | | | | | | | | | | | | | | | | | Home loans | | | 788 | | | | – | | | | (23) | | | | (200) | | | | (191) | | | | 17 | | | | 156 | | | | 547 | | | Credit cards, unsecured and other retail lending | | | 3,603 | | | | 13 | | | | (116) | | | | (307) | | | | (1,679) | | | | 126 | | | | 1,705 | | | | 3,345 | | | Corporate loans | | | 2,867 | | | | – | | | | (14) | | | | (540) | | | | (1,167) | | | | 78 | | | | 339 | | | | 1,563 | | | Total impairment allowance | | | 7,258 | | | | 13 | | | | (153) | | | | (1,047) | | | | (3,037) | | | | 221 | | | | 2,200 | | | | 5,455 | | |
Management adjustments to models for impairment Management adjustments to models for impairment are applied in order to factor in certain conditions or changes in policy that are not incorporated into the relevant impairment models, or to ensure that the impairment allowance reflects all known facts and circumstances at the period end. Adjustments typically increase the model derived impairment allowance. Where applicable, management adjustments are reviewed and incorporated into future model development. Management adjustments to models of more than £10m with respect to impairment allowance in our principal portfolios are presented below. | | | | | | | | | | | | | | | | | Principal portfolios that have management adjustments greater than £10m (unaudited) | | | | | 2015 | | | | 2014 | | As at 31 December | |
| Total management adjustments to impairment stock, including forbearance
£m |
| | | Proportion of total impairment stock % | | |
| Total management adjustments to impairment stock, including forbearance
£m |
| | | Proportion of total impairment stock % | | PCB | | | | | | | | | | | | | | | | | UK home loans | | | 68 | | | | 67 | | | | 52 | | | | 55 | | UK personal loans | | | 75 | | | | 16 | | | | 48 | | | | 10 | | UK overdrafts | | | 37 | | | | 29 | | | | 30 | | | | 19 | | UK large corporate and business lending | | | 183 | | | | 26 | | | | 98 | | | | 14 | | Africa Banking | | | | | | | | | | | | | | | | | South Africa home loans | | | 22 | | | | 17 | | | | 22 | | | | 11 | | Barclaycard | | | | | | | | | | | | | | | | | UK cards | | | 147 | | | | 17 | | | | 62 | | | | 5 | | US Cards | | | 58 | | | | 9 | | | | 10 | | | | 2 | | Barclays Partner Finance | | | 41 | | | | 28 | | | | 9 | | | | 7 | | Germany Cards | | | 20 | | | | 21 | | | | 3 | | | | 3 | |
| | | | | | | | | | | | | | | | | Principal portfolios that have management adjustments greater than £10m | | | | | 2016 | | | | 2015 | | As at 31 December | |
| Total management adjustments to impairment stock, including forbearance
£m |
| |
| Proportion of total impairment stock
% |
| |
| Total management adjustments to impairment stock, including forbearance
£m |
| |
| Proportion of total impairment stock
% |
| Barclays UK | | | | | | | | | | | | | | | | | UK cards | | | 312 | | | | 34 | | | | 147 | | | | 17 | | UK home loans | | | 70 | | | | 69 | | | | 68 | | | | 67 | | UK business lending | | | 69 | | | | 33 | | | | 67 | | | | 36 | | Barclays International | | | | | | | | | | | | | | | | | US cards | | | 278 | | | | 24 | | | | 58 | | | | 9 | | Corporate Banking | | | 71 | | | | 14 | | | | 116 | | | | 25 | | Barclays Partner Finance | | | 59 | | | | 37 | | | | 41 | | | | 28 | | Germany cards | | | 29 | | | | 23 | | | | 20 | | | | 21 | |
During 2015,2016, the models were aligned to a strengthened Retail Impairment Policy, was significantly strengthenedfollowing which adjustments were reviewed. UK and US cards: Higher provisions held pending full implementation of newly developed and independently approved models enhanced.with enhanced methodology following an impairment policy revision in Q316. UK home loans: Adjustments toTo capture the potential impact from an increase in the house price to earnings ratio, change in the impairment methodology and increased coverage on interest onlyinterest-only loans maturing in the next five years. UK personal loans:business lending: AdjustmentsTo align to incorporate revised impairment policy requirements, and for updated model requirements. UK overdrafts: Principally for updated model-related requirements and adjustments to align to revised impairment policy.
UK large corporate and business lending: In business lending to reflect policy changes affecting customers on forbearance and impairment treatment. In corporate lending to account for single name losses, adjustment to allow for small names yet to emerge within the oil and gas sector,potential impact from commercial property price deterioration and the susceptibility of minimum debt service customers to interest rate raisesrises not currently captured in models.
South Africa home loans:Corporate Banking: Primarily to incorporate the uncertaintyReflects release against single names in the macroeconomic outlook. The adjustment has increased by 27% in local currency.oil and gas sector.
Barclaycard:Barclays Partner Finance: PredominantlyDue to increased risk in the secured motor portfolio along with adjustments on account of impairment methodology.
Germany cards: To align to new impairment policy requirements in models,methodology and to increase coverageincreased cover on forbearance programmes and accounts in recoveries.programme. Note a | Exchange and other adjustments for 2016 primarily includes the reclassification of impairments held against the Portuguese loans£762m related to BAGL now held for sale offset by currency movements due to the appreciation of average US Dollar and the Spanish loans held for sale in 2014.Euro against Sterling. |
| | | 138 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Analysis of debt securities Debt securities include government securities held as part of the Group’s treasury management portfolio for liquidity and regulatory purposes, and are for use on a continuing basis in the activities of the Group. The following tables provide an analysis of debt securities held by the Group for trading and investment purposes by issuer type, and where the Group held government securities exceeding 10% of shareholders’ equity. Further information on the credit quality of debt securities is presented on pages121 to122. Further disclosure on sovereign exposures in the Eurozone is presented on page124 | | | | | | | | | | | | | | | | | Debt securities | | | | | | | | | | | | | | | | | | | | 2016 | | | | 2015 | | As at 31 December | | | £m | | | | % | | | | £m | | | | % | | Of which issued by: | | | | | | | | | | | | | | | | | Governments and other public bodies | | | 64,852 | | | | 63.7 | | | | 96,537 | | | | 70.9 | | Corporate and other issuers | | | 28,284 | | | | 27.8 | | | | 26,166 | | | | 19.2 | | US agency | | | 6,208 | | | | 6.1 | | | | 8,927 | | | | 6.6 | | Mortgage and asset backed securities | | | 2,372 | | | | 2.3 | | | | 4,009 | | | | 2.9 | | Bank and building society certificates of deposit | | | 23 | | | | 0.1 | | | | 598 | | | | 0.4 | | Total | | | 101,739 | | | | 100.0 | | | | 136,237 | | | | 100.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Government securities | | | | | | | | | | | | | | | | | As at 31 December | | | | | | | | | |
| 2016 Fair value £m | | |
| 2015 Fair value £m | | United Kingdom | | | | | | | | | | | 20,145 | | | | 22,372 | | United States | | | | | | | | | | | 16,284 | | | | 26,119 | |
Analysis of derivatives (audited) 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 | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | 2015 | | As at 31 December | |
| Balance sheet assets
£m |
| |
| Counterparty netting
£m |
| |
| Net exposure £m | | |
| Balance sheet assets
£m |
| |
| Counterparty netting
£m |
| |
| Net exposure £m | | Foreign exchange | | | 79,744 | | | | 59,040 | | | | 20,704 | | | | 54,936 | | | | 40,301 | | | | 14,635 | | Interest rate | | | 228,652 | | | | 185,723 | | | | 42,929 | | | | 231,426 | | | | 190,513 | | | | 40,913 | | Credit derivatives | | | 16,273 | | | | 12,891 | | | | 3,382 | | | | 18,181 | | | | 14,110 | | | | 4,071 | | Equity and stock index | | | 17,089 | | | | 12,603 | | | | 4,486 | | | | 13,799 | | | | 8,358 | | | | 5,441 | | Commodity derivatives | | | 4,868 | | | | 3,345 | | | | 1,523 | | | | 9,367 | | | | 6,300 | | | | 3,067 | | Total derivative assets | | | 346,626 | | | | 273,602 | | | | 73,024 | | | | 327,709 | | | | 259,582 | | | | 68,127 | | Cash collateral held | | | | | | | | | | | 41,641 | | | | | | | | | | | | 34,918 | | Net exposure less collateral | | | | | | | | | | | 31,383 | | | | | | | | | | | | 33,209 | |
Derivative asset exposures would be £315bn (2015: £295bn) lower than reported under IFRS if netting were permitted for assets and liabilities with the same counterparty or for which the Group holds cash collateral. Similarly, derivative liabilities would be £317bn (2015: £295bn) lower reflecting counterparty netting and collateral placed. In addition,non-cash collateral of £8bn (2015: £7bn) was held in respect of derivative assets. The Group received collateral from clients in support of over the counter derivative transactions. These transactions are generally undertaken under International Swaps and Derivative Association (ISDA) agreements governed by either UK or New York law. Exposure relating to derivatives, repurchase agreements, reverse repurchase agreements, stock borrowing and loan transactions is calculated using internal PRA approved models. These are used as the basis to assess both regulatory capital and capital appetite and are managed on a daily basis. The methodology encompasses all relevant factors to enable the current value to be calculated and the future value to be estimated, for example, current market rates, market volatility and legal documentation (including collateral rights). | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 137139 |
Risk review Risk performance MarketCredit risk
The table below sets out the fair value and notional amounts of OTC derivative instruments by type of collateral arrangement. Analysis of market risk
Market risk is the risk of a reduction in earnings or capital due to volatility of trading book positions or as a consequence of running a banking book balance sheet and liquidity pools.
This section contains key disclosures describing the Group’s market risk profile, highlighting regulatory as well as management measures.
Key metrics
Measures of traded market risk, such as Value at Risk (VaR), decreased in the year primarily due to the removal of certain banking book assets from VaR, reduced client activity, and risk reduction in Non-Core businesses.
We saw a reduction in associated risk measures and lower income from reduced activity
85%
of days generated positive trading revenue
-23%
reduction in management VaR
10%
increase in average daily trading revenue
| | | | | | | | | | | | | | | | | | | | | | | | | Derivatives by collateral arrangement | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | 2015 | | | |
| Notional
contract amount £m |
| | | Fair value | | |
| Notional contract
amount £m |
| | | Fair value | | | | |
| Assets £m | | |
| Liabilities £m | | | |
| Assets £m | | |
| Liabilities £m | | Unilateral in favour of Barclays | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange | | | 17,713 | | | | 607 | | | | (274) | | | | 15,645 | | | | 242 | | | | (308) | | Interest rate | | | 6,666 | | | | 1,017 | | | | (60) | | | | 4,365 | | | | 846 | | | | (65) | | Credit derivatives | | | 174 | | | | 3 | | | | (2) | | | | 277 | | | | 2 | | | | (7) | | Equity and stock index | | | 390 | | | | 3 | | | | (147) | | | | 303 | | | | 4 | | | | (146) | | Commodity derivatives | | | 753 | | | | 33 | | | | (26) | | | | 905 | | | | 150 | | | | (30) | | Total unilateral in favour of Barclays | | | 25,696 | | | | 1,663 | | | | (509) | | | | 21,495 | | | | 1,244 | | | | (556) | | Unilateral in favour of counterparty | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange | | | 20,837 | | | | 786 | | | | (2,549) | | | | 50,343 | | | | 810 | | | | (2,107) | | Interest rate | | | 108,915 | | | | 3,795 | | | | (5,979) | | | | 121,231 | | | | 4,436 | | | | (6,981) | | Credit derivatives | | | 152 | | | | 3 | | | | (7) | | | | 140 | | | | 3 | | | | (1) | | Equity and stock index | | | 1,121 | | | | 312 | | | | (49) | | | | 827 | | | | 100 | | | | (83) | | Commodity derivatives | | | 1,231 | | | | 67 | | | | (66) | | | | 74 | | | | – | | | | (3) | | Total unilateral in favour of counterparty | | | 132,256 | | | | 4,963 | | | | (8,650) | | | | 172,615 | | | | 5,349 | | | | (9,175) | | Bilateral arrangement | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange | | | 3,772,477 | | | | 70,464 | | | | (68,788) | | | | 2,878,125 | | | | 46,831 | | | | (50,899) | | Interest rate | | | 7,335,641 | | | | 187,155 | | | | (179,650) | | | | 7,315,345 | | | | 197,900 | | | | (188,293) | | Credit derivatives | | | 608,859 | | | | 11,422 | | | | (9,994) | | | | 663,090 | | | | 13,617 | | | | (11,985) | | Equity and stock index | | | 192,448 | | | | 6,146 | | | | (9,692) | | | | 144,108 | | | | 4,991 | | | | (8,297) | | Commodity derivatives | | | 11,766 | | | | 1,318 | | | | (1,442) | | | | 36,794 | | | | 3,164 | | | | (3,104) | | Total bilateral arrangement | | | 11,921,191 | | | | 276,505 | | | | (269,566) | | | | 11,037,462 | | | | 266,503 | | | | (262,578) | | Uncollateralised derivatives | | | | | | | | | | | | | | | | | | | | | | | | | Foreign exchange | | | 363,921 | | | | 7,490 | | | | (6,287) | | | | 271,819 | | | | 7,008 | | | | (5,424) | | Interest rate | | | 184,362 | | | | 5,723 | | | | (2,459) | | | | 193,565 | | | | 6,091 | | | | (2,907) | | Credit derivatives | | | 5,872 | | | | 383 | | | | (510) | | | | 7,881 | | | | 467 | | | | (700) | | Equity and stock index | | | 13,706 | | | | 2,558 | | | | (3,385) | | | | 6,672 | | | | 2,204 | | | | (3,075) | | Commodity derivatives | | | 16,389 | | | | 504 | | | | (748) | | | | 13,347 | | | | 1,733 | | | | (1,667) | | Total uncollateralised derivatives | | | 584,250 | | | | 16,658 | | | | (13,389) | | | | 493,284 | | | | 17,503 | | | | (13,773) | | Total OTC derivative assets/(liabilities) | | | 12,663,393 | | | | 299,789 | | | | (292,114) | | | | 11,724,856 | | | | 290,599 | | | | (286,082) | |
| | | 138140 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Market risk Analysis of market risk Market risk is the risk of a reduction in earnings or capital due to volatility of trading book positions or as a consequence of running aan inability to fully hedge the banking book balance sheetsheet. This section contains key disclosures describing the Group’s market risk profile, highlighting regulatory as well as management measures. Key metrics Value at Risk increased in the year due to increased volatility. The income sensitivity to falling rates has increased compared to 2015 as a result of the lower GBP rate environment and liquidity pool.subsequent deposit repricing. All disclosures24%
Increase in this section (page 139 to 147) are unaudited unless otherwise stated.management Value at Risk -£220m Decrease in Annual Earnings at Risk from a negative 25bps shock in interest rates (floored assumption) | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 141 |
Risk review Risk performance Market risk | | | | | | | Summary of Contents | | Page | | | § Overview of Market Risk and Summary of Performance in the Period | | 143 | | Outlines key measures used to summarise the market risk profile of the bank such as Value at Risk (VaR) and Annual Earnings at Risk (AEaR). A distinction is made between management and regulatory measures. | § Balance sheet view of trading and banking books | | 144 | | Provides a Group-wide overview of where assets and liabilities on the Group’s balance sheet are managed within regulatory traded andnon-traded books. | Traded Market Risk § Review of Management Measures – The daily average, maximum and minimum values of management VaR – Business scenario stresses § Review of Regulatory Measures – Analysis of Regulatory VaR, SVaR, IRC and Comprehensive Risk Measure – Breakdown of the major regulatory risk measures by portfolio. | | 145 146 146 146 | | The Group discloses details on management measures of market risk. Total management VaR includes all trading positions and is presented on a diversified basis by risk factor. This section also outlines stress scenarios including macroeconomic conditions modelled as part of the Group’s risk management framework. Group’s regulatory measures of market risk under the approved internal models approach are also disclosed. As part of this year’s disclosure, both1-day and10-day VaR have been included. | Non-Traded Market Risk § Overview § Net Interest Income Sensitivity – by business unit – by currency § Economic Capital by Business Unit § Analysis of Equity Sensitivity § Volatility of the available for sale portfolio in the liquidity pool § Foreign Exchange Risk – Transactional foreign currency exposure – Translational foreign exchange exposure – Functional currency of operations. § Pension Risk Review – Assets and liabilities – IAS19 position – Risk measurement | | 147 147 148 148 149 149 149 149 150 150 150 151 151 | | A description of thenon-traded market risk framework is provided. The Group discloses a sensitivity analysis onpre-tax net interest income fornon-trading financial assets and liabilities. The analysis is carried out by Business Unit and currency. The Group measures somenon-traded market risks, in particular prepayment, recruitment and residual risk using an Economic Capital methodology. The Group discloses the overall impact of a parallel shift in interest rates on retained earnings, available for sale and cash flow hedges. The Group measures the volatility of the value of the available for sale instruments in the liquidity pool throughnon-traded market risk VaR. The Group discloses the two sources of foreign exchange risk that it is exposed to. A review focusing on the UK retirement fund, which represents majority of the Group’s total retirement benefit obligation. |
| | | 142 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Risk review Risk performance Market risk | Market risk Market risk is the risk of a reduction in earnings or capital due to volatility of the trading book positions or as a consequence of running a banking book balance sheet and liquidity funding pools. All disclosures in this section [pages 143-151] are unaudited unless otherwise stated. Disclosures for 2016 and 2015 exclude BAGL balances held for sale unless otherwise stated. |
Overview of market risk This section contains key statistics describing the market risk profile of the Group. This includes risk weighted assets by major business line, as wellGroup, such as Value at Risk (VaR) and Annual Earnings at risk (AEaR) measures. A distinction is made between regulatory and management measures within the section. The market risk management section on pages 376 to 391144 to147 provides descriptions of these metrics: § | | page 140page144 provides a view of market risk in the context of the Group’s balance sheet |
§ | | pages 101 to 102pages145 to146 cover the management of traded market risk. Management measures are shown from page 141 and regulatory equivalent measures are shown from page 142 |
Management measures are shown from page145 and regulatory equivalent measures are shown from page146 § | | non-traded market risk, arising from our banking books, is reviewed from page 143.147. |
Measures of market risk in the Group and accounting measures Traded market risk measures such as VaR and balance sheet exposure measures have fundamental differences: § | | balance sheet measures show accruals-based balances or marked to market values as at the reporting date |
§ | | VaR measures also take account of current marked to market values, but in addition hedging effects between positions are considered |
§ | | market risk measures are expressed in terms of changes in value or volatilities as opposed to static values. |
For these reasons, it is not possible to present direct reconciliations of traded market risk and accounting measures. The table ‘Balance sheet view of trading and banking books’, on page 140,144, helps the reader understand the main categories of assets and liabilities subject to regulatory market risk measures. Summary of performance in the period TheOverall, the Group has seenmaintained a decrease in marketsteady risk from reduced risk positions, notably in equities and interest rates, in addition to risk reduction in Non-Core businesses:profile, with key movements outlined below:
§ | | measures of traded market risk, such as VaR, decreasedvalue at risk (VaR), increased in the year mainly due to the removal of certain banking book assets fromunderlying movements to credit spreads and volatility in the measure (now reported as non-tradedcross currency markets driven by market risks), reduced client activity, and risk reduction in Non-Core businesses |
§ | | average trading revenue, in contrast, increased 10% compared with the previous year |
§ | | market risk RWAs fell from 2014 levels due to the implementation of diversification of the general and specific market risk VaR charges, partially offset by the inclusion of cost of funding RNIV into VaRstructural changes |
§ | | Annual Earnings at Risk (AEaR), is a key measure of interest rate risk volatility in the banking book (IRRBB),. This sensitivity measure decreased in 2015, primarily2016, driven by PCB duetwo factors: the reduction in GBP base rate in August 2016 with the 0% model floor; and additional protection that the Group has put in place to increased hedging; andreduce exposure to a possible further reduction in Treasury driven by increased exposure in the short dated available for sale bond portfolio, partially offset by reduced mismatch between assets and liabilities in the wholesale funding portfolioGBP base rate |
§ | | other marketpension risks such as pension risk and insurance risk, are disclosed from page 146page150 onwards. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 139143 |
Risk review Risk performance Market risk Balance sheet view of trading and banking books As defined by the regulatory rules, a trading book consists of positions held for trading intent or to hedge elements of the trading book. Trading intent must be evidenced in the basis of the strategies, policies and procedures set up by the firm to manage the position or portfolio. The table below provides a Group-wide overview of where assets and liabilities on the Group’s balance sheet are managed within regulatory traded andnon-traded books. The balance sheet split by trading book and banking books is shown on an IFRS accounting scope of consolidation. The reconciliation between the accounting and regulatory scope of consolidation is shown in the Barclays PLC 20152016 Pillar 3 Report. The reconciling items are all part of the banking book. | Balance sheet split by trading and banking books | | | | | | | | | | | | | As at 31 December 2015 | | | Banking book£m | a | |
| Trading book
£m |
| |
| Total
£m |
| | As at 31 December 2016 | | |
| Banking book£m | a | |
| Trading book
£m |
| |
| Total
£m |
| Cash and balances at central banks | | | 49,711 | | | | – | | | | 49,711 | | | | 102,353 | | | | – | | | | 102,353 | | Items in course of collection from other banks | | | 1,011 | | | | – | | | | 1,011 | | | | 1,467 | | | | – | | | | 1,467 | | Trading portfolio assets | | | 3,355 | | | | 73,993 | | | | 77,348 | | | | 1,160 | | | | 79,080 | | | | 80,240 | | Financial assets designated at fair value | | | 25,263 | | | | 51,567 | | | | 76,830 | | | | 10,475 | | | | 68,133 | | | | 78,608 | | Derivative financial instruments | | | 296 | | | | 327,413 | | | | 327,709 | | | | 1,551 | | | | 345,075 | | | | 346,626 | | Available for sale financial investments | | | 90,267 | | | | – | | | | 90,267 | | | Financial investments | | | | 63,317 | | | | – | | | | 63,317 | | Loans and advances to banks | | | 39,779 | | | | 1,570 | | | | 41,349 | | | | 42,288 | | | | 963 | | | | 43,251 | | Loans and advances to customers | | | 380,406 | | | | 18,811 | | | | 399,217 | | | | 373,156 | | | | 19,628 | | | | 392,784 | | Reverse repurchase agreements and other similar secured lending | | | 28,187 | | | | – | | | | 28,187 | | | | 13,454 | | | | – | | | | 13,454 | | Prepayments, accrued income and other assets | | | 3,010 | | | | – | | | | 3,010 | | | | 2,893 | | | | – | | | | 2,893 | | Investments in associates and joint ventures | | | 573 | | | | – | | | | 573 | | | | 684 | | | | – | | | | 684 | | Property, plant and equipment | | | 3,468 | | | | – | | | | 3,468 | | | | 2,825 | | | | – | | | | 2,825 | | Goodwill and intangible assets | | | 8,222 | | | | – | | | | 8,222 | | | | 7,726 | | | | – | | | | 7,726 | | Current tax assets | | | 415 | | | | – | | | | 415 | | | | 561 | | | | – | | | | 561 | | Deferred tax assets | | | 4,495 | | | | – | | | | 4,495 | | | | 4,869 | | | | – | | | | 4,869 | | Retirement benefit assets | | | 836 | | | | – | | | | 836 | | | | 14 | | | | – | | | | 14 | | Non-current assets classified as held for disposal | | | 7,364 | | | | – | | | | 7,364 | | | Assets included in disposal groups classified as held for saleb | | | | 64,139 | | | | 7,315 | | | | 71,454 | | Total assets | | | 646,658 | | | | 473,354 | | | | 1,120,012 | | | | 692,932 | | | | 520,194 | | | | 1,213,126 | | | Deposits from banks | | | 45,344 | | | | 1,736 | | | | 47,080 | | | | 46,905 | | | | 1,309 | | | | 48,214 | | Items in course of collection due to other banks | | | 1,013 | | | | – | | | | 1,013 | | | | 636 | | | | – | | | | 636 | | Customer accounts | | | 401,927 | | | | 16,315 | | | | 418,242 | | | | 408,434 | | | | 14,744 | | | | 423,178 | | Repurchase agreements and other similar secured borrowing | | | 25,035 | | | | – | | | | 25,035 | | | | 19,760 | | | | – | | | | 19,760 | | Trading portfolio liabilities | | | – | | | | 33,967 | | | | 33,967 | | | | – | | | | 34,687 | | | | 34,687 | | Financial liabilities designated at fair value | | | 7,027 | | | | 84,718 | | | | 91,745 | | | Financial liabilities designated at fair value: | | | | 5,059 | | | | 90,972 | | | | 96,031 | | Derivative financial instruments | | | 1,699 | | | | 322,553 | | | | 324,252 | | | | 883 | | | | 339,604 | | | | 340,487 | | Debt securities in issue | | | 69,150 | | | | – | | | | 69,150 | | | | 75,932 | | | | – | | | | 75,932 | | Subordinated liabilities | | | 21,467 | | | | – | | | | 21,467 | | | | 23,383 | | | | – | | | | 23,383 | | Accruals, deferred income and other liabilities | | | 10,610 | | | | – | | | | 10,610 | | | | 8,830 | | | | 41 | | | | 8,871 | | Provisions | | | 4,142 | | | | – | | | | 4,142 | | | | 4,134 | | | | – | | | | 4,134 | | Current tax liabilities | | | 903 | | | | – | | | | 903 | | | | 737 | | | | – | | | | 737 | | Deferred tax liabilities | | | 122 | | | | – | | | | 122 | | | | 29 | | | | – | | | | 29 | | Retirement benefit liabilities | | | 423 | | | | – | | | | 423 | | | | 390 | | | | – | | | | 390 | | Liabilities included in disposal groups classified as held for sale | | | 5,997 | | | | – | | | | 5,997 | | | Liabilities included in disposal groups classified as held for saleb | | | | 60,703 | | | | 4,589 | | | | 65,292 | | Total liabilities | | | 594,859 | | | | 459,289 | | | | 1,054,148 | | | | 655,815 | | | | 485,946 | | | | 1,141,761 | |
Included within the trading book are assets and liabilities which are included in the market risk regulatory measures. For more information on these measures (VaR, SVaR, IRC and APR) see the risk management section on page 383.146. NoteNotes
a | The primary risk factors for banking book assets and liabilities are interest rates and to a lesser extent, foreign exchange rates. Credit spreads and equity prices will also be factors where the Group holds debt and equity securities respectively, either as financial assets designated at fair value (see Note 14)15) or as available for sale (see Note 16)17). |
| | | 140144 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review
Risk performance
Market risk
Traded market risk review Review of management measures The following disclosures provide details on management measures of market risk. See the risk management section on page 38389 for more detail on management measures and the differences when compared to regulatory measures. The table below shows the Total managementtotal Management VaR on a diversified basis by risk factor. Total managementManagement VaR includes all trading positions in the Investment Bank, Barclays International,Non-Core, Africa Banking BAGL and Head Office. Limits are applied against each risk factor VaR as well as Total managementtotal Management VaR, which are then cascaded further by risk managers to each business. | The daily average, maximum and minimum values of management VaR (audited) | | | | | | | | | | | The daily average, maximum and minimum values of management VaRa | | The daily average, maximum and minimum values of management VaRa | | | | | | | | | | Management VaR (95%) (audited) | | | | | | | | | | | | | | | | | | | 2015 | | | | | | | | 2014 | | | | | | 2016 | | | | 2015 | | Management VaR (95%) | | | Average | | | | High | a | | | Low | a | | | Average | | | | High | a | | | Low | a | | For the year ended 31 December | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | |
| Average
£m |
| |
| High
£m | b
| |
| Low
£m | b
| |
| Average
£m |
| |
| High
£m | b
| |
| Low
£m | b
| Credit risk | | | 11 | | | | 17 | | | | 8 | | | | 11 | | | | 15 | | | | 9 | | | | 16 | | | | 24 | | | | 9 | | | | 11 | | | | 17 | | | | 8 | | Interest rate risk | | | 6 | | | | 14 | | | | 4 | | | | 11 | | | | 17 | | | | 6 | | | | 7 | | | | 13 | | | | 4 | | | | 6 | | | | 14 | | | | 4 | | Equity risk | | | 8 | | | | 18 | | | | 4 | | | | 10 | | | | 16 | | | | 6 | | | | 7 | | | | 11 | | | | 4 | | | | 8 | | | | 18 | | | | 4 | | Basis risk | | | 3 | | | | 4 | | | | 2 | | | | 4 | | | | 8 | | | | 2 | | | | 5 | | | | 9 | | | | 3 | | | | 3 | | | | 4 | | | | 2 | | Spread risk | | | 3 | | | | 6 | | | | 2 | | | | 4 | | | | 8 | | | | 3 | | | | 3 | | | | 5 | | | | 2 | | | | 3 | | | | 6 | | | | 2 | | Foreign exchange risk | | | 3 | | | | 6 | | | | 1 | | | | 4 | | | | 23 | | | | 1 | | | | 3 | | | | 5 | | | | 2 | | | | 3 | | | | 6 | | | | 1 | | Commodity risk | | | 2 | | | | 3 | | | | 1 | | | | 2 | | | | 8 | | | | 1 | | | | 2 | | | | 4 | | | | 1 | | | | 2 | | | | 3 | | | | 1 | | Inflation risk | | | 3 | | | | 5 | | | | 2 | | | | 2 | | | | 4 | | | | 2 | | | | 2 | | | | 3 | | | | 2 | | | | 3 | | | | 5 | | | | 2 | | Diversification effecta | | | (22 | ) | | | n/a | | | | n/a | | | | (26 | ) | | | n/a | | | | n/a | | | Diversification effectb | | | | (24) | | | | n/a | | | | n/a | | | | (22) | | | | n/a | | | | n/a | | Total management VaR | | | 17 | | | | 25 | | | | 12 | | | | 22 | | | | 36 | | | | 17 | | | | 21 | | | | 29 | | | | 13 | | | | 17 | | | | 25 | | | | 12 | |
Average interest rateCredit Risk VaR increased by £5m to £16m (2015: £11m) primarily due to the underlying volatile movements to credit spreads given own credit contribution. Average Basis VaR increased by £2m to £5m (2015: £3m) primarily due to a combination of structural changes in the cross currency markets that led to higher volatility and higher client activity in G10 cross currency basis. Average Equity VaR decreased by £5m£1m to £6m (Dec 14: £11m) during 2015 as certain banking book positions were transferred from the Investment Bank to Head Office Treasury, reflecting the operational transfer of responsibility (see page 143). These positions are high quality and liquid banking book assets and are now reported as non-traded market risk exposures. Similarly, lower spread risk and basis risk VaR in 2015 reflect reduced risk taking. Average equities risk VaR reduced by 20% to £8m,£7m (2015: £8m) reflecting reduced cash portfolio activities and a more conservative risk profile maintained in the derivatives portfolio.
Average foreign exchange riskForeign Exchange Risk VaR decreased by 25% to £3mwas stable as a result of lower activitymaintaining a conservative risk profile in the first half of the year, partially offset by higher volatilityderivatives portfolio. Group Management VaRa (£m) The daily VaR chart illustrates an average increasing trend in the global foreign exchange market seen in the second half of the year. Inflation risk2016. Intermittent VaR increased by £1m to £3m, primarilyincreases were due to increased client flow in periods of heightened volatility in the inflation market.
Average commodityspecific markets and subsequent risk VaR remained stable at £2m, but the high levels reduced significantly year-on-year due to the portfolio having been largely divested, and reduced client flows impacted by lower oil prices.
| | | | | Group management VaR
| | | | Daily trading revenue
|
| | | |
|
The chart above presents the frequency distribution of our daily trading revenues for all material positions included in VaR for 2015. This includes daily trading revenue generated in the Investment Bank (except for Private Equity and Principal Investments), Treasury, Africa Banking and Non-Core.
The basis of preparation for trading revenue was changed in 2015 to align better with and reflect the portfolio structure included in Group Management VaR. 2014 figures have been presented on a comparable basis. Disclosed trading revenue includes realised and unrealised mark to market gains and losses from intraday market moves but excludes commission and advisory fees. The trading revenue measure is based on actual trading results and holding periods. In contrast, the VaR shows the volatility of a hypothetical measure. To construct this measure, positions are assumed to be held for one day, and the aggregate unrealised gain or loss is the measure. VaR and the actual revenue figure are not directly comparable. VaR informs risk managers of the risk implications of current portfolio decisions.position.
NoteNotes
b | Diversification effects recognise that forecast losses from different assets or businesses are unlikely to occur concurrently, hence the expected aggregate loss is lower than the sum of the expected losses from each risk factor area. Historic correlations between losses are taken into account in making these assessments. The high and low VaR figures reported for each category did not necessarily occur on the same day as the high and low VaR reported as a whole. Consequently a diversification effect balancesbalance for the high and low VaR figures would not be meaningful and areis therefore omitted from the above table. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 141145 |
Risk review Risk performance Market risk The average daily net revenue increased by 10% to £10.1m; there were more positive trading revenue days in 2015 than in 2014, with 85% (2014: 82%) of days generating positive trading revenue.
The daily VaR chart illustrates an average declining trend in 2015. Intermittent VaR increases were due to increased client flow in periods of heightened volatility in specific markets and subsequent risk management of the position.
Business scenario stressesScenario Stresses As part of the Group’s risk management framework on a regular basis the performance of the trading business in hypothetical scenarios characterised by severe macroeconomic conditions is modelled. Up to sixseven global scenarios are modelled on a regular basis, for example, a sharp deterioration in liquidity, a slowdown in the global economy, terrorist attacks, global recession, and a sovereign peripheral crisis.sharp increase in economic growth. Throughout 2015In 2016, the scenario analyses showed that the biggestlargest market risk related impactimpacts would be due to a severe deterioration in market liquidity and a sovereign peripheral crisis.global recession.
Review of regulatory measures The following disclosures provide details on regulatory measures of marketMarket risk. See the Barclays Pillar 3 Report for more detail on regulatory measures and the differences when compared to management measures. The Group’s market risk capital requirement comprises of two elements: § | | the market risk of trading book positions booked to legal entities within the scope of the Group’s PRA waiver where the market risk isthat are measured under a PRA approved internal models approach, including Regulatory VaR, Stressed Value at Risk (SVaR), Incremental Risk Charge (IRC), and All PriceComprehensive Risk (APR)Measure as required |
§ | | trading book positions that do not meet the conditions for inclusion within the approved internal models approach. The capital requirement for these positions is calculated using standardised rules.rules |
The table below summarises the regulatory market risk measures, under the internal models approach. See Table ‘Market risk own funds requirements’in the Barclays 2016 Pillar 3 Report for a breakdown of capital requirements by approach. | | | | | | | | | | | | | | | | | Analysis of Regulatory VaR, SVaR, IRC and APR | | | | | | | | | | | | | | | | | | | | Year end £m | | | | Average £m | | | | Max £m | | | | Min £m | | As at 31 December 2015 | | | | | | | | | | | | | | | | | Regulatory VaR | | | 26 | | | | 28 | | | | 46 | | | | 20 | | SVaR | | | 44 | | | | 54 | | | | 68 | | | | 38 | | IRC | | | 129 | | | | 142 | | | | 254 | | | | 59 | | APR | | | 12 | | | | 15 | | | | 27 | | | | 11 | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | Regulatory VaR | | | 29 | | | | 39 | | | | 66 | | | | 29 | | SVaR | | | 72 | | | | 74 | | | | 105 | | | | 53 | | IRC | | | 80 | | | | 118 | | | | 287 | | | | 58 | | APR | | | 24 | | | | 28 | | | | 39 | | | | 24 | |
| | | | | | | | | | | | | | | | | Analysis of Regulatory VaR, SVaR, IRC and Comprehensive Risk Measure | | | | | | | | | | | | | | | | | | |
| Year-end £m | | |
| Avg. £m | | |
| Max £m | | |
| Min £m | | As at 31 December 2016 | | | | | | | | | | | | | | | | | Regulatory VaR(1-day) | | | 33 | | | | 26 | | | | 34 | | | | 18 | | Regulatory VaR(10-day)a | | | 105 | | | | 84 | | | | 108 | | | | 57 | | SVaR(1-day) | | | 65 | | | | 56 | | | | 75 | | | | 34 | | SVaR(10-day)a | | | 205 | | | | 178 | | | | 236 | | | | 109 | | IRC | | | 154 | | | | 155 | | | | 238 | | | | 112 | | Comprehensive Risk Measure | | | 2 | | | | 5 | | | | 12 | | | | 2 | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | Regulatory VaR(1-day) | | | 26 | | | | 28 | | | | 46 | | | | 20 | | Regulatory VaR(10-day)a | | | 82 | | | | 89 | | | | 145 | | | | 63 | | SVaR(1-day) | | | 44 | | | | 54 | | | | 68 | | | | 38 | | SVaR(10-day)a | | | 139 | | | | 171 | | | | 215 | | | | 120 | | IRC | | | 129 | | | | 142 | | | | 254 | | | | 59 | | Comprehensive Risk Measure | | | 12 | | | | 15 | | | | 27 | | | | 11 | |
Overall, there was a lower risk profile during 2015:an increase in average IRC in 2016, with no significant movements in other internal model components: § | | Regulatory VaR/SVaR:reduction in a Regulatory VaR/SVaR is driven by application of diversification to the general and specific market risk VaR charges which resulted in an overall RWA reduction Remained broadly stable year on year. |
§ | | IRC:Increased primarily due to positional increases in the IRC increase was mainly driven by the implementationthird quarter of an updated IRC model in Q4 15 which features a more refined correlation structure, adoption of a continuous transition matrix and a local currency adjustment for sovereign issuance2016. |
§ | | APR:Comprehensive Risk Measure:reduced Reduced as a result of further reductions in a specific legacy portfolio. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Breakdown of the major regulatory risk measures by portfolio | | As at 31 December 2015 | |
| Macro
£m |
| |
| Equities
£m |
| | | Credit £m | | |
| Client Capital
Management £m |
| | | Treasury £m | | | | Africa £m | | | | Non-Core £m | | Regulatory VaR | | | 10 | | | | 8 | | | | 5 | | | | 12 | | | | 4 | | | | 4 | | | | 3 | | SVaR | | | 25 | | | | 33 | | | | 15 | | | | 18 | | | | 11 | | | | 6 | | | | 12 | | IRC | | | 197 | | | | 5 | | | | 79 | | | | 99 | | | | 13 | | | | – | | | | 62 | | APR | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 12 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | Breakdown of the major regulatory risk measures by portfolio | | As at 31 December 2016 | |
| Macro
£m |
| |
| Equities £m | | |
| Credit
£m |
| |
| Barclays International Treasury£m | b | |
| Banking
£m | b
| |
| Group Treasury £m | | |
| Barclays Non-Core £m | | Regulatory VaR(1-day) | | | 14 | | | | 12 | | | | 6 | | | | 14 | | | | 12 | | | | 5 | | | | 6 | | Regulatory VaR(10-day) | | | 44 | | | | 38 | | | | 20 | | | | 45 | | | | 40 | | | | 15 | | | | 21 | | SVaR(1-day) | | | 22 | | | | 43 | | | | 7 | | | | 30 | | | | 18 | | | | 9 | | | | 22 | | SVaR(10-day) | | | 69 | | | | 137 | | | | 24 | | | | 95 | | | | 58 | | | | 30 | | | | 69 | | IRC | | | 220 | | | | 8 | | | | 146 | | | | 196 | | | | 25 | | | | 10 | | | | 18 | | Comprehensive Risk Measure | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 2 | |
The table above shows the primary portfolios which are drivingdrove the trading businesses’ modelled capital requirement as at 2015 year end.31 December 2016. The standalonestand-alone portfolio results diversify at the total level and are not necessarily additive. Regulatory VaR, SVaR, IRC and APRComprehensive Risk Measure in the prior table show the diversified results at a groupGroup level. Notes a | The 10 day VaR is based on scaling of 1 day VaR model output. More information about Regulatory and Stressed VaR methodology is available in the Barclays PLC 2016 Pillar 3 Report. |
b | In the fourth quarter, the Client Capital Management (CCM) portfolio was split into Barclays International Treasury, Banking and Agency Derivative Services (ADS) and Financing. For the purposes of the disclosures, only material portfolios (Barclays International Treasury and Banking) have been included. |
| | | 142146 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review
Risk performance
Market risk
Non-traded market risk Overview Thenon-traded market risk framework covers exposures in the banking book, mostly consisting of exposures relating to accrual accounted and available for sale instruments. The potential volatility of the net interest income of the bank is measured by an Annual Earnings at Risk (AEaR) metric that is monitored regularly and reported to senior managementSenior Management and the Board Risk Committee as part of the limit monitoring framework. Net interest income sensitivity The table below shows a sensitivity analysis onpre-tax net interest income for the non-trading financial assets and financial liabilities, including the effect of any hedging. The sensitivity has been measured using the Annual Earnings at Risk (AEaR) methodology.methodology as described in the Barclays Pillar 3 Report. Note that this metric assumes an instantaneous parallel change to interest rate forward curves. The model floors shocked market rates at zero; changes in net interest income sensitivity are only observed where forward rates are greater than zero. The main model assumptions are: (i) one year time horizon; (ii) balance sheet is simplisticheld constant; (iii) balances are adjusted for assumed behavioural profiles (i.e. considers that customers may remortgage before the contractual maturity); and (iv) behavioural assumptions are kept unchanged in that it assumes a large parallel shock occurs instantaneously across all major currencies and ignores the impact of any management actions on customer products.rate scenarios. | | | | | | | | | | | | | | | | | | | | | | | | | Net interest income sensitivity (AEaR) by business unit | | | | | Personal & Corporate Banking £m | | | | Barclaycard £m | | | | Africa £m | | |
| Non-Core
£m | a
| |
| Treasury
£m | b
| | | Total £m | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | +200bps | | | 305 | | | | (31 | ) | | | 28 | | | | 27 | | | | (131 | ) | | | 198 | | +100bps | | | 152 | | | | (14 | ) | | | 14 | | | | 14 | | | | (63 | ) | | | 103 | | -100bps | | | (385 | ) | | | 10 | | | | (11 | ) | | | – | | | | (26 | ) | | | (412 | ) | -200bps | | | (433 | ) | | | 14 | | | | (14 | ) | | | – | | | | (36 | ) | | | (469 | ) | | | | | | | | As at 31 December 2014c | | | | | | | | | | | | | | | | | | | | | | | | | +200bps | | | 464 | | | | (59 | ) | | | 26 | | | | 6 | | | | 14 | | | | 451 | | +100bps | | | 239 | | | | (27 | ) | | | 13 | | | | 3 | | | | 10 | | | | 238 | | -100bps | | | (426 | ) | | | 26 | | | | (9 | ) | | | (1 | ) | | | (29 | ) | | | (439 | ) | -200bps | | | (430 | ) | | | 29 | | | | (17 | ) | | | (1 | ) | | | (39 | ) | | | (458 | ) |
| | | | | | | | | | | | | | | | | Net interest income sensitivity (AEaR) by business unita,b (audited) | | | | Barclays UK £m | | | Barclays International £m | | | Barclays Non-Core £m | | | Total £m | | As at 31 December 2016 | | | | | | | | | | | | | | | | | +25bps | | | 5 | | | | 16 | | | | 1 | | | | 22 | | -25bps | | | (130 | ) | | | (90 | ) | | | – | | | | (220 | ) | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | +25bps | | | 16 | | | | 21 | | | | 5 | | | | 42 | | -25bps | | | (50 | ) | | | (41 | ) | | | – | | | | (91 | ) |
Overall the NIIThe income sensitivity to falling rates has increased compared to 2015 as a result of the Group to sudden changes in interest rates has decreased. The main drivers of the change in NII sensitivities are:lower GBP rate environment and subsequent depositre-pricing.
§ | | PCB:The reduction in NII sensitivity was due to increased hedging of certain deposit products exposure to interest rate changes |
| | | | | | | | | Net interest income sensitivity (AEaR) by currencyc | | | | | | | | | As at 31 December 2016 | |
| +25 basis points £m | | |
| -25 basis points £m | | GBP | | | 9 | | | | (215 | ) | USD | | | 3 | | | | (5 | ) | EUR | | | 7 | | | | 1 | | Other currencies | | | 3 | | | | (1 | ) | Total | | | 22 | | | | (220 | ) | As percentage of net interest income | | | 0.21% | | | | (2.09% | ) |
§ | | Barclaycard:The reduction in NII is due to a decrease in the period of time that the book can be repriced post a change in interest rates |
§ | | Non-Core:The increase is predominantly due to a change in the hedge profile following the announced disposals in Europe |
§ | | Treasury:The increase in NII sensitivity is primarily driven by an increased exposure in the short dated available for sale bond portfolio This results in a higher duration mismatch between assets and liabilities which an up-shock scenario creates a negative impact. In a down shock scenario the full benefit of this is not realised due to the rates being floored as zero, resulting in a net negative Nil impact from Treasury under these simple modelling assumptions. |
| | | | | | | | | | | | | | | | | Net interest income sensitivity (AEaR) by currency (audited) | | | | | | | | | | | | | | | | | | | | 2015 | | | | 2014 | | As at 31 December | |
| +100 basis points
£m |
| |
| -100 basis points
£m |
| |
| +100 basis points
£m |
| |
| -100 basis points
£m |
| GBP | | | 94 | | | | (368 | ) | | | 184 | | | | (406 | ) | USD | | | (15 | ) | | | (30 | ) | | | (11 | ) | | | (11 | ) | EUR | | | (6 | ) | | | (8 | ) | | | 21 | | | | 3 | | ZAR | | | 6 | | | | (5 | ) | | | 10 | | | | (8 | ) | Other currencies | | | 24 | | | | (1 | ) | | | 34 | | | | (17 | ) | Total | | | 103 | | | | (412 | ) | | | 238 | | | | (439 | ) | As percentage of net interest income | | | 0.82 | % | | | (3.28 | )% | | | 1.97 | % | | | (3.63 | )% |
Notes a | Only retail exposures within Non-Core are included in the calculation.The investment banking part of Barclays International has been excluded. |
b | Excludes Treasury includes both accrual and fair value accounted positions modelled with an appropriate holding period. It excludes hedge accounting ineffectiveness. Although hedge accounting ineffectiveness is recorded withinoperations, which are driven by the Group’s investments in the liquidity pool, which are risk managed using VaR measures described on page 149. Treasury’s net interest income itsensitivity (AEaR) sensitivity to a +25/-25bps move is excluded in this analysis as it is driven by fair value movements rather than interest accruals.£(39)m / £36m respectively. |
c | 2014 comparatives have been revised to reflect the inclusion of allIncludes Barclays UK, Barclays International (excluding investment banking) andNon-Core sensitivity. Treasury banking books and the exclusion of hedge ineffectiveness.excluded. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 143147 |
Risk review Risk performance Market risk Economic Capital by business unit Barclays measures somenon-traded market risks using an economic capital (EC) methodology. EC is predominantly calculated using a daily VaR model and then scaled up to a one-year EC99% confidence interval. A 99.98% confidence interval, (99.98%).as previously reported, is considered to be a very extreme shock i.e. a 1 in 5000 event. A 99% confidence interval is considered more appropriate and also aligns to other regulatory submissions. For more information on definitions of prepayment, recruitment and residual risk, and on how EC is used to manage market risk, see the markettreasury and capital risk management section on page 389.372. | Economic capital for non-trading risk by business unit | | | | | | | | | | | | Economic Capital by business unit | | | | | | | | | | | | |
| Barclays UK
£m |
| |
| Barclays International£m | a | |
| Barclays Non-Core£m | b | |
| Total £m | | As at 31 December 2016 | | | | | | | | | | Prepayment risk | | | | 27 | | | 8 | | | | – | | | | 35 | | Recruitment risk | | | | 18 | | | 1 | | | | 1 | | | | 20 | | Residual risk | | | | 1 | | | 23 | | | | 12 | | | | 36 | | Total | | | | 46 | | | 32 | | | | 13 | | | | 91 | | | | | Personal & Corporate Banking £m | | | | Barclaycard £m | | |
| Africa
Banking £m |
| |
| Non-Core
£m | a
| | | Total £m | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | Prepayment risk | | | 35 | | | 7 | | | | – | | | | – | | | | 42 | | | | 20 | | | | 7 | | | | – | | | | 27 | | Recruitment risk | | | 64 | | | 1 | | | | – | | | | 5 | | | | 70 | | | | 39 | | | | 4 | | | | 4 | | | | 47 | | Residual risk | | | 7 | | | 2 | | | | 126 | | | | 5 | | | | 140 | | | | 2 | | | | 26 | | | | 3 | | | | 31 | | Total | | | 106 | | | 10 | | | | 126 | | | | 10 | | | | 252 | | | | 61 | | | | 37 | | | | 7 | | | | 105 | | | As at 31 December 2014 | | | | | | | | | | | | Prepayment risk | | | 32 | | | | 15 | | | | – | | | | – | | | | 47 | | | Recruitment risk | | | 148 | | | | 1 | | | | – | | | | – | | | | 149 | | | Residual risk | | | 12 | | | | 3 | | | | 34 | | | | 16 | | | | 65 | | | Total | | | 192 | | | | 19 | | | | 34 | | | | 16 | | | | 261 | | |
PCB recruitment risk:The reduction of EC for PCB isTotal Economic Capital decreased by £14m to £91m (2015: £105m), mainly driven by lower levels of recruitment risk associated with hedging mismatch for savings and mortgage products as at 31 December 2015. The mortgage book in particular saw significant falls in recruitment riskBarclays UK which decreased by £21m due to lower levels of pre-hedging, particularly within mortgages of longer tenor.
Africa Banking residual risk: The significant changesa reduction in EC for Africa Banking are mainly due to the adoption of new behavioural assumptions for residual risk which went live on 1 January 2015.market rates and volatility.
Analysis of equity sensitivity The equity sensitivity table below measures the overall impact of a +/- 100bps25bps movement in interest rates on retained earnings, available for sale and cash flow hedge reserves. This data is captured using PV01a DV01 metric which is an indicator of the shift in asset value for a 1 basis point shiftmovement in the yield curve. Note that the methodology used to estimate the impact of the negative movement applied a 0% floor to interest rates. | Analysis of equity sensitivity | | | | | | | | | | Analysis of equity sensitivity (audited) | | | | | | | | | | | | | 2015 | | | 2014 | | | | 2016 | | | | 2015 | | As at 31 December | |
| +100 basis points
£m |
| |
| -100 basis points
£m |
| |
| +100 basis points
£m |
| |
| -100 basis points
£m |
| |
| +25 basis points £m | | |
| -25 basis points £m | | |
| +25 basis points £m | | |
| -25 basis points
£m |
| Net interest income | | | 103 | | | | (412) | | | | 238 | | | | (439) | | | | 22 | | | | (220 | ) | | | 42 | | | | (91 | ) | Taxation effects on the above | | | (31) | | | | 124 | | | | (57) | | | | 105 | | | | (7 | ) | | | 66 | | | | (13 | ) | | | 27 | | Effect on profit for the year | | | 72 | | | | (288) | | | | 181 | | | | (334) | | | | 15 | | | | (154 | ) | | | 29 | | | | (64 | ) | As percentage of net profit after tax | | | 11.56% | | | | (46.23) | % | | | 21.42% | | | | (39.53)% | | | | 0.54% | | | | (5.45% | ) | | | 4.72% | | | | (10.22% | ) | | Effect on profit for the year (per above) | | | 72 | | | | (288) | | | | 181 | | | | (334) | | | | 15 | | | | (154 | ) | | | 29 | | | | (64 | ) | Available for sale reserve | | | (751) | | | | 1,052 | | | | (698) | | | | 845 | | | | (154 | ) | | | 114 | | | | (180 | ) | | | 248 | | Cash flow hedge reserve | | | (3,104) | | | | 1,351 | | | | (3,058) | | | | 2,048 | | | | (732 | ) | | | 692 | | | | (754 | ) | | | 694 | | Taxation effects on the above | | | 1,157 | | | | (721) | | | | 901 | | | | (694) | | | | 222 | | | | (202 | ) | | | 280 | | | | (283 | ) | Effect on equity | | | (2,626) | | | | 1,394 | | | | (2,674) | | | | 1,865 | | | | (649 | ) | | | 450 | | | | (625 | ) | | | 595 | | As percentage of equity | | | (3.99) | % | | | 2.12% | | | | (4.05) | % | | | 2.83% | | | | (0.91% | ) | | | 0.63% | | | | (0.95% | ) | | | 0.90% | |
As discussed inIn relation to the net interest income sensitivity table on page 143,147, the impact of a 100bps25bps movement in rates is largely driven by PCB and Treasury. Barclays UK.
The change in available for sale reserve change in sensitivitysensitivities was mainly driven by changesa reduction in portfolio composition, primarily due to an increaseinterest rate risk in available for sale assets held on a shorter dated outright basis. Note that the movementliquidity pool during the year. Movements in the available for sale reserve would impact CRD IV fully loaded Common Equity Tier 1 (CET1)CET1 capital, buthowever the movement in the cash flow hedge reserve would not impact CET1 capital. NoteNotes
a | Residual risk for Barclays International includes Barclays Bank Delaware products to align with the NII disclosure. Prior period restated on the same basis for consistency. |
b | Only the retail exposures withinNon-Core are captured in thethis measure. |
| | | 144148 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review
Risk performance
Market risk
Volatility of the available for sale portfolio in the liquidity pool Changes in value of the available for sale exposures flow directly through capital via the equityavailable for sale reserve. The volatility of the value of the available for sale investments in the liquidity pool is captured and managed through a value measure rather than an earning measure, i.e. the non-tradedNon-traded market risk VaR. Although the underlying methodology to calculate thenon-traded VaR is the same asidentical to the one used to calculatein traded management VaR, the two measures are not directly comparable. Thenon-traded VaR represents the volatility to capital driven by the available for sale exposures. This is used for internal management purposes and although it is not formally backtested like the regulatory VaR (as shown on page 142), it is reviewed on a regular basis by risk managers to ensure it remains adequate for risk appetite and monitoring purposes. These exposures are in the banking book and do not meet the criteria for trading book treatment. As such available for sale volatility is a risk which is taken into account in the IRRBB internal capital assessment, which is covered by the Pillar 2 capital framework. Volatility of the Available for saleAFS portfolio in liquidity poolLiquidity Pool
| | | | | | | | | | | | | | | | | | | | | | | | | Analysis of volatility of the available for sale portfolio in the liquidity pool | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | 2015 | | For the year ended 31 December | |
| Average £m | | |
| High £m | | |
| Low £m | | |
| Average £m | | |
| High £m | | |
| Low £m | | Non-traded market Value at Risk (daily, 95%) | | | 40 | | | | 46 | | | | 32 | | | | 42 | | | | 49 | | | | 37 | |
| | | | | | | | | | | | | Analysis of volatility of the available for sale portfolio in liquidity pool | | | | | | | | | | | | | | | | 2015 | | For the year ended 31 December | | | Average £m | | | | High £m | | | | Low £m | | Non-traded market VaR (daily, 95%) | | | 41.6 | | | | 48.5 | | | | 37.0 | |
The non-tradedNon-traded VaR is mainly driven by volatility of interest rates in developed markets in the chart above. The increasesharp reduction in available for sale VaR seen in H215 is due toat the volatility in the government and swap rate markets observed in that period, particularly in the US and the UK. The subsequent decreaseend of September was due to subsiding market volatility in combination withdriven by a reduction in exposure.outright interest rate risk taken in the liquidity pool, which wasre-established in early October. Foreign exchange risk The Group is exposed to two sources of foreign exchange risk. a) Transactional foreign currency exposure Transactional foreign exchange exposure representsexposures 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 the Investment BankBarclays International which is monitored through VaR. Banking book transactional foreign exchange risk outside of the Investment BankBarclays International is monitored on a daily basis by the market risk functionsMarket Risk function and minimised by the businesses. b) Translational foreign exchange exposure The Group’s investments in overseas subsidiaries and branches create capital resources denominated in foreign currencies, principally USD, EUR and ZAR. Changes in the GBP value of the net investments due to foreign currency movements are captured in the currency translation reserve, resulting in a movement in CET1 capital. The Group’s strategy is to minimise the volatility of the capital ratios caused by foreign exchange movements by ensuring thatusing the CET1 capital movements to broadly match the revaluation of the Group’s foreign currency RWA exposures. The economic hedges primarily represent the USD and EUR preference shares and Additional Tier 1 (AT1) instruments that are held as equity, which are accounted for at historic cost under IFRS and do not qualify as hedges for accounting purposes. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 145149 |
Risk review Risk performance Market risk | 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 31 December 2016 | | | | | | | | | | | | | | USD | | | | 29,460 | | | | (12,769 | ) | | | – | | | | 16,691 | | | | (7,898 | ) | | 8,793 | | EUR | | | | 2,121 | | | | (363 | ) | | | – | | | | 1,758 | | | | (2,053 | ) | | (295 | ) | ZAR | | | | 3,679 | | | | – | | | | (2,571 | ) | | | 1,108 | | | | – | | | 1,108 | | JPY | | | | 438 | | | | (209 | ) | | | (224 | ) | | | 5 | | | | – | | | 5 | | Other | | | | 2,793 | | | | – | | | | (1,318 | ) | | | 1,475 | | | | – | | | 1,475 | | Total | | | | 38,491 | | | | (13,341 | ) | | | (4,113 | ) | | | 21,037 | | | | (9,951 | ) | | 11,086 | | | |
| 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 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | USD | | | 24,712 | | | | 8,839 | | | | 1,158 | | | | 14,715 | | | | 7,008 | | | | 7,707 | | | | 24,712 | | | | (8,839 | ) | | | (1,158 | ) | | | 14,715 | | | | (7,008 | ) | | | 7,707 | | EUR | | | 2,002 | | | | 630 | | | | 14 | | | | 1,358 | | | | 1,764 | | | | (406 | ) | | | 2,002 | | | | (630 | ) | | | (14 | ) | | | 1,358 | | | | (1,764 | ) | | | (406 | ) | ZAR | | | 3,201 | | | | 4 | | | | 99 | | | | 3,098 | | | | – | | | | 3,098 | | | | 3,201 | | | | (4 | ) | | | (99 | ) | | | 3,098 | | | | – | | | | 3,098 | | JPY | | | 383 | | | | 168 | | | | 205 | | | | 10 | | | | – | | | | 10 | | | | 383 | | | | (168 | ) | | | (205 | ) | | | 10 | | | | – | | | | 10 | | Other | | | 2,927 | | | | – | | | | 1,294 | | | | 1,633 | | | | – | | | | 1,633 | | | | 2,927 | | | | – | | | | (1,294 | ) | | | 1,633 | | | | – | | | | 1,633 | | Total | | | 33,225 | | | | 9,641 | | | | 2,770 | | | �� | 20,814 | | | | 8,772 | | | | 12,042 | | | | 33,225 | | | | (9,641 | ) | | | (2,770 | ) | | | 20,814 | | | | (8,772 | ) | | | 12,042 | | | As at 31 December 2014 | | | | | | | | | | | | | | USD | | | 23,728 | | | | 5,270 | | | | 1,012 | | | | 17,446 | | | | 6,655 | | | | 10,791 | | | EUR | | | 3,056 | | | | 328 | | | | 238 | | | | 2,490 | | | | 1,871 | | | | 619 | | | ZAR | | | 3,863 | | | | – | | | | 103 | | | | 3,760 | | | | – | | | | 3,760 | | | JPY | | | 364 | | | | 164 | | | | 208 | | | | (8 | ) | | | – | | | | (8 | ) | | Other | | | 2,739 | | | | – | | | | 1,198 | | | | 1,541 | | | | – | | | | 1,541 | | | Total | | | 33,750 | | | | 5,762 | | | | 2,759 | | | | 25,229 | | | | 8,526 | | | | 16,703 | | |
During 2015,2016, total structural currency exposure net of hedging instruments decreased by £4.7bn£1.0bn to £12.0bn (2014: £16.7bn)£11.1bn (2015: £12.0bn). The decrease iswas broadly driven by an increase in line withZAR hedges following Barclays announcement to reduce the overall RWA currency profile, with a reductionGroup’s interest in USD RWAs in the year.BAGL. Foreign currency net investments remained stable at £33.2bn (2014: £33.8bn)increased by £5.3bn to £38.5bn (2015: £33.2bn) driven predominantly by the appreciation of US Dollar against Sterling. The hedges associated with these investments increased by £5.0bn to £17.5bn (2015: £12.4bn). Pension risk review The UK Retirement Fund (UKRF) represents approximately 92% (2014:96% (2015: 92%) of the Group’s total retirement benefit obligations globally. The other material overseas schemes are in South Africa and in the US and they represent approximately 4% (2014: 4%) and 2% (2014: 2%) respectively of the Group’s total retirement benefit obligations. As such, this risk review section focuses exclusively on the UKRF. Note that the schemeThe UKRF is closed to new entrants.entrants, and there is no new final salary benefit being accrued. Existing active members accrue a combination of a cash balance benefit and a defined contribution element. Pension risk arises as the estimated market value of the pension fund assets mightmay decline, or the investment returns might reduce;may reduce or the estimated value of the pension liabilities mightmay increase. See page 390the Barclays PLC 2016 Pillar 3 Report for more information on how pension risk is managed. Assets The Trustee Board of Trusteesthe UKRF defines anits overall long termlong-term investment strategy for the UKRF, with investments across a broad range of asset classes. This ensures an appropriate mix of return seeking assets to generate future returns as well as liability matching assets to better match the future pension obligations. The main market risks within the asset portfolio are due to movements inagainst interest rates and equities, as shown by the analysisequities. The split of scheme assets is shown within Note 35 Pensions and retirement benefits. 35. The fair value of the UKRF plan assets was £26.8bn. See Note 35 Pensions and retirement benefits.£31.8bn as at 31 December 2016. | | | 146150 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review
Risk performance
Market risk
Liabilities The UKRF retirement benefit obligations are a series of future cash flows with relatively long duration. On an IAS 19IAS19 basis these cash flows are sensitive to changes in the expected long termlong-term price inflation rate (RPI) and the discount rate (AA corporate bond yield curve): § | | anAn increase in long termlong-term expected inflation corresponds to an increase in liabilities |
§ | | an increaseA decrease in the discount rate corresponds to a decreasean increase in liabilities.liabilities |
Pension risk is generated through the Group’s defined benefit schemes and this risk is set to reduce over time as our main defined benefit schemes arescheme is closed to new entrants, and in many cases closed to future accruals.entrants. The chart below outlines the shape of the UKRF’s liability cash flow profile (as at 31 December 2016) that takes account of future inflation indexing of payments to beneficiaries, with the majority of the cash flows (approximately 83%) falling between 0 and 40 years, peaking within the 2111 to 3020 year band and reducing thereafter. The shape may vary depending on changes in inflation expectation and mortality and it is updated in line with the triennial valuation process.mortality. For more detail on liabilitythe UKRF’s financial and demographic assumptions see Note 35 to the financial statements. Pensions and post retirement benefits. | | | Proportion of liability cash flows | | Net IAS19 Position | | | |
ProportionThe graph above shows the UKRF’s net IAS19 pension position for eachquarter-end for the past two years. The volatility shown by the fluctuation in the net IAS19 pension position is reflective of the IAS 19 liability cash flowsmovements observed in the market.
In Q2 2016, the UKRF IAS19 position deteriorated as the AA discount rate moved lower, driven by both a decrease in long-dated government bond yields as well as tightening in credit spreads. During H2 2016, this trend continued driven by the outcome of the EU Referendum in June as well as the Bank of England’s announcement on quantitative easing in August. These events drove significant market moves adversely affecting the UKRF AA discount rate. For example, the market index IBOXX £-Corp AA yield was 53bps lower between June and September. Gilt yields reverted higher in the months following September which was also reflected in higher AA discount rate. As a result, the net IAS19 position reverted close to zero as at 31 December 2016.
Please see Note 35 for the sensitivity of the UKRF to change in key assumptions. Risk measurement In line with BarclaysBarclays’ risk management framework, the assets and liabilities of the UKRF are modelled within a VaR framework to show the volatility of the pension positions on a total portfolio level. This ensures that the risks, diversification and liability matching characteristics of the UKRF obligations and investments are adequately captured. VaR is measured and monitored on a monthly basis. It is discussedRisks are reviewed and reported regularly at pension risk fora such as theforums including Market Risk Committee, Group Risk Committee, Pensions Management Group and Pension Executive Board. The VaR model takes into account the valuation of the liabilities followingbased on an IAS 19IAS19 basis (see Note 35 Pension and post-retirement benefits in the financial statements)35). The trustees receiveTrustee receives quarterly VaR measures on a funding basis. The pension liability is also sensitive to post-retirement mortality assumptions (seewhich are also reviewed regularly. See Note 35).35 for more details. In addition, to this, the impact of pension risk to the Group is taken into account as part of the stress testing process. Stress testing is performed internally on at least on an annual basis. The UKRF exposure is also included as part of the regulatory stress tests and exercises indicated that the UKRF risk profile is resilient to severe stress events.tests. TheBarclays defined benefit pension schemeschemes affects capital in two ways. An IAS 19 deficit impacts the CET1 capital ratio, and pension risk is also taken into account in the Pillar 2A capital assessment.
Triennial valuation
Please see Note 35 Pensions and retirement benefits for information on the funding position of the UKRF.
Insurance risk review
Insurance risk is managed within Africa Banking primarily in the Wealth, Investment Management & Insurance (WIMI) portfolios and is reported across four significant categories. Please see page 138 of the Barclays PLC 2015 Pillar 3 Report for more information on the definitions and governance procedure.
The risk types below mainly determine the regulatory capital requirements. The year-on-year decrease in risk appetite was agreed as part of the medium-term planning process.ways:
| | | | | | | | | | | | | | | | | Analysis of insurance riska | | | | | | | | | | | | | | | | | | | | 2015 | | | | 2014 | | As at 31 December | | | Position £m | | | | Appetite £m | | | | Position £m | | | | Appetite £m | | Short term insurance underwriting risk | | | 30 | | | | 32 | | | | 40 | | | | 44 | | Life insurance underwriting risk | | | 17 | | | | 20 | | | | 21 | | | | 28 | | Life insurance mismatch risk | | | 12 | | | | 20 | | | | 16 | | | | 40 | | Life and short-term insurance investment risk | | | 11 | | | | 18 | | | | 12 | | | | 14 | |
§ | | An IAS19 deficit is treated as a liability on the Group’s balance sheet. Movement in a deficit due to remeasurements, including actuarial losses, are recognised immediately through Other Comprehensive Income and as such reduces shareholders’ equity and CET1 capital. An IAS19 surplus is treated as an asset on the balance sheet and increases shareholders’ equity, however is deducted for the purposes of determining CET1 capital. |
In 2015, the largest year-on-year movement was in short-term insurance underwriting risk where the reduction in the position reflected the closure of the Agriculture book to new insurance business.
For mismatch risk, the 2015 Appetite was materially lower than the 2014 Appetite as the level of mismatch between policyholder assets and policyholder liabilities decreased following the adoption of improved reserving methodologies and sign off by the independent statutory actuary function. As a result, while 2015 Position has reduced in absolute terms, the utilisation against appetite has increased.
From 2016 onwards, the methodology for assessment of Insurance Risk will change from a CAR-based approach to a Solvency Assessment and Management (SAM) based approach (the Solvency II equivalent) which is considered to be a more robust risk management approach with well-developed methodologies.
Note
a§ | The figures | In the Group’s statutory balance sheet, an IAS19 surplus or deficit is partially offset by a deferred tax liability or asset respectively. These may or may not be recognised for calculating CET1 capital depending on the overall deferred tax position of the Group at the particular time. |
§ | | Pension risk is taken into account in the table are reported usingPillar 2A capital assessment undertaken by the PRA at least annually. The Pillar 2A requirement forms part of the Group’s overall regulatory minimum requirement for CET1 capital, Tier 1 capital and total capital. More detail on minimum regulatory requirements can be found in the Funding Risk – Capital Adequacy Requirement (CAR) approach.section on page152. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 147151 |
Risk review Risk performance Funding risk – Capital | Analysis of capital risk Capital risk is the risk that the Group has insufficient capital resources to (i) meet minimum regulatory requirements in all jurisdictions; (ii) support its credit rating; and (iii) support its business strategy. This section details Barclays’ capital position providing information on both capital resources and capital requirements. It also provides details of the leverage ratio and exposures. Key metrics 12.4% | Fully loaded Common Equity Tier 1 ratio The fully loaded CRD IV CET1 ratio increased to 12.4% (2015: 11.4%) reflecting an increase in CET1 capital of £4.5bn to £45.2bn, despite RWAs increasing by £7bn to £366bn. The increase in CET1 capital was largely driven by profits of £2.1bn generated in the period, after absorbing the impact of notable items. Other favourable movements included the currency translation reserve as a result of the appreciation of all major currencies against Sterling. The increase in RWAs was principally due to the appreciation of South African Rand, US Dollar and Euro against Sterling and business growth, which more than offset RWA reductions inNon-Core. | 4.6% Leverage ratio The leverage ratio increased to 4.6% (2015: 4.5%) driven by a £5.8bn increase in fully loaded Tier 1 capital to £52.0bn partially offset by an increase in the leverage exposure of £97bn to £1,125bn. Total IFRS assets increased 8% to £1,213bn from 2015 contributing to the 9% increase in the leverage exposure. |
Analysis of capital risk
Capital risk is the risk that the Group has insufficient capital resources, which could lead to: (i) a failure to meet regulatory requirements; (ii) a change to credit rating; or (iii) an inability to support business activity and growth.
This section details Barclays’ capital position providing information on both capital resources and capital requirements. It also provides detail of the leverage ratio and exposures.
Key metrics
11.4% fully loaded
Common Equity Tier 1 ratio
RWAs decreased by £44bn to £358bn. Non-Core RWAs decreased £29bn to £47bn as a result of the sale of the Spanish business and the rundown of legacy structured and credit products. Investment Bank RWAs decreased by £14bn to £108bn mainly due to a reduction in securities and derivatives, and improved RWA efficiency.
CET1 capital decreased £0.7bn to £40.7bn after absorbing adjusting items and dividends paid and foreseen.
4.5% leverage ratio
The leverage ratio increased significantly to 4.5% (2014: 3.7%) driven by a reduction in the leverage exposure of £205bn to £1,028bn predominantly due to the rundown in Non-Core of £156bn to £121bn.
| | | 148152 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
| | | | | Summary of Contents | | Page | | | § Capital risk overview and summary of performance § Regulatory minimum capital and leverage requirements – Capital – Leverage | �� | 154 | | Capital risk is the risk that the Group has insufficient capital resources to (i) meet minimum regulatory requirements in all jurisdictions; (ii) support its credit rating; and (iii) support its business strategy. This section details Barclays’ capital position providing information on both capital resources and capital requirements. It also provides details of the leverage ratio and exposures. | | | | | | § Analysis of capital resources – Capital ratios – Capital resources – Movement in CET1 capital | | 155 | | This section outlines the Group’s capital ratios, capital composition, and provides information on significant movements in CET1 capital during the year. | § Analysis of risk weighted assets | | 157 | | This section outlines risk weighted assets by risk type, business and macro drivers. | – Risk weighted assets by risk type and business | | | | – Movement analysis of risk weighted assets | | | | | § Analysis of leverage ratio and exposures – Leverage ratio and exposures | | 158 | | This section outlines the Group’s leverage ratios, leverage exposure composition, and provides information on significant movements in the IFRS and leverage balance sheet. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 153 |
Risk review Risk performance Funding risk – Capital | Capital risk is the risk that the Group has insufficient capital resources to: | § | | Capital risk is the risk that the Group has insufficient capital resources to: – meet minimum regulatory requirements in the UK and in otherall jurisdictions such as the US 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 at each level where prudential capital requirements are applied |
| § | | – support its credit rating. A weaker credit rating would increaserating; and – support its business strategy. More details on monitoring and managing capital risk may be found in the Group’s cost of fundsRisk Management sections on pages97 to114 All disclosures in this section (pages154 to178) are unaudited unless otherwise stated. Disclosures for 2016 and 2015 include BAGL balances held for sale unless otherwise stated. |
| § | | support its growth and strategic options. |
More details on monitoring and managing capital risk may be found in the Risk Management sections on pages 103 to 104.
All disclosures in this section (pages 149 to 153) are unaudited unless otherwise stated.
Overview The fully loaded CRD IV CET1 ratio, among other metrics, is a measure of the capital strength and resilience of Barclays. Maintenance of our capital is vital in order to meet the minimum capital requirements of regulatory authorities and to fund growth within our businesses. This section provides an overview of the Group’s: i)(i) regulatory minimum capital and leverage requirements; ii)(ii) capital resources; iii)(iii) risk weighted assets (RWAs); and iv)(iv) leverage ratio and exposures. Summary of performance in the period Barclays continues to be in excess of the minimum CRD IV transitional and fully loaded capital ratiosrequirements and PRA capital and leverage ratios.requirements. The fully loaded CRD IV CET1 ratio increased to 12.4% (2015: 11.4% (2014: 10.3%) driven by a £43.5bn reductionreflecting an increase in RWAs to £358.4bn partially offset by a decrease in fully loaded CRD IV CET1 capital of £0.7bn£4.5bn to £40.7bn.£45.2bn, despite RWAs increasing by £7bn to £366bn. The RWA reductionincrease in CET1 capital was primarilylargely driven by a £29bn decreaseprofits of £2.1bn generated in the Non-Core RWAs to £47bnperiod, after absorbing the impact of notable items. Other favourable movements included the currency translation reserve as a result of the saleappreciation of the Spanish business and a rundown of legacy structured and credit products. Investment Bankall major currencies against Sterling. The increase in RWAs decreased £14bn to £108bn mainlywas principally due to a reductionthe appreciation of South African Rand, US Dollar and Euro against Sterling and business growth, which more than offset RWA reductions in securities and derivatives, and improved RWA efficiency. CET1 capital decreased £0.7bn to £40.7bn after absorbing adjusting items and dividends paid and foreseen.Non-Core.
The leverage ratio increased significantly to 4.6% (2015: 4.5% (2014: 3.7%), driven by a reduction£5.8bn increase in fully loaded Tier 1 capital to £52.0bn partially offset by an increase in the leverage exposure of £97bn to £1,028bn (2014: £1,233bn). This£1,125bn. Total IFRS assets increased 8% to £1,213bn from 2015 contributing to the 9% increase in leverage exposure. The IFRS asset increase was predominantlymainly driven by loans and advances and other assets which increased £82bn to £707bn. The increase was primarily due to the appreciation of major currencies against Sterling, an increase in liquidity pool assets, and lending growth in Barclays UK and Barclays International. This was partially offset by the rundown and exit ofNon-Core assets. Net derivative leverage exposure, remained broadly flat as an increase in assets of the Non-Core business£19bn to £347bn was offset by an increase in derivative liabilities resulting in regulatory derivative netting increasing £20bn to £313bn. The increase was mainly within foreign exchange derivatives driven by an increase in trade volumes and appreciation of £156bn to £121bn. all major currencies against Sterling. Regulatory minimum capital and leverage requirements Capital – Fully loaded Barclays’ current regulatory requirement is to meet a fully loaded CRD IV CET1 ratio of 9% by 2019, plus a Pillar 2A add-on. The 9% comprisescomprising the required 4.5% minimum CET1 ratio and, phased in from 2016, a Combined Buffer Requirement made up ofRequirement. This currently comprises a Capital Conservation Buffer (CCB) of 2.5% and a Globally Systemically Important Institution(G-SII) buffer determined by the PRA in line with guidance from the Financial Stability Board (FSB). Both buffers are subject to phased implementation, the CCB is phased in at 25% per annum with 0.625% applicable for 2016. TheG-SII buffer for 2016 and 2017 has been set at 2% and is also phased in at 25% per annum with 0.5% applicable for 2016 and 1% for 2017. On 21 November 2016 the FSB confirmed that theG-SII buffer for 2018 will be 1.5% with 1.1% applicable for 2018 and taking full effect from 2019 onwards. Also forming part of 2%the Combined Buffer Requirement is a Counter-Cyclical Capital Buffer (CCyB) and a Systemic Risk Buffer (SRB). On 30 November 2016 the Financial Policy Committee (FPC) reaffirmed that it expects to maintain a CCyB of 0% on UK exposures until at least June 2017. Other national authorities also determine the appropriate CCyBs that should be applied to exposures in their jurisdiction. During 2016, CCyBs started to apply for Barclays’ exposures to other jurisdictions; however based on current exposures these are not material. No SRB has been set to date. In addition, Barclays’ Pillar 2A requirement as per the PRA’s Individual Capital Guidance (ICG) is subject to review at least annually. Under current PRA guidance, the Pillar 2A add-on for 2016 will bebased on a point in time assessment was 3.9% of which 56% will needneeds to be met in CET1 form, equating to approximately 2.2% of RWAs. Basel Committee consultations and reviews might further impact theThe Pillar 2A requirement in the future. In addition, a Counter-Cyclical Capital Buffer (CCCB) and/or additional Sectoral Capital Requirements (SCR) mayis subject to at least annual review and for 2017 Barclays’ Pillar 2Aadd-on will be required by the BoE to protect against perceived threats to financial stability. These buffers could be applied at the Group level or at a legal entity, sub-consolidated or portfolio level. No SCR has been set to date by the BoE, while the CCCB is currently 0% for UK exposures. Other national authorities determine the appropriate CCCBs that should be applied to exposures in their jurisdiction. During 2016, CCCBs will start to apply for our exposures in Hong Kong, Norway and Sweden. Based on current exposures we do not expect this4.0%, with approximately 2.3% of RWAs needing to be material.met in CET1 form. All capital, RWA and leverage calculations reflect Barclays’ interpretation of the current rules.
Capital – Transitional
On aThe CRD IV CET1 transitional basis,minimum capital requirement for 2016 is 7.8% including the PRA has implemented a minimum requirement4.5% CET1 ratio requirement, 2.2% of 4%, Tier 1 ratio of 5.5%Pillar 2A, a 0.625% CCB buffer, a 0.5%G-SII buffer and Total Capital ratio of 8%.
From 1 January 2015, the transitional capital ratios are equal to the fully loaded ratios following the PRA’s acceleration of transitional provisions relating to CET1 deductions and filters. The adjustment relating to unrealised gains on available for sale debt and equity that was applied throughout 2014 as an exception no longer applies.
Grandfathering limits on capital instruments, previously qualifying as Tier 1 and Tier 2, are unchanged under the PRA transitional rules.a 0% CCyB.
Leverage In additionEffective 1 January 2016, Barclays is required to the Group’s capital requirements, minimum ratios have also been set in respect of leverage. Thedisclose a leverage ratio and an average leverage ratio applicable to the Group has been calculated in accordanceGroup:
§ | | The leverage ratio is consistent with the December 2015 method of calculation and has been included in our disclosure. The calculation uses the end point CRR definition of Tier 1 capital for the numerator and the CRR definition of leverage exposure. The current expected minimum fully loaded requirement is 3%, but this could be impacted by the Basel Consultation on the Leverage Framework |
§ | | The average leverage ratio as outlined by the PRA Supervisory Statement SS45/15 and the updated PRA rulebook is calculated as the capital measure divided by the exposure measure, where the capital and exposure measure is based on the average of the last day of each month in the quarter. The expected end point minimum requirement is 3.5% comprising of the 3% minimum requirement, a fully phased inG-SII additional leverage ratio buffer(G-SII ALRB) and a countercyclical leverage ratio buffer (CCLB). The minimum requirement is on a phased basis in line with CET1G-SII buffer which results in a minimum requirement of 3.175% at 31 December 2016. |
In August 2016, the requirementsPRA implemented the FPC’s recommendation to allow firms to exclude qualifying central bank claims from the calculation of the EU Capital Requirements Regulation (CRR)leverage exposure measure, as long as these are matched by deposits denominated in the same currency, subject to firms obtaining permission from the PRA. This change in reporting requirements is effective 1 April 2017, which was amended effective from January 2015. The leveragewill result in a modification to the calculation usesof the end-point CRR definition of Tier 1 capitalexposure measure for the numerator and the CRR definitionpurpose of leverage exposure. During 2015 Barclays was measured against the PRA leverage ratio requirement of 3%. In December 2015, the PRA finalisedcalculating the UK leverage ratio framework in which it adopted the FPC’s recommendations onratio. At 31 December 2016, Barclays’ reported leverage ratio requirements. These recommendations have been finalised in the Supervisory Statement SS45/15 and have been incorporated as part of the updated PRA rulebook, effective January 2016. This would result in a fully phased inaverage leverage ratio requirement of 3.7% for Barclays. The minimum requirement would increase in the event that Barclays was subject to: (i) an increased CCCB; and/or (ii) Barclays was reclassified into a higher G-SII category. Furthermore from January 2016,disclosed is unaffected by this announcement as firms are required to report quarterly leverage ratio information, including an average ratio.
disclose based on the existing rules. | | | | | 154 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 149 | | |
Capital resourcesResources The CRR and Capital Requirements Directive (CRD) implemented Basel III within the EU (collectively known as CRD IV) on 1 January 2014. The rules are supplemented by Regulatory Technical Standards and the PRA’s rulebook, including the implementation of transitional rules. However, rules and guidance are still subject to change as certain aspects of CRD IV are dependent on final technical standards and clarifications to be issued by the EBA and adopted by the European Commission and the PRA. All capital, RWA and leverage calculations reflect Barclays’ interpretation of the current rules. | Key capital ratios | | | | | | Capital ratios | | | | | | As at 31 December | | | 2015 | | | 2014 | | | 2016 | | | 2015 | Fully Loaded CET1 | | | 11.4% | | | 10.3% | | PRA Transitional CET1a | | | 11.4% | | | 10.2% | | PRA Transitional Tier 1b,c | | | 14.7% | | | 13.0% | | PRA Transitional Total Capitalb,c | | | 18.6% | | | 16.5% | | Fully Loaded CET1a,b | | | | 12.4% | | | 11.4% | PRA Transitional Tier 1c,d | | | | 15.6% | | | 14.7% | PRA Transitional Total Capitalc,d | | | | 19.6% | | | 18.6% | | | | | | | | | | Capital resources (audited) | | | | | | | | | As at 31 December | |
| 2015
£m |
| | 2014 £m | |
| 2016
£m |
| | 2015 £m | Shareholders’ equity (excluding non-controlling interests) per the balance sheet | | | 59,810 | | | 59,567 | | | 64,873 | | | 59,810 | Less: other equity instruments (recognised as AT1 capital) | | | (5,305) | | | (4,322) | | | (6,449) | | | (5,305) | Adjustment to retained earnings for foreseeable dividends | | | (631) | | | (615) | | | (388) | | | (631) | | Minority interests (amount allowed in consolidated CET1) | | | 950 | | | 1,227 | | | 1,825 | | | 950 | | Other regulatory adjustments and deductions | | | | | | | | | Additional value adjustments (PVA) | | | (1,602) | | | (2,199) | | | (1,571) | | | (1,602) | Goodwill and intangible assets | | | (8,234) | | | (8,127) | | | (9,054) | | | (8,234) | Deferred tax assets that rely on future profitability excluding temporary differences | | | (855) | | | (1,080) | | | (494) | | | (855) | Fair value reserves related to gains or losses on cash flow hedges | | | (1,231) | | | (1,814) | | | (2,104) | | | (1,231) | Excess of expected losses over impairment | | | (1,365) | | | (1,772) | | | (1,294) | | | (1,365) | Gains or losses on liabilities at fair value resulting from own credit | | | 127 | | | 658 | | | 86 | | | 127 | Defined benefit pension fund assets | | | (689) | | | – | | | (38) | | | (689) | Direct and indirect holdings by an institution of own CET1 instruments | | | (57) | | | (25) | | | (50) | | | (57) | Deferred tax assets arising from temporary differences (amount above 10% threshold) | | | | (183) | | | – | Other regulatory adjustments | | | (177) | | | (45) | | | 45 | | | (177) | Fully loaded CET1 capital | | | 40,741 | | | 41,453 | | | 45,204 | | | 40,741 | Regulatory adjustments relating to unrealised gains | | | – | | | (583) | | PRA transitional CET1 capital | | | 40,741 | | | 40,870 | | | Additional Tier 1 (AT1) capital | | | | | | | | | Capital instruments and the related share premium accounts | | | 5,305 | | | 4,322 | | | 6,449 | | | 5,305 | Qualifying AT1 capital (including minority interests) issued by subsidiaries | | | 6,718 | | | 6,870 | | | 5,445 | | | 6,718 | Other regulatory adjustments and deductions | | | (130) | | | – | | | (130) | | | (130) | Transitional AT1 capitald | | | 11,893 | | | 11,192 | | Transitional AT1 capitale | | | | 11,764 | | | 11,893 | PRA transitional Tier 1 capital | | | 52,634 | | | 52,062 | | | 56,968 | | | 52,634 | | Tier 2 capital | | | | | | Tier 2 (T2) capital | | | | | | Capital instruments and the related share premium accounts | | | 1,757 | | | 800 | | | 3,769 | | | 1,757 | Qualifying Tier 2 capital (including minority interests) issued by subsidiaries | | | 12,389 | | | 13,529 | | | 11,366 | | | 12,389 | Other regulatory adjustments and deductions | | | (253) | | | (48) | | | (257) | | | (253) | PRA transitional total regulatory capital | | | 66,527 | | | 66,343 | | | 71,846 | | | 66,527 |
Notes a | The transitional regulatory adjustments to CET1 capital are no longer applicable resulting in CET1 capital on a fully loaded basis being equal to that on a transitional basis. |
b | The CRD IV CET1 ratio (FSA October 2012 transitional statement) as applicable to Barclays’ Tier 2 Contingent Capital Notes was 13.1%13.7% based on £46.8bn£50.0bn of transitional CRD IV CET1CET 1 capital and £358bn£366bn RWAs.The transitional CET1 ratio according to the FSA October 2012 transitional statement would be 13.1%13.7%. This is calculated as CET1 capital as adjusted for the transitional relief (£46.8bn)(£50.0bn), divided by CRD IV RWAs. The following transitional relief items are added back to CET1 capital: Goodwill and Intangibles (£4.9bn)(£3.6bn), Deferred tax asset (£0.5bn), Debt valuation adjustment (£0.1bn)(£0.2bn), Expected losses over impairment (£0.8bn) and(£0.5bn), Excess minority interest (£(£0.2bn), partially offset by the defined benefit pension adjustment of £0.5bn. and Deferred tax assets arising from temporary differences (amount above 10% threshold) (£0.2bn). |
bc | The PRA transitional capital is based on the PRA Rulebook and accompanying supervisory statements. |
cd | As at 31 December 2015,2016, Barclays’ fully loaded Tier 1 capital was £46,173m,£51,993m, and the fully loaded Tier 1 ratio was 12.9%14.2%. Fully loaded total regulatory capital was £62,103m£67,772m and the fully loaded total capital ratio was 17.3%18.5%. The fully loaded Tier 1 capital and total capital measures are calculated without applying the transitional provisions set out in CRD IV and assessing compliance of AT1 and Tier 2 instruments against the relevant criteria in CRD IV. |
de | Of the £11.9bn£11.8bn transitional AT1 capital, fully loaded AT1 capital used for the leverage ratio comprises the £5.3bn£6.4bn capital instruments and related share premium accounts, £0.3bn£0.5bn qualifying minority interests and £0.1bn capital deductions. It excludes legacy Tier 1 capital instruments issued by subsidiaries that are subject to grandfathering. |
| | | 150 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 155 |
Risk review Risk performance Funding risk – Capital | | | Movement in CET1 capital | | | | | 20152016
£m | Opening balance as at 1 January | | 41,45340,741 | | | LossProfit for the period attributable to equity holders
| | (49)2,080 | Own credit | | (531)(41) | Dividends paid and foreseen | | (1,372)(843) | DecreaseIncrease in retained regulatory capital generated from earnings
| | (1,952)1,196 | | | Net impact of share awards | | 609535 | Available for sale reserves | | (245)(391) | Currency translation reserves | | (41)3,674 | Other reserves | | 9 (778) | Increase in other qualifying reserves | | 3323,040 | | | Retirement benefit reserve | | 916 (988) | Defined benefit pension fund asset deduction | | (689)651 | Net impact of pensions | | 227 (337) | | | Minority interests | | (277)875 | Additional value adjustments (PVA) | | 59731 | Goodwill and intangible assets | | (107)(820) | Deferred tax assets that rely on future profitability excluding those arising from temporary differences | | 225361 | Excess of expected loss over impairment | | 40771 | Direct and indirect holdings by an institution of own CET1 instruments | | (32)7 | Deferred tax assets arising from temporary differences (amount above 10% threshold) | | (183) | Other regulatory adjustments | | (132)222 | DecreaseIncrease in regulatory capital due to adjustments and deductions
| | 681564 | Closing balance as at 31 December | | 40,74145,204 |
The CET1 ratio improved to 12.4% (2015: 11.4%) primarily driven by an increase in CET1 capital of £4.5bn to £45.2bn as a result of profits of £2.1bn generated in the year, after absorbing the impact of notable items. Regulatory capital generated from earnings after absorbing the impact of own credit and dividends paid and foreseen increased CET1 capital by £1.2bn. Other significant movements in the year were: § | | a £3.0bn increase in other qualifying reserves including a £3.7bn increase in the currency translation reserves as US Dollar, Euro and South African Rand strengthened against Sterling; partially offset by a £0.4bn decrease as a result of preference share redemptions and a £0.4bn decrease in available for sale reserves; |
§ | | Duringa £0.3bn decrease, net of tax, as a result of movements relating to pensions. There was a £1.0bn decrease in the retirement benefit reserve largely due to the UKRF, which is the Group’s main pension scheme, moving from a £0.8bn surplus in December 2015 to a £27m deficit in December 2016. The decrease in reserves was partially offset by the fully loaded CET1 ratio increased to 11.4% (2014: 10.3%) driven byremoval of a significant reduction£0.7bn capital deduction for the UKRF asset in RWAs.December 2015; |
§ | | CET1 capital decreased by £0.7bn to £40.7bn, after absorbing adjusting items, with thea £0.9bn increase in minority interests following significant movements: |
| – | a £1.4bn reduction for dividends paid and foreseen |
| – | a £0.2bn net increase as the retirement benefit reserve increased £0.9bn, offset by £0.7bn pension asset deduction |
| – | a £0.7bn increase due to lower regulatory deductions and adjustments including a £0.6bn decrease in PVA, a £0.4bn decrease in expected losses due to the sale of the Spanish business and disposals across the Investment Bank,12.2% of BAGL’s issued share capital was partially offset by a £0.3bn decrease in eligible minority interests.higher capital deductions. |
Transitional AT1 capital remained largely flat in the period as redemptions and repurchases of £1.3bn of CRD IV end point non qualifying preference shares, tier one notes and reserve capital instruments were offset by the issuance of $1.5bn of end point qualifying AT1 capital instruments. | | | | | 156 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 151 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Risk weighted assets (RWAs) by risk type and business | | | | | Credit risk | | | | Counterparty credit riska | | | | Market riskb | | | | Operational risk | | | | Total RWAs | | | |
| Std
£m |
| |
| IRB
£m |
| |
| Std
£m |
| |
| IRB
£m |
| |
| Std
£m |
| |
| IMA
£m |
| | | £m | | | | £m | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personal & Corporate Banking | | | 31,506 | | | | 71,352 | | | | 242 | | | | 1,122 | | | | 30 | | | | – | | | | 16,176 | | | | 120,428 | | Barclaycard | | | 17,988 | | | | 17,852 | | | | – | | | | – | | | | – | | | | – | | | | 5,505 | | | | 41,345 | | Africa Banking | | | 8,556 | | | | 17,698 | | | | 22 | | | | 487 | | | | 885 | | | | 682 | | | | 5,604 | | | | 33,934 | | Investment Bank | | | 4,808 | | | | 39,414 | | | | 11,020 | | | | 10,132 | | | | 9,626 | | | | 13,713 | | | | 19,620 | | | | 108,333 | | Head Office and Other Operations | | | 1,513 | | | | 2,763 | | | | 32 | | | | 59 | | | | 48 | | | | 1,230 | | | | 2,104 | | | | 7,749 | | Total Core | | | 64,371 | | | | 149,079 | | | | 11,316 | | | | 11,800 | | | | 10,589 | | | | 15,625 | | | | 49,009 | | | | 311,789 | | Barclays Non-Core | | | 5,078 | | | | 11,912 | | | | 1,397 | | | | 9,231 | | | | 679 | | | | 10,639 | | | | 7,651 | | | | 46,587 | | Total risk weighted assets | | | 69,449 | | | | 160,991 | | | | 12,713 | | | | 21,031 | | | | 11,268 | | | | 26,264 | | | | 56,660 | | | | 358,376 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personal & Corporate Banking | | | 32,657 | | | | 70,080 | | | | 238 | | | | 1,049 | | | | 26 | | | | – | | | | 16,176 | | | | 120,226 | | Barclaycard | | | 15,910 | | | | 18,492 | | | | – | | | | – | | | | – | | | | – | | | | 5,505 | | | | 39,907 | | Africa Banking | | | 9,015 | | | | 21,794 | | | | 10 | | | | 562 | | | | 948 | | | | 588 | | | | 5,604 | | | | 38,521 | | Investment Bank | | | 5,773 | | | | 36,829 | | | | 13,739 | | | | 11,781 | | | | 18,179 | | | | 16,480 | | | | 19,621 | | | | 122,402 | | Head Office and Other Operations | | | 506 | | | | 2,912 | | | | 234 | | | | 62 | | | | 7 | | | | 521 | | | | 1,326 | | | | 5,568 | | Total Core | | | 63,861 | | | | 150,107 | | | | 14,221 | | | | 13,454 | | | | 19,160 | | | | 17,589 | | | | 48,232 | | | | 326,624 | | Barclays Non-Core | | | 10,679 | | | | 19,416 | | | | 3,023 | | | | 18,406 | | | | 2,236 | | | | 13,088 | | | | 8,428 | | | | 75,276 | | Total risk weighted assets | | | 74,540 | | | | 169,523 | | | | 17,244 | | | | 31,860 | | | | 21,396 | | | | 30,677 | | | | 56,660 | | | | 401,900 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Movement analysis of risk weighted assets | | Risk weighted assets | | | | | | | | | | | | | | | Credit risk £bn | | | | Counterparty credit risk£bn | a | |
| Market risk
£bn | b
| |
| Operational risk
£bn |
| | | Total RWAs £bn | | As at 1 January 2015 | | | | | | | | | | | | | | | 244.0 | | | | 49.1 | | | | 52.1 | | | | 56.7 | | | | 401.9 | | Book size | | | | | | | | | | | | | | | 8.3 | | | | (10.6 | ) | | | (9.5 | ) | | | – | | | | (11.8 | ) | Acquisitions and disposals | | | | | | | | | | | | | | | (14.2 | ) | | | – | | | | (0.4 | ) | | | – | | | | (14.6 | ) | Book quality | | | | | | | | | | | | | | | 0.1 | | | | (1.7 | ) | | | 0.7 | | | | – | | | | (0.9 | ) | Model updates | | | | | | | | | | | | | | | (2.1 | ) | | | (1.1 | ) | | | (2.7 | ) | | | – | | | | (5.9 | ) | Methodology and policy | | | | | | | | | | | | | | | 2.3 | | | | (1.9 | ) | | | (2.6 | ) | | | – | | | | (2.2 | ) | Foreign exchange movementc | | | | | | | | | | | | | | | (8.0 | ) | | | (0.1 | ) | | | – | | | | – | | | | (8.1 | ) | Other | | | | | | | | | | | | | | | – | | | | – | | | | – | | | | – | | | | – | | As at 31 December 2015 | | | | | | | | | | | | | | | 230.4 | | | | 33.7 | | | | 37.6 | | | | 56.7 | | | | 358.4 | |
Risk weighted assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Risk weighted assets (RWAs) by risk type and business | | | | | Credit risk | | | | Counterparty credit riska,b | | | | Market risk | | |
| Operational risk | | |
| Total
RWAs |
| As at 31 December 2016 | |
| Std
£m |
| |
| IRB
£m |
| |
| Std
£m |
| |
| IRB
£m |
| |
| Settlement Risk
£m |
| |
| CVA
£m |
| |
| Std
£m |
| |
| IMA
£m |
| | | £m | | | | £m | | Barclays UK | | | 5,592 | | | | 49,591 | | | | 47 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 12,293 | | | | 67,523 | | Barclays International | | | 53,201 | | | | 82,327 | | | | 13,515 | | | | 13,706 | | | | 30 | | | | 3,581 | | | | 9,343 | | | | 9,460 | | | | 27,538 | | | | 212,701 | | Head Officec | | | 9,048 | | | | 27,122 | | | | 77 | | | | 1,157 | | | | – | | | | 927 | | | | 482 | | | | 2,323 | | | | 12,156 | | | | 53,292 | | Barclays Core | | | 67,841 | | | | 159,040 | | | | 13,639 | | | | 14,863 | | | | 30 | | | | 4,508 | | | | 9,825 | | | | 11,783 | | | | 51,987 | | | | 333,516 | | BarclaysNon-Core | | | 4,714 | | | | 9,945 | | | | 1,043 | | | | 6,081 | | | | 37 | | | | 2,235 | | | | 477 | | | | 2,928 | | | | 4,673 | | | | 32,133 | | Barclays Group | | | 72,555 | | | | 168,985 | | | | 14,682 | | | | 20,944 | | | | 67 | | | | 6,743 | | | | 10,302 | | | | 14,711 | | | | 56,660 | | | | 365,649 | | | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | 6,562 | | | | 50,763 | | | | 26 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 12,174 | | | | 69,525 | | Barclays International | | | 45,892 | | | | 77,275 | | | | 10,463 | | | | 11,055 | | | | 516 | | | | 3,406 | | | | 8,373 | | | | 10,196 | | | | 27,657 | | | | 194,833 | | Head Officec | | | 8,291 | | | | 20,156 | | | | 54 | | | | 538 | | | | 8 | | | | 382 | | | | 399 | | | | 1,903 | | | | 8,003 | | | | 39,734 | | Barclays Core | | | 60,745 | | | | 148,194 | | | | 10,543 | | | | 11,593 | | | | 524 | | | | 3,788 | | | | 8,772 | | | | 12,099 | | | | 47,834 | | | | 304,092 | | BarclaysNon-Core | | | 8,704 | | | | 12,797 | | | | 1,653 | | | | 9,430 | | | | 1 | | | | 7,480 | | | | 1,714 | | | | 3,679 | | | | 8,826 | | | | 54,284 | | Barclays Group | | | 69,449 | | | | 160,991 | | | | 12,196 | | | | 21,023 | | | | 525 | | | | 11,268 | | | | 10,486 | | | | 15,778 | | �� | | 56,660 | | | | 358,376 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Movement analysis of risk weighted assets | | Risk weighted assets | | | | | | | | | | | | | | | | | | | | | |
| Credit risk £bn | | |
| Counterparty credit risk£bn | a,b | |
| Market risk £bn | | |
| Operational risk
£bn |
| |
| Total RWAs
£bn |
| As at 1 January 2016 | | | | | | | | | | | | | | | | | | | | | | | 230.4 | | | | 45.0 | | | | 26.3 | | | | 56.7 | | | | 358.4 | | Book size | | | | | | | | | | | | | | | | | | | | | | | 0.8 | | | | 1.2 | | | | (0.6) | | | | – | | | | 1.4 | | Acquisitions and disposals | | | | | | | | | | | | | | | | | | | | | | | (6.4) | | | | (0.2 | ) | | | – | | | | – | | | | (6.6) | | Book quality | | | | | | | | | | | | | | | | | | | | | | | (0.5) | | | | (0.4 | ) | | | 0.6 | | | | – | | | | (0.3) | | Model updates | | | | | | | | | | | | | | | | | | | | | | | (2.9) | | | | (2.0 | ) | | | (0.3) | | | | – | | | | (5.2) | | Methodology and policy | | | | | | | | | | | | | | | | | | | | | | | 1.1 | | | | (1.2 | ) | | | (1.0) | | | | – | | | | (1.1) | | Foreign exchange movementd | | | | | | | | | | | | | | | | | | | | 19.0 | | | | – | | | | – | | | | – | | | | 19.0 | | As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | 241.5 | | | | 42.4 | | | | 25.0 | | | | 56.7 | | | | 365.6 | |
RWAs decreased £43.5bnincreased £7.2bn to £358.4bn,£365.6bn, driven by: § | | Book size:book size increased RWAs decreased £11.8bnby £1.4bn primarily due to a reductionan increase in holdings of US bondstrading activity in Barclays International and equitiesbusiness growth in corporate and a reduction in derivatives and securities financing transactions. This wasconsumer lending partially offset by a growth in corporate lending, particularly in Africa and the UKsecuritisation transactions |
§ | | Acquisitionsacquisitions and disposals:disposals decreased RWAs decreased £14.6bnby £6.6bn primarily due to disposals in the rundown ofNon-Core portfolios, including the sale of the Spanish businessPortuguese and Italian businesses |
§ | | Model updates:model updates decreased RWAs decreased £5.9bnby £5.2bn primarily due to implementation of diversification benefits across advanced general and specific market risk, as well as a recalibration of a credit riskdriven by model within the Investment Bank and Non-Corechanges in Barclays UK mortgages following formal approval |
§ | | Methodologymethodology and policy:Policy decreased RWAs decreased £2.2bnby £1.1bn primarily due todriven by the implementationeffect of collateral modelling for mismatched FX collateral on average CVA and a transfer of securities financing transactions in certain businesses from the banking book to trading book, enabling further collateralnew treatment for sovereign exposures partly offset by modelled wholesale recalibration |
§ | | Foreignforeign exchange movements decreasedincreased RWAs by £8.1bn£19.0bn primarily due to depreciationdriven by the appreciation of ZARSouth African Rand, US Dollar and Euro against GBP.Sterling. |
Notes a | RWAs in relation to default fund contributions are included in counterparty credit risk. |
b | RWAs in relation to credit valuation adjustment (CVA) are included in marketcounterparty credit risk. |
c | Includes Africa Banking discontinued operations. |
d | Foreign exchange movement does not include FX for modelled counterparty risk or modelled market risk. |
| | | 152 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 157 |
Risk review Risk performance Funding risk – Capital Leverage ratio and exposures The leverage ratio applicable to the Group has been calculated in accordance with the requirements of the CRR which was amended effective from January 2015. The leverage calculation below uses the end point CRR definition of Tier 1 capital for the numerator and the CRR definition of leverage exposure.
At 31 December 2015,2016, Barclays’ leverage ratio was 4.6% (2015: 4.5%) and the average leverage ratio was 4.3%, which exceeds the transitional minimum requirement for Barclays of 3.175% and expected end point minimum requirement of 3.7% as outlined by3.5%. The impact of the PRA Supervisory Statement SS45/15 andrule modification to allow firms to exclude qualifying central bank claims from the updated PRA rulebook, comprisingcalculation of the 3% minimum requirement,leverage exposure measure would have resulted in an average leverage ratio of 4.5% and the fully phased in G-SII buffer.a leverage ratio at 31 December 2016 of 5.0%. | Leverage exposure | | | | | | | | | | |
| As at
31.12.15 £bn |
| |
| As at
31.12.14 £bn |
a | |
| As at 31.12.16 £bn | | |
| As at 31.12.15 £bn | | Accounting assets | | | | | | | | | Derivative financial instruments | | | 328 | | | | 440 | | | | 347 | | | | 328 | | Cash collateral | | | 62 | | | | 73 | | | | 67 | | | | 62 | | Reverse repurchase agreements and other similar secured lending | | | 28 | | | | 132 | | | | 13 | | | | 28 | | Financial assets designated at fair valueb | | | 77 | | | | 38 | | | Financial assets designated at fair valuea | | | | 79 | | | | 77 | | Loans and advances and other assets | | | 625 | | | | 675 | | | | 707 | | | | 625 | | Total IFRS assets | | | 1,120 | | | | 1,358 | | | | 1,213 | | | | 1,120 | | | | | | | | | | | Regulatory consolidation adjustments | | | (10 | ) | | | (8 | ) | | | (6) | | | | (10) | | | | | | | | Derivatives adjustments | | | | | | | | | Derivatives netting | | | (293 | ) | | | (395 | ) | | | (313) | | | | (293) | | Adjustments to cash collateral | | | (46 | ) | | | (53 | ) | | | (50) | | | | (46) | | Net written credit protection | | | 15 | | | | 27 | | | | 12 | | | | 15 | | Potential Future Exposure (PFE) on derivatives | | | 129 | | | | 179 | | | | 136 | | | | 129 | | Total derivatives adjustments | | | (195 | ) | | | (242 | ) | | | (215) | | | | (195) | | | | | | | | | | | Securities financing transactions (SFTs) adjustments | | | 16 | | | | 25 | | | | 29 | | | | 16 | | | | | | | | | | | Regulatory deductions and other adjustments | | | (14 | ) | | | (15 | ) | | | (15) | | | | (14) | | Weighted off-balance sheet commitments | | | 111 | | | | 115 | | | | 119 | | | | 111 | | Total fully loaded leverage exposure | | | 1,028 | | | | 1,233 | | | Total leverage exposure | | | | 1,125 | | | | 1,028 | | | | | | | | | | | Fully loaded CET1 capital | | | 40.7 | | | | 41.5 | | | | 45.2 | | | | 40.7 | | Fully loaded AT1 capital | | | 5.4 | | | | 4.6 | | | | 6.8 | | | | 5.4 | | Fully loaded Tier 1 capital | | | 46.2 | | | | 46.0 | | | | 52.0 | | | | 46.2 | | | | | | | | | | | Fully loaded leverage ratio | | | 4.5% | | | | 3.7% | | | Leverage ratio | | | | 4.6% | | | | 4.5% | |
The leverage ratio increased to 4.6% (2015: 4.5%) primarily driven by a £5.8bn increase in fully loaded Tier 1 capital to £52.0bn (December 2015: £46.2bn), partially offset by an increase in the leverage exposure of £97bn to £1,125bn (2015: £1,028bn): § | | During 2015 the leverage ratio increased significantly to 4.5% (2014: 3.7%)IFRS asset increase was mainly driven by a reductionloans and advances and other assets which increased £82bn to £707bn. The increase was primarily due to the appreciation of major currencies against Sterling, an increase in liquidity pool assets, and lending growth in Barclays UK and Barclays International. This was partially offset by the leverage exposurerundown and exit of £205bn to £1,028bn.Non-Core assets |
§ | | Total derivative exposurescdecreased £76bnSFT adjustments increased by £13bn to £195bn: |
| – | PFE decreased £50bn to £129bn, mainly£29bn, primarily as a result of continued Non-Core rundown and optimisations including trade compressions and tear-ups |
| – | other derivative assets decreased £14bn to £51bn, driven by a net decreasechange in IFRS derivatives. The decrease was mainly within interest rate and foreign exchange derivatives due to net trade reduction and an increase in major interest forward curves |
| – | net written credit protection decreased £12bn to £15bn due to a reduction in business activity and improved portfolio netting.treatment of securitiespre-positioned for use against undrawn central bank lending facilities |
§ | | Taken together, reverse repurchase agreementsPFE on derivatives increased by £7bn to £136bn primarily driven by the appreciation of major currencies against Sterling, partially offset by compression activity, sale of positions and other similar secured lending and financial assets designated at fair value decreased £65bn to £105bn, reflecting a reduction in matched book trading and general firm financing due to balance sheet deleveraging.maturity of trades |
§ | | Loans and advances and other assets decreased £50bnweightedoff-balance sheet commitments increased by £8bn to £625bn£119bn primarily driven by £37bn reduction in trading portfolio assets primarily due to Non-Core rundown, a reduction in trading activities in the Investment Bank, as well as a £10bn decrease in settlement balances and a £5bn decrease in Africa reflecting the depreciationappreciation of ZARmajor currencies against GBP. This was partially offset by lending growth of £3bn in Barclaycard.Sterling. |
The average leverage exposure measure for Q4 2016 was £1,206bn resulting in an average leverage ratio of 4.3%. The CET1 capital held against the 0.175% transitionalG-SII ALRB was £2bn. The impact of the CCLB is currently nil. § | | SFT adjustments decreased by £9bn to £16bn due to maturity of trades and a reduction in trading volumes. |
The difference between the average leverage ratio and the leverage ratio was primarily driven by higher positions in October and November within trading portfolio assets, reverse repurchase agreements and settlements balances. Notes
Note a | 2014 comparatives have been prepared on a BCBS 270 basis. Barclays does not believe that there is a material difference between the BCBS 270 leverage exposure and a leverage exposure calculated in accordance with the EU delegated act. |
b | Included within financial assets designated at fair value are reverse repurchase agreements designated at fair value of £50bn (2014: £5bn)£63bn (2015: £50bn). |
c | Total derivative exposures includes IFRS derivative financial instruments, cash collateral and total derivative adjustments. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 153 |
Risk review
Risk performance
Funding risk – liquidity
Analysis of liquidity risk
Liquidity risk is the risk that a firm, although solvent, either does not have sufficient financial resources available to enable it to meet its obligations as they fall due, or can secure such resources only at excessive cost.
This section details the Group’s liquidity risk profile and provides information on the way the Group manages that risk.
Key metrics
133% LCR
The Group strengthened its liquidity position during the year, increasing its surplus to internal and regulatory requirements.
£9bn Term Issuance
The Group maintains access to stable and diverse sources of funding across customer deposits and wholesale debt.
| | | 154158 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Funding risk – liquidity | Analysis of liquidity risk Liquidity risk is the risk that a firm, although solvent, either does not have sufficient financial resources available to enable it to meet its obligations as they fall due, or can secure such resources only at excessive cost. This section details the Group’s liquidity risk profile and provides information on the way the Group manages that risk. Key metrics 131% LCR The Group strengthened its liquidity position during the year, increasing its surplus to internal and regulatory requirements £12bn Term Issuance The Group maintains access to stable and diverse sources of funding across customer deposits and wholesale debt |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 159 |
| | | | | | | | | Summary of Contents | | Page | | | | | § Liquidity risk overview and summary of performance § Liquidity risk stress testing – Liquidity Risk appetite – Liquidity regulation – Internal and regulatory stress tests | | 161 161 161 162 163 | | The risk that the firm, although solvent, either does not have sufficient financial resources available to enable it to meet its obligations as they fall due, or can secure such resources only at excessive cost. This section provides an overview of the Group’s liquidity risk. | | | § Liquidity pool – Composition of the liquidity pool – Liquidity pool by currency – Management of the group liquidity pool – Contingent liability | | 164 164 164 164 165 | | The liquidity pool is held unencumbered and is not used to support payment or clearing requirements. The liquidity pool is intended to offset stress outflows, and comprises cash and unencumbered assets. | | | § Funding structure and funding relationships – Deposit funding – Behavioural Maturity Profile – Wholesale funding – Term financing | | 165 165 166 166 168 | | The basis for sound liquidity risk management is a solid funding structure that reduces the probability of a liquidity stress leading to an inability to meet funding obligations as they fall due. | | | § Encumbrance – On-balance sheet – Off-balance sheet – Repurchase agreements and reverse repurchase agreements | | 168 169 169 171 | | Asset encumbrance arises from collateral pledged against secured funding and other collateralised obligations. Barclays funds a portion of trading portfolio assets and other securities via repurchase agreements and other similar borrowing, and pledges a portion of customer loans and advances as collateral in securitisation, covered bond and other similar secured structures. | | | § Credit ratings – Contractual credit rating downgrade exposure | | 172 172 | | In addition to monitoring and managing key metrics related to the financial strength of the Group, Barclays solicits independent credit ratings. These ratings assess the creditworthiness of the Group, its subsidiaries and branches and are based on reviews of a broad range of business and financial attributes including risk management processes and procedures, capital strength, earnings, funding, asset quality, liquidity, accounting and governance. | | | § Liquidity management at BAGL Group | | 173 | | Liquidity risk is managed separately at BAGL Group due to local currency, funding and regulatory requirements. | | | § Contractual maturity of financial assets and liabilities | | 174 | | Provides details on the contractual maturity of all financial instruments and other assets and liabilities. |
| | | 160 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Risk review Risk performance LiquidityFunding risk is the risk that the Group, although solvent, either does not have sufficient financial resources available to meet its obligations as they fall due, or can secure such resources only at excessive cost. This also results in a firm’s inability to meet regulatory– liquidity requirements. This risk is inherent in all banking operations and can be affected by a range of Group-specific and market-wide events.
All disclosures in this section (pages 155 to 171) are unaudited and exclude BAGL unless otherwise stated.
| Liquidity risk Liquidity risk is the risk that the Group, although solvent, either does not have sufficient financial resources available to meet its obligations as they fall due, or can secure such resources only at excessive cost. This also results in a firm’s inability to meet regulatory liquidity requirements. This risk is inherent in all banking operations and can be affected by a range of Group-specific and market-wide events. All disclosures in this section (pages 161 to 177) are unaudited and exclude BAGL unless otherwise stated. |
Overview The Group has a comprehensive Key Risk Control Framework for managing the Group’s liquidity risk. The Liquidity Framework meets the PRA’s standards and is designed to ensure the Group maintains liquidity resources that are sufficient in amount and quality, and a funding profile that is appropriate to meet the liquidity risk appetite. The Liquidity Framework is delivered via a combination of policy formation, review and governance, analysis, stress testing, limit setting and monitoring. Liquidity risk is managed separately at Barclays Africa Group Limited (BAGL) due to local currency and funding requirements. Unless stated otherwise, all disclosures in this section exclude BAGL and they are reported on a stand-alonestandalone basis. Adjusting for local requirements, BAGL liquidity risk is managed on a consistent basis to the Group. This section provides an analysis of the Group’s: i) liquidity risk stress testing; ii) internal and regulatory stress tests; iii) liquidity pool; iv) funding structure and funding relationships; v) wholesale funding; vi) term financing; vii) encumbrance; viii) repurchase agreements; ix) credit ratings; x) liquidity management at BAGLBAGL; and xi) contractual maturity of financial assets and liabilities. For further detail on liquidity risk governance and framework see page 105.384. Summary of performance in the period The Group maintained a surpluscontinued to maintain surpluses to its internal and regulatory requirements in 2015.requirements. The liquidity pool was £145bn (2014: £149bn)increased to £165bn (2015: £145bn), primarily driven by the depreciation of GBP against other major currencies and net increase in retail and commercial deposits and wholesale funding to support business growth. The Liquidity Coverage Ratio (LCR) was 131% (December 2015: 133% (2014: 124%), equivalent to a surplus of £37bn (2014: £30bn)£39bn (December 2015: £37bn). While the liquidity pool may reduce in future, the Group intends to continue to maintain a prudent surplus to regulatory requirements. Wholesale funding outstanding excluding repurchase agreements reduced to £142bn (2014: £171bn)was £158bn (December 2015: £142bn). The increase was driven by the prudent management of the liquidity position, holding company issuance and depreciation of GBP against other major currencies. The Group issued £9bn£12.1bn equivalent of term funding net of early redemptions during 2015,capital and senior unsecured debt from the holding company of which £4bn was£8.6bn equivalent and £0.7bn equivalent in public and private senior unsecured debt issued byrespectively, and £2.8bn of capital instruments. In the holding company, Barclays PLC. During Q415, Barclays PLC also issued EUR Tier 2 securitiessame period £7.4bn of £1bn equivalent. All the capital and debt proceeds raised by Barclays PLC have been used to subscribe for instruments at Barclays Bank PLC the operating company with a ranking corresponding to the securities issued by Barclays PLC.capital and senior unsecured debt was bought back or called. Liquidity risk stress testing Under the Liquidity Framework, the Group has established a Liquidity Risk Appetite (LRA) together with the appropriate limits for the management of the liquidity risk. This is the level of liquidity risk the Group chooses to take in pursuit of its business objectives and in meeting its regulatory obligations. The key expression of the liquidity risk is through internal stress tests. It is measured with reference to the liquidity pool compared to anticipated stressed net contractual and contingent outflows for each of three short-term stress scenarios. Liquidity Risk Appetite As part of the LRA, the Group runs three primary short-term liquidity stress scenarios, aligned to the PRA’s prescribed stresses: § | | a 90-day market-wide stress event |
§ | | a 30-day Barclays-specific stress event |
§ | | a combined30-day market-wide and Barclays-specific stress event. |
Under normal market conditions, the liquidity pool is managed to be at a target of at least 100% of anticipated outflows under each of these stress scenarios. The30-day Barclays-specific stress scenario results in the greatest net outflows of each of the liquidity stress tests .Thetests. The combined30-day scenario assumes outflows consistent with a firm specificfirm-specific stress for the first two weeks of the stress period, followed by relatively lower outflows consistent with a market-wide stress for the remainder of the stress period. Barclays also evaluates its long-term LRA, one year stress test based on prolonged closure of capital markets. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 155161 |
Key LRA assumptions include:
For the year ended 31 December 2015
| | | Liquidity risk driver | | Barclays-specific stressKey LRA assumptions include: | | For the year ended 31 December 2016 | Wholesale secured
and unsecured
fundingDrivers of Liquidity Risk
| | § Zero rollover of wholesale unsecured liabilities maturing, senior unsecured debt and conduit commercial paper. LRA Specific Stress – Key Assumptions | | § No benefit assumed from reverse repos covering firm short positions.Wholesale Secured and Unsecured Funding Risk
| | § Rollover of trades secured on extremely liquid collateral.
| | § Varying rollover of trades secured on liquid collateral, subject to haircut widening.
| | § Zero rollover of trades secured on less-liquid collateral.maturing wholesale unsecured funding | | § 100%Loss of repo capacity onnon-extremely liquid repos at contractual maturity date § Withdrawal of contractual buybacks will occur.buyback obligations, excess client futures margin, PB client cash and overlifts | | § Haircuts applied to the market value of marketable assets held in the liquidity buffer. | | | Deposit outflow
| | § Substantial deposit outflows in PCB and Barclaycard as the Group is seen as greater credit risk than competitors.
| | | Funding
concentration
| | § Additional outflows recognised against concentration of providers of wholesale financing (largest unsecured counterparty unwilling to roll).
| | | Intra-day liquidity
| | § Anticipated liquidity required to support additional intra-day requirements at cash payment and securities settlement venues based on historical peak usage and triparty settlement based on forward maturities of trades.buffer
| Intra-groupRetail and Corporate Funding Risk
| | § Anticipated liquidity requiredRetail and Corporate deposit outflows as counterparties seek to diversify their deposit balances | Intra-day Liquidity Risk | | § Liquidity held againstintra-day requirements for the settlement of cash and securities under a stress | Intra-Group Liquidity Risk | | § Liquidity support for material subsidiaries, based on stand-alone stress tests.subsidiaries. Surplus liquidity held within certain subsidiaries is not taken as a benefit to the wider Group. | | | Off-balance sheetCross-Currency Liquidity Risk
| | § Currency liquidity cash flows at contractual maturity for physically settled FX forwards and cross currency swaps | Off-Balance Sheet Liquidity Risk | | § Drawdown on committed facilities based on facility type,and counterparty type and counterparty creditworthiness. | | § Outflow of all collateral owed to counterparties but not yet called.
| | § Collateral outflows based on Monte Carlo simulation and historical stress outflows.due to a 2 notch credit rating downgrade | | § Increase in the Group’s initial margin requirement across all major exchanges.exchanges | | § Outflows as a result of a multi-notch downgrade in credit rating. | | | Franchise viability
| | § Liquidity required in order to meetVariation margin outflows that are non-contractual in nature but necessary in order to support the Group’s ongoing franchise (for example, market-making activities and non contractual debt buyback).from collateralised risk positions
| Cross currency risk
| | § Net settlement cash flows at contractual maturity for physically settled FX forwards and cross currency swaps are reflected. | | § No benefit assumed from surplus net inflows in non-G10 currencies.
| | | Mitigating actions
| | § MonetisationOutflow of unencumbered assets that are of known liquidity value to the firmcollateral owing but held outside the liquidity pool (subject to haircut/valuation adjustment).not called
| Internalisation Risk
| | § Loss of internal sources of funding within the Prime Brokerage Synthetic Business.synthetics business | Franchise-Viability Risk | | § Acceleration of term profile associated with Prime Brokerage Clients deleveraging their portfolios asymmetrically by closing short positions.Liquidity held in order to meet outflows that arenon-contractual in nature, but are necessary in order to support the firm’s ongoing franchise (e.g. debt buybacks) | Funding Concentration Risk | | § Liquidity held against largest wholesale funding counterparty refusing to roll | Management Actions | | § Specifically defined actions that raise liquidity or mitigate cash outflows that would be conducted in a manner so as not to increase market volatility, whilst maintaining all core franchises |
Liquidity regulation Since October 2015, the Group manages its liquidity profile against the new CRD IV liquidity regime implemented by PRA. The CRD IV regime defines the liquidity risk ratio, liquidity pool asset eligibility and net stress outflow applied against Barclays reported balances.
The Group monitors its position against the CRD IV Interim LCRDelegated Act Liquidity Coverage Ratio (LCR) and the Basel III Net Stable Funding Ratio (NSFR). The LCR is designed to promote short-term resilience of a bank’s liquidity risk profile by ensuring that it hasholds sufficient high quality liquid resourcesHigh Quality Liquid Assets to survive an acute stress scenario lasting for 30 days. The NSFR has a time horizon of at least six12 months and has been developed to promote a sustainable maturity structure of assets and liabilities. The PRA regime requires phased compliance with theCRD IV LCR standard frombecame effective on 1 October 2015, atwith a minimum ratio requirement in the UK of 80% increasingas at 31 December 2016; this will increase to 90% on 1 January 2017 and then to 100% byon 1 January 2018. The methodology forAs of 31 December 2016, the Group reported a CRD IV LCR is based off the final published Delegated Act which became EU law in October 2015.of 131% (2015: 133%). In October 2014, the BCBS published a final standard for the NSFR with the minimum requirement to be introduced in January 2018 at 100% on an ongoing basis. The methodology for calculatingOn 23 November 2016 the European Commission published draft amendments to the Capital Requirements Regulation (CRR) including its proposed implementation of NSFR in the EU. This proposal makes a number of changes from Basel NSFR, particularly in the treatment of derivative and secured financing transactions. Barclays is in the process of assessing the impact of these changes on its NSFR ratio, and notes that NSFR is not proposed to be a binding regulation in the EU until two years after the European legislation is finalised. We remain above 100% well ahead of implementation timelines, based on ana conservative interpretation of the Basel standards published in October 2014 and includes a number of assumptions which are subject to change prior to adoption by the European Commission through the CRD IV. Based on the CRD IV and Basel III standards respectively, as at 31 December 2015, the Group had a surplus to both of these metrics with a CRD IV Interim LCR of 133% (2014: 124%) and a Basel III NSFR of 106% (2014: 102%).rule.
| | | 156162 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Funding risk – liquidity Comparing internal and regulatory liquidity stress tests The LRA stress scenarios and the CRD IV Interim LCR are all broadly comparable short-term stress scenarios in which the adequacy of defined liquidity resources is assessed against contractual and contingent stress outflows. The CRD IV Interim LCR stress tests provide an independent assessment of the Group’s liquidity risk profile. | | | | | | | Stress Test | | Barclays LRA | | CRD IV Interim LCR | | Basel III NSFR | Time Horizon | | 30 –to 90 days | | 30 days | | 6+ months | Calculation | | Liquid assets to net cash outflows | | Liquid assets to net cash outflows | | Stable funding resources to stable
funding requirements
|
As at 31 December 2015,2016, the Group held eligible liquid assets in excess of 100% of stress requirements for all three short-term LRA scenarios and the CRD IV Interim LCR requirement. | | | | | | | | | Compliance with internal and regulatory stress tests | | As at 31 December 2015 | |
| Barclays’ LRA
(one month Barclays specific requirement £bn |
)a | | | CRD IV Interim LCR£bn | b | Total eligible liquidity pool | | | 145 | | | | 147 | | Asset inflows | | | 1 | | | | 18 | | Stress outflows | | | | | | | | | Retail and commercial deposit outflows | | | (50 | ) | | | (72 | ) | Wholesale funding | | | (15 | ) | | | (12 | ) | Net secured funding | | | (12 | ) | | | (1 | ) | Derivatives | | | (8 | ) | | | (6 | ) | Contractual credit rating downgrade exposure | | | (6 | ) | | | (5 | ) | Drawdowns of loan commitments | | | (7 | ) | | | (32 | ) | Intraday | | | (13 | ) | | | – | | Total stress net cash flows | | | (110 | ) | | | (110 | ) | Surplus | | | 35 | | | | 37 | | Liquidity pool as a percentage of anticipated net cash flows | | | 131% | | | | 133% | | As at 31 December 2014 | | | 124% | | | | 124% | |
| | | | | | | | | Compliance with internal and regulatory stress tests | | As at 31 December 2016 | |
| Barclays’ LRA
(30 day Barclays- specific requirement £bn |
)a, b | |
| CRD IV
LCRb £bn |
| Eligible liquidity buffer | | | 173 | | | | 166 | | Net stress outflows | | | (144 | ) | | | (127 | ) | Surplus | | | 29 | | | | 39 | | Liquidity pool as a percentage of anticipated net outflows as at 31 December 2016 | | | 120% | | | | 131% | | Liquidity pool as a percentage of anticipated net outflows as at 31 December 2015 | | | 131% | | | | 133% | |
In 2015, the Group strengthened its liquidity position, building a larger surplus to its internal and regulatory requirements. The Group plans to maintain its surplus to the internal and regulatory stress requirements at an efficient level, while considering risks to market funding conditions and its liquidity position. The continuous reassessment of these risks may lead to appropriate actions being taken with respect to sizing of the liquidity pool.
Note
Notes a | Of the three stress scenarios monitored as part of the LRA, the30-day Barclays-specific scenario results in the lowest ratio at 120% (December 2015: 131% (2014: 124%). This compares to 134% (December 2015: 144% (2014: 135%) under the90-day market-wide scenario, and 144% (December 2015: 133% (2014: 127%) under the30-day combined scenario. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 157163 |
Liquidity pool The Group liquidity pool as at 31 December 20152016 was £145bn (2014: £149bn)£165bn (2015: £145bn). During 2015,2016, themonth-end liquidity pool ranged from £132bn to £175bn (2015: £142bn to £168bn (2014: £134bn to £156bn)£168bn), and themonth-end average balance was £155bn (2014: £145bn)£153bn (2015: £155bn). The liquidity pool is held unencumbered and is not used to support payment or clearing requirements. Such requirements are treated as part of our regular business funding. The liquidity pool is intended to offset stress outflows, and comprises the following cash and unencumbered assets. | | | | | | | | | | | | | | | | | | | | | Composition of the Group liquidity pool as at 31 December 2015 | | | | | | | | | Liquidity pool of which CRD IV LCR eligible | | | | | | | | | | | | | | | | | | | | |
| Liquidity pool
£bn |
| |
| Cash
£bn |
| |
| Level 1
£bn |
| |
| Level 2A
£bn |
| | | 2014 Liquidity pool | | Cash and deposits with central banksa | | | 48 | | | | 45 | | | | 1 | | | | – | | | | 37 | | | | | | | | Government bondsb | | | | | | | | | | | | | | | | | | | | | AAA rated | | | 63 | | | | – | | | | 63 | | | | – | | | | 73 | | AA+ to AA- rated | | | 11 | | | | – | | | | 7 | | | | 4 | | | | 12 | | Other government bonds | | | 1 | | | | – | | | | 1 | | | | – | | | | – | | Total government bonds | | | 75 | | | | – | | | | 71 | | | | 4 | | | | 85 | | | | | | | | Other | | | | | | | | | | | | | | | | | | | | | Supranational bonds and multilateral development banks | | | 7 | | | | – | | | | 7 | | | | – | | | | 9 | | Agencies and agency mortgage-backed securities | | | 8 | | | | – | | | | 6 | | | | 2 | | | | 11 | | Covered bonds (rated AA- and above) | | | 4 | | | | – | | | | 2 | | | | 2 | | | | 3 | | Other | | | 3 | | | | – | | | | – | | | | – | | | | 4 | | Total Other | | | 22 | | | | – | | | | 15 | | | | 4 | | | | 27 | | Total as at 31 December 2015 | | | 145 | | | | 45 | | | | 87 | | | | 8 | | | | | | Total as at 31 December 2014 | | | 149 | | | | 37 | | | | 99 | | | | 7 | | | | | | The Group liquidity pool is well diversified by major currency and the Group monitors LRA stress scenarios for major currencies. | | Liquidity pool by currency | | | | | USD £bn | | | | EUR £bn | | | | GBP £bn | | | | Other £bn | | | | Total £bn | | Liquidity pool as at 31 December 2015 | | | 41 | | | | 33 | | | | 46 | | | | 25 | | | | 145 | | Liquidity pool as at 31 December 2014 | | | 46 | | | | 27 | | | | 54 | | | | 22 | | | | 149 | |
| | | | | | | | | | | | | | | | | | | | | Composition of the Group liquidity pool as at 31 December 2016 | | | | | Liquidity pool £bn | | | | Liquidity pool of which CRD IV LCR eligible | | |
| 2015 Liquidity pool £bn | | | | |
| Cash
£bn |
| |
| Level 1
£bn |
| |
| Level 2A
£bn |
| | Cash and deposits with central banksa | | | 103 | | | | 101 | | | | – | | | | – | | | | 48 | | | | | | | | Government bondsb | | | | | | | | | | | | | | | | | | | | | AAA to AA- | | | 34 | | | | – | | | | 34 | | | | – | | | | | | A+ to A- | | | 3 | | | | – | | | | 3 | | | | – | | | | | | BBB+ to BBB- | | | 1 | | | | – | | | | 1 | | | | – | | | | | | Other LCR Ineligible Government bonds | | | 1 | | | | – | | | | – | | | | – | | | | | | Total government bonds | | | 39 | | | | – | | | | 38 | | | | – | | | | 75 | | | | | | | | Other | | | | | | | | | | | | | | | | | | | | | Government Guaranteed Issuers, PSEs and GSEs | | | 12 | | | | – | | | | 9 | | | | 3 | | | | | | International Organisations and MDBs | | | 6 | | | | – | | | | 7 | | | | – | | | | | | Covered bonds | | | 1 | | | | – | | | | 1 | | | | – | | | | | | Corporate bonds | | | – | | | | – | | | | – | | | | – | | | | | | Other | | | 4 | | | | – | | | | – | | | | – | | | | | | Total Other | | | 23 | | | | – | | | | 17 | | | | 3 | | | | 22 | | Total as at 31 December 2016 | | | 165 | | | | 101 | | | | 55 | | | | 3 | | | | | | Total as at 31 December 2015 | | | 145 | | | | 45 | | | | 87 | | | | 8 | | | | | | The Group liquidity pool is well diversified by major currencies and the Group monitors LRA stress scenarios for major currencies. | | Liquidity pool by currency | | | | | USD £bn | | | | EUR £bn | | | | GBP £bn | | | | Other £bn | | | | Total £bn | | Liquidity pool as at 31 December 2016 | | | 44 | | | | 36 | | | | 49 | | | | 36 | | | | 165 | | Liquidity pool as at 31 December 2015 | | | 41 | | | | 33 | | | | 46 | | | | 25 | | | | 145 | |
Management of the Group liquidity pool The composition of the Group liquidity pool is efficiently managed. The maintenance of the liquidity pool increases the Group’s costs as the interest expense paid on the liabilities used to fund the liquidity pool is greater than the interest income received on liquidity pool assets. This cost can be reduced by investing a greater portion of the Group liquidity pool in highly liquid assets other than cash and deposits with central banks while maintaining a minimum level of cash in the liquidity pool to meet cash outflows on the first day of a Barclays-specific stress and enough cash and same day settlement securities to meet all outflows in the first three days of the stress. These assets in the liquidity pool primarily comprise highly rated government bonds, and their inclusion in the liquidity pool does not compromise the liquidity position of the Group.
The composition of the liquidity pool is subject to limits set by the Board, Treasury Committee and the independent Creditcredit risk and Marketmarket risk functions. In addition, the investment of the liquidity pool is monitored for concentration risk by issuer, currency and asset type. Given the incremental returns generated by these highly liquid assets, the risk and reward profile is continuously managed. The Group manages the liquidity pool on a centralised basis. As at 31 December 2015, 94%2016, 91% of the liquidity pool was located in Barclays Bank PLC (2014: 92%(2015: 94%) and was available to meet liquidity needs across the Group. The residual liquidity pool is held predominantly within Barclays Capital Inc. (BCI). The portion of the liquidity pool outside of Barclays Bank PLC is held against entity-specific stressed outflows and regulatory requirements. To the extent the use of this portion of the liquidity pool is restricted due to regulatory requirements, it is assumed to be unavailable to the rest of the Group. Notes a | Of which over 97% (2014:98% (2015: over 95%97%) was placed with the BoE,Bank of England, US Federal Reserve, European Central Bank, Bank of Japan and Swiss National Bank. |
b | Of which over 92% (2014:90% (2015: over 95%92%) are comprised of UK, US, Japanese, French, German, Danish, Swiss and Dutch securities. |
| | | 158164 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Funding risk – liquidity Contingent liquidity In addition to the Group liquidity pool, the Group has access to other unencumbered assets which provide a source of contingent liquidity. While these are not relied on in the Group’s LRA, a portion of these assets may be monetised in a stress to generate liquidity through use as collateral for secured funding or through outright sale. In either a Barclays-specific or market-wide liquidity stress, liquidity available via market sources could be severely disrupted. In circumstances where market liquidity is unavailable or available only at heavily discounted prices, the Group could generate liquidity via central bank facilities. The Group maintains a significant amount of collateralpre-positioned at central banks and available to raise funding. For more detail on the Group’s other unencumbered assets see page 163.168. Funding structure and funding relationships The basis for sound liquidity risk management is a solid funding structure that reduces the probability of a liquidity stress leading to an inability to meet funding obligations as they fall due. The Group’s overall funding strategy is to develop a diversified funding base (geographically, by type and by counterparty) and maintain access to a variety of alternative funding sources, to provide protection against unexpected fluctuations, while minimising the cost of funding. Within this, the Group aims to align the sources and uses of funding. As such, retail and commercial customer loans and advances are largely funded by customer deposits, with the surplus funding the liquidity pool. Other assets, together with other loans and advances and unencumbered assets, are funded by long-term wholesale debt and equity. The majority of reverse repurchase agreements are matched by repurchase agreements. The liquidity pool is predominantly funded through wholesale markets. These funding relationships are summarised below: | Assets | | | 2015 £bn | | | | 2014 £bn | | | | | Liabilities | | | 2015 £bn | | | | 2014 £bn | | | | 2016 £bn | | | | 2015 £bn | | | | | Liabilities | | | 2016 £bn | | | | 2015 £bn | | Loans and advances to customersa | | | 336 | | | | 346 | | | | | Customer accountsa | | | 374 | | | | 366 | | | | 326 | | | | 336 | | | | | Customer accountsa | | | 374 | | | | 374 | | Group liquidity pool | | | 145 | | | | 149 | | | | | < 1 Year wholesale funding | | | 54 | | | | 75 | | | | 165 | | | | 145 | | | | | < 1 Year wholesale funding | | | 70 | | | | 54 | | | | | | | | | | > 1 Year wholesale funding | | | 88 | | | | 96 | | | | | | | | | > 1 Year wholesale funding | | | 88 | | | | 88 | | Other assetsb | | | 135 | | | | 153 | | | | | Equity and other liabilitiesb | | | 104 | | | | 112 | | | Reverse repurchase agreements and other similar secured lendingc | | | 178 | | | | 271 | | | | | Repurchase agreements and other similar secured borrowingc | | | 178 | | | | 271 | | | Derivative financial instruments | | | 326 | | | | 439 | | | | | Derivative financial instruments | | | 322 | | | | 438 | | | Other assets | | | | 185 | | | | 135 | | | | | Equity and other liabilities | | | 151 | | | | 104 | | Reverse repurchase agreements and other similar secured lendingb | | | | 190 | | | | 178 | | | | | Repurchase agreements and other similar secured borrowingb | | | 190 | | | | 178 | | Derivative financial instrumentsb | | | | 347 | | | | 326 | | | | | Derivative financial instrumentsb | | | 340 | | | | 322 | | Total assets | | | 1,120 | | | | 1,358 | | | | | Total liabilities and equity | | | 1,120 | | | | 1,358 | | | | 1,213 | | | | 1,120 | | | | | Total liabilities | | | 1,213 | | | | 1,120 | |
| | | | | | | | | | | | | | | | | Deposit funding (Includes BAGL) (audited) | | | | | 2015 | | | | 2014 | | Funding of loans and advances to customers | | | Loans and advances to customers | | | | Customer deposits | | | | Loan to deposit ratio | | | | Loan to deposit ratio | | As at 31 December 2015 | | | £bn | | | | £bn | | | | % | | | | % | | Personal and Corporate Banking | | | 218 | | | | 305 | | | | | | | | | | Barclaycard | | | 40 | | | | 10 | | | | | | | | | | Africa Banking | | | 30 | | | | 31 | | | | | | | | | | Non-Core (retail) | | | 12 | | | | 2 | | | | | | | | | | Total retail and corporate funding | | | 300 | | | | 348 | | | | 86 | | | | 89 | | | | | | | Investment Bank, Non-Core (wholesale) and Other | | | 99 | | | | 70 | | | | | | | | | | Total | | | 399 | | | | 418 | | | | 95 | | | | 100 | |
Deposit funding | | | | | | | | | | | | | | | | | Deposit funding (audited) | | | | | 2016 | | | | 2015 | | Funding of loans and advances to customers As at 31 December 2016 | |
| Loans and advances to customers £bn | | |
| Customer deposits £bn | | |
| Loan to deposit ratio % | | |
| Loan to deposit ratio % | | | | | | Barclays UK | | | 167 | | | | 189 | | | | – | | | | – | | Barclays International | | | 98 | | | | 152 | | | | – | | | | – | | Non-Core | | | 19 | | | | – | | | | – | | | | – | | Total Barclays UK, Barclays International andNon-Corec | | | 284 | | | | 341 | | | | 83% | | | | 86% | | | | | | | Barclays International, Head Office andNon-Cored | | | 109 | | | | 82 | | | | | | | | | | Total | | | 393 | | | | 423 | | | | 93% | | | | 95% | |
Total Barclays UK, Barclays International andNon-Corec are largely funded by customer deposits. The loan to deposit ratio for these businesses was 83% (2015: 86%). The customer deposits in excess of loans and advances are primarily used to fund liquidity buffer requirements for these businesses. The loan to deposit ratio for the Group was 93% (2015: 95%). As at 31 December 2016, £139bn (2015: £129bn) of total customer deposits were insured through the UK Financial Services Compensation Scheme (FSCS) and other similar schemes. In addition to these customer deposits, there were £4bn (2015: £4bn) of other liabilities insured by governments. Notes a | Excluding cash collateral and settlement balances. |
b | BAGL Group balances other than customer loans and advances of £29bn and customer deposits of £29bn are included in other assets and liabilities. |
c | Comprised of reverse repurchase agreements that provide financing to customers collateralised by highly liquid securities on a short-term basis or are used to settle short-term inventory positions and repo financing of trading portfolio assets. |
c | Excluding investment banking businesses. |
d | Including investment banking businesses. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 159165 |
PCB, Barclaycard, Non-Core (Retail) and Africa Banking activities are largely funded with customer deposits. As at 31 December 2015, the loan to deposit ratio for these businesses was 86% (2014: 89%). The Group loan to deposit ratio as at 31 December 2015 was 95% (2014: 100%).
The excess of the Investment Bank’s loans and advances over customer deposits is funded with long-term debt and equity. The Investment Bank does not rely on customer retail deposit funding from PCB.
As at 31 December 2015, £129bn (2014: £128bn) of total customer deposits were insured through the UK Financial Services Compensation Scheme (FSCS) and other similar schemes. In addition to these customer deposits, there were £4bn (2014: £4bn) of other liabilities insured by governments.
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 protect against unexpected fluctuations in balances. Such accounts form a stable funding base for the Group’s operations and liquidity needs. The Group assesses the behavioural maturity of both customer assets and liabilities to identify structural balance sheet funding gaps. Customer behaviour is determined by quantitative modelling combined with qualitative assessment taking into account for historical experience, current customer composition, and macroeconomic projections. These behavioural profiles represent our forward looking expectation of therun-off profile. The relatively low cash outflow within one year demonstrates that customer funding remains broadly matched with customer assets from a behavioural perspective. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Behavioural maturity profile (Includes BAGL) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Behavioural maturity profile cash outflow/(inflow) | | | | | Loans and advances to customers £bn | | | | Customer deposits £bn | | |
| Customer funding surplus/ (deficit)
£bn |
| |
| Not more than one year
£bn |
| | | Over one year but not more than five years £bn | | | | More than five years £bn | | | | Total £bn | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personal and Corporate Banking | | | 218 | | | | 305 | | | | 87 | | | | 18 | | | | 3 | | | | 66 | | | | 87 | | Barclaycard | | | 40 | | | | 10 | | | | (30 | ) | | | (10 | ) | | | (10 | ) | | | (10 | ) | | | (30 | ) | Africa Banking | | | 30 | | | | 31 | | | | 1 | | | | 2 | | | | 1 | | | | (2 | ) | | | 1 | | Non-Core (Retail) | | | 12 | | | | 2 | | | | (10 | ) | | | (1 | ) | | | (2 | ) | | | (7 | ) | | | (10 | ) | Total | | | 300 | | | | 348 | | | | 48 | | | | 9 | | | | (8 | ) | | | 47 | | | | 48 | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personal and Corporate Banking | | | 217 | | | | 299 | | | | 82 | | | | 19 | | | | 3 | | | | 60 | | | | 82 | | Barclaycard | | | 37 | | | | 7 | | | | (30 | ) | | | (10 | ) | | | (10 | ) | | | (10 | ) | | | (30 | ) | Africa Banking | | | 35 | | | | 35 | | | | – | | | | 2 | | | | (2 | ) | | | – | | | | – | | Non-Core (Retail) | | | 20 | | | | 8 | | | | (12 | ) | | | – | | | | (2 | ) | | | (10 | ) | | | (12 | ) | Total | | | 309 | | | | 349 | | | | 40 | | | | 11 | | | | (11 | ) | | | 40 | | | | 40 | |
| | | | | | | | | | | | | | | | | | | | | | | | | Behavioural maturity profile | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Behavioural maturity profile cash outflow/(inflow) | | | |
| Loans and advances to customers £bn | | |
| Customer deposits £bn | | |
| Customer funding surplus/ (deficit) £bn | | |
| Not more than one year
£bn |
| |
| Over one year but not more than five years £bn | | |
| More than five years £bn | | As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | 167 | | | | 189 | | | | 22 | | | | (2 | ) | | | (19 | ) | | | 43 | | Barclays International | | | 98 | | | | 152 | | | | 54 | | | | 3 | | | | 17 | | | | 34 | | BarclaysNon-Core | | | 19 | | | | – | | | | (19 | ) | | | (1 | ) | | | (6 | ) | | | (12 | ) | Total | | | 284 | | | | 341 | | | | 57 | | | | – | | | | (8 | ) | | | 65 | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | Barclays UK | | | 166 | | | | 176 | | | | 10 | | | | (4 | ) | | | (26 | ) | | | 40 | | Barclays International | | | 88 | | | | 135 | | | | 47 | | | | 11 | | | | 18 | | | | 18 | | Africa (discontinued) | | | 29 | | | | 29 | | | | – | | | | 1 | | | | – | | | | (1 | ) | BarclaysNon-Core | | | 17 | | | | 8 | | | | (9 | ) | | | 1 | | | | (1 | ) | | | (9 | ) | Total | | | 300 | | | | 348 | | | | 48 | | | | 9 | | | | (9 | ) | | | 48 | |
Wholesale funding Group Wholesale funding relationships are summarised below: | Assets | |
| 2015
£bn |
| | | 2014 £bn | | | | | Liabilities | | | 2015 £bn | | | | 2014 £bn | | |
| 2016 £bn | | |
| 2015 £bn | | | | | Liabilities | |
| 2016 £bn | | |
| 2015 £bn | | Trading portfolio assets | | | 28 | | | | 37 | | | | | Repurchase agreements | | | 70 | | | | 124 | | | | 33 | | | | 28 | | | | | Repurchase agreements | | | 75 | | | | 70 | | Reverse repurchase agreements | | | 42 | | | | 87 | | | | | | | | | | | | 42 | | | | 42 | | | | | | | | – | | | | – | | | Reverse repurchase agreements | | | 34 | | | | 45 | | | | | Trading portfolio liabilities | | | 34 | | | | 45 | | | | 35 | | | | 34 | | | | | Trading portfolio liabilities | | | 35 | | | | 34 | | | Derivative financial instruments | | | 326 | | | | 440 | | | | | Derivative financial instruments | | | 322 | | | | 439 | | | | 347 | | | | 326 | | | | | Derivative financial instruments | | | 340 | | | | 322 | | | Liquidity pool | | | 97 | | | | 109 | | | | | Less than one year wholesale debt | | | 54 | | | | 75 | | | | 108 | | | | 97 | | | | | Less than 1 year wholesale debt | | | 70 | | | | 54 | | Other assetsa | | | 103 | | | | 122 | | | | | Greater than one year wholesale debt and equity | | | 150 | | | | 157 | | | | 109 | | | | 103 | | | | | Greater than 1 year wholesale debt and equity | | | 154 | | | | 150 | |
Repurchase agreements fund reverse repurchase agreements and trading portfolio assets. Trading portfolio liabilities are settled by the remainder of reverse repurchase agreements (see Note 19 Offsetting financial assets and financial liabilities for further detail on netting). Derivative liabilities and assets are largely matched. A substantial proportion of balance sheet derivative positions qualify for counterparty netting and the remaining portions are largely offset once netted against cash collateral received and paid. Wholesale debt, along with the surplus of customer deposits to loans and advances to customers, is used to fund the liquidity pool. Term wholesale debt and equity largely fund other assets. Note a | Predominantly available for sale investments, financial assets designated at fair value and loans and advances to banks funded by greater than one year wholesale debt and equity and trading portfolio assets.assets partially. |
| | | 160166 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Funding risk – liquidity Composition of wholesale fundinga The Group maintains access to a variety of sources of wholesale funds in major currencies, including those available from term investors across a variety of distribution channels and geographies, money markets, and repo markets. The Group has direct access to US, European and Asian capital markets through its global investment banking operations and long-term investors through its clients worldwide, and is an active participant in money markets. As a result, wholesale funding is well diversified by product, maturity, geography and major currency. As at 31 December 2015,2016, the Group’s total wholesale funding outstanding (excluding repurchase agreements) was £142bn (2014: £171bn)£158bn (December 2015: £142bn). £54bn (2014: £75bn)£70bn (December 2015: £54bn) of wholesale funding matures in less than one year, of which £14bn (2014: £22bn)£22bn (December 2015: £14bn)ab relates to term funding. As at 31 December 2015,2016, outstanding wholesale funding comprised £25bn (2014: £33bn)£26bn (December 2015: £25bn) of secured funding and £117bn (2014: £138bn)£132bn (December 2015: £117bn) of unsecured funding. In preparation forAs the Group progresses to a Single Point of Entry resolution model, Barclays continues to issue debt capital and term senior unsecured funding out offrom Barclays PLC, the holding company, replacing maturing debt in Barclays Bank PLC.
| Maturity profile of wholesale fundingb | Maturity profile of wholesale fundingb | | Maturity profile of wholesale fundingb | | | |
| Not more than one month
£bn |
| |
| Over one month but not more than three months
£bn |
| |
| Over three months but not more than six months
£bn |
| |
| Over six months but not more than one year
£bn |
| |
| Sub-total less than one year
£bn |
| |
| Over one year but not more than two years
£bn |
| |
| Over two years but not more than three years
£bn |
| |
| Over three years but not more than four years
£bn |
| |
| Over four years but not more than five years
£bn |
| |
| More than five years
£bn |
| |
| Total
£bn |
| |
| <1 month £bn | | |
| 1-3 months £bn | | |
| 3-6 months £bn | | |
| 6-12 months £bn | | |
| <1 year £bn | | |
| 1-2 years £bn | | |
| 2-3 years £bn | | |
| 3-4 years £bn | | |
| 4-5 years £bn | | |
| >5 years £bn | | |
| Total £bn | | Barclays PLC | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Senior unsecured (public benchmark) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 0.8 | | | 1.3 | | | 0.9 | | | 3.1 | | | 6.1 | | | Senior unsecured (privately placed) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 0.1 | | | | – | | | | – | | | | – | | | 0.1 | | | Senior unsecured (Public benchmark) | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 0.9 | | | | 1.6 | | | | 1.1 | | | | 4.5 | | | | 7.9 | | | | 16.0 | | Senior unsecured (Privately placed) | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 0.1 | | | | – | | | | – | | | | 0.2 | | | | 0.5 | | | | 0.8 | | Subordinated liabilities | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 0.9 | | | 0.9 | | | 1.8 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1.1 | | | | – | | | | 2.7 | | | | 3.8 | | Barclays Bank PLC | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | 9.5 | | | 3.1 | | | 1.3 | | | 0.8 | | | 14.7 | | | 0.1 | | | | – | | | | – | | | | – | | | 0.3 | | | 15.1 | | | | 9.2 | | | | 4.3 | | | | 1.7 | | | | 1.1 | | | | 16.3 | | | | 0.2 | | | | – | | | | 0.3 | | | | – | | | | – | | | | 16.8 | | Certificates of deposit and commercial paper | | 0.5 | | | 4.9 | | | 3.4 | | | 5.3 | | | 14.1 | | | 1.0 | | | 0.6 | | | 0.9 | | | 0.4 | | | 0.5 | | | 17.5 | | | | 0.3 | | | | 5.2 | | | | 5.6 | | | | 10.9 | | | | 22.0 | | | | 0.7 | | | | 1.1 | | | | 0.5 | | | | 0.5 | | | | 0.3 | | | | 25.1 | | Asset backed commercial paper | | 2.2 | | | 3.3 | | | 0.2 | | | | – | | | 5.7 | | | | – | | | | – | | | | – | | | | – | | | | – | | | 5.7 | | | | 3.7 | | | | 3.1 | | | | 0.7 | | | | – | | | | 7.5 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 7.5 | | Senior unsecured (public benchmark) | | | – | | | 1.3 | | | | – | | | 1.4 | | | 2.7 | | | 3.6 | | | | – | | | 4.3 | | | 1.3 | | | 3.9 | | | 15.8 | | | Senior unsecured (privately placed)c | | 0.6 | | | 1.6 | | | 2.3 | | | 4.8 | | | 9.3 | | | 5.1 | | | 5.4 | | | 3.7 | | | 3.0 | | | 8.5 | | | 35.0 | | | Senior unsecured (Public benchmark) | | | | 1.7 | | | | 0.6 | | | | 1.6 | | | | – | | | | 3.9 | | | | – | | | | 2.7 | | | | 0.7 | | | | 0.7 | | | | 1.1 | | | | 9.1 | | Senior unsecured (Privately placed)c | | | | 0.6 | | | | 1.5 | | | | 3.6 | | | | 3.5 | | | | 9.2 | | | | 7.3 | | | | 5.5 | | | | 3.2 | | | | 1.6 | | | | 10.0 | | | | 36.8 | | Covered bonds | | | – | | | | – | | | 1.1 | | | | – | | | 1.1 | | | 4.4 | | | 1.0 | | | 1.6 | | | | – | | | 4.2 | | | 12.3 | | | | – | | | | 1.8 | | | | 1.6 | | | | 1.5 | | | | 4.9 | | | | 1.0 | | | | 1.8 | | | | – | | | | 1.0 | | | | 3.7 | | | | 12.4 | | Asset backed securities | | 0.7 | | | | – | | | | – | | | | – | | | 0.7 | | | 0.5 | | | 1.4 | | | 1.3 | | | 0.5 | | | 0.3 | | | 4.7 | | | | – | | | | 0.6 | | | | 1.0 | | | | 0.6 | | | | 2.2 | | | | 0.7 | | | | 1.4 | | | | 0.4 | | | | – | | | | 0.7 | | | | 5.4 | | Subordinated liabilities | | | – | | | | – | | | | – | | | | – | | | | – | | | 1.1 | | | 3.0 | | | 0.2 | | | 0.9 | | | 14.0 | | | 19.2 | | | | – | | | | – | | | | – | | | | 1.3 | | | | 1.3 | | | | 3.2 | | | | 0.1 | | | | 1.0 | | | | 5.5 | | | | 8.5 | | | | 19.6 | | Otherd | | 2.3 | | | 1.1 | | | 0.3 | | | 1.5 | | | 5.2 | | | 0.7 | | | 0.3 | | | 0.4 | | | 0.4 | | | 1.6 | | | 8.6 | | | | 1.1 | | | | 0.2 | | | | 0.6 | | | | 1.1 | | | | 3.0 | | | | 0.2 | | | | 0.2 | | | | 0.3 | | | | 0.1 | | | | 0.7 | | | | 4.5 | | Total as at 31 December 2016 | | | | 16.6 | | | | 17.3 | | | | 16.4 | | | | 20.0 | | | | 70.3 | | | | 14.3 | | | | 14.4 | | | | 8.6 | | | | 14.1 | | | | 36.1 | | | | 157.8 | | Of which secured | | | | 3.7 | | | | 5.6 | | | | 3.4 | | | | 2.3 | | | | 15.0 | | | | 1.8 | | | | 3.2 | | | | 0.4 | | | | 1.0 | | | | 4.4 | | | | 25.8 | | Of which unsecured | | | | 12.9 | | | | 11.7 | | | | 13.0 | | | | 17.7 | | | | 55.3 | | | | 12.5 | | | | 11.2 | | | | 8.2 | | | | 13.1 | | | | 31.7 | | | | 132.0 | | Total as at 31 December 2015 | | 15.8 | | | 15.3 | | | 8.6 | | | 13.8 | | | 53.5 | | | 16.5 | | | 12.6 | | | 13.7 | | | 8.3 | | | 37.3 | | | 141.9 | | | | 15.8 | | | | 15.3 | | | | 8.6 | | | | 13.8 | | | | 53.5 | | | | 16.5 | | | | 12.6 | | | | 13.7 | | | | 8.3 | | | | 37.3 | | | | 141.9 | | Of which secured | | 4.2 | | | 3.9 | | | 1.6 | | | 0.3 | | | 10.0 | | | 5.1 | | | 2.4 | | | 2.8 | | | 0.5 | | | 4.5 | | | 25.3 | | | | 4.2 | | | | 3.9 | | | | 1.6 | | | | 0.3 | | | | 10.0 | | | | 5.1 | | | | 2.4 | | | | 2.8 | | | | 0.5 | | | | 4.5 | | | | 25.3 | | Of which unsecured | | 11.6 | | | 11.4 | | | 7.0 | | | 13.5 | | | 43.5 | | | 11.4 | | | 10.2 | | | 10.9 | | | 7.8 | | | 32.8 | | | 116.6 | | | | 11.6 | | | | 11.4 | | | | 7.0 | | | | 13.5 | | | | 43.5 | | | | 11.4 | | | | 10.2 | | | | 10.9 | | | | 7.8 | | | | 32.8 | | | | 116.6 | | Total as at 31 December 2014 | | | 16.8 | | | | 23.2 | | | | 14.4 | | | | 21.0 | | | | 75.4 | | | | 14.0 | | | | 16.1 | | | | 6.5 | | | | 14.0 | | | | 45.4 | | | | 171.4 | | | Of which secured | | | 5.3 | | | | 7.8 | | | | 1.7 | | | | 2.2 | | | | 17.0 | | | | 2.7 | | | | 5.1 | | | | 0.1 | | | | 2.4 | | | | 6.0 | | | | 33.3 | | | Of which unsecured | | | 11.5 | | | | 15.4 | | | | 12.7 | | | | 18.8 | | | | 58.4 | | | | 11.3 | | | | 11.0 | | | | 6.4 | | | | 11.6 | | | | 39.4 | | | | 138.1 | | |
Outstanding wholesale funding includes £35bn (2014: £45bn)£37.6bn (December 2015: £35.1bn) of privately placed senior unsecured notes in issue. These notes are issued through a variety of distribution channels including intermediaries and private banks. Although not a requirement, the liquidity pool exceeded wholesale funding maturing in less than one year by £91bn (2014: £74bn)£95bn (December 2015: £91bn). Notes a | Term funding maturities comprise public benchmark and privately placed senior unsecured notes, covered bonds/asset backed securities (ABS) and subordinated debt where the original maturity of the instrument was more than one year. |
b | The composition of wholesale funds comprises the balance sheet reported deposits from banks, financial liabilities at fair value, debt securities in issue and subordinated liabilities, excluding cash collateral and settlement balances. It does not includebalances and collateral swaps, including participation in the BoE’s Funding for Lending Scheme.swaps. Included within deposits from banks are £6bn£4.5bn of liabilities drawn in the European Central Bank’s facilities. |
b | Term funding maturities comprise public benchmark and privately placed senior unsecured notes, covered bonds/asset-backed securities (ABS) and subordinated debt where the original maturity of the instrument was more than 1 year. |
c | Includes structured notes of £28bn, £8bn£30.8bn, £7.7bn of which maturematures within one year. |
d | Primarily comprised of fair value deposits £5bnof £3.0bn and secured financing transactions of physical gold £3bn.of £0.5bn. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 161167 |
Currency composition of wholesale debt As at 31 December 2015,2016, the proportion of wholesale funding by major currencies was as follows: | Currency composition of wholesale funding | | | | | | | | | | | | | | | | | | | | USD % | | | | EUR % | | | | GBP % | | | | Other % | | |
| USD
% |
| |
| EUR
% |
| |
| GBP
% |
| |
| Other
% |
| Deposits from banks | | | 25 | | | | 51 | | | | 19 | | | | 5 | | | | 22 | | | | 44 | | | | 30 | | | | 4 | | Certificates of deposits and commercial paper | | | 25 | | | | 60 | | | | 14 | | | | 1 | | | | 44 | | | | 48 | | | | 7 | | | | 1 | | Asset backed commercial paper | | | 92 | | | | 8 | | | | – | | | | – | | | | 89 | | | | 8 | | | | 3 | | | | – | | Senior unsecured (public benchmark) | | | 43 | | | | 20 | | | | 28 | | | | 9 | | | | 51 | | | | 25 | | | | 16 | | | | 8 | | Senior unsecured (privately placed) | | | 39 | | | | 21 | | | | 18 | | | | 22 | | | | 48 | | | | 25 | | | | 11 | | | | 16 | | Covered bonds/ABS | | | 27 | | | | 41 | | | | 31 | | | | 1 | | | | 30 | | | | 42 | | | | 28 | | | | – | | Subordinated liabilities | | | 44 | | | | 19 | | | | 37 | | | | – | | | | 53 | | | | 28 | | | | 19 | | | | – | | Total as at 31 December 2016 | | | | 48 | | | | 32 | | | | 16 | | | | 4 | | Total as at 31 December 2015 | | | 38 | | | | 31 | | | | 23 | | | | 8 | | | | 38 | | | | 31 | | | | 23 | | | | 8 | | Total as at 31 December 2014 | | | 35 | | | | 32 | | | | 25 | | | | 8 | | |
To manage cross-currency refinancing risk the Group manages to foreign exchange cash flow limits, which limit risk at specific maturities. Across wholesale funding, theThe composition of wholesale funding is materially unchanged. Term financing The Group issued £9bn (2014: £15bn) of term funding net of early redemptions during 2015. The Group has £14bn of term debt maturing in 2016 and £16bn maturing in 2017a.
The Group expectsissued £12.1bn equivalent of capital and senior unsecured debt from the holding company of which £8.6bn equivalent and £0.7bn equivalent in public and private senior unsecured debt respectively, and £2.8bn of capital instruments. In the same period £7.4bn of Barclays Bank PLC capital and senior unsecured debt was bought back or called. The Group has £21.2bn of term funding maturing in 2017 and £13.2bn in 2018. The Group expect to continue issuing public wholesale debt in 2016,2017 from Barclays PLC, in order to ensure compliance with new prospective loss absorbency requirements and to maintain a stable and diverse funding base by type, currency and distribution channel. Encumbrance Asset encumbrance arises from collateral pledged against secured funding and other collateralised obligations. Barclays funds a portion of trading portfolio assets and other securities via repurchase agreements and other similar borrowing, and pledges a portion of customer loans and advances as collateral in securitisations,securitisation, covered bond and other similar secured structures. Barclays monitors the mix of secured and unsecured funding sources within the Group’s funding plan and seeks to efficiently utilise available collateral to raise secured funding and meet other collateralised obligations.collateral requirements. Encumbered assets have been defined consistently with the Group’s reporting requirements under Article 100 of the CRR.Capital Requirements Regulation (CRR). Securities and commodities assets are considered encumbered when they have been pledged or used to secure, collateralise or credit enhance a transaction which impacts their transferability and free use. This includes external repurchase or other similar agreements with market counterparts. Excluding assets positioned at central banks, as at 31 December 2015, £157bn (2014: £176bn)2016, £168bn (December 2015: £157bn) of the Group’s assets were encumbered, primarily due to cash collateral posted, firm financing of trading portfolio assets and other securities and funding secured against loans and advances to customers. Assets may also be encumbered under secured funding arrangements with central banks, such as the Funding for Lending Scheme.banks. In advance of such encumbrance, assets are often positioned with central banks to facilitate efficient future draw down. £88bn (2014: £99bn)£63bn (December 2015: £88bn) ofon-balance sheet assets were positioned at the central banks, consisting of encumbered assets and collateralpre-positioned and available for use in secured financing transactions. £212bn (2014: £270bn)277bn (December 2015: £212bn) of on andoff-balance sheet assets not positioned at the central bank were identified as readily available and available for use in secured financing transactions. Additionally, they include cash and securities held in the Group liquidity pool as well as unencumbered assets which provide a source of contingent liquidity. While these additional assets are not relied upon in the Group’s LRA, a portion of these assets may be monetised to generate liquidity through use as collateral for secured funding or through outright sale. Loans and advances to customers are only classified as readily available if they are already in a form, such that, they can be used to raise funding without further management actions. This includes excess collateral already in secured funding vehicles. £208bn (2014:231bn (December 2015: £208bn) of assets not positioned at the central bank were identified as available as collateral. These assets are not subject to any restrictions on their ability to secure funding, to be offered as collateral, or to be sold to reduce potential future funding requirements, but are not immediately available in the normal course of business in their current form. They primarily consist of loans and advances which would be suitable for use in secured funding structures but are conservatively classified as not readily available because they are not in transferable form. Not available as collateral consistconsists of assets that cannot be pledged or used as security for funding due to restrictions that prevent their pledge or use as security for funding in the normal course of business. Derivatives and reverse repo assets relate specifically to derivatives, reverse repurchase agreements and other similar secured lending. These are shown separately as theseon-balance sheet assets cannot be pledged. However, these assets can give rise to the receipt ofnon-cash assets which are heldoff-balance sheet, and can be used to raise secured funding or meet additional funding requirements. In addition, £265bn (2014: £313bn)£406bn (December 2015: £265bn) of the total £306bn (2014: £396bn)£466bn (December 2015: £306bn) securities accepted as collateral, and heldoff-balance sheet, wereon-pledged, the significant majority of which related to matched-book activity where reverse repurchase agreements are matched by repurchase agreements entered into to facilitate client activity. The remainder relates primarily to reverse repurchases used to settle trading portfolio liabilities as well as collateral posted against derivativederivatives margin requirements. Note
a | Includes £0.6bn of bilateral secured funding in 2016 and £0.4bn in 2017. |
| | | 162168 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Funding risk – liquidity | Asset encumbrancea | | | | | | | | | Asset encumbrance | | Asset encumbrance | | | | | | | | | | | | | Assets encumbered as a result of transactions with counterparties other than central banks | | | | |
| Other assets (comprising assets encumbered at the central bank
and unencumbered assets) |
| | | |
| Assets encumbered as a result of transactions with counterparties other than central banks | | | | |
| Other assets (comprising assets encumbered at the central banks and unencumbered assets) | | | | | | | | | | | | | | Assets | | | | Assets not positioned at the central bank | | | | | | | | | | | | | | | | | Assets | | | | Assets not positioned at the central banks | | | | On-balance sheet As at 31 December 2015 | | | Assets £bn | | |
| As a result
of covered bonds £bn |
| |
| As a
result of securitis- ations £bn |
| | | Other £bn | | |
| Total
£bn |
| | positioned at central banksc £bn | | | | Readily available assets £bn | | |
| Available
as collateral £bn |
| | | Not available as collateral £bn | | |
| Derivatives and Reverse repos
£bn |
| | | Total £bn | | | On-balance sheet As at 31 December 2016 | | |
| Assets £bn | | |
| As a result
of covered bonds £bn |
| |
| As a
result of securitis- ations £bn |
| |
| Other
£bn |
| |
| Total
£bn |
| | | |
| positioned at the central banks£bn | b | |
| Readily
available assets £bn |
| |
| Available as collateral £bn | | |
| Not available as collateral £bn | | |
| Derivatives and Reverse repos
£bn |
| |
| Total £bn | | Cash and balances at central banks | | 47.9 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | 47.9 | | | | – | | | | – | | | | – | | | 47.9 | | | 102.4 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | 102.4 | | | | – | | | | – | | | | – | | | 102.4 | | Trading portfolio assets | | 74.8 | | | | – | | | | – | | | 49.1 | | | 49.1 | | | | | | – | | | 25.7 | | | | – | | | | – | | | | – | | | 25.7 | | | 80.2 | | | | – | | | | – | | | 51.2 | | | 51.2 | | | | | | – | | | 29.0 | | | | – | | | | – | | | | – | | | 29.0 | | Financial assets at fair value | | 72.5 | | | | – | | | | – | | | 2.5 | | | 2.5 | | | | | | – | | | 3.2 | | | 17.7 | | | 1.3 | | | 47.8 | | | 70.0 | | | 78.6 | | | | – | | | | – | | | 3.2 | | | 3.2 | | | | | | – | | | 1.5 | | | 10.7 | | | | – | | | 63.2 | | | 75.4 | | Derivative financial instruments | | 325.5 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | 325.5 | | | 325.5 | | | 346.6 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | 346.6 | | | 346.6 | | Loans and advances – banksb | | 19.6 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | 7.9 | | | 10.2 | | | 1.5 | | | | – | | | 19.6 | | | Loans and advances – customersb | | 307.3 | | | 16.4 | | | 5.9 | | | 8.0 | | | 30.3 | | | | | 86.4 | | | 14.8 | | | 175.8 | | | | – | | | | – | | | 277.0 | | | Loans and advances – banksa | | | 20.2 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | 10.1 | | | 9.0 | | | 1.1 | | | | – | | | 20.2 | | Loans and advances – customersa | | | 325.7 | | | 16.5 | | | 6.2 | | | 8.0 | | | 30.7 | | | | | 63.0 | | | 23.8 | | | 208.2 | | | | – | | | | – | | | 295.0 | | Cash collateral | | 62.6 | | | | – | | | | – | | | 62.6 | | | 62.6 | | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 68.8 | | | | – | | | | – | | | 68.8 | | | 68.8 | | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Settlement balances | | 20.4 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | 20.4 | | | | – | | | 20.4 | | | 21.3 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | 21.3 | | | | – | | | 21.3 | | Available for sale financial investments | | 87.0 | | | | – | | | | – | | | 12.2 | | | 12.2 | | | | | | – | | | 72.2 | | | 1.0 | | | 1.6 | | | | – | | | 74.8 | | | Financial investments | | | 63.3 | | | | – | | | | – | | | 13.6 | | | 13.6 | | | | | | – | | | 49.3 | | | 0.4 | | | | – | | | | – | | | 49.7 | | Reverse repurchase agreements | | 28.2 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | 28.2 | | | 28.2 | | | 13.5 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | 13.5 | | | 13.5 | | Non-current assets held for sale | | 7.3 | | | | – | | | | – | | | | – | | | | – | | | | | 1.9 | | | 1.2 | | | 3.2 | | | 1.0 | | | | – | | | 7.3 | | | 6.4 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | 1.2 | | | 3.1 | | | 2.1 | | | | – | | | 6.4 | | Other financial assets | | 19.9 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | 19.9 | | | | – | | | 19.9 | | | Other Financial Assets | | | 21.0 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | 21.0 | | | | – | | | 21.0 | | Total on-balance sheet | | 1,073.0 | | | 16.4 | | | 5.9 | | | 134.4 | | | 156.7 | | | | | 88.3 | | | 172.9 | | | 207.9 | | | 45.7 | | | 401.5 | | | 916.3 | | | 1,148.0 | | | 16.5 | | | 6.2 | | | 144.8 | | | 167.5 | | | | | 63.0 | | | 217.3 | | | 231.4 | | | 45.5 | | | 423.3 | | | 980.5 | | | | | | | | | | | | | | | | | | | | | | | | | | | | Off-balance sheet | | Off-balance sheet | | | | | | | | | | | | | | | | |
| Collateral received £bn | | | | |
| Collateral received of which on- pledged £bn | | |
| Readily available assets £bn | | |
| Available as collateral £bn | | |
| Not available as collateral £bn | | | | | | Fair value of securities accepted as collateral | | Fair value of securities accepted as collateral | | | | | 466.2 | | | | | 405.5 | | | 59.7 | | | | – | | | 1.0 | | | | | | Total unencumbered collateral | | Total unencumbered collateral | | | | | – | | | | | | – | | | 277.0 | | | 231.4 | | | 46.5 | | | | | |
| | | | | | | | | | | | | | | | | | | | | Off-balance sheet | | | | | Collateral received £bn | | |
| Collateral received of which
on- pledged £bn |
| | | Readily available assets £bn | | | | Available as collateral £bn | | | | Not available as collateral £bn | | Fair value of securities accepted as collateral | | | 305.9 | | | | 265.4 | | | | 39.0 | | | | – | | | | 1.5 | | Total unencumbered collateral | | | – | | | | – | | | | 211.9 | | | | 207.9 | | | | 47.2 | |
Notes a | The format of this disclosure has been updated following the issuance of a ‘Dear CFO’ letter by the PRA. The revised format continues to satisfy the recommendations of the Enhanced Disclosure Task Force on encumbrance disclosure. |
b | Excluding cash collateral and settlement balances. |
cb | Includes both encumbered and unencumbered assets. Assets within this category that have been encumbered are disclosed as assets pledged in Note 40 to the financial statements.statements page 301. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 163169 |
| Asset encumbrancea | | | | | | | | | Asset encumbrance | | Asset encumbrance | | | | | | | | | | | |
| Assets encumbered as a result of transactions
with counterparties other than central banks |
| | | |
| Other assets (comprising assets encumbered at the central bank
and unencumbered assets) |
| | | |
| Assets encumbered as a result of transactions
with counterparties other than central banks |
| | | |
| Other assets (comprising assets encumbered at the central
banks and unencumbered assets) |
| | | | | | | | | | | | | Assets | | | | Assets not positioned at the central bank | | | | | | | | | | | | | | | | | | Assets | | | | Assets not positioned at the central banks | | | | On-balance sheet As at 31 December 2014 | |
| Assets
£bn |
| |
| As a result
of covered bonds £bn |
| |
| As a
result of securitis- ations £bn |
| |
| Other
£bn |
| |
| Total
£bn |
| | positioned at the central banksc £bn | | |
| Readily
available assets £bn |
| |
| Available
as collateral £bn |
| |
| Not
available as collateral £bn |
| |
| Derivatives
and Reverse repos £bn |
| |
| Total
£bn |
| | On-balance sheet As at 31 December 2015 | | |
| Assets £bn | | |
| As a result of covered bonds
£bn |
| |
| As a result of securitis- ations
£bn |
| |
| Other
£bn |
| |
| Total
£bn |
| | | |
| positioned at the central banks£bn | b | |
| Readily available assets £bn | | |
| Available as collateral £bn | | |
| Not available as collateral £bn | | |
| Derivatives
and Reverse repos £bn |
| |
| Total £bn | | Cash and balances at central banks | | | 37.8 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | 37.8 | | | | – | | | | – | | | | – | | | | 37.8 | | | | 47.9 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | 47.9 | | | | – | | | | – | | | | – | | | | 47.9 | | Trading portfolio assets | | | 111.9 | | | | – | | | | – | | | | 50.7 | | | | 50.7 | | | | | | – | | | | 61.2 | | | | – | | | | – | | | | – | | | | 61.2 | | | | 74.8 | | | | – | | | | – | | | | 49.1 | | | | 49.1 | | | | | | – | | | | 25.7 | | | | – | | | | – | | | | – | | | | 25.7 | | Financial assets at fair value | | | 34.2 | | | | – | | | | – | | | | 2.3 | | | | 2.3 | | | | | | – | | | | 3.5 | | | | 20.7 | | | | 2.5 | | | | 5.2 | | | | 31.9 | | | | 72.5 | | | | – | | | | – | | | | 2.5 | | | | 2.5 | | | | | | – | | | | 3.2 | | | | 17.7 | | | | 1.3 | | | | 47.8 | | | | 70.0 | | Derivative financial instruments | | | 438.6 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | | 438.6 | | | | 438.6 | | | | 325.5 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | | 325.5 | | | | 325.5 | | Loans and advances – banksb | | | 19.5 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | 8.6 | | | | 9.2 | | | | 1.7 | | | | – | | | | 19.5 | | | Loans and advances – customersb | | | 311.1 | | | | 20.4 | | | | 9.2 | | | | 10.3 | | | | 39.9 | | | | | | 93.4 | | | | 8.7 | | | | 169.1 | | | | – | | | | – | | | | 271.2 | | | Loans and advances – banksa | | | | 19.6 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | 7.9 | | | | 10.2 | | | | 1.5 | | | | – | | | | 19.6 | | Loans and advances – customersa | | | | 307.3 | | | | 16.4 | | | | 5.9 | | | | 8.0 | | | | 30.3 | | | | | | 86.4 | | | | 14.8 | | | | 175.8 | | | | – | | | | – | | | | 277.0 | | Cash collateral | | | 72.6 | | | | – | | | | – | | | | 72.6 | | | | 72.6 | | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 62.6 | | | | – | | | | – | | | | 62.6 | | | | 62.6 | | | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Settlement balances | | | 30.8 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | 30.8 | | | | – | | | | 30.8 | | | | 20.4 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | 20.4 | | | | – | | | | 20.4 | | Available for sale financial investments | | | 82.0 | | | | – | | | | – | | | | 9.3 | | | | 9.3 | | | | | | – | | | | 70.0 | | | | 0.5 | | | | 2.2 | | | | – | | | | 72.7 | | | Financial investments | | | | 87.0 | | | | – | | | | – | | | | 12.2 | | | | 12.2 | | | | | | – | | | | 72.2 | | | | 1.0 | | | | 1.6 | | | | – | | | | 74.8 | | Reverse repurchase agreements | | | 131.7 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | | 131.7 | | | | 131.7 | | | | 28.2 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | – | | | | 28.2 | | | | 28.2 | | Non-current assets held for sale | | | 15.6 | | | | – | | | | 1.5 | | | | – | | | | 1.5 | | | | | | 5.1 | | | | 0.2 | | | | 8.3 | | | | 0.5 | | | | – | | | | 14.1 | | | | 7.3 | | | | – | | | | – | | | | – | | | | – | | | | | | 1.9 | | | | 1.2 | | | | 3.2 | | | | 1.0 | | | | – | | | | 7.3 | | Other financial assets | | | 18.8 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | 18.8 | | | | – | | | | 18.8 | | | Other Financial Assets | | | | 19.9 | | | | – | | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | 19.9 | | | | – | | | | 19.9 | | Total on-balance sheet | | | 1,304.6 | | | | 20.4 | | | | 10.7 | | | | 145.2 | | | | 176.3 | | | | | | 98.5 | | | | 190.0 | | | | 207.8 | | | | 56.5 | | | | 575.5 | | | | 1,128.3 | | | | 1,073.0 | | | | 16.4 | | | | 5.9 | | | | 134.4 | | | | 156.7 | | | | | | 88.3 | | | | 172.9 | | | | 207.9 | | | | 45.7 | | | | 401.5 | | | | 916.3 | | | | | | | | | | Off-balance sheet | | Off-balance sheet | | | | | | | | | | | | | | | | |
| Collateral received
£bn |
| | | |
| Collateral received of which on- pledged
£bn |
| |
| Readily available assets
£bn |
| |
| Available as collateral
£bn |
| |
| Not available as collateral
£bn |
| | | | | Fair value of securities accepted as collateral | | Fair value of securities accepted as collateral | | | | | | 305.9 | | | | | | 265.4 | | | | 39.0 | | | | – | | | | 1.5 | | | | | | Total unencumbered collateral | | Total unencumbered collateral | | | | | | – | | | | | | – | | | | 211.9 | | | | 207.9 | | | | 47.2 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Off-balance sheet | | | | | |
| Collateral
received £bn |
| |
| Collateral
received of which on- pledged £bn |
| |
| Readily
available assets £bn |
| |
| Available
as collateral £bn |
| |
| Not
available as collateral £bn |
| | | Fair value of securities accepted as collateral | | | 395.7 | | | | 313.0 | | | | 79.9 | | | | – | | | | 2.8 | | | | Total unencumbered collateral | | | | | | | | | | | 269.9 | | | | 207.8 | | | | 59.3 | | | |
Notes a | The format of this disclosure has been updated following the issuance of a ‘Dear CFO’ letter by the PRA. The revised format continues to satisfy the recommendations of the Enhanced Disclosure Task Force on encumbrance disclosure. |
b | Excluding cash collateral and settlement balances. |
cb | Includes both encumbered and unencumbered assets. Assets within this category that have been encumbered are disclosed as assets pledged in Note 40 to the financial statements.statements page301. |
| | | 164170 | ��Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Funding risk – liquidity Repurchase agreements and reverse repurchase agreements Barclays enters into repurchase and other similar secured borrowing agreements to finance its trading portfolio assets. The majority of reverse repurchase agreements are matched by offsetting repurchase agreements entered into to facilitate client activity. The remainder are used to settle trading portfolio liabilities. Due to the high quality of collateral provided against secured financing transactions, the liquidity risk associated with this activity is significantly lower than unsecured financing transactions. Nonetheless, Barclays manages to gross and net secured mismatch limits to limit refinancing risk under a severe stress scenario and a portion of the Group’s liquidity pool is held against stress outflows on these positions. The Group secured mismatch limits are calibrated based on market capacity, liquidity characteristics of the collateral and risk appetite of the Group.appetite. The cash value of repurchase and reverse repurchase transactions will typically differ from the market value of the collateral against which these transactions are secured by an amount referred to as a haircut (or over-collateralisation). Typical haircut levels vary depending on the quality of the collateral that underlies these transactions. For transactions secured against extremely liquid fixed income collateral, lenders demand relatively small haircuts (typically ranging from0-2%). For transactions secured against less liquid collateral, haircuts vary by asset class (typically ranging from5-10% for corporate bonds and other less liquid collateral). As at 31 December 2015,2016, the significant majority of repurchasesrepurchase activity related to matched-book activity. The Group may face refinancing risk on the net maturity mismatch for matched-book activity. | | | | | | | | | | | Net matched-book activitya,b | Negative number represents net repurchase agreement (net liability) | | | Less than one month £bn | | | | One month to three months £bn | | | Over three months £bn | As at 31 December 2015 | | | | | | | | | | | Extremely liquid fixed income | | | (12.9) | | | | 7.3 | | | 5.6 | Liquid fixed income | | | 0.3 | | | | 0.6 | | | (0.9) | Equities | | | 7.0 | | | | (1.5) | | | (5.5) | Less liquid fixed income | | | 1.6 | | | | (0.4) | | | (1.2) | Total | | | (4.0) | | | | 6.0 | | | (2.0) | As at 31 December 2014 | | | | | | | | | | | Extremely liquid fixed income | | | (8.9) | | | | 6.3 | | | 2.6 | Liquid fixed income | | | (0.1) | | | | 0.5 | | | (0.4) | Equities | | | 8.9 | | | | (3.0) | | | (5.9) | Less liquid fixed income | | | 1.2 | | | | 0.3 | | | (1.5) | Total | | | 1.1 | | | | 4.1 | | | (5.2) |
The residual repurchase agreement activity is the firm-financing component and reflects the Group funding of a portion of its trading portfolio assets. The primary risk related to firm-financing activity is the inability to roll-over transactions as they mature. However, 50% (2014: 54%) of firm-financing activity was secured against highly liquid assets.
| Firm financing repurchase agreementsa,b | | | | | Net matched-book activitya,b | | Net matched-book activitya,b | Negative number represents the cash value of the net repurchase agreement (net liability) | | | | |
| Less than one month £bn | | |
| One month to three months £bn | | | Over three months £bn | As at 31 December 2016 | | | | | | | | | | Extremely Liquid Fixed Incomec | | | | | | (21.8) | | | | 11.6 | | | 10.7 | Liquid Fixed Income | | | | | | (0.4) | | | | 0.8 | | | (0.7) | Equities | | | | | | 6.1 | | | | (0.5) | | | (9.6) | Less liquid Fixed Income | | | | | | 0.6 | | | | (0.2) | | | (1.3) | Total | | | | | | (15.5) | | | | 11.7 | | | (0.9) | As at 31 December 2015 | | | | | | | | | | Extremely Liquid Fixed Income | | | | | | (12.9) | | | | 7.3 | | | 5.6 | Liquid Fixed Income | | | | | | 0.3 | | | | 0.6 | | | (0.9) | Equities | | | | | | 7.0 | | | | (1.5) | | | (5.5) | Less liquid Fixed Income | | | | | | 1.6 | | | | (0.4) | | | (1.2) | Total | | | | | | (4.0) | | | | 6.0 | | | (2.0) | | | | Less than one month £bn | | |
| One month to three months
£bn |
| |
| Over three months
£bn |
| | Total £bn | | As at 31 December 2015 | | | | | | | | | | Extremely liquid fixed income | | | 28.8 | | | | 8.3 | | | | 0.3 | | | 37.4 | | Liquid fixed income | | | 2.0 | | | | 0.6 | | | | 1.1 | | | 3.7 | | The residual repurchase agreement activity is the firm-financing component and reflects Barclays funding of a portion of its trading portfolio assets. The primary risk related to firm-financing activity is the inability to roll-over transactions as they mature. However, 44% (2015: 50%) of firm-financing activity was secured against extremely liquid fixed income assets. | | The residual repurchase agreement activity is the firm-financing component and reflects Barclays funding of a portion of its trading portfolio assets. The primary risk related to firm-financing activity is the inability to roll-over transactions as they mature. However, 44% (2015: 50%) of firm-financing activity was secured against extremely liquid fixed income assets. | Firm financing repurchase agreementsa,b | | Firm financing repurchase agreementsa,b | | | | | | |
| Less than one month £bn | | |
| One month to three months
£bn |
| |
| Over three months £bn | | | Total £bn | As at 31st December 2016 | | | | | | | | | | Extremely Liquid Fixed Incomec | | | | 28.3 | | | | 7.1 | | | | 1.1 | | | 36.5 | Liquid Fixed Income | | | | 2.8 | | | | 0.8 | | | | 1.2 | | | 4.8 | Highly liquid | | | 10.9 | | | | 6.3 | | | | 10.2 | | | 27.4 | | | 13.2 | | | | 8.9 | | | | 14.0 | | | 36.1 | Less liquid | | | 2.7 | | | | 1.1 | | | | 1.9 | | | 5.7 | | | 1.9 | | | | 0.8 | | | | 2.6 | | | 5.3 | Total | | | 44.4 | | | | 16.3 | | | | 13.5 | | | 74.2 | | | 46.2 | | | | 17.6 | | | | 18.9 | | | 82.7 | As at 31 December 2014 | | | | | | | | | | Extremely liquid fixed income | | | 33.4 | | | | 4.1 | | | | 2.2 | | | 39.7 | | Liquid fixed income | | | 3.6 | | | | 0.3 | | | | 0.6 | | | 4.5 | | As at 31st December 2015 | | | | | | | | | | Extremely Liquid Fixed Income | | | | 28.8 | | | | 8.3 | | | | 0.3 | | | 37.4 | Liquid Fixed Income | | | | 2.0 | | | | 0.6 | | | | 1.1 | | | 3.7 | Highly liquid | | | 13.1 | | | | 5.0 | | | | 4.1 | | | 22.2 | | | 10.9 | | | | 6.3 | | | | 10.2 | | | 27.4 | Less liquid | | | 2.3 | | | | 1.3 | | | | 3.3 | | | 6.9 | | | 2.7 | | | | 1.1 | | | | 1.9 | | | 5.7 | Total | | | 52.4 | | | | 10.7 | | | | 10.2 | | | 73.3 | | | 44.4 | | | | 16.3 | | | | 13.5 | | | 74.2 |
Notes a | Includes collateral swaps. |
b | Includes financing positions for prime brokerage clients which are reported as customer payables/receivables on-balanceon balance sheet. |
c | Extremely liquid fixed income is defined as very highly rated sovereigns and agencies, typically rated AA+ or better. It excludes liquid fixed income, equities and other less liquid collateral. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 165171 |
Credit ratings In addition to monitoring and managing key metrics related to the financial strength of the Group, Barclays also subscribe tosolicits independent credit rating agency reviewsratings by Standard & Poor’s (S&P), Moody’s and Fitch, andas well as Rating and Investment Information (R&I). These ratings assess the creditworthiness of the Group, its subsidiaries and branches and are based on reviews of a broad range of business and financial attributes including risk management processes and procedures, capital strength, earnings, funding, asset quality, liquidity, accounting and governance. | | | | | | | | | | | Credit ratingsa | | | | | | | | | | | As at 31 December 20152016 | | Standard & Poor’s | | | | Moody’s | | | | Fitch | Barclays Bank PLC | | | | | | | | | | | Long-term | | A- (Stable) (Negative) | | | | A2 (Stable)A1 (Negative) | | | | A (Stable) | Short-term | | A-2 | | | | P-1 | | | | F1 | Stand-alone ratinga | | BBB+bbb+ | | | | BAA2Baa2 | | | | A a | Barclays PLC | | | | | | | | | | | Long-term | | BBB (Stable)(Negative) | | | | Baa3 (Stable)Baa2 (Negative) | | | | A (Stable) | Short-term | | A-2 | | | | P-3 | | | | F1 |
During the year, Barclays’ ratings outlooks for Moody’s and S&P were changed to Negative from Stable following the outcome of the EU referendum in June 2016. The rating actions were part of a wider set of actions which saw the two agencies place several UK banks on negative outlooks whilst affirming the ratings. The ratings continue to carry a stable outlook with Fitch. In December 2016 Moody’s upgraded senior long-term ratings for both Barclays Bank PLC and Barclays PLC by one notch reflecting the continuedbuild-up of loss absorbing capacity at Barclays PLC which would provide additional protection for Barclays Bank PLC’s depositors and senior unsecured creditors, and Barclays PLC’s senior unsecured creditors in a failure scenario. The negative outlooks assigned in June remained in place as the rating agency’s assessment of Barclays’ stand-alone credit strength was unaffected by the rating action. S&P Moody’s and Fitch. Fitch affirmed theBarclays’ ratings in July and December 20152016 respectively as part of itstheir periodic review, noting the balance of Barclays’ stable PCB and strong Barclaycard businesses against the Investment Bank and Barclays Non-Core performance.reviews. Credit rating agencies took industry wide actions in 2015 driven by evolving resolution frameworks. This involved the reassessment of the likelihood of sovereign support resulting in downward pressure on senior credit ratings. They also updated their methodologies which provided some mitigation to reflect the subordination of junior debt available to absorb losses ahead of senior bank creditors.
As a consequence, S&P downgraded Barclays PLC, the holding company, by two notches and Barclays Bank PLC, the operating company, by one notch in H115. Moody’s downgraded Barclays PLC by three notches while affirming the rating of Barclays Bank PLC also in H115. There was no impact on Barclays’ stand-alone credit ratings with all credit rating agencies.
During the year, Barclays also solicitedsolicits issuer ratings from R&I for which they assignedlocal issuance purposes in Japan and the ratings ofA- for Barclays PLC and A for Barclays Bank PLC were affirmed in July 2016 with stable outlooks.
| Contractual credit rating downgrade exposure (cumulative cash flow) | | | Contractual credit rating downgrade exposure (incremental cash outflow) | | Contractual credit rating downgrade exposure (incremental cash outflow) | | | | Cumulative cash outflow | | | Incremental cash outflow | | | | |
| One-notch downgrade £bn | | |
| Two-notch downgrade £bn | | As at 31 December 2016 | | | | | | Securitisation derivatives | | | | (2 | ) | | | (1 | ) | Contingent liabilities | | | | – | | | | – | | Derivatives margining | | | | (1 | ) | | | – | | Liquidity facilities | | | | (1 | ) | | | – | | Total contractual funding or margin requirements | | | | (4 | ) | | | (1 | ) | | | | One-notch downgrade £bn | | | | Two-notch downgrade £bn | | | As at 31 December 2015 | | | | | | | | | Securitisation derivatives | | | 2 | | | | 3 | | | | (2 | ) | | | (1 | ) | Contingent liabilities | | | 1 | | | | 1 | | | | (1 | ) | | | – | | Derivatives margining | | | – | | | | 1 | | | | – | | | | – | | Liquidity facilities | | | 1 | | | | 1 | | | | (1 | ) | | | (1 | ) | Total contractual funding or margin requirements | | | 4 | | | | 6 | | | | (4 | ) | | | (2 | ) | | As at 31 December 2014 | | | | | | Securitisation derivatives | | | 5 | | | | 6 | | | Contingent liabilities | | | 8 | | | | 8 | | | Derivatives margining | | | – | | | | 1 | | | Liquidity facilities | | | 1 | | | | 2 | | | Total contractual funding or margin requirements | | | 14 | | | | 17 | | |
Note a | Refers to Standard & Poor’s Stand-Alone Credit Profile (SACP), Moody’s Bank Financial Strength Ratio (BFSR)/Baseline Credit Assessment (BCA) and FitchFitch’s Viability Rating (VR). |
| | | 166172 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Funding risk – liquidity Liquidity management at BAGL Group (audited) Liquidity risk is managed separately at BAGL Group due to local currency, funding and regulatory requirements. In addition to the Group liquidity pool, as at 31 December 2015,2016, BAGL Group held £6bn (2014: £7bn)£10.6bn (2015: £6.0bn) of liquidity pool assets against BAGL specificBAGL-specific anticipated stressed outflows. The liquidity pool consists of notes and coins, central bank deposits, government bonds, treasury bills and Treasury bills.notes, and coins. Absa Bank successfully applied for a Committed Liquidity Facility from the South African Reserve Bank, which is included in the liquidity pool from January 2016. The BAGL loan to deposit ratio as at 31 December 20152016 was 102% (2014:107% (2015: 102%). As at 31 December 2015, BAGL had £9bn (2014: £9bn) of wholesale funding outstanding, of which £5bn (2014: £5bn) matures in less than 12 months.
Additional information on liquidity management at BAGL can be found in the Barclays Africa Group Annual Report. Contractual maturity of financial assets and liabilities (audited) The table on the next pagebelow 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. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 167173 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contractual maturity of financial assets and liabilities (including BAGL) (audited) | | | As at 31 December 2015 | | | 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 nine months £m | | | | Over nine months but not more than one year £m | | |
| Over one year
but not more than two years £m |
| |
| Over two years 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 | | | 49,580 | | | | 131 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 49,711 | | | Items in the course of collection from other banks | | | 631 | | | | 380 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 1,011 | | | Trading portfolio assets | | | 77,348 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 77,348 | | | Financial assets designated at fair value | | | 5,692 | | | | 46,941 | | | | 1,722 | | | | 1,372 | | | | 583 | | | | 1,021 | | | | 587 | | | | 424 | | | | 867 | | | | 16,172 | | | 75,381 | | | Derivative financial instruments | | | 326,772 | | | | 28 | | | | 3 | | | | 1 | | | | 53 | | | | 328 | | | | 61 | | | | 257 | | | | 147 | | | | 59 | | | 327,709 | | | Loans and advances to banks | | | 5,354 | | | | 31,539 | | | | 1,954 | | | | 366 | | | | 468 | | | | 588 | | | | 991 | | | | 43 | | | | 12 | | | | 34 | | | 41,349 | | | Loans and advances to customers | | | 29,117 | | | | 76,337 | | | | 13,935 | | | | 7,084 | | | | 12,332 | | | | 27,616 | | | | 27,318 | | | | 48,707 | | | | 50,737 | | | | 106,034 | | | 399,217 | | | Reverse repurchase agreements and other similar secured lending | | | 2 | | | | 24,258 | | | | 3,296 | | | | 292 | | | | 205 | | | | 74 | | | | 35 | | | | 1 | | | | 24 | | | | – | | | 28,187 | | | Available for sale investments | | | 467 | | | | 2,396 | | | | 1,792 | | | | 4,936 | | | | 2,088 | | | | 11,537 | | | | 14,659 | | | | 17,898 | | | | 21,445 | | | | 13,049 | | | 90,267 | | | Other financial assets | | | – | | | | 1,304 | | | | – | | | | – | | | | – | | | | 100 | | | | – | | | | – | | | | – | | | | – | | | 1,404 | | | Total financial assets | | | 494,963 | | | | 183,314 | | | | 22,702 | | | | 14,051 | | | | 15,729 | | | | 41,264 | | | | 43,651 | | | | 67,330 | | | | 73,232 | | | | 135,348 | | | 1,091,584 | | | Other assetsa | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 28,428 | | | Total assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,120,012 | | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 5,717 | | | | 38,720 | | | | 1,355 | | | | 540 | | | | 335 | | | | 97 | | | | 9 | | | | 67 | | | | 236 | | | | 4 | | | 47,080 | | | Items in the course of collection due to other banks | | | 1,013 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 1,013 | | | Customer accounts | | | 312,921 | | | | 80,114 | | | | 7,605 | | | | 4,253 | | | | 5,304 | | | | 2,845 | | | | 912 | | | | 1,654 | | | | 622 | | | | 2,012 | | | 418,242 | | | Repurchase agreements and other similar secured borrowing | | | 66 | | | | 17,346 | | | | 3,479 | | | | 1,975 | | | | 876 | | | | 843 | | | | 52 | | | | – | | | | 398 | | | | – | | | 25,035 | | | Trading portfolio liabilities | | | 33,967 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 33,967 | | | Financial liabilities designated at fair value | | | 319 | | | | 52,185 | | | | 3,152 | | | | 3,470 | | | | 2,317 | | | | 6,093 | | | | 5,458 | | | | 7,446 | | | | 4,139 | | | | 5,533 | | | 90,112 | | | Derivative financial instruments | | | 323,786 | | | | 80 | | | | 92 | | | | 49 | | | | 49 | | | | 42 | | | | 13 | | | | 57 | | | | 70 | | | | 14 | | | 324,252 | | | Debt securities in issue | | | 50 | | | | 14,270 | | | | 5,615 | | | | 4,322 | | | | 4,469 | | | | 10,164 | | | | 4,797 | | | | 13,037 | | | | 10,028 | | | | 2,398 | | | 69,150 | | | Subordinated liabilities | | | 2 | | | | – | | | | – | | | | 9 | | | | 28 | | | | 1,254 | | | | 2,994 | | | | 2,194 | | | | 8,741 | | | | 6,245 | | | 21,467 | | | Other financial liabilities | | | – | | | | 2,685 | | | | – | | | | – | | | | – | | | | 1,075 | | | | – | | | | – | | | | – | | | | – | | | 3,760 | | | Total financial liabilities | | | 677,841 | | | | 205,400 | | | | 21,298 | | | | 14,618 | | | | 13,378 | | | | 22,413 | | | | 14,235 | | | | 24,455 | | | | 24,234 | | | | 16,206 | | | 1,034,078 | | | Other liabilitiesa | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 20,070 | | | Total liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,054,148 | | | Cumulative liquidity gap | | | (182,878 | ) | | | (204,964 | ) | | | (203,560 | ) | | | (204,127 | ) | | | (201,776 | ) | | | (182,925 | ) | | | (153,509 | ) | | | (110,634 | ) | | | (61,636 | ) | | | 57,506 | | | 65,864 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contractual maturity of financial assets and liabilities (including BAGL) (audited) | | As at 31 December 2016 | |
| 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 nine months £m |
| |
| Over nine months but not more
than one year £m |
| |
| Over one year but not more than two years
£m |
| |
| Over two years 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 | | | 102,031 | | | | 322 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 102,353 | | Items in the course of collection from other banks | | | 1,467 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,467 | | Trading portfolio assets | | | 80,240 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 80,240 | | Financial assets designated at fair value | | | 15,558 | | | | 43,270 | | | | 5,518 | | | | 2,376 | | | | 2,081 | | | | 686 | | | | 90 | | | | 129 | | | | 771 | | | | 8,129 | | | | 78,608 | | Derivative financial instruments | | | 345,625 | | | | 5 | | | | 400 | | | | 5 | | | | 2 | | | | 14 | | | | 168 | | | | 175 | | | | 123 | | | | 109 | | | | 346,626 | | Loans and advances to banks | | | 4,858 | | | | 34,346 | | | | 2,753 | | | | 480 | | | | 133 | | | | 412 | | | | 236 | | | | 20 | | | | 13 | | | | – | | | | 43,251 | | Loans and advances to customers | | | 26,929 | | | | 85,993 | | | | 7,522 | | | | 6,310 | | | | 8,245 | | | | 29,326 | | | | 25,602 | | | | 44,776 | | | | 48,233 | | | | 109,848 | | | | 392,784 | | Reverse repurchase agreements and other similar secured lending | | | 7,043 | | | | 3,678 | | | | 892 | | | | 144 | | | | 905 | | | | 792 | | | | – | | | | – | | | | – | | | | – | | | | 13,454 | | Available for sale financial investments | | | 40 | | | | 1,015 | | | | 3,064 | | | | 741 | | | | 2,666 | | | | 10,127 | | | | 9,031 | | | | 15,148 | | | | 12,768 | | | | 8,717 | | | | 63,317 | | Other financial assets | | | – | | | | 1,128 | | | | – | | | | – | | | | – | | | | 77 | | | | – | | | | – | | | | – | | | | – | | | | 1,205 | | Total financial assets | | | 583,791 | | | | 169,757 | | | | 20,149 | | | | 10,056 | | | | 14,032 | | | | 41,434 | | | | 35,127 | | | | 60,248 | | | | 61,908 | | | | 126,803 | | | | 1,123,305 | | Other assetsa | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 89,821 | | Total assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,213,126 | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 5,906 | | | | 39,610 | | | | 1,120 | | | | 672 | | | | 351 | | | | 193 | | | | 13 | | | | 328 | | | | 21 | | | | – | | | | 48,214 | | Items in the course of collection due to other banks | | | 636 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 636 | | Customer accounts | | | 317,963 | | | | 86,081 | | | | 5,305 | | | | 3,023 | | | | 4,528 | | | | 2,836 | | | | 1,262 | | | | 1,043 | | | | 441 | | | | 696 | | | | 423,178 | | Repurchase agreements and other similar secured borrowing | | | 5,480 | | | | 9,235 | | | | 1,934 | | | | 917 | | | | 1,326 | | | | 311 | | | | – | | | | 83 | | | | 474 | | | | – | | | | 19,760 | | Trading portfolio liabilities | | | 34,687 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 34,687 | | Financial liabilities designated at fair value | | | 15,285 | | | | 41,583 | | | | 3,970 | | | | 4,112 | | | | 1,827 | | | | 7,540 | | | | 5,762 | | | | 5,773 | | | | 3,588 | | | | 6,591 | | | | 96,031 | | Derivative financial instruments | | | 339,646 | | | | 4 | | | | – | | | | – | | | | 2 | | | | 10 | | | | 34 | | | | 46 | | | | 75 | | | | 670 | | | | 340,487 | | Debt securities in issue | | | 27 | | | | 16,731 | | | | 11,713 | | | | 5,902 | | | | 6,867 | | | | 3,166 | | | | 8,069 | | | | 9,186 | | | | 10,152 | | | | 4,119 | | | | 75,932 | | Subordinated liabilities | | | – | | | | 8 | | | | – | | | | – | | | | 1,317 | | | | 3,230 | | | | 56 | | | | 7,487 | | | | 6,575 | | | | 4,710 | | | | 23,383 | | Other financial liabilities | | | – | | | | 3,198 | | | | – | | | | – | | | | – | | | | 1,189 | | | | – | | | | – | | | | – | | | | – | | | | 4,387 | | Total financial liabilities | | | 719,630 | | | | 196,450 | | | | 24,042 | | | | 14,626 | | | | 16,218 | | | | 18,475 | | | | 15,196 | | | | 23,946 | | | | 21,326 | | | | 16,786 | | | | 1,066,695 | | Other liabilitiesa | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 75,066 | | Total liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,141,761 | | Cumulative liquidity gap | | | (135,839 | ) | | | (162,532 | ) | | | (166,425 | ) | | | (170,995 | ) | | | (173,181 | ) | | | (150,222 | ) | | | (130,291 | ) | | | (93,989 | ) | | | (53,407 | ) | | | 56,610 | | | | 71,365 | |
Note a | OtherAs at 31 December 2016, other assets includes balances of £7,364m (2014: £15,574m)£71,454m (2015: £7,364m) and other liabilities includes balances of £5,997m (2014: £13,115m)£65,292m (2015: £5,997m) relating to amounts held for sale. Please refer to Note 44 for details. |
| | | 168174 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Funding risk – liquidity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contractual maturity of financial assets and liabilities (including BAGL) (audited) | | | | | As at 31 December 2014 | | | 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 nine months £m |
| | | Over nine months but not more than one year £m | | |
| Over one year
but not more than two years £m |
| |
| Over two years 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 | | | 39,466 | | | | 229 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 39,695 | | | | | Items in the course of collection from other banks | | | 828 | | | | 382 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 1,210 | | | | | Trading portfolio assets | | | 114,717 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 114,717 | | | | | Financial assets designated at fair value | | | 5,732 | | | | 3,139 | | | | 1,540 | | | | 797 | | | | 602 | | | | 2,696 | | | | 1,322 | | | | 1,253 | | | | 1,038 | | | | 18,538 | | | 36,657 | | | | | Derivative financial instruments | | | 438,270 | | | | 26 | | | | 6 | | | | 8 | | | | 7 | | | | 204 | | | | 274 | | | | 443 | | | | 439 | | | | 232 | | | 439,909 | | | | | Loans and advances to banks | | | 5,875 | | | | 31,138 | | | | 3,236 | | | | 225 | | | | 944 | | | | 404 | | | | 233 | | | | 20 | | | | 36 | | | | – | | | 42,111 | | | | | Loans and advances to customers | | | 24,607 | | | | 99,208 | | | | 9,225 | | | | 6,900 | | | | 9,241 | | | | 35,477 | | | | 24,653 | | | | 48,486 | | | | 54,168 | | | | 115,802 | | | 427,767 | | | | | Reverse repurchase agreements and other similar secured lending | | | 144 | | | | 117,977 | | | | 9,857 | | | | 2,013 | | | | 941 | | | | 28 | | | | 116 | | | | 109 | | | | 22 | | | | 546 | | | 131,753 | | | | | Available for sale investments | | | 513 | | | | 1,324 | | | | 2,045 | | | | 3,576 | | | | 844 | | | | 10,804 | | | | 16,705 | | | | 10,107 | | | | 23,683 | | | | 16,465 | | | 86,066 | | | | | Other financial assets | | | – | | | | 1,469 | | | | – | | | | – | | | | – | | | | 176 | | | | – | | | | – | | | | – | | | | – | | | 1,645 | | | | | Total financial assets | | | 630,152 | | | | 254,892 | | | | 25,909 | | | | 13,519 | | | | 12,579 | | | | 49,789 | | | | 43,303 | | | | 60,418 | | | | 79,386 | | | | 151,583 | | | 1,321,530 | | | | | Other assetsa | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 36,376 | | | | | Total assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,357,906 | | | | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 7,978 | | | | 48,155 | | | | 1,041 | | | | 504 | | | | 298 | | | | 187 | | | | 95 | | | | 69 | | | | 57 | | | | 6 | | | 58,390 | | | | | Items in the course of collection due to other banks | | | 1,177 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 1,177 | | | | | Customer accounts | | | 317,449 | | | | 86,626 | | | | 7,284 | | | | 5,442 | | | | 3,245 | | | | 4,208 | | | | 494 | | | | 1,219 | | | | 713 | | | | 1,024 | | | 427,704 | | | | | Repurchase agreements and other similar secured borrowing | | | 40 | | | | 111,766 | | | | 7,175 | | | | 2,847 | | | | 1,989 | | | | 119 | | | | 116 | | | | – | | | | 427 | | | | – | | | 124,479 | | | | | Trading portfolio liabilities | | | 45,124 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | 45,124 | | | | | Financial liabilities designated at fair value | | | 665 | | | | 6,554 | | | | 3,493 | | | | 4,056 | | | | 3,244 | | | | 7,015 | | | | 5,524 | | | | 9,573 | | | | 6,174 | | | | 8,851 | | | 55,149 | | | | | Derivative financial instruments | | | 438,623 | | | | 29 | | | | 7 | | | | 12 | | | | 5 | | | | 62 | | | | 69 | | | | 78 | | | | 268 | | | | 167 | | | 439,320 | | | | | Debt securities in issue | | | 10 | | | | 19,075 | | | | 11,146 | | | | 9,712 | | | | 4,791 | | | | 7,568 | | | | 10,560 | | | | 10,350 | | | | 11,376 | | | | 1,511 | | | 86,099 | | | | | Subordinated liabilities | | | – | | | | 235 | | | | 48 | | | | 15 | | | | – | | | | 37 | | | | 1,259 | | | | 1,947 | | | | 10,938 | | | | 6,674 | | | 21,153 | | | | | Other financial liabilities | | | – | | | | 3,060 | | | | – | | | | – | | | | – | | | | 815 | | | | – | | | | – | | | | – | | | | – | | | 3,875 | | | | | Total financial liabilities | | | 811,066 | | | | 275,500 | | | | 30,194 | | | | 22,588 | | | | 13,572 | | | | 20,011 | | | | 18,117 | | | | 23,236 | | | | 29,953 | | | | 18,233 | | | 1,262,470 | | | | | Other liabilitiesa | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 29,478 | | | | | Total liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 1,291,948 | | | | | Cumulative liquidity gap | | | (180,914 | ) | | | (201,522 | ) | | | (205,807 | ) | | | (214,876 | ) | | | (215,869 | ) | | | (186,091 | ) | | | (160,905 | ) | | | (123,723 | ) | | | (74,290 | ) | | | 59,060 | | | 65,958 | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contractual maturity of financial assets and liabilities (including BAGL) (audited) | | As at 31 December 2015 | |
| 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 nine months £m |
| |
| Over nine months
but not more than one year £m |
| |
| Over one year but not more than two years
£m |
| |
| Over two years 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 | | | 49,580 | | | | 131 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 49,711 | | Items in the course of collection from other banks | | | 631 | | | | 380 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,011 | | Trading portfolio assets | | | 77,348 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 77,348 | | Financial assets designated at fair valuea | | | 30,667 | | | | 21,966 | | | | 1,722 | | | | 1,372 | | | | 583 | | | | 1,021 | | | | 587 | | | | 424 | | | | 867 | | | | 16,172 | | | | 75,381 | | Derivative financial instruments | | | 326,772 | | | | 28 | | | | 3 | | | | 1 | | | | 53 | | | | 328 | | | | 61 | | | | 257 | | | | 147 | | | | 59 | | | | 327,709 | | Loans and advances to banks | | | 5,354 | | | | 31,539 | | | | 1,954 | | | | 366 | | | | 468 | | | | 588 | | | | 991 | | | | 43 | | | | 12 | | | | 34 | | | | 41,349 | | Loans and advances to customers | | | 29,117 | | | | 76,337 | | | | 13,935 | | | | 7,084 | | | | 12,332 | | | | 27,616 | | | | 27,318 | | | | 48,707 | | | | 50,737 | | | | 106,034 | | | | 399,217 | | Reverse repurchase agreements and other similar secured lendinga | | | 12,171 | | | | 12,089 | | | | 3,296 | | | | 292 | | | | 205 | | | | 74 | | | | 35 | | | | 1 | | | | 24 | | | | – | | | | 28,187 | | Available for sale financial investments | | | 467 | | | | 2,396 | | | | 1,792 | | | | 4,936 | | | | 2,088 | | | | 11,537 | | | | 14,659 | | | | 17,898 | | | | 21,445 | | | | 13,049 | | | | 90,267 | | Other financial assets | | | – | | | | 1,304 | | | | – | | | | – | | | | – | | | | 100 | | | | – | | | | – | | | | – | | | | – | | | | 1,404 | | Total financial assets | | | 532,107 | | | | 146,170 | | | | 22,702 | | | | 14,051 | | | | 15,729 | | | | 41,264 | | | | 43,651 | | | | 67,330 | | | | 73,232 | | | | 135,348 | | | | 1,091,584 | | Other assets | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 28,428 | | Total assets | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,120,012 | | Liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 5,717 | | | | 38,720 | | | | 1,355 | | | | 540 | | | | 335 | | | | 97 | | | | 9 | | | | 67 | | | | 236 | | | | 4 | | | | 47,080 | | Items in the course of collection due to other banks | | | 1,013 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,013 | | Customer accounts | | | 312,921 | | | | 80,114 | | | | 7,605 | | | | 4,253 | | | | 5,304 | | | | 2,845 | | | | 912 | | | | 1,654 | | | | 622 | | | | 2,012 | | | | 418,242 | | Repurchase agreements and other similar secured borrowinga | | | 5,729 | | | | 11,683 | | | | 3,479 | | | | 1,975 | | | | 876 | | | | 843 | | | | 52 | | | | – | | | | 398 | | | | – | | | | 25,035 | | Trading portfolio liabilities | | | 33,967 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 33,967 | | Financial liabilities designated at fair valuea | | | 20,051 | | | | 32,453 | | | | 3,152 | | | | 3,470 | | | | 2,317 | | | | 6,093 | | | | 5,458 | | | | 7,446 | | | | 4,139 | | | | 5,533 | | | | 90,112 | | Derivative financial instruments | | | 323,786 | | | | 80 | | | | 92 | | | | 49 | | | | 49 | | | | 42 | | | | 13 | | | | 57 | | | | 70 | | | | 14 | | | | 324,252 | | Debt securities in issue | | | 50 | | | | 14,270 | | | | 5,615 | | | | 4,322 | | | | 4,469 | | | | 10,164 | | | | 4,797 | | | | 13,037 | | | | 10,028 | | | | 2,398 | | | | 69,150 | | Subordinated liabilities | | | 2 | | | | – | | | | – | | | | 9 | | | | 28 | | | | 1,254 | | | | 2,994 | | | | 2,194 | | | | 8,741 | | | | 6,245 | | | | 21,467 | | Other financial liabilities | | | – | | | | 2,685 | | | | – | | | | – | | | | – | | | | 1,075 | | | | – | | | | – | | | | – | | | | – | | | | 3,760 | | Total financial liabilities | | | 703,236 | | | | 180,005 | | | | 21,298 | | | | 14,618 | | | | 13,378 | | | | 22,413 | | | | 14,235 | | | | 24,455 | | | | 24,234 | | | | 16,206 | | | | 1,034,078 | | Other liabilities | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 20,070 | | Total liabilities | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,054,148 | | Cumulative liquidity gap | | | (171,129 | ) | | | (204,964 | ) | | | (203,560 | ) | | | (204,127 | ) | | | (201,776 | ) | | | (182,925 | ) | | | (153,509 | ) | | | (110,634 | ) | | | (61,636 | ) | | | 57,506 | | | | 65,864 | |
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 |
§ | | 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 (see behaviouralBehavioural maturity profile on page 160)166; and |
§ | | financial assets designated at fair value held in respect of linked liabilities, which are managed with the associated liabilities. |
Note a | OtherThe On demand and Not more than three months categories for 2015 have been adjusted by £37bn for financial assets includes balancesand £25bn for financial liabilities to better reflect the contractual maturity of £7,364m (2014: £15,574m)both Reverse repurchase agreements and other liabilities includes balances of £5,997m (2014: £13,115m) relating to amounts held for sale. Please refer to Note 44 for details.Repurchase agreements measured at amortised cost and fair value. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 169175 |
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). 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 (including BAGL Group) (audited) | | | | | |
| 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 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 5,717 | | | | 38,721 | | | | 1,357 | | | | 877 | | | | 108 | | | | 70 | | | | 239 | | | | 10 | | | | 47,099 | | | | Items in the course of collection due to other banks | | | 1,013 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,013 | | | | Customer accounts | | | 312,921 | | | | 80,142 | | | | 7,640 | | | | 9,655 | | | | 3,858 | | | | 1,854 | | | | 744 | | | | 3,087 | | | | 419,901 | | | | Repurchase agreements and other similar secured lending | | | 66 | | | | 17,349 | | | | 3,482 | | | | 2,853 | | | | 898 | | | | – | | | | 491 | | | | – | | | | 25,139 | | | | Trading portfolio liabilities | | | 33,967 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 33,967 | | | | Financial liabilities designated at fair value | | | 319 | | | | 52,202 | | | | 3,165 | | | | 5,830 | | | | 11,851 | | | | 7,840 | | | | 4,690 | | | | 8,694 | | | | 94,591 | | | | Derivative financial instruments | | | 323,786 | | | | 81 | | | | 94 | | | | 102 | | | | 57 | | | | 59 | | | | 80 | | | | 16 | | | | 324,275 | | | | Debt securities in issue | | | 50 | | | | 14,352 | | | | 5,845 | | | | 9,277 | | | | 16,777 | | | | 14,175 | | | | 11,276 | | | | 4,547 | | | | 76,299 | | | | Subordinated liabilities | | | 2 | | | | 253 | | | | 403 | | | | 344 | | | | 6,057 | | | | 3,737 | | | | 9,969 | | | | 6,313 | | | | 27,078 | | | | Other financial liabilities | | | – | | | | 2,685 | | | | – | | | | – | | | | 1,075 | | | | – | | | | – | | | | – | | | | 3,760 | | | | Total financial liabilities | | | 677,841 | | | | 205,785 | | | | 21,986 | | | | 28,938 | | | | 40,681 | | | | 27,735 | | | | 27,489 | | | | 22,667 | | | | 1,053,122 | | | | | | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 7,978 | | | | 48,155 | | | | 1,042 | | | | 804 | | | | 287 | | | | 75 | | | | 62 | | | | 29 | | | | 58,432 | | | | Items in the course of collection due to other banks | | | 1,177 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,177 | | | | Customer accounts | | | 317,449 | | | | 86,659 | | | | 7,364 | | | | 8,854 | | | | 4,851 | | | | 1,399 | | | | 1,046 | | | | 2,218 | | | | 429,840 | | | | Repurchase agreements and other similar secured lending | | | 40 | | | | 111,769 | | | | 7,178 | | | | 4,837 | | | | 236 | | | | – | | | | 428 | | | | – | | | | 124,488 | | | | Trading portfolio liabilities | | | 45,124 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 45,124 | | | | Financial liabilities designated at fair value | | | 665 | | | | 6,561 | | | | 3,508 | | | | 7,378 | | | | 12,854 | | | | 10,285 | | | | 7,170 | | | | 14,273 | | | | 62,694 | | | | Derivative financial instruments | | | 438,623 | | | | 30 | | | | 7 | | | | 17 | | | | 137 | | | | 85 | | | | 314 | | | | 341 | | | | 439,554 | | | | Debt securities in issue | | | 10 | | | | 19,481 | | | | 11,406 | | | | 14,952 | | | | 19,416 | | | | 11,352 | | | | 12,075 | | | | 2,760 | | | | 91,452 | | | | Subordinated liabilities | | | – | | | | 380 | | | | 324 | | | | 171 | | | | 1,403 | | | | 4,339 | | | | 11,218 | | | | 6,683 | | | | 24,518 | | | | Other financial liabilities | | | – | | | | 3,060 | | | | – | | | | – | | | | 815 | | | | – | | | | – | | | | – | | | | 3,875 | | | | Total financial liabilities | | | 811,066 | | | | 276,095 | | | | 30,829 | | | | 37,013 | | | | 39,999 | | | | 27,535 | | | | 32,313 | | | | 26,304 | | | | 1,281,154 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contractual maturity of financial liabilities – undiscounteda (including BAGL) (audited) | | | |
| 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 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 5,906 | | | | 39,617 | | | | 1,122 | | | | 1,025 | | | | 207 | | | | 328 | | | | 21 | | | | – | | | | 48,226 | | Items in the course of collection due to other banks | | | 636 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 636 | | Customer accounts | | | 317,963 | | | | 86,101 | | | | 5,325 | | | | 7,565 | | | | 4,266 | | | | 1,120 | | | | 1,403 | | | | 1,013 | | | | 424,756 | | Repurchase agreements and other similar secured lending | | | 5,480 | | | | 9,249 | | | | 1,939 | | | | 2,253 | | | | 312 | | | | 83 | | | | 474 | | | | – | | | | 19,790 | | Trading portfolio liabilities | | | 34,687 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 34,687 | | Financial liabilities designated at fair value | | | 15,285 | | | | 41,599 | | | | 3,986 | | | | 5,979 | | | | 13,445 | | | | 5,899 | | | | 3,900 | | | | 8,443 | | | | 98,536 | | Derivative financial instruments | | | 339,646 | | | | 4 | | | | – | | | | 2 | | | | 44 | | | | 48 | | | | 84 | | | | 1,086 | | | | 340,914 | | Debt securities in issue | | | 27 | | | | 17,126 | | | | 11,894 | | | | 13,285 | | | | 12,915 | | | | 10,505 | | | | 12,282 | | | | 6,054 | | | | 84,088 | | Subordinated liabilities | | | – | | | | 398 | | | | 680 | | | | 3,117 | | | | 7,089 | | | | 9,324 | | | | 7,842 | | | | 4,866 | | | | 33,316 | | Other financial liabilities | | | – | | | | 3,198 | | | | – | | | | – | | | | 1,189 | | | | – | | | | – | | | | – | | | | 4,387 | | Total financial liabilities | | | 719,630 | | | | 197,292 | | | | 24,946 | | | | 33,226 | | | | 39,467 | | | | 27,307 | | | | 26,006 | | | | 21,462 | | | | 1,089,336 | | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 5,717 | | | | 38,721 | | | | 1,357 | | | | 877 | | | | 108 | | | | 70 | | | | 239 | | | | 10 | | | | 47,099 | | Items in the course of collection due to other banks | | | 1,013 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,013 | | Customer accounts | | | 312,921 | | | | 80,142 | | | | 7,640 | | | | 9,655 | | | | 3,858 | | | | 1,854 | | | | 744 | | | | 3,087 | | | | 419,901 | | Repurchase agreements and other similar secured lendingb | | | 5,729 | | | | 11,686 | | | | 3,482 | | | | 2,853 | | | | 898 | | | | – | | | | 491 | | | | – | | | | 25,139 | | Trading portfolio liabilities | | | 33,967 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 33,967 | | Financial liabilities designated at fair valueb | | | 20,051 | | | | 32,470 | | | | 3,165 | | | | 5,830 | | | | 11,851 | | | | 7,840 | | | | 4,690 | | | | 8,694 | | | | 94,591 | | Derivative financial instruments | | | 323,786 | | | | 81 | | | | 94 | | | | 102 | | | | 57 | | | | 59 | | | | 80 | | | | 16 | | | | 324,275 | | Debt securities in issue | | | 50 | | | | 14,352 | | | | 5,845 | | | | 9,277 | | | | 16,777 | | | | 14,175 | | | | 11,276 | | | | 4,547 | | | | 76,299 | | Subordinated liabilities | | | 2 | | | | 253 | | | | 403 | | | | 344 | | | | 6,057 | | | | 3,737 | | | | 9,969 | | | | 6,313 | | | | 27,078 | | Other financial liabilities | | | – | | | | 2,685 | | | | – | | | | – | | | | 1,075 | | | | – | | | | – | | | | – | | | | 3,760 | | Total financial liabilities | | | 703,236 | | | | 180,390 | | | | 21,986 | | | | 28,938 | | | | 40,681 | | | | 27,735 | | | | 27,489 | | | | 22,667 | | | | 1,053,122 | |
Note a | Financial liabilities on an undiscounted basis for 2016 exclude BAGL balances now held for sale but are included for 2015. |
b | The On demand and Not more than three months categories for 2015 have been adjusted by £25bn for financial liabilities to better reflect the contractual maturity of Repurchase agreements measured at amortised cost and fair value. |
| | | 170176 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Funding risk – liquidity Maturity ofoff-balance sheet commitments received and given (audited) The table below presents the maturity split of the Group’soff-balance sheet commitments received and given at the balance sheet date. The amounts disclosed in the table are the undiscounted cash flows (i.e. nominal values) on the basis of earliest opportunity at which they are available. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturity analysis of off-balance sheet commitments received (including BAGL) | | | | | | | 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 nine months £m | | |
| Over nine months but not more than one year
£m |
| |
| Over one year but not more than two years
£m |
| |
| Over two years 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 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Guarantees, letters of credit and credit insurance | | | 6,329 | | | | 138 | | | | 4 | | | | 5 | | | | 32 | | | | 84 | | | | 12 | | | | 97 | | | | 4 | | | | 17 | | | | 6,722 | | | | Forward starting repurchase agreementsa | | | – | | | | 392 | | | | – | | | | 73 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 465 | | | | Total off-balance sheet commitments received | | | 6,329 | | | | 530 | | | | 4 | | | | 78 | | | | 32 | | | | 84 | | | | 12 | | | | 97 | | | | 4 | | | | 17 | | | | 7,187 | | | | | | | | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Guarantees, letters of credit and credit insurance | | | 6,571 | | | | 60 | | | | 37 | | | | 38 | | | | 39 | | | | 152 | | | | 138 | | | | 203 | | | | 65 | | | | – | | | | 7,303 | | | | Forward starting repurchase agreementsa | | | – | | | | 10,778 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 10,778 | | | | Total off-balance sheet commitments received | | | 6,571 | | | | 10,838 | | | | 37 | | | | 38 | | | | 39 | | | | 152 | | | | 138 | | | | 203 | | | | 65 | | | | – | | | | 18,081 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturity analysis of off-balance sheet commitments given (including BAGL) (audited) | | | | | | | 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 nine months £m | | |
| Over nine months but not more than one year
£m |
| |
| Over one year but not more than two years
£m |
| |
| Over two years 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 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 17,421 | | | | 933 | | | | 493 | | | | 140 | | | | 590 | | | | 423 | | | | 158 | | | | 161 | | | | 164 | | | | 138 | | | | 20,621 | | | | Documentary credits and other short-term trade-related transactions | | | 617 | | | | 30 | | | | 10 | | | | – | | | | 61 | | | | 119 | | | | – | | | | 8 | | | | – | | | | – | | | | 845 | | | | Forward starting reverse repurchase agreementsa | | | – | | | | 93 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 93 | | | | Standby facilities, credit lines and other commitments | | | 274,020 | | | | 1,152 | | | | 1,564 | | | | 1,116 | | | | 1,071 | | | | 873 | | | | 554 | | | | 906 | | | | 78 | | | | 35 | | | | 281,369 | | | | Total off-balance sheet commitments given | | | 292,058 | | | | 2,208 | | | | 2,067 | | | | 1,256 | | | | 1,722 | | | | 1,415 | | | | 712 | | | | 1,075 | | | | 242 | | | | 173 | | | | 302,928 | | | | | | | | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 17,304 | | | | 1,770 | | | | 352 | | | | 162 | | | | 102 | | | | 410 | | | | 55 | | | | 83 | | | | 1,037 | | | | 49 | | | | 21,324 | | | | Documentary credits and other short-term trade-related transactions | | | 869 | | | | 75 | | | | 13 | | | | – | | | | 19 | | | | 115 | | | | – | | | | – | | | | – | | | | – | | | | 1,091 | | | | Forward starting reverse repurchase agreementsa | | | – | | | | 13,735 | | | | – | | | | 121 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 13,856 | | | | Standby facilities, credit lines and other commitments | | | 262,540 | | | | 4,045 | | | | 1,722 | | | | 844 | | | | 646 | | | | 3,638 | | | | 877 | | | | 1,846 | | | | 137 | | | | 20 | | | | 276,315 | | | | Total off-balance sheet commitments given | | | 280,713 | | | | 19,625 | | | | 2,087 | | | | 1,127 | | | | 767 | | | | 4,163 | | | | 932 | | | | 1,929 | | | | 1,174 | | | | 69 | | | | 312,586 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturity analysis ofoff-balance sheet commitments received | | | |
| 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 nine months £m | | |
| Over nine months but not more than
one year £m |
| |
| Over one year but not more than two years
£m |
| |
| Over two years 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 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Guarantees, letters of credit and credit insurance | | | 6,044 | | | | 18 | | | | 1 | | | | 410 | | | | 2 | | | | 23 | | | | 1 | | | | 3 | | | | – | | | | – | | | | 6,502 | | Forward starting repurchase agreements | | | 102 | | | | 246 | | | | – | | | | 1 | | | | – | | | | – | | | | 18 | | | | – | | | | – | | | | – | | | | 367 | | Totaloff-balance sheet commitments receiveda | | | 6,146 | | | | 264 | | | | 1 | | | | 411 | | | | 2 | | | | 23 | | | | 19 | | | | 3 | | | | – | | | | – | | | | 6,869 | | | | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Guarantees, letters of credit and credit insurance | | | 6,329 | | | | 138 | | | | 4 | | | | 5 | | | | 32 | | | | 84 | | | | 12 | | | | 97 | | | | 4 | | | | 17 | | | | 6,722 | | Forward starting repurchase agreements | | | – | | | | 392 | | | | – | | | | 73 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 465 | | Totaloff-balance sheet commitments receiveda | | | 6,329 | | | | 530 | | | | 4 | | | | 78 | | | | 32 | | | | 84 | | | | 12 | | | | 97 | | | | 4 | | | | 17 | | | | 7,187 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Maturity analysis ofoff-balance sheet commitments given (audited) | | | |
| 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 nine months £m | | |
| Over nine months but not more than one year £m | | |
| Over one year but not more than two years
£m |
| |
| Over two years 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 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 17,111 | | | | 425 | | | | 845 | | | | 233 | | | | 285 | | | | 355 | | | | 187 | | | | 88 | | | | 259 | | | | 151 | | | | 19,939 | | Documentary credits and other short-term trade related transactions | | | 987 | | | | 10 | | | | 8 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,005 | | Forward Starting reverse repurchase agreements | | | – | | | | 24 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 24 | | Standby facilities, credit lines and other commitments | | | 300,043 | | | | 455 | | | | 415 | | | | 604 | | | | 818 | | | | 55 | | | | 47 | | | | 150 | | | | – | | | | 70 | | | | 302,657 | | Totaloff-balance sheet commitments givena | | | 318,141 | | | | 914 | | | | 1,268 | | | | 837 | | | | 1,103 | | | | 410 | | | | 234 | | | | 238 | | | | 259 | | | | 221 | | | | 323,625 | | | | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Contingent liabilities | | | 17,421 | | | | 933 | | | | 493 | | | | 140 | | | | 590 | | | | 423 | | | | 158 | | | | 161 | | | | 164 | | | | 138 | | | | 20,621 | | Documentary credits and other short-term trade related transactions | | | 617 | | | | 30 | | | | 10 | | | | – | | | | 61 | | | | 119 | | | | – | | | | 8 | | | | – | | | | – | | | | 845 | | Forward Starting reverse repurchase agreements | | | – | | | | 93 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 93 | | Standby facilities, credit lines and other commitments | | | 274,020 | | | | 1,152 | | | | 1,564 | | | | 1,116 | | | | 1,071 | | | | 873 | | | | 554 | | | | 906 | | | | 78 | | | | 35 | | | | 281,369 | | Totaloff-balance sheet commitments givena | | | 292,058 | | | | 2,208 | | | | 2,067 | | | | 1,256 | | | | 1,722 | | | | 1,415 | | | | 712 | | | | 1,075 | | | | 242 | | | | 173 | | | | 302,928 | |
Note a | Forward starting reverse repurchase and repurchase agreements were previously disclosed as loan commitments. Following the business designation of reverse repurchase and repurchase agreements at fair value through profit and loss, new forward starting reverse repurchase and repurchase agreementsAmounts for 2016 exclude BAGL balances now held for sale but are within the scope of IAS 39 and are recognised as derivatives on the balance sheet.included for 2015. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 171177 |
Risk review Risk performance Operational risk Analysis of operational risk
Operational risk is the risk of direct or indirect impacts resulting from human factors, inadequate or failed internal processes and systems or external events.
This section provides an analysis of the Group’s operational risk profile, including events which have had a significant impact in 2015.
A small reduction in the number of recorded incidents occurring during the period
83%
of the Group’s net reportable operational risk events had a loss value of £50,000 or less
67%
of events are due to external fraud
| | | Analysis of operational risk This section provides an analysis of the Group’s operational risk profile, including events which have had a significant impact in 2016. Key metrics A small reduction in the number of recorded incidents occurring during the period 91% of the Group’s net reportable operational risk events had a loss value of £50,000 or less 65% of events by number are due to External Fraud | | | | | |
| | | 172178 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Operational risk Operational risk Operational risk is defined as any instance where there is a potential or actual impactthe risk of loss to the Group resultingfirm from inadequate or failed internal processes people,or systems, human factors or from andue to external event. The impactsevents (for example fraud) where the root cause is not due to the Group can be financial, including lossescredit or an unexpected financial gain, as well as non-financial such as customer detriment, reputational or regulatory consequences.market risks All disclosures in this section (page 173) are unaudited.unaudited unless otherwise stated. Overview Operational risks are inherent in all the Group’s business activities and are typical of any large enterprise. Itit is not always cost effective or possible to attempt to eliminate all operational risks and in any event it would not be possible to do so. Small losses fromrisks. The operational risk management framework is therefore focused on ensuring operational risks are expected to occuridentified, assessed and are accepted as part ofmitigated within the normal course of business.Group’s approved risk appetite. More material losses are less frequent and the Group seeks to reduce the likelihood of these in accordance with its risk appetite. The Operational Principal Riskprincipal risk comprises the following Key Risks: External suppliers, Financial crime, Financialrisks: financial reporting, Fraud, Information, Legal, Paymentsfraud, information, payments process, People, Premisespeople, premises and security, Taxation, Technologysupplier, tax, technology (including cyber security)cyber) and Transactiontransaction operations. In 2016 legal risk and financial crime risk were managed as part of operational risk. For definitions of these key risks see page 106.109. In order to ensure complete coverage of the potential adverse impacts on the Group arising from Operationaloperational risk, the Operationaloperational risk taxonomy extends beyond the Operational keyoperational risks listed above to cover areas included within Conductconduct and legal risk. This section provides an analysis of the Group’s operational risk profile, including events, those which are above the Bank’s reportable threshold, which have had a financial impact in 2015.2016. For more information on Conductconduct risk events please see page 175.181. Summary of performance in the period During 2015,2016, total operational risk lossesa increased decreased to £241.3m (2014: £143.9m)£225.9m (2015: £283.5m) with a 3%4% reduction in the number of recorded events as compared to lastprior year. The loss for the year was primarily driven by a limited number of events in execution, delivery and process management category. Losses were mainly due to execution, deliverycategories and process management impacts, external fraud and business disruption and system failures.fraud.
Operational risk profile Within operational risk, a high proportion of risk events have a low associated financial cost and a very small proportion of operational risk events will have a material impact on the financial results of the Group. In 2015, 82.6% (2014: 78.0%)2016, 90.8% of the Group’s net reportable operational risk events had a value of £50,000 or less (2015: 88.1%) and accounted for 11.1% (2014: 30.5%23.2% (2015: 14.5%) of the Group’s total net loss impact. The analysis below presents the Group’s operational risk events by Basel event category: § | | Execution, delivery and process management impacts increased to £137.5m (2014: £81.3m)£124.4m (2015: £111.8m) and accounted for 57.0% (2014: 56.5%55.0% (2015: 39.4%) of overall operational risk losses. The events in this category are typical of the banking industry as a whole where high volumes of transactions are processed on a daily basis. The increases in impacts were largely driven by limited number of events with higher loss valuesvalues. |
§ | | External fraud (66.6%(65.2%) is the category with the highest frequency of events where high volume, low value events are also consistent with industry experience, driven by debit and credit card fraud. This accounted for 27.4%25.8% of overall operational risk losses in the year from 29.7%22.2% last year. |
The Group’s operational risk profile is informed bybottom-up risk assessments undertaken by each business unit andtop-down qualitative review from the Governance Risk and Control Committeesoperational risk management for each of the key risks.risk type. External fraudFraud and technology are highlighted as key operational risk exposures. DevelopmentsThe operational risk profile is also informed by a number of risk themes: change, resilience and cyber security. These represent material risk to the bank but have scope which sits across multiple risk types, and therefore require a risk management approach which is integrated within relevant risk and control frameworks. Investment continues to be made in new and enhanced fraud prevention systems and transaction profiling tools underway to combat the increasing externallevel of fraud frequency especially inattempts being made and to minimise any disruption to genuine transactions. Fraud remains anindustry-wide threat and the credit cards, digital banking, unauthorised trading and social engineering. Cyber security riskBank continues to be an area of attention givenwork closely with external partners on various prevention initiatives. Technology, resilience and cyber security risks evolve rapidly so the increasing sophistication and scope of potential cyber-attack. Risks to technology and Cyber security change rapidly and requireBank maintains continued focus and investment.investment in our control environment to manage these risks, and actively partners with peers and relevant organisations to understand and disrupt threats originating outside the Bank.
For further information see Operational Risk managementManagement section on pages 106109 to 107.110.
| Operational risk events by risk category % of total risk events by count | |
| Operational risk events by risk category % of total risk events by value | |
Note a | FiguresThe data disclosed include operational risk losses for reportable events (excluding Africa) having impact of +/-> £10,000 and exclude events that are conduct risk, aggregatedaggregate and boundary events. A boundary event is an operational risk event that results in a credit risk impact. Legal risk events are also included. Due to the nature of risk events that keep evolving, prior year losses are updated. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 173179 |
Risk review Risk performance Conduct risk Analysis of conduct risk Conduct risk is the risk that detriment is caused to our customers, clients, counterparties or Barclays because of inappropriate judgement in the execution of our business activities.
This section details Barclays’ conduct risk profile and provides information on key 20152016 risk events and risk mitigation actions Barclays has taken. Conduct riskKey metrics
5.4/10 on the conduct Balanced Scorecard The Conduct Reputation Balanced Scorecard Measure Driven has been sustained mainly by improvements in the following components:our focus on:
| § | | OperatesOperating openly and transparently |
| § | | HasHaving high quality products and services |
| § | | DeliversDelivering value for money for customers and clients |
| | | 174180 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Risk performance Conduct risk Conduct risk Conduct risk is the risk thatof detriment is caused to our customers, clients, counterpartiesmarket integrity, competition or Barclays becausefrom the inappropriate supply of inappropriate judgement in the executionfinancial services, including instances of our business activities.wilful or negligent conduct All disclosures in this section (pages 175 to 176) are unaudited unless otherwise statedstated. Conduct riskRisk Doing the right thing in the right wayBarclays strives to create and maintain mutually beneficial long-term relationships with our customers and clients. This means taking personal accountability for understanding their needs and providing suitablethem with products and services that meet those needs appropriately and help them manage their financial affairs.
As a transatlantic consumer, corporate and investment bank, Barclays also plays a critical role in promoting fair, open and transparent markets, as well as fostering shared growth for customers and clients is central to Barclays’ strategy. Barclays is committed to Group-wide changes to business practices, governance and mindset and behaviours so that good customer outcomes and protecting market integrity are integral to the way Barclays operates. Improving our reputation in the market will demonstrate to customersall. This means abiding by standards that in Barclays they have a partner they can trust. The FCA expects Barclays Boardmany cases are higher than those set by the laws and Senior Management, supported by a governance structure and suitable management information to: have oversight of and mitigate conduct risks; consistently promote appropriate conduct outcomes; and drive the embedding of a conduct focused culture.
A key driver in delivering effective structural reform is balancing regulatory requirements and ensuring good outcomes for customers. The structural reform programme expects conduct risks to be managed through existing committees with escalation to the Structural Reform Programme Implementation Steering Committee as appropriate.
Furthermore, Barclays is working to implement new regulatory requirements related to Individual Accountability whichregulations that apply to all UK banks and certain investment firms. The three new interlinking elements under the new rules on Strengthening Personal Accountability are: Senior Managers Regime, Certification Regime and a new set of Conduct Rules. These represent some of the most important regulatory changes in banking to date. At Barclays, we welcome these changes, and recognise the importance of how strengthening personal accountability will enhance the way we work, and will provide us with a framework to demonstrate our integrity and professionalism.business.
Reputation risk
Reputation risk is designated as a key risk by Barclays. It is defined as the risk of damage to the Group’s brand arising from any association, action or inaction which is perceived by stakeholders to be inappropriate or unethical. While reputation risk can arise anywhere in the business, it is aligned with the Conduct Principal Risk due to the significant correlation between them as issues relating to conduct have material reputation impact.
The Reputation Key Risk Framework governs how Barclays’ businesses and functions implement effective risk management in this area, including identification, evaluation, prioritisation, mitigation, escalation and reporting of current and emerging reputation risks. Forward looking reputation risk horizon scanning is undertaken centrally and validated via ongoing stakeholder dialogue with a variety of relevant opinion formers. This provides an informed and broad view of the external reputation environment and identifies issues and themes likely to impact the reputation of Barclays and the finance sector.
Summary of performance in the period In 2016, Barclays remained focused on the continuous improvements being made to manage risk effectively, with an emphasis on enhancing governance and management information to help ensure forward-looking risks are identified at earlier stages. The cornerstone of our efforts is the Strengthening Personal Accountability programme, which is designed to strengthen our culture and embed our values throughout the organisation. The programme includes implementation of the UK Senior Manager, Certification and Conduct Rules, in addition to similar regulatory requirements and expectations in other jurisdictions. The Group introduced dashboards on conduct, culture, complaints and citizenship to help the Board and senior management oversee and measure change across the organisation and take action where necessary to address issues and encourage progress. The dashboard data reflects a downward trend in conduct issues and complaints alongside an upward trend in confidence with respect to speaking up about potential conduct risks and issues. Barclays proactively undertook ‘Lessons Learned’ assessments on issues identified in enforcement matters across the industry, including the use of performance metrics and formulaic incentives in remuneration and performance management. The Group also enhanced the role and impact of conduct issues in the remuneration process at both the individual and business level. Businesses have continued to assess the potential customer, client and market impacts of strategic change and structural reform. As part of the 2016 Medium-Term Planning Process, material conduct risks associated with strategic and financial plans were assessed. Divestment ofNon-Core assets and businesses remains subject to a governance framework that considers the impacts on customer and client choice, market access, liquidity and other conduct risks. The Group also continually assesses the impact of economic and geopolitical events on customers, clients and markets. In anticipation of the EU Referendum, Barclays successfully applied incident management techniques to prepare for and respond to customer and client needs and provide market liquidity. Throughout 2014 the Conduct Risk Programme designed relevant governance, reporting, training, and definition of roles and responsibilities, and from January 2015 conduct risk management was fully integrated within the businesses. Following stakeholder feedback additional improvements have been made to enhance conduct risk management in 2015. The main aims have been to:
§ | | simplify the governance processes |
§ | | improve the quality, completeness and reliability of Management information reported, including reporting against forward looking risk indicators |
§ | | improve the quality of Conduct Material Risk Assessment through more explanation of what good looks like and provision of targeted support to both the business and Compliance |
§ | | develop more productive relationships with internal stakeholders and other control functions, including colleagues across Compliance |
§ | | increase staff awareness of Conduct risk through e-learning |
§ | | align Conduct risk management more closely with HR colleagues |
§ | | build a relationship with Operational risk to leverage technology and in recognition of the high level of crossover between the two risks |
§ | | improve the consideration of Conduct risk in strategy setting and review processes. |
Throughout 2015,2016 conduct risks were raised by businesses for consideration by the RepCo. RepCo hasBoard Reputation Committee. The Board Reputation Committee reviewed the risks raised and whether the managementmanagement’s proposed actions proposed were appropriate to ensuremanage the risks effectively. In addition to structural reform, strategic change, the EU Referendum and lessons learned assessments, the Board Reputation Committee reviewed
issues related to data security, cyber risk and technology resilience. While there has been significant progress, a need for continued focus remains. Barclays must drive cultural change through all levels of the organisation and evidence consistent consideration of conduct risks were managed effectively. Below are general themes ofin long-term, medium-term andday-to-day strategic decisions. The Group must continue to refine its conduct riskgovernance structure, particularly with respect to forward-looking management information to drive proactive decision making and control discussed by Senior Management at the RepCo in 2015.
§ | | Barclays continues to be party to litigation and regulatory actions involving claimants who consider that inappropriate conduct by the Group has caused damage. Details in respect of such investigations and related litigation are included in Note 29 Legal, competition and regulatory matters on page (261). |
§ | | The need to ensure that customers, and especially vulnerable customers, experiencing financial difficulty are treated appropriately and with due regard to their circumstances as a means to ensuring good customer outcomes. |
§ | | There are potential risks arising from conflicts of interest, including those related to the benchmark submission process. While primarily relevant to the Investment Bank, these potential risks may also impact the corporate and retail customer base. Barclays seeks to mitigate these risks by the maintaining of clear operating models and effective identification and management of conflicts of interest controls and supervisory oversight. |
§ | | The risk of mismanagement of customer data. |
§ | | Due to the volume and pace of strategic change, good customer outcomes are not sufficiently considered and achieved. |
§ | | Customers have degraded access to systems and information such as transaction delays, inability to access funds and incorrect information, increased risk of fraudulent activity and payment delays. |
§ | | The risk of digitisation that automated channels may not deliver the services that customers expect, the impact on vulnerable customers, fraud and cyber security risk. The need for strong and robust product design to ensure the minimisation or avoidance of adverse customer outcomes through the sale of products, services and advice inappropriate for a target market. |
§ | | Client assets sourcebook (CASS) – Due to the unprecedented level of change the firm is to implement over the next 12 months, the current stable environment relating to CASS is affected. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 175 |
Such conduct related themes also carry material reputation risk implications. Another area of reputation riskaddress issues that continues to intensify relates to public, regulatory and political concernspersist around the integration of climate change issuesgeneral control environment and impacts into finance sector operations and strategy.
§infrastructure. | | The intergovernmental conference on climate change in December 2015 agreed to keep global warming to within 2ºC, which will require significant and far reaching policy and regulation to constrain the combustion of fossil fuel reserves. This will impact many sectors, however, there has been significant activity during 2015 on furthering the finance sector’s understanding of the potential financial, operational and strategic implications of climate change. In particular, the Financial Stability Board (FSB) recommended a proposal to the G20 for the creation of an industry-led disclosure task force on climate-related risks in November 2015. This taskforce has been established with the mandate to consider the physical, liability and transition risks associated with climate change; identify effective corporate financial disclosures and develop a set of recommendations for climate-related disclosures. Improving the quality and consistency of climate financial risk disclosures by companies will enable the effective disclosure and analysis of material information by lenders, insurers, investors and other stakeholders. |
Barclays participates in a number of industry groups looking at these issues and is assessing the implications for our global business.
Increasing the awareness of all staff of the importance of good customer outcomes and protecting market integrity has been a priority in 2015. Over 97% of Barclays staff have successfully completed training in this area.
The Group continued to incur significant costs in relation to litigation and conduct matters, please refer to Note 29 Legal, competition and regulatory matters and Note 27 Provisions for further detail. Litigation and conduct chargesCosts include customer redress and remediation, as well as expenses including damages, fines remediation of affected customers or clients, other penalties or settlements incurred in connection with legal, competition and regulatory matters. settlements. Resolution of these matters remains a necessary and important part of delivering the Group’s strategy but there are early signs that we are driving better outcomes for customers from a more thoughtful consideration of our customers’ needs. As a result of increased awareness and early consideration of conduct risk in the business, a number of actions have been takenan ongoing commitment to improve customer outcomes including:oversight of culture and conduct.
Reputation Risk has been managed as a Key Risk under Conduct Risk, prior to beingre-designated as a Principal Risk with effect from 2017. Barclays association with sensitive sectors is often an area of concern for stakeholders and the following topics were of particular interest during the year: § | | proactive considerationClimate change and the management of potential customer detriment associatedclimate risks is an increasingly important issue for the banking sector. There has been an increase in the level of interest in our response to climate change from a number of different stakeholder groups, largely driven by the ratification of COP21 requirements and publication of draft recommendations by the Financial Stability Board’s Taskforce on Climate-related Financial Disclosures for annual reports. We are undertaking a review of our global energy sector client portfolio, in order to develop a strategic approach that is sustainable in the long term. We expect credit appetite to fossil fuels more broadly to decrease over time due to regulatory requirements, political appetite and moves towards development of cleaner energy sources, with Barclays’ strategyparticular short-term focus on coal. In the meantime, we are actively pursuing opportunities in the green energy and renewable sectors. Please refer to simplify its business and product. For example, change programmes monitoring customers subject to multiple changes including platform and online migrationshome.barclays/citizenship/our-reporting.html for further information. |
§ | | applicationSupporting the manufacture and export of more stringent residential mortgage requirementsmilitary and riot control goods and services is a reputation risk for the financial services sector. Political and public concern in particular relates to buy-to-let mortgage applicants, ensuring better lending decisionsthe use of weapons against civilians in conflict situations and to support unjustified external aggression. Our Defence Policy mandates our relationship with clients in this sector and includes a number of restrictions regarding client activities. For example, it is our policy not to finance trade in, or manufacture of, nuclear, chemical, biological or other weapons of mass destruction. A formal governance structure is in place to review high risk defence relationships and trade transactions on a case by case basis, taking into account the client, types of goods, end user and country risk. |
§ | | enhanced surveillance monitoringThe banking sector has come under increased scrutiny for its perceived indirect involvement in human rights abuses committed by clients and customers. Barclays Group Statement on Human Rights outlines how we manage our impacts across four key areas: employees, local communities, suppliers and clients/customers, taking into account the Investment Bank identifyingUN Framework and proactivelyGuiding Principles on business and human rights and other internationally recognised human rights standards. The UK Modern Slavery Act which came into force in October 2015 has helped raise awareness of the role business plays in managing activity which appearhuman rights impacts. We are committed to cause unusual market impactcombatting the risk of modern slavery or human trafficking in our supply chain or in any part of our business and Barclays Group Statement on Modern Slavery is available on home.barclays/content/dam/barclayspublic/docs/Citizenship/Policy-Positions/MSA2016.pdf |
§ | | improvements in key areas suchReputation Risk may also arise as bereavement and power of Attorney and ongoing training to equip staff to support customers in vulnerable circumstances and |
§ | | separation plans of Non-Core businesses to consider customer outcomes. |
Salz recommendations
The Board commissioned a reviewresult of Barclays’ business practicesissues and incidents relevant to other Principal Risks, in July 2012, led by Sir Anthony Salz. The report contained 34 recommendations that can be categorised broadly under Regulatory, Culture, Board Governance, People Pay and Management Oversight and Risk Management. Please refer to previous annual updates for further detail of past actions taken. All actions to implement the recommendations have been completed and independently validated. The Group continues to monitor the actions to ensure that they become fully embedded throughout the organisation.
particular othernon-financial risks e.g. Conduct reputation measureor Operational Risk. To aid monitoring of progress in the management of conduct, a ‘Conduct Reputation’ measure is included within Barclays’ Balanced Scorecard. The conduct measure is developed through a conduct and reputation survey, undertaken by YouGov, across a range of respondents including business and political stakeholders, the media, NGOs, charities and other opinion formers across key geographies (the UK, Europe, Africa, the US and Asia).
In 2015 Barclays made progress on its Conduct measure recording a score of 5.4 (2014: 5.3). ‘Operates openly and transparently’, ‘Has high quality products and services’ and ‘Delivers value for money for customers and clients’ have all improved according to audience perception. Performance on two components, ‘Treats staff well at all levels of the business’ and ‘it can be trusted’ have declined slightly. In terms of target we are below where we would like to be for 2015, although overall progress on the measure is in line with our expectations and puts our 2018 target within reach.
| | | 176 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 181 |
Risk review Supervision and regulation Supervision of the Group 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. These apply to business operations, affectimpact financial returns and include reserve and reporting requirements and prudential and conduct of business regulations. These requirements are set by the relevant central banks and regulatory authorities that authorise, regulate and supervise the Group in the jurisdictions in which it operates. The requirements generally reflect global standards developed by, amongamongst others, the Basel Committee on Banking Supervision (BCBS) and, the International Organization of Securities Commissions.Commissions (IOSCO) and the Financial Stability Board (FSB). They also reflect requirements imposed directly by, or derived from, EU legislation. Various bodies, such as central banks, also create voluntary Codes of Conduct which affect the way the Group does business. Regulatory developments impact the Group globally. We focus particularly on EU, UK and US regulation due to the location of Barclays’ principal areas of business. Regulations elsewhere will affect Barclays due to the location of its branches, subsidiaries and, in some cases, clients. The Group and certain of its members are subject to supervisory stress testing exercises in a number of jurisdictions. These exercises currently include the programmes of the Bank of England (BoE), the European Banking Authority (EBA), the Federal Deposit Insurance Corporation (FDIC), the Board of Governors of the Federal Reserve System (FRB) and the South African Reserve Bank (SARB). These exercises are designed to assess the resilience of banks to adverse economic or financial developments and ensure that they have robust, forward-looking capital planning processes that account for the risks associated with their business profile. Assessment by regulators is on both a quantitative and qualitative basis, the latter focusing on the Group’s data provision, stress testing capability and internal management processes and controls. Failure to meet requirements of regulatory stress tests, or the failure by regulators to approve the stress test results and capital plans of the Group or its members subject to these exercises, could result in the Group or certain of its members being required to enhance its capital position or limit capital distributions, to any external holders of its equity or capital or within the Group. In 2016 Barclays and certain of its subsidiaries completed stress testing pursuant to the requirements of the BoE, EBA and SARB. Barclays was not required to submit revised plans as a result of these tests. Further details of Barclays capital requirements are set out below under ‘Prudential Developments’. Supervision in the EU Financial regulation in the UK is to a significant degree shaped and influenced by EU legislation. This provides the structure of the European Single Market, an important feature of which is the framework for the regulation of authorised firms in the EU. This framework is designed to enable a credit institution or investment firm authorised in one EU member state to conduct banking or investment business in another member state through the establishment of branches or by the provision of services on a cross-border basis without the need for local authorisation. Barclays’ operations in Europe are authorised and regulated by a combination of both home and host regulators. The impact of the UK’s departure from the EU in this respect and, more broadly, its impact on the UK domestic regulatory framework, is yet to be determined. See the Risk Factor entitled ‘EU referendum’, which discusses the potential impact of the UK’s departure from the EU in more detail. In the UK, the BoE has responsibility for monitoring the UK financial system as a whole. Theday-to-day regulation and supervision of the Group is divided between the PRA – which is established as part of the Bank of England –Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA). In addition, the Financial Policy Committee (FPC) of the BoE has significant influence on the prudential requirements that may be imposed on the banking system through its powers of direction and recommendation. The FPC has direction powers over leverage ratios and sectoral capital requirements, which it sets in relation to exposures to specific sectors judged to pose a risk to the financial system as a whole and which apply to all UK banks and building societies generally, rather than to the Group specifically. The government has also made the FPC responsible for the Basel III countercyclical capital buffer, introduced in the EU under the CRD and CRR (collectively known as CRD IV). The Financial Services and Markets Act 2000 (as amended)(FSMA) remains the principal statute under which financial institutions are regulated in the UK. Barclays Bank PLC is authorised under FSMA to carry on a range of regulated activities within the UK. It is also authorised and subject to solo and consolidated prudential supervision by the PRA and subject to conduct regulation and supervision by the FCA. Barclays Bank PLC’s Italian and French branches are also subject to direct supervision by the European Central Bank (ECB).
In its role as supervisor, the PRA 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 PRA’s continuing supervision of financial institutions is conducted through a variety of regulatory tools, including the collection of information by way of prudential returns, reports obtained from skilled persons, visits to firms and regular meetings with management to discuss issues such as performance, risk management, conduct and culture and strategy. The regulation and supervision of market conduct matters is the responsibility of the FCA. FCAThe FCA’s regulation of the UK firms in the Group is carried out through a combination of continuous assessment;assessment, regular thematic and project work based on the FCA’s sector assessments, which analyse the different areas of the market and the risks that may lie ahead; and responding to crystallised risks, seeking to ensure remediation as appropriate. Global regulatory developments
Regulatory change continues to affect all large financial institutions; globally notably through the G20, Financial Stability Board (FSB) and Basel Committee on Banking Supervision (BCBS), regionally through the EU and nationally, especially in the UK and US. Further changes to prudential requirements and further refinements to the definitions of capital and liquid assets may affect the Group’s planned activities and could increase costs and contribute to adverse impacts on the Group’s earnings. Similarly, increased requirements in relation to capital markets activities and to market conduct requirements may affect the Group’s planned activities and could increase costs and thereby contribute to adverse impacts on the Group’s earnings.
The programme of reform of the global regulatory framework previously agreed by G20 Heads of Government in April 2009 has continued to be taken forward throughout 2015 and into 2016.
The FSB has been designated by the G20 as the body responsible for co-ordinating the delivery of the global reform programme in relation to the financial services industry. It has focused particularly on the risks posed by systemically important financial institutions. In 2011, G20 Heads of Government adopted FSB proposals to reform the regulation of Global Systematically Important Financial Institutions (G-SIFIs), including Global Systematically Important Banks (G-SIBs). A key element of this programme is that G-SIFIs should be capable of being resolved without recourse to taxpayer support. Barclays has been designated a G-SIB by the FSB. G-SIBs are subject to a number of requirements, including additional loss absorption capacity above that required by Basel III standards (see below). The surcharges rise in increments from 1% to 2.5% of risk weighted assets (with an empty category of 3.5% for institutions that increase the extent of the systemic risk they pose which is intended to discourage institutions from developing their business in a way that heightens their systemic nature). This additional buffer must be met with common equity.
In its November 2015 list of G-SIBs, the FSB confirmed Barclays position in a category that requires it to meet a 2% surcharge. The additional loss absorbency requirements apply to those financial institutions identified in November 2014 as G-SIBs and will be phased in starting from January 2016, with full implementation due to have taken place by January 2019. G-SIBs have also been required to meet higher supervisory expectations for data aggregation capabilities since 1 January 2016. In the EU the requirements for a systemic risk buffer have been implemented through mechanisms under CRD IV.
The BCBS issued the final guidelines on Basel III capital and liquidity standards in June 2011, with revisions to counterparty credit risk in July and November 2011. Regulatory liquidity revisions were agreed in January 2013 to the definitions of high quality liquid assets and net cash outflows for the purpose of calculating the Liquidity Coverage Ratio, as well as establishing a timetable for phasing in the standard from January 2016. The requirements of Basel III as a whole are subject to a number of transitional provisions that run to the end of 2018. The Group is, however, primarily subject to the EU’s implementation of the Basel III standard through CRD IV (see below).
The BCBS also maintains a number of active workstreams that will affect the Group. In January 2016, the BCBS endorsed a new market risk framework, including rules made as a result of its fundamental review of the trading book, which will take effect in 2019. The Committee also continues to focus on the consistency of risk weighting of assets and explaining the variations between banks. This includes revisions to the standardised rules for credit risk, counterparty credit risk, CVA volatility risk and operational risk. The Committee is also considering whether to limit the use of internal models in certain areas (for example, removing the Advanced Measurement Approach for operational risk) and applying RWA floors based on the standardised approaches. The final standards for measuring and controlling large exposures were published by the Basel Committee in April 2014 to take effect in 2019. Also in April 2014, the Basel Committee published the final standard for calculating regulatory capital for banks’ exposure to Central Counterparties (CCPs). In conjunction with the International Organization of Securities Commissions, the BCBS published a revised version of the framework for margin requirements for non-centrally cleared derivatives in March 2015, which recommends the phasing in of requirements for initial and variation margin from 1 September 2016.
In November 2015 the FSB finalised its proposals to enhance the loss absorbing capacity of G-SIBs to ensure that there is sufficient loss absorbing and recapitalisation capacity available in resolution to implement an orderly resolution which minimises the impact on financial stability, ensures the continuity of critical functions and avoids exposing taxpayers to losses. To this end, the FSB has set a new minimum requirement for ‘Total Loss Absorbing Capacity’ (TLAC). From 1 January 2019, the FSB will expect Barclays and other G-SIBs to meet a minimum TLAC requirement of 16% of the risk weighted assets of their respective resolution groups, rising to 18% from 1 January 2022. From that time, G-SIBs will also be expected to hold TLAC equivalent to at least 6% of the Basel III leverage ratio denominator, rising to 6.75% from 1 January 2022. The BCBS is also consulting on the capital treatment of banks’ TLAC holdings from other issuers.
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Also in November 2015, Barclays re-adhered to a protocol which was developed by the International Swaps and Derivatives Association (ISDA) in coordination with the FSB to support cross-border resolution and reduce systemic risk. By re-adhering to this protocol Barclays is able, in ISDA Master Agreements and related credit support agreements, as well as certain repo and stock lending agreements, entered into with other adherents, to opt in to different resolution regimes such that cross-default and direct default rights that would otherwise arise under the terms of such agreements would be stayed temporarily (and in some circumstances overridden) on the resolution of one of the parties.
Influence of European legislation
Financial regulation in the UK is to a significant degree shaped and influenced by EU legislation. This provides the structure of the European Single Market, 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 and host regulators.
EU developments
The EU continues to develop its regulatory structure in response to the financial and Eurozone crises. At the December 2012 meeting of EU Finance Ministers it was agreed to establish a single supervisory mechanism within the Eurozone. The European Central Bank (ECB) has had responsibility for the supervision of the most significant credit institutions, financial holding companies or mixed financial holding companies within the Eurozone since November 2014. The ECB can also extend its supervision to institutions of significant relevance that have established subsidiaries in more than one participating member state and with significant cross-border assets or liabilities.
Notwithstanding the new responsibilities of the ECB, the European Banking Authority (EBA), along with the other European Supervisory Authorities, remains charged with the development of a single rulebook for the EU as a whole and with enhancing co-operation between national supervisory authorities. The European Securities Markets Authority (ESMA) has a similar role in relation to the capital markets and to banks and other firms doing investment and capital markets business. The progressive reduction of national discretion on the part of national regulatory authorities within the EU may lead to the elimination of prudential arrangements that have been agreed with those authorities. This may serve to increase or decrease the amount of capital and other resources that the Group is required to hold. The overall effect is not clear and may only become evident over a number of years. The EBA and ESMA each have the power to mediate between and override national authorities under certain circumstances.
Responsibility for day-to-day supervision remains with national authorities and for banks, like Barclays Bank PLC, that are incorporated in countries that will not participate in the single supervisory mechanism, is expected to remain so. Barclays Bank PLC Italian and French branches are, however, also subject to direct supervision by the ECB.
Basel III and the capital surcharge for G-SIBs have been, or will be, implemented in the EU by CRD IV. The provisions of CRD IV either entered into force automatically on, or had to be implemented in member states by, 1 January 2014. Much of the ongoing and outstanding implementation is expected to be done through binding technical standards being developed by the EBA, that are intended to ensure a harmonised application of rules through the EU, some of which are still in the process of being developed and adopted.
A significant addition to the EU legislative framework for financial institutions has been the Bank Recovery and Resolution Directive (BRRD) which establishes a framework for the recovery and resolution of EU credit institutions and investment firms. The BRRD is intended to implement many of the requirements of the FSB’s ‘Key Attributes of Effective Resolution Regimes for Financial Institutions’. The BRRD entered into force in July 2014. All of the provisions of the BRRD had to be implemented in the law of EU Member States by 1 January 2015 except for those relating to bail-in which had to be implemented in Member States by 1 January 2016.
As implemented, the BRRD gives resolution authorities powers to intervene in and resolve a financial institution that is no longer viable, including through the transfers of business and, when implemented in relevant member states, creditor financed recapitalisation (bail-in within resolution) that allocates losses to shareholders and unsecured and uninsured creditors in their order of seniority, at a regulator determined point of non-viability that may precede insolvency. The concept of bail-in will affect the rights of unsecured creditors subject to any bail-in in the event of a resolution of a failing bank.
The BRRD also requires competent authorities to impose a ‘Minimum Requirement for own funds and Eligible Liabilities’ (‘MREL’) on financial institutions to facilitate the effective exercise of the bail-in tool referred to above. This will have to be co-ordinated with the FSB’s TLAC standards mentioned above and, as set out in more detail below, the BoE has stated that MREL for UK G-SIBs will be set consistently with those standards. The BRRD also requires the development of recovery and resolution plans at group and firm level. The BRRD sets out a harmonised set of resolution tools across the EU, including the power to impose a temporary stay on the rights of creditors to terminate, accelerate or close out contracts. There are also significant funding implications for financial institutions, which include the establishment of pre-funded resolution funds of 1% of covered deposits to be built up over 10 years, although the proposal envisages that national deposit guarantee schemes may be able to fulfil this function (see directly below). The UK Government uses the bank levy to meet the ex ante funding requirements set out in the BRRD.
The Directive on Deposit Guarantee Schemes provides that national deposit guarantee schemes should be pre-funded, with the funds to be raised over a number of years. The funds of national deposit guarantee scheme are to total 0.8% of the covered deposits of its members by the date 10 years after the entry into force of the recast directive. In the UK, the pre-funding requirements of the UK Financial Services Compensation Scheme are met through the bank levy.
In October 2012, a group of experts set up by the European Commission to consider possible reform of the structure of the EU banking sector presented its report. Among other things, the Group recommended the mandatory separation of proprietary trading and other high risk trading activities from other banking activities. The European Commission issued proposals to implement these recommendations in January 2014. These proposals would apply to institutions that have been identified as G-SIBs under CRD IV and envisage, among other things: (i) a ban on proprietary trading in financial instruments and commodities; and (ii) rules on the economic, legal, governance, and operational links between the separated trading entity and the rest of the banking group.
Contemporaneously, the European Commission also adopted proposals to enhance the transparency of shadow banking, especially in relation to securities financing transactions. These proposals have still yet to be considered formally by the European Parliament and by the Council.
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Risk review
Supervision and regulation
The European Market Infrastructure Regulation (EMIR) has introduced requirements designed to improve transparency and reduce the risks associated with the derivatives market, some of which are still to be brought in. When it is fully in force, EMIR will require entities that enter into any form of derivative contract, including interest rate, foreign exchange, equity, credit and commodity derivatives: to report specified details of every derivative contract that they enter to a trade repository (this requirement is already in force); implement risk management standards for all bilateral over-the-counter derivatives trades that are not cleared by a central counterparty (this requirement is also partly in force, but requirements relating to the mandatory provision of margin are to be phased in from 2016); and clear, through a central counterparty, over-the-counter derivatives, but only where those derivatives are subject to a mandatory clearing obligation. The obligation to clear derivatives will only apply to certain counterparties and specified types of derivative. EMIR has potential operational and financial impacts on the Group, including by imposing collateral requirements.
CRD IV aims to complement EMIR by applying higher capital requirements for bilateral, uncleared over-the-counter derivative trades. Lower capital requirements for cleared derivatives trades are only available if the central counterparty through which the trade is cleared is recognised as a ‘qualifying central counterparty’ which has been authorised or recognised under EMIR (in accordance with binding technical standards).
Amendments to the Markets in Financial Instruments Directive (known as MiFID II) came into force in July 2014. These amendments take the form of a directive and a regulation, and will affect many of the investment markets in which the Group operates and the instruments in which it trades, and how it transacts with market counterparties and other customers. Changes to the MiFID regime include the introduction of a new type of trading venue (the organised trading facility), to capture non-equity trading that falls outside the current regime.
Investor protections have been strengthened, and new curbs imposed on high frequency and commodity trading. Pre- and post-trade transparency has been increased, and a new regime for third country firms introduced. The changes also include new requirements for non-discriminatory access to trading venues, central counterparties, and benchmarks, and harmonised supervisory powers and sanctions across the EU. While the final implementation date of MiFID II remains subject to discussions between various European bodies, member states will not have to apply the provisions of MiFID II until 3 January 2017 at the earliest, although recent communications by several European bodies has suggested that this date might be delayed by 12 months. Many of the provisions of MiFID II and its accompanying regulation will be implemented by means of technical standards to be drafted by ESMA. While ESMA has published its final report in respect of some of these technical standards, the impacts on the Group will not be clear until all of the relevant technical standards have been finalised and adopted.
Regulation in the UK
Recent developments in banking law and regulation in the UK have been dominated by legislation designed to ring-fence the retail and SME deposit-taking business of large banks. The content and the impact of this legislation are outlined above. The Banking Reform Act put in place a framework for this ring-fencing and secondary legislation passed in 2014 elaborated on the operation and application of the ring-fence. Ring-fencing rules have been consulted on by the PRA and the FCA and it is expected that final rules will be published during the first half of 2016 which will further determine how ring-fenced banks will be permitted to operate.
In addition to, and complementing a EU-wide stress testing exercise conducted on a sample of EU banks by the EBA, and in response to recommendations from the FPC, the BoE conducted a variant of the EU-wide stress test in 2014. The ‘UK variant’ test explored particular UK macroeconomic vulnerabilities facing the UK banking system. Key parameters of the test – including the design of the UK elements of the stress scenario – were designed by the BoE and approved by the FPC and the PRA. The BoE published key elements of its 2014 stress test in March 2015 and the results of its 2015 stress test on 1 December 2015. The FPC determined that no macroprudential actions on bank capital were required in response to the results of either test.ahead.
Both the PRA and the FCA have continued to develop and apply a more assertive approach to supervision and the application of existing standards. This may include application of standards that either anticipate or go beyond requirements established by global or EU standards, whether in relation to capital, leverage and liquidity, resolvability and resolution or matters of conduct. The PRA has implemented the European capital regime under CRD IV in the UK and has required banks to meet a 4.5% Pillar 1 CET1 requirement since 1 January 2015, which is up from 4% in 2014. The PRA has expected Barclays, in common with six other major UK banks and building societies, to meet a 7% CET1 ratio at the level of the consolidated Group since 1 January 2016. The FCA has retained an approach to enforcement based on credible deterrence that has continued to seeseen significant growth in the size of regulatory fines. The approach appears to be trending towards a more US model of enforcement including the use of Deferred Prosecution Agreements, vigorous enforcement of criminal and regulatory breaches, heightened fines and proposed measures related to increased corporate criminal liability and the failure to prevent the facilitation of tax evasion. The FCA has focused strongly on conduct risk and on customer outcomes and will continue to do so. This has included a focus on the design and operation of products, the behaviour of customers and the operation of markets. This may impactaffect both the incidence of conduct costs and increase the cost of remediation. The FCA has also increasingly focused on individual accountability within firms, as illustrated by the Senior Managers’ Regime and Certification Regime detailed below. On 1Supervision in the US
The supervisory framework of Barclays within the US is set out below in the section entitled ‘Regulation in the United States’. Supervision in South Africa In South Africa, BAGLs operations are supervised and regulated by the South African Reserve Bank (SARB), the Financial Services Board (SAFSB) as well as ancillary regulators including, amongst others, the Financial Intelligence Centre. SARB oversees the banking industry and follows a risk-based approach to supervision, whilst the SAFSB overseesnon-banking financial services such as insurance and investment businesses. The National Credit Regulator regulates consumer credit and the National Consumer Commission is responsible for other aspects of consumer protection not regulated under the jurisdiction of the SAFSB. It is intended that regulatory responsibilities in South Africa will in future be divided between the SARB, which will be responsible for prudential regulation, and the SAFSB, which will be responsible for matters of market conduct. The proposed ‘twin peaks’ legislation is currently going through the consultation phase of the Parliamentary process to enact the legislation. Barclays’ and BAGL’s operations in other African countries are primarily supervised and regulated by the central banks in the jurisdictions where Barclays or BAGL (as relevant) has a banking presence. In some African countries, the conduct of Barclays’ and BAGL’s operations and thenon-banking activities are also regulated by financial market authorities. | | | 182 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Risk review Supervision and regulation Supervision in Asia Pacific Barclays’ operations in Asia Pacific are supervised and regulated by a broad range of national regulators including: the Japan Financial Services Agency, the Bank of Japan, the Hong Kong Monetary Authority, the Hong Kong Securities and Futures Commission, the Monetary Authority of Singapore, the Reserve Bank of India, the Securities and Exchange Board of India and the People’s Bank of China, China’s State Administration of Foreign Exchange and the China Banking Regulatory Commission. Such supervision and regulation extends to activities conducted through branches of Barclays Bank PLC in the Asia Pacific region as well as subsidiaries of the Group. Global regulatory developments Regulatory change continues to affect all large financial institutions. Such change emanates from: global institutions such as the G20, FSB, IOSCO and BCBS; the European Union regionally; and national regulators, especially in the UK and US. 2016 gave rise to significant political changes in these markets, which have increased the level of regulatory and supervisory uncertainty faced by the Group and the financial markets more broadly. For more information, please see the Risk Factor entitled ‘Business conditions, general economy and geopolitical issues’. Further changes to financial services regulations impacting Barclays may affect the Group’s planned activities and could increase costs and contribute to adverse impacts on the Group’s earnings. The programme of reform of the global regulatory framework previously agreed by G20 Heads of Government in April 20142009 has continued to be taken forward throughout 2016. The G20 continues to monitor emerging risks and vulnerabilities in the FCA took overfinancial system and has stated that it will take action to address them if necessary. The FSB has been designated by the G20 as the body responsible forco-ordinating the delivery of the global reform programme in relation to the financial services industry. It has focused particularly on the risks posed by systemically important financial institutions. In 2011, G20 Heads of Government adopted FSB proposals to reform the regulation of consumer creditglobal systematically important financial institutions(G-SIFIs), including global systematically important banks(G-SIBs), such as Barclays. Regulatory developments in the UK. Thisfinancial services industry can broadly be categorised as follows: (a) prudential developments; (b) recovery and resolution developments, a key aspect of which is to ensure thatG-SIFIs are capable of being resolved without recourse to taxpayer support; (c) structural reform developments; (d) market infrastructure developments, aimed at enhancing client protection, financial stability and market integrity; and (e) conduct, culture and consumer protection developments. Regulation in the EU and the UK (a) Prudential developments The ‘Basel III’ capital and liquidity standards, defined by BCBS, are implemented in EU law through CRD IV. The provisions of CRD IV either applied from, or had to be implemented in EU Member States by, 1 January 2014. In addition, the PRA has ledexpected Barclays, in common with other major UK banks and building societies, to meet a 7% CET1 ratio at the level of the consolidated group since 1 January 2016. G-SIBs are subject to a regulatory regime for consumer credit whichnumber of additional prudential requirements, including the requirement to hold additional loss absorbing capacity and additional capital buffers above the level required by Basel III standards. The level ofG-SIB buffer is considerably more intensive and intrusive than was the case when consumer credit was regulatedset by the OfficeFSB according to a bank’s systemic importance and can range from 1% to 3.5% of Fair Trading.risk-weighted assets. TheG-SIB buffer must be met with common equity. In 2014November 2016, the FSB published an update to its list ofG-SIBs, reducing theG-SIB buffer that Barclays is required to hold from 2% to 1.5%, effective from January 2018. The additionalG-SIB buffer began to be phased in from January 2016, from whenG-SIBs were required to meet 25% of their designated buffer. This will increase to 50% in 2017, 75% in 2018 and 100% in January 2019.G-SIBs have also been required to meet higher supervisory expectations for data aggregation capabilities since 1 January 2016. Barclays is also subject to, among other buffers, a countercyclical capital buffer (CCyB) based on rates determined by the regulatory authorities in each jurisdiction in which Barclays maintains exposures. These rates may vary in either direction – for example, in July 2016, the FPC published a policy statement directing the PRA to reduce the UK CCyB rate from 0.5% to 0% of banks’ UK exposures with immediate effect, which was subsequently adopted by the PRA. In November 2016, the FPC reaffirmed that it expects to maintain a UK CCyB rate at 0% until at least June 2017, absent any material change in the economic outlook. The systemic risk buffer is expected to be set by the PRA for the first time in early 2019. The BCBS maintains a number of active workstreams that will affect the Group. In January 2016, the BCBS endorsed a new market risk framework, including rules made as a result of its fundamental review of the trading book, to take effect in 2019. The BCBS also continues to focus on the consistency of risk weighting of assets and on reducing the variations of approaches to risk weightings between banks. This includes revisions to the standardised rules for credit risk, CVA volatility risk and operational risk. The BCBS is also considering whether to limit the use of internal models in certain areas (for example, removing the Advanced Measurement Approach for operational risk) and to apply capital floors based on the standardised approaches. The BCBS has also recently published final standards on the Basel III securitisation framework, interest rate risk in the banking book and minimum capital requirements for market risk. The final standards for measuring and controlling large exposures were published by the BCBS in April 2014 to take effect in 2019. In November 2016 the European Commission adopted a proposal (commonly referred to as CRD V) to begin the legislative process for introducing these standards within the EU, with legislation expected to be finalised in late 2017 or early 2018. These proposals, if implemented in their current form would, among other things, overhaul existing rules relating to standardised and advanced market risk and the FCA consulted on new accountability mechanismsrules governing the inclusion of positions in the regulatory trading book. The proposals would also enhance rules for individuals workingcounterparty credit risk, strengthen requirements relating to leverage and large exposures and introduce a net stable funding ratio, requiring banks to ensure that they hold reliable sources of funds in banks, includingexcess of their required amount of stable funding over a one year period. CRD V also proposes to require thatnon-EU parent undertakings with two or more subsidiary firms established in the introduction of a new ‘Senior Managers Regime’ (aimed at a limited number of individuals with senior management responsibilities within a firm)EU establish an intermediate parent undertaking, authorised and a ‘Certification Regime’ (aimed at assessingestablished in, and monitoring the fitness and propriety of a wider range of employees who could pose a risk of significant harmsubject to the firm or anysupervision of, an EU Member State. This requirement would apply tonon-EU groups that have been identified asnon-EU Global Systemically Important Institutions(G-SIIs) under CRD IV (as amended) and to groups with entities in the EU with total assets of at least€30bn. If implemented as proposed, Barclays could be required to establish such a holding company in respect of its customers). This representsEU operations following the implementationUK’s departure from the EU. In January 2017, the BCBS announced that its finalisation of recommendations made byreforms to Basel III had been delayed. The BCBS is now expected to issue updated standards on the Parliamentarycalculation of operational risk, the standardised framework for credit risk, restrictions on the use of internal models (including the application of RWA floors based on standardised approaches), the leverage ratio (including a leverage ratio buffer forG-SIBs) and an output floor based on a standardised approach, later in 2017. As these measures will require EU and domestic legislation to be implemented, it is not clear when they will become effective. IFRS9 will be implemented in the European Union from 1 January 2018. In October 2016, the Basel Committee issued two documents on Banking Standardsthe treatment of accounting provisions in this area. The FCA and PRA have published final rules on most aspectsthe regulatory framework, to take account of the Senior Managers Regimefuture move to expected credit loss provisioning under IFRS and Financial Accounting Standards Board (FASB) standards. One paper considered transitional arrangements tophase-inthe regime will enter into force on 7 March 2016. Resolution of UK banking groups
The Banking Act 2009 (the Banking Act) provides a regime to allow the BoE (or, in certain circumstances, HM Treasury) to resolve failing banks in the UK, in consultation with the PRA and HM Treasury as appropriate. Under the Banking Act the BoE is given powers to: (i) make share transfer instruments pursuant to which all or someimmediate capital impact of the securities issued by a UK bank may be transferrednew provisioning standards, while the other discussed more fundamental changes to a commercial purchaser; (ii) the powerrecognition of provisions in regulatory capital and changes to transferthe risk weighting framework. The European Commission’s CRR2 proposal also proposed transitional arrangements. The regulatory capital impact of IFRS9 on the group will depend on the timing and final form of all or somethese initiatives.
(b) Recovery and Resolution developments An important component of the property, rightsEU legislative framework is the 2014 Bank Recovery and liabilitiesResolution Directive (BRRD) which establishes a framework for the recovery and resolution of aEU credit institutions and investment firms. The UK bank to a commercial purchaser or a ‘bridge bank’, which is a company wholly owned byimplemented the BoE; and (iii) transferBRRD through the impaired or problem assets of the relevant financial institution to an asset management vehicle to allow them to be managed over time. In addition, under the Banking Act, HM Treasury is given the power to take a bank into temporary public ownership by making one or more share transfer orders in which the transferee is a nominee of HM Treasury or a company wholly owned by HM Treasury. A share transfer instrument or 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. Certain of these powers also extend to companies within the same group as a UK bank.Financial | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 179183 |
TheServices (Banking Reform) Act 2013 (the Banking Reform Act), which amended the Banking Act also gives2009.
Pursuant to the Banking Act, UK resolution authorities are empowered to intervene in and resolve a UK financial institution that is no longer viable. Pursuant to these laws, the BoE (in consultation with the PRA and HM Treasury as appropriate) has several stabilisation options where a banking institution is failing or likely to fail: (i) transfer some or all of the securities of the bank to a commercial purchaser; (ii) transfer some or all of the property, rights and liabilities of the bank to a ‘bridge bank’ wholly owned by the BoE or to a commercial purchaser; (iii) transfer the impaired or problem assets to an asset management vehicle to allow them to be managed over time; (iv) cancel or reduce certain liabilities of the institution or convert liabilities to equity to absorb losses and recapitalise the institution and (v) in the case of a holding company, transfer the banking institution into temporary public ownership. In addition, the BoE may apply for a court insolvency order in order to wind up or liquidate the institution or to put the institution into special administration. When exercising any of its stabilisation powers, the BoE must generally provide that shareholders bear first losses, followed by creditors in accordance with the priority of their claims under normal insolvency proceedings. In order to enable the exercise of its stabilisation powers, the BoE may impose a temporary stay on the rights of creditors to terminate, accelerate or close out contracts, and in some cases to override events of default or termination rights that might otherwise be invoked as a result of the exercise of thea resolution powers. The Banking Act powers apply regardless of any contractual restrictions and compensation that may be payable in the context of both share transfer orders and property appropriation. The resolution powers described above were supplemented with effect from 31 December 2014 by a ‘bail-in’ power introduced under the Banking Reform Act. This power allows for the cancellation or modification of one or more liabilities (with the exception of ‘excluded liabilities’).
Excluded liabilities include (among other things): deposits protected under a deposit insurance scheme, secured liabilities (to the extent that they are secured), client assets and assets with an original maturity of less than seven days which are owed to a credit institution or investment firm. The BoE’s new bail-in powers were brought into force with effect from 1 January 2015.
action. In a consultation paper published in 2015, the BoE indicated that during 2016 it would notify banks of the final MREL requirements which would apply to them from 1 January 2020, when the regime will become fully effective. The Bank intends to apply MREL standards on a transitional basis from 2016 until that time. As noted above, during the consultation process, the BoE announced that it intends to set MREL for UK G-SIBs consistently with the FSB’s TLAC standards, and will not set any TLAC requirement for a UK G-SIB which is separate from or different to its MREL. Since 20 February 2015, UK banks and their parents have also been required to include in debt instruments, issued by them under the law of a non-EEA country, terms under which the relevant creditor recognises that the liability is subject to the exercise of bail-in powers by the BoE. Similar terms will be required in contracts governing other liabilities of UK banks and their parents if those liabilities are governed by the law of a non-EEA country, are not excluded liabilities underaddition, the Banking Act 2009 and are issued, entered into or arise after 31 December 2015. The PRA has made rules and will be consulting further in relation to contractual recognition of bail-in of liabilities governed by third country laws.
The Banking Act also gives the BoE the power to override, vary, or impose conditions or contractual obligations between a UK bank, its holding company and its group undertakings, in order to enable any transferee or successor bank to operate effectively after any of the resolution tools have been applied. There is also power for HM 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.
The Financial Services Act 2010, among other things, requires the UK regulators to make rules about remuneration and to require regulated firms to have a remuneration policy that is consistent with effective risk management. The Banking Act also amended FSMApowers apply regardless of any contractual restrictions and compensation that may be payable. In July 2016 the PRA issued final rules on ensuring operational continuity in resolution. The rules will apply from 1 January 2019 and will require banks to allowensure that their operational structures facilitate effective recovery and resolution planning and the FCAcontinued provision of functions critical to makethe economy in a resolution scenario.
In July 2016 the PRA issued final rules requiring firmson ensuring operational continuity in resolution. The rules will apply from 1 January 2019 and will require banks to operateensure that their operational structures facilitate effective recovery and resolution planning and the continued provision of fucntions ciritcal to the economy in a collective consumer redress schemeresolution scenario. The BRRD requires EU member states to deal with casesestablishpre-funded resolution funds of widespread failure1% of covered deposits to be built up by regulated firms31 December 2024. The UK government uses the Bank Levy to meet regulatorythis ex ante funding requirements, as well as the ex post contributions that would be required were theex-ante contributions not to cover costs or other expenses incurred by use of the resolution funds. Separately, Financial Services Compensation Scheme (FSCS), a deposit guarantee scheme established under the EU Deposit Guarantee Schemes Directive and Investor Schemes Directive, is funded through fees levied on participant firms, including Barclays. The FSCS operates when an authorised firm is unable or is likely to be unable to meet claims made against it by its customers because of its financial circumstances. Most insured deposits made with branches of Barclays Bank PLC within the EEA 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 question in another EEA member state. Deposits covered by the FSCS are preferred in an insolvency of the bank. In the event that the HM Treasury significantly increases the Bank Levy applicable to Barclays, or the FSCS significantly increases the fees levied on Barclays by virtue of its participation in the FSCS, the associated costs to the Group may have created consumer detriment.a material impact on the Group’s results. The BRRD also requires competent authorities to impose a ‘Minimum Requirement for own funds and Eligible Liabilities’ (‘MREL’) on financial institutions to facilitate the effective exercise of thebail-in tool referred to above. The EU proposes that forG-SIBs, such as Barclays, MREL should be set in accordance with the FSB Total Loss Absorbing Capital (TLAC) standard, discussed further below. In November 2015 the FSB finalised its proposals to enhance the loss-absorbing capacity ofG-SIBs to ensure that there is sufficient loss-absorbing and recapitalisation capacity available in resolution to implement an orderly resolution which minimises the impact on financial stability, ensures the continuity of critical functions and avoids exposing taxpayers to losses. To this end, the FSB has set a new minimum requirement for ‘total loss absorbing capacity’ (TLAC). The EU has proposed to implement the TLAC standard via the MREL requirement and the European Commission has proposed amendments in its CRD V proposal to achieve this. As the proposals remain in draft it is uncertain what the final requirements and timing will be. The statement of policy confirmed that the BoE will set MREL for UKG-SIBs as necessary to implement the TLAC standard and that institution or group-specific MREL requirements will depend on the preferred resolution strategy for that institution or group. The MREL will be phased in from 1 January 2019 and will be fully implemented by 1 January 2022, at which timeG-SIBs with resolution entities incorporated in the UK, including Barclays, will be required to meet a MREL equivalent to the higher of (i) two times the sum of its Pillar 1 and Pillar 2A requirements or (ii) the higher of two times its leverage ratio or 6.75% of leverage exposures. However, the PRA will review the MREL calibration by the end of 2020, including assessing the proposal for Pillar 2A recapitalisation which may drive a different 1 January 2022 MREL requirement than currently proposed. In addition, it is proposed that CET1 capital cannot be counted towards both MREL and the combined buffer requirement (CBR), meaning that the CBR will effectively be applied above both the Pillar 1 and Pillar 2A requirements relating to own funds and MREL, such that a failure to maintain sufficient other MREL resources could result in a breach of the CBR. In October 2016, the BCBS also published its final standard on the prudential treatment of banks’ investments in TLAC instruments issued by other institutions, confirming that internationally active banks (bothG-SIBs andnon-G-SIBs) must deduct their holdings of TLAC instruments that do not otherwise qualify as regulatory capital from their own Tier 2 capital. Where the investing bank owns less than 10% of the issuing bank’s common shares, TLAC holdings are to be deducted from Tier 2 capital only to the extent that they exceed 10% of the investing bank’s common equity (or 5% fornon-regulatory capital TLAC holdings); below this threshold, holdings would instead be subjected to risk-weighting.G-SIBs may only apply risk-weighting tonon-regulatory capital TLAC holdings by the 5% threshold where those holdings are in the trading book and are sold within 20 business days. In addition to the amendments proposed to align MREL forG-SIBs with the TLAC standard, in November 2016 the European Commission proposed a package of amendments to the BRRD, including to harmonise the priority ranking of unsecured debt instruments under national insolvency proceedings and to enhance the stabilisation tools by including a moratorium tool. The PRA has made rules that require authorised firms to draw up recovery plans and resolution packs.packs, as required by the BRRD. Recovery plans are designed to outline credible recovery actions that authorised firms could implement in the event of severe stress in order to restore their business to a stable and sustainable condition. The resolution pack contains detailed information on the authorised firm in question which will be used to develop resolution strategies for that firm, assess its current level of resolvability against the strategy, and to inform work on identifying barriers to the implementation of operational resolution plans. In additionthe UK, Recovery and Resolution Planning (RRP) work is considered part of continuing supervision. Removal of potential impediments to establishingan orderly resolution of the FPC, PRAGroup or one or more of its subsidiaries in considered as part of the BoE’s and FCA, the Financial Services Act 2012 among other things clarifies responsibilities between HM TreasuryPRA’s supervisory strategy for each firm, and the BoEPRA can require firms to make significant changes in order to enhance resolvability. Barclays currently provides the PRA with a Recovery Plan annually and with a Resolution Pack every other year. | | | 184 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Risk review Supervision and regulation The BoE’s preferred approach for the resolution of the Group is abail-in strategy with a single point of entry through Barclays PLC. Under such a strategy, Barclays PLC’s subsidiaries would remain operational while Barclays PLC’s eligible liabilities would be written down or converted to equity in order to recapitalise the Group and allow for the continued provision of services and operations throughout the resolution. This strategy relies on Barclays PLC having issued sufficient loss-absorbing capacity to effectbail-in and recapitalise the Group should the need arise. As a result the Group is focusing on transitioning eligible loss absorbing capital from subsidiary level to Barclays PLC level. (c) Structural reform developments Recent developments in banking law and regulation in the eventUK have included legislation designed to ring-fence the retail and smaller deposit-taking businesses of large banks. The Banking Reform Act put in place a financial crisis by givingframework for this ring-fencing and secondary legislation passed in 2014 elaborated on the Chancelloroperation and application of the Exchequer powersring-fence. Ring-fencing rules have been published by the PRA further determining how ring-fenced banks will be permitted to direct the BoE where public funds are at risk and there is a serious threat to financial stability. The Financial Services Act 2012 also establishes the objectives and accountabilities of the FPC, PRA and FCA; amends the conditions which need to be metoperate. Further rules published by a firm before it can be authorised; gives the FPC, PRA and FCA additional powers, including powers of direction over unregulated parent undertakings (such as Barclays PLC) where this is necessary to ensure effective consolidated supervision of the Group; and gives the FCA a powerset out the disclosures thatnon-ring-fenced banks are required to make temporary product intervention rules for a maximum period of six months, if necessary without consultation. The Financial Services Act 2013 also created a new criminal offence relating to the making of a false or misleading statement, or the creation of a false or misleading impression, in connection with the setting of a benchmark. Structural reform of banking groupsprospective customers that are individuals.
In additionrelation to providing forring-fencing in the bail-in stabilisation power referred to above,UK, FSMA, as amended by the Banking Reform Act, requires, amongamongst other things: (i)things, the separation of the retail and SMEsmaller-business deposit-taking activities of UK banks in the UK and branches of UK banks in the European Economic Area (EEA) into a legally distinct, operationally separate and economically independent entity, which will not be permitted to undertake a range of activities (so called ring-fencing); (ii) the increase of the loss absorbing capacity of. UK ring-fenced banks and large UK headquartered global systemically important banksbuilding societies will be required to levels higher thanhold CET1 capital in excess of that required under CRD IV from 2019. This requirement will be applied by the PRA on an institution specific basis according to a framework set out by the FPC. The implications of these requirements on Barclays are discussed in more detail in the Risk Factor entitled ‘Structural Reform’. At European level, the European Commission issued proposals recommending the mandatory separation of proprietary trading and (iii) preferenceother high-risk trading activities from banking activities in January 2014. These proposals would apply to deposits protected under the Financial Services Compensation Scheme if a bank enters insolvency. The Banking Reform Act also implements key recommendations of the Parliamentary Commission on Banking Standards. Recommendationsinstitutions that have been implementedidentified asG-SIIs under CRD IV and envisage, amongst other things: (i) a ban on proprietary trading in financial instruments and commodities; and (ii) rules on the economic, legal, governance, and operational links between the trading entities and other banking group entities. The legislative proposal includes a derogation in respect of the separation of trading activities (but not the ban on proprietary trading) for Member States which had adopted similar measures before the date of its publication. The legislative proposal remains under consideration by the European Parliament and the Council of the EU.
(d) Market Infrastructure developments The European Market Infrastructure Regulation (EMIR) has introduced requirements designed to improve transparency and reduce the risks associated with the derivatives market, some of which are still to be fully implemented. EMIR requires that certain entities that enter into derivative contracts: report such transactions; clear certain over the counter (OTC) transactions where mandated to do so; and implement risk mitigation standards in respect of uncleared OTC trades. The obligation to clear derivatives only applies to certain counterparties and specified types of derivative. In October 2016 the European Commission adopted a delegated regulation relating to the exchange of collateral, one of the risk mitigation techniques under EMIR. Provisions relating to initial margin will be phased in from 6 February 2017 until 1 September 2020. Provisions relating to variation margin applied on a phased basis from 4 February 2017. EMIR has potential operational and financial impacts on the Group, including by imposing collateral requirements. CRD IV aims to complement EMIR by applying higher capital requirements for bilateral, unclearedover-the-counter derivative trades. Lower capital requirements for cleared derivatives trades are only available if the central counterparty through which the trade is cleared is recognised as a ‘qualifying central counterparty’ (QCCP) which has been authorised or recognised under EMIR (in accordance with binding technical standards). Higher capital requirements may apply to the Group following the UK’s departure from the EU if UK CCPs are not regarded as QCCPs. The amended Markets in Financial Instruments Directive and Markets in Financial Instruments Regulation (collectively referred to as MiFID II) is expected to apply from 3 January 2018. MiFID II will affect many of the investment markets in which the Group operates, the instruments in which it trades and the way it transacts with market counterparties and other customers. Changes introduced by MiFID II include: (i) the establishmentintroduction of a reserve powernew type of trading venue (the organised trading facility), capturingnon-equity trading that falls outside the current regime; and the expansion of the concept of, and requirements applicable to, firms which systematically trade against proprietary capital (systematic internalisers). MiFID II also strengthens investor protections and imposes new curbs on high frequency and commodity trading. It also increasespre-and post-trade transparency and introduces a new regime for third country firms. MiFID II also includes new requirements relating tonon-discriminatory access to trading venues, central counterparties and benchmarks, and harmonised supervisory powers and sanctions across the EU. The EU Benchmarks Regulation came into force in June 2016, with the majority of provisions intended to apply from January 2018. This Regulation applies to the administration, contribution of data to and use of benchmarks within the EU. Financial institutions within the EU will be prohibited from using benchmarks unless their administrators are authorised, registered or otherwise recognised in the EU. This may impact the ability of Barclays to use certain benchmarks. In 2015 the European Commission launched work on establishing a Capital Markets Union (CMU) within the EU. The CMU aims to increase the availability ofnon-bank financing in the EU, deepen the single market for financial services and promote growth and financial stability. The Commission’s work on the CMU includes the development of a regulatory framework in order to enhance efficiencies in the cross-border environment for capital markets, as well as a review of existing legislation to determine instances in which such legislation should be modified. This work is likely to continue through 2017 and beyond and may result in changes to the EU regulatory framework in which the Group operates. (e) Conduct, Culture and Consumer Protection developments On 7 March 2016 the PRA and FCA introduced measures to enforce full separationincrease the individual accountability of UK banks under certain circumstances; (ii) the creation of a ‘senior manager’s’ regime for senior managers and other covered individuals in the banking sector. The new regime comprises the ‘Senior Managers Regime’, which applies to a limited number of individuals with senior management responsibilities within a firm, the ‘Certification Regime’, which is intended to assess and investment banking sectors to ensure better accountability for decisions made; (iii)monitor the establishmentfitness and proprietary of a criminal offencewider range of causingemployees who could pose a financial institutionrisk of significant harm to fail;the firm or its customers and (iv)conduct rules that individuals subject to either regime must comply with. From March 2017, the establishmentconduct rules will apply more widely to other staff of a regulator for payment systems.firms within scope of the regime. The Financial Services Act 2010, amongst other things, requires the UK regulators to make rules about remuneration and to require regulated firms to have a remuneration policy that is consistent with effective risk management. The Banking Reform Act is primarily an enabling statute which provides HM Treasuryalso amended FSMA to allow the FCA 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. Barclays has to comply with national data protection laws, governing the requisite powers to implement the policy underlying the legislation through secondary legislation. Secondary legislation relating to the ring-fencingcollection, use, and disclosure of banks has now been passed. Partspersonal data, in a majority of the secondary legislation became effective on 1 January 2015 andcountries in which it operates. From 25 May 2018 data protection laws throughout the rest will come into effect on 1 January 2019 by which date UK banksEU will be required to be compliant with the structural reform requirements. The PRA published ‘near final’ rules on the legal structure and governance of ring-fenced banks in May 2015 andreplaced by a consultation paper on post-ring-fencing prudential requirements and intra-group arrangements (among other things) in October 2015. PRA final rules are expected in 2016. Compensation schemes
Banks, insurance companies and other financial institutions insingle General Data Protection Regulation (GDPR); the UK are subject to a single compensation scheme (the Financial Services Compensation Scheme – FSCS) which operates when an authorised firm is unable or is likely togovernment has confirmed the UK will adopt and apply the GDPR from May 2018. The impact across Barclays will be unable to meet claims made against it by its customers because of its financial circumstances. Most deposits made with branches of Barclays Bank PLCsignificant, affecting not only Group entities operating and processing personal data within the EEA are covered byEU but also those outside the FSCS. Most claims made in respectEU offering goods or services to, or monitoring individuals within the EU. The GDPR contains significant penalties for data protection breaches andnon-compliance, up to 4% 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 question 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 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.global turnover.
| | | 180 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 185 |
Risk review
Supervision and regulation
A number of recent developments have indicated a clear political and regulatory desire to make customer transactional account information more easily accessible to customers and parties providing services to them. One such example is the revised Payment Services Directive (PSD2), which came into force on 12 January 2016 and must be implemented by 13 January 2018. Shortly after the finalisation of PSD2, the Open Banking Working Group, a body established at the request of HM Treasury, issued a report outlining how an ecosystem allowing the sharing of bank and customer information could be established, operated and governed. The resulting ‘Open Banking Standard’ is intended to allow for the provision of access to public data and secure access to private data. In August 2016, the UK Competition and Markets Authority (CMA) published the results of its market investigation into retail banking, identifying features of the market that were having an adverse effect on competition and setting out a number of measures to remedy the shortcomings. One of these remedies requires Barclays, among other banks, to help establish and fund an entity to govern open access to information about bank services, provision and service quality. Barclays expects to be required to make public information available through open application programming interfaces (APIs) through the course of 2017, with transactional information being available through an open API by January 2018 to align with the PSD2 timeframes. EU regulation and governments have been increasingly focused on cyber security risk management for banking organisations and have proposed laws that would impose a variety of requirements on regulated Barclays entities. These requirements include minimum required security measures, enhanced reporting requirements and a variety of other cyber and information risk governance measures. When implemented, the proposals may increase technology and compliance costs for Barclays. The UK Bribery Act 2010 introduced a new form of corporate criminal liability focussed on a company’s failure to prevent bribery on its behalf. The legislation has broad application and in certain circumstances may have extraterritorial impact as to entities, persons or activities located outside the UK, including Barclays PLC and its subsidiaries. In practice, the legislation requires Barclays to have adequate procedures to prevent bribery which, due to the extraterritorial nature of the status, makes this both complex and costly. Regulation in the USUnited States InSupervision in the US
Barclays’ US activities and operations are subject to umbrella supervision by the Board of Governors of the Federal Reserve System (FRB), as well as additional supervision, requirements and restrictions imposed by other federal and state regulators. Barclays PLC, Barclays Bank PLC and their US branches and subsidiaries are subject to a comprehensive regulatory framework involving numerous statutes, rules and regulations, including the International Banking Act of 1978, the Bank Holding Company Act of 1956 (BHC Act), the USA PATRIOT Act of 2001 and the DFA. This legislation regulates theDodd Frank Wall Street Reform and Consumer Protection Act of 2010 (DFA). In some cases, US requirements may impose restrictions on Barclays’ global activities of Barclays, includingin addition to its US banking subsidiaries and the US branches of Barclays Bank PLC, as well as imposing prudential restrictions, such as limits on extensions of credit by Barclays Bank PLC’s US branches and the US banking subsidiaries to a single borrower and to affiliates. The New York and Florida branches of Barclays Bank PLC are subject to extensive federal and state supervision and regulation by the Board of Governors of the Federal Reserve System (FRB) and, as applicable, the New York State Department of Financial Services and the Florida Office of Financial Regulation. Barclays Bank Delaware, a Delaware chartered commercial bank, is subject to supervision and regulation by the Federal Deposit Insurance Corporation (FDIC), the Delaware Office of the State Bank Commissioner and the Consumer Financial Protection Bureau (CFPB). The deposits of Barclays Bank Delaware are insured by the FDIC. The licensing authority of each US branch of Barclays Bank PLC has the authority, in certain circumstances, to take possession of the business and property of Barclays Bank PLC locatedactivities in the state of the office it licenses or to revoke or suspend such licence. Such circumstances generally include violations of law, unsafe business practices and insolvency.US. Barclays PLC and Barclays Bank PLC are bank holding companies registered with the FRB, which exercises umbrella supervisory authority over Barclays’ US operations. Barclays is required to implement byIn July 2016, Barclays established a US intermediate holding company, (IHC)Barclays US LLC (BUSL), which will holdholds substantially all of Barclays’ US subsidiaries and assets (including Barclays Capital Inc. and Barclays Bank Delaware,Delaware), other than Barclays’ US branches and certain other assets and subsidiaries). This IHC will also besubsidiaries. BUSL, Barclays PLC and Barclays Bank PLC are regulated as bank holding companies (BHCs) by the FRB, which exercises umbrella supervisory authority over and imposes a wide variety of requirements and restrictions on Barclays’ US operations, including with respect to safety and soundness. As Barclays’top-tier US bank holding company, and generally regulated as such under the BHC Act. As part of this supervision, the IHCBUSL is or will also generally bebecome subject to substantially similarthe enhanced prudential supervision requirements asapplicable to US bank holding companies of similarcomparable size, including: (i) regulatory capital requirements and leverage limits; (ii) mandatory annual supervisory and annual and semi-annualcompany-runstress testing of capital levels, , and annual submission of a capital plan in connection with the FRB’s annual Comprehensive Capital Analysis and Review (CCAR), resulting in an FRB objection ornon-objection to the capital plan; (iii) supervisory approval ofFRBnon-objection to any proposed capital distributions by the IHCBUSL, including to Barclays Bank PLC; (iv) additional substantive liquidity requirements,
including requirements to conduct monthly internal liquidity stress tests for the IHCBUSL (and also, separately, for Barclays Bank PLC’s US branch network), and to maintain a30-day buffer of highly liquid assets; (v) other liquidity risk management requirements, including compliance with liquidity risk management standards established by the FRB, and maintenance of an independent function to review and evaluate regularly the adequacy and effectiveness of the liquidity risk management practices of Barclays’ combined US operations; and (vi) overall risk management requirements, including a US risk committee and a US chief risk officer. The IHCBUSL will also bebecome subject to TLACthe FRB’s capital planning requirements pursuantin 2017. The BHC Act generally restricts the activities of BHCs to proposed regulations issued by the Federal Reservebanking and activities closely related to banking. In order to engage in the falla broader range of 2015. Barclays is well advanced in its plans to transfer the relevant US subsidiaries and assets into a newly incorporated IHC, and to implement the related DFA and other requirements, to meet the prescribed deadlines. activities, Barclays PLC and Barclays Bank PLC have eachalso elected to be treated as a financial holding companycompanies under the BHC Act. Financial holding companies may generally engage in a broader range of financial and related activities, directly or through subsidiaries, including underwriting, dealing and dealingmaking markets in all types of securities, than are permittedsecurities. In order to registered bank holding companies that do not maintain its status as a financial holding company, status. Financiala financial holding companies such as Barclays PLC and Barclays Bank PLC arecompany is required to meet or exceed certain regulatory capital ratios and other requirements toand be considereddeemed ‘well capitalised’ and be deemed to be ‘well managed’ in order to maintain their status as such. Once established, Barclays’ IHC would also need to meet similar requirements for FHC purposes. Barclays Bank Delaware is also required to meet certain capital ratio requirements and be deemed to be ‘well managed’. In addition, the financial holding company status requires Barclays Bank Delaware must haveto maintain at least a ‘satisfactory’ rating under the Community Reinvestment Act of 1977 (CRA). Entities ceasing to meet any of these requirements are required to enter into an agreement to correct the deficiency and are allotted a period of time in which to restore capital levels or the management or CRA rating. Should the relevant Barclays entities failratings. Thenon-compliant entity will be subject to meet the above requirements,limitations on activities during the allottedany period of time they could be prohibited from engaging in new types of financial activities or making certain types of acquisitions in the US.non-compliance. If the capital level or rating is not restored, the Group maynon-compliant entity would be subjected to increasingly stringent penalties and could ultimately be closed or required by the FRB to cease certain activities in the US. More generally, Barclays’ US activities and operations may be subject In addition to other requirements and restrictionsgeneral oversight by the FRB, under itscertain of Barclays’ branches and subsidiaries are regulated by additional authorities based on the location or activities of those entities. The deposits of Barclays Bank Delaware are insured by the FDIC, which also exercises supervisory authority including with respect to safety and soundness. over the bank’s operations. Under the Federal Deposit Insurance Act as amended by the DFA, Barclays PLC, Barclays Bank PLC and the IHC (once established)BUSL are required to act as a source of financial strength for Barclays Bank Delaware. This could, among other things, require Barclays and/or the IHCthese entities to inject capital into Barclays Bank Delaware if it fails to meet applicable regulatory capital requirements. Regulations applicable to US operations The New York and Florida branches of Barclays Bank PLC are subject to extensive supervision and its subsidiaries impose obligationsregulation by, as applicable, the New York State Department of Financial Services (NYSDFS) and the Florida Office of Financial Regulation. Barclays Bank Delaware, a Delaware chartered commercial bank, is subject to maintain appropriate policies, proceduressupervision 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. The enforcementregulation by the Delaware Office of these regulations has been a major focus of US government policy relating to financial institutions in recent years. 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.State Bank Commissioner.
Barclays’ US securities broker/dealer, investment advisory and investment banking operations are also subject to ongoing supervision and regulation by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA) and other government agencies and self-regulatory organisations (SROs) as part of a comprehensive scheme of regulation of all aspects of the securities and commodities business under the US federal and state securities laws. Similarly, BarclaysBarclays’ US commodity futures, commodity options and commodity options-relatedswaps-related operations are subject to ongoing supervision and regulation by the Commodity Futures Trading Commission (CFTC), the National Futures Association and other SROs. Barclays’ US retail and consumer activities, including the US credit card activitiesoperations of Barclays Bank Delaware, are subject to ongoingdirect supervision and regulation by the CFPB,Consumer Financial Protection Bureau (CFPB), which was established by the DFA. The statute gave the CFPB has the authority to examine and take enforcement action against any US financial institution with over $10bn in total assets, such as Barclays Bank Delaware, with respectrelated to its compliance with federal laws and regulations regarding the provision of consumer financial services (including credit card and deposit services) and with respect tothe prohibition of ‘unfair, deceptive or abusive acts and practices.’ One of the laws the CFPB enforces is the Credit Card Accountability, Responsibility and Disclosure Act of 2009 which prohibits certain pricing and marketing practices for consumer credit card accounts.practices’. | | | | | 186 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 181 | | |
Risk review Supervision and regulation The ‘Volcker Rule’, a provision of the DFA that came into effect in July 2015, prohibits banking entities from undertaking certain ‘proprietary trading’ activities and limits the sponsorship of, and investment in, private equity funds (includingnon-conforming real estate and credit funds) and hedge funds, in each case broadly defined, by such entities. These restrictions are subject to certain exemptions, including for underwriting, market-making and risk-mitigating hedging activities as well as for transactions and investments occurring solely outside of the US. As required by the rule, Barclays has developed and implemented an extensive compliance and monitoring programme (both inside and outside of the US) addressing proprietary trading and covered fund activities. These efforts are expected to continue as the FRB and the other relevant US regulatory agencies further implement and monitor these requirements and Barclays may incur additional costs in relation to such efforts. The Volcker Rule is highly complex and its full impact will not be known with certainty until market practices and structures further develop under it. The Bank Secrecy Act, USA PATRIOT Act 2001 and regulations thereunder contain numerous anti-money laundering and anti-terrorist financing requirements for financial institutions. In addition, Barclays is subject to the US Foreign Corrupt Practices Act, which prohibits certain payments to foreign officials, as well as rules and regulations relating to economic sanctions and embargo programs administered by the US Office of Foreign Assets Control which restrict certain business activities with certain individuals, entities, groups, countries and territories. In some cases, these regulations may impact entities, persons or activities located outside the US, including Barclays PLC and its subsidiaries. The enforcement of these regulations has been a major focus of US government policy relating to financial institutions in recent years, and failure of a financial institution to ensure compliance could have serious legal, financial and reputational consequences for the institution. The US regulators have enhanced their focus on the promotion of cultural values as a key area for banks. The regulators view the responsibility for reforming culture as primarily sitting with the industry. In this regard regulators have increasingly focused on areas such as incentive compensation, promotion processes and measurements of success. Title II of the DFA established the Orderly Liquidation Authority, a new regime for orderly liquidation of systemically important financial institutions, which could apply to BUSL. Specifically, when a systemically important financial institution is in default or danger of default, the FDIC may be appointed receiver under the orderly liquidation authority instead of the institution being resolved through a voluntary or involuntary proceeding under the US Bankruptcy Code. In addition, the licensing authorities of each US branch of Barclays Bank PLC and of Barclays Bank Delaware have the authority, in certain circumstances, to take possession of the business and property of the applicable Barclays entity they license or to revoke or suspend such licence. Such circumstances include violations of law, unsafe business practices and insolvency. Under the DFA, Barclays must submit annually to the FRB and the FDIC a plan for its ‘rapid and orderly’ resolution in the event of material financial distress or failure. As required, Barclays submitted its most recent annual US resolution plan to the US regulators on 1 July 2015. Barclays’ next submission will be due on 1 July 2017 in view of the FDIC’s and FRB’s joint determination that certain foreign banking organisations’ 2016 annual resolution plan filing requirements would be satisfied by the 2017 submission. In addition, on 3 February 2017, the President of the US issued an executive order identifying ‘core principles’ for the administration’s financial services regulatory policy and directing the US Secretary of Treasury, in consultation with the heads of other US financial regulatory agencies, to evaluate and issue a report within 120 days examining how the current regulatory framework promotes or inhibits the principles and what actions have been and are being taken to promote the principles. Regulatory developments in the US The DFA’s ultimate impact on the Group continues to remain uncertain and some rules are not yet fully implemented. In addition, market practices and structures may change in response to the requirements of the DFA in ways that are difficult to predict but that could impact BarclaysBarclays’ business. Nonetheless, certain provisions of the DFAproposed or final regulations are particularly likely to have a significant effect on the Group, including: (a) Regulation of derivatives markets § | | Restrictions on proprietary trading and fund-related activities:Theso-called ‘Volcker Rule’ which was promulgated by the relevant US regulatory agencies, including the FRB, the FDIC, the SEC, and the CFTC, prohibits banking entities, including Barclays PLC, Barclays Bank PLC and their various subsidiaries and affiliates, from undertaking certain ‘proprietary trading’ activities and will limit the sponsorship of, and investment in, private equity funds (including non-conforming real estate and credit funds) and hedge funds, in each case broadly defined, by such entities. These restrictions are subject to certain exceptions and exemptions, including exemptions for underwriting, market-making and risk-mitigating hedging activities as well as exemptions applicable to transactions and investments occurring solely outside of the US. As required by the rule, Barclays has developed and implemented an extensive compliance and monitoring programme (both inside and outside of the US) addressing proprietary trading and covered fund activities. These efforts are expected to continue as the FRB and the other relevant US regulatory agencies further implement and monitor these requirements and Barclays may incur additional costs in relation to such efforts. The Volcker Rule is highly complex and its full impact will not be known with certainty until market practices and structures further develop under it. The prohibition on proprietary trading and the requirement to develop an extensive compliance programme came into effect in July 2015. The FRB subsequently extended the compliance period through July 2016 for investments in and relationships with covered funds that were in place prior to 31 December 2013, and indicated that it intends to further extend the compliance period through July 2017. |
The DFA also established a regulatory scheme with respect toover-the-counter swaps and other derivatives, which has resulted in substantial changes in the markets for such instruments and will result in additional regulatory requirements. Among the changes mandated by the DFA is a requirement that many types of derivatives that used to be traded in the over the counter markets be traded on an exchange or swap execution facility and centrally cleared through a regulated clearing house. At present, most interest rate swaps and certain credit default swaps are subject to these requirements, but other categories of swaps will become subject to the requirements in the future. The DFA also mandates that swaps and security-based swaps entered into within the jurisdiction of U.S. regulators be reported to central data repositories and that certain of that information be made available to the public on an anonymous basis. In addition, certain participants in these markets are required to register with the CFTC as ‘swap dealers’ or ‘major swap participants’ and/or, following the compliance date for relevant SEC rules, with the SEC as ‘security-based swap dealers’ or ‘major security-based swap participants’. Such registrants are or will be subject to CFTC and SEC regulation and oversight. SEC finalised the rules governing security based swap dealer registration in 2015 but clarified that registration timing is contingent upon the finalisation of certain additional rules under Title VII of DFA, several of which are still pending. Additional SEC rules governing security-based swap transactions, including security-based swap reporting, will become effective after the security-based swap dealer registration date. Barclays Bank PLC has provisionally registered with the CFTC as a swap dealer. Entities required to register are subject to business conduct and record-keeping and reporting requirements and will be subject to capital and margin requirements in connection with transactions with certain US andnon-US counterparties. Barclays Bank PLC is also prudentially regulated as a swaps dealer so is subject to the FRB swaps rules. § | | Resolution plans:The DFA requires non-bank financial companies supervised by the FRB, such as Barclays, and bank holding companies with total consolidated assets of $50bn or more to submit annually to the FRB, the FDIC, and the Financial Stability Oversight Council (FSOC), a plan for a ‘the firm’s rapid and orderly’ resolution in the event of material financial distress or failure. As required, Barclays submitted its most recent annual US resolution plan to the US regulators on 1 July 2015. |
The CFTC has approved certain comparability determinations that would permit substituted compliance withnon-US regulatory regimes for certain swap regulations related to business conduct requirements. The CFTC had previously stated that its transaction-level rules (such as margin and documentation requirements) would apply to certain transactions entered into between anon-US swap dealer and anon-US counterparty but has delayed the compliance date for this requirement a number of times. The most recent extension of this relief expires on 30 September 2017. In addition, the CFTC has proposed to apply transaction-level rules to certain cross-border transactions with a U.S. nexus. It is unclear whether further changes will be made to these proposed rules or when they will become effective. § | | Regulation of derivatives markets:Among the changes mandated by the DFA is a requirement that many types of derivatives that used to be traded in the over-the-counter markets be traded on an exchange or swap execution facility and centrally cleared through a regulated clearing house. The DFA also mandates that many swaps and security-based swaps be reported and that certain of that information be made available to the public on an anonymous basis. In addition, certain participants in these markets are required to register with the CFTC as ‘swap dealers’ or ‘major swap participants’ and/or, following the compliance date for relevant SEC rules, with the SEC as ‘security based swap dealers’ or ‘major security- based swap participants’. Such registrants would be subject to CFTC and SEC regulation and oversight. SEC finalised the rules for security based swap dealers in August 2015 with an effective date of October 2015. The SEC clarified that registration timing is contingent upon the finalisation of rules under Title VII of DFA in 2016 and no earlier than six months after such date. Barclays Bank PLC has registered as a swap dealer. Entities required to register are subject to business conduct and record-keeping requirements and will be subject to capital and margin requirements. |
In this regard, the US prudential regulators and the CFTC recently finalised and issued their respectivehave imposed rules imposing initial and variation margin requirements onrequiring the exchange of collateral in respect of OTC derivative transactions, in uncleared swaps and security-based swaps. Such requirements will become effective over a period of time beginningsimilar manner to the European Commission as set out above in September, 2016. The margin requirements can be expected to increase the costs of over-the-counter derivative transactions and could adversely affect market liquidity.section entitled ‘Market Infrastructure Developments’. These registration, execution, clearing, reporting and compliance requirements could adversely affect the business of Barclays Bank PLC and its affiliates, including by reducing market liquidity and increasing the difficulty and cost of hedging and trading activities.
§ | | CFPB and consumer protection regulations and enforcement:Since its creation, the CFPB has issued a number of regulations aimed at protecting consumers of financial products including credit card and deposit customers. The CFPB has also initiated several high-profile public actions against financial companies, including major credit card issuers. Settlements of those actions have included monetary penalties, customer remediation requirements, and commitments to modify business practices. |
§ | | TLAC in the US:In 2015, the FRB also issued its own TLAC proposal that, while generally following the FSB framework, contains a number of provisions that are more restrictive. If ultimately adopted in its current form, the US TLAC proposal would require the Barclays IHC, subject to certain phase-in provisions between 2019 and 2022: (i) a specified outstanding amount of eligible long term debt (LDT), (ii) a specified outstanding amount of TLAC (consisting of common and preferred equity regulatory capital plus LTD), and (iii) a specified internal common equity buffer, in each case issued to a controlling parent of the IHC. The US TLAC proposal also contains certain other requirements, including that the LTD must be cancellable or convertible into equity of the IHC upon the order to the FRB if the IHC is in default or danger of default and certain other requirements are met. If finally adopted by the FRB, these requirements may increase the funding costs of the IHC. |
Regulation in Africa(b) Prudential developments
Barclays’ operations in South Africa, including Barclays Africa Group Limited, are supervised and regulated mainly by the South African Reserve Bank (SARB), the Financial Services Board (SAFSB)The FRB has proposed a number of prudential rules to implement DFA requirements, as well as its own versions of a number of international regulatory standards, including Basel large exposure rules (or single counterparty credit limits, proposed in March 2016) and temporary resolution stays for qualified financial contracts (proposed in May 2016).
In December 2016, the Department of Trade and Industry (DTI). The SARB oversees the banking industry and follows a risk-based approach to supervision, while the SAFSB oversees financial services such as insurance and investment business and focuses on enhancing consumer protection and regulating market conduct. The DTI regulates consumer credit through the National Credit Regulator, established under the National Credit Act (NCA) 2005, as well as other aspects of consumer protection not regulated under the jurisdiction of the SAFSB through the Consumer Protection Act (CPA) 2008. It is intended that regulatory responsibilities in South Africa will in future be divided between the SARBFRB issued final regulations for TLAC which will be responsibleapply to BUSL. The FRB’s final TLAC rule, while generally following the FSB termsheet, contains a number of provisions that are more restrictive. For example, the FRB’s TLAC rule includes provisions that require BUSL (the Barclays IHC) to have (i) a specified outstanding amount of eligible long-term debt, (ii) a specified outstanding amount of TLAC (consisting of common and preferred equity regulatory capital plus long term debt), and (iii) a specified common equity buffer. In addition, the FRB’s TLAC rule would prohibit BUSL, for prudential regulationso long as the Group’s overall resolution plan treats BUSL as anon-resolution entity, from issuing TLAC to entities other than the Group and the SAFSB will be responsible for matters of market conduct. The transition to ‘twin peaks’ regulation will commence in 2016. Barclays’ operations in other African countries are primarily supervised and regulated by the central banks in the jurisdictions where Barclays has a banking presence. In some African countries, the conduct of Barclays’ operations and the non-banking activities are also regulated by Financial Market Authorities.itsnon-US subsidiaries. | | | 182 | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 187 |
In addition, the FRB has issued proposed regulations for net stable funding ratio (NSFR) implementation. The NSFR is one of the two BaselIII-based liquidity measures, along with the LCR, and as proposed by the FRB, would apply to US bank holding companies with more than $250bn in total assets or $10bn or more inon-balance sheet foreign exposures, including BUSL, and consolidated depositary institution subsidiaries of such banking organisations with more than $10bn in assets, including Barclays Bank Delaware. Under the proposed rule, such entities would be required to maintain a minimum level of available stable funding that equals or exceeds the amount of required stable funding over aone-year period. The proposal provides for an effective date of 1 January 2018, subject to finalisation of the rules. If finally adopted as currently proposed, the NSFR requirement could impact Barclays liquidity and increase the funding and compliance costs for BUSL. (c) Cybersecurity US regulators, including the FRB, FDIC and NYSDFS, have been increasingly focused on cybersecurity risk management for banking organisations and have issued proposals for, or requested comment on, regulations that would impose a variety of new requirements on regulated Barclays entities. These requirements include, among others, the adoption of cybersecurity policies and procedures meeting specified criteria, a set of minimum required security measures, new reporting and compliance certification requirements and a variety of other cyber and information risk governance measures. If finally implemented, the proposals may increase technology and compliance costs for Barclays. Structural Reform Overview Barclays announced in March 2016 that it will be organised as two clearly defined divisions, Barclays UK and Barclays International, to simplify the Group and prepare early for UK ring-fencing requirements. Barclays intends to achieve ring-fencing separation by setting up an operational legal entity, which will constitute the ring-fenced bank (RFB) and will be separate from Barclays Bank PLC. The Barclays UK division of Barclays Bank PLC will be transferred to RFB. Barclays Bank PLC will continue to house the Barclays International division. The two legal entities, RFB (including Barclays UK) and BBPLC (including Barclays International) will operate alongside one another together with the Group Service Company, Barclays Services Limited (BSerl), as subsidiaries of Barclays PLC within the Barclays Group. In order to achieve this target-state structure, Barclays will need to undertake a number of legal transfers, including the transfer of customer and non-customer assets, liabilities and contractual arrangements. Barclays intends to use a court approved statutory ring-fence transfer scheme process as defined in Financial Services and Markets Act 2000 part VII section 106B (RFTS) to conduct the majority of these transfers to the RFB, as well as certain other items to BSerL. In addition to the transfers conducted through the RFTS, certain items will be transferred via alternative arrangements. Between now and 1 January 2019, Barclays will complete the transition from the former divisional constructs to the legal entity constructs described above. | | | 188 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Risk review Supervision and regulation Timeline Barclays’ Structural Reform timeline, including progress to date and indicative future milestones is as follows: | – | The legal entity which will become the RFB was incorporated. |
| – | Barclays’ US intermediate holding company was established. |
| – | RFB banking authorisation application was submitted to the regulators. |
| – | BSerL, which will become the Group Service Company, was transferred to be a direct subsidiary of BPLC. |
| – | Various legal entities connected with the future Barclays UK business will be transferred to be subsidiaries of the entity which will become the RFB. |
| – | Certain assets, liabilities, and other items connected with service provision will be transferred from Barclays Bank PLC to BSerL to establish the entity as the Group Service Company. |
| – | RFTS court process will be initiated during Q4 2017 with the submission of an application to the high court followed by the directions court hearing. |
| – | Final court hearing will be held in respect of the RFTS. |
| – | Barclays UK businesses and related items will be transferred to the RFB through the RFTS and via alternative arrangements, taking effect in H1 2018. |
| – | Additional items connected with service provision will be transferred to BSerL, also via the RFTS in H1 2018. |
| – | Immediately following completion of the RFTS, the equity ownership in the RFB will be transferred, establishing the RFB as a direct subsidiary of Barclays PLC, alongside Barclays Bank PLC and BSerL. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 189 |
Financial review Contents
A review of the performance of Barclays, including the key performance indicators, and the contribution of each of our businesses’ contribution to the overall performance of the Group. | | | | | | | | | Financial review | | | | | | | Page | | Financial review | | | | | | | | | | | | | § Key performance indicators | | | 184191 | | | | | | § Consolidated summary income statement | | | 186193 | | | | | | § Income statement commentary | | | 187194 | | | | | | § Consolidated summary balance sheet | | | 189195 | | | | | | § Balance sheet commentary | | | 190196 | | | | | | § Analysis of results by business | | | 191197 | | | | | | § Appendix:Non-IFRS performance measures | | | 212 | |
| | | | | 190 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 183 | | |
Financial review Key performance indicators In assessing the financial performance of the Group, management uses a range of Key Performance Indicators (KPIs) which focus on the Group’s financial strength, the delivery of sustainable returns and cost management. Non-IFRS performance measures Barclays management believes that thenon-IFRS performance measures included in this document provide valuable information to the readers of the financial statements as they enable the reader to identify a more consistent basis for comparing the business’ performance between financial periods, and provide more detail concerning the elements of performance which the managers of these businesses are most directly able to influence or are relevant for an assessment of the Group. They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by Barclays’ management. However, anynon-IFRS performance measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well. Refer to pagesi to x and pages 212 to 215 for further information, reconciliations and calculations ofnon-IFRS performance measures included throughout this document, and the most directly comparable IFRS measures. | | | | | | | | | Definition | | Why is it important and how the Group performed | | | | | | | CRD IV fully loaded Common Equity Tier 1 (CET1)CET1 ratio Capital requirements are part of the regulatory framework governing how banks and depository institutions are supervised. Capital ratios express a bank’s capital as a percentage of its risk weighted assets (RWAs)RWAs as defined by the PRA. In the context of CRD IV, the fully loaded CET1 ratio is a measure of capital that is predominantly common equity as defined by the Capital Requirements Regulation. | | The Group’s capital management objective is to maximise shareholders’shareholder value by prudently optimisingmanaging the level mix, and distribution to businessesmix of its capital resources, while maintaining sufficient capital resources to: ensure the Group is welland all of its subsidiaries are appropriately capitalised relative to itstheir minimum regulatory and stressed capital requirements set byrequirement support the PRA and other regulatory authorities; support its credit rating; and support itsGroup risk appetite, growth and strategic objectives.option wide seeking to maintain a robust credit proposition for the Group and its subsidiaries. The Group’s CRD IV fully loaded CET1 ratio increased to 12.4% (2015: 11.4% (2014: 10.3%) due to a £44bn reduction in RWAs to £358bn, demonstrating continued progress on the Non-Core rundown together with reductions in the Investment Bank, which was partially offset by a decreasean increase in CET1 capital to £40.7bn (2014: £41.5bn)£45.2bn (2015: £40.7bn), partially offset by an increase in RWAs to £366bn (2015: £358bn). The 100 bps increase reflected the Group’s ability to grow capital through profit generation. Group target: Revisedend-state CET1 capital ratio target of 150-200bps above the minimum regulatory level providing400-450bps buffer to the Bank of England stress test systemic reference point. | | | | 12.4% CRD IV fully loaded CET1 ratio 2015:11.4% 2014: 10.3% 2013: 9.1%
| | | Leverage ratio
The ratio is calculated as fully loaded Tier 1 Capital divided by leverage exposure.
| | The leverage ratio is non-risk based and is intended to act as a supplementary measure to the risk based capital metrics such as the CET1 ratio.
The leverage ratio increased to 4.5% (2014: 3.7%), reflecting a reduction in the leverage exposure of £205bn to £1,028bn and an increase in Tier 1 Capital to £46.2bn (2014: £46.0bn). Tier 1 Capital includes £5.4bn (2014: £4.6bn) of Additional Tier 1 (AT1) securities.
| | | | 2015:4.5%
2014: 3.7%
2013: n/a
| | | Return on average shareholders’ equity (RoE) RoE is calculated as profit for the yearafter tax attributable to ordinary shareholders, including an adjustment for the tax credit recorded in reserves in respect of other equity holdersinstruments, as a proportion of the parent, divided by average shareholders’ equity for the year excludingnon-controlling interests and other equity interests. Adjusted RoE excludes post tax adjusting items for gains on US Lehman acquisition assets, movements in own credit, the revision to the Education, Social Housing and Local Authority (ESHLA) valuation methodology, provisions for UK customer redress, provisions for ongoing investigations and litigation including Foreign Exchange, the gain on valuation of a component of the defined retirement benefit liability, impairment of goodwill and other assets relating to businesses being disposed, and losses on sale relating to the Spanish, Portuguese and Italian businesses.
Average shareholders’ equity for adjusted
RoE excludes the impact of own credit on
retained earnings.
instruments. | | This measure indicates the return generated by the management of the business based on shareholders’ equity. Achieving a target RoE demonstrates the Group’sorganisation’s ability to execute its strategy and align management’s interests with the shareholders’. RoE for the Group increased to 3.0% (2015: (0.6%)) reflecting an increase in Group attributable profit to £1,623m (2015: loss of £394m) and increased shareholders’ equity of £57.4bn (2015: £55.9bn). | | 3.0% Group RoE 2015: (0.6%) 2014: (0.2%) | | | Return on average tangible shareholders’ equity RoTE is calculated as profit after tax attributable to ordinary shareholders, including an adjustment for the tax credit recorded in reserves in respect of other equity instruments, as a proportion of average shareholders’ equity excludingnon-controlling interests and other equity instruments adjusted for the deduction of intangible assets and goodwill. | | This measure indicates the return generated by the management of the business based on shareholders’ tangible equity. Achieving a target RoTE demonstrates the organisation’s ability to execute its strategy and align management’s interests with the shareholders’. RoTE lies at the heart of the Group’s capital allocation and performance management process. Adjusted RoERoTE for the Group decreasedincreased to 4.9% (2014: 5.1%3.6% (2015: (0.7%)) driven by a 3% reductionreflecting an increase in Group adjusted attributable profit asto £1,623m (2015: loss of £394m) and increased average tangible shareholders’ equity remained in line at £56bn (2014: £56bn)of £49bn (2015: £48bn).
Statutory RoE for the Group decreasedCore RoTE increased to negative 0.6% (2014: negative 0.2%8.4% (2015: 4.8%) driven byreflecting a 95% increase in attributable profit to £3,350m and a £4bn increase in average allocated tangible equity to £41bn, as capital was returned fromNon-Core. Core RoTE excluding notable items reduced to 9.4% (2015: 11.2%) with a 4% increase in profit before tax to £6,436m and an 8% reduction in attributable profit to £3,781m primarily reflecting an increase in attributable loss.tax, due to the introduction of a new surcharge of 8% that applies to banks’ UK profits with effect from 1 January 2016.
Group target: Group RoTE will converge with Core RoTE. | | | | Group adjusted RoE
2015:4.9%
2014: 5.1%
2013: 4.3%a3.6%
Group statutory RoE 2015: (0.6%)RoTE
2014: (0.2%2015: (0.7%)
2013: 1.0%2014: (0.3%)
8.4% Core RoTE 2015: 4.8% 2014: 7.0% 9.4% Core RoTE excluding notable items 2015: 11.2% 2014: 11.2% | | |
Note
a | 2013 adjusted total operating expenses and profit before tax have been revised to account for the reclassification of £173m of charges, relating to a US residential mortgage-related business settlement with the Federal Housing Finance Agency, to provisions for ongoing investigations and litigation including Foreign Exchange to aid comparability. |
| | | 184 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 191 |
| | | | | | | | | Definition | | Why is it important and how the Group performed | | | | | Leverage ratio The ratio is calculated as fully loaded tier 1 capital divided by leverage exposure. | | The leverage ratio isnon-risk based and is intended to act as a supplementary measure to the risk-based capital metrics such as the CET1 ratio. The leverage ratio increased to 4.6% (2015: 4.5%), reflecting an increase in tier 1 capital to £52.0bn (2015: £46.2bn) and an increase in leverage exposure of £97bn to £1,125bn. Tier 1 capital included £6.8bn (2015: £5.4bn) of AT1 securities. Group target: maintaining the leverage ratio above future minimum requirements | | 4.6% Leverage ratio 2015: 4.5% 2014: 3.7% | | | Cost: income ratio Total operating expenses divided by total income | | 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. The Group cost: income ratio reduced to 76% (2015: 84%) driven by a 12% reduction in operating expenses, partially offset by a 3% reduction in income. The reduction in operating expenses included a £3,024m reduction in litigation and conduct charges in 2016 to £1,363m. The Core cost: income ratio reduced to 64% (2015: 75%) reflecting the reduction in litigation and conduct charges. Excluding notable items, the Core cost: income ratio reduced to 61% in 2016 (2015: 62%). Group target: cost: income ratio of less than 60% over time | | 76% Cost: income ratio 2015: 84% 2014: 84% | | | Operating expenses excluding costs to achieve Defined as adjusted totalTotal operating expenses excluding costs to achieve.
Adjusted operating expenses exclude provisions for UK customer redress, provisions for ongoing investigations and litigation including Foreign Exchange, the gain on valuation of a component of the defined retirement benefit liability, impairment of goodwill and other assets relating to businesses being disposed, and losses on sale relating to the Spanish, Portuguese and Italian businesses.
| | Barclays views the active management and control of operating expenses as a key strategic objective. Adjusted operating expenses excludingarea for banks; those who actively manage costs to achieve of £793m (2014: £1,165m), decreased 4% to £16,205m.
Statutory operating expenses, excluding costs to achieve of £793m (2014: £1,165m), increased 3% to £19,884m.and control them effectively will gain a strong competitive advantage.
Operating expenses for the Group were £16,338m (2015: £18,536m). This reflected lower litigation and conduct charges, increased structural reform implementation costs and the strengthening in average USD and EUR against GBP. Q416 included the impact of a decision for 2016 compensation awards, to more closely align income statement recognition with performance awards and to harmonise deferral structures across the Group. These changes resulted in a £395m income statement charge in Q416, of which £390m was in Core, business,resulting in Core costs being above guidance by that amount. Refer to pages vi to viii for a reconciliation of total operating expenses excluding costs to achieve of £693m (2014: £953m), were broadly in line at £15,106m (2014: £15,105m).conduct and litigation charges, and other notable items. | | | | Group adjusted
2015: £16,205m
2014: £16,904m
2013: £18,511ma16,338m
Group statutory 2015: £18,536m 2014: £18,184m £14,975m £19,884mGroup total operating expenses, excluding conduct and litigation charges, and other notable items
2015: £14,479m 2014: £19,264m£15,377m 2013: £20,763m
£14,507m Core statutory 2015: £15,990m 2014: £15,170m £13,390m £15,106mCore total operating expenses, excluding conduct and litigation charges, and other notable items
2015: £12,532m 2014: £15,105m 2013: £16,377m£12,664m
| | | Non-Core RWAs RWAs are a risk adjusted measure of assets adjusted for associated risks.assets. Risk weightings are established in accordance with the rulesBasel Capital Accord as implemented by CRD IV and local regulators.the PRA. | | BarclaysNon-Core was established as a separate unit in 2014 and groups together businesses and assets which do not fit with the strategic objectives of the Group. ReducingNon-Core RWAs will rebalance the Group to deliver higher and more sustainable returns. Non-Core RWAs have reduced from £110bnby £22bn to £32bn in December 20132016. The 41% reduction in the year reflects strong progress in the rundown, driven by a £10bn reduction in Derivatives, a £3bn reduction in Securities and loans, a £4bn reduction in Businesses RWAs, and a £4bn reallocation to £47bn, resulting in an equity allocationHead Office of £7.2bnoperational risk RWAs associated with exited businesses and assets. Target:Non-Core RWAs of c.£25bn as at December 2015, 13% of the Group total. This is down from £15.1bn as at December 2013, which was 28% of the Group total.30 June 2017. | | | | £32bn Non-Core 2015: £47bn £54bn 2014: £75bn 2013: £110bn£89bn
| | |
Note
a | 2013 adjusted total operating expenses and profit before tax have been revised to account for the reclassification of £173m of charges, relating to a US residential mortgage-related business settlement with the Federal Housing Finance Agency, to provisions for ongoing investigation and litigation including Foreign Exchange to aid comparability. |
| | | | | 192 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 185 | | |
Financial review Consolidated summary income statement | | | | | | | | | | | | | | | | | | | | | For the year ended 31 December | |
| 2015
£m |
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| 2014
£m |
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| 2013a
£m |
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| 2012
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| 2011
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| Continuing operations | | | | | | | | | | | | | | | | | | | | | Net interest income | | | 12,558 | | | | 12,080 | | | | 11,600 | | | | 11,654 | | | | 12,201 | | Non-interest income net of claims and benefits on insurance contracts | | | 11,970 | | | | 13,648 | | | | 16,296 | | | | 17,707 | | | | 16,312 | | Adjusted total income net of insurance claims | | | 24,528 | | | | 25,728 | | | | 27,896 | | | | 29,361 | | | | 28,513 | | Gain on US Lehman acquisition assets | | | 496 | | | | 461 | | | | 259 | | | | – | | | | – | | Own credit gain/(charge) | | | 430 | | | | 34 | | | | (220) | | | | (4,579) | | | | 2,708 | | Revision of ESHLA valuation methodology | | | – | | | | (935) | | | | – | | | | – | | | | – | | Gain/(loss) on disposal of BlackRock, Inc. investment | | | – | | | | – | | | | – | | | | 227 | | | | (58) | | Gains on debt buy-backs | | | – | | | | – | | | | – | | | | – | | | | 1,130 | | Statutory total income net of insurance claims | | | 25,454 | | | | 25,288 | | | | 27,935 | | | | 25,009 | | | | 32,292 | | | | | | | | Adjusted credit impairment charges and other provisions | | | (2,114) | | | | (2,168) | | | | (3,071) | | | | (3,340) | | | | (3,802) | | Impairment of BlackRock, Inc. investment | | | – | | | | – | | | | – | | | | – | | | | (1,800) | | Statutory credit impairment charges and other provisions | | | (2,114) | | | | (2,168) | | | | (3,071) | | | | (3,340) | | | | (5,602) | | | | | | | | Adjusted operating expenses | | | (16,998) | | | | (18,069) | | | | (19,720) | | | | (18,562) | | | | (19,289) | | Provisions for UK customer redress | | | (2,772) | | | | (1,110) | | | | (2,000) | | | | (2,450) | | | | (1,000) | | Provisions for ongoing investigations and litigation including Foreign Exchange | | | (1,237) | | | | (1,250) | | | | (173) | | | | – | | | | – | | Gain on valuation of a component of the defined retirement benefit liability | | | 429 | | | | – | | | | – | | | | – | | | | – | | Impairment of goodwill and other assets relating to businesses being disposed | | | (96) | | | | – | | | | (79) | | | | – | | | | (597) | | Losses on sale relating to the Spanish, Portuguese and Italian businesses | | | (3) | | | | – | | | | – | | | | – | | | | – | | Statutory operating expenses | | | (20,677) | | | | (20,429) | | | | (21,972) | | | | (21,012) | | | | (20,886) | | | | | | | | Adjusted other net (expenses)/income | | | (13) | | | | 11 | | | | (24) | | | | 140 | | | | 60 | | Losses on sale relating to the Spanish, Portuguese and Italian businesses | | | (577) | | | | (446) | | | | – | | | | – | | | | – | | Losses on acquisitions and disposals | | | – | | | | – | | | | – | | | | – | | | | (94) | | Statutory other net (expenses)/income | | | (590) | | | | (435) | | | | (24) | | | | 140 | | | | (34) | | | | | | | | Statutory profit before tax | | | 2,073 | | | | 2,256 | | | | 2,868 | | | | 797 | | | | 5,770 | | Statutory taxation | | | (1,450) | | | | (1,411) | | | | (1,571) | | | | (616) | | | | (1,902) | | Statutory profit after tax | | | 623 | | | | 845 | | | | 1,297 | | | | 181 | | | | 3,868 | | Statutory (loss)/profit attributable to equity holders of the parent | | | (394) | | | | (174) | | | | 540 | | | | (624) | | | | 2,924 | | Statutory profit attributable to non-controlling interests | | | 672 | | | | 769 | | | | 757 | | | | 805 | | | | 944 | | Statutory profit attributable to other equity holdersb | | | 345 | | | | 250 | | | | – | | | | – | | | | – | | | | | 623 | | | | 845 | | | | 1,297 | | | | 181 | | | | 3,868 | | | | | | | | Selected statutory financial statistics | | | | | | | | | | | | | | | | | | | | | Basic (loss)/earnings per share | | | (1.9p) | | | | (0.7p) | | | | 3.8p | | | | (4.8p) | | | | 22.9p | | Diluted (loss)/earnings per share | | | (1.9p) | | | | (0.7p) | | | | 3.7p | | | | (4.8p) | | | | 21.9p | | Dividends per ordinary share | | | 6.5p | | | | 6.5p | | | | 6.5p | | | | 6.5p | | | | 6.0p | | Return on average tangible shareholders’ equityb | | | (0.7%) | | | | (0.3%) | | | | 1.2% | | | | (1.4%) | | | | 7.1% | | Return on average shareholders’ equityb | | | (0.6%) | | | | (0.2%) | | | | 1.0% | | | | (1.2%) | | | | 5.9% | | | | | | | | Adjusted profit before tax | | | 5,403 | | | | 5,502 | | | | 5,081 | | | | 7,599 | | | | 5,482 | | Adjusted taxation | | | (1,690) | | | | (1,704) | | | | (2,029) | | | | (2,159) | | | | (1,299) | | Adjusted profit after tax | | | 3,713 | | | | 3,798 | | | | 3,052 | | | | 5,440 | | | | 4,183 | | Adjusted profit attributable to equity holders of the parent | | | 2,696 | | | | 2,779 | | | | 2,295 | | | | 4,635 | | | | 3,239 | | Adjusted profit attributable to non-controlling interests | | | 672 | | | | 769 | | | | 757 | | | | 805 | | | | 944 | | Adjusted profit attributable to other equity interestsb | | | 345 | | | | 250 | | | | – | | | | – | | | | – | | | | | 3,713 | | | | 3,798 | | | | 3,052 | | | | 5,440 | | | | 4,183 | | | | | | | | Selected adjusted financial statistics | | | | | | | | | | | | | | | | | | | | | Basic earnings per share | | | 16.6p | | | | 17.3p | | | | 16.0p | | | | 35.5p | | | | 25.3p | | Dividend payout ratio | | | 39% | | | | 38% | | | | 41% | | | | 18% | | | | 24% | | Return on average tangible shareholders’ equityb | | | 5.8% | | | | 5.9% | | | | 5.1% | | | | 10.6% | | | | 8.1% | | Return on average shareholders’ equityb | | | 4.9% | | | | 5.1% | | | | 4.3% | | | | 9.0% | | | | 6.7% | |
| | | | | | | | | | | | | | | | | | | | | For the year ended 31 Decembera | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| |
| 2012
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| Continuing operationsb | | | | | | | | | | | | | | | | | | | | | Net interest income | | | 10,537 | | | | 10,608 | | | | 10,086 | | | | 9,457 | | | | 9,442 | | Non-interest income | | | 10,914 | | | | 11,432 | | | | 11,677 | | | | 14,587 | | | | 11,399 | | Total income | | | 21,451 | | | | 22,040 | | | | 21,763 | | | | 24,044 | | | | 20,841 | | | | | | | | | | | | | | | | | | | | | | | Credit impairment charges and other provisions | | | (2,373) | | | | (1,762) | | | | (1,821) | | | | (2,601) | | | | (2,659) | | | | | | | | Operating expenses | | | (14,565) | | | | (13,723) | | | | (14,959) | | | | (16,628) | | | | (15,256) | | UK bank levy | | | (410) | | | | (426) | | | | (418) | | | | (462) | | | | (311) | | Litigation and conduct | | | (1,363) | | | | (4,387) | | | | (2,807) | | | | (2,442) | | | | (2,912) | | Total operating expenses | | | (16,338) | | | | (18,536) | | | | (18,184) | | | | (19,532) | | | | (18,479) | | | | | | | | | | | | | | | | | | | | | | | Other net income/(expenses) | | | 490 | | | | (596) | | | | (445) | | | | (32) | | | | 122 | | | | | | | | | | | | | | | | | | | | | | | Profit/(loss) before tax | | | 3,230 | | | | 1,146 | | | | 1,313 | | | | 1,879 | | | | (175) | | Tax charge | | | (993) | | | | (1,149) | | | | (1,121) | | | | (1,251) | | | | (326) | | Profit/(loss) after tax in respect of continuing operations | | | 2,237 | | | | (3) | | | | 192 | | | | 628 | | | | (502) | | Profit after tax in respect of discontinued operationb | | | 591 | | | | 626 | | | | 653 | | | | 669 | | | | 683 | | Non-controlling interests in respect of continuing operations | | | (346) | | | | (348) | | | | (449) | | | | (414) | | | | (467) | | Non-controlling interests in respect of discontinued operationb | | | (402) | | | | (324) | | | | (320) | | | | (343) | | | | (339) | | Other equity holders | | | (457) | | | | (345) | | | | (250) | | | | – | | | | – | | Attributable profit/(loss) | | | 1,623 | | | | (394) | | | | (174) | | | | 540 | | | | (624) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Selected financial statistics | | | | | | | | | | | | | | | | | | | | | Basic earnings/(loss) per sharec | | | 10.4p | | | | (1.9p) | | | | (0.7p) | | | | 3.8p | | | | (4.8p) | | Diluted earnings/(loss) per sharec | | | 10.3p | | | | (1.9p) | | | | (0.7p) | | | | 3.7p | | | | (4.8p) | | Dividends per ordinary share | | | 4.5p | | | | 6.5p | | | | 6.5p | | | | 6.5p | | | | 6.5p | | | | | | | | Dividend payout ratio | | | 23% | | | | 39% | | | | 38% | | | | 41% | | | | 18% | | Return on equity | | | 3.0% | | | | (0.6%) | | | | (0.2%) | | | | 1.0% | | | | (1.2%) | | Return on average tangible shareholders’ equityc | | | 3.6% | | | | (0.7%) | | | | (0.3%) | | | | 1.2% | | | | (1.4%) | |
The financial information above is extracted from the published accounts. This information should be read together with the information included in the accompanying consolidated financial statements. Notes a | 2013 adjusted total operating expenses and profit before taxComparatives have been revisedrestated to account forreflect the reclassificationimplementation of £173m of charges, relating to a US residential mortgage relatedthe Group business settlement with the Federal Housing Finance Agency, to provisions for ongoing investigations and litigation including Foreign Exchange to aid comparability.reorganisation. These restatements were detailed in our announcement on 14 April 2016, accessible at home.barclays/results. |
b | Refer to page 210 for further information on the Africa Banking discontinued operation. |
c | The profit after tax attributable to other equity holders of £345m (2014: £250m)£457m (2015: £345m) is offset by a tax credit recorded in reserves of £70m (2014: £54m)£128m (2015: £70m). The net amount of £275m (2014: £196m)£329m (2015: £275m), along with non-controlling interests (NCI)NCI is deducted from profit after tax in order to calculate earnings per share and return on average tangible shareholders’ equity and return on average shareholders’ equity. |
| | | 186 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 193 |
Financial review Income statement commentary 2016 compared to 2015 Profit before tax increased to £3,230m (2015: £1,146m). The Group performance reflected good operational performance in Barclays UK and Barclays International whilst being impacted by theNon-Core loss before tax of £2,786m (2015: £2,603m) driven by the accelerated rundown ofNon-Core and provisions for UK customer redress of £1,000m (2015: £2,772m). The appreciation of average USD and EUR against GBP positively impacted income and adversely affected impairment and operating expenses. Total income decreased 3% to £21,451m asNon-Core income reduced £1,776m to a net expense of £1,164m due to the acceleration of theNon-Core rundown, while Core income increased 6% to £22,615m. Within Core, Barclays International income increased 9% to £14,995m, with growth in both CIB and Consumer, Cards and Payments, and Barclays UK income increased 2% to £7,517m. Total income included a £615m (2015: £nil) gain on disposal of Barclays’ share of Visa Europe Limited and an own credit loss of £35m (2015: gain of £430m). Credit impairment charges increased £611m to £2,373m including a £320m charge in Q316 following the management review of the UK and US cards portfolio impairment modelling and balance growth primarily within Consumer, Cards and Payments. This was partially offset by a reduction in credit impairment charges of 9% to £122m inNon-Core due to lower impairment charges in European businesses. This resulted in a 11bps increase in the loan loss rate to 53bps. Total operating expenses reduced 12% to £16,338m reflecting lower litigation and conduct charges. This was partially offset by thenon-recurrence of the prior year gain of £429m on the valuation of a component of the defined retirement benefit liability and increased structural reform implementation costs. Operating expenses also included a £395m additional charge in Q416 relating to 2016 compensation awards reflecting a decision to more closely align income statement recognition with performance awards and to harmonise deferral structures across the Group. Total operating expenses included provisions for UK customer redress of £1,000m (2015: £2,772m). The cost: income ratio improved to 76% (2015: 84%). Other net income of £490m (2015: expense of £596m) included gains on the sale of Barclays Risk Analytics and Index Solutions, the Asia wealth and investment management business and the Southern European cards business, partly offset by the loss on sale of the French retail business of £455m. The effective tax rate on profit before tax decreased to 30.7% (2015: 100.3%) principally as a result of a reduction innon-deductible charges. Profit after tax in respect of continuing operations increased to £2,237m (2015: loss of £3m). Profit after tax in relation to the Africa Banking discontinued operation decreased 6% to £591m as increased credit impairment charges and operating expenses were partially offset by income growth. Return on shareholders’ equity was 3.0% (2015: (0.6)%). Return on average tangible shareholders’ equity was 3.6% (2015: (0.7%)) and basic earnings per share was 10.4p (2015: (1.9p)). 2015 compared to 2014 Statutory profitProfit before tax decreased to £2,073m£1,146m (2014: £2,256m), adjusted profit before tax decreased 2% to £5,403m.£1,313m).
Statutory totalTotal income net of insurance claims increased 1% to £25,454m, including adjusting items for£22,040m as Core income increased 4% to £21,428m, reflecting a £496m (2014: £461m) gain on the US Lehman acquisition assets6% increase to £13,747m in Barclays International and an own credit gain of £430m (2014: £34m). 2014 statutory total income net of insurance claims included a loss of £935m (2015: nil) relating22% increase in Head Office to £338m, which was partially offset by a revision1% decrease to the ESHLA valuation methodology.
£7,343m in Barclays UK.Adjusted total income net of insurance claims decreased 5% to £24,528m, as Non-Core income reduced 46% to a net expense of £164m£612m, following assets and securities rundown, business sales including the impact of the sales of the Spanish and UAE retail businesses, and fair value losses on the ESHLA portfolio of £359m (2014: £156m). Core Total income remained in line at £24,692mincluded a £496m (2014: £24,678m) reflecting:£461m) gain on the US Lehman acquisition assets and an own credit gain of £430m (2014: £34m). 2014 total income included a 13% increaseloss of £935m (2015: £nil) relating to £4,927m in Barclaycard, primarily reflecting growth in US cards; Investment Bank income remaining broadly in line at £7,572m (2014: £7,588m); a 1% reduction in PCB duerevision to the impact of customer redress in, and the sale of, the US Wealth business; and a 2% reduction in Africa Banking as the ZAR depreciated against GBP. On a constant currency basisa income in Africa Banking increased 7% reflecting good growth in Retail and Business Banking and corporate banking in South Africa, and Wealth, Investment Management and Insurance (WIMI).ESHLA valuation methodology. Net interest income increased 4% to £12,558m, with higher net interest income in PCB, Barclaycard and Non-Core, partially offset by reductions in Africa Banking, the Investment Bank and Head Office. Net interest income for PCB, Barclaycard and Africa Banking increased 5% to £12,024m due to an increase in average customer assets to £287.7bn (2014: £280.0bn) with growth in PCB and Barclaycard, partially offset by reductions in Africa Banking as the ZAR depreciated against GBP. Net interest margin increased 10bps to 4.18% primarily due to growth in interest earning lending within Barclaycard.
Credit impairment charges improved 2%3% to £2,114m,£1,762m, with a loan loss rate of 47bps42bps (2014: 46bps)42bps). This reflected higher recoveries in Europe and the sale of the Spanish business in Non-Core, and lower impairments in PCBBarclays UK due to the benign economic environment in the UK resulting in lower default rates and charges.charges and higher recoveries in European businesses inNon-Core. This was partially offset by a number of single name exposures in the Investment Bank, and increased impairment charges in Barclaycard reflectingConsumer, Cards and Payments primarily driven by asset growth and updates to impairment model methodologies.methodologies, and increased impairment charges in CIB due to impairment of a number of single name exposures. StatutoryTotal operating expenses increased 1%2% to £20,677m.£18,536m due to an increase in litigation and conduct charges, and costs associated with the implementation of structural reform. This was partially offset by savings from the strategic cost programme, in addition to the continued rundown ofNon-Core.
Total operating expenses included adjusting itemsadditional provisions for additional UK customer redress provisions of £2,772m (2014: £1,110m), £1,237m (2014: £1,250m) of additional provisions for ongoing investigations and litigation including Foreign Exchange of £1,237m (2014: £1,250m), a £429m (2014: nil)£nil) gain on valuation of a component of the defined retirement benefit liability and £96m (2014: nil)£nil) of impairment of goodwill and other assets relating to businesses being disposed, and £3m (2014: nil) of losses on sale relating to the Spanish, Portuguese and Italian businesses. Adjusted operating expenses decreased 6% to £16,998m as a result of savings from strategic cost programmes, particularly in the Investment Bank and PCB, in addition to the continued rundown of Non-Core. Total compensation costs decreased 6% to £8,339m, with the Investment Bank reducing 5% to £3,423m, reflecting lower deferred and current year bonus charges and reduced headcount. Reductions in costs to achieve of 32% to £793m, and in litigation and conduct charges of 16% to £378m, were partially offset by costs associated with the implementation of the structural reform programme and a 3% increase in the UK bank levy to £476m.disposed.
The statutory cost:income ratio remained in linestable at 81%84% (2014: 81%). The adjusted cost:income ratio decreased to 69% (2014: 70%84%). Statutory otherOther net expenses increased to £590m£596m (2014: £435m) and included an adjusting item for£445m) primarily relating to losses on sale relating to the Spanish, Portuguese and Italian businesses of £577m (2014: £446m).
The tax charge of £1,450m£1,149m (2014: £1,411m)£1,121m) on statutory profit before tax of £2,073m£1,146m (2014: £2,256m) represents£1,313m) represented an effective tax rate of 69.9%100.3% (2014: 62.5%85.4%), impacted bynon-deductible items. Profit after tax in respect of continuing operations decreased to a loss of £3m (2014: profit of £192m). Profit after tax in relation to the Africa Banking discontinued operation decreased 4% to £626m driven by a reduction in total income and an increase in credit impairment charges, partially offset by a reduction in operating expenses. Return on shareholders’ equity was (0.6)% (2014: (0.2)%). The effective tax rate Return on adjusted profit before tax of 31.3%average tangible shareholders’ equity was (0.7%) (2014: 31.0%(0.3%)) is less than the effective tax rate on statutory profit before tax mainly because it excludes the impact of adjusting items such as non-deductible provisions for ongoing investigations and litigation including Foreign Exchange and provisions for UK customer redress. The adjusted measure of profit before tax is considered to provide a more consistent basis for comparing business performance between periods as it is more representative of the underlying, ongoing performance. Consistent with this, the effective tax rate on adjusted profit before tax is considered a more representative measure of the Group’s underlying, ongoing tax charge.basic loss per share was 1.9p (2014: 0.7p). | | | 194 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Financial review Consolidated summary balance sheet Note
a | Constant currency results are calculated by converting ZAR results into GBP using the average exchange rate for 2015. |
| | | | | | | | | | | | | | | | | | | | | As at 31 December | |
| 2016
£m |
| |
| 2015
£m |
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| 2014
£m |
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| 2013
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| Assets | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 102,353 | | | | 49,711 | | | | 39,695 | | | | 45,687 | | | | 86,191 | | Items in the course of collection from other banks | | | 1,467 | | | | 1,011 | | | | 1,210 | | | | 1,282 | | | | 1,473 | | Trading portfolio assets | | | 80,240 | | | | 77,348 | | | | 114,717 | | | | 133,069 | | | | 146,352 | | Financial assets designated at fair value | | | 78,608 | | | | 76,830 | | | | 38,300 | | | | 38,968 | | | | 46,629 | | Derivative financial instruments | | | 346,626 | | | | 327,709 | | | | 439,909 | | | | 350,300 | | | | 485,140 | | Financial investments | | | 63,317 | | | | 90,267 | | | | 86,066 | | | | 91,756 | | | | 75,109 | | Loans and advances to banks | | | 43,251 | | | | 41,349 | | | | 42,111 | | | | 39,422 | | | | 41,799 | | Loans and advances to customers | | | 392,784 | | | | 399,217 | | | | 427,767 | | | | 434,237 | | | | 430,601 | | Reverse repurchase agreements and other similar secured lending | | | 13,454 | | | | 28,187 | | | | 131,753 | | | | 186,779 | | | | 176,522 | | Assets included in disposal groups classified held for sale | | | 71,454 | | | | 7,364 | | | | – | | | | – | | | | – | | Other assets | | | 19,572 | | | | 21,019 | | | | 36,378 | | | | 22,128 | | | | 22,535 | | Total assets | | | 1,213,126 | | | | 1,120,012 | | | | 1,357,906 | | | | 1,343,628 | | | | 1,512,351 | | Liabilities | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 48,214 | | | | 47,080 | | | | 58,390 | | | | 55,615 | | | | 77,345 | | Items in the course of collection due to other banks | | | 636 | | | | 1,013 | | | | 1,177 | | | | 1,359 | | | | 1,587 | | Customer accounts | | | 423,178 | | | | 418,242 | | | | 427,704 | | | | 431,998 | | | | 390,828 | | Trading portfolio liabilities | | | 34,687 | | | | 33,967 | | | | 45,124 | | | | 53,464 | | | | 44,794 | | Financial liabilities designated at fair value | | | 96,031 | | | | 91,745 | | | | 56,972 | | | | 64,796 | | | | 78,561 | | Derivative financial instruments | | | 340,487 | | | | 324,252 | | | | 439,320 | | | | 347,118 | | | | 480,987 | | Debt securities in issuea | | | 75,932 | | | | 69,150 | | | | 86,099 | | | | 86,693 | | | | 119,525 | | Subordinated liabilities | | | 23,383 | | | | 21,467 | | | | 21,153 | | | | 21,695 | | | | 24,018 | | Repurchase agreements and other similar secured borrowings | | | 19,760 | | | | 25,035 | | | | 124,479 | | | | 196,748 | | | | 217,178 | | Liabilities included in disposal groups classified as held for sale | | | 65,292 | | | | 5,997 | | | | – | | | | – | | | | – | | Other liabilities | | | 14,161 | | | | 16,200 | | | | 31,530 | | | | 20,193 | | | | 17,542 | | Total liabilities | | | 1,141,761 | | | | 1,054,148 | | | | 1,291,948 | | | | 1,279,679 | | | | 1,452,365 | | Equity | | | | | | | | | | | | | | | | | | | | | Called up share capital and share premium | | | 21,842 | | | | 21,586 | | | | 20,809 | | | | 19,887 | | | | 12,477 | | Other equity instruments | | | 6,449 | | | | 5,305 | | | | 4,322 | | | | 2,063 | | | | – | | Other reserves | | | 6,051 | | | | 1,898 | | | | 2,724 | | | | 249 | | | | 3,674 | | Retained earnings | | | 30,531 | | | | 31,021 | | | | 31,712 | | | | 33,186 | | | | 34,464 | | Total equity excludingnon-controlling interests | | | 64,873 | | | | 59,810 | | | | 59,567 | | | | 55,385 | | | | 50,615 | | Non-controlling interests | | | 6,492 | | | | 6,054 | | | | 6,391 | | | | 8,564 | | | | 9,371 | | Total equity | | | 71,365 | | | | 65,864 | | | | 65,958 | | | | 63,949 | | | | 59,986 | | Total liabilities and equity | | | 1,213,126 | | | | 1,120,012 | | | | 1,357,906 | | | | 1,343,628 | | | | 1,512,351 | | | | | | | | | | | | | | | | | | | | | | | Net asset value per ordinary share | | | 344p | | | | 324p | | | | 335p | | | | 331p | | | | 414p | | Tangible net asset value per share | | | 290p | | | | 275p | | | | 285p | | | | 283p | | | | 349p | | Number of ordinary shares of Barclays PLC (in millions) | | | 16,963 | | | | 16,805 | | | | 16,498 | | | | 16,113 | | | | 12,243 | | | | | | | | | | | | | | | | | | | | | | | Year-end US Dollar exchange rate | | | 1.23 | | | | 1.48 | | | | 1.56 | | | | 1.65 | | | | 1.62 | | Year-end Euro exchange rate | | | 1.17 | | | | 1.36 | | | | 1.28 | | | | 1.20 | | | | 1.23 | | Year-end South African Rand exchange rate | | | 16.78 | | | | 23.14 | | | | 18.03 | | | | 17.37 | | | | 13.74 | |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 187195 |
Financial review Income statementBalance sheet commentary
2014 compared to 2013
Statutory profit before tax decreased to £2,256m (2013: £2,868m), adjusted profit before tax increased 8% to £5,502m.
Statutory total income net of insurance claims decreased 9% to £25,288m including adjusting items for an own credit gain of £34m (2013: loss of £220m), a £461m (2013: £259m) gain on the US Lehman acquisition assets and a valuation revision of £935m (2013: nil) relating to changes in discount rates applied in the valuation methodology of the ESHLA loan portfolio held at fair value.
Adjusted total income net of insurance claims decreased 8% to £25,728m, reflecting a 54% reduction in Non-Core following assets and securities rundown and business disposals, a 12% reduction in the Investment Bank, driven by a decrease in the Markets business, particularly Macro, and a 9% reduction in Africa Banking, due to adverse currency movements, partially offset by growth in Barclaycard and PCB.
Net interest income increased 4% to £12,080m, with higher net interest income in PCB, the Investment Bank and Barclaycard, partially offset by reductions in Africa Banking, Head Office and Non-Core. Net interest income for PCB, Barclaycard and Africa Banking increased 4% to £11,435m driven by strong savings income growth in PCB, and volume growth in Barclaycard, partially offset by a reduction in Africa Banking due to currency movements. This resulted in a net interest margin of 4.08% (2013: 4.02%).
Credit impairment charges improved 29% to £2,168m, with a loan loss rate of 46bps (2013: 64bps). This reflected the non-recurrence of impairments on single name exposures, impairment releases on the wholesale portfolio, and improved performance in Europe withinNon-Core. Within the Core business there were lower impairments in PCB due to the improving UK economic environment, particularly impacting Corporate Banking which benefited from one-off releases and lower defaults from large UK corporate clients, and reduced impairments in the Africa Banking South Africa mortgages portfolio.
As a result, statutory net operating income for the Group decreased 7% to £23,120m. Net adjusted operating income excluding movements in own credit, the gains on US Lehman acquisition assets and the revision of the ESHLA valuation methodology decreased 5% to £23,560m.
Statutory operating expenses reduced 7% to £20,429m. This included adjusting items for an additional PPI redress provision of £1,270m, resulting in a full year net charge of £1,110m (2013: £2,000m) in relation to UK customer redress, £1,250m (2013: £173m) of provisions for ongoing investigations and litigation including Foreign Exchange and goodwill impairment of nil (2013: £79m). Adjusted operating expenses decreased 8% to £18,069m, driven by savings from strategic cost programmes, including a 5% reduction in headcount and currency movements. Total compensation costs decreased 8% to £8,891m, with the Investment Bank reducing 9% to £3,620m, reflecting reduced headcount, and lower deferred and current year bonus charges. Costs to achieve were £1,165m (2013: £1,209m) and the UK bank levy was £462m (2013: £504m).
The statutory cost:income ratio increased to 81% (2013: 79%). The adjusted cost:income ratio excluding movements in own credit, the gains on US Lehman acquisition assets, provisions for UK customer redress, the provision for ongoing investigations and litigation including Foreign Exchange, the revision of the ESHLA valuation methodology and goodwill impairment decreased to 70% (2013: 71%).
Statutory other net expense increased to £435m (2013: £24m) including an adjusting item for a loss on the sale of the Spanish business of £446m, which completed on 2 January 2015. In addition, accumulated currency translation reserve losses of approximately £100m were recognised on completion in Q115.
The tax charge was £1,411m (2013: £1,571m) on statutory profit before tax of £2,256m (2013: £2,868m), representing an effective tax rate of 62.5% (2013: 54.8%). The effective tax rate on adjusted profit before tax decreased to 31.0% (2013: 39.9%). 2013 included a charge of £440m relating to the write-down of deferred tax assets in Spain.
| | | 188 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Financial review
Consolidated summary balance sheet
| | | | | | | | | | | | | | | | | | | | | As at 31 December | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| |
| 2012
£m |
| |
| 2011
£m |
| Assets | | | | | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | 49,711 | | | | 39,695 | | | | 45,687 | | | | 86,191 | | | | 106,894 | | Items in the course of collection from other banks | | | 1,011 | | | | 1,210 | | | | 1,282 | | | | 1,473 | | | | 1,812 | | Trading portfolio assets | | | 77,348 | | | | 114,717 | | | | 133,069 | | | | 146,352 | | | | 152,183 | | Financial assets designated at fair value | | | 76,830 | | | | 38,300 | | | | 38,968 | | | | 46,629 | | | | 36,949 | | Derivative financial instruments | | | 327,709 | | | | 439,909 | | | | 350,300 | | | | 485,140 | | | | 559,010 | | Available for sale investments | | | 90,267 | | | | 86,066 | | | | 91,756 | | | | 75,109 | | | | 68,491 | | Loans and advances to banks | | | 41,349 | | | | 42,111 | | | | 39,422 | | | | 41,799 | | | | 48,576 | | Loans and advances to customers | | | 399,217 | | | | 427,767 | | | | 434,237 | | | | 430,601 | | | | 437,355 | | Reverse repurchase agreements and other similar secured lending | | | 28,187 | | | | 131,753 | | | | 186,779 | | | | 176,522 | | | | 153,665 | | Other assets | | | 28,383 | | | | 36,378 | | | | 22,128 | | | | 22,535 | | | | 23,745 | | Total assets | | | 1,120,012 | | | | 1,357,906 | | | | 1,343,628 | | | | 1,512,351 | | | | 1,588,680 | | Liabilities | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | 47,080 | | | | 58,390 | | | | 55,615 | | | | 77,345 | | | | 90,905 | | Items in the course of collection due to other banks | | | 1,013 | | | | 1,177 | | | | 1,359 | | | | 1,587 | | | | 969 | | Customer accounts | | | 418,242 | | | | 427,704 | | | | 431,998 | | | | 390,828 | | | | 371,806 | | Trading portfolio liabilities | | | 33,967 | | | | 45,124 | | | | 53,464 | | | | 44,794 | | | | 45,887 | | Financial liabilities designated at fair value | | | 91,745 | | | | 56,972 | | | | 64,796 | | | | 78,561 | | | | 87,997 | | Derivative financial instruments | | | 324,252 | | | | 439,320 | | | | 347,118 | | | | 480,987 | | | | 548,944 | | Debt securities in issue | | | 69,150 | | | | 86,099 | | | | 86,693 | | | | 119,525 | | | | 129,736 | | Subordinated liabilities | | | 21,467 | | | | 21,153 | | | | 21,695 | | | | 24,018 | | | | 24,870 | | Repurchase agreements and other similar secured borrowings | | | 25,035 | | | | 124,479 | | | | 196,748 | | | | 217,178 | | | | 207,292 | | Other liabilities | | | 22,197 | | | | 31,530 | | | | 20,193 | | | | 17,542 | | | | 16,315 | | Total liabilities | | | 1,054,148 | | | | 1,291,948 | | | | 1,279,679 | | | | 1,452,365 | | | | 1,524,721 | | Equity | | | | | | | | | | | | | | | | | | | | | Called up share capital and share premium | | | 21,586 | | | | 20,809 | | | | 19,887 | | | | 12,477 | | | | 12,380 | | Other equity instruments | | | 5,305 | | | | 4,322 | | | | 2,063 | | | | – | | | | – | | Other reserves | | | 1,898 | | | | 2,724 | | | | 249 | | | | 3,674 | | | | 3,837 | | Retained earnings | | | 31,021 | | | | 31,712 | | | | 33,186 | | | | 34,464 | | | | 38,135 | | Total equity excluding non-controlling interests | | | 59,810 | | | | 59,567 | | | | 55,385 | | | | 50,615 | | | | 54,352 | | Non-controlling interests | | | 6,054 | | | | 6,391 | | | | 8,564 | | | | 9,371 | | | | 9,607 | | Total equity | | | 65,864 | | | | 65,958 | | | | 63,949 | | | | 59,986 | | | | 63,959 | | Total liabilities and equity | | | 1,120,012 | | | | 1,357,906 | | | | 1,343,628 | | | | 1,512,351 | | | | 1,588,680 | | | | | | | | | | | | | | | | | | | | | | | Net tangible asset value per share | | | 275p | | | | 285p | | | | 283p | | | | 349p | | | | 381p | | Net asset value per ordinary share | | | 324p | | | | 335p | | | | 331p | | | | 414p | | | | 446p | | Number of ordinary shares of Barclays PLC (in millions) | | | 16,805 | | | | 16,498 | | | | 16,113 | | | | 12,243 | | | | 12,199 | | | | | | | | | | | | | | | | | | | | | | | Year-end US Dollar exchange rate | | | 1.48 | | | | 1.56 | | | | 1.65 | | | | 1.62 | | | | 1.54 | | Year-end Euro exchange rate | | | 1.36 | | | | 1.28 | | | | 1.20 | | | | 1.23 | | | | 1.19 | | Year-end South African Rand exchange rate | | | 23.14 | | | | 18.03 | | | | 17.37 | | | | 13.74 | | | | 12.52 | |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 189 |
Financial review
Balance sheet commentary
2015 compared to 2014
Total assets Total assets decreased £238bnincreased £93bn to £1,120bn.£1,213bn. Cash and balances at central banks and items in the course of collection from other banks increased £10bn£53bn to £51bn,£102bn, as the cash contribution to the Group liquidity pool was increased. Trading portfolio assets decreased £37bnincreased £3bn to £77bn£80bn primarily driven by balance sheet deleveraging resulting in lower securities positions, consistent with client demand inactivity and the Investment Bank, and exitingappreciation of positions in Non-Core.USD against GBP, partially offset by reduction due to firm strategy. Financial assets designated at fair value increased by £39bn£2bn to £77bn.£79bn. During the period, reverse repurchase agreements designated at fair value have increased by £14bn as new reverse repurchase agreements in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. This has resulted in an increase of £44bn in this account line. Across fair value and amortised cost classifications, total reverse repurchase agreements have decreased £59bn due to a reduction in matched book trading and general firm financing due to balance sheet deleveraging. Additionally, within financial assets designated at fair value, there was a partial offset by decreases in loans and advances, equity securities, debt securities and debt securities.assets held in respect of linked liabilities. Derivative financial instrument assets decreased £112bnincreased £19bn to £328bn,£347bn, consistent with the decreaseincrease in derivative financial instrument liabilities. This included a £79bn decrease in interest rate derivativesThe increase was primarily due to net trade reductions and increases in major forward interest rates and a £19bn decrease in foreign exchange derivatives reflectingmainly driven by an increase in trade reductions.volumes and appreciation of all major currencies against GBP. Available for saleFinancial investments increased £4bndecreased £27bn to £90bn£63bn due to an increasea decrease in government bonds held in the liquidity pool.
Total loans and advances decreased by £29bn£5bn to £441bn£436bn driven by a £31bn decrease due to the reclassification of BAGL balances to held for sale and £9bn from the exit of other assets inNon-Core. This was offset by lending growth of £20bn, a net £20bn decrease£9bn increase in settlement and cash collateral balances, a £6bnand an £8bn increase due to the reclassification of ESHLA loans to other assets, relating to the Portuguese retail business and Italian retail banking branch network which are now held for sale and a £5bn decrease in Africa reflecting the depreciation of ZAR against GBP. This was partially offset by lending growth of £5bn in Barclaycard.recognised at amortised cost. Reverse repurchase agreements and other similar secured lending decreased £104bn£15bn to £28bn reflecting a reduction in matched book trading and general firm financing£13bn mainly due to balance sheet deleveraging andmaturity of trades within amortised cost. New trades are designated as a result of the designation to fair value described inthrough profit and loss to better align to the financialway the business manages the portfolio’s risk and performance. Non current assets designated at fair value comment above.classified as held for disposal increased £64bn to £71bn mainly due to the reclassification of BAGL to held for sale. Total liabilities Total liabilities decreased £238bnincreased £88bn to £1,054bn. Deposits from banks decreased £11bn to £47bn primarily driven by a £9bn decrease in cash collateral due to lower derivative mark to market.£1,142bn.
Customer accounts decreased £10bnincreased £5bn to £418bn as a result£423bn mainly due to deposit growth of £38bn and an increase in settlement and cash collateral balances of £5bn offset by reclassification of £4bn£29bn of BAGL balances to other liabilities relating to the Portuguese retail business and Italian retail banking branch network which are now held for sale a £7bn reduction in settlement balances, a £3bn decrease in cash collateral due to lower derivative mark to market and a £7bnan £8bn decrease due to depreciation of ZAR. This is partially offset by £13bn growth within PCB, BarclaycardNon-Core disposals. Repurchase agreements and Africa.other similar secured borrowing decreased £5bn to £20bn in line with Reverse repurchase agreements and other similar secured lending described above. Trading portfolio liabilities decreased £11bnincreased £1bn to £34bn£35bn primarily driven by balance sheet deleveraging resulting in lower securities positions, consistent with client demand inand the Investment Bank, and exitingappreciation of positions in Non-Core.the USD against GBP. Financial liabilities designated at fair value increased by £35bn£4bn to £92bn. In line with financial assets£96bn. During the period, repurchase agreements designated at fair value the designation of repurchase agreements to fair value resulted in an increase of £45bn during the year. Across fair valuehave increased by £5bn and amortised cost classifications, total repurchase agreements have decreased £54bn due to a reduction in matched book trading and general firm financing due to balance sheet deleveraging. Additionally, within financial liabilities designateddebt securities at fair value thereby £2bn, which was a partialpartially offset due by decreases in debt securities dueliabilities to reduced funding requirements.customer under investment contracts and deposits at fair value. Derivative financial instrument liabilities decreased £115bnincreased £16bn to £324bn£340bn in line with the decreaseincrease in derivative financial assets. Debt Securities in issue decreasedincreased by £17bn£7bn to £69bn£76bn driven primarily driven by a decreasean increase in Certificateliquidity requirements and currency revaluations partially offset by the reclassification of Deposits and Bonds and MTNs dueBAGL balances to reduced funding requirements.held for sale. Subordinated liabilities increased £0.3bn£2bn to £21.5bn£23bn due to issuances of dated subordinated notes and FX movements due to the appreciation of USD and EUR against GBP. These were partially offset by the redemptions of dated and undated subordinated notes, and fair value hedge movements.the reclassification of BAGL balances to held for sale. Repurchase agreementsAccruals, deferred income and other similar secured borrowingsliabilities decreased £99bn£2bn to £25bn reflecting£9bn mainly driven by a reduction in matched book trading and general firm financinginsurance contract liabilities.
Liabilities included in disposal groups classified as held for sale increased £59bn to £65bn mainly due to balance sheet deleveraging and as a resultthe reclassification of the designationBAGL to fair value described in the financial assets designated at fair value comment above.held for sale. Shareholders’ equity Total shareholders’ equity remained flat at £66bn.increased by £6bn to £71bn. Share capital and share premium increased by £0.8bn£0.3bn to £22bn£21.8bn due to the issuance of shares under employee share schemes and the Barclays PLC scrip dividend programme. Other equity instruments increased by £1.0bn£1.1bn to £5.3bn£6.4bn due to issuance of equity accounted AT1 securities to investors. TheAs at 31 December 2016 there was a debit balance of £0.1bn (2015: £0.3bn credit) in the available for sale reserve decreasedreserve. The decrease of £0.4bn (2015: £0.2bn decrease) was due to £0.3bn driven by £0.4bn of lossesa £2.2bn gain from changes in the fair value of government bonds,on Government Bonds, predominantly held in the liquidity pool £0.1bnwhich was more than offset by £1.7bn of losses from related hedging £0.4bnand £0.9bn of net gains transferred to net profit, partially offset by £0.4bn gains from changes in fair valuemainly due to £0.6bn purchase of equity investments in Visa Europe and an £0.1bn change in insurance liabilities.by Visa Inc. A tax creditcharge of £0.1bn£28m was recognised in the period relating to these items.
The cash flow hedging reserve decreased £0.6bnincreased £0.8bn to £1.3bn£2.1bn driven by a £0.4bn decrease£1.6bn increase in the fair value of interest rate swaps held for hedging purposes as forward interest rate forward curves increased, and £0.2bnrates decreased, partially offset by decreases of £0.5bn due to gains recycled to the income statement in line with when the hedged item affects profit or loss, partially offset by aand £0.3bn tax credit of £0.1bn.charge. The currency translation reserve remained stable as the effect of ZAR depreciating against GBP was offsetincreased by £3.7bn to £3.1bn due to the appreciation of USD and EUR against GBP. Net asset value per share increased to 344p (2015: 324p). Net tangible asset value per share decreasedincreased to 275p (2014: 285p)290p (2015: 275p). The decreaseThis increase was primarilymainly attributable to dividends paid and a decreasefavourable movements in the cash flow hedgingcurrency translation reserve as explained.partially offset by pension remeasurement. Capital and indebtedness The capital and indebtedness tables with respect to Barclays PLC and Barclays Bank PLC that are exhibited to this Annual Report onForm 20-F as Exhibits 99.1 and 99.2, respectively, are incorporated by reference into thisForm 20-F. | | | 190196 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Financial review
Analysis of results by business
All disclosures in this section are unaudited unless otherwise stated.
Segmental analysis (audited)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of adjusted results by business | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Personal and Corporate Banking £m | | | | Barclaycard £m | | | | Africa Banking £m | | |
| Investment Bank
£m |
| | | Head Office £m | | |
| Barclays Core
£m |
| | | Barclays Non-Core £m | | | | Group adjusted results £m | | For the year ended 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total income net of insurance claims | | | 8,726 | | | | 4,927 | | | | 3,574 | | | | 7,572 | | | | (107) | | | | 24,692 | | | | (164) | | | | 24,528 | | Credit impairment charges and other provisions | | | (378) | | | | (1,251) | | | | (352) | | | | (55) | | | | – | | | | (2,036) | | | | (78) | | | | (2,114) | | Net operating income | | | 8,348 | | | | 3,676 | | | | 3,222 | | | | 7,517 | | | | (107) | | | | 22,656 | | | | (242) | | | | 22,414 | | Operating expenses | | | (4,774) | | | | (1,927) | | | | (2,169) | | | | (5,362) | | | | (246) | | | | (14,478) | | | | (873) | | | | (15,351) | | UK bank levy | | | (93) | | | | (42) | | | | (52) | | | | (203) | | | | (8) | | | | (398) | | | | (78) | | | | (476) | | Litigation and conduct | | | (109) | | | | – | | | | – | | | | (107) | | | | (14) | | | | (230) | | | | (148) | | | | (378) | | Costs to achieve | | | (292) | | | | (106) | | | | (29) | | | | (234) | | | | (32) | | | | (693) | | | | (100) | | | | (793) | | Other (losses)/incomea | | | (40) | | | | 33 | | | | 7 | | | | – | | | | 5 | | | | 5 | | | | (18) | | | | (13) | | Profit/(loss) before tax from continuing operations | | | 3,040 | | | | 1,634 | | | | 979 | | | | 1,611 | | | | (402) | | | | 6,862 | | | | (1,459) | | | | 5,403 | | Total assets (£bn) | | | 287.2 | | | | 47.4 | | | | 49.9 | | | | 375.9 | | | | 56.4 | | | | 816.9 | | | | 303.1 | | | | 1,120.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total income net of insurance claims | | | 8,828 | | | | 4,356 | | | | 3,664 | | | | 7,588 | | | | 242 | | | | 24,678 | | | | 1,050 | | | | 25,728 | | Credit impairment charges and other provisions | | | (482) | | | | (1,183) | | | | (349) | | | | 14 | | | | – | | | | (2,000) | | | | (168) | | | | (2,168) | | Net operating income | | | 8,346 | | | | 3,173 | | | | 3,315 | | | | 7,602 | | | | 242 | | | | 22,678 | | | | 882 | | | | 23,560 | | Operating expenses | | | (4,951) | | | | (1,727) | | | | (2,244) | | | | (5,504) | | | | (57) | | | | (14,483) | | | | (1,510) | | | | (15,993) | | UK bank levy | | | (70) | | | | (29) | | | | (45) | | | | (218) | | | | (9) | | | | (371) | | | | (91) | | | | (462) | | Litigation and conduct | | | (54) | | | | – | | | | (2) | | | | (129) | | | | (66) | | | | (251) | | | | (198) | | | | (449) | | Costs to achieve | | | (400) | | | | (118) | | | | (51) | | | | (374) | | | | (10) | | | | (953) | | | | (212) | | | | (1,165) | | Other income/(losses)a | | | 14 | | | | 40 | | | | 11 | | | | – | | | | (3) | | | | 62 | | | | (51) | | | | 11 | | Profit/(loss) before tax from continuing operations | | | 2,885 | | | | 1,339 | | | | 984 | | | | 1,377 | | | | 97 | | | | 6,682 | | | | (1,180) | | | | 5,502 | | Total assets (£bn) | | | 285.0 | | | | 41.3 | | | | 55.5 | | | | 455.7 | | | | 49.1 | | | | 886.5 | | | | 471.5 | | | | 1,357.9 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended 31 December 2013b | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total income net of insurance claims | | | 8,723 | | | | 4,103 | | | | 4,039 | | | | 8,596 | | | | 142 | | | | 25,603 | | | | 2,293 | | | | 27,896 | | Credit impairment charges and other provisions | | | (621) | | | | (1,096) | | | | (479) | | | | 22 | | | | 3 | | | | (2,171) | | | | (900) | | | | (3,071) | | Net operating income | | | 8,102 | | | | 3,007 | | | | 3,560 | | | | 8,618 | | | | 145 | | | | 23,432 | | | | 1,393 | | | | 24,825 | | Operating expenses | | | (5,362) | | | | (1,752) | | | | (2,451) | | | | (6,141) | | | | (103) | | | | (15,809) | | | | (1,929) | | | | (17,738) | | UK bank levy | | | (66) | | | | (22) | | | | (42) | | | | (236) | | | | (29) | | | | (395) | | | | (109) | | | | (504) | | Litigation and conduct | | | (98) | | | | (34) | | | | – | | | | (31) | | | | (10) | | | | (173) | | | | (96) | | | | (269) | | Costs to achieve | | | (384) | | | | (49) | | | | (26) | | | | (190) | | | | (22) | | | | (671) | | | | (538) | | | | (1,209) | | Other income/(losses)a | | | 41 | | | | 33 | | | | 8 | | | | – | | | | 4 | | | | 86 | | | | (110) | | | | (24) | | Profit/(loss) before tax from continuing operations | | | 2,233 | | | | 1,183 | | | | 1,049 | | | | 2,020 | | | | (15) | | | | 6,470 | | | | (1,389) | | | | 5,081 | | Total assets (£bn) | | | 278.5 | | | | 34.4 | | | | 54.9 | | | | 438.0 | | | | 26.6 | | | | 832.4 | | | | 511.2 | | | | 1,343.6 | |
Notes
a | Other (losses)/income represents the share of post-tax results of associates and joint ventures, profit (or loss) on disposal of subsidiaries, associates and joint ventures, and gains on acquisitions. |
b | 2013 adjusted total operating expenses and profit before tax have been revised to account for the reclassification of £173m of charges, relating to a US residential mortgage-related business settlement with the Federal Housing Finance Agency, to provisions for ongoing investigations and litigation including Foreign Exchange to aid comparability. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 191 |
Financial review Analysis of results by business All disclosures in this section are unaudited unless otherwise stated. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted results reconciliation | | | | | | | | | 2015 | | | | | | | | | | | | 2014 | | | | | | | | | | | | 2013a | | | | | | For the year ended 31 December | |
| Group adjusted results
£m |
| |
| Adjusting items
£m |
| |
| Group statutory results
£m |
| |
| Group adjusted results
£m |
| |
| Adjusting items
£m |
| |
| Group statutory results
£m |
| |
| Group adjusted results
£m |
| |
| Adjusting items
£m |
| |
| Group statutory results
£m |
| Total income net of insurance claims | | | 24,528 | | | | 926 | | | | 25,454 | | | | 25,728 | | | | (440 | ) | | | 25,288 | | | | 27,896 | | | | 39 | | | | 27,935 | | Credit impairment charges and other provisions | | | (2,114 | ) | | | – | | | | (2,114 | ) | | | (2,168 | ) | | | – | | | | (2,168 | ) | | | (3,071 | ) | | | – | | | | (3,071 | ) | Net operating income | | | 22,414 | | | | 926 | | | | 23,340 | | | | 23,560 | | | | (440 | ) | | | 23,120 | | | | 24,825 | | | | 39 | | | | 24,864 | | Operating expenses | | | (15,351 | ) | | | 330 | | | | (15,021 | ) | | | (15,993 | ) | | | – | | | | (15,993 | ) | | | (17,738 | ) | | | (79 | ) | | | (17,817 | ) | UK bank levy | | | (476 | ) | | | – | | | | (476 | ) | | | (462 | ) | | | – | | | | (462 | ) | | | (504 | ) | | | – | | | | (504 | ) | Litigation and conduct | | | (378 | ) | | | (4,009 | ) | | | (4,387 | ) | | | (449 | ) | | | (2,360 | ) | | | (2,809 | ) | | | (269 | ) | | | (2,173 | ) | | | (2,442 | ) | Costs to achieve | | | (793 | ) | | | – | | | | (793 | ) | | | (1,165 | ) | | | – | | | | (1,165 | ) | | | (1,209 | ) | | | – | | | | (1,209 | ) | Other (losses)/incomeb | | | (13 | ) | | | (577 | ) | | | (590 | ) | | | 11 | | | | (446 | ) | | | (435 | ) | | | (24 | ) | | | – | | | | (24 | ) | Profit/(loss) before tax from continuing operations | | | 5,403 | | | | (3,330 | ) | | | 2,073 | | | | 5,502 | | | | (3,246 | ) | | | 2,256 | | | | 5,081 | | | | (2,213 | ) | | | 2,868 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted profit reconciliation | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended 31 December | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m | a
| Adjusted profit before tax | | | | 5,403 | | | | 5,502 | | | | 5,081 | | Provisions for UK customer redress | | | | (2,772 | ) | | | (1,110 | ) | | | (2,000 | ) | Provisions for ongoing investigations and litigation including Foreign Exchange | | | | (1,237 | ) | | | (1,250 | ) | | | (173 | ) | Losses on sale relating to the Spanish, Portuguese and Italian businesses | | | | (580 | ) | | | (446 | ) | | | – | | Gain on US Lehman acquisition assets | | | | 496 | | | | 461 | | | | 259 | | Own credit | | | | 430 | | | | 34 | | | | (220 | ) | Gain on valuation of a component of the defined retirement benefit liability | | | | 429 | | | | – | | | | – | | Impairment of goodwill and other assets relating to businesses being disposed | | | | (96 | ) | | | – | | | | (79 | ) | Revision of ESHLA valuation methodology | | | | – | | | | (935 | ) | | | – | | Statutory profit before tax | | | | | | | | | | | | 2,073 | | | | 2,256 | | | | 2,868 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Income by geographic region (audited) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjusted | | | | | | | | | | | | Statutory | | | | | | | | | | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| Continuing operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | UKc | | | | | | | | | | | | | | | 11,730 | | | | 12,357 | | | | 11,681 | | | | 12,160 | | | | 11,456 | | | | 11,461 | | Europe | | | | | | | | | | | | | | | 2,245 | | | | 2,896 | | | | 4,019 | | | | 2,245 | | | | 2,896 | | | | 4,019 | | Americasd | | | | | | | | | | | | | | | 6,114 | | | | 5,547 | | | | 6,775 | | | | 6,610 | | | | 6,008 | | | | 7,034 | | Africa and Middle East | | | | | | | | | | | | | | | 3,801 | | | | 4,152 | | | | 4,137 | | | | 3,801 | | | | 4,152 | | | | 4,137 | | Asia | | | | | | | | | | | | | | | 638 | | | | 776 | | | | 1,284 | | | | 638 | | | | 776 | | | | 1,284 | | Total | | | | | | | | | | | | | | | 24,528 | | | | 25,728 | | | | 27,896 | | | | 25,454 | | | | 25,288 | | | | 27,935 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Statutory income from individual countries which represent more than 5% of total income (audited)e | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| Continuing operations | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | UK | | | | | | | | | | | | | | | | | | | | | | | | | | | 12,160 | | | | 11,456 | | | | 11,461 | | US | | | | | | | | | | | | | | | | | | | | | | | | | | | 6,228 | | | | 5,866 | | | | 6,760 | | South Africa | | | | | | | | | | | | | | | | | | | | | | | | | | | 2,727 | | | | 2,915 | | | | 2,884 | |
Segmental analysis (audited) | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of results by business | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Barclays
UK £m |
| |
| Barclays
International £m |
| |
| Head
Office £m |
| |
| Barclays
Core £m |
| |
| Barclays
Non-Core £m |
| |
| Group
results £m |
| For the year ended 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | Total income | | | 7,517 | | | | 14,995 | | | | 103 | | | | 22,615 | | | | (1,164) | | | | 21,451 | | Credit impairment charges and other provisions | | | (896) | | | | (1,355) | | | | – | | | | (2,251) | | | | (122) | | | | (2,373) | | Net operating income | | | 6,621 | | | | 13,640 | | | | 103 | | | | 20,364 | | | | (1,286) | | | | 19,078 | | Operating expenses | | | (3,792) | | | | (9,129) | | | | (135) | | | | (13,056) | | | | (1,509) | | | | (14,565) | | UK bank levy | | | (48) | | | | (284) | | | | (2) | | | | (334) | | | | (76) | | | | (410) | | Litigation and conduct | | | (1,042) | | | | (48) | | | | (27) | | | | (1,117) | | | | (246) | | | | (1,363) | | Total operating expenses | | | (4,882) | | | | (9,461) | | | | (164) | | | | (14,507) | | | | (1,831) | | | | (16,338) | | Other net (expenses)/incomea | | | (1) | | | | 32 | | | | 128 | | | | 159 | | | | 331 | | | | 490 | | Profit/(loss) before tax from continuing operations | | | 1,738 | | | | 4,211 | | | | 67 | | | | 6,016 | | | | (2,786) | | | | 3,230 | | Total assets (£bn)b | | | 209.6 | | | | 648.5 | | | | 75.2 | | | | 933.4 | | | | 279.7 | | | | 1,213.1 | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | Total income | | | 7,343 | | | | 13,747 | | | | 338 | | | | 21,428 | | | | 612 | | | | 22,040 | | Credit impairment charges and other provisions | | | (706) | | | | (922) | | | | – | | | | (1,628) | | | | (134) | | | | (1,762) | | Net operating income | | | 6,637 | | | | 12,825 | | | | 338 | | | | 19,800 | | | | 478 | | | | 20,278 | | Operating expenses | | | (3,464) | | | | (8,029) | | | | (272) | | | | (11,765) | | | | (1,958) | | | | (13,723) | | UK bank levy | | | (77) | | | | (253) | | | | (8) | | | | (338) | | | | (88) | | | | (426) | | Litigation and conduct | | | (2,511) | | | | (1,310) | | | | (66) | | | | (3,887) | | | | (500) | | | | (4,387) | | Total operating expenses | | | (6,052) | | | | (9,592) | | | | (346) | | | | (15,990) | | | | (2,546) | | | | (18,536) | | Other net income/(expenses)a | | | – | | | | 45 | | | | (106) | | | | (61) | | | | (535) | | | | (596) | | Profit/(loss) before tax from continuing operations | | | 585 | | | | 3,278 | | | | (114) | | | | 3,749 | | | | (2,603) | | | | 1,146 | | Total assets (£bn)b | | | 202.5 | | | | 532.2 | | | | 59.4 | | | | 794.2 | | | | 325.8 | | | | 1,120.0 | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | Total income | | | 7,436 | | | | 12,908 | | | | 276 | | | | 20,620 | | | | 1,143 | | | | 21,763 | | Credit impairment charges and other provisions | | | (901) | | | | (679) | | | | – | | | | (1,580) | | | | (241) | | | | (1,821) | | Net operating income | | | 6,535 | | | | 12,229 | | | | 276 | | | | 19,040 | | | | 902 | | | | 19,942 | | Operating expenses | | | (4,108) | | | | (8,170) | | | | (70) | | | | (12,348) | | | | (2,611) | | | | (14,959) | | UK bank levy | | | (59) | | | | (248) | | | | (9) | | | | (316) | | | | (102) | | | | (418) | | Litigation and conduct | | | (1,108) | | | | (1,333) | | | | (65) | | | | (2,506) | | | | (301) | | | | (2,807) | | Total operating expenses | | | (5,275) | | | | (9,751) | | | | (144) | | | | (15,170) | | | | (3,014) | | | | (18,184) | | Other net income/(expenses)a | | | – | | | | 52 | | | | 316 | | | | 368 | | | | (813) | | | | (445) | | Profit/(loss) before tax from continuing operations | | | 1,260 | | | | 2,530 | | | | 448 | | | | 4,238 | | | | (2,925) | | | | 1,313 | | Total assets (£bn)b | | | 198.0 | | | | 596.5 | | | | 61.0 | | | | 855.5 | | | | 502.4 | | | | 1,357.9 | |
| | | | | | | | | | | | | Notable itemsc | | | | | | | | | | | | | For the year ended 31 December | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Total income | | | | | | | | | | | | | Own credit | | | (35) | | | | 430 | | | | 34 | | Gain on disposal of Barclays’ share of Visa Europe Limited | | | 615 | | | | – | | | | – | | Revision of ESHLA valuation methodology | | | – | | | | – | | | | (935) | | Gains on US Lehman acquisition assets | | | – | | | | 496 | | | | 461 | | Litigation and conduct | | | | | | | | | | | | | Provisions for UK customer redress | | | (1,000) | | | | (2,772) | | | | (1,110) | | Provisions for ongoing investigations and litigation including Foreign Exchange | | | – | | | | (1,237) | | | | (1,250) | | Operating expenses | | | | | | | | | | | | | Gain on valuation of a component of the defined retirement benefit liability | | | – | | | | 429 | | | | – | | Impairment of goodwill and other assets relating to businesses being disposed | | | – | | | | (96) | | | | – | | Other net expenses | | | | | | | | | | | | | Losses on sale relating to the Spanish, Portuguese and Italian businesses | | | – | | | | (580) | | | | (446) | | Total notable items | | | (420) | | | | (3,330) | | | | (3,246) | |
Notes a | 2013 adjusted total operating expenses and profit before tax have been revised to account for the reclassification of £173m of charges, relating to a US residential mortgage-related business settlement with the Federal Housing Finance Agency, to provisions for ongoing investigations and litigation including Foreign Exchange to aid comparability. |
b | Other (losses)net (expenses)/income represents the share ofpost-tax results of associates and joint ventures, profit (or loss) on disposal of subsidiaries, associates and joint ventures, and gains on acquisitions. |
b | Africa Banking assets held for sale are reported in Head Office within Core. |
c | UK adjusted income excludes the impactRefer to pagesi to x and pages 212 to 215 for further information, reconciliations and calculations of an own credit gain of £430m (2014: £34m gain) and ESHLA valuation revision of nil (2014: £935m). |
d | Americas adjusted income excludes the gains on US Lehman acquisition assets of £496m (2014: £461m). |
e | Total income net of insurance claims based on counterparty location. Income from any single external customer does not amount to 10% or greater of the Group’s total income net of insurance claims. |
| | | 192 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
| | | | | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| Income statement information | | | | | | | | | | | | | Total income net of insurance claims | | | 24,692 | | | | 24,678 | | | | 25,603 | | Credit impairment charges and other provisions | | | (2,036 | ) | | | (2,000 | ) | | | (2,171 | ) | Net operating income | | | 22,656 | | | | 22,678 | | | | 23,432 | | Operating expenses | | | (14,478 | ) | | | (14,483 | ) | | | (15,809 | ) | UK bank levy | | | (398 | ) | | | (371 | ) | | | (395 | ) | Litigation and conduct | | | (230 | ) | | | (251 | ) | | | (173 | ) | Costs to achieve | | | (693 | ) | | | (953 | ) | | | (671 | ) | Total operating expenses | | | (15,799 | ) | | | (16,058 | ) | | | (17,048 | ) | Other net income | | | 5 | | | | 62 | | | | 86 | | Profit before tax | | | 6,862 | | | | 6,682 | | | | 6,470 | | Tax charge | | | (1,749 | ) | | | (1,976 | ) | | | (1,754 | ) | Profit after tax | | | 5,113 | | | | 4,706 | | | | 4,716 | | Non-controlling interests | | | (610 | ) | | | (648 | ) | | | (638 | ) | Other equity interests | | | (284 | ) | | | (194 | ) | | | – | | Attributable profit | | | 4,219 | | | | 3,864 | | | | 4,078 | | | | | | Balance sheet information | | | | | | | | | | | | | Total assets | | | £816.9bn | | | | £886.5bn | | | | £832.4bn | | Risk weighted assets | | | £311.8bn | | | | £326.6bn | | | | £332.6bn | | Leverage exposure | | | £906.5bn | | | | £955.9bn | | | | n/a | | | | | | Key facts | | | | | | | | | | | | | Number of employees (full time equivalent) | | | 123,800 | | | | 123,400 | | | | 129,700 | | | | | | Performance measures | | | | | | | | | | | | | Return on average tangible equity | | | 10.9% | | | | 11.3% | | | | 14.4% | | Average allocated tangible equity | | | £39.2bn | | | | £34.6bn | | | | £28.4bn | | Return on average equity | | | 9.0% | | | | 9.2% | | | | 11.3% | | Average allocated equity | | | £47.3bn | | | | £42.3bn | | | | £35.9bn | | Period end allocated equity | | | £47.6bn | | | | £44.9bn | | | | £39.0bn | | Cost:income ratio | | | 64% | | | | 65% | | | | 67% | | Loan loss rate (bps) | | | 51 | | | | 49 | | | | 55 | |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 193 |
Financial review
Analysis of results by business
Personal and
Corporate Banking
£8,726m total income
£3,040m profit before tax
2015 compared to 2014non-IFRS performance measures included throughout this document.
Profit before tax improved 5% to £3,040m driven by the continued reduction in operating expenses and lower impairment due to the benign economic environment in the UK. The reduction in operating expenses was delivered through strategic cost programmes including the restructure of the branch network and technology improvements to increase automation. Corporate performed strongly with income increasing 5% through growth in both lending and cash management.
PCB results were significantly impacted by customer redress in, and the sale of, the US Wealth business. Excluding the US Wealth business profit before tax improved 12% to £3,277m.
Total income reduced 1% to £8,726m. Excluding the US Wealth business income remained flat. Personal income decreased 3% to £4,054m driven by a reduction in fee income and mortgage margin pressure, partially offset by improved deposit margins and balance growth. Corporate income increased 5% to £3,754m due to balance growth in both lending and deposits and improved deposit margins, partially offset by reduced margins in the lending business. Wealth income reduced 15% to £918m primarily as a result of the impact of customer redress in, and the sale of, the US Wealth business. Excluding the US Wealth business income decreased 2%.
Net interest income increased 2% to £6,438m driven by growth in Corporate balances and the change in the overdraft proposition in June 2014. Net interest margin remained broadly in line at 2.99% (2014: 3.00%) as mortgage margin pressure and lower Corporate lending margins were partially offset by increased margins on Corporate and Personal deposits, and the benefit of the change in the overdraft proposition.
Net fee, commission and other income reduced 10% to £2,288m driven primarily by the impact of the change in the overdraft proposition and customer redress in the US.
Credit impairment charges improved 22% to £378m due to the benign economic environment in the UK resulting in lower default rates and charges across all businesses. The loan loss rate reduced 4bps to 17bps.
Total operating expenses reduced 4% to £5,268m reflecting savings realised from strategic cost programmes relating to restructuring of the branch network and technology improvements, and lower costs to achieve, partially offset by increased litigation and conduct charges.
Loans and advances to customers increased 1% to £218.4bn due to increased Corporate lending.
Total assets increased 1% to £287.2bn driven by the growth in loans and advances to customers.
Customer deposits increased 2% to £305.4bn primarily driven by the Personal and Corporate businesses.
RWAs were broadly flat at £120.4bn (2014: £120.2bn).
2014 compared to 2013
Profit before tax increased 29% to £2,885m driven by 3% growth in Personal income, lower impairment due to the improving economic environment in the UK, and the continued reduction in operating expenses delivered through strategic cost programmes. This resulted in a 2.2% increase in return on average equity to 11.9%. In Personal, income increased £119m alongside significant cost reductions, with the net closure of 72 branches as part of ongoing branch network optimisation, as well as investment in the customer experience across multiple channels. Corporate increased both loans and deposits, and Wealth undertook a substantial reorganisation to reduce the number of target markets while simplifying operations.
Total income increased 1% to £8,828m. Personal income increased 3% to £4,159m due to balance growth and improved savings margins, partially offset by lower fee income. Corporate income was broadly in line at £3,592m (2013: £3,620m), with balance growth in both lending and deposits, offset by margin compression. Wealth income was broadly in line at £1,077m (2013: £1,063m) driven by growth in the UK business, offset by client and market exits as part of the reorganisations in the US and EU businesses, and lower fee income.
Net interest income increased 7% to £6,298m driven by lending and deposit growth and margin improvement. Net interest margin improved 9bps to 3.00% primarily due to the launch of a revised overdraft proposition, which recognises the majority of overdraft income as net interest income as opposed to fee income, and higher savings margins within Personal and Wealth. These factors were partially offset by lower Corporate deposit margins.
Net fee, commission and other income reduced 11% to £2,530m due to the launch of the revised overdraft proposition and lower transactional income in Wealth.
Credit impairment charges improved 22% to £482m and the loan loss rate reduced 7bps to 21bps due to the improving economic environment in the UK, particularly impacting Corporate which benefited from one-off releases and lower defaults from large UK Corporate clients.
Total operating expenses reduced 7% to £5,475m reflecting savings realised from strategic cost programmes relating to restructuring of the branch network and technology improvements to increase automation.
Loans and advances to customers increased 2% to £217.0bn due to mortgage growth and Corporate loan growth.
Total assets increased 2% to £285.0bn driven by the growth in loans and advances to customers.
Customer deposits increased to £299.2bn (2013: £295.9bn).
RWAs increased 2% to £120.2bn primarily driven by growth in mortgage and Corporate lending.
| | | 194 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
| | | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| | 2013 £m | Income statement information | | | | | | | | | | | Net interest income | | | 6,438 | | | | 6,298 | | | 5,893 | Net fee, commission and other income | | | 2,288 | | | | 2,530 | | | 2,830 | Total income | | | 8,726 | | | | 8,828 | | | 8,723 | Credit impairment charges and other provisions | | | (378) | | | | (482) | | | (621) | Net operating income | | | 8,348 | | | | 8,346 | | | 8,102 | Operating expenses | | | (4,774) | | | | (4,951) | | | (5,362) | UK bank levy | | | (93) | | | | (70) | | | (66) | Litigation and conduct | | | (109) | | | | (54) | | | (98) | Costs to achieve | | | (292) | | | | (400) | | | (384) | Total operating expenses | | | (5,268) | | | | (5,475) | | | (5,910) | Other net (expenses)/income | | | (40) | | | | 14 | | | 41 | Profit before tax | | | 3,040 | | | | 2,885 | | | 2,233 | Attributable profit | | | 2,179 | | | | 2,058 | | | 1,681 | | | | | Balance sheet information | | | | | | | | | | | Loans and advances to customers at amortised cost | | | £218.4bn | | | | £217.0bn | | | £212.2bn | Total assets | | | £287.2bn | | | | £285.0bn | | | £278.5bn | Customer deposits | | | £305.4bn | | | | £299.2bn | | | £295.9bn | Risk weighted assets | | | £120.4bn | | | | £120.2bn | | | £118.3bn | | | | | Key facts | | | | | | | | | | | Average LTV of mortgage lendinga | | | 49% | | | | 52% | | | 56% | Average LTV of new mortgage lendinga | | | 64% | | | | 65% | | | 64% | Client assetsb | | | £112.2bn | | | | £148.6bn | | | £155.3bn | Number of branches | | | 1,362 | | | | 1,488 | | | 1,560 | Number of employees (full time equivalent) | | | 45,700 | | | | 45,600 | | | 50,100 | | | | | Performance measures | | | | | | | | | | | Return on average tangible equity | | | 16.2% | | | | 15.8% | | | 12.7% | Average allocated tangible equity | | | £13.6bn | | | | £13.1bn | | | £13.2bn | Return on average equity | | | 12.1% | | | | 11.9% | | | 9.7% | Average allocated equity | | | £18.2bn | | | | £17.5bn | | | £17.3bn | Cost:income ratio | | | 60% | | | | 62% | | | 68% | Loan loss rate (bps) | | | 17 | | | | 21 | | | 28 | Net interest margin | | | 2.99% | | | | 3.00% | | | 2.91% | | | | | Analysis of total income | | | £m | | | | £m | | | £m | Personal | | | 4,054 | | | | 4,159 | | | 4,040 | Corporate | | | 3,754 | | | | 3,592 | | | 3,620 | Wealth | | | 918 | | | | 1,077 | | | 1,063 | Total income | | | 8,726 | | | | 8,828 | | | 8,723 | | | | | Analysis of loans and advances to customers at amortised cost | | | | | | | | | | | Personal | | | £137.0bn | | | | £136.8bn | | | £133.8bn | Corporate | | | £67.9bn | | | | £65.1bn | | | £62.5bn | Wealth | | | £13.5bn | | | | £15.1bn | | | £15.9bn | Total loans and advances to customers at amortised cost | | | £218.4bn | | | | £217.0bn | | | £212.2bn | | | | | Analysis of customer deposits | | | | | | | | | | | Personal | | | £151.3bn | | | | £145.8bn | | | £140.5bn | Corporate | | | £124.4bn | | | | £122.2bn | | | £118.5bn | Wealth | | | £29.7bn | | | | £31.2bn | | | £36.9bn | Total customer deposits | | | £305.4bn | | | | £299.2bn | | | £295.9bn |
Notes
a | Average LTV of mortgage lending and new mortgage lending calculated on the balance weighted basis. |
b | Includes assets managed or administered by Barclays on behalf of clients including Assets Under Management (AUM), custody assets, assets under administration, and Wealth client deposits and client lending. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 195197 |
| | | | | | | | | | | | | Income by geographic region (audited) | | | | | | | | | | | | | For the year ended 31 December | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Continuing operations | | | | | | | | | | | | | UK | | | 11,096 | | | | 12,160 | | | | 11,456 | | Europe | | | 2,087 | | | | 2,245 | | | | 2,896 | | Americas | | | 7,278 | | | | 6,610 | | | | 6,008 | | Africa and Middle East | | | 419 | | | | 387 | | | | 627 | | Asia | | | 571 | | | | 638 | | | | 776 | | Total | | | 21,451 | | | | 22,040 | | | | 21,763 | | | | | | | | | | | | | | | | | | | Income from individual countries which represent more than 5% of total income (audited)a | | | | | | | | | | | | | For the year ended 31 December | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Continuing operations | | | | | | | | | | | | | UK | | | 11,096 | | | | 12,160 | | | | 11,456 | | US | | | 6,876 | | | | 6,228 | | | | 5,866 | |
Note a | Total income based on counterparty location. Income from each single external customer does not amount to 10% or greater of the Group’s total income. |
| | | 198 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Financial review Analysis of results by business £4,927m total income
£1,634m profit before taxBarclays Core
2015 compared to 2014
| | | | | | | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Income statement informationa | | | | | | | | | | | | | Total income | | | 22,615 | | | | 21,428 | | | | 20,620 | | Credit impairment charges and other provisions | | | (2,251 | ) | | | (1,628 | ) | | | (1,580 | ) | Net operating income | | | 20,364 | | | | 19,800 | | | | 19,040 | | Operating expenses | | | (13,056 | ) | | | (11,765 | ) | | | (12,348 | ) | UK bank levy | | | (334 | ) | | | (338 | ) | | | (316 | ) | Litigation and conduct | | | (1,117 | ) | | | (3,887 | ) | | | (2,506 | ) | Total operating expenses | | | (14,507 | ) | | | (15,990 | ) | | | (15,170 | ) | Other net income/(expenses) | | | 159 | | | | (61 | ) | | | 368 | | Profit before tax | | | 6,016 | | | | 3,749 | | | | 4,238 | | Tax charge | | | (1,975 | ) | | | (1,479 | ) | | | (1,590 | ) | Profit after tax | | | 4,041 | | | | 2,270 | | | | 2,648 | | Non-controlling interests | | | (297 | ) | | | (266 | ) | | | (303 | ) | Other equity interests | | | (394 | ) | | | (282 | ) | | | (193 | ) | Attributable profitb | | | 3,350 | | | | 1,722 | | | | 2,152 | | | | | | Balance sheet information | | | | | | | | | | | | | Total assetsb | | | £933.4bn | | | | £794.2bn | | | | £855.5bn | | Risk weighted assetsb | | | £333.5bn | | | | £304.1bn | | | | £312.8bn | | Leverage exposureb | | | £1,024.0bn | | | | £879.1bn | | | | £917.1bn | | | | | | Key facts | | | | | | | | | | | | | Number of employees (full time equivalent) | | | 73,000 | | | | 78,000 | | | | 75,000 | | | | | | Performance measures | | | | | | | | | | | | | Return on equity | | | 7.0% | | | | 4.0% | | | | 5.6% | | Average equity | | | £49.6bn | | | | £44.7bn | | | | £38.9bn | | Return on average allocated tangible equity | | | 8.4% | | | | 4.8% | | | | 7.0% | | Average allocated tangible equityb | | | £41.0bn | | | | £36.8bn | | | | £31.4bn | | Cost: income ratio | | | 64% | | | | 75% | | | | 74% | | Loan loss rate (bps) | | | 58 | | | | 45 | | | | 43 | | Basic earnings per share contribution | | | 20.5p | | | | 10.7p | | | | 13.4p | | | | | | Notable items | | | | | | | | | | | | | Total income | | | | | | | | | | | | | Own credit | | | (35 | ) | | | 430 | | | | 34 | | Gain on disposal of Barclays’ share of Visa Europe Limited | | | 615 | | | | – | | | | – | | Gains on US Lehman acquisition assets | | | – | | | | 496 | | | | 461 | | Litigation and conduct | | | | | | | | | | | | | Provisions for UK customer redress | | | (1,000 | ) | | | (2,649 | ) | | | (1,035 | ) | Provisions for ongoing investigations and litigation including Foreign Exchange | | | – | | | | (1,036 | ) | | | (1,250 | ) | Operating expenses | | | | | | | | | | | | | Gain on valuation of a component of the defined retirement benefit liability | | | – | | | | 429 | | | | – | | Other net expenses | | | | | | | | | | | | | Losses on sale relating to the Spanish, Portuguese and Italian businesses | | | – | | | | (112 | ) | | | 315 | | Total notable items | | | (420 | ) | | | (2,442 | ) | | | (1,475 | ) |
Profit before tax increased 22% to £1,634m. Strong growth was delivered throughExcluding notable items, the diversified consumer and merchant business model with asset growth across all geographies. The cost to income ratio improved to 42% (2014: 43%) whilst investment in business growth continued. The business focus on risk management was reflected in stable 30 day delinquency rates and improved loan loss rates.
Total income increased 13% to £4,927m driven primarily by business growth in US cards and the appreciation of the average USD rate against GBP.
Net interest income increased 16% to £3,520m driven by business growth. Net interest margin also improved to 9.13% (2014: 8.75%) reflecting growth in interest earning lending.
Net fee, commission and other income increased 7% to £1,407m due to growth in payment volumes, partially offset by the impact of rate capping from European Interchange Fee Regulation.
Credit impairment charges increased 6% to £1,251m primarily reflecting asset growth and updates to impairment model methodologies, partially offset by improved performance in UK Cards. Delinquency rates remained broadly stable and the loan loss rate reduced 19bps to 289bps.
Total operating expenses increased 11% to £2,075m due to continued investment in business growth, the appreciation of the average USD rate against GBP and the impact of one-off items, including a write-off of intangible assets of £55m relating to the withdrawal of the Bespoke product.
Loans and advances to customers increased 9% to £39.8bn reflecting growth across all geographies.
Total assets increased 15% to £47.4bn primarily due to the increase in loans and advances to customers.
Customer deposits increased 40% to £10.2bn driven by the deposits funding strategy in the US.
RWAs increased 4% to £41.3bn primarily driven by the growth in the US cards business.
2014 compared to 2013
Profit before tax increased 13% to £1,339m. Strong growth in 2014 was delivered through a diversified consumer and merchant business model, with customer numbers increasing to 29m (2013: 26m) and asset growth across all geographies generating a 6% increase in income. Growth has been managed on a well-controlled cost base, with the business focusing on scale through insourcing of services, consolidation of sites and digitalisation, resulting in an improvement in the cost to income ratio to 43% (2013: 45%). The business focus on risk management is reflected in stable 30 day delinquency rates and falling loan loss rates. The diversified and scaled business model has allowed the business to deliver a strongCore return on average allocated tangible equity of 16.0% (2013: 15.5%was 9.4% (2015: 11.2%).
Total income increased 6% to £4,356m reflecting growth in the UK consumer and merchant, Germany and US businesses, partially offset by depreciation of average USD against GBP.
Net interest income increased 8% to £3,044m driven by volume growth. Net interest margin decreased to 8.75% (2013: 8.99%) due to a change in product mix and the impact of promotional offers, particularly in the US, partially offset by lower funding costs.Core basic earnings per share was 23.1p (2015: 24.9p).
Net fee, commission and other income increased 3% to £1,312m due to growth in payment volumes.
Credit impairment charges increased 8% to £1,183m due to asset growth and enhanced coverage for forbearance. Delinquency rates remained broadly stable and the loan loss rate reduced 24bps to 308bps.
Total operating expenses increased 1% to £1,874m driven by higher costs to achieve of £118m (2013: £49m), partially offset by depreciation of average USD against GBP, VAT refunds, and savings from strategic cost programmes, including insourcing of services, consolidation of sites and digitalisation.
Loans and advances to customers increased 16% to £36.6bn reflecting growth across all geographies, including the impact of promotional offers and the acquisition of portfolios in the US.
Total assets increased 20% to £41.3bn due to the increase in loans and advances to customers.
Customer deposits increased 43% to £7.3bn driven by the deposits funding strategy in the US.
RWAs increased 12% to £39.9bn primarily driven by the growth in loans and advances to customers.
Notes a | | | 196 | Barclays PLCRefer to pages i to x and Barclays Bank PLC 2015 Annual Report on Form 20-F | | pages 212 to 215 for further information, reconciliations and calculations ofnon-IFRS performance measures included throughout this document. |
| | | | | | | | | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| | 2013 £m | | | | | Income statement information | | | | | | | | | | | | | | | Net interest income | | | 3,520 | | | | 3,044 | | | 2,829 | | | | | Net fee, commission and other income | | | 1,407 | | | | 1,312 | | | 1,274 | | | | | Total income | | | 4,927 | | | | 4,356 | | | 4,103 | | | | | Credit impairment charges and other provisions | | | (1,251) | | | | (1,183) | | | (1,096) | | | | | Net operating income | | | 3,676 | | | | 3,173 | | | 3,007 | | | | | Operating expenses | | | (1,927) | | | | (1,727) | | | (1,752) | | | | | UK bank levy | | | (42) | | | | (29) | | | (22) | | | | | Litigation and conduct | | | – | | | | – | | | (34) | | | | | Costs to achieve | | | (106) | | | | (118) | | | (49) | | | | | Total operating expenses | | | (2,075) | | | | (1,874) | | | (1,857) | | | | | Other net income | | | 33 | | | | 40 | | | 33 | | | | | Profit before tax | | | 1,634 | | | | 1,339 | | | 1,183 | | | | | Attributable profit | | | 1,106 | | | | 938 | | | 822 | | | | | | | | | | | Balance sheet information | | | | | | | | | | | | | | | Loans and advances to customers at amortised cost | | | £39.8bn | | | | £36.6bn | | | £31.5bn | | | | | Total assets | | | £47.4bn | | | | £41.3bn | | | £34.4bn | | | | | Customer deposits | | | £10.2bn | | | | £7.3bn | | | £5.1bn | | | | | Risk weighted assets | | | £41.3bn | | | | £39.9bn | | | £35.7bn | | | | | | | | | | | Key facts | | | | | | | | | | | | | | | 30 days arrears rates – UK cards | | | 2.3% | | | | 2.5% | | | 2.4% | | | | | 30 days arrears rates – US cards | | | 2.2% | | | | 2.1% | | | 2.1% | | | | | Total number of Barclaycard consumer customers | | | 28.2m | | | | 29.1m | | | 26.3m | | | | | Total number of Barclaycard business clients | | | 341,000 | | | | 340,000 | | | 350,000 | | | | | Value of payments processed | | | £293bn | | | | £257bn | | | £236bn | | | | | Number of employees (full time equivalent) | | | 13,100 | | | | 12,200 | | | 11,000 | | | | | | | | | | | Performance measures | | | | | | | | | | | | | | | Return on average tangible equity | | | 22.3% | | | | 19.9% | | | 19.9% | | | | | Average allocated tangible equity | | | £5.0bn | | | | £4.7bn | | | £4.1bn | | | | | Return on average equity | | | 17.7% | | | | 16.0% | | | 15.5% | | | | | Average allocated equity | | | £6.3bn | | | | £5.9bn | | | £5.3bn | | | | | Cost:income ratio | | | 42% | | | | 43% | | | 45% | | | | | Loan loss rate (bps) | | | 289 | | | | 308 | | | 332 | | | | | Net interest margin | | | 9.13% | | | | 8.75% | | | 8.99% | | |
b | Attributable profit in respect of the Africa Banking discontinued operation is reported at the Group level only. Assets held for sale, risk weighted assets, leverage exposure and allocated tangible equity are reported in Head Office within Core. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 197 |
Financial review
Analysis of results by business
£3,574m total income net
of insurance claims
£979m profit before tax
2015 compared to 2014
Profit before tax decreased 1% to £979m and total income net of insurance claims decreased 2% to £3,574m. The ZAR depreciated against GBP by 10% based on average rates and by 28% based on the closing exchange rate in 2015. The deterioration was a significant contributor to the movement in the reported results of Africa Banking and therefore the discussion of business performance below is based on results on a constant currency basis.
Results on a constant currency basis
Profit before tax increased 11% to £979m reflecting an increase of 18% in operations outside South Africa and an increase of 9% in South Africa despite the challenging macroeconomic environment. Good growth was delivered in the focus areas of Retail and Business Banking (RBB) and corporate banking in South Africa, and Wealth, Investment Management and Insurance (WIMI), whilst performance in the corporate business outside South Africa was impacted by higher impairment.
Total income net of insurance claims increased 7% to £3,574m.
Net interest income increased 8% to £2,066m driven by higher average customer advances in Corporate and Investment Banking (CIB) and strong growth in customer deposits in RBB. Net interest margin increased 11bps to 6.06% primarily due to improved asset margins in retail in South Africa.
Net fee, commission and other income increased 5% to £1,668m reflecting increased transactional income in RBB, partially offset by lower investment banking income in South Africa.
Credit impairment charges increased 11% to £352m driven by an increase in single name exposures and additional coverage on performing loans. The loan loss rate increased 16bps to 109bps.
Total operating expenses increased 5% to £2,250m reflecting inflationary impacts, partially offset by savings from strategic cost programmes including the restructure of the branch network, technology improvements and property rationalisation.
Loans and advances to customers increased 8% to £29.9bn driven by strong CIB growth.
Total assets increased 14% to £49.9bn primarily due to the increase in loans and advances to customers.
Customer deposits increased 11% to £30.6bn reflecting strong growth in the RBB business.
RWAs increased 8% to £33.9bn primarily due to an increase in corporate lending.
2014 compared to 2013
On a reported basis, total income net of insurance claims decreased 9% to £3,664m and profit before tax decreased 6% to £984m. Based on average rates, the ZAR depreciated against GBP by 18% in 2014. The deterioration was a significant contributor to the movement in the reported results of Africa Banking. The discussion of business performance below is based on results on a constant currency basis unless otherwise stated.
Results on a constant currency basis
Profit before tax increased 13% to £984m, reflecting good growth in Corporate and Investment Banking (CIB) and Retail and Business Banking (RBB). CIB experienced strong income growth, driven by the corporate banking business outside South Africa and improved investment banking trading performance across Africa. Continued progress was made on the RBB South Africa turnaround strategy, with increased net fee and commission income growth in the second half of the year, and Wealth, Investment Management and Insurance (WIMI) delivered strong growth outside South Africa due to expansion initiatives.
Total income net of insurance claims increased 7% to £3,664m.
Net interest income increased 9% to £2,093m, primarily driven by higher average loans and advances to customers in CIB and growth in customer deposits in RBB in South Africa. Net interest margin on a reported basis increased 14bps to 5.95% following the rise in the South African benchmark interest rate and the favourable impact of higher deposit margins, partially offset by lower rates outside South Africa.
Net fee, commission and other income increased 4% to £1,741m mainly reflecting increased RBB transactions in South Africa.
Credit impairment charges decreased 14% to £349m and on a reported basis the loan loss rate improved 35bps to 93bps, driven by reduced impairments in the South Africa mortgages portfolio and business banking, partially offset by increased impairments in the card portfolio.
Total operating expenses increased 8% to £2,342m largely reflecting inflationary increases, resulting in higher staff costs and increased investment spend on key initiatives, including higher costs to achieve of £51m (2013: £23m), partially offset by savings from strategic cost programmes.
Loans and advances to customers increased 5% to £35.2bn primarily driven by strong corporate banking growth across Africa in CIB and limited growth in RBB, mainly due to a modest reduction in the South Africa mortgages portfolio.
Total assets increased 5% to £55.5bn due to the increase in loans and advances to customers.
Customer deposits increased 5% to £35.0bn reflecting strong growth in the South African RBB business.
RWAs increased 1% to £38.5bn on a reported basis, primarily driven by growth in loans and advances to customers, partially offset by the depreciation of ZAR against GBP.
| | | 198 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | 199 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Constant currencya | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| | 2013 £m | | | | 2015 £m | | 2014 £m | | | | | Income statement information | | | | | | | | | | | | | | | | | | | | | Net interest income | | | 2,066 | | | | 2,093 | | | 2,245 | | | | 2,066 | | 1,908 | | | | | Net fee, commission and other income | | | 1,668 | | | | 1,741 | | | 1,979 | | | | 1,668 | | 1,583 | | | | | Total income | | | 3,734 | | | | 3,834 | | | 4,224 | | | | 3,734 | | 3,491 | | | | | Net claims and benefits incurred under insurance contracts | | | (160) | | | | (170) | | | (185) | | | | (160) | | (155) | | | | | Total income net of insurance claims | | | 3,574 | | | | 3,664 | | | 4,039 | | | | 3,574 | | 3,336 | | | | | Credit impairment charges and other provisions | | | (352) | | | | (349) | | | (479) | | | | (352) | | (317) | | | | | Net operating income | | | 3,222 | | | | 3,315 | | | 3,560 | | | | 3,222 | | 3,019 | | | | | Operating expenses | | | (2,169) | | | | (2,244) | | | (2,451) | | | | (2,169) | | (2,051) | | | | | UK bank levy | | | (52) | | | | (45) | | | (42) | | | | (52) | | (45) | | | | | Litigation and conduct | | | – | | | | (2) | | | – | | | | – | | (2) | | | | | Costs to achieve | | | (29) | | | | (51) | | | (26) | | | | (29) | | (46) | | | | | Total operating expenses | | | (2,250) | | | | (2,342) | | | (2,519) | | | | (2,250) | | (2,144) | | | | | Other net income | | | 7 | | | | 11 | | | 8 | | | | 7 | | 10 | | | | | Profit before tax | | | 979 | | | | 984 | | | 1,049 | | | | 979 | | 885 | | | | | Attributable profit | | | 332 | | | | 360 | | | 356 | | | | 332 | | 320 | | | | | | | | | | | | | | Balance sheet information | | | | | | | | | | | | | | | | | | | | | Loans and advances to customers at amortised cost | | | £29.9bn | | | | £35.2bn | | | £34.9bn | | | | £29.9bn | | £27.6bn | | | | | Total assets | | | £49.9bn | | | | £55.5bn | | | £54.9bn | | | | £49.9bn | | £43.8bn | | | | | Customer deposits | | | £30.6bn | | | | £35.0bn | | | £34.6bn | | | | £30.6bn | | £27.6bn | | | | | Risk weighted assets | | | £33.9bn | | | | £38.5bn | | | £38.0bn | | | | £33.9bn | | £31.3bn | | | | | | | | | | | | | | Key facts | | | | | | | | | | | | | | | | | | | | | Average LTV of mortgage portfoliob | | | 58.4% | | | | 59.9% | | | 62.3% | | | | | | | | | | | Average LTV of new mortgage lendingb | | | 74.7% | | | | 74.8% | | | 74.9% | | | | | | | | | | | Number of employees (full time equivalent) | | | 44,400 | | | | 45,000 | | | 45,900 | | | | | | | | | | | | | | | | | | | | Performance measures | | | | | | | | | | | | | | | | | | | | | Return on average tangible equity | | | 11.7% | | | | 12.9% | | | 11.3% | | | | | | | | | | | Average allocated tangible equity | | | £2.8bn | | | | £2.8bn | | | £3.2bn | | | | | | | | | | | Return on average equity | | | 8.7% | | | | 9.3% | | | 8.1% | | | | | | | | | | | Average allocated equity | | | £3.8bn | | | | £3.9bn | | | £4.4bn | | | | | | | | | | | Cost:income ratio | | | 63% | | | | 64% | | | 62% | | | | | | | | | | | Loan loss rate (bps) | | | 109 | | | | 93 | | | 128 | | | | | | | | | | | Net interest margin | | | 6.06% | | | | 5.95% | | | 5.81% | | | | | | | | |
| | | | | | | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Income statement informationa | | | | | | | | | | | | | Net interest income | | | 6,048 | | | | 5,973 | | | | 5,839 | | Net fee, commission and other income | | | 1,469 | | | | 1,370 | | | | 1,597 | | Total income | | | 7,517 | | | | 7,343 | | | | 7,436 | | Credit impairment charges and other provisions | | | (896 | ) | | | (706 | ) | | | (901 | ) | Net operating income | | | 6,621 | | | | 6,637 | | | | 6,535 | | Operating expenses | | | (3,792 | ) | | | (3,464 | ) | | | (4,108 | ) | UK bank levy | | | (48 | ) | | | (77 | ) | | | (59 | ) | Litigation and conduct | | | (1,042 | ) | | | (2,511 | ) | | | (1,108 | ) | Total operating expenses | | | (4,882 | ) | | | (6,052 | ) | | | (5,275 | ) | Other net expenses | | | (1 | ) | | | – | | | | – | | Profit before tax | | | 1,738 | | | | 585 | | | | 1,260 | | Attributable profit/(loss) | | | 828 | | | | (47 | ) | | | 852 | | | | | | Balance sheet information | | | | | | | | | | | | | Loans and advances to customers at amortised cost | | | £166.4bn | | | | £166.1bn | | | | £165.3bn | | Total assets | | | £209.6bn | | | | £202.5bn | | | | £198.0bn | | Customer deposits | | | £189.0bn | | | | £176.8bn | | | | £168.3bn | | Risk weighted assets | | | £67.5bn | | | | £69.5bn | | | | £69.3bn | | | | | | Key facts | | | | | | | | | | | | | Average LTV of mortgage portfoliob | | | 48% | | | | 49% | | | | 52% | | Average LTV of new mortgage lendingb | | | 63% | | | | 64% | | | | 65% | | Number of branches | | | 1,305 | | | | 1,362 | | | | 1,488 | | Barclays mobile banking customers | | | 5.7m | | | | 4.7m | | | | 3.6m | | 30 day arrears rate – Barclaycard Consumer UK | | | 1.9% | | | | 2.3% | | | | 2.5% | | Number of employees (full time equivalent) | | | 36,000 | | | | 38,800 | | | | 38,300 | | | | | | Performance measures | | | | | | | | | | | | | Return on equity | | | 6.4% | | | | (0.2)% | | | | 6.6% | | Average equity | | | £13.4bn | | | | £13.7bn | | | | £13.1bn | | Return on average allocated tangible equitya | | | 9.6% | | | | (0.3% | ) | | | 9.5% | | Average allocated tangible equitya | | | £8.9bn | | | | £9.3bn | | | | £9.1bn | | Cost: income ratio | | | 65% | | | | 82% | | | | 71% | | Loan loss rate (bps) | | | 52 | | | | 42 | | | | 53 | | Loan: deposit ratio | | | 88% | | | | 94% | | | | 98% | | Net interest margin | | | 3.62% | | | | 3.56% | | | | n/a | | | | | | Notable Items | | | | | | | | | | | | | Total income | | | | | | | | | | | | | Gain on disposal of Barclays’ share of Visa Europe Limited | | | 151 | | | | – | | | | – | | Litigation and conduct | | | | | | | | | | | | | Provisions for UK customer redress | | | (1,000 | ) | | | (2,431 | ) | | | (1,067 | ) | Operating expenses | | | | | | | | | | | | | Gain on valuation of a component of the defined retirement benefit liability | | | – | | | | 296 | | | | – | | Total notable items | | | (849 | ) | | | (2,135 | ) | | | (1,067 | ) |
Excluding notable items, the Barclays UK return on average allocated tangible equity was 19.3% (2015: 21.1%). Notes a | Constant currency results are calculated by converting ZAR results into GBP using the average 2015 exchange rateRefer to pagesi to x and pages 212 to 215 for the income statementfurther information, reconciliations and the closing 2015 exchange rate for the balance sheet to eliminate the impactcalculations of movement in exchange rates between the two periods.non-IFRS performance measures included throughout this document. |
b | Average LTV of mortgage portfolio and new mortgage lending calculated on the balance weighted basis. |
| | | | | 200 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 199 | | |
Financial review Analysis of results by business Investment
| | | | | | | | | | | | | Analysis of Barclays UK | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Analysis of total income | | | | | | | | | | | | | Personal Banking | | | 3,891 | | | | 3,714 | | | | 3,788 | | Barclaycard Consumer UK | | | 2,022 | | | | 2,065 | | | | 2,078 | | Wealth, Entrepreneurs & Business Banking | | | 1,604 | | | | 1,564 | | | | 1,570 | | Total income | | | 7,517 | | | | 7,343 | | | | 7,436 | | Analysis of credit impairment charges and other provisions | | | | | | | | | | | | | Personal Banking | | | (183 | ) | | | (194 | ) | | | (211 | ) | Barclaycard Consumer UK | | | (683 | ) | | | (488 | ) | | | (592 | ) | Wealth, Entrepreneurs & Business Banking | | | (30 | ) | | | (24 | ) | | | (98 | ) | Total credit impairment charges and other provisions | | | (896 | ) | | | (706 | ) | | | (901 | ) | Analysis of loans and advances to customers at amortised cost | | | | | | | | | | | | | Personal Banking | | | £135.0bn | | | | £134.0bn | | | | £133.8bn | | Barclaycard Consumer UK | | | £16.5bn | | | | £16.2bn | | | | £15.8bn | | Wealth, Entrepreneurs & Business Banking | | | £14.9bn | | | | £15.9bn | | | | £15.7bn | | Total loans and advances to customers at amortised cost | | | £166.4bn | | | | £166.1bn | | | | £165.3bn | | Analysis of customer deposits | | | | | | | | | | | | | Personal Banking | | | £139.3bn | | | | £131.0bn | | | | £124.5bn | | Barclaycard Consumer UK | | | – | | | | – | | | | – | | Wealth, Entrepreneurs & Business Banking | | | £49.7bn | | | | £45.8bn | | | | £43.8bn | | Total customer deposits | | | £189.0bn | | | | £176.8bn | | | | £168.3bn | |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 201 |
| £7,572m total income
£1,611m profit before tax
|
2016 compared to 2015 Profit before tax increased £1,153m to £1,738m reflecting lower provisions for UK customer redress. Profit before tax excluding notable itemsa decreased 5% to £2,587m driven by an increase in credit impairment charges following the management review of the cards portfolio impairment modelling, partially offset by a reduction in total operating expenses. Total income, including a gain on disposal of Barclays’ share of Visa Europe Limited recognised in Personal Banking and Wealth, Entrepreneurs & Business Banking (WEBB), increased 2% to £7,517m. Total income excluding notable items was broadly in line at £7,366m (2015: £7,343m). Personal Banking income increased 1% to £3,762m driven by improved deposit margins and balance growth, partially offset by lower mortgage margins. Barclaycard Consumer UK income decreased 2% to £2,022m primarily as a result of the European Interchange Fee Regulation, which came into full effect from December 2015, offset by balance growth and gains from debt sales. WEBB income increased 1% to £1,582m reflecting improved margins and deposit growth, partially offset by reduced transactional fee income. Net interest income increased 1% to £6,048m due to balance growth and deposit pricing initiatives, partially offset by lower mortgage margins. Net interest margin increased 6bps to 3.62% reflecting higher margins on deposits, partially offset by lower mortgage margins. Net fee, commission and other income decreased 4% to £1,318m due to the impact of the European Interchange Fee Regulation in Barclaycard Consumer UK, which came into full effect from December 2015, and reduced fee and commission income in WEBB. Credit impairment charges increased 27% to £896m due to a £200m charge in Q316 following the management review of the cards portfolio impairment modelling. The 30 day and 90 day arrears rates on the cards portfolio improvedyear-on-year to 1.9% (2015: 2.3%) and 0.9% (2015: 1.2%) respectively. Total operating expenses, including provisions for UK customer redress of £1,000m (2015: £2,431m), reduced 19% to £4,882m. Total operating expenses excluding notable items reduced 1% to £3,882m reflecting savings realised from strategic cost programmes, relating to restructuring of the branch network and technology improvements, offset by structural reform programme implementation costs. The cost: income ratio was 65% (2015: 82%), RoE was 6.4% (2015: (0.2%)) and RoTE was 9.6% (2015: (0.3%)) The cost: income ratio excluding notable items was 53% (2015: 53%) and RoTE excluding notable items was 19.3% (2015: 21.1%). Loans and advances to customers were stable at £166.4bn (December 2015: £166.1bn). Total assets increased £7.1bn to £209.6bn primarily reflecting an increase in the allocated liquidity pool. Customer deposits increased 7% to £189.0bn primarily driven by higher balances in Personal Banking and WEBB. RWAs reduced £2.0bn to £67.5bn primarily driven by changes in the mortgages credit risk model. 2015 compared to 2014 Profit before tax decreased 54% to £585m. Profit before tax excluding notable items increased 17% to £1,611m. Income remained flat despite reductions£2,720m driven by the continued reduction in RWAs. Focusing on its home marketsoperating expenses and lower credit impairment charges. The reduction in operating expenses was delivered through strategic cost programmes including the restructure of the branch network and technology improvements to increase automation. Total income reduced 1% to £7,343m. Personal Banking income decreased 2% to £3,714m due to a reduction in fee income and mortgage margin pressure, partially offset by improved deposit margins and balance growth. Barclaycard Consumer UK income decreased 1% to £2,065m primarily due to the impact of the European Interchange Fee Regulation, partially offset by balance growth. WEBB income remained broadly flat at £1,564m (2014: £1,570m) as balance growth was offset by margin pressure. Net interest income increased 2% to £5,973m due to balance growth, deposit pricing initiatives and the impact of changes in the overdraft proposition in June 2014, partially offset by mortgage margin pressure. Net fee, commission and other income decreased 14% to £1,370m due to the change in the overdraft proposition and the impact of the European Interchange Fee Regulation. Credit impairment charges decreased 22% to £706m primarily due to the benign economic environment in the UK resulting in lower default rates and charges across all businesses. The loan loss rate reduced 11bps to 42bps. Total operating expenses increased 15% to £6,052m, including provisions for UK customer redress of £2,431m (2014: £1,067m). Total operating expenses excluding notable items reduced 7% to £3,917m reflecting savings realised from strategic cost programmes including the restructure of the branch network and technology improvements. Loans and advances to customers remained broadly flat at £166.1bn (2014: £165.3bn). Total assets increased 2% to £202.5bn. Customer deposits increased 5% to £176.8bn driven by higher balances in Personal Banking and WEBB. RWAs were broadly flat at £69.5bn (2014: £69.3bn). Note a | Refer to pagesi to x and pages 212 to 215 for further information, reconciliations and calculations ofnon-IFRS performance measures included throughout this document. |
| | | 202 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Financial review Analysis of results by business | | | | | | | | | | | | | | |
| 2016
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| 2015
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| 2014
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| Income statement information | | | | | | | | | | | | | Net interest income | | | 4,512 | | | | 4,324 | | | | 3,874 | | Net trading income | | | 4,580 | | | | 3,782 | | | | 3,533 | | Net fee, commission and other income | | | 5,903 | | | | 5,641 | | | | 5,501 | | Total income | | | 14,995 | | | | 13,747 | | | | 12,908 | | Credit impairment charges and other provisions | | | (1,355 | ) | | | (922 | ) | | | (679 | ) | Net operating income | | | 13,640 | | | | 12,825 | | | | 12,229 | | Operating expenses | | | (9,129 | ) | | | (8,029 | ) | | | (8,170 | ) | UK bank levy | | | (284 | ) | | | (253 | ) | | | (248 | ) | Litigation and conduct | | | (48 | ) | | | (1,310 | ) | | | (1,333 | ) | Total operating expenses | | | (9,461 | ) | | | (9,592 | ) | | | (9,751 | ) | Other net income | | | 32 | | | | 45 | | | | 52 | | Profit before tax | | | 4,211 | | | | 3,278 | | | | 2,530 | | Attributable profit | | | 2,412 | | | | 1,758 | | | | 926 | | | | | | Balance sheet information | | | | | | | | | | | | | Loans and advances to banks and customers at amortised costb | | | £211.3bn | | | | £184.1bn | | | | £193.6bn | | Trading portfolio assets | | | £73.2bn | | | | £61.9bn | | | | £87.3bn | | Derivative financial instrument assets | | | £156.2bn | | | | £111.5bn | | | | £149.6bn | | Derivative financial instrument liabilities | | | £160.6bn | | | | £119.0bn | | | | £157.3bn | | Reverse repurchase agreements and other similar secured lending | | | £13.4bn | | | | £24.7bn | | | | £62.9bn | | Financial assets designated at fair value | | | £62.3bn | | | | £46.8bn | | | | £5.7bn | | Total assets | | | £648.5bn | | | | £532.2bn | | | | £596.5bn | | Customer depositsc | | | £216.2bn | | | | £185.6bn | | | | £188.2bn | | Risk weighted assets | | | £212.7bn | | | | £194.8bn | | | | £201.7bn | | | | | | Key facts | | | | | | | | | | | | | Number of employees (full time equivalent) | | | 36,900 | | | | 39,100 | | | | 36,600 | | | | | | Performance measures | | | | | | | | | | | | | Return on equity | | | 8.8% | | | | 6.6% | | | | 3.5% | | Average equity | | | £28.2bn | | | | £27.1bn | | | | £27.1bn | | Return on average allocated tangible equitya | | | 9.8% | | | | 7.2% | | | | 3.8% | | Average allocated tangible equitya | | | £25.5bn | | | | £24.9bn | | | | £25.0bn | | Cost: income ratio | | | 63% | | | | 70% | | | | 76% | | Loan loss rate (bps) | | | 63 | | | | 49 | | | | 35 | | Loan: deposit ratio | | | 86% | | | | 88% | | | | 90% | | Net interest margind | | | 3.98% | | | | 3.80% | | | | n/a | | | | | | Notable items | | | | | | | | | | | | | Total income | | | | | | | | | | | | | Gains on US Lehman acquisition assets | | | – | | | | 496 | | | | 461 | | Gain on disposal of Barclays’ share of Visa Europe Limited | | | 464 | | | | – | | | | – | | Litigation and conduct | | | | | | | | | | | | | Provisions for UK customer redress | | | – | | | | (218 | ) | | | 32 | | Provisions for ongoing investigations and litigation including Foreign Exchange | | | – | | | | (984 | ) | | | (1,250 | ) | Operating expenses | | | | | | | | | | | | | Gain on valuation of a component of the defined retirement benefit liability | | | – | | | | 133 | | | | – | | Total notable items | | | 464 | | | | (573 | ) | | | (757 | ) |
Excluding notable items, the Barclays International return on average allocated tangible equity was 8.0% (2015: 9.5%). Notes a | Refer to pagesi to x and pages 212 to 215 for further information, reconciliations and calculations ofnon-IFRS performance measures included throughout this document. |
b | As at 31 December 2016 loans and advances included £185.9bn (December 2015: £162.6bn) of loans and advances to customers (including settlement balances of £19.5bn (December 2015: £18.5bn) and cash collateral of £30.1bn (December 2015: £24.8bn)), and £25.4bn (December 2015: £21.5bn) of loans and advances to banks (including settlement balances of £1.7bn (December 2015: £1.6bn) and cash collateral of £6.3bn (December 2015: £5.7bn)). Loans and advances to banks and customers in respect of Consumer, Cards and Payments were £39.7bn (December 2015: £32.1bn). |
c | As at 31 December 2016 customer deposits included settlement balances of £16.6bn (December 2015: £16.3bn) and cash collateral of £20.8bn (December 2015: £15.9bn). |
d | Barclays International margins have been restated to include interest earning lending within the investment banking business. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 203 |
| | | | | | | | | | | | | Analysis of Barclays International | |
| 2016
£m |
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| 2015
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| 2014
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| Corporate and Investment Bank | | | | | | | | | | | | | Income statement information | | | | | | | | | | | | | Analysis of total income | | | | | | | | | | | | | Credit | | | 1,185 | | | | 824 | | | | 792 | | Equities | | | 1,790 | | | | 1,912 | | | | 1,956 | | Macro | | | 2,304 | | | | 2,108 | | | | 1,950 | | Markets | | | 5,279 | | | | 4,844 | | | | 4,698 | | Banking fees | | | 2,397 | | | | 2,087 | | | | 2,115 | | Corporate lending | | | 1,195 | | | | 1,361 | | | | 1,268 | | Transactional banking | | | 1,657 | | | | 1,663 | | | | 1,594 | | Banking | | | 5,249 | | | | 5,111 | | | | 4,977 | | Other | | | 5 | | | | 495 | | | | 476 | | Total income | | | 10,533 | | | | 10,450 | | | | 10,151 | | Credit impairment charges and other provisions | | | (260) | | | | (199) | | | | (87) | | Total operating expenses | | | (7,624) | | | | (7,929) | | | | (8,279) | | Profit before tax | | | 2,650 | | | | 2,322 | | | | 1,787 | | Balance sheet information | | | | | | | | | | | | | Risk weighted assets | | | £178.6bn | | | | £167.3bn | | | | £175.1bn | | Performance measures | | | | | | | | | | | | | Return on equity | | | 5.8% | | | | 5.1% | | | | 1.8% | | Average equity | | | £23.2bn | | | | £23.1bn | | | | £23.1bn | | Return on average allocated tangible equitya | | | 6.1% | | | | 5.4% | | | | 1.9% | | Average allocated tangible equitya | | | £21.9bn | | | | £21.9bn | | | | £22.0bn | | | | | | | | | | | | | | | | |
| 2016
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| 2015
£m |
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| 2014
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| Consumer, Cards and Payments | | | | | | | | | | | | | Income statement information | | | | | | | | | | | | | Total income | | | 4,462 | | | | 3,297 | | | | 2,757 | | Credit impairment charges and other provisions | | | (1,095) | | | | (723) | | | | (592) | | Total operating expenses | | | (1,837) | | | | (1,663) | | | | (1,472) | | Profit before tax | | | 1,561 | | | | 956 | | | | 743 | | Balance sheet information | | | | | | | | | | | | | Loans and advances to banks and customers at amortised cost | | | £39.7bn | | | | £32.1bn | | | | £29.7bn | | Customer deposits | | | £50.0bn | | | | £41.8bn | | | | £37.9bn | | Risk weighted assets | | | £34.1bn | | | | £27.5bn | | | | £26.6bn | | Key facts | | | | | | | | | | | | | 30 day arrears rates - Barclaycard US | | | 2.6% | | | | 2.2% | | | | 2.1% | | Total number of Barclaycard business clients | | | 355,000 | | | | 341,000 | | | | 340,000 | | Value of payments processed | | | £296bn | | | | £271bn | | | | £236bn | | Performance measures | | | | | | | | | | | | | Return on equity | | | 23.1% | | | | 15.3% | | | | 13.2% | | Average equity | | | £5.0bn | | | | £4.0bn | | | | £4.0bn | | Return on average allocated tangible equitya | | | 31.4% | | | | 20.2% | | | | 17.8% | | Average allocated tangible equitya | | | £3.6bn | | | | £3.0bn | | | | £3.0bn | |
Notes a | Refer to pagesi to x and pages 212 to 215 for further information, reconciliations and calculations of non-IFRS performance measured included throughout this document. |
| | | 204 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Financial review Analysis of results by business 2016 compared to 2015 Profit before tax increased 28% to £4,211m, including the gain on disposal of Barclays’ share of Visa Europe Limited. Profit before tax excluding notable itemsa decreased 3% to £3,747m driven by an 11% increase in total operating expenses, and a 47% increase in impairment, partially offset by a 10% increase in total income. Total income increased 9% to £14,995m including the gain on disposal of Barclays’ share of Visa Europe Limited, as well as the factors outlined below. Total income excluding notable items increased 10% to £14,531m, including the appreciation of average USD and EUR against GBP, with Consumer, Cards and Payments income increasing 21% to £3,998m and Corporate and Investment Bank (CIB) income increasing 6% to £10,533m. Markets income increased 9% to £5,279m. Credit income increased 44% to £1,185m driven by strong performance in fixed income flow credit, which benefitted from increased market volatility and client demand. Equities income decreased 6% to £1,790m with lower client activity in Asia and the simplification of the EMEA business, partially offset by improved performance in cash, derivatives and financing in H216. Macro income increased 9% to £2,304m driven by increased activity post the EU referendum decision and US elections. Banking income increased 3% to £5,249m. Banking fees income increased 15% to £2,397m driven by higher debt underwriting and advisory fees, partially offset by lower equity underwriting fees. Corporate lending reduced 12% to £1,195m due to losses on fair value hedges and thenon-recurrence ofone-offwork-out gains recognised in Q215. Transactional banking was broadly flat at £1,657m (2015: £1,663m) as income from higher deposit balances was offset by margin compression. Consumer, Cards and Payments income increased 35% to £4,462m driven by growth the gain on disposal of Barclays’ share of Visa Europe Limited, across all key businesses and the appreciation of average USD and EUR against GBP. Credit impairment charges increased 47% to £1,355m including the appreciation of average USD and EUR against GBP. CIB credit impairment charges increased 31% to £260m driven by the impairment of a number of single name exposures. Consumer, Cards and Payments credit impairment charges increased 51% to £1,095m primarily driven by balance growth, a change in portfolio mix and a £120m charge in Q316 following a management review of the cards portfolio impairment modelling. Total operating expenses decreased 1% to £9,461m, resulting from lower litigation and conduct charges. This decrease was mostly offset by the appreciation of average USD against GBP, an additional charge in Q416 relating to the 2016 compensation awards, higher restructuring costs, £150m of which related to reducing the real estate footprint in Q316, and higher structural reform programme implementation costs including those relating to the incorporation of the US Intermediate Holding Company (IHC) on 1 July 2016. The cost: income ratio was 63% (2015: 70%), RoE was 8.8% (2015: 6.6%) and RoTE was 9.8% (2015: 7.2%). The cost: income ratio excluding notable items was 65% (2015: 64%) and RoTE excluding notable items was 8.0% (2015: 9.5%). Loans and advances to banks and customers at amortised cost increased £27.2bn to £211.3bn with CIB increasing £19.7bn to £171.7bn due to increased lending and cash collateral and the appreciation of USD and EUR against GBP. Consumer, Cards and Payments increased £7.6bn to £39.7bn driven by appreciation of USD and EUR against GBP and growth in Barclaycard US, including the acquisition of the JetBlue credit card portfolio. Trading portfolio assets increased £11.3bn to £73.2bn due to an increase in client activity and appreciation of major currencies against GBP. Derivative financial instrument assets and liabilities increased £44.7bn to £156.2bn and £41.6bn to £160.6bn respectively, due to the appreciation of USD and EUR against GBP and decreases in forward interest rates. Financial assets designated at fair value increased £15.5bn to £62.3bn and reverse repurchase agreements and other similar lending decreased £11.3bn to £13.4bn. Since 2015, new reverse repurchase agreements in certain businesses have been designated at fair value to better align to the way the business continued to build on existing strengths inmanages the face of challenging market conditions. Costs decreasedportfolio’s risk and performance. On a net basis reverse repos have increased by £4.2bn as a result of improved cost efficiencyincreased matched book trading. Customer deposits increased £30.6bn to £216.2bn, with CIB increasing £22.6bn to £166.3bn primarily driven by increases in deposits cash collateral and the appreciation of USD and EUR against GBP. Consumer, Cards and Payments increased £8.2bn to £50.0bn driven by balance growth in Barclaycard US and Private Banking, and the appreciation of USD and EUR against GBP. RWAs increased £17.9bn to £212.7bn, due to the appreciation of USD against GBP, and business growth, including the acquisition of the JetBlue credit card portfolio in Consumer, Cards and Payments. Note a | Refer to pages i to x and pages 212 to 215 for further information, reconciliations and calculations ofnon-IFRS performance measures included throughout this document. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 205 |
2015 compared to 2014 Profit before tax increased 30% to £3,278m. Profit before tax excluding notable itemsa increased 17% to £3,851m driven by a reduction6% increase in costs to achieve. Total income, was broadly flat at £7,572m (2014: £7,588m), including the appreciation of the average USD rateand EUR against GBP.GBP, with Consumer, Cards and Payments income increasing 20% to £3,297m and CIB income increasing 3% to £9,954m.
Markets income increased 3% to £4,844m. Credit income increased 4% to £824m driven by a higher contribution from credit flow trading and financing businesses. Equities income decreased 2% to £1,912m driven by lower client activity in EMEA equity derivatives, partially offset by higher performance in cash equities. Macro income increased 8% to £2,108m due to higher income in rates and currency products reflecting increased market volatility and client activity. Banking income was flat at £2,529m (2014: £2,528m). Investmentincreased 3% to £5,111m. Banking fee income reduced 1% to £2,093m£2,087m driven by lower equity underwriting fees, partially offset by higher financial advisory and debt underwriting fees. Lending incomeCorporate lending increased 7% to £436m (2014: £417m) due to lower losses on fair value hedges. Markets income was broadly flat at £5,030m (2014: £5,040m). Credit income decreased 5% to £995m£1,361m driven by lower income in securitised products as a result of the accelerated strategic repositioning in thisfair value losses on hedges and increased asset class and lower income from distressed credit. This was partially offset by higher income as a result of client driven credit flow trading. Equities income decreased 2% to £2,001m driven by lower client activity in EMEA in equity derivatives, partially offset by higher performance in cash equities. Macrobalances. Transactional banking income increased 4% to £2,034m£1,663m primarily due to cash management income driven by higher balances with improved margins.
Consumer, Cards and Payments income increased 20% to £3,297m, driven by business growth in ratesBarclaycard US and currency products reflecting increased market volatility and client activity.the appreciation of average USD against GBP. Credit impairment charges of £55mincreased to £922m (2014: release of £14m) arose from£679m). Consumer, Cards and Payments credit impairment charges increased £131m to £723m primarily reflecting asset growth and updates to impairment model methodologies. CIB credit impairment charges increased £112m to £199m driven by a number of single name exposures. Total operating expenses decreased 5%2% to £5,906m reflecting£9,592m, resulting from a 5% reduction in compensation costs to £3,423m and lower costs to achieve.restructuring costs. Further cost savings were achieved from strategic cost programmes, including business restructuring, operational streamlining and real estate rationalisation, partially offset by the appreciation of the average USD rate against GBP. The cost: income ratio was 70% (2014: 76%), RoE was 6.6% (2014: 3.5%) and RoTE was 7.2% (2014: 3.8%) Cost: income ratio excluding notable items was 64% (2014: 69%) and RoTE excluding notable items was 9.5% (2014: 7.0%). Loans and advances to banks and customers decreased £9.5bn to £184.1bn as CIB decreased £11.8bn to £152.0bn due to a decrease in settlement and cash collateral balances, partially offset by an increase of £2.4bn in Consumer, Cards and Payments to £32.1bn reflecting growth in Barclaycard US. Derivative financial instrument assets and liabilities decreased 25%£38.1bn to £114.3bn£111.5bn and 24%£38.3bn to £122.2bn£119.0bn respectively, due to net trade reduction and increases in major interest rate forward curves. Trading portfolio assets decreased 31%£25.4bn to £65.1bn primarily£61.9bn driven by balance sheet deleveraging, resulting in lower securities positions. TotalFinancial assets designated at fair value increased £41.1bn to £46.8bn and reverse repurchase agreements and other similar lending decreased 18%£38.2bn to £375.9bn due£24.7bn. Since 2015, new reverse repurchase agreements in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. On a decreasenet basis reverse repos have increased by £0.2bn as a result of increased matched book trading.
Customer deposits decreased £2.6bn to £185.6bn, with CIB decreasing £6.6bn to £143.7bn primarily driven by decreases in derivative financial instrument assets, trading portfolio assets, and settlement and cash collateral balances, within loanspartially offset by an increase of £3.9bn to £41.8bn in Consumer, Cards and advances to banks and customers.Payments, driven by the deposits funding strategy in Barclaycard US. RWAs decreased 12%£6.9bn to £108.3bn mainly£194.8bn, within which CIB RWAs decreased £7.8bn to £167.3bn primarily due to a reduction in securities and derivatives, and improved RWA efficiency. 2014 compared to 2013
Profit before tax decreased 32% to £1,377m. The Investment Bank continues to make progress on its origination-led strategy, building on leading positions in its home markets of the UK and US, while driving cost savings and RWA efficiencies. The business is focused on a simpler product set in Markets, which will enable it to build on existing strengths and adapt to regulatory developments. The business continued to execute this strategy despite difficult market-making conditions and continued low levels of activity. This has particularly impacted credit and interest rate products, resulting in an income decline across the Markets businesses. This decline was partially offset by improved banking performance and significant cost reductions as a result of savings from strategic cost programmes.
Total income decreased 12% to £7,588m, including the impact of depreciation of average USD against GBP. Banking income increased 2% to £2,528m. Investment Banking fee income decreased 2% to £2,111m driven by lower debt underwriting fees, partially offset by higher financial advisory and equity underwriting fees. Lending income increased to £417m (2013: £325m) due to lower fair value losses on hedges and higher net interest and fee income.
Markets income decreased 18% to £5,040m. Credit decreased 17% to £1,044m driven by reduced volatility and client activity, with lower income in distressed credit, US high yield and US high grade products. Equities decreased 11% to £2,046m due to declines in cash equities and equity derivatives, reflecting lower client volumes, partially offset by higher income in equity financing. Macro decreased 24% to £1,950m reflecting subdued client activity in rates and lower volatility in currency markets in the first half of the year.
Net credit impairment release of £14m (2013: £22m) arose from a number of single name exposures.
Total operating expenses decreased 6% to £6,225m reflecting a 9% reduction in compensation costs to £3,620m, savings from strategic cost programmes, including business restructuring, continued rationalisation of the technology platform and real estate infrastructure, and depreciation of average USD against GBP. This was partially offset by increased costs to achieve of £374m (2013: £190m) and litigation and conduct charges.
Loans and advances to customers and banks increased 2% to £106.3bn driven by an increase of £0.9bn to £27.5bn in cash collateralConsumer, Cards and lending, partially offset by a reduction in settlement balances due to reduced activity.
Derivative financial instrument assets and liabilities increased 40% to £152.6bn and 38% to £160.6bn respectively, driven by decreases in predominantly GBP, USD and EUR forward interest rates, and strengthening of USD against major currencies.
Reverse repurchase agreements and other similar secured lending decreased 18% to £64.3bn due to decreased match book trading and funding requirements.
Total assets increased 4% to £455.7bn due to an increase in derivative financial instrument assets, partially offset by a decrease in reverse repurchase agreements and other similar secured lending, and financial assets at fair value.
RWAs decreased 2% to £122.4bnPayments, primarily driven by risk reductionsthe growth in the trading book, partially offset by the implementation of a revised credit risk model for assessing counterparty probability of default.US cards business.
Note a | Refer to pagesi to x and pages 212 to 215 for further information, reconciliations and calculations ofnon-IFRS performance measures included throughout this document. |
| | | 200206 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Financial review Analysis of results by business | | | | | | | | | | | | | | |
| 2015
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| 2014
£m |
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| 2013
£m |
| Income statement information | | | | | | | | | | | | | Net interest income | | | 588 | | | | 647 | | | | 393 | | Net trading income | | | 3,859 | | | | 3,735 | | | | 4,969 | | Net fee, commission and other income | | | 3,125 | | | | 3,206 | | | | 3,234 | | Total income | | | 7,572 | | | | 7,588 | | | | 8,596 | | Credit impairment (charges)/releases and other provisions | | | (55 | ) | | | 14 | | | | 22 | | Net operating income | | | 7,517 | | | | 7,602 | | | | 8,618 | | Operating expenses | | | (5,362 | ) | | | (5,504 | ) | | | (6,141 | ) | UK bank levy | | | (203 | ) | | | (218 | ) | | | (236 | ) | Litigation and conduct | | | (107 | ) | | | (129) | | | | (31 | ) | Costs to achieve | | | (234 | ) | | | (374 | ) | | | (190 | ) | Total operating expenses | | | (5,906 | ) | | | (6,225 | ) | | | (6,598 | ) | Profit before tax | | | 1,611 | | | | 1,377 | | | | 2,020 | | Attributable profit | | | 804 | | | | 397 | | | | 1,308 | | | | | | Balance sheet information | | | | | | | | | | | | | Loans and advances to banks and customers at amortised costa | | | £92.2bn | | | | £106.3bn | | | | £104.5bn | | Trading portfolio assets | | | £65.1bn | | | | £94.8bn | | | | £96.6bn | | Derivative financial instrument assets | | | £114.3bn | | | | £152.6bn | | | | £108.7bn | | Derivative financial instrument liabilities | | | £122.2bn | | | | £160.6bn | | | | £116.6bn | | Reverse repurchase agreements and other similar secured lendingb | | | £25.5bn | | | | £64.3bn | | | | £78.2bn | | Financial assets designated at fair valueb | | | £48.1bn | | | | £8.9bn | | | | £16.5bn | | Total assets | | | £375.9bn | | | | £455.7bn | | | | £438.0bn | | Risk weighted assets | | | £108.3bn | | | | £122.4bn | | | | £124.4bn | | | | | | Key facts | | | | | | | | | | | | | Number of employees (full time equivalent) | | | 19,800 | | | | 20,500 | | | | 22,600 | | | | | | Performance measures | | | | | | | | | | | | | Return on average tangible equity | | | 6.0% | | | | 2.8% | | | | 8.5% | | Average allocated tangible equity | | | £13.9bn | | | | £14.6bn | | | | £15.3bn | | Return on average equity | | | 5.6% | | | | 2.7% | | | | 8.2% | | Average allocated equity | | | £14.8bn | | | | £15.4bn | | | | £15.9bn | | Cost:income ratio | | | 78% | | | | 82% | | | | 77% | | | | | | Analysis of total income | | | | | | | | | | | | | Investment banking fees | | | 2,093 | | | | 2,111 | | | | 2,160 | | Lending | | | 436 | | | | 417 | | | | 325 | | Banking | | | 2,529 | | | | 2,528 | | | | 2,485 | | Credit | | | 995 | | | | 1,044 | | | | 1,257 | | Equities | | | 2,001 | | | | 2,046 | | | | 2,297 | | Macro | | | 2,034 | | | | 1,950 | | | | 2,580 | | Markets | | | 5,030 | | | | 5,040 | | | | 6,134 | | Banking & Markets | | | 7,559 | | | | 7,568 | | | | 8,619 | | Other | | | 13 | | | | 20 | | | | (23 | ) | Total income | | | 7,572 | | | | 7,588 | | | | 8,596 | |
| | | | | | | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Income statement information | | | | | | | | | | | | | Net interest income | | | (183 | ) | | | (305 | ) | | | (216 | ) | Net fee, comission and other income | | | 286 | | | | 643 | | | | 492 | | Net operating income | | | 103 | | | | 338 | | | | 276 | | Operating expenses | | | (135 | ) | | | (272 | ) | | | (70 | ) | UK bank levy | | | (2 | ) | | | (8 | ) | | | (9 | ) | Litigation and conduct | | | (27 | ) | | | (66 | ) | | | (65 | ) | Total operating expenses | | | (164 | ) | | | (346 | ) | | | (144 | ) | Other net income/(expenses) | | | 128 | | | | (106 | ) | | | 316 | | Profit/(loss) before tax | | | 67 | | | | (114 | ) | | | 448 | | Attributable profit | | | 110 | | | | 11 | | | | 374 | | | | | | Balance sheet information | | | | | | | | | | | | | Total assetsb | | | £75.2bn | | | | £59.4bn | | | | £61.0bn | | Risk weighted assetsb | | | £53.3bn | | | | £39.7bn | | | | £41.8bn | | | | | | Key facts | | | | | | | | | | | | | Number of employees (full time equivalent) | | | 100 | | | | 100 | | | | 100 | | | | | | Performance measuresa | | | | | | | | | | | | | Average allocated tangible equity | | | £6.5bn | | | | £2.6bn | | | | £(2.7bn | ) | | | | | Notable items | | | | | | | | | | | | | Total income | | | | | | | | | | | | | Own credit | | | (35 | ) | | | 430 | | | | 34 | | Litigation and conduct | | | | | | | | | | | | | Provisions for ongoing investigations and litigation including Foreign Exchange | | | – | | | | (52 | ) | | | – | | Other net expenses | | | | | | | | | | | | | Losses on sale relating to the Spanish business | | | – | | | | (112 | ) | | | 315 | | Total notable items | | | (35 | ) | | | 266 | | | | 349 | |
2016 compared to 2015 Profit before tax was £67m (2015: loss of £114m). Profit before tax excluding notable itemsa improved from a loss of £380m to a profit of £102m. Net operating income decreased to £103m (2015: £338m) reflecting a reduction in own credit. Net operating income excluding notable items increased to £138m (2015: loss of £92m) primarily due to changes in net income from treasury operations. Total operating expenses reduced to £164m (2015: £346m) reflecting reduced litigation and conduct charges and a reduction in structural reform implementation costs now allocated to the businesses. Other net income increased to £128m (2015: (£106m)) due to the non recurrence of notable items and the recycling of the currency translation reserve on the disposal of the Southern European cards business. Total assets increased £15.8bn to £75.2bn primarily driven by the appreciation of ZAR against GBP. RWAs increased £13.6bn to £53.3bn primarily driven by the appreciation of ZAR against GBP and the reallocation of operational risk RWAs fromNon-Core associated with exited businesses and assets. 2015 compared to 2014 Profit before tax reduced £562m to a loss of £114m. Profit before tax excluding the impact of notable items moved from a profit of £99m in 2014 to a loss of £380m in 2015. Net operating income increased to £338m (2015: £276m) due to an increase in own credit, partially offset by the factors outlined below. Net operating income excluding notable items reduced to a loss of £92m (2014: income of £242m) primarily reflecting the net expense from Treasury operations and thenon-recurrence of gains in 2014, including net gains from foreign exchange recycling arising from the restructure of Group subsidiaries. Total operating expenses excluding notable items increased £202m to £346m primarily due to costs relating to the implementation of the structural reform programme. Total assets decreased £1.6bn to £59.4bn and RWAs decreased £2.1bn to £39.7bn primarily due to the depreciation of ZAR against GBP. Notes a | As at 31 December 2015 loansRefer to pagesi to x and advancespages 212 to 215 for further information, reconciliations and calculations of non-IFRS performance measures included £74.8bn (2014: £86.4bn) of loans and advances to customers (including settlement balances of £18.6bn (2014: £25.8bn) and cash collateral of £24.8bn (2014: £32.2bn)) and loans and advances to banks of £17.4bn (2014: £19.9bn) (including settlement balances of £1.6bn (2014: £2.7bn) and cash collateral of £5.7bn (2014: £6.9bn)).throughout this document. |
b | During 2015, new reverse repurchase agreementsIncludes Africa Banking assets held for sale of £65.1bn (December 2015: £47.9bn) and other similar secured lending in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. Included within financialweighted assets designated at fair value are reverse repurchase agreements designated at fair value of £42.5bn (2014: £3.4bn)£42.3bn (December 2015: £31.7bn). |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 201207 |
| | | | | | | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Income statement information | | | | | | | | | | | | | Net interest income | | | 160 | | | | 615 | | | | 590 | | Net trading income | | | (1,703) | | | | (706) | | | | (590) | | Net fee, commission and other income | | | 379 | | | | 703 | | | | 1,143 | | Total income | | | (1,164) | | | | 612 | | | | 1,143 | | Credit impairment charges and other provisions | | | (122) | | | | (134) | | | | (241) | | Net operating income | | | (1,286) | | | | 478 | | | | 902 | | Operating expenses | | | (1,509) | | | | (1,958) | | | | (2,611) | | UK bank levy | | | (76) | | | | (88) | | | | (102) | | Litigation and conduct | | | (246) | | | | (500) | | | | (301) | | Total operating expenses | | | (1,831) | | | | (2,546) | | | | (3,014) | | Other net income/(expenses) | | | 331 | | | | (535) | | | | (813) | | Loss before tax | | | (2,786) | | | | (2,603) | | | | (2,925) | | Attributable loss | | | (1,916) | | | | (2,418) | | | | (2,659) | | Balance sheet information | | | | | | | | | | | | | Loans and advances to banks and customers at amortised costb | | | £51.1bn | | | | £51.8bn | | | | £70.7bn | | Derivative financial instrument assets | | | £188.7bn | | | | £213.7bn | | | | £288.9bn | | Derivative financial instrument liabilities | | | £178.6bn | | | | £202.1bn | | | | £280.6bn | | Reverse repurchase agreements and other similar secured lending | | | £0.1bn | | | | £3.1bn | | | | £50.7bn | | Financial assets designated at fair value | | | £14.5bn | | | | £21.4bn | | | | £25.5bn | | Total assets | | | £279.7bn | | | | £325.8bn | | | | £502.4bn | | Customer depositsc | | | £12.5bn | | | | £20.9bn | | | | £30.8bn | | Risk weighted assets | | | £32.1bn | | | | £54.3bn | | | | £89.1bn | | Leverage exposure | | | £101.5bn | | | | £148.7bn | | | | £316.4bn | | | | | | | | | | | | | | | Key facts | | | | | | | | | | | | | Number of employees (full time equivalent) | | | 5,500 | | | | 9,900 | | | | 15,000 | | Performance measures | | | | | | | | | | | | | Average equity | | | £7.8bn | | | | £11.2 bn | | | | £16.0bn | | Average allocated tangible equitya | | | £7.8bn | | | | £10.9bn | | | | £15.6bn | | Loan loss rate (bps) | | | 22 | | | | 23 | | | | 39 | | Notable items | | | | | | | | | | | | | Total income | | | | | | | | | | | | | Revision of ESHLA valuation methodology | | | – | | | | – | | | | (935) | | Litigation and conduct | | | | | | | | | | | | | Provisions for UK customer redress | | | – | | | | (123) | | | | (75) | | Provisions for ongoing investigations and litigation including Foreign Exchange | | | – | | | | (201) | | | | – | | Operating expenses | | | | | | | | | | | | | Impairment of goodwill and other assets relating to businesses being disposed | | | – | | | | (96) | | | | – | | Other net expenses | | | | | | | | | | | | | Losses on sale relating to the Spanish business | | | – | | �� | | (468) | | | | (761) | | Total notable items | | | – | | | | (888) | | | | (1,771) | | Analysis of total income | | | | | | | | | | | | | Businesses | | | 485 | | | | 1,139 | | | | 1,503 | | Securities and loans | | | (638) | | | | (350) | | | | (318) | | Derivatives | | | (1,011) | | | | (177) | | | | (42) | | Total income | | | (1,164) | | | | 612 | | | | 1,143 | |
a | Refer to pagesi to x and pages 212 to 215 for further information, reconciliations and calculations ofnon-IFRS performance measures included throughout this document. |
b | As at 31 December 2016 loans and advances included £38.5bn (December 2015: £40.4bn) of loans and advances to customers (including settlement balances of £0.1bn (December 2015: £0.3bn) and cash collateral of £17.3bn (December 2015: £19.0bn)), and £12.6bn (December 2015: £11.4bn) of loans and advances to banks (including settlement balances of £0.1bn (December 2015: £nil) and cash collateral of £12.1bn (December 2015: £10.1bn)). |
c | As at 31December 2016 customer deposits included settlement balances of £0.1bn (December 2015: £0.2bn) and cash collateral of £11.9bn (December 2015: £12.3bn). |
| | | 208 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Financial review Analysis of results by business 20152016 compared to 20142015
The lossLoss before tax increased to £2,786m (2015: £2,603m). Loss before tax excluding notable itemsa increased to £2,786m (2015: £1,715m) driven by reduced income and increased losses resulting from continued progress on the rundown of £402m (2014: profitDerivatives, Businesses and Securities and loans, partially offset by lower operating expenses and higher other net income primarily from business and country exits.
Total income reduced £1,776m to a net expense of £97m) was primarily£1,164m. Businesses income reduced £654m to £485m due to the net expense from Treasury operationsimpact of lower income following the completion of the sale of a number of income generating businesses and costsfees paid to Head Office relating to the implementationtermination of the structural reform programme.internal hedging and funding positions no longer required. Net operatingSecurities and loans income decreased £288m to ana net expense of £107m (2014:£638m primarily driven by the impact of restructuring the ESHLA portfolio, thenon-recurrence of a £91m provision release relating to a litigation matter in Q115 and portfolio rundown. Fair value losses on the ESHLA portfolio were £393m (2015: £359m).
Derivatives income reduced £834m to a net expense of £242m) primarily£1,011m principally reflecting the net expense from Treasury operations andcosts of running down the non-recurrence of gainsportfolio. Credit impairment charges improved 9% to £122m due to lower impairment charges in 2014, including net gains from foreign exchange recycling arising from the restructure of Group subsidiaries.European businesses. Total operating expenses increased £158mimproved 28% to £300m primarily due to costs relating to£1,831m reflecting the implementationnon recurrence of notable items and the structural reform programme and an increase in costs to achieve, partially offset by reduced litigation and conduct charges. Total assets increased £7.3bn to £56.4bn due to an increase in the element of the liquidity buffer held centrally.
2014 compared to 2013
Profit before tax of £97m improved from a loss of £15m in 2013.
Net operating income increased to £242m (2013: £145m) predominantly due to net gains of £88m from foreign exchange recycling arising from the restructure of Group subsidiaries.factors outlined below.
Total operating expenses decreased £22mexcluding notable items improved 14% to £142m mainly due to£1,831m reflecting cost savings from ceasing certain investment banking activities in a reduction in UK bank levy to £9m (2013: £29m), the non-recurrencenumber of costs associated with the Salz Reviewcountries and the establishmentcompletion of the strategic cost programme in the prior year,sale of a number of businesses, partially offset by increased litigationa c.£200m increase in restructuring charges, which totalled c.£400m. Other net income of £331m (2015: net expense £535m) included gains on the sale of Barclays Risk Analytics and conduct charges.Index Solutions, the Asia wealth and investment management business and the Southern European cards business, partially offset by the loss on sale of the French retail, business of £455m. Loans and advances to banks and customers at amortised cost decreased £0.7bn to £51.1bn due to the sale of the Asia wealth and investment management business, and the rundown and exit of historical investment bank assets, partially offset by the recognition of £8bn of ESHLA loans at amortised cost, following the restructure of LOBO loan terms. Total assets increased £22.5bndecreased £46.1bn to £49.1bn reflecting an increase in£279.7bn due to lower derivative financial instrument assets which decreased £25.0bn to £188.7bn whilst derivative financial instrument liabilities decreased £23.5bn to £178.6bn mainly on continued rundown of the Group liquidity poolderivative back book. Leverage exposure decreased £47bn to £101bn due to reduced potential future exposure on derivatives and trading portfolio assets. RWAs decreased £10.6bnreduced £22.2bn to £5.6bn,£32.1bn despite the appreciation of USD and EUR against GBP, including receipt of certain US Lehman acquisition assetsa £10bn reduction in Derivatives, a £3bn reduction in Securities and loans, a £4bn reduction in Businesses RWAs, and a £6.9bn revision£4bn reallocation of operational risk RWAs to 2013 RWAs following full implementation of CRD IV reporting, as disclosed in the 30 June 2014 Results Announcement. Negative average allocated equity reduced to £0.4bn (2013: £7.0bn) as the Group moved towards the allocation rate of 10.5% fully loaded CRD IV CET1 ratio during the year, resulting in a reduction in excess equity allocated to businesses.
Head Office associated with business disposals and exits. | | | | | | | | | | | | | | |
| 2015
£m |
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| 2014
£m |
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| 2013
£m |
| Income statement information | | | | | | | | | | | | | Total income | | | (107 | ) | | | 242 | | | | 142 | | Credit impairment releases and other provisions | | | – | | | | – | | | | 3 | | Net operating (expense)/income | | | (107 | ) | | | 242 | | | | 145 | | Operating expenses | | | (246 | ) | | | (57 | ) | | | (103 | ) | UK bank levy | | | (8 | ) | | | (9 | ) | | | (29 | ) | Litigation and conduct | | | (14 | ) | | | (66 | ) | | | (10 | ) | Cost to achieve | | | (32 | ) | | | (10 | ) | | | (22 | ) | Total operating expenses | | | (300 | ) | | | (142 | ) | | | (164 | ) | Other net income/(expense) | | | 5 | | | | (3 | ) | | | 4 | | (Loss)/profit before tax | | | (402 | ) | | | 97 | | | | (15 | ) | Attributable (loss)/profit | | | (202 | ) | | | 112 | | | | (89 | ) | | | | | Balance sheet information | | | | | | | | | | | | | Total assets | | | £56.4bn | | | | £49.1bn | | | | £26.6bn | | Risk weighted assets | | | £7.7bn | | | | £5.6bn | | | | £16.2bn | | | | | | Key facts | | | | | | | | | | | | | Number of employees (full time equivalent) | | | 800 | | | | 100 | | | | 100 | |
| | | 202 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
| (£164m) total income net of
insurance claims
£1,459m loss before tax
|
2015 compared to 2014 Loss before tax increased 24%decreased to £1,459m£2,603m (2014: £2,925m). Loss before tax decreased excluding notable items £561m to £1,715m driven by continued progress in the exit of Businesses, Securities and loans, and Derivative assets. RWAs reduced £29bn£34.8bn to £47bn£54.3bn including a £10bn reduction in Derivatives, £9bn£13bn reduction in Securities and loans, £11bn reduction in Derivatives, and BusinessBusinesses reductions fromdriven by the completion of the sales of the Spanish and UK Secured Lending businesses. The announced sales of the Portuguese and Italian retail businesses, which are due to be completed in H116, are expected to result in a further £2.5bn reduction in RWAs. Total income netreduced £531m to £612m due to the non recurrence of insurance claimsnotable items, partially offset by the reduction in income outlined below. Total income excluding notable items reduced £1,466m to an expense of £164m (2014: income of £1,050m).£612m. Businesses income reduced 44%24% to £613m due to£1,139m driven by the impact of lower income following the completion of the sale of businesses including the Spanish business, Barclays Wealth Americas and the sale and rundown of legacy portfolio assets.UK Secured Lending. Securities and loans income reduceddecreased 10% to ana net expense of £481m (2014: income of £117m)£350m primarily driven by fair value losses and funding costsof £359m (2014: £156m) on the ESHLA portfolio, the active rundown of securities, exit of historical investment bank businesses and the non-recurring gain on the sale of the UAE retail bankingbusinesses and portfolio in 2014. Fair value losses on the ESHLA portfolio were £359m (2014: £156m), of which £156m was in Q415, as gilt swap spreads widened. Derivativesrundown. Derivative income reduced 76%£135m to an expense of £296m reflecting£177m due to the active rundown of the portfolios and funding costs.portfolios. Credit impairment charges improved 54%44% to £78m£134m due to higher recoveries in Europe and the sale of the Spanish business. Total operating expenses improved 40%16% to £1,199m£2,546m reflecting savings from the sales of the Spanish UAE retail, commodities,business, Barclays Wealth Americas, and several principal investment businesses, as well as a reduction in costs to achieve, and conduct and litigation charges.businesses. Loans and advances to banks and customers reduced 28%at amortised cost decreased 27% to £45.9bn£51.8bn due to the reclassification of £5.5bn of loans relating toassets on the announced salessale of the Portuguese and Italian businesses to assets held for sale, and the rundown and exit of historical investment bank assets. Derivative financial instrument assets and liabilities decreased 26% to £210.3bn£213.7bn and 28% to £198.7bn£202.1bn respectively, largely as a result of trade reduction. Total assets decreased 36%£176.6bn to £303.1bn£325.8bn due to reduced reverse repurchase agreements and other similar secured lending, and lower derivative financial instrument assets. Leverage exposure reduced £156.2bndecreased £167.7bn to £121.3bn£148.7bn primarily in reverse repurchase agreements, potential future exposure on derivatives and trading portfolio assets. RWAs decreased £28.7bnreduced £34.8bn to £46.6bn and period end equity decreased £3.8bn to £7.2bn primarily£54.3bn driven by the sale of the Spanish business, the active rundown of legacy structured and credit products, and derivative trade unwinds. 2014 compared to 2013
Loss before tax reduced 15% to £1,180m as Non-Core made good progress in exiting and running down certain businesses and securities during 2014. This drove a £34.6bn reduction in RWAs, making substantial progress towards the Non-Core target reductions as outlined in the Group Strategy Update on 8 May 2014.
Total income net of insurance claims reduced 54% to £1,050m. Businesses income reduced 27% to £1,101m due to the sale and rundown of legacy portfolio assets and the rationalisation of product offerings within the European retail business. Securities and loans income reduced 82% to £117m primarily driven by the active rundown of securities, fair value losses on wholesale loan portfolios and the non-recurrence of prior year favourable market movements on certain securitised products, partially offset by a £119m gain on the sale of the UAE retail banking portfolio. Derivatives income reduced £321m to an expense of £168m reflecting the funding costs of the traded legacy derivatives portfolio and the non-recurrence of fair value gains in the prior year.
Credit impairment charges improved 81% to £168m due to the non-recurrence of impairments on single name exposures, impairment releases on the wholesale portfolio as a result of confirmation on Spanish government subsidies in the renewable energy sector and improved performance in Europe, primarily due to improved recoveries and delinquencies in the mortgages portfolio.
Total operating expenses improved 25% to £2,011m reflecting savings from strategic cost programmes, including lower headcount and the results of the previously announced European retail restructuring. In addition, costs to achieve reduced 61% to £212m.
Loans and advances to banks and customers reduced 22% to £63.9bn due to a £12.9bn reclassification of loans relating to the Spanish business, which was held for sale, and a reduction in Europe retail driven by a run-off of assets.
Trading portfolio assets reduced 48% to £15.9bn due to the sale and rundown of legacy portfolio assets.
Derivative financial instrument assets and liabilities increased 19% to £285.4bn and 21% to £277.1bn respectively, driven by decreases in major forward interest rates.
Total assets decreased 8% to £471.5bn with reduced reverse repurchase agreements and other similar secured lending, and trading portfolio assets, due to the rundown of legacy portfolio assets, offset by an increase in derivative financial instrument assets. BCBS 270 leverage exposure reduced to £277bn.
RWAs decreased £34.6bn to £75.3bn and average allocated equity decreased £3.7bn to £13.4bn, reflecting the disposal of businesses, rundown and exit of securities and loans, and derivative risk reductions.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 203 |
Financial review
Analysis of results by business
Barclays Non-Core – continued
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| 2015
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| 2014
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| 2013
£m |
| Income statement information | | | | | | | | | | | | | Net interest income | | | 249 | | | | 214 | | | | 307 | | Net trading income | | | (805 | ) | | | 120 | | | | 1,327 | | Net fee, commission and other income | | | 765 | | | | 1,026 | | | | 983 | | Total income | | | 209 | | | | 1,360 | | | | 2,617 | | Net claims and benefits incurred under insurance contracts | | | (373 | ) | | | (310 | ) | | | (324 | ) | Total income net of insurance claims | | | (164 | ) | | | 1,050 | | | | 2,293 | | Credit impairment charges and other provisions | | | (78 | ) | | | (168 | ) | | | (900 | ) | Net operating (expense)/income | | | (242 | ) | | | 882 | | | | 1,393 | | Operating expenses | | | (873 | ) | | | (1,510 | ) | | | (1,929 | ) | UK bank levy | | | (78 | ) | | | (91 | ) | | | (109 | ) | Litigation and conduct | | | (148 | ) | | | (198 | ) | | | (96 | ) | Costs to achieve | | | (100 | ) | | | (212 | ) | | | (538 | ) | Total operating expenses | | | (1,199 | ) | | | (2,011 | ) | | | (2,672 | ) | Other net expenses | | | (18 | ) | | | (51 | ) | | | (110 | ) | Loss before tax | | | (1,459 | ) | | | (1,180 | ) | | | (1,389 | ) | Attributable loss | | | (1,523 | ) | | | (1,085 | ) | | | (1,783 | ) | | | | | Balance sheet information | | | | | | | | | | | | | Loans and advances to banks and customers at amortised costb | | | £45.9bn | | | | £63.9bn | | | | £81.9bn | | Derivative financial instrument assets | | | £210.3bn | | | | £285.4bn | | | | £239.3bn | | Derivative financial instrument liabilities | | | £198.7bn | | | | £277.1bn | | | | £228.3bn | | Reverse repurchase agreements and other similar secured lendingc | | | £2.4bn | | | | £49.3bn | | | | £104.7bn | | Financial assets designated at fair valuec | | | £20.1bn | | | | £22.2bn | | | | £19.5bn | | Total assets | | | £303.1bn | | | | £471.5bn | | | | £511.2bn | | Customer deposits | | | £14.9bn | | | | £21.6bn | | | | £29.3bn | | Risk weighted assets | | | £46.6bn | | | | £75.3bn | | | | £109.9bn | | Leverage exposure | | | £121.3bn | | | | £277.5bn | | | | n/a | | | | | | Key facts | | | | | | | | | | | | | Number of employees (full time equivalent) | | | 5,600 | | | | 8,900 | | | | 9,900 | | | | | | Performance measures | | | | | | | | | | | | | Return on average tangible equityd | | | (5.1% | ) | | | (5.4% | ) | | | (9.3% | ) | Average allocated tangible equity | | | £8.9bn | | | | £13.2bn | | | | £16.8bn | | Return on average equityd | | | (4.1% | ) | | | (4.1% | ) | | | (7.0% | ) | Average allocated equity | | | £9.0bn | | | | £13.4bn | | | | £17.1bn | | Period end allocated equity | | | £7.2bn | | | | £11.0bn | | | | £15.1bn | | | | | | Analysis of total income net of insurance claims | | | £m | | | | £m | | | | £m | | Businesses | | | 613 | | | | 1,101 | | | | 1,498 | | Securities and loans | | | (481 | ) | | | 117 | | | | 642 | | Derivatives | | | (296 | ) | | | (168 | ) | | | 153 | | Total income net of insurance claims | | | (164 | ) | | | 1,050 | | | | 2,293 | |
NotesNote
a | 2013 adjusted total operating expensesRefer to pagesi to x and profit before tax have been revisedpages 212 to account215 for the reclassificationfurther information, reconciliations and calculations of £173m of charges, relating to a US residential mortgage-related business settlement with the Federal Housing Finance Agency, to provisions for onging investigations and litigations including Foreign Exchange to aid comparability. |
b | As at 31 December 2015 loans and advancesnon-IFRS performance measures included £35.2bn (2014: £51.6bn) of loans and advances to customers (including settlement balances of £0.2bn (2014: £1.6bn) and cash collateral of £19.0bn (2014: £22.1bn)) and loans and advances to banks of £10.6bn (2014: £12.3bn) (including settlement balances of nil (2014: £0.3bn) and cash collateral of £10.1bn (2014: £11.3bn)). |
c | During 2015, new reverse repurchase agreements and other similar secured lending in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. Included within financial assets designated at fair value are reverse repurchase agreements designated at fair value of £1.4bn (2014: £1.0bn). |
d | Return on average equity and average tangible equity for Barclays Non-Core represents its impact on the Group. This does not represent the return on average tangible equity of the Non-Core business. |
| | | 204 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Returns and equity
by business
Returns on average equity and average tangible equity are calculated as profit for the year attributable to ordinary equity holders of the parent (adjusted for the tax credit recorded in reserves in respect of coupons on other equity instruments) divided by average allocated equity or average allocated tangible equity for the period as appropriate, excluding non-controlling and other equity interests for businesses, apart from Africa Banking (see below). Allocated equity has been calculated as 10.5% of CRD IV fully loaded risk weighted assets for each business, adjusted for CRD IV fully loaded capital deductions, including goodwill
and intangible assets, reflecting the assumptions the Group uses for capital planning purposes. The excess of allocated Group equity, caused by the fully loaded CRD IV CET1 ratio being below 10.5% on average in the period, is allocated as negative equity to Head Office. Allocated tangible equity is calculated using the same method, but excludes goodwill and intangible assets.
For Africa Banking, the equity used for return on average equity is Barclays’ share of the statutory equity of the BAGL entity (together with that of the Barclays Egypt and Zimbabwe businesses which remain outside the BAGL corporate entity), as well as Barclays’ goodwill on acquisition of these businesses. The tangible equity for return on tangible equity uses the same basis, but excludes both the Barclays’ goodwill on acquisition and the goodwill and intangibles held within the BAGL statutory equity.
| | | | | | | | | | | | | Return on average tangible equity | | | | | | | | | | | | | | |
| 2015
% |
| |
| 2014
% |
| |
| 2013
% | c
| Personal and Corporate Banking | | | 16.2 | | | | 15.8 | | | | 12.7 | | Barclaycard | | | 22.3 | | | | 19.9 | | | | 19.9 | | Africa Banking | | | 11.7 | | | | 12.9 | | | | 11.3 | | Investment Bank | | | 6.0 | | | | 2.8 | | | | 8.5 | | Barclays Core operating businesses | | | 12.7 | | | | 10.8 | | | | 11.6 | | Head Office impacta | | | (1.8 | ) | | | 0.5 | | | | 2.8 | | Barclays Core | | | 10.9 | | | | 11.3 | | | | 14.4 | | Barclays Non-Core impacta | | | (5.1 | ) | | | (5.4 | ) | | | (9.3 | ) | Barclays Group adjusted totald | | | 5.8 | | | | 5.9 | | | | 5.1 | | Barclays Group statutory total | | | (0.7 | ) | | | (0.3 | ) | | | 1.2 | | | | | | | | | | | | | | | Return on average equity | | | | | | | | | | | | | | |
| 2015
% |
| |
| 2014
% |
| |
| 2013
% | c
| Personal and Corporate Banking | | | 12.1 | | | | 11.9 | | | | 9.7 | | Barclaycard | | | 17.7 | | | | 16.0 | | | | 15.5 | | Africa Banking | | | 8.7 | | | | 9.3 | | | | 8.1 | | Investment Bank | | | 5.6 | | | | 2.7 | | | | 8.2 | | Barclays Core operating businesses | | | 10.4 | | | | 8.9 | | | | 9.7 | | Head Office impacta | | | (1.4 | ) | | | 0.3 | | | | 1.6 | | Barclays Core | | | 9.0 | | | | 9.2 | | | | 11.3 | | Barclays Non-Core impacta | | | (4.1 | ) | | | (4.1 | ) | | | (7.0 | ) | Barclays Group adjusted totald | | | 4.9 | | | | 5.1 | | | | 4.3 | | Barclays Group statutory total | | | (0.6 | ) | | | (0.2 | ) | | | 1.0 | | | | | | | | | | | | | | | Profit/(loss) attributable to ordinary equity holders of the parentb | | | | | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m | c
| Personal and Corporate Banking | | | 2,203 | | | | 2,075 | | | | 1,681 | | Barclaycard | | | 1,114 | | | | 943 | | | | 822 | | Africa Banking | | | 332 | | | | 360 | | | | 356 | | Investment Bank | | | 829 | | | | 415 | | | | 1,308 | | Head Office | | | (202 | ) | | | 112 | | | | (89 | ) | Barclays Core | | | 4,276 | | | | 3,905 | | | | 4,078 | | Barclays Non-Core | | | (1,510 | ) | | | (1,072 | ) | | | (1,783 | ) | Barclays Group adjusted totald | | | 2,766 | | | | 2,833 | | | | 2,295 | | Barclays Group statutory total | | | (394 | ) | | | (174 | ) | | | 540 | |
Notes
a | Return on average equity and average tangible equity for Head Office and Barclays Non-Core represents their impact on Barclays Core and the Group respectively. This does not represent the return on average equity and average tangible equity of Head Office or the Non-Core business. |
b | Profit for the period attributable to ordinary equity holders of the parent includes the tax credit recorded in reserves in respect of interest payments on other equity instruments. |
c | 2013 adjusted total operating expenses and profit before tax have been revised to account for the reclassification of £173m of charges, relating to a US residential mortgage-related business settlement with the Federal Housing Finance Agency, to provisions for ongoing investigations and litigation including Foreign Exchange to aid comparability. |
d | Adjusted Barclays Group profit excludes the impact of own credit of £430m gain (2014: £34m gain), impairment of goodwill and other assets relating to businesses being disposed of £96m (2014: nil), provisions for UK customer redress of £2,772m (2014: £1,110m), gain on US Lehman acquisition assets of £496m (2014:£461m), provisions for ongoing investigations and litigation including Foreign Exchange of £1,237m (2014: £1,250m), loss on sale relating to the Spanish, Portuguese and Italian businesses of £580m (2014: £446m), Education, Social Housing, and Local Authority (ESHLA) revision of valuation methodology of nil (2014: £935m), and gain on valuation of a component of the defined retirement benefit liability £429m gain (2014: nil).throughout this document. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 205209 |
| Discontinued Operation: Africa Banking |
On 1 March 2016, Barclays announced its intention to sell down the Group’s interest in BAGL. This sell down is intended to be to a level which will permit deconsolidation from an accounting and regulatory perspective, subject to shareholder and regulatory approvals as required. On 5 May 2016 Barclays executed the first tranche of the sell down of the Group’s interest in BAGL with the sale of 12.2% of BAGL’s issued share capital. Following completion of the sale, Barclays’ holding represents 50.1% of BAGL’s issued share capital. The terms of the transitional services arrangements and related separation payments have been agreed with BAGL and submitted to relevant regulators as part of a request for approval for Barclays to sell down to below a 50% holding. These proposed separation terms include contributions totalling £765m, of which £27.5m was paid in 2016, with the remainder to be paid over the period through to completion of any initial sale of Barclays’ stake in BAGL to below 50%. The majority of these funds would be used by BAGL to separate from the Barclays group, including termination of the existing Master Services Agreement, making investments in branding, operations and technology, and covering separation related expenses. In addition, Barclays will contribute an amount equivalent to 1.5% of BAGL’s market capitalisation to a new Broad-Based Black Economic Empowerment scheme, equating to approximately £130m at the 31 December 2016 share price and ZAR exchange rate, and expects to incur some additional operating expenses in respect of delivering the separation of the businesses under the transitional services arrangements. These proposed contributions have been taken into account in assessing whether any impairment of the BAGL disposal group was required in the Group’s balance sheet. No impairment of the BAGL disposal group was required at 31 December 2016, as the market value of BAGL less estimated costs to sell at the year-end share price and ZAR exchange rate was £8.4bn which was greater than the carrying asset value of BAGL at that date of £7.3bn, plus the proposed costs of separation referred to above. The Africa Banking business meets the requirements for presentation as a discontinued operation. As such, these results have been presented as two lines on the face of the Group income statement, representing the profit after tax and non-controlling interest in respect of the discontinued operation. Were the fair value of BAGL, based on its quoted share price, less estimated costs to sell, to fall below the carrying amount of the net assets of BAGL including goodwill on acquisition, a resulting impairment to Barclays’ stake in BAGL would also be recognised through these lines. | | | | | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| | 2014 £m | Income statement information | | | | | | | | | | | Net interest income | | | 2,169 | | | | 1,950 | | | 1,994 | Net fee, commission and other income | | | 1,577 | | | | 1,464 | | | 1,532 | Total income | | | 3,746 | | | | 3,414 | | | 3,526 | Credit impairment charges and other provisions | | | (445) | | | | (353) | | | (347) | Net operating income | | | 3,301 | | | | 3,061 | | | 3,179 | Operating expenses | | | (2,345) | | | | (2,091) | | | (2,199) | UK bank levy | | | (65) | | | | (50) | | | (44) | Litigation and conduct | | | – | | | | – | | | (2) | Total operating expenses | | | (2,410) | | | | (2,141) | | | (2,245) | Other net income | | | 6 | | | | 7 | | | 10 | Profit before tax | | | 897 | | | | 927 | | | 944 | Profit after tax | | | 591 | | | | 626 | | | 653 | Attributable profit | | | 189 | | | | 302 | | | 334 | | | | | Balance sheet information | | | £bn | | | | £bn | | | £bn | Total assetsa | | | 65.1 | | | | 47.9 | | | 53.7 | Risk weighted assetsa | | | 42.3 | | | | 31.7 | | | 36.7 | | | | | Key facts | | | | | | | | | | | Period end – ZAR/GBP | | | 16.78 | | | | 23.14 | | | 18.03 | Average – ZAR/GBPb | | | 20.04 | | | | 19.57 | | | 17.84 | Barclays Africa Group Limited share price (ZAR) | | | 168.69 | | | | 143.49 | | | 182.00 | Barclays Africa Group Limited number of shares (m) | | | 848 | | | | 848 | | | 848 | Number of employees (full time equivalent) | | | 40,800 | | | | 41,500 | | | 42,300 |
Notes a | Africa Banking assets held for sale and RWAs are reported in Head Office within Core. |
b | The average rate is derived from daily spot rates during the year. |
| | | 210 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Financial review Analysis of results by business Returns and equity by business – continuedMargins analysis
| | | | | | | | | | | Average allocated tangible equity | | | | | | | | | | | | | 2015 £bn | |
| 2014
£bn |
| |
| 2013
£bn |
| Personal and Corporate Banking | | 13.6 | | | 13.1 | | | | 13.2 | | Barclaycard | | 5.0 | | | 4.7 | | | | 4.1 | | Africa Banking | | 2.8 | | | 2.8 | | | | 3.2 | | Investment Bank | | 13.9 | | | 14.6 | | | | 15.3 | | Head Officea | | 3.9 | | | (0.6 | ) | | | (7.4 | ) | Barclays Core | | 39.2 | | | 34.6 | | | | 28.4 | | Barclays Non-Core | | 8.9 | | | 13.2 | | | | 16.8 | | Barclays Group adjusted total | | 48.1 | | | 47.8 | | | | 45.2 | | Barclays Group statutory total | | 47.7 | | | 47.0 | | | | 44.3 | | | | | | | | | | | | | Average allocated equity | | | | | | | | | | | | | 2015 £bn | |
| 2014
£bn |
| |
| 2013
£bn |
| Personal and Corporate Banking | | 18.2 | | | 17.5 | | | | 17.3 | | Barclaycard | | 6.3 | | | 5.9 | | | | 5.3 | | Africa Banking | | 3.8 | | | 3.9 | | | | 4.4 | | Investment Bank | | 14.8 | | | 15.4 | | | | 15.9 | | Head Officea | | 4.2 | | | (0.4 | ) | | | (7.0 | ) | Barclays Core | | 47.3 | | | 42.3 | | | | 35.9 | | Barclays Non-Core | | 9.0 | | | 13.4 | | | | 17.1 | | Barclays Group adjusted total | | 56.3 | | | 55.7 | | | | 53.0 | | Barclays Group statutory total | | 55.9 | | | 54.9 | | | | 52.2 | | | | | | | | | | | | | Period end allocated equity | | | | | | | | | | | | | 2015 £bn | |
| 2014
£bn |
| |
| 2013
£bn |
| Personal and Corporate Banking | | 18.3 | | | 17.9 | | | | 17.3 | | Barclaycard | | 6.3 | | | 6.2 | | | | 5.4 | | Africa Banking | | 3.4 | | | 4.0 | | | | 3.8 | | Investment Bank | | 13.0 | | | 14.7 | | | | 14.6 | | Head Officea | | 6.6 | | | 2.1 | | | | (2.1 | ) | Barclays Core | | 47.6 | | | 44.9 | | | | 39.0 | | Barclays Non-Core | | 7.2 | | | 11.0 | | | | 15.1 | | Barclays Group adjusted total | | 54.8 | | | 55.9 | | | | 54.1 | | Barclays Group statutory total | | 54.5 | | | 55.2 | | | | 53.3 | | | | | | | | | | | | |
Note
a | Based on risk weighted assets and capital deductions in Head Office plus the residual balance of average ordinary shareholders’ equity and tangible ordinary shareholders’ equity. |
| | | 206 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Total PCB, BarclaycardBarclays UK and Africa BankingBarclays International net interest income increased 5% to £12.0bn£10.3bn due to an increase in average customer assets to £287.7bn (2014: £280.0bn)£274.6bn (2015: £268.8bn) with growth in PCB and Barclaycard, partially offset by reductions in Africa Banking as the ZAR depreciated against GBP.Barclays International, while Barclays UK remained stable. Net interest margin increased 10bps11bps to 4.18%3.76% primarily due to growth in interest earning lending within Barclaycard.the cards portfolio of Barclays International and higher margins on deposits in Barclays UK. Group net interest income increaseddecreased to £12.6bn (2014: £12.1bn)£10.5bn (2015: £10.6bn) including net structural hedge contributions of £1.5bn (2014: £1.6bn)(2015: £1.4bn). Equity structural hedge income decreased driven by the maintenance of the hedge in a continuing low rate environment. Net interest margin by business reflects movements in the Group’s internal funding rates which are based on the cost to the Group of alternative funding in wholesale markets. The internal funding rate prices intra-group funding and liquidity to appropriately give appropriate credit to businesses with net surplus liquidity and to charge those businesses in need of alternative funding at a rate that is driven by prevailing market rates and includes a term premium. | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 31 December 2016 | | | | Year ended 31 December 2015 | | | |
| Net interest income
£m |
| |
| Average customer assets £m | | |
| Net interest margin
£m |
| |
| Net interest income
£m |
| |
| Average customer assets £m | | |
| Net interest margin
£m |
| Barclays UK | | | 6,048 | | | | 167,233 | | | | 3.62 | | | | 5,973 | | | | 167,599 | | | | 3.56 | | Barclays Internationala | | | 4,275 | | | | 107,333 | | | | 3.98 | | | | 3,841 | | | | 101,164 | | | | 3.80 | | Total Barclays UK and Barclays International | | | 10,323 | | | | 274,566 | | | | 3.76 | | | | 9,814 | | | | 268,763 | | | | 3.65 | | Otherb | | | 214 | | | | | | | | | | | | 794 | | | | | | | | | | Total net interest income | | | 10,537 | | | | | | | | | | | | 10,608 | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended 31 December 2015 | | | | Year ended 31 December 2014 | | | |
| Net interest income
£m |
| | | Average customer assets £m | | |
| Net interest margin
% |
| |
| Net interest income
£m |
| |
| Average customer assets
£m |
| |
| Net interest margin
% |
| Personal and Corporate Banking | | | 6,438 | | | | 214,989 | | | | 2.99 | | | | 6,298 | | | | 210,026 | | | | 3.00 | | Barclaycard | | | 3,520 | | | | 38,560 | | | | 9.13 | | | | 3,044 | | | | 34,776 | | | | 8.75 | | Africa Banking | | | 2,066 | | | | 34,116 | | | | 6.06 | | | | 2,093 | | | | 35,153 | | | | 5.95 | | Total Personal and Corporate Banking, Barclaycard and Africa Banking | | | 12,024 | | | | 287,665 | | | | 4.18 | | | | 11,435 | | | | 279,955 | | | | 4.08 | | Investment Bank | | | 588 | | | | | | | | | | | | 647 | | | | | | | | | | Head Office | | | (303 | ) | | | | | | | | | | | (216 | ) | | | | | | | | | Barclays Core | | | 12,309 | | | | | | | | | | | | 11,866 | | | | | | | | | | Barclays Non-Core | | | 249 | | | | | | | | | | | | 214 | | | | | | | | | | Group net interest income | | | 12,558 | | | | | | | | | | | | 12,080 | | | | | | | | | |
Notes a | Barclays International margins have been restated to include interest earning lending within the investment banking business. |
b | Other includes Head Office, BarclaysNon-Core andnon-lending related investment banking balances. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 207211 |
Non-IFRS performance measures Barclays management believes that the non-IFRS performance measures included in this document provide valuable information to the readers of the financial statements as they enable the reader to identify a more consistent basis for comparing the business’ performance between financial periods, and provide more detail concerning the elements of performance which the managers of these businesses are most directly able to influence or are relevant for an assessment of Barclays PLC and its subsidiaries (the Group). They also reflect an important aspect of the way in which operating targets are defined and performance is monitored by Barclays’ management. Non-IFRS and IFRS performance measures may also be presented on an excluding notable items basis. Notable items are considered to be significant items impacting comparability of performance. Any non-IFRS performance measures in this document are not a substitute for IFRS measures and readers should consider the IFRS measures as well. | | | Non-IFRS performance measures glossary | Measure | | Definition | Barclays Core | | Barclays Core includes Barclays UK, Barclays International and Head Office. A reconciliation of Core statutory results and results excluding notable items is included on pages vi to viii. | Return on average tangible shareholders’ equity | | Statutory profit after tax attributable to ordinary shareholders, including an adjustment for the tax credit in reserves in respect of other equity instruments, as a proportion of average shareholders’ equity excludingnon-controlling interests and other equity instruments adjusted for the deduction of intangible assets and goodwill. The components of the calculation have been included on page 213. | Return on average allocated tangible shareholders’ equity | | Statutory profit after tax attributable to ordinary shareholders, including an adjustment for the tax credit in reserves in respect of other equity instruments, as a proportion of average allocated tangible equity. The components of the calculation have been included on page 213. | Average tangible shareholders’ equity | | Calculated as the average of the monthly period end tangible shareholders’ equity during the period. | Average allocated tangible shareholders’ equity | | Calculated as the average of the monthly period end allocated tangible shareholders’ equity during the period. | Cost: income ratio | | Total operating expenses divided by total income. | Basic earnings/(loss) per share contribution (Barclays Core andNon-Core) | | The calculation is consistent with the IFRS measure and applied to the Barclays Core andNon-Core: statutory profit after tax attributable to ordinary shareholders, including an adjustment for the tax credit in reserves in respect of other equity instruments, divided by the Group basic weighted average number of shares. The components of the calculation have been included on page 215. | Loan loss rate | | Is quoted in basis points and represents total loan impairment divided by gross loans and advances to customers and banks held at amortised cost at the balance sheet date. | Loan: deposit ratio | | Loans and advances divided by customer accounts calculated for Barclays UK, Barclays International andNon-Core, excluding investment banking businesses. This excludes particular liabilities issued by the retail businesses that have characteristics comparable to retail deposits (for example structured Certificates of Deposit and retail bonds), which are included within debt securities in issue. | Notable items | | Notable items are considered to be significant items impacting comparability of performance and are shown for each of the business segments. A reconciliation between statutory results and results excluding notable items is included on pages vi to viii including relevant performance measures. | Net interest margin | | Net interest income divided by the sum of average customer assets. The components of the calculation have been included on page 211. | Tangible net asset value per share | | Calculated by dividing shareholders equity, excludingnon-controlling interests and other equity instruments, less goodwill and intangible assets, by the number of issued ordinary shares. The components of the calculation have been included on page 215. |
| | | 212 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Returns Return on average allocated tangible equity is calculated as profit for the period attributable to ordinary equity holders of the parent (adjusted for the tax credit recorded in reserves in respect of interest payments on other equity instruments) divided by average allocated tangible equity for the period as appropriate, excludingnon-controlling and other equity interests for businesses. Allocated tangible equity has been calculated as 11.5% of CRD IV fully loaded risk weighted assets for each business, adjusted for CRD IV fully loaded capital deductions, excluding goodwill and intangible assets, reflecting the assumptions the Group uses for capital planning purposes. Head Office average tangible equity represents the difference between the Group’s average tangible equity and the amounts allocated to businesses. | | | | | | | | | | | | | | |
| Year ended 31.12.16 £m | | |
| Year ended 31.12.15 £m | | |
| Year ended 31.12.14 £m | | Attributable profit | | | | | | | | | | | | | Barclays UK | | | 828 | | | | (47 | ) | | | 852 | | Barclays International | | | 2,412 | | | | 1,758 | | | | 926 | | Head Office | | | 110 | | | | 11 | | | | 374 | | Barclays Core | | | 3,350 | | | | 1,722 | | | | 2,152 | | BarclaysNon-Core | | | (1,916 | ) | | | (2,418 | ) | | | (2,659 | ) | Africa Banking discontinued operation | | | 189 | | | | 302 | | | | 334 | | Barclays Group | | | 1,623 | | | | (394) | | | | (174 | ) | | | | | Tax credit in respect of interest payments on other equity instruments | | | £m | | | | £m | | | | £m | | Barclays UK | | | 29 | | | | 14 | | | | 17 | | Barclays International | | | 83 | | | | 42 | | | | 23 | | Head Office | | | (1 | ) | | | – | | | | (1 | ) | Barclays Core | | | 111 | | | | 56 | | | | 39 | | BarclaysNon-Core | | | 17 | | | | 14 | | | | 14 | | Africa Banking discontinued operation | | | – | | | | – | | | | – | | Barclays Group | | | 128 | | | | 70 | | | | 54 | | | | | | Profit/(loss) attributable to ordinary equity holders of the parent | | | £m | | | | £m | | | | £m | | Barclays UK | | | 857 | | | | (33 | ) | | | 869 | | Barclays International | | | 2,495 | | | | 1,800 | | | | 949 | | Head Office | | | 109 | | | | 11 | | | | 373 | | Barclays Core | | | 3,461 | | | | 1,778 | | | | 2,191 | | BarclaysNon-Core | | | (1,899 | ) | | | (2,405 | ) | | | (2,645 | ) | Africa Banking discontinued operation | | | 189 | | | | 302 | | | | 334 | | Barclays Group | | | 1,751 | | | | (324 | ) | | | (120 | ) | | | | | Average allocated tangible equitya | | | £bn | | | | £bn | | | | £bn | | Barclays UK | | | 8.9 | | | | 9.3 | | | | 9.1 | | Barclays International | | | 25.5 | | | | 24.9 | | | | 25.0 | | Head Officeb | | | 6.5 | | | | 2.6 | | | | (2.7 | ) | Barclays Core | | | 41.0 | | | | 36.8 | | | | 31.4 | | BarclaysNon-Core | | | 7.8 | | | | 10.9 | | | | 15.6 | | Barclays Group | | | 48.7 | | | | 47.7 | | | | 47.0 | | | | | | Return on average allocated tangible equitya | | | % | | | | % | | | | % | | Barclays UK | | | 9.6% | | | | (0.3% | ) | | | 9.5% | | Barclays International | | | 9.8% | | | | 7.2% | | | | 3.8% | | Barclays Core | | | 8.4% | | | | 4.8% | | | | 7.0% | | Barclays Group | | | 3.6% | | | | (0.7% | ) | | | (0.3% | ) |
Note a | Refer to pagesi to x and pages 212 to 215 for further information, reconciliations and calculations of non-IFRS performance measures included throughout this document. |
b | Includes the Africa Banking discontinued operation. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 213 |
Financial review Non-IFRS performance measures | | | | | | | | | | | | | Returns excluding notable items | | | | | | | | | | | | | | |
| Year ended 31.12.16 £m | | |
| Year ended 31.12.15 £m | | |
| Year ended 31.12.14 £m | | Attributable profit excluding notable items | | | | | | | | | | | | | Barclays UK | | | 1,685 | | | | 1,961 | | | | 1,707 | | Barclays International | | | 1,961 | | | | 2,320 | | | | 1,734 | | Head Office | | | 135 | | | | (176 | ) | | | 114 | | Barclays Core | | | 3,781 | | | | 4,105 | | | | 3,555 | | BarclaysNon-Core | | | (1,916 | ) | | | (1,711 | ) | | | (1,109 | ) | Africa Banking discontinued operation | | | 189 | | | | 302 | | | | 334 | | Barclays Group | | | 2,054 | | | | 2,696 | | | | 2,780 | | | | | | Tax credit in respect of interest payments on other equity instruments | | | | | | | | | | | | | Barclays UK | | | 29 | | | | 14 | | | | 17 | | Barclays International | | | 83 | | | | 42 | | | | 23 | | Head Office | | | (1 | ) | | | – | | | | (1 | ) | Barclays Core | | | 111 | | | | 56 | | | | 39 | | BarclaysNon-Core | | | 17 | | | | 14 | | | | 14 | | Africa Banking discontinued operation | | | – | | | | – | | | | – | | Barclays Group | | | 128 | | | | 70 | | | | 54 | | | | | | Profit/(loss) attributable to ordinary equity holders of the parent excluding notable items | | | | | | | | | | | | | Barclays UK | | | 1,714 | | | | 1,975 | | | | 1,724 | | Barclays International | | | 2,044 | | | | 2,362 | | | | 1,757 | | Head Office | | | 133 | | | | (176) | | | | 126 | | Barclays Core | | | 3,891 | | | | 4,161 | | | | 3,594 | | BarclaysNon-Core | | | (1,899 | ) | | | (1,697 | ) | | | (1,095 | ) | Africa Banking discontinued operation | | | 189 | | | | 302 | | | | 334 | | Barclays Group | | | 2,182 | | | | 2,766 | | | | 2,834 | | | | | | Average allocated tangible equity excluding notable itemsa | | | £bn | | | | £bn | | | | £bn | | Barclays UK | | | 8.9 | | | | 9.3 | | | | 9.1 | | Barclays International | | | 25.5 | | | | 24.9 | | | | 25.0 | | Head Officeb,c | | | 6.8 | | | | 2.9 | | | | (1.9 | ) | Barclays Core | | | 41.3 | | | | 37.2 | | | | 32.2 | | BarclaysNon-Core | | | 7.8 | | | | 10.9 | | | | 15.6 | | Barclays Group | | | 49.0 | | | | 48.1 | | | | 47.8 | | | | | | Return on average allocated tangible equity excluding notable itemsa | | | % | | | | % | | | | % | | Barclays UK | | | 19.3% | | | | 21.1% | | | | 18.9% | | Barclays International | | | 8.0% | | | | 9.5% | | | | 7.0% | | Barclays Core | | | 9.4% | | | | 11.2% | | | | 11.2% | | Barclays Group | | | 4.4% | | | | 5.8% | | | | 5.9% | |
Notes a | Refer to pagesi to x and pages 212 to 215 for further information reconciliations and calculations of non-IFRS performance measures included throughout this document. |
b | Includes the Africa Banking discontinued operation. |
c | Excludes the cumulativepost-tax impact of own credit. |
| | | 214 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Non-IFRS performance measures | | | | | | | | | | | | | Earnings per share | | | | | | | | | | | | | | |
| Year ended 31.12.16 £m | | |
| Year ended 31.12.15 £m | | |
| Year ended 31.12.14 £m | | Profit/(loss) attributable to ordinary equity holders of the parenta | | | | | | | | | | | | | Barclays Core | | | 3,461 | | | | 1,778 | | | | 2,191 | | BarclaysNon-Core | | | (1,899) | | | | (2,405) | | | | (2,645) | | Africa Banking discontinued operation | | | 189 | | | | 302 | | | | 334 | | Barclays Groupb | | | 1,751 | | | | (324) | | | | (120) | | | | | | | | | | | | | | | | | | £m | | | | £m | | | | £m | | Basic weighted average number of shares | | | 16,860 | | | | 16,683 | | | | 16,329 | | | | | | | | | | | | | | | Basic earnings per ordinary sharea.b | | | p | | | | p | | | | p | | Barclays Core contribution | | | 20.5 | | | | 10.7 | | | | 13.4 | | BarclaysNon-Core contribution | | | (11.3) | | | | (14.4) | | | | (16.2) | | Barclays Group | | | 10.4 | | | | (1.9) | | | | (0.7) | | | | | | | | | | | | | | | Profit/(loss) attributable to ordinary equity holders of the parent excluding notable itemsa | | | £m | | | | £m | | | | £m | | Barclays Core | | | 3,891 | | | | 4,161 | | | | 3,594 | | BarclaysNon-Core | | | (1,899) | | | | (1,697) | | | | (1,095) | | Africa Banking discontinued operation | | | 189 | | | | 302 | | | | 334 | | | | | | | | | | | | | | | Barclays Groupb | | | 2,182 | | | | 2,766 | | | | 2,834 | | | | | | | | | | | | | | | Basic earnings per ordinary share excluding notable itemsa,b | | | p | | | | p | | | | p | | Barclays Core contribution | | | 23.1 | | | | 24.9 | | | | 22.0 | | BarclaysNon-Core contribution | | | (11.3) | | | | (10.2) | | | | (6.7) | | | | | | | | | | | | | | | Barclays Group | | | 12.9 | | | | 16.6 | | | | 17.3 | | | | | | Tangible net asset value | | | | | | | | | | | | | | |
| Year ended 31.12.16 £m | | |
| Year ended 31.12.15 £m | | |
| Year ended 31.12.14 £m | | Total equity excludingnon-controlling interests | | | 64,873 | | | | 59,810 | | | | 59,567 | | Other equity instruments | | | (6,449) | | | | (5,305) | | | | (4,322) | | Shareholder’s equity excluding non-controlling interests attributable to ordinary shareholders of the parent | | | 58,424 | | | | 54,505 | | | | 55,245 | | Goodwill and intangiblesc | | | (9,245) | | | | (8,222) | | | | (8,180) | | Tangible shareholders’ equity excludingnon-controlling interests attributable to ordinary shareholders of the parent | | | 49,179 | | | | 46,283 | | | | 47,023 | | | | | | | | | | | | | | | | | | £m | | | | £m | | | | £m | | Shares in issue | | | 16,963 | | | | 16,805 | | | | 16,498 | | | | | | | | | | | | | | | | | | p | | | | p | | | | p | | Net asset value per share | | | 344 | | | | 324 | | | | 335 | | Tangible net asset value per share | | | 290 | | | | 275 | | | | 285 | |
Notes a | Profit for the period attributable to ordinary equity holders of the parent includes the tax credit recorded in reserves in respect of interest payments on other equity instruments. The tax credit of £128m (2015: £70m) is allocated to businesses in proportion to the allocation of the payments in relation to the other equity instruments. |
b | Includes the Africa Banking discontinued operation |
c | 2016 includes goodwill and intangibles in relation to Africa Banking of £1,519m. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 215 |
Financial statements Contents
Detailed analysis of our statutory accounts, independently audited and providing in-depth disclosure on the financial performance of the Group. | | | | | | | | Page | | | | Note | | | | | | | | | | Consolidated financial statements | Consolidated financial statements | | | | | Consolidated financial statements | | | Page | | | | Note | | | | | § | | Presentation of information | | | 209 | | | | n/a | | | § | | Presentation of information | | | 217 | | | | n/a | | | | § | | Independent Registered Public Accounting Firm’s report | | | 210 | | | | n/a | | | § | | Independent Registered Public Accounting Firm’s report | | | 218 | | | | n/a | | | | § | | Consolidated income statement | | | 211 | | | | n/a | | | § | | Consolidated income statement | | | 219 | | | | n/a | | | | § | | Consolidated statement of comprehensive income | | | 212 | | | | n/a | | | § | | Consolidated statement of comprehensive income | | | 220 | | | | n/a | | | | § | | Consolidated balance sheet | | | 213 | | | | n/a | | | § | | Consolidated balance sheet | | | 221 | | | | n/a | | | | § | | Consolidated statement of changes in equity | | | 214 | | | | n/a | | | § | | Consolidated statement of changes in equity | | | 222 | | | | n/a | | | | § | | Consolidated cash flow statement | | | 215 | | | | n/a | | | § | | Consolidated cash flow statement | | | 223 | | | | n/a | | | | § | | Parent Company accounts | | | 216 | | | | n/a | | | § | | Parent Company accounts | | | 224 | | | | n/a | | | | § | | Notes to the financial statements | | | 218 | | | | n/a | | | § | | Notes to the financial statements | | | 226 | | | | n/a | | | | § | | Significant accounting policies | | | 218 | | | | 1 | | | § | | Significant accounting policies | | | 226 | | | | 1 | | Notes to the financial statements | Notes to the financial statements | | | | | Notes to the financial statements | | | | | | Performance/return | | § | | Segmental reporting | | | 221 | | | | 2 | | | § | | Segmental reporting | | | 231 | | | | 2 | | | | § | | Net interest income | | | 221 | | | | 3 | | | § | | Net interest income | | | 231 | | | | 3 | | | | § | | Net fee and commission income | | | 222 | | | | 4 | | | § | | Net fee and commission income | | | 232 | | | | 4 | | | | § | | Net trading income | | | 222 | | | | 5 | | | § | | Net trading income | | | 232 | | | | 5 | | | | § | | Net investment income | | | 223 | | | | 6 | | | § | | Net investment income | | | 233 | | | | 6 | | | | § | | Credit impairment charges and other provisions | | | 223 | | | | 7 | | | § | | Credit impairment charges and other provisions | | | 233 | | | | 7 | | | | § | | Operating expenses | | | 225 | | | | 8 | | | § | | Operating expenses | | | 235 | | | | 8 | | | | § | | Profit/(loss) on disposal of subsidiaries, associates and joint ventures | | | 225 | | | | 9 | | | § | | Profit/(loss) on disposal of subsidiaries, associates and joint ventures | | | 235 | | | | 9 | | | | § | | Tax | | | 226 | | | | 10 | | | § | | Tax | | | 236 | | | | 10 | | | | § | | Earnings per share | | | 229 | | | | 11 | | | § | | Earnings per share | | | 240 | | | | 11 | | | | § | | Dividends on ordinary shares | | | 229 | | | | 12 | | | § | | Dividends on ordinary shares | | | 240 | | | | 12 | | | Assets and liabilities held at fair value | | § | | Trading portfolio | | | 230 | | | | 13 | | | Assets and liabilities | | | § | | Trading portfolio | | | 241 | | | | 13 | | held at fair value | | | § | | Financial assets designated at fair value | | | 241 | | | | 14 | | | | § | | Financial assets designated at fair value | | | 230 | | | | 14 | | | § | | Derivative financial instruments | | | 242 | | | | 15 | | | | § | | Derivative financial instruments | | | 231 | | | | 15 | | | § | | Financial investments | | | 245 | | | | 16 | | | | § | | Available for sale financial assets | | | 234 | | | | 16 | | | § | | Financial liabilities designated at fair value | | | 245 | | | | 17 | | | | § | | Financial liabilities designated at fair value | | | 234 | | | | 17 | | | § | | Fair value of financial instruments | | | 246 | | | | 18 | | | | § | | Fair value of assets and liabilities | | | 235 | | | | 18 | | | § | | Offsetting financial assets and financial liabilities | | | 263 | | | | 19 | | | | § | | Offsetting financial assets and financial liabilities | | | 251 | | | | 19 | | | | | Financial instruments held | | § | | Loans and advances to banks and customers | | | 253 | | | | 20 | | | at amortised cost | | § | | Finance leases | | | 253 | | | | 21 | | | Financial instruments | | | § | | Loans and advances to banks and customers | | | 264 | | | | 20 | | held at amortised cost | | | § | | Finance leases | | | 264 | | | | 21 | | | | § | | Reverse repurchase and repurchase agreements including other similar secured lending and borrowing | | | 254 | | | | 22 | | | § | | Reverse repurchase and repurchase agreements including other similar lending and borrowing | | | 265 | | | | 22 | | | Non-current assets and other investments | | § | | Property, plant and equipment | | | 255 | | | | 23 | | | Non-current assets and | | | § | | Property, plant and equipment | | | 266 | | | | 23 | | other investments | | | § | | Goodwill and intangible assets | | | 267 | | | | 24 | | | | § | | Goodwill and intangible assets | | | 256 | | | | 24 | | | § | | Operating leases | | | 269 | | | | 25 | | | | § | | Operating leases | | | 258 | | | | 25 | | | | | Accruals, provisions, contingent liabilities | | § | | Accruals, deferred income and other liabilities | | | 259 | | | | 26 | | | Accruals, provisions, | | | § | | Accruals, deferred income and other liabilities | | | 270 | | | | 26 | | contingent liabilities | | | § | | Provisions | | | 270 | | | | 27 | | and legal proceedings | | § | | Provisions | | | 259 | | | | 27 | | | § | | Contingent liabilities and commitments | | | 272 | | | | 28 | | | | § | | Contingent liabilities and commitments | | | 261 | | | | 28 | | | § | | Legal, competition and regulatory matters | | | 272 | | | | 29 | | | | § | | Legal, competition and regulatory matters | | | 261 | | | | 29 | | | | | Capital instruments, equity and reserves | | § | | Subordinated liabilities | | | 272 | | | | 30 | | | | | § | | Ordinary shares, share premium and other equity | | | 276 | | | | 31 | | | Capital instruments, | | | § | | Subordinated liabilities | | | 281 | | | | 30 | | equity and reserves | | | § | | Ordinary shares, share premium and other equity | | | 284 | | | | 31 | | | | § | | Reserves | | | 277 | | | | 32 | | | § | | Reserves | | | 285 | | | | 32 | | | | § | | Non-controlling interests | | | 277 | | | | 33 | | | § | | Non-controlling interests | | | 285 | | | | 33 | | | Employee benefits | | § | | Share based payments | | | 279 | | | | 34 | | | § | | Share-based payments | | | 287 | | | | 34 | | | | § | | Pensions and post retirement benefits | | | 281 | | | | 35 | | | § | | Pensions and post retirement benefits | | | 288 | | | | 35 | | | Scope of consolidation | | § | | Principal subsidiaries | | | 285 | | | | 36 | | | § | | Principal subsidiaries | | | 294 | | | | 36 | | | | § | | Structured entities | | | 286 | | | | 37 | | | § | | Structured entities | | | 295 | | | | 37 | | | | § | | Investments in associates and joint ventures | | | 291 | | | | 38 | | | § | | Investments in associates and joint ventures | | | 298 | | | | 38 | | | | § | | Securitisations | | | 291 | | | | 39 | | | § | | Securitisations | | | 299 | | | | 39 | | | | § | | Assets pledged | | | 293 | | | | 40 | | | § | | Assets pledged | | | 301 | | | | 40 | | | Other disclosure matters | | § | | Related party transactions and Directors’ remuneration | | | 294 | | | | 41 | | | § | | Related party transactions and Directors’ remuneration | | | 302 | | | | 41 | | | | § | | Auditors’ remuneration | | | 296 | | | | 42 | | | § | | Auditors’ remuneration | | | 304 | | | | 42 | | | | § | | Financial risks, liquidity and capital management | | | 297 | | | | 43 | | | § | | Financial risks, liquidity and capital management | | | 304 | | | | 43 | | | | § | | Non-current assets held for sale and associated liabilities | | | 297 | | | | 44 | | | § | | Assets included in disposal groups held for sale and associated liabilities | | | 305 | | | | 44 | | | | § | | Barclays PLC (the Parent Company) | | | 298 | | | | 45 | | | § | | Barclays PLC (the Parent Company) | | | 307 | | | | 45 | | | | § | | Related undertakings | | | 299 | | | | 46 | | | § | | Related undertakings | | | 308 | | | | 46 | |
| | | 208216 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Presentation of information Barclays’Barclays approach to disclosures
The Group aims to continually enhance its disclosures and their usefulness to the readers of the financial statements in the light of developing market practice and areas of focus. Consequently Barclays’Barclays disclosures go beyond the minimum standards required by accounting standards and other regulatory requirements. Barclays continuescontinue to support the recommendations and guidance made by the Enhanced Disclosure Taskforce (EDTF). The EDTF was formed by the Financial Stability Board with a remit to broaden and deepen the risk disclosures of global banks in a number of areas, including liquidity and funding, credit risk and market risk. Barclays has fully adopted the recommendations across the Annual Report and Pillar 3 Report. In line with the Financial Reporting Council’s guidance on ‘ClearClear and Concise’ reporting, for 2015,Concise reporting. Barclays has focused reporting on material items and sought to reorganise information to aid usersusers’ understanding. It is Barclays’ view that best in class disclosures will continue to evolve in light of ongoing market and stakeholder engagement with the banking sector. Barclays is committed to engaging with a published Code for Financial Reporting Disclosure (the Code). The Code sets out five disclosure principles together with supporting guidance which states 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 |
§ | | clearly differentiate in their annual reports between information that is audited and information that is unaudited. |
British Bankers’ Association (BBA) Code for Financial Reporting Disclosure Barclays has adopted the BBA Code for Financial Reporting Disclosure and has prepared the 20152016 Annual Report and Accounts in compliance with the Code. Statutory accountsAccounts The consolidated accounts of Barclays PLC and its subsidiaries are set out on pages 211219 to 215223 along with the accounts of Barclays PLC itself on pages 216 and 217.224 to 225. The accounting policies on pages 218226 to 220230 and the Notesnotes commencing on page 221231 apply equally to both sets of accounts unless otherwise stated. The financial statements have been prepared on a going concern basis, in accordance with The Companies Act 2006 as applicable to companies using IFRS. On 1 March 2016, Barclays announced its intention to sell down the Group’s interest in BAGL. This sell down is intended to be to a level which will permit deconsolidation from an accounting and regulatory perspective, subject to shareholder and regulatory approvals as required. As the Africa Banking Business meets requirements for presentation as a discontinued operation, these results have been presented as two lines on the face of the Group income statement, representing the profit after tax andnon-controlling interest in respect of the discontinued operation. Capital Requirements Country by CountryCountry-by-Country Reporting HM Treasury has transposed the requirements set out under CRD IV and issued the Capital Requirements Country by CountryCountry-by-Country Reporting Regulations 2013. The legislation requires Barclays PLC to publish additional information in respect of the year ended 31 December 2015.2016. This information is available on the Barclays’Barclays website: home.barclays/ barclays.com/citizenship/reports-and-publications/country-snapshot.html | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 209217 |
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 balance sheets and the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity and consolidated cash flow statements present fairly, in all material respects, the financial position of Barclays PLC and its subsidiaries at 31 December 20152016 and 31 December 2014,2015, and the results of their operations and their cash flows for each of the three years in the period ended 31 December 20152016 in conformity with International Financial Reporting Standards 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 31 December 2015,2016, based on criteria established inInternal Control - Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management 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 report on internal control over financial reporting included in the Directors’ Report appearing on page 40 of the Annual Report to Shareholders. 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 (US). 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, UKUnited Kingdom 2922 February 20162017
| | | 210218 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Consolidated financial statements Consolidated income statement | | | | | | | | | | | | | | | | | For the year ended 31 December | | | Notes | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| Continuing operations | | | | | | | | | | | | | | | | | Interest income | | | 3 | | | | 17,201 | | | | 17,363 | | | | 18,315 | | Interest expense | | | 3 | | | | (4,643 | ) | | | (5,283 | ) | | | (6,715 | ) | Net interest income | | | | | | | 12,558 | | | | 12,080 | | | | 11,600 | | Fee and commission income | | | 4 | | | | 9,655 | | | | 9,836 | | | | 10,479 | | Fee and commission expense | | | 4 | | | | (1,763 | ) | | | (1,662 | ) | | | (1,748 | ) | Net fee and commission income | | | | | | | 7,892 | | | | 8,174 | | | | 8,731 | | Net trading income | | | 5 | | | | 3,623 | | | | 3,331 | | | | 6,553 | | Net investment income | | | 6 | | | | 1,138 | | | | 1,328 | | | | 680 | | Net premiums from insurance contracts | | | | | | | 709 | | | | 669 | | | | 732 | | Other income | | | | | | | 67 | | | | 186 | | | | 148 | | Total income | | | | | | | 25,987 | | | | 25,768 | | | | 28,444 | | Net claims and benefits incurred on insurance contracts | | | | | | | (533 | ) | | | (480 | ) | | | (509 | ) | Total income net of insurance claims | | | | | | | 25,454 | | | | 25,288 | | | | 27,935 | | Credit impairment charges and other provisions | | | 7 | | | | (2,114 | ) | | | (2,168 | ) | | | (3,071 | ) | Net operating income | | | | | | | 23,340 | | | | 23,120 | | | | 24,864 | | Staff costs | | | 8 | | | | (9,960 | ) | | | (11,005 | ) | | | (12,155 | ) | Infrastructure costs | | | 8 | | | | (3,180 | ) | | | (3,443 | ) | | | (3,531 | ) | Administration and general expenses | | | 8 | | | | (3,528 | ) | | | (3,621 | ) | | | (4,113 | ) | Provision for UK customer redress | | | 27 | | | | (2,772 | ) | | | (1,110 | ) | | | (2,000 | ) | Provision for ongoing investigations and litigation including Foreign Exchange | | | 27 | | | | (1,237 | ) | | | (1,250 | ) | | | (173 | ) | Operating expenses | | | 8 | | | | (20,677 | ) | | | (20,429 | ) | | | (21,972 | ) | Share of post-tax results of associates and joint ventures | | | | | | | 47 | | | | 36 | | | | (56 | ) | (Loss)/profit on disposal of subsidiaries, associates and joint ventures | | | 9 | | | | (637 | ) | | | (471 | ) | | | 6 | | Gain on acquisitions | | | | | | | – | | | | – | | | | 26 | | Profit before tax | | | | | | | 2,073 | | | | 2,256 | | | | 2,868 | | Taxation | | | 10 | | | | (1,450 | ) | | | (1,411 | ) | | | (1,571 | ) | Profit after tax | | | | | | | 623 | | | | 845 | | | | 1,297 | | | | | | | Attributable to: | | | | | | | | | | | | | | | | | Equity holders of the parent | | | | | | | (394 | ) | | | (174 | ) | | | 540 | | Other equity holdersa | | | | | | | 345 | | | | 250 | | | | – | | Total equity holders | | | | | | | (49 | ) | | | 76 | | | | 540 | | Non-controlling interests | | | 33 | | | | 672 | | | | 769 | | | | 757 | | Profit after tax | | | | | | | 623 | | | | 845 | | | | 1,297 | | | | | | | | | | | | | | p | | | | p | | | | p | | Earnings per share | | | | | | | | | | | | | | | | | Basic (loss)/earnings per share | | | 11 | | | | (1.9 | ) | | | (0.7 | ) | | | 3.8 | | Diluted (loss)/earnings per share | | | 11 | | | | (1.9 | ) | | | (0.7 | ) | | | 3.7 | |
| | | | | | | | | | | | | | | | | For the year ended 31 December | | | Note | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Continuing operations | | | | | | | | | | | | | | | | | Interest income | | | 3 | | | | 14,541 | | | | 13,953 | | | | 14,194 | | Interest expense | | | 3 | | | | (4,004 | ) | | | (3,345 | ) | | | (4,108 | ) | Net interest income | | | | | | | 10,537 | | | | 10,608 | | | | 10,086 | | Fee and commission income | | | 4 | | | | 8,570 | | | | 8,470 | | | | 8,622 | | Fee and commission expense | | | 4 | | | | (1,802 | ) | | | (1,611 | ) | | | (1,500 | ) | Net fee and commission income | | | | | | | 6,768 | | | | 6,859 | | | | 7,122 | | Net trading income | | | 5 | | | | 2,768 | | | | 3,426 | | | | 3,086 | | Net investment income | | | 6 | | | | 1,324 | | | | 1,097 | | | | 1,309 | | Other income | | | | | | | 54 | | | | 50 | | | | 160 | | Total income | | | | | | | 21,451 | | | | 22,040 | | | | 21,763 | | Credit impairment charges and other provisions | | | 7 | | | | (2,373 | ) | | | (1,762 | ) | | | (1,821 | ) | Net operating income | | | | | | | 19,078 | | | | 20,278 | | | | 19,942 | | Staff costs | | | 8 | | | | (9,423 | ) | | | (8,853 | ) | | | (9,860 | ) | Infrastructure costs | | | 8 | | | | (2,998 | ) | | | (2,691 | ) | | | (2,895 | ) | Administration and general expenses | | | 8 | | | | (2,917 | ) | | | (2,983 | ) | | | (3,069 | ) | Provision for UK customer redress | | | | | | | (1,000 | ) | | | (2,772 | ) | | | (1,110 | ) | Provision for ongoing investigations and litigation relating to Foreign Exchange | | | | | | | – | | | | (1,237 | ) | | | (1,250 | ) | Operating expenses | | | 8 | | | | (16,338 | ) | | | (18,536 | ) | | | (18,184 | ) | Share ofpost-tax results of associates and joint ventures | | | | | | | 70 | | | | 41 | | | | 28 | | Profit/(loss) on disposal of subsidiaries, associates and joint ventures | | | 9 | | | | 420 | | | | (637 | ) | | | (473 | ) | Profit before tax | | | | | | | 3,230 | | | | 1,146 | | | | 1,313 | | Taxation | | | 10 | | | | (993 | ) | | | (1,149 | ) | | | (1,121 | ) | Profit/(loss) after tax in respect of continuing operations | | | | | | | 2,237 | | | | (3 | ) | | | 192 | | Profit after tax in respect of discontinued operation | | | | | | | 591 | | | | 626 | | | | 653 | | Profit after tax | | | | | | | 2,828 | | | | 623 | | | | 845 | | | | | | | Attributable to: | | | | | | | | | | | | | | | | | Equity holders of the parent | | | | | | | 1,623 | | | | (394 | ) | | | (174 | ) | Other equity holdersa | | | | | | | 457 | | | | 345 | | | | 250 | | Total equity holders of the parent | | | | | | | 2,080 | | | | (49 | ) | | | 76 | | Non-controlling interests in respect of continuing operations | | | 33 | | | | 346 | | | | 348 | | | | 449 | | Non-controlling interests in respect of discontinued operation | | | 33 | | | | 402 | | | | 324 | | | | 320 | | Profit after tax | | | | | | | 2,828 | | | | 623 | | | | 845 | | | | | | | Earnings per share | | | | | | | | | | | | | | | | | Basic earnings/(loss) per ordinary share | | | 11 | | | | 10.4 | | | | (1.9 | ) | | | (0.7 | ) | Basic earnings/(loss) per ordinary share in respect of continuing operations | | | | | | | 9.3 | | | | (3.7 | ) | | | (2.7 | ) | Basic earnings per ordinary share in respect of discontinued operation | | | | | | | 1.1 | | | | 1.8 | | | | 2.0 | | Diluted earnings/(loss) per share | | | 11 | | | | 10.3 | | | | (1.9 | ) | | | (0.7 | ) |
Note a | The profit after tax attributable to other equity holders of £345m (2014: £250m)£457m (2015: £345m) is offset by a tax credit recorded in reserves of £70m (2014: £54m)£128m (2015: £70m). The net amount of £275m (2014: £196m)£329m (2015: £275m), along with NCI, is deducted from profit after tax in order to calculate earnings per share. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 211219 |
Consolidated financial statements Consolidated statement of comprehensive income | For the year ended 31 December | | | 2015 £m | | | | 2014 £m | | | | 2013 £m | | |
| 2016 £m | | |
| 2015 £m | | |
| 2014 £m | | Profit after tax | | | 623 | | | | 845 | | | | 1,297 | | | | 2,828 | | | | 623 | | | | 845 | | Other comprehensive (loss)/income from continuing operations: | | | | | | | | Profit/(loss) after tax in respect of continuing operations | | | | 2,237 | | | | (3 | ) | | | 192 | | Profit after tax in respect of discontinued operation | | | | 591 | | | | 626 | | | | 653 | | Other comprehensive income that may be recycled to profit or loss from continuing operations: | | | | | | | | Currency translation reserve | | | | | | | | | | | | | Currency translation differences | | | (476 | ) | | | 486 | | | | (1,767 | ) | | | 3,024 | | | | 748 | | | | 774 | | | Available for sale reserve | | | | | | | | | | | | | Net gains/(losses) from changes in fair value | | | 33 | | | | 5,333 | | | | (2,734 | ) | | Net gains transferred to net profit on disposal | | | (373 | ) | | | (619 | ) | | | (145 | ) | | Net gains from changes in fair value | | | | 2,147 | | | | 64 | | | | 5,339 | | Net losses transferred to net profit on disposal | | | | (912 | ) | | | (374 | ) | | | (619 | ) | Net losses/(gains) transferred to net profit due to impairment | | | 17 | | | | (31 | ) | | | (7 | ) | | | 20 | | | | 17 | | | | (31 | ) | Net (gains)/losses transferred to net profit due to fair value hedging | | | (148 | ) | | | (4,074 | ) | | | 2,376 | | | Net (gains) transferred to net profit due to fair value hedging | | | | (1,677 | ) | | | (148 | ) | | | (4,074 | ) | Changes in insurance liabilities | | | 86 | | | | (94 | ) | | | 28 | | | | 53 | | | | 86 | | | | (94 | ) | Tax | | | 134 | | | | (102 | ) | | | 100 | | | | (18 | ) | | | 126 | | | | (103 | ) | Cash flow hedging reserve | | | | | | | | | | | | | Net (losses)/gains from changes in fair value | | | (407 | ) | | | 2,687 | | | | (1,914 | ) | | Net gains transferred to net profit | | | (268 | ) | | | (767 | ) | | | (547 | ) | | Net gains/(losses) from changes in fair value | | | | 1,455 | | | | (312 | ) | | | 2,650 | | Net losses transferred to net profit | | | | (365 | ) | | | (238 | ) | | | (713 | ) | Tax | | | 81 | | | | (380 | ) | | | 571 | | | | (292 | ) | | | 57 | | | | (384 | ) | Other | | | 21 | | | | (42 | ) | | | (37 | ) | | | 13 | | | | 20 | | | | (42 | ) | Total comprehensive (loss)/income that may be recycled to profit or loss | | | (1,300 | ) | | | 2,397 | | | | (4,076 | ) | | Other comprehensive income that may be recycled to profit or loss | | | | 3,448 | | | | 46 | | | | 2,703 | | | Other comprehensive income/(loss) not recycled to profit or loss: | | | | | | | | Other comprehensive (loss)/income not recycled to profit or loss: | | | | | | | | Retirement benefit remeasurements | | | 1,174 | | | | 268 | | | | (512 | ) | | | (1,309 | ) | | | 1,176 | | | | 268 | | Tax | | | (260 | ) | | | (63 | ) | | | (3 | ) | | | 329 | | | | (260 | ) | | | (63 | ) | Other comprehensive (loss)/income for the period | | | (386 | ) | | | 2,602 | | | | (4,591 | ) | | Total comprehensive income/(loss) for the year | | | 237 | | | | 3,447 | | | | (3,294 | ) | | Other comprehensive income for the period | | | | 2,468 | | | | 962 | | | | 2,908 | | Total comprehensive income for the year, net of tax from continuing operations | | | | 4,705 | | | | 959 | | | | 3,100 | | Total comprehensive income/(loss) for the year, net of tax from discontinued operation | | | | 2,111 | | | | (722 | ) | | | 346 | | Total comprehensive income for the year | | | | 6,816 | | | | 237 | | | | 3,446 | | | Attributable to: | | | | | | | | | | | | | Equity holders of the parent | | | 45 | | | | 2,756 | | | | (3,406 | ) | | | 5,233 | | | | 45 | | | | 2,755 | | Non-controlling interests | | | 192 | | | | 691 | | | | 112 | | | | 1,583 | | | | 192 | | | | 691 | | | | | 237 | | | | 3,447 | | | | (3,294 | ) | | Total comprehensive income for the year | | | | 6,816 | | | | 237 | | | | 3,446 | |
| | | 212220 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Consolidated financial statements Consolidated balance sheet | As at 31 December | | | Notes | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| | | Notes | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Assets | | | | | | | | | | | | | | | | | Cash and balances at central banks | | | | | 49,711 | | | | 39,695 | | | | 45,687 | | | | | | 102,353 | | | | 49,711 | | | | 39,695 | | Items in the course of collection from other banks | | | | | 1,011 | | | | 1,210 | | | | 1,282 | | | | | | 1,467 | | | | 1,011 | | | | 1,210 | | Trading portfolio assets | | | 13 | | | | 77,348 | | | | 114,717 | | | | 133,069 | | | | 13 | | | | 80,240 | | | | 77,348 | | | | 114,717 | | Financial assets designated at fair value | | | 14 | | | | 76,830 | | | | 38,300 | | | | 38,968 | | | | 14 | | | | 78,608 | | | | 76,830 | | | | 38,300 | | Derivative financial instruments | | | 15 | | | | 327,709 | | | | 439,909 | | | | 350,300 | | | | 15 | | | | 346,626 | | | | 327,709 | | | | 439,909 | | Available for sale investments | | | 16 | | | | 90,267 | | | | 86,066 | | | | 91,756 | | | Financial investments | | | | 16 | | | | 63,317 | | | | 90,267 | | | | 86,066 | | Loans and advances to banks | | | 20 | | | | 41,349 | | | | 42,111 | | | | 39,422 | | | | 20 | | | | 43,251 | | | | 41,349 | | | | 42,111 | | Loans and advances to customers | | | 20 | | | | 399,217 | | | | 427,767 | | | | 434,237 | | | | 20 | | | | 392,784 | | | | 399,217 | | | | 427,767 | | Reverse repurchase agreements and other similar secured lending | | | 22 | | | | 28,187 | | | | 131,753 | | | | 186,779 | | | | 22 | | | | 13,454 | | | | 28,187 | | | | 131,753 | | Prepayments, accrued income and other assets | | | | | 3,010 | | | | 3,607 | | | | 3,920 | | | | | | 2,893 | | | | 3,010 | | | | 3,607 | | Investments in associates and joint ventures | | | 38 | | | | 573 | | | | 711 | | | | 653 | | | | 38 | | | | 684 | | | | 573 | | | | 711 | | Property, plant and equipment | | | 23 | | | | 3,468 | | | | 3,786 | | | | 4,216 | | | | 23 | | | | 2,825 | | | | 3,468 | | | | 3,786 | | Goodwill and intangible assets | | | 24 | | | | 8,222 | | | | 8,180 | | | | 7,685 | | | | 24 | | | | 7,726 | | | | 8,222 | | | | 8,180 | | Current tax assets | | | 10 | | | | 415 | | | | 334 | | | | 219 | | | | 10 | | | | 561 | | | | 415 | | | | 334 | | Deferred tax assets | | | 10 | | | | 4,495 | | | | 4,130 | | | | 4,807 | | | | 10 | | | | 4,869 | | | | 4,495 | | | | 4,130 | | Retirement benefit assets | | | 35 | | | | 836 | | | | 56 | | | | 133 | | | | 35 | | | | 14 | | | | 836 | | | | 56 | | Non current assets classified as held for sale | | | 44 | | | | 7,364 | | | | 15,574 | | | | 495 | | | Assets included in disposal groups classified as held for sale | | | | 44 | | | | 71,454 | | | | 7,364 | | | | 15,574 | | Total assets | | | | | 1,120,012 | | | | 1,357,906 | | | | 1,343,628 | | | | | | 1,213,126 | | | | 1,120,012 | | | | 1,357,906 | | Liabilities | | | | | | | | | | | | | | | | | Deposits from banks | | | | | 47,080 | | | | 58,390 | | | | 55,615 | | | | | | 48,214 | | | | 47,080 | | | | 58,390 | | Items in the course of collection due to other banks | | | | | 1,013 | | | | 1,177 | | | | 1,359 | | | | | | 636 | | | | 1,013 | | | | 1,177 | | Customer accounts | | | | | 418,242 | | | | 427,704 | | | | 431,998 | | | | | | 423,178 | | | | 418,242 | | | | 427,704 | | Repurchase agreements and other similar secured borrowing | | | 22 | | | | 25,035 | | | | 124,479 | | | | 196,748 | | | | 22 | | | | 19,760 | | | | 25,035 | | | | 124,479 | | Trading portfolio liabilities | | | 13 | | | | 33,967 | | | | 45,124 | | | | 53,464 | | | | 13 | | | | 34,687 | | | | 33,967 | | | | 45,124 | | Financial liabilities designated at fair value | | | 17 | | | | 91,745 | | | | 56,972 | | | | 64,796 | | | | 17 | | | | 96,031 | | | | 91,745 | | | | 56,972 | | Derivative financial instruments | | | 15 | | | | 324,252 | | | | 439,320 | | | | 347,118 | | | | 15 | | | | 340,487 | | | | 324,252 | | | | 439,320 | | Debt securities in issue | | | | | 69,150 | | | | 86,099 | | | | 86,693 | | | | | | 75,932 | | | | 69,150 | | | | 86,099 | | Subordinated liabilities | | | 30 | | | | 21,467 | | | | 21,153 | | | | 21,695 | | | | 30 | | | | 23,383 | | | | 21,467 | | | | 21,153 | | Accruals, deferred income and other liabilities | | | 26 | | | | 10,610 | | | | 11,423 | | | | 12,934 | | | | 26 | | | | 8,871 | | | | 10,610 | | | | 11,423 | | Provisions | | | 27 | | | | 4,142 | | | | 4,135 | | | | 3,886 | | | | 27 | | | | 4,134 | | | | 4,142 | | | | 4,135 | | Current tax liabilities | | | 10 | | | | 903 | | | | 1,021 | | | | 1,042 | | | | 10 | | | | 737 | | | | 903 | | | | 1,021 | | Deferred tax liabilities | | | 10 | | | | 122 | | | | 262 | | | | 373 | | | | 10 | | | | 29 | | | | 122 | | | | 262 | | Retirement benefit liabilities | | | 35 | | | | 423 | | | | 1,574 | | | | 1,958 | | | | 35 | | | | 390 | | | | 423 | | | | 1,574 | | Liabilities included in disposal groups classified as held for sale | | | 44 | | | | 5,997 | | | | 13,115 | | | | – | | | | 44 | | | | 65,292 | | | | 5,997 | | | | 13,115 | | Total liabilities | | | | | 1,054,148 | | | | 1,291,948 | | | | 1,279,679 | | | | | | 1,141,761 | | | | 1,054,148 | | | | 1,291,948 | | | Total equity | | | | | | | | | | | | | | | | | Called up share capital and share premium | | | 31 | | | | 21,586 | | | | 20,809 | | | | 19,887 | | | | 31 | | | | 21,842 | | | | 21,586 | | | | 20,809 | | Other equity instruments | | | 31 | | | | 5,305 | | | | 4,322 | | | | 2,063 | | | | 31 | | | | 6,449 | | | | 5,305 | | | | 4,322 | | Other reserves | | | 32 | | | | 1,898 | | | | 2,724 | | | | 249 | | | | 32 | | | | 6,051 | | | | 1,898 | | | | 2,724 | | Retained earnings | | | | | 31,021 | | | | 31,712 | | | | 33,186 | | | | | | 30,531 | | | | 31,021 | | | | 31,712 | | Total equity excluding non-controlling interests | | | | | 59,810 | | | | 59,567 | | | | 55,385 | | | | | | 64,873 | | | | 59,810 | | | | 59,567 | | Non-controlling interests | | | 33 | | | | 6,054 | | | | 6,391 | | | | 8,564 | | | | 33 | | | | 6,492 | | | | 6,054 | | | | 6,391 | | Total equity | | | | | 65,864 | | | | 65,958 | | | | 63,949 | | | | | | 71,365 | | | | 65,864 | | | | 65,958 | | Total liabilities and equity | | | | | 1,120,012 | | | | 1,357,906 | | | | 1,343,628 | | | | | | 1,213,126 | | | | 1,120,012 | | | | 1,357,906 | |
The Board of Directors approved the financial statements on pages 211219 to 305316 on 2922 February 2016.2017. John McFarlane Group Chairman JesJames E Staley
Group Chief Executive Tushar Morzaria Group Finance Director | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 213221 |
Consolidated financial statements Consolidated statement of changes in equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Called up
share capital and share premium £m |
| |
| Other equity
instruments £m |
| |
| Available
for sale reserve £m |
| |
| Cash
flow hedging reserve £m |
| |
| Currency
translation reserve £m |
| |
| Other
reserves and treasury shares £m |
| |
| Retained
earnings £m |
| |
| Total
equity excluding non- controlling interests £m |
| |
| Non-
controlling interests £m |
| |
| Total
equity £m |
| Balance as at 1 January 2015 | | | 20,809 | | | | 4,322 | | | | 562 | | | | 1,817 | | | | (582 | ) | | | 927 | | | | 31,712 | | | | 59,567 | | | | 6,391 | | | | 65,958 | | Profit after tax | | | – | | | | 345 | | | | – | | | | – | | | | – | | | | – | | | | (394 | ) | | | (49 | ) | | | 672 | | | | 623 | | Currency translation movements | | | – | | | | – | | | | – | | | | – | | | | (41 | ) | | | – | | | | – | | | | (41 | ) | | | (435 | ) | | | (476 | ) | Available for sale investments | | | – | | | | – | | | | (245 | ) | | | – | | | | – | | | | – | | | | – | | | | (245 | ) | | | (6 | ) | | | (251 | ) | Cash flow hedges | | | – | | | | – | | | | – | | | | (556 | ) | | | – | | | | – | | | | – | | | | (556 | ) | | | (38 | ) | | | (594 | ) | Pension remeasurement | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 916 | | | | 916 | | | | (2 | ) | | | 914 | | Other | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 20 | | | | 20 | | | | 1 | | | | 21 | | Total comprehensive (loss)/income for the year | | | – | | | | 345 | | | | (245 | ) | | | (556 | ) | | | (41 | ) | | | – | | | | 542 | | | | 45 | | | | 192 | | | | 237 | | Issue of new ordinary shares | | | 137 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 137 | | | | – | | | | 137 | | Issue of shares under employee share schemes | | | 640 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 571 | | | | 1,211 | | | | – | | | | 1,211 | | Issue and exchange of other equity instruments | | | – | | | | 995 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 995 | | | | – | | | | 995 | | Other equity instruments coupons paid | | | – | | | | (345 | ) | | | – | | | | – | | | | – | | | | – | | | | 70 | | | | (275 | ) | | | – | | | | (275 | ) | Redemption of preference shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Increase in treasury shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | (602 | ) | | | – | | | | (602 | ) | | | – | | | | (602 | ) | Vesting of shares under employee share schemes | | | – | | | | – | | | | – | | | | – | | | | – | | | | 618 | | | | (755 | ) | | | (137 | ) | | | – | | | | (137 | ) | Dividends paid | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (1,081 | ) | | | (1,081 | ) | | | (552 | ) | | | (1,633 | ) | Other reserve movements | | | – | | | | (12 | ) | | | – | | | | – | | | | – | | | | – | | | | (38 | ) | | | (50 | ) | | | 23 | | | | (27 | ) | Balance as at 31 December 2015 | | | 21,586 | | | | 5,305 | | | | 317 | | | | 1,261 | | | | (623 | ) | | | 943 | | | | 31,021 | | | | 59,810 | | | | 6,054 | | | | 65,864 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 1 January 2014 | | | 19,887 | | | | 2,063 | | | | 148 | | | | 273 | | | | (1,142 | ) | | | 970 | | | | 33,186 | | | | 55,385 | | | | 8,564 | | | | 63,949 | | Profit after tax | | | – | | | | 250 | | | | – | | | | – | | | | – | | | | – | | | | (174 | ) | | | 76 | | | | 769 | | | | 845 | | Currency translation movements | | | – | | | | – | | | | – | | | | – | | | | 560 | | | | – | | | | – | | | | 560 | | | | (74 | ) | | | 486 | | Available for sale investments | | | – | | | | – | | | | 414 | | | | – | | | | – | | | | – | | | | – | | | | 414 | | | | (1 | ) | | | 413 | | Cash flow hedges | | | – | | | | – | | | | – | | | | 1,544 | | | | – | | | | – | | | | – | | | | 1,544 | | | | (4 | ) | | | 1,540 | | Pension remeasurement | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 205 | | | | 205 | | | | – | | | | 205 | | Other | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (43 | ) | | | (43 | ) | | | 1 | | | | (42 | ) | Total comprehensive (loss)/income for the year | | | – | | | | 250 | | | | 414 | | | | 1,544 | | | | 560 | | | | – | | | | (12 | ) | | | 2,756 | | | | 691 | | | | 3,447 | | Issue of new ordinary shares | | | 150 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 150 | | | | – | | | | 150 | | Issue of shares under employee share schemes | | | 772 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 693 | | | | 1,465 | | | | – | | | | 1,465 | | Issue and exchange of other equity instruments | | | – | | | | 2,263 | | | | – | | | | – | | | | – | | | | – | | | | (155 | ) | | | 2,108 | | | | (1,527 | ) | | | 581 | | Other equity instruments coupons paid | | | – | | | | (250 | ) | | | – | | | | – | | | | – | | | | – | | | | 54 | | | | (196 | ) | | | – | | | | (196 | ) | Redemption of preference shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (104 | ) | | | (104 | ) | | | (687 | ) | | | (791 | ) | Increase in treasury shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | (909 | ) | | | – | | | | (909 | ) | | | – | | | | (909 | ) | Vesting of shares under employee share schemes | | | – | | | | – | | | | – | | | | – | | | | – | | | | 866 | | | | (866 | ) | | | – | | | | – | | | | – | | Dividends paid | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (1,057 | ) | | | (1,057 | ) | | | (631 | ) | | | (1,688 | ) | Other reserve movements | | | – | | | | (4 | ) | | | – | | | | – | | | | – | | | | – | | | | (27 | ) | | | (31 | ) | | | (19 | ) | | | (50 | ) | Balance as at 31 December 2014 | | | 20,809 | | | | 4,322 | | | | 562 | | | | 1,817 | | | | (582 | ) | | | 927 | | | | 31,712 | | | | 59,567 | | | | 6,391 | | | | 65,958 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 1 January 2013 | | | 12,477 | | | | – | | | | 527 | | | | 2,099 | | | | 59 | | | | 989 | | | | 34,464 | | | | 50,615 | | | | 9,371 | | | | 59,986 | | Profit after tax | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 540 | | | | 540 | | | | 757 | | | | 1,297 | | Currency translation movements | | | – | | | | – | | | | – | | | | – | | | | (1,201 | ) | | | – | | | | – | | | | (1,201 | ) | | | (566 | ) | | | (1,767 | ) | Available for sale investments | | | – | | | | – | | | | (379 | ) | | | – | | | | – | | | | – | | | | – | | | | (379 | ) | | | (3 | ) | | | (382 | ) | Cash flow hedges | | | – | | | | – | | | | – | | | | (1,826 | ) | | | – | | | | – | | | | – | | | | (1,826 | ) | | | (64 | ) | | | (1,890 | ) | Pension remeasurement | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (503 | ) | | | (503 | ) | | | (12 | ) | | | (515 | ) | Other | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (37 | ) | | | (37 | ) | | | – | | | | (37 | ) | Total comprehensive (loss)/income for the year | | | – | | | | – | | | | (379 | ) | | | (1,826 | ) | | | (1,201 | ) | | | – | | | | – | | | | (3,406 | ) | | | 112 | | | | (3,294 | ) | Issue of new ordinary shares | | | 6,620 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 6,620 | | | | – | | | | 6,620 | | Issue of shares under employee share schemes | | | 790 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 689 | | | | 1,479 | | | | – | | | | 1,479 | | Issue and exchange of other equity instruments | | | – | | | | 2,063 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 2,063 | | | | – | | | | 2,063 | | Other equity instruments coupons paid | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Redemption of preference shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Increase in treasury shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | (1,066 | ) | | | – | | | | (1,066 | ) | | | – | | | | (1,066 | ) | Vesting of shares under employee share schemes | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,047 | | | | (1,047 | ) | | | – | | | | – | | | | – | | Dividends paid | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (859 | ) | | | (859 | ) | | | (813 | ) | | | (1,672 | ) | Other reserve movements | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (61 | ) | | | (61 | ) | | | (106 | ) | | | (167 | ) | Balance as at 31 December 2013 | | | 19,887 | | | | 2,063 | | | | 148 | | | | 273 | | | | (1,142 | ) | | | 970 | | | | 33,186 | | | | 55,385 | | | | 8,564 | | | | 63,949 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Called up
share capital and share premium £m |
| |
| Other equity instruments £m | | |
| Available
for sale reserve £m |
| |
| Cash
flow hedging reserve £m |
| |
| Currency
translation reserve £m |
| |
| Other
reserves and treasury shares £m |
| |
| Retained
earnings £m |
| |
| Total
equity excluding non- controlling interests £m |
| |
| Non-
controlling interests £m |
| |
| Total
equity £m |
| Balance as at 1 January 2016 | | | 21,586 | | | | 5,305 | | | | 317 | | | | 1,261 | | | | (623 | ) | | | 943 | | | | 31,021 | | | | 59,810 | | | | 6,054 | | | | 65,864 | | Profit after tax | | | – | | | | 457 | | | | – | | | | – | | | | – | | | | – | | | | 1,434 | | | | 1,891 | | | | 346 | | | | 2,237 | | Currency translation movements | | | – | | | | – | | | | – | | | | – | | | | 3,022 | | | | – | | | | – | | | | 3,022 | | | | 2 | | | | 3,024 | | Available for sale investments | | | – | | | | – | | | | (387 | ) | | | – | | | | – | | | | – | | | | – | | | | (387 | ) | | | – | | | | (387 | ) | Cash flow hedges | | | – | | | | – | | | | – | | | | 798 | | | | – | | | | – | | | | – | | | | 798 | | | | – | | | | 798 | | Pension remeasurement | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (980 | ) | | | (980 | ) | | | – | | | | (980 | ) | Other | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 12 | | | | 12 | | | | 1 | | | | 13 | | Total comprehensive income net of tax from continuing operations | | | – | | | | 457 | | | | (387 | ) | | | 798 | | | | 3,022 | | | | – | | | | 466 | | | | 4,356 | | | | 349 | | | | 4,705 | | Total comprehensive income net of tax from discontinued operation | | | – | | | | – | | | | (4 | ) | | | 46 | | | | 652 | | | | – | | | | 183 | | | | 877 | | | | 1,234 | | | | 2,111 | | Total comprehensive (loss)/income for the year | | | – | | | | 457 | | | | (391 | ) | | | 844 | | | | 3,674 | | | | – | | | | 649 | | | | 5,233 | | | | 1,583 | | | | 6,816 | | Issue of new ordinary shares | | | 68 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 68 | | | | – | | | | 68 | | Issue of shares under employee share schemes | | | 188 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 668 | | | | 856 | | | | – | | | | 856 | | Issue and exchange of other equity instruments | | | – | | | | 1,132 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,132 | | | | – | | | | 1,132 | | Other equity instruments coupons paid | | | – | | | | (457 | ) | | | – | | | | – | | | | – | | | | – | | | | 128 | | | | (329 | ) | | | – | | | | (329 | ) | Redemption of preference shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (417 | ) | | | (417 | ) | | | (1,170 | ) | | | (1,587 | ) | Increase in treasury shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | (140 | ) | | | – | | | | (140 | ) | | | – | | | | (140 | ) | Vesting of shares under employee share schemes | | | – | | | | – | | | | – | | | | – | | | | – | | | | 166 | | | | (415 | ) | | | (249 | ) | | | – | | | | (249 | ) | Dividends paid | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (757 | ) | | | (757 | ) | | | (575 | ) | | | (1,332 | ) | Net equity impact of partial BAGL disposal | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (349 | ) | | | (349 | ) | | | 601 | | | | 252 | | Other reserve movements | | | – | | | | 12 | | | | – | | | | – | | | | – | | | | – | | | | 3 | | | | 15 | | | | (1 | ) | | | 14 | | Balance as at 31 December 2016 | | | 21,842 | | | | 6,449 | | | | (74 | ) | | | 2,105 | | | | 3,051 | | | | 969 | | | | 30,531 | | | | 64,873 | | | | 6,492 | | | | 71,365 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 1 January 2015 | | | 20,809 | | | | 4,322 | | | | 562 | | | | 1,817 | | | | (582 | ) | | | 927 | | | | 31,712 | | | | 59,567 | | | | 6,391 | | | | 65,958 | | Profit after tax | | | – | | | | 345 | | | | – | | | | – | | | | – | | | | – | | | | (696 | ) | | | (351 | ) | | | 348 | | | | (3 | ) | Currency translation movements | | | – | | | | – | | | | – | | | | – | | | | 747 | | | | – | | | | – | | | | 747 | | | | 1 | | | | 748 | | Available for sale investments | | | – | | | | – | | | | (229 | ) | | | – | | | | – | | | | – | | | | – | | | | (229 | ) | | | – | | | | (229 | ) | Cash flow hedges | | | – | | | | – | | | | – | | | | (493 | ) | | | – | | | | – | | | | – | | | | (493 | ) | | | – | | | | (493 | ) | Pension remeasurement | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 916 | | | | 916 | | | | – | | | | 916 | | Other | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 20 | | | | 20 | | | | – | | | | 20 | | Total comprehensive income net of tax from continuing operations | | | – | | | | 345 | | | | (229 | ) | | | (493 | ) | | | 747 | | | | – | | | | 240 | | | | 610 | | | | 349 | | | | 959 | | Total comprehensive income net of tax from discontinued operation | | | – | | | | – | | | | (16 | ) | | | (63 | ) | | | (788 | ) | | | – | | | | 302 | | | | (565 | ) | | | (157 | ) | | | (722 | ) | Total comprehensive (loss)/income for the year | | | – | | | | 345 | | | | (245 | ) | | | (556 | ) | | | (41 | ) | | | – | | | | 542 | | | | 45 | | | | 192 | | | | 237 | | Issue of new ordinary shares | | | 137 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 137 | | | | – | | | | 137 | | Issue of shares under employee share schemes | | | 640 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 571 | | | | 1,211 | | | | – | | | | 1,211 | | Issue and exchange of other equity instruments | | | – | | | | 995 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 995 | | | | – | | | | 995 | | Other equity instruments coupons paid | | | – | | | | (345 | ) | | | – | | | | – | | | | – | | | | – | | | | 70 | | | | (275 | ) | | | – | | | | (275 | ) | Redemption of preference shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Increase in treasury shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | (602 | ) | | | – | | | | (602 | ) | | | – | | | | (602 | ) | Vesting of shares under employee share schemes | | | – | | | | – | | | | – | | | | – | | | | – | | | | 618 | | | | (755 | ) | | | (137 | ) | | | – | | | | (137 | ) | Dividends paid | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (1,081 | ) | | | (1,081 | ) | | | (552 | ) | | | (1,633 | ) | Other reserve movements | | | – | | | | (12 | ) | | | – | | | | – | | | | – | | | | – | | | | (38 | ) | | | (50 | ) | | | 23 | | | | (27 | ) | Balance as at 31 December 2015 | | | 21,586 | | | | 5,305 | | | | 317 | | | | 1,261 | | | | (623 | ) | | | 943 | | | | 31,021 | | | | 59,810 | | | | 6,054 | | | | 65,864 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as at 1 January 2014 | | | 19,887 | | | | 2,063 | | | | 148 | | | | 273 | | | | (1,142 | ) | | | 970 | | | | 33,186 | | | | 55,385 | | | | 8,564 | | | | 63,949 | | Profit after tax | | | – | | | | 250 | | | | – | | | | – | | | | – | | | | – | | | | (507 | ) | | | (257 | ) | | | 449 | | | | 192 | | Currency translation movements | | | – | | | | – | | | | – | | | | – | | | | 773 | | | | – | | | | – | | | | 773 | | | | 1 | | | | 774 | | Available for sale investments | | | – | | | | – | | | | 418 | | | | – | | | | – | | | | – | | | | – | | | | 418 | | | | – | | | | 418 | | Cash flow hedges | | | – | | | | – | | | | – | | | | 1,554 | | | | – | | | | – | | | | – | | | | 1,554 | | | | – | | | | 1,554 | | Pension remeasurement | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 205 | | | | 205 | | | | – | | | | 205 | | Other | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (43 | ) | | | (43 | ) | | | 1 | | | | (42 | ) | Total comprehensive income net of tax from continuing operations | | | – | | | | 250 | | | | 418 | | | | 1,554 | | | | 773 | | | | – | | | | (345 | ) | | | 2,650 | | | | 451 | | | | 3,101 | | Total comprehensive income net of tax from discontinued operation | | | – | | | | – | | | | (4 | ) | | | (10 | ) | | | (213 | ) | | | – | | | | 333 | | | | 106 | | | | 240 | | | | 346 | | Total comprehensive (loss)/income for the year | | | – | | | | 250 | | | | 414 | | | | 1,544 | | | | 560 | | | | – | | | | (12 | ) | | | 2,756 | | | | 691 | | | | 3,447 | | Issue of new ordinary shares | | | 150 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 150 | | | | – | | | | 150 | | Issue of shares under employee share schemes | | | 772 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 693 | | | | 1,465 | | | | – | | | | 1,465 | | Issue and exchange of other equity instruments | | | – | | | | 2,263 | | | | – | | | | – | | | | – | | | | – | | | | (155 | ) | | | 2,108 | | | | (1,527 | ) | | | 581 | | Other equity instruments coupons paid | | | – | | | | (250 | ) | | | – | | | | – | | | | – | | | | – | | | | 54 | | | | (196 | ) | | | – | | | | (196 | ) | Redemption of preference shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (104 | ) | | | (104 | ) | | | (687 | ) | | | (791 | ) | Increase in treasury shares | | | – | | | | – | | | | – | | | | – | | | | – | | | | (909 | ) | | | – | | | | (909 | ) | | | – | | | | (909 | ) | Vesting of shares under employee share schemes | | | – | | | | – | | | | – | | | | – | | | | – | | | | 866 | | | | (866 | ) | | | – | | | | – | | | | – | | Dividends paid | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (1,057 | ) | | | (1,057 | ) | | | (631 | ) | | | (1,688 | ) | Other reserve movements | | | – | | | | (4 | ) | | | – | | | | – | | | | – | | | | – | | | | (27 | ) | | | (31 | ) | | | (19 | ) | | | (50 | ) | Balance as at 31 December 2014 | | | 20,809 | | | | 4,322 | | | | 562 | | | | 1,817 | | | | (582 | ) | | | 927 | | | | 31,712 | | | | 59,567 | | | | 6,391 | | | | 65,958 | |
| | | 214222 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Consolidated financial statements Consolidated cash flow statement | For the year ended 31 December | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Continuing operations | | | | | | | | | | | | | Reconciliation of profit before tax to net cash flows from operating activities: | | | | | | | | | | | | | Profit before tax | | | 2,073 | | | | 2,256 | | | | 2,868 | | | | 3,230 | | | | 1,146 | | | | 1,312 | | Adjustment for non-cash items: | | | | | | | | | | | | | Allowance for impairment | | | 2,105 | | | | 2,168 | | | | 3,071 | | | | 2,357 | | | | 1,752 | | | | 1,816 | | Depreciation, amortisation and impairment of property, plant, equipment and intangibles | | | 1,324 | | | | 1,279 | | | | 1,274 | | | | 1,261 | | | | 1,215 | | | | 1,108 | | Other provisions, including pensions | | | 4,333 | | | | 3,600 | | | | 3,674 | | | | 1,964 | | | | 4,241 | | | | 3,487 | | Net loss on disposal of investments and property, plant and equipment | | | (374 | ) | | | (619 | ) | | | (145 | ) | | Other non-cash movements | | | (635 | ) | | | (808 | ) | | | (1,293 | ) | | Net profit on disposal of investments and property, plant and equipment | | | | (912 | ) | | | (374 | ) | | | (619 | ) | Othernon-cash movements including exchange rate movements | | | | (20,025 | ) | | | 226 | | | | (595 | ) | Changes in operating assets and liabilities | | | | | | | | | | | | | Net decrease/(increase) in loans and advances to banks and customers | | | 27,565 | | | | 3,684 | | | | (3,915 | ) | | Net decrease/(increase) in reverse repurchase agreements and other similar secured lending | | | 103,566 | | | | 55,021 | | | | (10,264 | ) | | Net (decrease) in deposits and debt securities in issue | | | (37,721 | ) | | | (2,113 | ) | | | (13,392 | ) | | Net (decrease) in repurchase agreements and other similar secured borrowing | | | (99,444 | ) | | | (72,269 | ) | | | (20,430 | ) | | Net (increase)/decrease in loans and advances to banks and customers | | | | (25,385 | ) | | | 22,641 | | | | 4,079 | | Net decrease in reverse repurchase agreements and other similar lending | | | | 14,733 | | | | 103,471 | | | | 54,380 | | Net increase/(decrease) in deposits and debt securities in issue | | | | 49,064 | | | | (33,120 | ) | | | (2,319 | ) | Net (decrease) in repurchase agreements and other similar borrowing | | | | (4,852 | ) | | | (99,602 | ) | | | (72,107 | ) | Net (increase)/decrease in derivative financial instruments | | | (2,868 | ) | | | 2,593 | | | | 971 | | | | (2,318 | ) | | | (3,315 | ) | | | 2,961 | | Net decrease in trading assets | | | 37,342 | | | | 18,368 | | | | 13,443 | | | Net (decrease)/increase in trading liabilities | | | (11,157 | ) | | | (8,340 | ) | | | 8,670 | | | Net (increase) in financial investments | | | (3,757 | ) | | | (7,156 | ) | | | (6,114 | ) | | Net (increase)/decrease in other assets | | | (2,324 | ) | | | (14,694 | ) | | | 128 | | | Net (decrease)/increase in other liabilities | | | (2,230 | ) | | | 8,141 | | | | (1,930 | ) | | Net (increase)/decrease in trading assets | | | | (5,577 | ) | | | 37,091 | | | | 18,651 | | Net increase/(decrease) in trading liabilities | | | | 880 | | | | (10,877 | ) | | | (8,565 | ) | Net decrease/(increase) in financial investments | | | | 807 | | | | (3,064 | ) | | | (5,882 | ) | Net (increase) in other assets | | | | (2,629 | ) | | | (2,661 | ) | | | (14,642 | ) | Net (increase)/decrease in other liabilities | | | | (532 | ) | | | (1,766 | ) | | | 8,092 | | Corporate income tax paid | | | (1,670 | ) | | | (1,552 | ) | | | (1,558 | ) | | | (780 | ) | | | (1,670 | ) | | | (1,552 | ) | Net cash from operating activities | | | 16,128 | | | | (10,441 | ) | | | (24,942 | ) | | | 11,286 | | | | 15,334 | | | | (10,395 | ) | Purchase of available for sale investments | | | (120,251 | ) | | | (108,645 | ) | | | (92,015 | ) | | | (65,086 | ) | | | (120,061 | ) | | | (109,296 | ) | Proceeds from sale or redemption of available for sale investments | | | 113,048 | | | | 120,843 | | | | 69,473 | | | | 102,515 | | | | 114,529 | | | | 119,129 | | Purchase of property, plant and equipment | | | (852 | ) | | | (657 | ) | | | (736 | ) | | Purchase of property, plant and equipment and intangibles | | | | (1,707 | ) | | | (1,928 | ) | | | (691 | ) | Proceeds from sale of property, plant and equipment and intangibles | | | | 358 | | | | 393 | | | | 335 | | Proceeds from part disposal of investment in BAGL | | | | 595 | | | | – | | | | – | | Other cash flows associated with investing activities | | | (379 | ) | | | (886 | ) | | | 633 | | | | 32 | | | | 516 | | | | (48 | ) | Net cash from investing activities | | | (8,434 | ) | | | 10,655 | | | | (22,645 | ) | | | 36,707 | | | | (6,551 | ) | | | 8,429 | | Dividends paid | | | (1,496 | ) | | | (1,688 | ) | | | (1,672 | ) | | | (1,304 | ) | | | (1,496 | ) | | | (1,688 | ) | Proceeds of borrowings and issuance of subordinated debt | | | 1,138 | | | | 826 | | | | 700 | | | Repayments of borrowings and redemption of subordinated debt | | | (682 | ) | | | (1,100 | ) | | | (1,425 | ) | | Issuance of subordinated debt | | | | 1,457 | | | | 879 | | | | 848 | | Redemption of subordinated debt | | | | (1,143 | ) | | | (556 | ) | | | (869 | ) | Net issue of shares and other equity instruments | | | 1,278 | | | | 559 | | | | 9,473 | | | | 1,400 | | | | 1,278 | | | | 559 | | Repurchase of shares and other equity instruments | | | | (1,587 | ) | | | – | | | | (104 | ) | Net purchase of treasury shares | | | (679 | ) | | | (909 | ) | | | (1,066 | ) | | | (140 | ) | | | (679 | ) | | | (909 | ) | Net redemption of shares issued to non-controlling interests | | | – | | | | (746 | ) | | | (100 | ) | | | – | | | | – | | | | (746 | ) | Net cash from financing activities | | | (441 | ) | | | (3,058 | ) | | | 5,910 | | | | (1,317 | ) | | | (574 | ) | | | (2,805 | ) | Net cash from discontinued operations | | | | 405 | | | | (1,821 | ) | | | 1,809 | | Effect of exchange rates on cash and cash equivalents | | | 824 | | | | (431 | ) | | | 198 | | | | 10,473 | | | | 1,689 | | | | (313 | ) | Net increase/(decrease) in cash and cash equivalents | | | 8,077 | | | | (3,275 | ) | | | (41,479 | ) | | | 57,554 | | | | 8,077 | | | | (3,275 | ) | Cash and cash equivalents at beginning of year | | | 78,479 | | | | 81,754 | | | | 123,233 | | | | 86,556 | | | | 78,479 | | | | 81,754 | | Cash and cash equivalents at end of year | | | 86,556 | | | | 78,479 | | | | 81,754 | | | | 144,110 | | | | 86,556 | | | | 78,479 | | Cash and cash equivalents comprise: | | | | | | | | | | | | | Cash and balances at central banks | | | 49,711 | | | | 39,695 | | | | 45,687 | | | | 102,353 | | | | 49,711 | | | | 39,695 | | Loans and advances to banks with original maturity less than three months | | | 35,876 | | | | 36,282 | | | | 35,259 | | | | 38,252 | | | | 35,876 | | | | 36,282 | | Available for sale treasury and other eligible bills with original maturity less than three months | | | 816 | | | | 2,322 | | | | 644 | | | | 356 | | | | 816 | | | | 2,322 | | Trading portfolio assets with original maturity less than three months | | | 153 | | | | 180 | | | | 164 | | | | – | | | | 153 | | | | 180 | | Cash and cash equivalents held for sale | | | | 3,149 | | | | – | | | | – | | | | | 86,556 | | | | 78,479 | | | | 81,754 | | | | 144,110 | | | | 86,556 | | | | 78,479 | |
Interest received was £20,376m (2014: £21,372m, 2013: £23,387m)£22,099m (2015: £20,376m; 2014: £21,372m) and interest paid was £7,534m (2014: £8,566m, 2013: £10,709m)£8,850m (2015: £7,534m; 2014: £8,566m). The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £4,369m (2014: £4,448m, 2013: £4,722m)£4,254m (2015: £4,369m; 2014: £4,448m). 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 three months or less. Repurchase and reverse repurchase agreements are not considered to be part of cash equivalents. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 215223 |
Financial statements of Barclays PLC Parent company accounts | | | | | | | | | | | | | | | | | Income statement | | | | | | | | | | | | | | | | | For the year ended 31 December | | | Notes | | | | 2015 £m | | | | 2014 £m | | | | 2013 £m | | Dividends received from subsidiary | | | | | | | 876 | | | | 821 | | | | 734 | | Net interest expense | | | | | | | (7 | ) | | | (6 | ) | | | (6 | ) | Other income/(expense) | | | 45 | | | | 227 | | | | 275 | | | | (137 | ) | Management charge from subsidiary | | | | | | | (6 | ) | | | (6 | ) | | | (6 | ) | Profit before tax | | | | | | | 1,090 | | | | 1,084 | | | | 585 | | Tax | | | | | | | (43 | ) | | | (57 | ) | | | 35 | | Profit after tax | | | | | | | 1,047 | | | | 1,027 | | | | 620 | | Attributable to | | | | | | | | | | | | | | | | | Ordinary equity holders | | | | | | | 702 | | | | 777 | | | | 620 | | Other equity holders | | | | | | | 345 | | | | 250 | | | | – | |
| | | | | | | | | | | | | | | | | Income statement | | | | | | | | | | | | | | | | | For the year ended 31 December | | | Notes | | |
| 2016 £m | | |
| 2015 £m | | |
| 2014 £m | | Dividends received from subsidiary | | | | | | | 621 | | | | 876 | | | | 821 | | Net interest income/(expense) | | | | | | | 5 | | | | (7 | ) | | | (6 | ) | Other income | | | 45 | | | | 334 | | | | 227 | | | | 275 | | Operating expenses | | | | | | | (26 | ) | | | (6 | ) | | | (6 | ) | Profit before tax | | | | | | | 934 | | | | 1,090 | | | | 1,084 | | Tax | | | | | | | (60 | ) | | | (43 | ) | | | (57 | ) | Profit after tax | | | | | | | 874 | | | | 1,047 | | | | 1,027 | | Attributable to | | | | | | | | | | | | | | | | | Ordinary equity holders | | | | | | | 417 | | | | 702 | | | | 777 | | Other equity holders | | | | | | | 457 | | | | 345 | | | | 250 | |
Profit after tax and total comprehensive income for the year was £1,047m (2014: £1,027m)£874m (2015: £1,047m). There were no other components of total comprehensive income other than the profit after tax. The Company had nohas seven members of staff during the year (2014: nil, 2013:(2015: nil). | Balance sheet | | | | | | | | | | | | | As at 31 December | | | Notes | | |
| 2015
£m |
| |
| 2014
£m |
| | | Notes | | |
| 2016 £m | | |
| 2015 £m | | Assets | | | | | | | | | | | | | Investment in subsidiary | | | 45 | | | | 35,303 | | | | 33,743 | | | Loans and advances to subsidiary | | | 45 | | | | 7,990 | | | | 2,866 | | | Derivative financial instrument | | | 45 | | | | 210 | | | | 313 | | | Investment in subsidiaries | | | | 45 | | | | 36,553 | | | | 35,303 | | Loans and advances to subsidiaries | | | | 45 | | | | 19,421 | | | | 7,990 | | Financial investments | | | | 45 | | | | 1,218 | | | | – | | Derivative financial instruments | | | | 45 | | | | 268 | | | | 210 | | Other assets | | | | | 133 | | | | 174 | | | | | | 105 | | | | 133 | | Total assets | | | | | 43,636 | | | | 37,096 | | | | | | 57,565 | | | | 43,636 | | | Liabilities | | | | | | | | | | | | | Deposits from banks | | | | | 494 | | | | 528 | | | | | | 547 | | | | 494 | | Subordinated liabilities | | | 45 | | | | 1,766 | | | | 810 | | | | 45 | | | | 3,789 | | | | 1,766 | | Debt securities in issue | | | 45 | | | | 6,224 | | | | 2,056 | | | | 45 | | | | 16,893 | | | | 6,224 | | Other liabilities | | | | | – | | | | 10 | | | | | | 14 | | | | – | | Total liabilities | | | | | 8,484 | | | | 3,404 | | | | | | 21,243 | | | | 8,484 | | | Shareholders’ equity | | | | | | | | Equity | | | | | | | | Called up share capital | | | 31 | | | | 4,201 | | | | 4,125 | | | | 31 | | | | 4,241 | | | | 4,201 | | Share premium account | | | 31 | | | | 17,385 | | | | 16,684 | | | | 31 | | | | 17,601 | | | | 17,385 | | Other equity instruments | | | 31 | | | | 5,321 | | | | 4,326 | | | | 31 | | | | 6,453 | | | | 5,321 | | Capital redemption reserve | | | | | 394 | | | | 394 | | | | | | 420 | | | | 394 | | Retained earnings | | | | | 7,851 | | | | 8,163 | | | | | | 7,607 | | | | 7,851 | | Total shareholders’ equity | | | | | 35,152 | | | | 33,692 | | | Total liabilities and shareholders’ equity | | | | | 43,636 | | | | 37,096 | | | Total equity | | | | | | 36,322 | | | | 35,152 | | Total liabilities and equity | | | | | | 57,565 | | | | 43,636 | |
The financial statements on pages 216 and 217224 to 225 and the accompanying note on page 298307 were approved by the Board of Directors on 2922 February 20162017 and signed on its behalf by: John McFarlane Group Chairman JesJames E Staley
Group Chief Executive Tushar Morzaria Group Finance Director | | | 216224 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
| Statement of changes in equity | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Notes | | |
| Called up share capital and share premium
£m |
| |
| Other equity instruments
£m |
| |
| Capital redemption reserve
£m |
| |
| Available for sale reserve £m | | |
| Retained earnings £m | | |
| Total equity £m | | Balance as at 1 January 2016 | | | | | | 21,586 | | | | 5,321 | | | | 394 | | | | – | | | | 7,851 | | | | 35,152 | | Profit after tax and total comprehensive income | | | | | | – | | | | 457 | | | | – | | | | – | | | | 417 | | | | 874 | | Issue of new ordinary shares | | | | | | 68 | | | | – | | | | – | | | | – | | | | – | | | | 68 | | Issue of shares under employee share schemes | | | | | | 188 | | | | – | | | | – | | | | – | | | | – | | | | 188 | | Issue of other equity instruments | | | | | | – | | | | 1,132 | | | | – | | | | – | | | | – | | | | 1,132 | | Dividends | | | | 12 | | | | – | | | | – | | | | – | | | | – | | | | (757 | ) | | | (757 | ) | Other equity instruments coupons paid | | | | | | – | | | | (457 | ) | | | – | | | | – | | | | 91 | | | | (366 | ) | Other | | | | | | – | | | | – | | | | – | | | 26 | | | | 5 | | | | 31 | | Balance as at 31 December 2016 | | | | | | 21,842 | | | | 6,453 | | | | 394 | | | 26 | | | | 7,607 | | | | 36,322 | | | | | Notes | | |
| Called up share capital and
share premium £m |
| |
| Other equity instruments
£m |
| |
| Capital
reserves and other equity £m |
| |
| Retained
earnings £m |
| | | Total equity £m | | | Balance as at 1 January 2015 | | | | | 20,809 | | | | 4,326 | | | | 394 | | | | 8,163 | | | | 33,692 | | | | | | 20,809 | | | | 4,326 | | | | 394 | | | | | | 8,163 | | | | 33,692 | | Profit after tax and total comprehensive income | | | | | – | | | | 345 | | | | – | | | | 702 | | | | 1,047 | | | | | | – | | | | 345 | | | | – | | | | | | 702 | | | | 1,047 | | Issue of new ordinary shares | | | | | 137 | | | | – | | | | – | | | | – | | | | 137 | | | | | | 137 | | | | – | | | | – | | | | | | – | | | | 137 | | Issue of shares under employee share schemes | | | | | 640 | | | | – | | | | – | | | | – | | | | 640 | | | | | | 640 | | | | – | | | | – | | | | | | – | | | | 640 | | Issue of other equity instruments | | | | | – | | | | 995 | | | | – | | | | – | | | | 995 | | | | | | – | | | | 995 | | | | – | | | | | | – | | | | 995 | | Dividends | | | 12 | | | | – | | | | – | | | | – | | | | (1,081 | ) | | | (1,081 | ) | | | 12 | | | | – | | | | – | | | | – | | | | | | (1,081 | ) | | | (1,081 | ) | Other equity instruments coupons paid | | | | | – | | | | (345 | ) | | | – | | | | 70 | | | | (275 | ) | | | | | – | | | | (345 | ) | | | – | | | | | | 70 | | | | (275 | ) | Other | | | | | – | | | | – | | | | – | | | | (3 | ) | | | (3 | ) | | | | | – | | | | – | | | | – | | | | | | (3 | ) | | | (3 | ) | Balance as at 31 December 2015 | | | | | 21,586 | | | | 5,321 | | | | 394 | | | | 7,851 | | | | 35,152 | | | | | | 21,586 | | | | 5,321 | | | | 394 | | | | | | 7,851 | | | | 35,152 | | | Balance as at 1 January 2014 | | | | | 19,887 | | | | 2,063 | | | | 394 | | | | 8,398 | | | | 30,742 | | | | | | 19,887 | | | | 2,063 | | | | 394 | | | | | | 8,398 | | | | 30,742 | | Profit after tax and total comprehensive income | | | | | – | | | | 250 | | | | – | | | | 777 | | | | 1,027 | | | | | | – | | | | 250 | | | | – | | | | | | 777 | | | | 1,027 | | Issue of new ordinary shares | | | | | 150 | | | | – | | | | – | | | | – | | | | 150 | | | | | | 150 | | | | – | | | | – | | | | | | – | | | | 150 | | Issue of shares under employee share schemes | | | | | 772 | | | | – | | | | – | | | | – | | | | 772 | | | | | | 772 | | | | – | | | | – | | | | | | – | | | | 772 | | Issue of other equity instruments | | | | | – | | | | 2,263 | | | | – | | | | – | | | | 2,263 | | | | | | – | | | | 2,263 | | | | – | | | | | | – | | | | 2,263 | | Dividends | | | 12 | | | | – | | | | – | | | | – | | | | (1,057 | ) | | | (1,057 | ) | | | 12 | | | | – | | | | – | | | | – | | | | | | (1,057 | ) | | | (1,057 | ) | Other equity instruments coupons paid | | | | | – | | | | (250 | ) | | | – | | | | 54 | | | | (196 | ) | | | | | – | | | | (250 | ) | | | – | | | | | | 54 | | | | (196 | ) | Other | | | | | – | | | | – | | | | – | | | | (9 | ) | | | (9 | ) | | | | | – | | | | – | | | | – | | | | | | (9 | ) | | | (9 | ) | Balance as at 31 December 2014 | | | | | 20,809 | | | | 4,326 | | | | 394 | | | | 8,163 | | | | 33,692 | | | | | | 20,809 | �� | | | 4,326 | | | | 394 | | | | | | 8,163 | | | | 33,692 | | | Balance as at 1 January 2013 | | | | | 12,477 | | | | – | | | | 394 | | | | 8,654 | | | | 21,525 | | | Profit after tax and total comprehensive income | | | | | – | | | | – | | | | – | | | | 620 | | | | 620 | | | Issue of new ordinary shares | | | | | 6,620 | | | | – | | | | – | | | | – | | | | 6,620 | | | Issue of shares under employee share schemes | | | | | 790 | | | | – | | | | – | | | | – | | | | 790 | | | Issue of other equity instruments | | | | | – | | | | 2,063 | | | | – | | | | – | | | | 2,063 | | | Dividends | | | 12 | | | | – | | | | – | | | | – | | | | (859 | ) | | | (859 | ) | | Other | | | | | – | | | | – | | | | | | (17 | ) | | | (17 | ) | | Balance as at 31 December 2013 | | | | | 19,887 | | | | 2,063 | | | | 394 | | | | 8,398 | | | | 30,742 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash flow statement | | | | | | | | | | | | | | | | | | | | | | | | | | | For the year ended 31 December | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Reconciliation of profit before tax to net cash flows from operating activities: | | | | | | | | | | | | | Reconciliation of profit before tax to net cash flows from operating activities: | | | | | | | | | | Profit before tax | | | | | | | | | 1,090 | | | | 1,084 | | | | 585 | | | | | | | | | | | 934 | | | | 1,090 | | | | 1,084 | | Changes in operating assets and liabilities | | | | | | | | | 100 | | | | 734 | | | | (546 | ) | | | | | | | | | | 37 | | | | 100 | | | | 734 | | Other non-cash movements | | | | | | | | | 52 | | | | (43 | ) | | | (20 | ) | | | | | | | | | | 62 | | | | 52 | | | | (43 | ) | Corporate income tax (paid)/received | | | | | | | | | (27 | ) | | | 38 | | | | (3 | ) | | | | | | | | | | | – | | | | (27 | ) | | | 38 | | Net cash from operating activities | | | | | | | | | 1,215 | | | | 1,813 | | | | 16 | | | Net cash generated from operating activities | | | | | | | | | | | 1,033 | | | | 1,215 | | | | 1,813 | | Capital contribution to subsidiary | | | | | | | | | (1,560 | ) | | | (3,684 | ) | | | (8,630 | ) | | | | | | | | | | (1,250 | ) | | | (1,560 | ) | | | (3,684 | ) | Net cash used in investing activities | | | | | | | | | (1,560 | ) | | | (3,684 | ) | | | (8,630 | ) | | | | | | | | | | (1,250 | ) | | | (1,560 | ) | | | (3,684 | ) | Issue of shares and other equity instruments | | | | | | | | | 1,771 | | | | 3,185 | | | | 9,473 | | | | | | | | | | | 1,388 | | | | 1,771 | | | | 3,185 | | Net (increase) in loans and advances to bank subsidiaries of the Parent | | | | | | | | | (4,973 | ) | | | (2,866 | ) | | | – | | | | | | | | | | | (10,942 | ) | | | (4,973 | ) | | | (2,866 | ) | Net increase in deposits and debt securities in issue | | | | | | | | | 4,052 | | | | 2,056 | | | | – | | | | | | | | | | | 9,314 | | | | 4,052 | | | | 2,056 | | Proceeds of borrowings and issuance of subordinated debt | | | | | | | | | 921 | | | | 803 | | | | (859 | ) | | | | | | | | | | 1,671 | | | | 921 | | | | 803 | | Dividends paid | | | | | | | | | (1,081 | ) | | | (1,057 | ) | | | – | | | | | | | | | | | (757 | ) | | | (1,081 | ) | | | (1,057 | ) | Coupons paid | | | | | | | | | (345 | ) | | | (250 | ) | | | – | | | Net cash from financing activities | | | | | | | | | 345 | | | | 1,871 | | | | 8,614 | | | Coupons paid on AT1 instruments | | | | | | | | | | | (457 | ) | | | (345 | ) | | | (250 | ) | Net cash generated from financing activities | | | | | | | | | | | 217 | | | | 345 | | | | 1,871 | | Net increase/(decrease) in cash and cash equivalents | | | | | | | | | – | | | | – | | | | – | | | | | | | | | | | | – | | | | – | | | | – | | Cash and cash equivalents at beginning of year | | | | | | | | | – | | | | – | | | | – | | | | | | | | | | | | – | | | | – | | | | – | | Cash and cash equivalents at end of year | | | | | | | | | – | | | | – | | | | – | | | | | | | | | | | | – | | | | – | | | | – | | | Net cash from operating activities includes: | | | | | | | | | | | | | | Net cash generated from operating activities includes: | | | | | | | | | | | | | | | | Dividends received | | | | | | | | | 876 | | | | 821 | | | | 734 | | | | | | | | | | | 621 | | | | 876 | | | | 821 | | Interest paid | | | | | | | | | (7 | ) | | | (6 | ) | | | (6 | ) | | Interest received/(paid) | | | | | | | | | | | 5 | | | | (7 | ) | | | (6 | ) |
The Parent Company’s principal activity is to hold the investment in its wholly-owned subsidiary,subsidiaries, Barclays Bank PLC.PLC and Group Service Company. Dividends received are treated as operating income. The Company was not exposed at 31 December 20152016 or 20142015 to significant risks arising from the financial instruments it holds, which comprised loans and advances and other assets which had no market risk or material credit risk. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 217225 |
Notes to the financial statements For the year ended 31 December 20152016 This section describes Barclays’ significant accounting policies and critical accounting estimates that relate to the financial statements and notes as a whole. If an accounting policy or a critical accounting estimate relates to a specificparticular note, the applicable accounting policy and/or critical accounting estimate is contained withinwith the relevant note. 1 Significant accounting policies | 1. Reporting entity These financial statements are prepared for Barclays PLC and its subsidiaries (the Barclays PLC Group or the Group) under Section 399 of the Companies Act 2006. The Group is a major global financial services provider engaged in retail banking, credit cards, wholesale banking, investment banking, wealth management and investment management services. In addition, individual financial statements have been presented for the holding company. 2. Compliance with International Financial Reporting Standards The consolidated financial statements of the Group, and the individual financial statements of Barclays PLC, have been prepared in accordance with International Financial Reporting Standards (IFRS) and interpretations (IFRICs) issued by the Interpretations Committee, as published by the International Accounting Standards Board (IASB). They are also in accordance with IFRS and IFRIC interpretations endorsed by the EU.European Union. The principal accounting policies applied in the preparation of the consolidated and individual financial statements are set out below, and in the relevant notes to the financial statements. These policies have been consistently applied. 3. Basis of preparation The consolidated and individual financial statements have been prepared under the historical cost convention modified to include the fair valuation of investment property, and particular financial instruments, to the extent required or permitted under IFRS as set out in the relevant accounting policies. They are stated in millions of pounds Sterling (£m), the functional currency of Barclays PLC. 4. Accounting policies Barclays prepares financial statements in accordance with IFRS. The Group’s significant accounting policies relating to specific financial statement items, together with a description of the accounting estimates and judgements that were critical to preparing them, are set out under the relevant notes. Accounting policies that affect the financial statements as a whole are set out below. (i) Consolidation Barclays applies IFRS 10Consolidated Financial Statements. The consolidated financial statements combine the financial statements of Barclays PLC and all its subsidiaries. Subsidiaries are entities over which Barclays PLC has control. The Group has control over another entity when the Group has all of the following: 1) power over the relevant activities of the investee, for example through voting or other rightsrights; 2) exposure to, or rights to, variable returns from its involvement with the investee,investee; and 3) the ability to affect those returns through its power over the investee. The assessment of control is based on the consideration of all facts and circumstances. The Group reassesses whether it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control. 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 the Group member is a partner, advantage has been taken of the exemption under Regulation 7 of the Partnership (Accounts) Regulations 2008 with regard to preparing and filing of individual partnership financial statements. Details of the principal subsidiaries are given in Note 36, and a complete list of all subsidiaries is presented in Note 46. (ii) Foreign currency translation The Group applies IAS 21The Effects of Changes in Foreign Exchange Rates.Rates. Transactions and balances in foreign currencies are translated into Sterling at the rate ruling on the date of the transaction. Foreign currency balances are translated into Sterling at the period end exchange rates. Exchange rate gains and losses on such balances are taken to the income statement. The Group’s foreign operations (including subsidiaries, joint ventures, associates and branches) based mainly outside the UK may have different functional currencies. The functional currency of an operation is the currency of the main economy to which it is exposed. Prior to consolidation (or equity accounting) the assets and liabilities ofnon-Sterling operations are translated at the closing rate and items of income, expense and other comprehensive income are translated into Sterling at the rate on the date of the transactions. Exchange rate differences arising on the translation of foreign operations are included in currency translation reserves within equity. These are transferred to the income statement when the Group loses control, joint control or significant influence over the foreign operation or on partial disposal of the operation. (iii) Financial assets and liabilities The Group applies IAS 39Financial Instruments: Recognition and Measurement to the recognition, classification and measurement, and derecognition of financial assets and financial liabilities, the impairment of financial assets, and hedge accounting. |
| | | 226 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
1 Significant accounting policiescontinued | Recognition The Group recognises financial assets and liabilities when it becomes a party to the terms of the contract, which is the trade date or the settlement date. |
| | | 218 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
1 Significant accounting policiescontinued
| Classification and measurement Financial assets and liabilities are initially recognised at fair value and may be held at fair value or amortised cost depending on the Group’s intention towardstoward the assets and the nature of the assets and liabilities, mainly determined by their contractual terms. The accounting policy for each type of financial asset or liability is included within the relevant note for the item. The Group’s policies for determining the fair values of the assets and liabilities are set out in Note 18. Derecognition The Group derecognises a financial asset, or a portion of a financial asset, from its balance sheet where the contractual rights to cash flows from the asset have expired, or have been transferred, usually by sale, and with them either substantially all the risks and rewards of the asset or significant risks and rewards, along with the unconditional ability to sell or pledge the asset. Financial liabilities are derecognised when the liability has been settled, has expired or has been extinguished. An exchange of an existing financial liability for a new liability with the same lender on substantially different terms – generally a difference of 10% in the present value of the cash flows or a substantive qualitative amendment – is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Critical accounting estimates and judgements Transactions in which the Group transfers assets and liabilities, portions of them, or financial risks associated with them can be complex and it may not be obvious whether substantially all of the risks and rewards have been transferred. It is often necessary to perform a quantitative analysis. Such an analysis compares 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 may require 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. (iv) Issued debt and equity instruments The Group applies IAS 32Financial Instruments: Presentation, to determine whether funding is either a financial liability (debt) or equity. Issued financial instruments or their components are classified as liabilities if the contractual arrangement results in the Group having a present obligation to either deliver cash or another financial asset, or a variable number of equity shares, to the holder of the instrument. If this is not the case, the instrument is generally an equity instrument and the proceeds included in equity, net of transaction costs. Dividends and other returns to equity holders are recognised when paid or declared by the members at the AGM and treated as a deduction from equity. Where issued financial instruments contain both liability and equity components, these are accounted for separately. The fair value of the debt is estimated first and the balance of the proceeds is included within equity. New and amended standards and interpretations The accounting policies adopted are consistent with those of the previous financial year. There were no new or amended standards or interpretations that resulted in a change in accounting policy. Future accounting developments There have been and are expected to be a number of significant changes to the Group’s financial reporting after 20152016 as a result of amended or new accounting standards that have been or will be issued by the IASB. The most significant of these are as follows: IFRS 9 – Financial instruments IFRS 9 Financial Instruments which will replace IAS 39Financial Instruments: Recognition and Measurement is effective for periods beginning on or after 1 January 2018 and is currently expected to bewas endorsed by the EU in November 2016. IFRS 9, in particular the impairment requirements, will lead to significant changes in the accounting for financial instruments. Barclays does not expect to restate comparatives on initial application of IFRS 9 on 1 January 2018 but will provide detailed transitional disclosures in accordance with the amended requirements of IFRS 7. Impairment IFRS 9 introduces a revised impairment model which will require entities to recognise expected credit losses based on unbiased forward-looking information, replacinginformation. This replaces the existing IAS 39 incurred loss model which only recognises impairment if there is objective evidence that a loss is already incurred. incurred and would measure the loss at the most probable outcome. The IFRS 9 impairment model will be applicable to all financial assets at amortised cost, lease receivables, debt financial assets at fair value through OCI,other comprehensive income, loan commitments and financial guarantee contracts. This contrasts to the IAS 39 impairment model which is not applicable to loan commitments and financial guarantee contracts (these were covered by IAS 37). In addition, the IAS 39 Availablerequires the impairment of available for Sale assets model is not fully alignedsale debt to be based on the modelfair value loss rather than estimated future cashflows as for amortised cost assets. Intercompany exposures, including loan commitments and financial guarantee contracts, are also in scope in the stand alone reporting entity accounts. IFRS 9 requires the recognition of lifetime expected credit losses for financial instruments for which the credit risk has increased significantly since initial recognition. If the credit risk has not increased significantly since initial recognition 12 month expected credit losses are recognised, being the expected credit losses from default events that are possible within 12 months after the reporting date.
|
Expected credit losses are the unbiased probability of default weighted average credit losses determined by evaluating a range of possible outcomes
| | | | | Barclays PLC and forecast future economic conditions. Credit losses are the expected cash shortfalls from what is contractually due over the expected life of the financial instrument, discounted at the effective interest rate.Barclays Bank PLC 2016 Annual Report on Form 20-F | 227 |
Notes to the financial statements For the year ended 31 December 2016 1 Significant accounting policiescontinued | Under IFRS 9, impairment will be recognised earlier than is the case under IAS 39 because it requires
The measurement of expected losses to be recognised before the loss event arises. Measurement will involve increased complexity and judgement including estimation of probabilities of defaults, loss given default, a range of unbiased future economic scenarios, estimation of expected lives, estimation of exposures at default and assessing increases in credit risk. It is expected to have a material financial impact but itand impairment charges will tend to be more volatile. Impairment will also be recognised earlier and the amounts will be higher. Unsecured products with longer expected lives, such as revolving credit cards, are expected to be most impacted. It will not be practical to disclose reliable financial impact estimates until the implementation programme and validation and testing is further advanced.advanced, which will be no later than the Barclays PLC Annual Report 2017. Based on the current requirements of CRD IV, the expected increase in the accounting impairment provision would reduce CET1 capital but the impact would be partially mitigated by the ‘excess of expected losses over impairment’ included in the CET1 calculation as discussed on page 156. However, the Basel Committee on Banking Supervision (BCBS) is currently considering amending the capital rules as a result of IFRS 9 and is considering transitional rules which may mitigate or spread capital impacts from 1 January 2018 as well as permanent changes to the capital requirements. In addition, as part of its review of the Capital Requirements Regulation (CRR) the European Commission has proposed that the capital impact of IFRS 9 isphased-in over a five-year period. IFRS 9 is considered in the Group capital planning. Key concepts and management judgements The impairment requirements are complex and require management judgements, estimates and assumptions. Key concepts and management judgements will continue to be refined during the 2017 parallel run and as any further authoritative guidance is issued, and include: ☒ Determining a significant increase in credit risk since initial recognition IFRS 9 requires the recognition of 12 month expected credit losses (the expected credit losses from default events that are expected within 12 months of reporting date) if credit risk has not significantly increased since initial recognition (stage 1), and lifetime expected credit losses for financial instruments for which the credit risk has increased significantly since initial recognition or which are credit impaired. Barclays expects to estimate when a significant increase in credit risk has occurred based on quantitative and qualitative assessments. Quantitative assessments will be based on changes in and/or absolute thresholds for weighted average cumulative lifetime probabilities of default, determined for each portfolio. Qualitative drivers of a significant increase in credit risk are expected to include exposures determined to be higher risk (by credit risk) and subject to closer credit risk monitoring. Exposures which are more than 30 days past due will be used as a backstop rather than a primary driver. Exposures will move back to stage 1 once they no longer meet the criteria for a significant increase in credit risk and when any cure criteria used for credit risk management are met. This is subject to a minimum of 12 months’ full performance including timely receipt of all payments over that period, for exposures that have been restructured or granted forbearance or concessions. Barclays does not expect to rely primarily on the low credit risk exemption which would assume facilities of investment grade are not significantly deteriorated. Determining the probability of default at initial recognition is expected to require management estimates, in particular for exposures issued before the effective date of IFRS 9. For certain revolving facilities such as credit cards and overdrafts, this is expected to be when the facility was first entered into which could have been significantly in the past. Exposures modified due to financial difficulty do not generally result in a substantial modification or derecognition and therefore the probability of default at initial recognition is not reset for these exposures. ☒ Forward-looking information Credit losses are the expected cash shortfalls from what is contractually due over the expected life of the financial instrument, discounted at the original effective interest rate. Expected credit losses are the unbiased probability-weighted credit losses determined by evaluating a range of possible outcomes and considering future economic conditions. When there is anon-linear relationship between forward-looking economic scenarios and their associated credit losses, a range of forward-looking economic scenarios, currently expected to be a minimum of five, will be considered to ensure a sufficient unbiased representative sample of the complete distribution is included in determining the expected loss. Stress testing methodologies will be leveraged for forecasting economic scenarios for IFRS 9 purposes. ☒ Definition of default and credit impaired assets The definition of default for the purpose of determining expected credit losses is expected to be aligned to the Regulatory Capital CRR Article 178 definition of default, which considers indicators that the debtor is unlikely to pay, includes exposures in forbearance and is no later than when the exposure is more than 90 days past due or 180 days past due in the case of UK mortgages. When exposures are identified as credit impaired or purchased or originated as such, IFRS 9 requires separate disclosure and interest income to be presented on a net basis rather than gross. Credit impairment is expected to occur when the exposure has defaulted which is also anticipated to align to when an exposure is identified as individually impaired under the incurred loss model of IAS 39.Write-off polices are not expected to change from IAS 39. ☒ Expected life Lifetime expected credit losses must be measured over the expected life. This is restricted to the maximum contractual life and takes into account expected prepayment, extension, call and similar options, except for certain revolver financial instruments that include both a drawn and an undrawn component where the entity’s contractual ability to demand repayment and cancel the undrawn commitment does not limit the entity’s exposure to credit losses to the contractual notice period, such as credit cards and overdrafts. The expected life for these revolver facilities is expected to be behavioral life. Potential future modifications of contracts are not taken into account when determining the expected life or exposure at default until they occur. ☒ Modelling techniques Expected credit losses (ECL) are calculated by multiplying three main components, being the probability of default (PD), loss given default (LGD) and the exposure at default (EAD). The Basel ECL calculations are leveraged for IFRS 9 modelling but adjusted for key differences which include: – BCBS requires 12 month through the economic cycle losses whereas IFRS 9 requires 12 month or lifetime point-in-time losses based on conditions at the reporting date and multiple forecasts of the future economic conditions over the expected lives; and – IFRS 9 models do not include some of the conservative BCBS model floors and downturn assessments and require discounting to the reporting date at the original effective interest rate rather than using the cost of capital to the date of default. Management adjustments will be made to modelled output to account for situations where known or expected risk factors and information have not been considered in the modelling process, for example forecast economic scenarios for uncertain political events. |
| | | 228 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
1 Significant accounting policiescontinued | Classification and measurement IFRS 9 will require financial assets to be classified on the basis of two criteria: 1) The business model within which financial assets are managed, and; 2) Their contractual cash flow characteristics (whether the cash flows represent ‘solely payments of principal and interest’). Financial assets will be measured at amortised cost if they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest. Financial assets will be measured at fair value through other comprehensive income if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest. Other financial assets are measured at fair value through profit and loss. There is an option to make an irrevocable election fornon-traded equity investments to be measured at fair value through other comprehensive income, in which case dividends are recognised in profit or loss, but gains or losses are not reclassified to profit or loss upon derecognition, and impairment is not recognised in the income statement. The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at fair value through profit and loss. Gains and losses on such financial liabilities arising from changes in Barclays’ own credit risk will be presented in other comprehensive income rather than in profit and loss. There is no subsequent reclassification of realised gains or losses on own credit to profit and loss statement. Barclays’ Classification and Measurement implementation programme is in progress. An assessment of potential changes to financial assets based on 30 June 2016 balances is being conducted, including an assessment of business models across various portfolios, and a review of contractual cash flow features for material financial assets. There are some classification changes expected but they are not significant from a Group perspective. The notable potential exception relates to loans with symmetric make whole or fair value prepayment options, which are currently subject to interpretation discussions at IFRS Interpretations Committee (IFRIC) and IASB as to whether their contractual cash flows represent solely payments of principal and interest, or whether they must be measured at fair value through profit or loss in their entirety. Such prepayment features are present in some fixed rate corporate and investment bank loans. The carrying value of such loans is expected to be significant on initial application of IFRS 9. If such loans are concluded to be measured at fair value through profit or loss the potential impact on opening equity and profit or loss would depend on their fair values compared to their carrying amounts, and the future changes in fair value. Business models are determined on initial application and this may differ from the model at 30 June 2016 for certain portfolios, and contractual cash flow characteristics assessed as at 30 June 2016 may not be representative of the population on transition. The focus of the project during 2017 will be on finalising processes, governance and controls in preparation for initial application in 2018. IFRS 9 is applied retrospectively, although comparatives are not restated, with adjustments arising from classification and measurement changes recognised in opening equity. Hedge accounting IFRS 9 contains revised requirements on hedge accounting, which are more closely aligned with an entity’s risk management strategies and risk management objectives. The new rules would replace the current quantitative effectiveness test with a simpler version, and requires that an economic relationship exist between the hedged item and the hedging instrument. Under the new rules, voluntary hedgede-designations would not be allowed. Adoption of the IFRS 9 hedge accounting requirements is optional, and certain aspects of IAS 39, being the portfolio fair value hedge for interest rate risk, would continue to be available for entities (while applying IFRS 9 to the remainder of the entity’s hedge accounting relationships) until the IASB completes its accounting for dynamic risk management project. Based on analysis performed, Barclays expects to continue applying IAS 39 hedge accounting, although it will implement the amended IFRS 7 hedge accounting disclosure requirements. Own credit Barclays has applied the option in IFRS 9 to recognise changes in own credit in other comprehensive income from 1 January 2017. This will have no effect on net assets, and any changes due to own credit in prior periods have not been restated. Any realised and unrealised amounts recognised in other comprehensive income will not be reclassified to the income statement in future periods. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 219229 |
Notes to the financial statements For the year ended 31 December 20152016 1 Significant accounting policiescontinued | Based on the current requirements of CRD IV, the expected increase in the accounting impairment provision would reduce CET1 capital but the impact would be partially mitigated by the ‘excess of expected losses over impairment’ included in the CET1 calculation as discussed on page 150). Classification and measurement IFRS 9 will require financial assets to be classified on the basis of two criteria: 1) the business model within which financial assets are managed, and 2) their contractual cash flow characteristics (whether the cash flows represent ‘solely payments of principal and interest’). Financial assets will be measured at amortised cost if they are held within a business model whose objective is to hold financial assets in order to collect contractual cash flows, and their contractual cash flows represent solely payments of principal and interest. Financial assets will be measured at fair value through other comprehensive income if they are held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets, and their contractual cash flows represent solely payments of principal and interest. Other financial assets are measured at fair value through profit and loss. There is an option to make an irrevocable election for non-traded equity investments to be measured at fair value through other comprehensive income. The accounting for financial liabilities is largely unchanged, except for financial liabilities designated at fair value through profit and loss. Gains and losses on such financial liabilities arising from changes in Barclays’ own credit risk will be presented in other comprehensive income rather than in profit and loss. Hedge accounting IFRS 9 contains revised requirements on hedge accounting, which are more closely aligned with an entity’s risk management strategies and risk management objectives. The new rules would replace the current quantitative effectiveness test with a simpler version, and requires that an economic relationship exist between the hedged item and the hedging instrument. Under the new rules, voluntary hedge de-designations would not be allowed. Adoption of the IFRS 9 hedge accounting requirements is optional, and certain aspects of IAS 39, being the portfolio fair value hedge for interest rate risk, would continue to be available for entities (while applying IFRS 9 to the remainder of the entity’s hedge accounting relationships) until the IASB completes its accounting for dynamic risk management project. Barclays is considering the most appropriate approach to adopt in this area. IFRS 15 – Revenue from Contracts with Customers In 2014, the IASB issued IFRS 15Revenue from Contracts with Customerswhich will replace IAS 18Revenue and IAS 11Construction Contracts. It applies to all contracts with customers except leases, financial instruments and insurance contracts. The standard will establish a more systematic approach for revenue measurement and recognition. During July 2015, the IASB confirmed the deferral of the effective date by one year to 1 January 2018. The standard has not yet been endorsed by the EU. Adoption of the standard is not expected to have a significant impact. IFRS 16 – Leases In January 2016, the IASB issued IFRS 16Leases, which will replace IAS 17Leases. Under the new requirements, lessees would be required to recognise assets and liabilities arising from both operating and finance leases on the balance sheet. The expected effective date is 1 January 2019. The standard has not yet been endorsed by the EU. Insurance contracts The IASB also plans to issue a new standard on insurance contracts. The Group is in the process of considering the financial impacts of the new standards. Critical accounting estimates and judgements The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management to exercise judgement in applying the accounting policies. The key areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the consolidated and individual financial statements are highlighted under the relevant note. Critical accounting estimates and judgements are disclosed in: | | IFRS 15 – Revenue from Contracts with Customers In 2014, the IASB issued IFRS 15Revenue from Contracts with Customers which will replace IAS 18Revenue and IAS 11 Construction Contracts. It applies to all contracts with customers except leases, financial instruments and insurance contracts. The standard establishes a more systematic approach for revenue measurement and recognition by introducing a five-step model governing revenue recognition. The five-step model includes: 1) identifying the contract with the customer; 2) identifying each of the performance obligations included in the contract; 3) determining the amount of consideration in the contract; 4) allocating the consideration to each of the identified performance obligations, and; 5) recognising revenue as each performance obligation is satisfied. In April 2016, the IASB issued clarifying amendments to IFRS 15 which provide additional application guidance but did not change the underlying principles of the standard. The standard was endorsed by the EU in September 2016. Adoption of the standard on 1 January 2018 is not expected to have a significant impact. Current project implementation efforts are primarily focused on preparing and sourcing information necessary to comply with the enhanced disclosure requirements introduced by IFRS 15. IFRS 16 – Leases In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17 Leases. IFRS 16 will apply to all leases with the exception of licenses of intellectual property, rights held by licensing agreement within the scope of IAS 38Intangible Assets, service concession arrangements, leases of biological assets within the scope of IAS 41Agriculture, and leases of minerals, oil, natural gas and similarnon-regenerative resources. IFRS 16 will not result in a significant change to lessor accounting; however for lessee accounting there will no longer be a distinction between operating and finance leases. Instead lessees will be required to recognise both a right of use asset and lease liability on balance sheet for all leases. As a result Barclays will observe an increase in both assets and liabilities for transactions currently accounted for as operating leases as at 1 January 2019 (the effective date of IFRS 16). A scope exemption will apply toshort-term and low-value leases. Current project implementation efforts are focused on preparing and sourcing information necessary to comply with IFRS 16 requirements. The standard has not yet been endorsed by the EU. Critical accounting estimates and judgements The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management to exercise judgement in applying the accounting policies. The key areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the consolidated and individual financial statements are highlighted under the relevant note. Critical accounting estimates and judgements are disclosed in: | | IFRS 15 – Revenue from Contracts with Customers In 2014, the IASB issued IFRS 15Revenue from Contracts with Customers which will replace IAS 18Revenue and IAS 11 Construction Contracts. It applies to all contracts with customers except leases, financial instruments and insurance contracts. The standard establishes a more systematic approach for revenue measurement and recognition by introducing a five-step model governing revenue recognition. The five-step model includes: 1) identifying the contract with the customer; 2) identifying each of the performance obligations included in the contract; 3) determining the amount of consideration in the contract; 4) allocating the consideration to each of the identified performance obligations, and; 5) recognising revenue as each performance obligation is satisfied. In April 2016, the IASB issued clarifying amendments to IFRS 15 which provide additional application guidance but did not change the underlying principles of the standard. The standard was endorsed by the EU in September 2016. Adoption of the standard on 1 January 2018 is not expected to have a significant impact. Current project implementation efforts are primarily focused on preparing and sourcing information necessary to comply with the enhanced disclosure requirements introduced by IFRS 15. IFRS 16 – Leases In January 2016, the IASB issued IFRS 16 Leases, which will replace IAS 17 Leases. IFRS 16 will apply to all leases with the exception of licenses of intellectual property, rights held by licensing agreement within the scope of IAS 38Intangible Assets, service concession arrangements, leases of biological assets within the scope of IAS 41Agriculture, and leases of minerals, oil, natural gas and similarnon-regenerative resources. IFRS 16 will not result in a significant change to lessor accounting; however for lessee accounting there will no longer be a distinction between operating and finance leases. Instead lessees will be required to recognise both a right of use asset and lease liability on balance sheet for all leases. As a result Barclays will observe an increase in both assets and liabilities for transactions currently accounted for as operating leases as at 1 January 2019 (the effective date of IFRS 16). A scope exemption will apply toshort-term and low-value leases. Current project implementation efforts are focused on preparing and sourcing information necessary to comply with IFRS 16 requirements. The standard has not yet been endorsed by the EU. Critical accounting estimates and judgements The preparation of financial statements in accordance with IFRS requires the use of estimates. It also requires management to exercise judgement in applying the accounting policies. The key areas involving a higher degree of judgement or complexity, or areas where assumptions are significant to the consolidated and individual financial statements are highlighted under the relevant note. Critical accounting estimates and judgements are disclosed in: | | | Page | | | | Page | | Page | | | | Page | Credit impairment charges and other provisions | | 223 | | Fair value of financial instruments | | 234 | | 233 | | Fair value of financial instruments | | 246 | Income taxes | | 226 | | Provisions | | 259 | | 236 | | Provisions | | 270 | Available for sale assets | | 234 | | Retirement benefit obligations | | 281 | | 245 | | Retirement benefit obligations | | 288 | Other disclosures To improve transparency and ease of reference, by concentrating related information in one place, and to reduce duplication, certain disclosures required under IFRS have been included within the Risk management section as follows: § Segmental reporting on pages 191 to 221 § Credit risk management, on pages 99 and 100, including exposures to selected countries § Market risk, on pages 101 and 102 § Funding risk – capital, on pages 103 and 104 and § Funding risk – liquidity, on page 105. These are covered by the Audit opinion included on page 210. | | Derecognition of financial assets | | | 299 | | | | | Other disclosures To improve transparency and ease of reference, by concentrating related information in one place, and to reduce duplication, certain disclosures required under IFRS have been included within the Risk management section as follows: ☒ Segmental reporting on pages 197 to 210; ☒ Credit risk management, on pages 101 and 102 including exposures to selected countries; ☒ Market risk, on page 103; ☒ Funding risk – liquidity, on pages 105 and 106 ; and ☒ Funding risk – capital, on pages 106 and 107. These are covered by the Audit opinion, where referenced as audited, included on page 218. The accompanying notes on pages 226 to 316 form an integral part of these financial statements. | | Other disclosures To improve transparency and ease of reference, by concentrating related information in one place, and to reduce duplication, certain disclosures required under IFRS have been included within the Risk management section as follows: ☒ Segmental reporting on pages 197 to 210; ☒ Credit risk management, on pages 101 and 102 including exposures to selected countries; ☒ Market risk, on page 103; ☒ Funding risk – liquidity, on pages 105 and 106 ; and ☒ Funding risk – capital, on pages 106 and 107. These are covered by the Audit opinion, where referenced as audited, included on page 218. The accompanying notes on pages 226 to 316 form an integral part of these financial statements. |
| | | 220230 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Notes to the financial statements Performance/return The notes included in this section focus on the results and performance of the Group. Information on the income generated, expenditure incurred, segmental performance, tax, earnings per share and dividends are included here.
| The notes included in this section focus on the results and performance of the Group. Information on the income generated, expenditure incurred, segmental performance, tax, earnings per share and dividends are included here. |
2 Segmental reporting | Presentation of segmental reporting The Group’s segmental reporting is presented in accordance with IFRS 8Operating Segments. Operating segments are reported in a manner consistent with the internal reporting provided to the Executive Committee, which is responsible for allocating resources and assessing performance of the operating segments, and has been identified as the chief operating decision maker. All transactions between business segments are conducted on an arm’s-lengtharm’s length basis, with intra-segment revenue and costs being eliminated in Head Office. Segmental income and expense excludes BAGL as it meets the requirement of a discontinued operation. Income and expenses directly associated with each segment are included in determining business segment performance. |
During 2016 the Group’s activities have beenre-segmented into Barclays UK and Barclays International in preparation for regulatory ring fencing requirements. In addition Barclays’ interest in Barclays Africa Group Limited wasre-classified as a discontinued operation and theNon-Core segment has been enlarged. Comparatives have been updated to reflect there-segmentation. An analysis of the Group’s performance by business segment and income by geographic segment is included on pages 191197 and 192.198. Further details on each of the segments are provided on pages 193199 to 221.210. 3 Net interest income | Accounting for interest income and expense The Group applies IAS 39Financial Instruments: Recognition and Measurement.Measurement. Interest income on loans and advances at amortised cost, available for salefinancial investments debt investments,securities, and interest expense on financial liabilities held at amortised cost, are calculated using the effective interest method which allocates interest, and direct and incremental fees and costs, over the expected lives of the assets and liabilities. The effective interest method requires the Group to estimate future cash flows, in some cases based on its experience of customers’ behaviour, considering all contractual terms of the financial instrument, as well as the expected lives of the assets and liabilities. Due Barclays incurs certain costs to originate credit card balances with the large numbermost significant beingco-brand partner fees. To the extent these costs are attributed to revolving customer balances they are capitalised and subsequently included within the calculation of product types (both assetsthe effective interest rate. They are amortised to interest income over the period of expected repayment of the originated balance. Costs attributed to transacting customer balances are recorded within fee and liabilities),commission expense when incurred. There are no other individual estimates involved in the normal coursecalculation of business there are no individual estimateseffective interest rates that are material to the results or financial position. |
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| Cash and balances with central banks | | | 158 | | | | 193 | | | | 219 | | | | 186 | | | | 157 | | | | 186 | | Available for sale investments | | | 1,387 | | | | 1,615 | | | | 1,804 | | | Financial investments | | | | 740 | | | | 698 | | | | 803 | | Loans and advances to banks | | | 541 | | | | 446 | | | | 468 | | | | 600 | | | | 487 | | | | 376 | | Loans and advances to customers | | | 14,732 | | | | 14,677 | | | | 15,613 | | | | 12,958 | | | | 12,512 | | | | 12,768 | | Other | | | 383 | | | | 432 | | | | 211 | | | | 57 | | | | 99 | | | | 61 | | Interest income | | | 17,201 | | | | 17,363 | | | | 18,315 | | | Interest incomea | | | | 14,541 | | | | 13,953 | | | | 14,194 | | Deposits from banks | | | (177 | ) | | | (199 | ) | | | (201 | ) | | | (265 | ) | | | (128 | ) | | | (133 | ) | Customer accounts | | | (930 | ) | | | (1,473 | ) | | | (2,656 | ) | | | (1,514 | ) | | | (1,406 | ) | | | (2,205 | ) | Debt securities in issue | | | (1,722 | ) | | | (1,922 | ) | | | (2,176 | ) | | | (990 | ) | | | (553 | ) | | | (691 | ) | Subordinated liabilities | | | (1,644 | ) | | | (1,622 | ) | | | (1,572 | ) | | | (1,104 | ) | | | (1,015 | ) | | | (1,006 | ) | Other | | | (170 | ) | | | (67 | ) | | | (110 | ) | | | (131 | ) | | | (243 | ) | | | (73 | ) | Interest expense | | | (4,643 | ) | | | (5,283 | ) | | | (6,715 | ) | | Interest expensea | | | | (4,004 | ) | | | (3,345 | ) | | | (4,108 | ) | Net interest income | | | 12,558 | | | | 12,080 | | | | 11,600 | | | | 10,537 | | | | 10,608 | | | | 10,086 | |
Costs to originate credit card balances of £480m (2015: £368m) have been amortised to interest during the period. Interest income includes £149m (2014: £153m)£75m (2015: £91m; 2014: £117m) accrued on impaired loans. Other interest income principally includes interest income relating to reverse repurchase agreements and hedging activity.agreements. Similarly, other interest expense principally includes interest expense relating to repurchase agreements and hedging activity.agreements. Included in net interest income is hedge ineffectiveness as detailed on page 233.in Note 15. 2016 Net interest income remained stable at £10,537m (2015: £10,608m), driven by increased expenses from debt securities in issue partially offset by volume growth and margin improvement within Barclays International cards portfolio. 2015 Net interest income increased by 4%£522m (5%) to £12,558m,£10,608m, primarily driven by margin improvement in Barclaycard and Africa Banking, and volume growth in both PCB and Barclaycard. This was partially offset by a decrease in Head Office due to a reduction in interest income on AFS investments. Interest income decreased by 1% to £17,201m, driven by a decline in income on AFS investments which fell 14% to £1,387m. Interest expense decreased 12% to £4,643m, driven by reducedlower interest expense onfrom customer accounts falling by 37% to £930m.accounts. 2014Note
Net interest income increased by 4% to £12,080m, driven by improvements in PCB savings margins and volume growth in Barclaycard, partially offset by a reduction in Africa Banking due to currency movements and the sale and rundown of assets in Non-Core. Interest income decreased by 5% to £17,363m, driven by a reduction in income from loans and advances to customers which fell 6% to £14,677m. Interest expense reduced 21% to £5,283m, driven by a reduction in interest on customer accounts of £1,183m to £1,473m.
a | Both interest income and interest expense for 2015 and 2014 have been adjusted by £442m and £605m respectively in order to better align the effect of hedge accounting relationships with the related hedged items. The following categories were restated: financial investments by £(545)m (2014: £(637)m), loans and advances to customers by £987m (2014: £1,242m). Customer accounts by £(1,783)m (2014: £(2,016)m), debt securities in issue by £784m (2014: £859m) and subordinated liabilities by £557m (2014: £552m). |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 221231 |
Notes to the financial statements Performance/return 4 Net fee and commission income | Accounting for net fee and commission income The Group applies IAS 18Revenue.Revenue. Fees and commissions charged for services provided or received by the Group are recognised as the services are provided, for example on completion of the underlying transaction. |
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| Fee and commission income | | | | | | | | | | | | | Banking, investment management and credit related fees and commissions | | | 9,497 | | | | 9,681 | | | | 10,311 | | | | 8,452 | | | | 8,340 | | | | 8,483 | | Foreign exchange commission | | | 158 | | | | 155 | | | | 168 | | | | 118 | | | | 130 | | | | 139 | | Fee and commission income | | | 9,655 | | | | 9,836 | | | | 10,479 | | | | 8,570 | | | | 8,470 | | | | 8,622 | | Fee and commission expense | | | (1,763 | ) | | | (1,662 | ) | | | (1,748 | ) | | | (1,802 | ) | | | (1,611 | ) | | | (1,500 | ) | Net fee and commission income | | | 7,892 | | | | 8,174 | | | | 8,731 | | | | 6,768 | | | | 6,859 | | | | 7,122 | |
20152016
Net fee and commission income decreased £282m£91m to £7,892m.£6,768m. This was primarily driven by an increase in expenses in Barclays International due to higher customer reward costs and lower fees income inNon-Core due to the sale of the US and Asia wealth businesses and the closure of the equities traded securities business as well as a decrease within Barclays UK due to lower interchange fees on account of EU Interchange regulation. These movements were partially offset by an increase in income in Barclays International driven by growth in the cards portfolio and an increase in investment banking business due to higher fees income from the US loans/bonds and investment grade products coupled with higher financial advisory fees. 2015 Net fee and commission income decreased £263m to £6,859m. This was primarily driven by lower income inNon-Core due to the sale of the US Wealth and Spanish retail businessesbusiness and the Barclays UK business due to the launch of the revised PCB overdraft proposition in mid 2014, which recognises the majority of the overdraft income as net interest income as opposed to fee income. Investment Bank income decreased,The decrease in Barclays International is driven by lower equity underwriting fees partially offset by higher financial advisory and debt underwriting fees. Growthfees and increase in Africa Banking was offset by adverse currency movements. These movements were partly offset by increases in Barclaycard International, driven by growth in payment volumes. 2014
Net fee and commission income decreased £557m to £8,174m. This was driven by lower fees as a result of decreased debt underwriting fees and declines in cash commissions, reflecting lower volumes in the Investment Bank. Further decreases were caused by the launch of the revised PCB overdraft proposition, which recognises the majority of the overdraft income as net interest income as opposed to fee income, and adverse currency movements in Africa Banking. These movements were partly offset by increases in Barclaycard, driven by growth in payment volumes.
5 Net trading income | Accounting for net trading income In accordance with IAS 39,Financial Instruments: Recognition and Measurement, 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. Income arises from both the sale and purchase of trading positions, margins which are achieved through market makingmarket-making and customer business and from changes in fair value caused by movements in interest and exchange rates, equity prices and other market variables. Own credit gains/losses arise from the fair valuation of financial liabilities designated at fair value through profit andor loss. See Note 17 Financial liabilities designated at fair value. |
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| 2014 £m | | Trading income | | | 3,193 | | | | 3,297 | | | | 6,773 | | | | 2,803 | | | | 2,996 | | | | 3,052 | | Own credit gains/(losses) | | | 430 | | | | 34 | | | | (220 | ) | | Own credit (losses)/gains | | | | (35) | | | | 430 | | | | 34 | | Net trading income | | | 3,623 | | | | 3,331 | | | | 6,553 | | | | 2,768 | | | | 3,426 | | | | 3,086 | |
Included within net trading income were gains of £31m (2015: £992m (2014:gain; 2014: £1,051m loss, 2013: £914m gain)loss) on financial assets designated at fair value and lossesgains of £346m (2015: £187m (2014:loss; 2014: £65m loss, 2013: £684m loss) on financial liabilities designated at fair value. 2016 Net trading income decreased by 19% to £2,768m, primarily reflecting a £465m movement in own credit as the credit spreads on Barclays’ issued debt were relatively flat as compared to prior year. Trading income decreased by £193m, mainly driven by the continued disposal and running down of certain businesses and fair value reduction on the ESHLA portfolio withinNon-Core. This was partially offset by higher contributions from Fixed Income businesses that benefited from market volatility and higher client volumes during the year. 2015 Net trading income increased 9%by 11% to £3,623m,£3,426m, primarily reflecting a £396m favourable variance in own credit due to widening of credit spreads on Barclays’ issued debt. Trading income decreased by £104m,£56m, mainly driven by the continued disposal and running down of certain businesses and fair value movements on the ESHLA portfolio within Non-Core, and depreciation of ZAR against GBP.Non-Core. This was partially offset by increases in various Investment Bankinvestment banking businesses within Barclays International driven by higher volatility and trading activity during the year. 2014
Net trading income decreased 49% to £3,331m, primarily reflecting a £2,541m decrease in trading income, as lower volatility and subdued trading activity combined with tighter spreads reduced income across a number of businesses. Disposals and running down of certain Non-Core businesses and the £935m fair value reduction on the ESHLA portfolio (see Note 18 for further details) also contributed to the lower income. This was partially offset by a £254m favourable variance in own credit gains/losses.
| | | 222232 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
6 Net investment income | Accounting for net investment income Dividends are recognised when the right to receive the dividend has been established. Other accounting policies relating to net investment income are set out in Note 16 Available for sale financial assets and Note 14 Financial assets designated at fair value.value and Note 16 Financial Investments. |
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| 2014 £m | | Net gain from disposal of available for sale investments | | | 374 | | | | 620 | | | | 145 | | | | 912 | | | | 385 | | | | 622 | | Dividend income | | | 8 | | | | 9 | | | | 14 | | | | 8 | | | | 8 | | | | 9 | | Net gain from financial instruments designated at fair value | | | 238 | | | | 233 | | | | 203 | | | | 158 | | | | 193 | | | | 203 | | Other investment income | | | 518 | | | | 466 | | | | 318 | | | | 246 | | | | 511 | | | | 475 | | Net investment income | | | 1,138 | | | | 1,328 | | | | 680 | | | | 1,324 | | | | 1,097 | | | | 1,309 | |
2016 Net investment income increased by 21% to £1,324m. This was largely driven by a gain of £615m on disposal of Barclays’ share of Visa Europe Limited and gains on buy-back of senior and subordinated debt issuances. These increases were partially offset by non-repeat of gains of £496m recognised in 2015 in other investment income due to the final and full legal settlement in respect of US Lehman acquisition assets. 2015 Net investment income decreased by £190m16% to £1,138m.£1,097m. This was largely driven by lower gains and fewer disposals of available for sale investments due to unfavourable market conditions. During the year a gain of £496m (2014: £461m) was recognised in other investment income due to the final and full legal settlement in respect of US Lehman acquisition assets. 2014
Net investment income increased by £648m to £1,328m. This was largely driven by an increase in disposals of available for sale investments due to favourable market conditions and increases in other investment income as a result of greater certainty regarding the recoverability of certain assets not yet received from the 2008 US Lehman acquisition (2014: £461m gain; 2013: £259m gain).
7 Credit impairment charges and other provisions | Accounting for the impairment of financial assets Loans and other assets held at amortised cost In accordance with IAS 39, the Group assesses at each balance sheet date whether there is objective evidence that loan assets or available for sale financial investments (debt or equity) will not be recovered in full and, wherever necessary, recognises an impairment loss in the income statement. An impairment loss is recognised if there is objective evidence of impairment as a result of events that have occurred and these have adversely impacted the estimated future cash flows from the assets. These events include: §☒ becoming aware of significant financial difficulty of the issuer or obligor
§☒ a breach of contract, such as a default or delinquency in interest or principal payments
§☒ the Group, for economic or legal reasons relating to the borrower’s financial difficulty, grants a concession that it would not otherwise consider
§☒ it becomes probable that the borrower will enter bankruptcy or other financial reorganisation
§☒ the disappearance of an active market for that financial asset because of financial difficulties and
§☒ observable data at a portfolio level indicating that there is a measurable decrease in the estimated future cash flows, although the decrease cannot yet be ascribed to individual financial assets in the portfolio – such as adverse changes in the payment status of borrowers in the portfolio or national or local economic conditions that correlate with defaults on the assets in the portfolio.
Impairment assessments are conducted individually for significant assets, which comprise all wholesale customer loans and larger retail business loans and collectively for smaller loans and for portfolio level risks, such as country or sectoral risks. For the purposes of the assessment, loans with similar credit risk characteristics are grouped together – generally on the basis of their product type, industry, geographical location, collateral type, past due status and other factors relevant to the evaluation of expected future cash flows. The impairment assessment includes estimating the expected future cash flows from the asset or the group of assets, which are then discounted using the original effective interest rate calculated for the asset. If this is lower than the carrying value of the asset or the portfolio, an impairment allowance is raised. 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. Following impairment, interest income continues to be recognised at the original effective interest rate on the restated carrying amount, representing the unwind of the discount of the expected cash flows, including the principal due onnon-accrual loans. Uncollectable loans are written off against the related allowance for loan impairment on completion of the Group’s internal processes andwhen all reasonably expected recoverable amounts have been collected. Subsequent recoveries of amounts previously written off are credited to the income statement. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 223233 |
Notes to the financial statements Performance/return 7 Credit impairment charges and other provisionscontinued | Available for sale financial assets Impairment of available for sale debt instruments Debt instruments are assessed for impairment in the same way as loans. If impairment is deemed to have occurred, the cumulative decline in the fair value of the instrument that has previously been recognised in the AFSavailable for sale reserve is removed from reserves and recognised in the income statement. This may be reversed if there is evidence that the circumstances of the issuer have improved. Impairment of available for sale equity instruments Where there has been a prolonged or significant decline in the fair value of an equity instrument below its acquisition cost, it is deemed to be impaired. The cumulative net loss that has been previously recognised directly in the AFSavailable for sale reserve is removed from reserves and recognised in the income statement. Increases in the fair value of equity instruments after impairment are recognised directly in other comprehensive income. Further declines in the fair value of equity instruments after impairment are recognised in the income statement. Critical accounting estimates and judgements The calculation of impairment involves the use of judgement, based on the Group’s experience of managing credit risk. Within the retail and small businesses portfolios, which comprise large numbers of small homogenoushomogeneous 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 retail portfolios is £1,808m (2014: £1,844m, 2013: £2,161m)£2,053m (2015: £1,535m; 2014: £1,549m) and amounts to 86% (2014: 84%, 2013: 71%87% (2015: 88%; 2014: 83%) of the total impairment charge on loans and advances. 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 thework-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 aswork-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 £289m (2014: £360m, 2013: £901m)£299m (2015: £209m; 2014: £308m) and amounts to 14% (2014: 16%, 2013: 29%13% (2015: 12%; 2014: 17%) of the total impairment charge on loans and advances. Further information on impairment allowances and related credit information is set out within the Risk review. |
| | | | 2015 £m | | | | 2014 £m | | | | 2013 £m | | |
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| 2014 £m | | New and increased impairment allowances | | | 3,056 | | | | 3,230 | | | | 3,929 | | | | 3,259 | | | | 2,641 | | | | 2,809 | | Releases | | | (547 | ) | | | (809 | ) | | | (683 | ) | | | (551 | ) | | | (535 | ) | | | (791 | ) | Recoveries | | | (400 | ) | | | (221 | ) | | | (201 | ) | | | (365 | ) | | | (350 | ) | | | (166 | ) | Impairment charges on loans and advances | | | 2,109 | | | | 2,200 | | | | 3,045 | | | | 2,343 | | | | 1,756 | | | | 1,852 | | Provision (releases)/charges for undrawn contractually committed facilities and guarantees provided | | | (12 | ) | | | 4 | | | | 17 | | | Provision charges/(releases) for undrawn contractually committed facilities and guarantees provided | | | | 9 | | | | (12 | ) | | | 5 | | Loan impairment | | | 2,097 | | | | 2,204 | | | | 3,062 | | | | 2,352 | | | | 1,744 | | | | 1,857 | | Available for sale investment | | | 17 | | | | (31 | ) | | | 1 | | | | 21 | | | | 18 | | | | (31 | ) | Reverse repurchase agreements | | | – | | | | (5 | ) | | | 8 | | | | – | | | | – | | | | (5 | ) | Credit impairment charges and other provisions | | | 2,114 | | | | 2,168 | | | | 3,071 | | | | 2,373 | | | | 1,762 | | | | 1,821 | |
20152016
Loan impairment fell 5%increased by 35% to £2,097m,£2,352m, primarily due to increased charges following the management review of impairment modelling for UK and US cards portfolios and the impairment of a number of single name exposures. 2015 Loan impairment decreased by 6% to £1,744m, reflecting lower impairment in PCBBarclays UK andNon-Core, partially offset by higherincreased charges in the Investment Bank and Barclaycard. 2014Barclays International.
Loan impairment fell 28% to £2,204m, reflecting lower impairment in Non-Core, PCB, and Africa Banking partially offset by higher charges in Barclaycard.
| | | 224234 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
8 Operating expenses | Accounting for staff costs The Group applies IAS 19Employee benefits in its accounting for most of the components of staff costs. Short-term employee benefits – salaries, accrued performance costs and social security are recognised over the period in which the employees provide the services to which the payments relate. Performance costs – recognised to the extent that the Group has a present obligation to its employees that can be measured reliably and are recognised over the period of service that employees are required to work to qualify for the services. Deferred cash bonus awards and deferred share bonus awards are made to employees to incentivise performance over the vesting period.period employees provide services. To receive payment under an award, employees must provide service over the vesting period, typically three years from the grant date.period. The period over which the expense for deferred cash and share bonus awards is recognised is based upon the common understanding betweenperiod employees consider their services contribute to the employee andawards. For past awards, the Group and the terms and conditions of the award. The Group considers that it is appropriate to recognise the awards over the period from the date of grant to the date that the awards vest as this is the period over which the employees understand that they must provide service in ordervest. In relation to receive awards. The table on page 91 details the relevant award dates, payment dates and the period in which the income statement charge arises for bonuses. No expense has been recognised in 2015 for the deferred bonuses that will beawards granted in March2017, the Group, taking into account the changing employee understanding surrounding those awards, considered it appropriate for expense to be recognised over four years including the financial year prior to the grant date. The impact in 2016 as they are dependent upon future performance rather than performance during 2015.of the 2017 grant is an expense of £150m including social security costs. The accounting policies for share basedshare-based payments, and pensions and other post retirementpost-retirement benefits are included in Note 34 and Note 35 respectively. |
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| 2014
£m |
| Infrastructure costs | | | | | | | | | | | | | Property and equipment | | | 1,353 | | | | 1,570 | | | | 1,610 | | | | 1,180 | | | | 1,082 | | | | 1,281 | | Depreciation of property, plant and equipment | | | 554 | | | | 585 | | | | 647 | | | | 492 | | | | 475 | | | | 495 | | Operating lease rentals | | | 500 | | | | 594 | | | | 645 | | | | 561 | | | | 411 | | | | 512 | | Amortisation of intangible assets | | | 617 | | | | 522 | | | | 480 | | | | 670 | | | | 570 | | | | 454 | | Impairment of property, equipment and intangible assets | | | 153 | | | | 172 | | | | 149 | | | | 95 | | | | 150 | | | | 153 | | Gain on property disposals | | | 3 | | | | – | | | | – | | | | – | | | | 3 | | | | – | | Total infrastructure costs | | | 3,180 | | | | 3,443 | | | | 3,531 | | | | 2,998 | | | | 2,691 | | | | 2,895 | | Administration and general costs | | | | | | | | | | | | | Consultancy, legal and professional fees | | | 1,191 | | | | 1,104 | | | | 1,253 | | | | 1,105 | | | | 1,078 | | | | 997 | | Subscriptions, publications, stationery and communications | | | 760 | | | | 842 | | | | 869 | | | | 644 | | | | 678 | | | | 756 | | Marketing, advertising and sponsorship | | | 536 | | | | 558 | | | | 583 | | | | 435 | | | | 451 | | | | 470 | | Travel and accommodation | | | 218 | | | | 213 | | | | 307 | | | | 136 | | | | 188 | | | | 185 | | UK bank levy | | | 476 | | | | 462 | | | | 504 | | | | 410 | | | | 425 | | | | 418 | | Goodwill impairment | | | 102 | | | | – | | | | 79 | | | | – | | | | 102 | | | | – | | Other administration and general expenses | | | 245 | | | | 442 | | | | 518 | | | | 187 | | | | 61 | | | | 243 | | Total administration and general costs | | | 3,528 | | | | 3,621 | | | | 4,113 | | | | 2,917 | | | | 2,983 | | | | 3,069 | | Recurring staff cost | | | 10,389 | | | | 11,005 | | | | 12,155 | | | Gains on retirement benefits | | | (429 | ) | | | – | | | | – | | | Staff costs | | | 9,960 | | | | 11,005 | | | | 12,155 | | | | 9,423 | | | | 8,853 | | | | 9,860 | | Provision for UK customer redress | | | 2,772 | | | | 1,110 | | | | 2,000 | | | | 1,000 | | | | 2,772 | | | | 1,110 | | Provision for ongoing investigations and litigation including Foreign Exchange | | | 1,237 | | | | 1,250 | | | | 173 | | | | – | | | | 1,237 | | | | 1,250 | | Operating expenses | | | 20,677 | | | | 20,429 | | | | 21,972 | | | | 16,338 | | | | 18,536 | | | | 18,184 | |
For information on2016
Operating expenses decreased by 12% to £16,338m (2015: £18,536m) primarily due to lower PPI provisions and lower litigation provisions in 2016. This is partially offset by an increase in staff costs referprimarily due to pages 57£395m of additional charges relating to 58 of the Remuneration Report.2016 compensation costs. 2015 Operating expenses have increased by 1%2% to £20,677m (2014: £20,429m)£18,536m attributable to an increase in provisions for UK customer redress including PPI and an increase in impairment of goodwill partially offset by a decrease in staff costs (includes a gain on Retirementretirement benefits, refer to Note 35, of £429m) and infrastructure costs reflecting savings from strategic cost programmes. 2014
Operating expenses have reduced by 7% to £20,429m, primarily driven by savings from strategic cost programmes, including a 5% reduction in headcount and currency movements, lower provisions for UK customer redress including PPI, reduced IT and infrastructure spend and non-occurrence of various provisions raised last year. This was partially offset by the charge of £1,250m (2013: £173m) for ongoing investigations and litigation relating to Foreign Exchange.
The impact of strategic cost programmes have driven savings across infrastructure and administration costs. Staff costs have decreased by 9% to £11,005m, reflecting a 5% net reduction in headcount and reductions in incentive awards granted.
9 Profit/(loss) on disposal of subsidiaries, associates and joint ventures During the year, the lossgain on disposal of subsidiaries, associates and joint ventures was £637m (2014:£420m (2015: loss of £471m, 2013: gain£637m; 2014: loss of £6m)£473m), principally relating to the sale of Spanish, PortugueseBarclays Risk Analytics and Italian businesses.Index Solutions, the disposal of the Southern European card business and the sale of the private banking and wealth management services conducted through the Hong Kong and Singapore branches. These gains were partially offset with the IFRS 5 charge on an impending disposal of the French business. Please refer to Note 44Non-current assets held for sale and associated liabilities.liabilities for further detail. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 225235 |
Notes to the financial statements Performance/return 10 Tax | Accounting for income taxes Barclays applies IAS 12Income Taxes in accounting for taxes on income. Income tax payable on taxable profits (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 a current tax asset only to the extent that it is regarded as recoverable by offset against taxable profits arising in the current or prior period. Current tax is measured using tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date. Deferred 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 tax is determined using tax rates and legislation enacted or substantively 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. Deferred tax assets and liabilities are only offset when there is both a legal right toset-off and an intention to settle on a net basis. The Group considers an uncertain tax position to exist when it considers that ultimately, in the future, the amount of profit subject to tax may be greater than the amount initially reflected in the Group’s tax returns. The Group accounts for provisions in respect of uncertain tax positions in two different ways. A current tax provision is recognised when it is considered probable that the outcome of a review by a tax authority of an uncertain tax position will alter the amount of cash tax due to, or from, a tax authority in the future. From recognition, the current tax provision is then measured at the amount the Group ultimately expects to pay the tax authority to resolve the position. Deferred tax provisions are adjustments made to the carrying value of deferred tax assets in respect of uncertain tax positions. A deferred tax provision is recognised when it is considered probable that the outcome of a review by a tax authority of an uncertain tax position will result in a reduction in the carrying value of the deferred tax asset. From recognition of a provision, measurement of the underlying deferred tax asset is adjusted to take into account the expected impact of resolving the uncertain tax position on the loss or temporary difference giving rise to the deferred tax asset. The approach taken to measurement takes account of whether the uncertain tax position is a discrete position that will be reviewed by the tax authority in isolation from any other position, or one of a number of issues which are expected to be reviewed together concurrently and resolved simultaneously with a tax authority. Barclays’ measurement of provisions is based upon its best estimate of the additional profit that will become subject to tax. For a discrete position, consideration is given only to the merits of that position. Where a number of issues are expected to be reviewed and resolved together, Barclays will take into account not only the merits of its position in respect of each particular issue but also the overall level of provision relative to the aggregate of the uncertain tax positions across all the issues that are expected to be resolved at the same time. In addition, in assessing provision levels, it is assumed that tax authorities will review uncertain tax positions and that all facts will be fully and transparently disclosed. |
| | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Current tax charge | | | | | | | | Current tax charge/(credit) | | | | | | | | Current year | | | 1,901 | | | | 1,421 | | | | 1,997 | | | | 896 | | | | 1,605 | | | | 1,131 | | Adjustment for prior years | | | (183 | ) | | | (19 | ) | | | 156 | | | Adjustments in respect of prior years | | | | (361) | | | | (188) | | | | (19) | | | | | 1,718 | | | | 1,402 | | | | 2,153 | | | | 535 | | | | 1,417 | | | | 1,112 | | Deferred tax charge/(credit) | | | | | | | | | | | | | Current year | | | (346 | ) | | | 75 | | | | (68 | ) | | | 393 | | | | (346) | | | | 75 | | Adjustment for prior years | | | 78 | | | | (66 | ) | | | (514 | ) | | Adjustments in respect of prior years | | | | 65 | | | | 78 | | | | (66) | | | | | (268 | ) | | | 9 | | | | (582 | ) | | | 458 | | | | (268) | | | | 9 | | Tax charge | | | 1,450 | | | | 1,411 | | | | 1,571 | | | | 993 | | | | 1,149 | | | | 1,121 | |
| | | 236 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
10 Tax relating to each component of other comprehensive income can be found in the consolidated statement of comprehensive income which additionally includes within Other a tax credit of £21m (2014: £42m charge) principally relating to share based payments.continued The table below shows the reconciliation between the actual tax charge and the tax charge that would result from applying the standard UK corporation tax rate to the Group’s profit before tax. | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2015
£m |
| |
| 2015
% |
| |
| 2014
£m |
| |
| 2014
% |
| |
| 2013
£m |
| |
| 2013
% |
| Profit before tax from continuing operations | | | 2,073 | | | | | | | | 2,256 | | | | | | | | 2,868 | | | | | | Tax charge based on the standard UK corporation tax rate of 20.25% (2014: 21.50%, 2013: 23.25%) | | | 420 | | | | 20.25 | | | | 485 | | | | 21.50 | | | | 667 | | | | 23.25 | | | | | | | | | Non-creditable taxes including withholding taxes | | | 309 | | | | 14.9 | | | | 329 | | | | 14.6 | | | | 559 | | | | 19.5 | | Non-deductible provisions for UK customer redress | | | 283 | | | | 13.6 | | | | – | | | | – | | | | – | | | | – | | Non-UK profits at statutory tax rates different from the UK statutory tax rate | | | 274 | | | | 13.2 | | | | 253 | | | | 11.2 | | | | 328 | | | | 11.4 | | Non-deductible provisions for ongoing investigations and litigation including Foreign Exchange | | | 261 | | | | 12.6 | | | | 387 | | | | 17.2 | | | | – | | | | – | | Non-deductible expenses including UK bank levy | | | 207 | | | | 10.0 | | | | 285 | | | | 12.6 | | | | 296 | | | | 10.3 | | Impact of change in tax rates | | | 158 | | | | 7.6 | | | | 9 | | | | 0.4 | | | | (159 | ) | | | (5.5 | ) | Tax adjustments in respect of share based payments | | | 30 | | | | 1.4 | | | | 21 | | | | 0.9 | | | | (13 | ) | | | (0.5 | ) | Non-deductible impairments and losses on disposal | | | 26 | | | | 1.3 | | | | 234 | | | | 10.4 | | | | – | | | | – | | Non-taxable gains and income | | | (241 | ) | | | (11.6 | ) | | | (282 | ) | | | (12.5 | ) | | | (234 | ) | | | (8.2 | ) | Adjustments in respect of prior years | | | (105 | ) | | | (5.1 | ) | | | (85 | ) | | | (3.8 | ) | | | (358 | ) | | | (12.5 | ) | Changes in recognition and measurement of deferred tax assets | | | (77 | ) | | | (3.7 | ) | | | (183 | ) | | | (8.1 | ) | | | 409 | | | | 14.3 | | Other items | | | (52 | ) | | | (2.5 | ) | | | 40 | | | | 1.8 | | | | 137 | | | | 4.8 | | Non-UK losses at statutory tax rates different from the UK statutory tax rate | | | (43 | ) | | | (2.1 | ) | | | (82 | ) | | | (3.6 | ) | | | (61 | ) | | | (2.1 | ) | Tax charge | | | 1,450 | | | | 69.9 | | | | 1,411 | | | | 62.5 | | | | 1,571 | | | | 54.8 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2016 £m | | |
| 2016
% |
| |
| 2015 £m | | |
| 2015
% |
| |
| 2014 £m | | |
| 2014
% |
| Profit before tax from continuing operations | | | 3,230 | | | | | | | | 1,146 | | | | | | | | 1,313 | | | | | | Tax charge based on the standard UK corporation tax rate of 20% | | | | | | | | | | | | | | | | | | | | | | | | | (2015: 20.25%, 2014; 21.50%) | | | 646 | | | | 20.0% | | | | 232 | | | | 20.25% | | | | 282 | | | | 21.5% | | Impact of profits/losses earned in territories with different statutory rates to the UK (weighted average tax rate is 32.8% | | | | | | | | | | | | | | | | | | | | | | | | | (2015: 33.4%, 2014; 29.3%)) | | | 415 | | | | 12.8% | | | | 151 | | | | 13.2% | | | | 103 | | | | 7.8% | | | | | | | | | Recurring items: | | | | | | | | | | | | | | | | | | | | | | | | | Non-creditable taxes including withholding taxes | | | 277 | | | | 8.6% | | | | 309 | | | | 27.0% | | | | 329 | | | | 25.1% | | Non-deductible expenses | | | 114 | | | | 3.5% | | | | 67 | | | | 5.8% | | | | 146 | | | | 11.1% | | Impact of UK bank levy beingnon-deductible | | | 82 | | | | 2.5% | | | | 96 | | | | 8.4% | | | | 99 | | | | 7.5% | | Other items | | | 58 | | | | 1.9% | | | | (14 | ) | | | (1.1% | ) | | | 42 | | | | 3.3% | | Tax adjustments in respect of share-based payments | | | 34 | | | | 1.1% | | | | 30 | | | | 2.6% | | | | 21 | | | | 1.6% | | Impact of change in tax rates | | | 30 | | | | 0.9% | | | | 158 | | | | 13.8% | | | | 9 | | | | 0.7% | | Adjustments in respect of prior years | | | (296 | ) | | | (9.2% | ) | | | (110 | ) | | | (9.6% | ) | | | (85 | ) | | | (6.5% | ) | Non-taxable gains and income | | | (199 | ) | | | (6.2% | ) | | | (197 | ) | | | (17.2% | ) | | | (212 | ) | | | (16.1% | ) | Changes in recognition of deferred tax and effect of unrecognised tax losses | | | (178 | ) | | | (5.5% | ) | | | (71 | ) | | | (6.2% | ) | | | (115 | ) | | | (8.8% | ) | Impact of Barclays Bank PLC’s overseas branches being taxed both locally and in the UK | | | (128 | ) | | | (4.0% | ) | | | (35 | ) | | | (3.1% | ) | | | (68 | ) | | | (5.2% | ) | | | | | | | | Non-recurring items: | | | | | | | | | | | | | | | | | | | | | | | | | Non-deductible provisions for UK customer redress | | | 203 | | | | 6.3% | | | | 283 | | | | 24.7% | | | | – | | | | – | | Non-deductible impairments and losses on divestments | | | 67 | | | | 2.1% | | | | 39 | | | | 3.4% | | | | 234 | | | | 17.8% | | Non-deductible provisions for investigations and litigation | | | 48 | | | | 1.5% | | | | 261 | | | | 22.8% | | | | 387 | | | | 29.5% | | Non-taxable gains and income on divestments | | | (180 | ) | | | (5.6% | ) | | | (50 | ) | | | (4.4% | ) | | | (51 | ) | | | (3.9% | ) | | | | | | | | | | | | | | | | | | | | | | | | | | Total tax charge | | | 993 | | | | 30.7% | | | | 1,149 | | | | 100.3% | | | | 1,121 | | | | 85.4% | |
Factors driving the effective tax rate The effective tax rate of 69.9% (2014: 62.5%) increased from30.7% is higher than the previous year. ThisUK corporation tax rate of 20% primarily due to profits earned outside the UK being taxed at higher local statutory tax rates. In addition the effective tax rate is mainly due toaffected by provisions for UK customer redress that were beingnon-deductible in 2015 as a result of changes introduced by the for tax purposes,non-creditable taxes andnon-deductible expenses including UK summer Budget, andbank levy. These factors, which have each increased the impact of changes to tax rates. The changes to tax rates in the period that had an adverse impact on the 2015 tax charge were the reduction of the local New York tax rate and the increase of the UK tax rate, specifically through the introduction of the new corporation tax surcharge that applies to banks. These tax rate changes resulted in the carrying value of US deferred tax assets being reduced and are further explained later in Note 10. The effective tax rate, are partially offset by the impact ofnon-taxable gains and income, including those arising from divestments, and reductions in expected liabilities in respect of 69.9% on statutory profit before tax is significantly higher thana range of issues related to a number of prior years.
Relative to the prior year, the effective tax rate on adjusted profit before tax. For further detailstax decreased to 30.7% (2015: 100.3%). This was principally a result of a lower level ofnon-deductible provisions for investigations and litigation in 2016, as well as gains arising in 2016 on the adjusteddivestment of businesses and assets, as the Group has pursued its strategy to run-downNon-Core, that were taxed at low rates. The Group’s future tax charge will be sensitive to the geographic mix of profits earned and the tax rates in force in the jurisdictions in which we operate. In the UK, legislation to reduce the corporation tax rate to 19% from 1 April 2017 and to 17% from 1 April 2020 has been enacted. In the US, proposed tax reform measures include a reduction in the US corporate income tax rate to as low as 15%. The US rate change is a proposal only at this stage and developments are being closely monitored. In the long term, a reduction in the tax rate would enhance the returns generated by the Group’s US business. However, if enacted, such a change would have a substantialup-front negative impact on the measurement of the Group’s US deferred tax assets, although this would reverse over time and result in a lower effective tax rate please referas these assets are utilised. Tax in the consolidated statement of comprehensive income The most significant tax charge in the consolidated statement of comprehensive income relates to page 187cash flow hedging reserve. The majority of this tax charge is on income brought into charge in the UK in 2016 and this reflects the new surcharge of 8%, that applies to banks’ UK profits, as well as the standard UK corporation tax rate of 20%. Additionally included within the ‘Other’ line is a tax credit of £21m (2015: £21m credit) relating to share-based payments. Tax in respect of discontinued operation Tax relating to the discontinued operation can be found in the BAGL disposal group income statement (see Note 44). The tax charge of £306m (2015: £301m) relates entirely to the profit from the ordinary activities of the financial review.discontinued operation. | | | 226 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 237 |
Notes to the financial statements Performance/return 10 Tax continued Current tax assets and liabilities Movements on current tax assets and liabilities were as follows: | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2016 £m | | |
| 2015 £m | | Assets | | | 334 | | | | 219 | | | | 415 | | | | 334 | | Liabilities | | | (1,021 | ) | | | (1,042 | ) | | | (903 | ) | | | (1,021 | ) | As at 1 January | | | (687 | ) | | | (823 | ) | | | (488 | ) | | | (687 | ) | Income statement | | | (1,718 | ) | | | (1,402 | ) | | Income statement from continuing operations | | | | (535 | ) | | | (1,417 | ) | Income statement in relation to BAGL disposal group | | | | – | | | | (301 | ) | Other comprehensive income | | | 6 | | | | (26 | ) | | | 23 | | | | 6 | | Corporate income tax paid | | | 1,670 | | | | 1,552 | | | | 780 | | | | 1,670 | | Other movements | | | 241 | | | | 12 | | | | 44 | | | | 241 | | | | | (488 | ) | | | (687 | ) | | | (176 | ) | | | (488 | ) | Assets | | | 415 | | | | 334 | | | | 561 | | | | 415 | | Liabilities | | | (903 | ) | | | (1,021 | ) | | | (737 | ) | | | (903 | ) | As at 31 December | | | (488 | ) | | | (687 | ) | | | (176 | ) | | | (488 | ) | | Deferred tax assets and liabilities | | | | | | | | | The deferred tax amounts on the balance sheet were as follows: | | | | | | | | | | |
| 2015
£m |
| | | 2014 £m | | |
| 2016 £m | | |
| 2015 £m | | Barclays Group US Inc (BGUS) – US tax group | | | 1,903 | | | | 1,588 | | | Intermediate Holding Company (IHC) – US tax group | | | | 2,207 | | | | 2,049 | | Barclays Bank PLC (US Branch) – US tax group | | | 1,569 | | | | 1,591 | | | | 1,766 | | | | 1,569 | | Barclays PLC – UK tax group | | | 411 | | | | 461 | | | | 575 | | | | 411 | | Other | | | 612 | | | | 490 | | | | 321 | | | | 466 | | Deferred tax asset | | | 4,495 | | | | 4,130 | | | | 4,869 | | | | 4,495 | | Deferred tax liability | | | (122 | ) | | | (262 | ) | | | (29 | ) | | | (122 | ) | Net deferred tax | | | 4,373 | | | | 3,868 | | | | 4,840 | | | | 4,373 | |
US deferred tax assets in BGUSthe IHC and the US Branch The deferred tax asset in BGUSthe IHC of £1,903m (2014: £1,588m)£2,207m (2015: £2,049m) includes £449m (2014: £348m)£321m (2015: £503m) relating to tax losses and the deferred tax asset in the US Branch of £1,569m (2014: £1,591m)£1,766m (2015: £1,569m) includes £244m (2014: £479m)£142m (2015: £244m) relating to tax losses. Under US tax rules, losses can be carried forward and offset against profits for a period of 20 years. The losses first arose in 2011 in BGUSthe IHC and 2008 in the US Branch and therefore any unused amounts may begin to expire in 2031 and 2028 respectively. The remaining US deferred tax assets relate primarily to temporary differences for which there is no time limit on recovery. The valuation of the Group’s US deferred tax assets was adjusted downwards in 2015 as a result of bothfor the reduction in the local New York rate ofIHC tax which affected the deferred tax asset in both BGUSlosses and the US Branch and the introductionlosses are projected to be fully utilised by 2018. The measurement of the new UK corporation tax surcharge, which affected theUS branch deferred tax asset in theassets takes into account both US Branch. The US Branch deferred tax assetand UK tax. This is stated net of a measurement for UK tax because Barclays Bank PLC is subject to UK tax on its worldwide profits, including the profits of its non-UKoverseas branches. The US branch deferred tax asset forassets are valued at the BGUS tax loss is projected to be fully utilised in 2017 and the deferred tax asset fordifference between the US Branch loss to be fully utilised in 2018.and UK tax rates. UK tax group deferred tax asset The deferred tax asset in the UK tax group of £411m (2014: £461m)£575m (2015: £411m) relates entirely to temporary differences (2014: £245m related to tax losses). Based on profit forecasts, it is probable that there will be sufficient future taxable profits available against which the temporary differences will be utilised.differences. Other deferred tax assets The deferred tax asset of £612m (2014: £490m)£321m (2015: £466m) in other entities within the Group includes £209m (2014: £243m)£40m (2015: £155m) relating to tax losses carried forward. These deferred tax assets relate to a number of different territories and their recognition is based on profit forecasts or local country lawslaw which indicate that it is probable that the losses and temporary differences will be utilised. Of the deferred tax asset of £612m (2014: £490m)£321m (2015: £466m), an amount of £106m (2014: £140m)£267m (2015: £106m) relates to entities which have suffered a loss in either the current or prior year. This has been taken into account in reaching the above conclusion that these deferred tax assets will be fully recovered in the future. | | | | | 238 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 227 | | |
Notes to the financial statements
Performance/return
10 Taxcontinued The table below shows movements on deferred tax assets and liabilities during the year. The amounts are different from those disclosed on the balance sheet and in the preceding table as they are presented before offsetting asset and liability balances where there is a legal right toset-off and an intention to settle on a net basis. | | | |
| Fixed asset timing differences £m | | |
| Available for sale
investments £m |
| |
| Cash flow hedges £m | | |
| Retirement benefit
obligations £m |
| |
| Loan
impairment allowance £m |
| |
| Other provisions £m | | |
| Tax losses carried forward
£m |
| |
| Share-based payments and deferred com- pensation
£m |
| |
| Other
£m |
| |
| Total
£m |
| Assets | | | | 2,008 | | | | 28 | | | | 5 | | | | 95 | | | | 157 | | | | 261 | | | | 902 | | | | 623 | | | | 1,511 | | | | 5,590 | | Liabilities | | | | (194 | ) | | | (70 | ) | | | (239 | ) | | | (144 | ) | | | – | | | | – | | | | – | | | | – | | | | (570 | ) | | | (1,217 | ) | At 1 January 2016 | | | | 1,814 | | | | (42 | ) | | | (234 | ) | | | (49 | ) | | | 157 | | | | 261 | | | | 902 | | | | 623 | | | | 941 | | | | 4,373 | | Income statement | | | | (358 | ) | | | 9 | | | | (7 | ) | | | (8 | ) | | | 52 | | | | 17 | | | | (522 | ) | | | 15 | | | | 344 | | | | (458 | ) | Other comprehensive income | | | | – | | | | 49 | | | | (61 | ) | | | 132 | | | | – | | | | – | | | | – | | | | 20 | | | | (6 | ) | | | 134 | | Other movements | | | | 253 | | | | 26 | | | | (31 | ) | | | 16 | | | | (58 | ) | | | (27 | ) | | | 123 | | | | 74 | | | | 415 | | | | 791 | | | | | | 1,709 | | | | 42 | | | | (333 | ) | | | 91 | | | | 151 | | | | 251 | | | | 503 | | | | 732 | | | | 1,694 | | | | 4,840 | | Assets | | | | 1,801 | | | | 183 | | | | – | | | | 91 | | | | 151 | | | | 251 | | | | 503 | | | | 732 | | | | 2,013 | | | | 5,725 | | Liabilities | | | | (92 | ) | | | (141 | ) | | | (333 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | (319 | ) | | | (885 | ) | At 31 December 2016 | | | | 1,709 | | | | 42 | | | | (333 | ) | | | 91 | | | | 151 | | | | 251 | | | | 503 | | | | 732 | | | | 1,694 | | | | 4,840 | | | | | Fixed asset timing differences £m | | | | Available for sale investments £m | | | | Cash flow hedges £m | | | | Retirement benefit obligations £m | | | | Loan impairment allowance £m | | | | Other provisions £m | | | | Tax losses carried forward £m | | |
| Share based payments
and deferred compensation £m |
| | | Other £m | | |
| Total
£m |
| | | | | | | | | | | | | | | | | | | | | Assets | | | 1,542 | | | | 18 | | | | 5 | | | | 321 | | | | 176 | | | | 233 | | | | 1,315 | | | | 729 | | | | 951 | | | | 5,290 | | | | 1,542 | | | | 18 | | | | 5 | | | | 321 | | | | 176 | | | | 233 | | | | 1,315 | | | | 729 | | | | 951 | | | | 5,290 | | Liabilities | | | (555 | ) | | | (35 | ) | | | (464 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | (368) | | | | (1,422) | | | | (555 | ) | | | (35 | ) | | | (464 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | (368 | ) | | | (1,422 | ) | At 1 January 2015 | | | 987 | | | | (17 | ) | | | (459 | ) | | | 321 | | | | 176 | | | | 233 | | | | 1,315 | | | | 729 | | | | 583 | | | | 3,868 | | | | 987 | | | | (17 | ) | | | (459 | ) | | | 321 | | | | 176 | | | | 233 | | | | 1,315 | | | | 729 | | | | 583 | | | | 3,868 | | Income statement | | | 779 | | | | (13 | ) | | | 1 | | | | (119 | ) | | | (14 | ) | | | 21 | | | | (540 | ) | | | (126 | ) | | | 279 | | | | 268 | | | | 779 | | | | (13 | ) | | | 1 | | | | (119 | ) | | | (14 | ) | | | 21 | | | | (540 | ) | | | (126 | ) | | | 279 | | | | 268 | | Other comprehensive income | | | – | | | | (14 | ) | | | 221 | | | | (261 | ) | | | – | | | | – | | | | 122 | | | | (10 | ) | | | (21) | | | | 37 | | | | – | | | | (14 | ) | | | 221 | | | | (261 | ) | | | – | | | | – | | | | 122 | | | | (10 | ) | | | (21 | ) | | | 37 | | Other movements | | | 48 | | | | 2 | | | | 3 | | | | 10 | | | | (5 | ) | | | 7 | | | | 5 | | | | 30 | | | | 100 | | | | 200 | | | | 48 | | | | 2 | | | | 3 | | | | 10 | | | | (5 | ) | | | 7 | | | | 5 | | | | 30 | | | | 100 | | | | 200 | | | | | 1,814 | | | | (42 | ) | | | (234 | ) | | | (49 | ) | | | 157 | | | | 261 | | | | 902 | | | | 623 | | | | 941 | | | | 4,373 | | | | 1,814 | | | | (42 | ) | | | (234 | ) | | | (49 | ) | | | 157 | | | | 261 | | | | 902 | | | | 623 | | | | 941 | | | | 4,373 | | Assets | | | 2,008 | | | | 28 | | | | 5 | | | | 95 | | | | 157 | | | | 261 | | | | 902 | | | | 623 | | | | 1,511 | | | | 5,590 | | | | 2,008 | | | | 28 | | | | 5 | | | | 95 | | | | 157 | | | | 261 | | | | 902 | | | | 623 | | | | 1,511 | | | | 5,590 | | Liabilities | | | (194 | ) | | | (70 | ) | | | (239 | ) | | | (144 | ) | | | – | | | | – | | | | – | | | | – | | | | (570) | | | | (1,217) | | | | (194 | ) | | | (70 | ) | | | (239 | ) | | | (144 | ) | | | – | | | | – | | | | – | | | | – | | | | (570 | ) | | | (1,217 | ) | At 31 December 2015 | | | 1,814 | | | | (42 | ) | | | (234 | ) | | | (49 | ) | | | 157 | | | | 261 | | | | 902 | | | | 623 | | | | 941 | | | | 4,373 | | | | 1,814 | | | | (42 | ) | | | (234 | ) | | | (49 | ) | | | 157 | | | | 261 | | | | 902 | | | | 623 | | | | 941 | | | | 4,373 | | | | | | | | | | | | | | | | | | | | | | | | Assets | | | 1,525 | | | | 53 | | | | 5 | | | | 490 | | | | 376 | | | | 360 | | | | 1,235 | | | | 762 | | | | 1,078 | | | | 5,884 | | | Liabilities | | | (761 | ) | | | (61 | ) | | | (87 | ) | | | (9 | ) | | | – | | | | – | | | | – | | | | – | | | | (532) | | | | (1,450) | | | At 1 January 2014 | | | 764 | | | | (8 | ) | | | (82 | ) | | | 481 | | | | 376 | | | | 360 | | | | 1,235 | | | | 762 | | | | 546 | | | | 4,434 | | | Income statement | | | 172 | | | | 84 | | | | (1 | ) | | | (54 | ) | | | 70 | | | | (87 | ) | | | 4 | | | | (40 | ) | | | (157) | | | | (9) | | | Other comprehensive income | | | – | | | | (104 | ) | | | (380 | ) | | | (63 | ) | | | – | | | | – | | | | – | | | | (10 | ) | | | (5) | | | | (562) | | | Other movements | | | 51 | | | | 11 | | | | 4 | | | | (43 | ) | | | (270 | ) | | | (40 | ) | | | 76 | | | | 17 | | | | 199 | | | | 5 | | | | | | 987 | | | | (17 | ) | | | (459 | ) | | | 321 | | | | 176 | | | | 233 | | | | 1,315 | | | | 729 | | | | 583 | | | | 3,868 | | | Assets | | | 1,542 | | | | 18 | | | | 5 | | | | 321 | | | | 176 | | | | 233 | | | | 1,315 | | | | 729 | | | | 951 | | | | 5,290 | | | Liabilities | | | (555 | ) | | | (35 | ) | | | (464 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | (368) | | | | (1,422) | | | At 31 December 2014 | | | 987 | | | | (17 | ) | | | (459 | ) | | | 321 | | | | 176 | | | | 233 | | | | 1,315 | | | | 729 | | | | 583 | | | | 3,868 | | |
Other movements include the impact of changes in foreign exchange rates as well as deferred tax amounts relating to acquisitions, disposals and exchange gains and losses.transfers to held for sale. The amount of deferred tax liability expected to be settled after more than 12 months is £675m (2014: £1,123m)£273m (2015: £675m). The amount of deferred tax assets expected to be recovered after more than 12 months is £4,838m (2014: £4,845m)£5,066m (2015: £4,838m). These amounts are before offsetting asset and liability balances where there is a legal right toset-off and an intention to settle on a net basis. Unrecognised deferred tax Tax losses and temporary differences Deferred tax assets have not been recognised in respect of gross deductible temporary differences of £51m (2014: £2,332m),£64m (2015: £51m) and gross tax losses of £13,456m (2014: £9,764m) which includes£16,820m (2015: £13,456m). The increase in these losses in 2016 is largely a result of the weakening of sterling against the overseas currencies these losses are denominated in. The tax losses include capital losses of £3,838m (2014: £3,522m),£3,138m (2015: £3,838m) and unused tax credits of £452m (2014: £405m)£514m (2015: £452m). Of these tax losses, £389m (2014: £341m)£394m (2015: £389m) expire within five years, £13m (2014: £18m)£57m (2015: £13m) expire within six to ten years, £124m (2014: £812m)£358m (2015: £124m) expire within 11 to 20 years and £12,930m (2014: £8,593m)£16,011m (2015: £12,930m) can be carried forward indefinitely. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profits and gains will be available against which they can be utilised. Group investments in subsidiaries, branches and associates Deferred tax is not recognised in respect of the value of the Group’s investments in subsidiaries, branches and associates where the Group is able to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. It is not practicable to determine theThe aggregate amount of income tax that would be payable were suchthese temporary differences to reverse.for which deferred tax liabilities have not been recognised is £2bn (2015: £2bn). Critical accounting estimates and judgements The Group is subjectdoes not consider there to corporate income taxesbe a significant risk of a material adjustment to the carrying amount of current and deferred tax balances, including provisions for uncertain tax positions, in numerous jurisdictionsthe next financial year. The provisions for uncertain tax positions cover a diverse range of issues and the calculationreflect legal advice from external counsel where relevant. It should be noted that only a proportion of the Group’stotal uncertain tax charge and worldwide provisions for corporate 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 has a number of open tax returns with various tax authorities with whom there is active dialogue. Liabilities relating to these open and judgemental matters are based on estimates of whether additional taxespositions will be due after taking into account external advice, where appropriate. Where the final tax outcome of these matters is different from the amounts provided, such differences will impact the tax chargeunder audit at any point in a future period. There is no individual position currentlytime, and could therefore be subject to challenge by a tax authority that if resolved in an adverse manner would materially impactover the Group’s financial position.next year. Deferred tax assets have been recognised based on business profit forecasts. Further detail on the recognition of deferred tax assets is provided in the deferred tax assets and liabilities section of this tax note. | | | 228 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 239 |
Notes to the financial statements Performance/return 11 Earnings per share
| 11 Earnings per share | | | | | | | | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2013
£m |
| | | |
| 2016 £m | | |
| 2015 £m | | |
| 2014 £m | | (Loss)/profit attributable to equity holders of parent from continuing operations | | | | (394 | ) | | | (174 | ) | | | 540 | | | Profit/(loss) attributable to ordinary equity holders of the parent from continuing and discontinued operations | | Profit/(loss) attributable to ordinary equity holders of the parent from continuing and discontinued operations | | | | 1,623 | | | | (394 | ) | | | (174 | ) | Tax credit on profit after tax attributable to other equity holders | Tax credit on profit after tax attributable to other equity holders | | | | 70 | | | | 54 | | | | – | | Tax credit on profit after tax attributable to other equity holders | | | | 128 | | | | 70 | | | | 54 | | Dilutive impact of convertible options | | | | – | | | | – | | | | 1 | | | (Loss)/profit attributable to equity holders of parent from continuing operations including dilutive impact of convertible options | | | | (324 | ) | | | (120 | ) | | | 541 | | | Total Profit/(loss) attributable to ordinary equity holders of the parent from continuing and discontinued operations | | Total Profit/(loss) attributable to ordinary equity holders of the parent from continuing and discontinued operations | | | | 1,751 | | | | (324 | ) | | | (120 | ) | | Continuing operations | | Continuing operations | | | | | | | | Profit/(loss) attributable to ordinary equity holders of the parent from continuing operations | | Profit/(loss) attributable to ordinary equity holders of the parent from continuing operations | | | | 1,434 | | | | (696 | ) | | | (508 | ) | Tax credit on profit after tax attributable to other equity holders | | Tax credit on profit after tax attributable to other equity holders | | | | 128 | | | | 70 | | | | 54 | | Profit/(loss) attributable to equity holders of the parent from continuing operations | | Profit/(loss) attributable to equity holders of the parent from continuing operations | | | | 1,562 | | | | (626 | ) | | | (454 | ) | | Discontinued operations | | Discontinued operations | | | | | | | | Profit attributable to ordinary equity holders of the parent from discontinued operations | | Profit attributable to ordinary equity holders of the parent from discontinued operations | | | | 189 | | | | 302 | | | | 334 | | Dilutive impact of convertible options from discontinued operations | | Dilutive impact of convertible options from discontinued operations | | | | (1 | ) | | | – | | | | – | | Profit attributable to equity holders of the parent from discontinued operations including dilutive impact on convertible options | | Profit attributable to equity holders of the parent from discontinued operations including dilutive impact on convertible options | | | | 188 | | | | 302 | | | | 334 | | | | | | | | | | | | Profit/(loss) attributable to equity holders of the parent from continuing and discontinued operations including dilutive impact on convertible options | | Profit/(loss) attributable to equity holders of the parent from continuing and discontinued operations including dilutive impact on convertible options | | | | 1,750 | | | | (324 | ) | | | (120 | ) | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2015
million |
| |
| 2014
million |
| |
| 2013
million |
| | | |
| 2016 million | | |
| 2015 million | | |
| 2014 million | | Basic weighted average number of shares in issue | Basic weighted average number of shares in issue | | | | 16,687 | | | | 16,329 | | | | 14,308 | | | | | | | | | | 16,860 | | | | 16,687 | | | | 16,329 | | Number of potential ordinary shares | Number of potential ordinary shares | | | | 367 | | | | 296 | | | | 360 | | | | | | | | | | 184 | | | | 367 | | | | 296 | | Diluted weighted average number of shares | Diluted weighted average number of shares | | | | 17,054 | | | | 16,625 | | | | 14,668 | | | | | | | | | | 17,044 | | | | 17,054 | | | | 16,625 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Basic earnings per share | | | Diluted earnings per sharea | | | | Basic earnings per share | | | | Diluted earnings per sharea | | | |
| 2015
p |
| |
| 2014
p |
| |
| 2013
p |
| |
| 2015
p |
| |
| 2014
p |
| |
| 2013
p |
| |
| 2016 p | | |
| 2015 p | | |
| 2014 p | | |
| 2016
p |
| |
| 2015
p |
| |
| 2014
p |
| (Loss)/earnings per ordinary share from continuing operations | | | (1.9 | ) | | | (0.7 | ) | | | 3.8 | | | | (1.9 | ) | | | (0.7 | ) | | | 3.7 | | | Basic earnings/(loss) per ordinary share | | | | 10.4 | | | | (1.9 | ) | | | (0.7 | ) | | | 10.3 | | | | (1.9 | ) | | | (0.7 | ) | Basic earnings/(loss) per ordinary share from continuing operations | | | | 9.3 | | | | (3.7 | ) | | | (2.7 | ) | | | 9.2 | | | | (3.7 | ) | | | (2.7 | ) | Basic earnings per ordinary share from discontinued operations | | | | 1.1 | | | | 1.8 | | | | 2.0 | | | | 1.1 | | | | 1.8 | | | | 2.0 | |
The calculation of basic earnings per share is based on the profit attributable to equity holders of the parent and the basic weighted average number of shares excluding treasury shares held in employee benefit trusts or held for trading. When calculating the diluted earnings per share, 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 367m (2014: 296m)184m (2015: 367m) 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 Barclays Africa Group Limited.BAGL. The increasedecrease in the number of potential ordinary shares is due to the average share price of £2.52 (2014: £2.39)£1.74 (2015: £2.52) being greaterlower than the average strike price of £2.11 (2014: £2.15)£1.88 (2015: £2.11). During the year the total number of share options granted under employee share schemes was 553m (2014: 666m)584m (2015: 533m). The schemes have strike prices ranging from £1.30£1.20 to £4.35.£2.49. Of the total number of employee share options and share awards at 31 December 2015, 23m (2014: 24m)2016, 93m (2015: 23m) were anti-dilutive. The 358m173m increase in the basic weighted average number of shares since 31 December 20142015 to 16,687m16,860m is primarily due to shares issued under employee share schemes and the Scrip Dividend Programme. 12 Dividends on ordinary shares The Directors have approved a final dividend in respect of 20152016 of 3.5p2.0p per ordinary share of 25p each which will be paid on 5 April 20162017 to shareholders on the Share Register on 113 March 2016. As at2017. On 31 December 2015,2016, there were 16,805m16,963m ordinary shares in issue. The financial statements for the year ended 31 December 2015 does2016 do not reflect this dividend, which will be accounted for in shareholders’ equity as an appropriation of retained profits in the year ending 31 December 2016.2017. The 20152016 financial statements include the 20152016 interim dividends of £503m (2014: £493m)£169m (2015: £503m) and final dividend declared in relation to 20142015 of £578m (2014: £564m)£588m (2015: £578m). Note a | Potential ordinary shares shall be treated as dilutive when, and only when, their conversion to ordinary shares would increase loss per share. |
| | | | | 240 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 229 | | |
Notes to the financial statements Assets and liabilities held at fair value The notes included in this section focus on assets and liabilities the Group holds and recognises at fair value. Fair value refers to the price that would be received to sell an asset or the price that would be paid to transfer a liability in an arm’s-lengtharms-length transaction with a willing counterparty, which may be an observable market price or, where there is no quoted price for the instrument, may be an estimate based on available market data. Detail regarding the Group’s approach to managing market risk can be found on pages 101 to 102.page 103. 13 Trading portfolio | Accounting for trading portfolio assets and liabilities In accordance with IAS 39, all assets and liabilities held for trading purposes are held at fair value with gains and losses in the changes in fair value taken to the income statement in Netnet trading income (Note 5). |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading portfolio assets | | | | Trading portfolio liabilities | | | | | | 2015 £m | | |
| 2014
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Debt securities and other eligible bills | | | | 45,576 | | | | 65,997 | | | | (24,985 | ) | | | (28,739 | ) | Equity securities | | | | 29,055 | | | | 44,576 | | | | (8,982 | ) | | | (16,022 | ) | Traded loans | | | | 2,474 | | | | 2,693 | | | | – | | | | – | | Commodities | | | | 243 | | | | 1,451 | | | | – | | | | (363 | ) | Trading portfolio assets/(liabilities) | | | | 77,348 | | | | 114,717 | | | | (33,967 | ) | | | (45,124 | ) | | 14 Financial assets designated at fair value | | Accounting for financial assets designated at fair value In accordance with IAS 39, financial assets may be designated at fair value, with gains and losses taken to the income statement in Net trading income (Note 5) and Net investment income (Note 6). The Group has the ability to make the fair value designation when holding the instruments at fair value reduces an accounting mismatch (caused by an offsetting liability or asset being held at fair value), or is managed by the Group on the basis of its fair value, or includes terms that have substantive derivative characteristics (Note 15 Derivative financial instruments). The details on how the fair value amounts are arrived for financial assets designated at fair value are described in Fair value of assets and liabilities (Note 18). | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| Loans and advances | | | | 17,913 | | | | 20,198 | | Debt securities | | | | 1,383 | | | | 4,448 | | Equity securities | | | | 6,197 | | | | 6,306 | | Reverse repurchase agreementsa | | | | 49,513 | | | | 5,236 | | Customers’ assets held under investment contracts | | | | 1,449 | | | | 1,643 | | Other financial assets | | | | 375 | | | | 469 | | Financial assets designated at fair value | | | | 76,830 | | | | 38,300 | | Credit risk of loans and advances designated at fair value and related credit derivatives The following table shows the maximum exposure to credit risk, the changes in fair value attributable to changes in credit risk, and the cumulative changes in fair value since initial recognition together with the amount by which related credit derivatives mitigate this risk: | | | | | Maximum exposure as at 31 December | | | | Changes in fair value during the year ended | | | | Cumulative changes in fair value from inception | | | |
| 2015
£m |
| |
| 2014
£m |
| | | 2015 £m | | |
| 2014
£m |
| |
| 2015
£m |
| |
| 2014
£m |
| Loans and advances designated at fair value, attributable to credit risk | | | 17,913 | | | | 20,198 | | | | 69 | | | | (112 | ) | | | (629 | ) | | | (828 | ) | Value mitigated by related credit derivatives | | | 417 | | | | 359 | | | | 26 | | | | – | | | | 42 | | | | 18 | |
Note
a | During 2015, new reverse repurchase agreements and other similar secured lending in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading portfolio assets | | | | Trading portfolio liabilities | | | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| Debt securities and other eligible bills | | | | 38,789 | | | | 45,576 | | | | (26,842 | ) | | | (24,985 | ) | Equity securities | | | | 38,329 | | | | 29,055 | | | | (7,831 | ) | | | (8,982 | ) | Traded loans | | | | 2,975 | | | | 2,474 | | | | – | | | | – | | Commodities | | | | 147 | | | | 243 | | | | (14 | ) | | | – | | Trading portfolio assets/(liabilities) | | | | 80,240 | | | | 77,348 | | | | (34,687 | ) | | | (33,967 | ) | | 14 Financial assets designated at fair value | | | Accounting for financial assets designated at fair value In accordance with IAS 39, financial assets may be designated at fair value, with gains and losses taken to the income statement within net trading income (Note 5) and net investment income (Note 6). The Group has the ability to make the fair value designation when holding the instruments at fair value reduces an accounting mismatch (caused by an offsetting liability or asset being held at fair value), or is managed by the Group on the basis of its fair value, or includes terms that have substantive derivative characteristics described in Note 15 Derivative financial instruments. The details on how the fair value amounts are derived for financial assets designated at fair value are described in Note 18 Fair value of assets and liabilities. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| Loans and advances | | | | 10,519 | | | | 17,913 | | Debt securities | | | | 70 | | | | 1,383 | | Equity securities | | | | 4,558 | | | | 6,197 | | Reverse repurchase agreements | | | | 63,162 | | | | 49,513 | | Customers’ assets held under investment contracts | | | | 37 | | | | 1,449 | | Other financial assets | | | | 262 | | | | 375 | | Financial assets designated at fair value | | | | 78,608 | | | | 76,830 | | Credit risk of loans and advances designated at fair value and related credit derivatives The following table shows the maximum exposure to credit risk, the changes in fair value attributable to changes in credit risk, and the cumulative changes in fair value since initial recognition together with the amount by which related credit derivatives mitigate this risk: | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Maximum exposure as at 31 December | | |
| Changes in fair value during the year ended | | |
| Cumulative changes in fair value from inception | | | |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| Loans and advances designated at fair value, attributable to credit risk | | | 10,519 | | | | 17,913 | | | | (42 | ) | | | 69 | | | | (42 | ) | | | (629 | ) | Value mitigated by related credit derivatives | | | 339 | | | | 417 | | | | (2 | ) | | | 26 | | | | (13 | ) | | | 42 | |
| | | 230 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 241 |
Notes to the financial statements Assets and liabilities held at fair value 15 Derivative financial instruments | Accounting for derivatives
Derivative instruments are contracts whose value is derived from one or more underlying financial instruments or indices defined in the contract. They include swaps, forward rate agreements, futures, options and combinations of these instruments and primarily affect the Group’s net interest income, net trading income, net fee and commission income and derivative assets and liabilities. Notional amounts of the contracts are not recorded on the balance sheet.
The Group applies IAS 39. All derivative instruments are held at fair value through profit or loss. Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative. This includes terms included in a contract or other financial asset or liability (the host), which, had it been a stand-alone contract, would have met the definition of a derivative. These are separated from the host and accounted for in the same way as a derivative.
Hedge accounting
The Group applies hedge accounting to represent, to the maximum possible extent permitted under accounting standards, the economic effects of its interest and currency risk management strategies. 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 for documentation and hedge effectiveness, 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.
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. The fair value changes adjust the carrying value of the hedged asset or liability held at amortised cost.
If hedge relationships no longer meet the criteria for hedge accounting, hedge accounting 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 hedge accounting
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 other comprehensive income, and then 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
The Group’s net investments in foreign operations, including monetary items accounted for as part of the net investment, are hedged for foreign currency risks using both derivatives and foreign currency borrowings. Hedges of net investments are accounted for similarly to cash flow hedges; the effective portion of the gain or loss on the hedging instrument is being recognised directly in other comprehensive income and the ineffective portion being recognised immediately in the income statement. The cumulative gain or loss recognised in other comprehensive income 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.
|
Accounting for derivatives 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 and derivative assets and liabilities. Notional amounts of the contracts are not recorded on the balance sheet. The Group applies IAS 39. All derivative instruments are held at fair value through profit or loss. Derivatives are classified as assets when their fair value is positive or as liabilities when their fair value is negative. This includes terms included in a contract or other financial asset or liability (the host), which, had it been a stand-alone contract, would have met the definition of a derivative. If these are separated from the host i.e. when the economic characteristics of the embedded derivative are not closely related with those of the host contract and the combined instrument is not measured at fair value through profit or loss then they are accounted for in the same way as derivatives. Hedge accounting The Group applies hedge accounting to represent, to the maximum possible extent permitted under accounting standards, the economic effects of its interest and currency risk management strategies. 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 tonon-trading positions. Where derivatives are held for risk management purposes, and when transactions meet the required criteria for documentation and hedge effectiveness, 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. 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. The fair value changes adjust the carrying value of the hedged asset or liability held at amortised cost. If hedge relationships no longer meet the criteria for hedge accounting, hedge accounting 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 hedge accounting 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 other comprehensive income, and then 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 The Group’s net investments in foreign operations, including monetary items accounted for as part of the net investment, are hedged for foreign currency risks using both derivatives and foreign currency borrowings. Hedges of net investments are accounted for similarly to cash flow hedges; the effective portion of the gain or loss on the hedging instrument is being recognised directly in other comprehensive income and the ineffective portion being recognised immediately in the income statement. The cumulative gain or loss recognised in other comprehensive income 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. | Total derivatives | | | | | | | | | | | | | | | | | 2016 | | | | | | | | 2015 | | | | | | | 2015 | | | 2014 | | | | | | Notional | | | | | | | | Notional | | | | | | | | Notional | | | | Fair value | | | | Notional | | | | Fair value | | | | | contract | | | | Fair value | | | | contract | | | | Fair value | | | | contract | | | | | | | | contract | | | | | | | | | amount | | | | Assets | | | | Liabilities | | | | amount | | | | Assets | | | | Liabilities | | | | amount | | | | Assets | | | | Liabilities | | | | amount | | | | Assets | | | | Liabilities | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | Total derivative assets/(liabilities) held for trading | | | 29,437,102 | | | | 326,772 | | | | (323,788 | ) | | | 32,624,342 | | | | 438,270 | | | | (438,623 | ) | | | 36,185,820 | | | | 345,624 | | | | (339,646 | ) | | | 29,437,102 | | | | 326,772 | | | | (323,788 | ) | Total derivative assets/(liabilities) held for risk management | | | 316,605 | | | | 937 | | | | (464 | ) | | | 268,448 | | | | 1,639 | | | | (697 | ) | | | 336,524 | | | | 1,002 | | | | (841 | ) | | | 316,605 | | | | 937 | | | | (464 | ) | Derivative assets/(liabilities) | | | 29,753,707 | | | | 327,709 | | | | (324,252 | ) | | | 32,892,790 | | | | 439,909 | | | | (439,320 | ) | | | 36,522,344 | | | | 346,626 | | | | (340,487 | ) | | | 29,753,707 | | | | 327,709 | | | | (324,252 | ) |
The fair value of gross derivative assets decreasedincreased by 26%6% to £328bn, driven by decrease in interest rate derivatives of £79bn due to net trade reduction and an increase in the major interest rate forward curves and a decrease£347bn. This was mainly in foreign exchange derivatives largely due to increase in trade volumes and appreciation of £19bn, materially reflecting trade maturities.all major currencies against GBP. Information on further netting of derivative financial instruments is included within Note 19 Offsetting financial assets and financial liabilities. Trading derivatives are managed within the Group’s market risk management policies, which are outlined on pages 101 and 102.page103. The Group’s exposure to credit risk arising from derivative contracts are outlined in the Credit Riskrisk section on page 130.139 and 140. | | | 242 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
15 Derivative financial instrumentscontinued The fair values and notional amounts of derivative instruments held for trading are set out in the following table: | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives held for trading | | | | | | | 2016 | | | | | | | | | | | | 2015 | | | | | | | |
| 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 | | | 2,308,922 | | | | 32,442 | | | | (30,907 | ) | | | 1,277,863 | | | | 17,613 | | | | (19,433) | | Currency swaps | | | 1,086,552 | | | | 40,083 | | | | (40,164 | ) | | | 1,006,640 | | | | 30,703 | | | | (32,449) | | OTC options bought and sold | | | 772,031 | | | | 6,338 | | | | (6,762 | ) | | | 924,832 | | | | 6,436 | | | | (6,771) | | OTC derivatives | | | 4,167,505 | | | | 78,863 | | | | (77,833 | ) | | | 3,209,335 | | | | 54,752 | | | | (58,653) | | Foreign exchange derivatives cleared by central counterparty | | | 43,478 | | | | 366 | | | | (388 | ) | | | 9,308 | | | | 33 | | | | (44) | | Exchange traded futures and options – bought and sold | | | 18,813 | | | | 31 | | | | (27 | ) | | | 6,071 | | | | 13 | | | | (12) | | Foreign exchange derivatives | | | 4,229,796 | | | | 79,260 | | | | (78,248 | ) | | | 3,224,714 | | | | 54,798 | | | | (58,709) | | Interest rate derivatives | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate swaps | | | 4,799,897 | | | | 153,822 | | | | (143,059 | ) | | | 4,600,472 | | | | 159,040 | | | | (148,475) | | Forward-rate agreements | | | 296,559 | | | | 999 | | | | (968 | ) | | | 371,510 | | | | 440 | | | | (390) | | OTC options bought and sold | | | 2,522,430 | | | | 42,412 | | | | (43,373 | ) | | | 2,634,527 | | | | 48,995 | | | | (49,001) | | OTC derivatives | | | 7,618,886 | | | | 197,233 | | | | (187,400 | ) | | | 7,606,509 | | | | 208,475 | | | | (197,866) | | Interest rate derivatives cleared by central counterpartya | | | 14,439,407 | | | | 30,503 | | | | (31,528 | ) | | | 11,407,745 | | | | 21,871 | | | | (22,603) | | Exchange traded futures and options – bought and sold | | | 7,952,733 | | | | 397 | | | | (370 | ) | | | 5,470,872 | | | | 281 | | | | (263) | | Interest rate derivatives | | | 30,011,026 | | | | 228,133 | | | | (219,298 | ) | | | 24,485,126 | | | | 230,627 | | | | (220,732) | | Credit derivatives | | | | | | | | | | | | | | | | | | | | | | | | | OTC swaps | | | 615,057 | | | | 11,811 | | | | (10,513 | ) | | | 671,389 | | | | 14,087 | | | | (12,693) | | Credit derivatives cleared by central counterpartya | | | 332,743 | | | | 4,462 | | | | (4,572 | ) | | | 277,257 | | | | 4,094 | | | | (3,931) | | Credit derivatives | | | 947,800 | | | | 16,273 | | | | (15,085 | ) | | | 948,646 | | | | 18,181 | | | | (16,624) | | Equity and stock index derivatives | | | | | | | | | | | | | | | | | | | | | | | | | OTC options bought and sold | | | 102,545 | | | | 6,766 | | | | (8,837 | ) | | | 53,645 | | | | 5,507 | | | | (7,746) | | Equity swaps and forwards | | | 105,120 | | | | 2,253 | | | | (4,435 | ) | | | 98,264 | | | | 1,794 | | | | (3,855) | | OTC derivatives | | | 207,665 | | | | 9,019 | | | | (13,272 | ) | | | 151,909 | | | | 7,301 | | | | (11,601) | | Exchange traded futures and options – bought and sold | | | 585,620 | | | | 8,070 | | | | (8,600 | ) | | | 429,592 | | | | 6,498 | | | | (6,851) | | Equity and stock index derivatives | | | 793,285 | | | | 17,089 | | | | (21,872 | ) | | | 581,501 | | | | 13,799 | | | | (18,452) | | Commodity derivatives | | | | | | | | | | | | | | | | | | | | | | | | | OTC options bought and sold | | | 14,053 | | | | 395 | | | | (461 | ) | | | 21,959 | | | | 1,402 | | | | (1,408) | | Commodity swaps and forwards | | | 16,086 | | | | 1,528 | | | | (1,821 | ) | | | 29,161 | | | | 3,645 | | | | (3,397) | | OTC derivatives | | | 30,139 | | | | 1,923 | | | | (2,282 | ) | | | 51,120 | | | | 5,047 | | | | (4,805) | | Exchange traded futures and options – bought and sold | | | 173,774 | | | | 2,946 | | | | (2,861 | ) | | | 145,995 | | | | 4,320 | | | | (4,466) | | Commodity derivatives | | | 203,913 | | | | 4,869 | | | | (5,143 | ) | | | 197,115 | | | | 9,367 | | | | (9,271) | | Derivative assets/(liabilities) held for trading | | | 36,185,820 | | | | 345,624 | | | | (339,646 | ) | | | 29,437,102 | | | | 326,772 | | | | (323,788) | | | | | | | | | Total OTC derivatives held for trading | | | 12,639,252 | | | | 298,849 | | | | (291,300 | ) | | | 11,690,262 | | | | 289,662 | | | | (285,618) | | Total derivatives cleared by central counterparty held for trading | | | 14,815,628 | | | | 35,331 | | | | (36,488 | ) | | | 11,694,310 | | | | 25,998 | | | | (26,578) | | Total exchange traded derivatives held for trading | | | 8,730,940 | | | | 11,444 | | | | (11,858 | ) | | | 6,052,530 | | | | 11,112 | | | | (11,592) | | Derivative assets/(liabilities) held for trading | | | 36,185,820 | | | | 345,624 | | | | (339,646 | ) | | | 29,437,102 | | | | 326,772 | | | | (323,788) | |
Note a | The Chicago Mercantile Exchange (CME) changed its rulebook with effective date 3 January 2017. Under the new rules, OTC positions cleared will be settled daily by cash payments and not collateralised by these payments (known currently as variation margin). For reporting periods following the effective date, the fair value of derivatives will reflect the settlement which will reduce the fair value of the recognised derivative assets and liabilities and there will be no separate cash collateral recognised for the daily ‘variation margin’. As of 31 December 2016, the fair value of impacted derivatives assets was £20.4bn and derivative liabilities £21.5bn. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 231243 |
Notes to the financial statements Assets and liabilities held at fair value 15 Derivative financial instrumentscontinued The fair values and notional amounts of derivative instruments held for trading are set out in the following table: | | | | | | | | | | | | | | | | | | | | | | | | | Derivatives held for trading | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2015 | | | | 2014 | | | |
| 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 | | | 1,277,863 | | | | 17,613 | | | | (19,433 | ) | | | 1,684,832 | | | | 31,883 | | | | (34,611 | ) | Currency swaps | | | 1,006,640 | | | | 30,703 | | | | (32,449 | ) | | | 1,109,795 | | | | 32,209 | | | | (33,919 | ) | OTC options bought and sold | | | 924,832 | | | | 6,436 | | | | (6,771 | ) | | | 895,226 | | | | 10,267 | | | | (10,665 | ) | OTC derivatives | | | 3,209,335 | | | | 54,752 | | | | (58,653 | ) | | | 3,689,853 | | | | 74,359 | | | | (79,195 | ) | Foreign exchange derivatives cleared by central counterparty | | | 9,308 | | | | 33 | | | | (44 | ) | | | 11,382 | | | | 56 | | | | (70 | ) | Exchange traded futures and options – bought and sold | | | 6,071 | | | | 13 | | | | (12 | ) | | | 57,623 | | | | 18 | | | | (16 | ) | Foreign exchange derivatives | | | 3,224,714 | | | | 54,798 | | | | (58,709 | ) | | | 3,758,858 | | | | 74,433 | | | | (79,281 | ) | Interest rate derivatives | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate swaps | | | 4,600,472 | | | | 159,040 | | | | (148,475 | ) | | | 5,779,015 | | | | 209,962 | | | | (200,096 | ) | Forward rate agreements | | | 371,510 | | | | 440 | | | | (390 | ) | | | 467,812 | | | | 794 | | | | (722 | ) | OTC options bought and sold | | | 2,634,527 | | | | 48,995 | | | | (49,001 | ) | | | 3,083,200 | | | | 67,039 | | | | (67,575 | ) | OTC derivatives | | | 7,606,509 | | | | 208,475 | | | | (197,866 | ) | | | 9,330,027 | | | | 277,795 | | | | (268,393 | ) | Interest rate derivatives cleared by central counterparty | | | 11,407,745 | | | | 21,871 | | | | (22,603 | ) | | | 15,030,090 | | | | 30,166 | | | | (31,152 | ) | Exchange traded futures and options – bought and sold | | | 5,470,872 | | | | 281 | | | | (263 | ) | | | 2,210,602 | | | | 382 | | | | (336 | ) | Interest rate derivatives | | | 24,485,126 | | | | 230,627 | | | | (220,732 | ) | | | 26,570,719 | | | | 308,343 | | | | (299,881 | ) | Credit derivatives | | | | | | | | | | | | | | | | | | | | | | | | | OTC swaps | | | 671,389 | | | | 14,087 | | | | (12,693 | ) | | | 896,386 | | | | 18,864 | | | | (17,825 | ) | Credit derivatives cleared by central counterparty | | | 277,257 | | | | 4,094 | | | | (3,931 | ) | | | 287,577 | | | | 4,643 | | | | (4,542 | ) | Credit derivatives | | | 948,646 | | | | 18,181 | | | | (16,624 | ) | | | 1,183,963 | | | | 23,507 | | | | (22,367 | ) | Equity and stock index derivatives | | | | | | | | | | | | | | | | | | | | | | | | | OTC options bought and sold | | | 53,645 | | | | 5,507 | | | | (7,746 | ) | | | 67,151 | | | | 6,461 | | | | (9,517 | ) | Equity swaps and forwards | | | 98,264 | | | | 1,794 | | | | (3,855 | ) | | | 102,663 | | | | 1,823 | | | | (3,532 | ) | OTC derivatives | | | 151,909 | | | | 7,301 | | | | (11,601 | ) | | | 169,814 | | | | 8,284 | | | | (13,049 | ) | Exchange traded futures and options – bought and sold | | | 429,592 | | | | 6,498 | | | | (6,851 | ) | | | 490,960 | | | | 6,560 | | | | (6,542 | ) | Equity and stock index derivatives | | | 581,501 | | | | 13,799 | | | | (18,452 | ) | | | 660,774 | | | | 14,844 | | | | (19,591 | ) | Commodity derivatives | | | | | | | | | | | | | | | | | | | | | | | | | OTC options bought and sold | | | 21,959 | | | | 1,402 | | | | (1,408 | ) | | | 38,196 | | | | 1,592 | | | | (1,227 | ) | Commodity swaps and forwards | | | 29,161 | | | | 3,645 | | | | (3,397 | ) | | | 61,639 | | | | 7,985 | | | | (8,175) | | OTC derivatives | | | 51,120 | | | | 5,047 | | | | (4,805 | ) | | | 99,835 | | | | 9,577 | | | | (9,402 | ) | Exchange traded futures and options – bought and sold | | | 145,995 | | | | 4,320 | | | | (4,466 | ) | | | 350,193 | | | | 7,566 | | | | (8,101 | ) | Commodity derivatives | | | 197,115 | | | | 9,367 | | | | (9,271 | ) | | | 450,028 | | | | 17,143 | | | | (17,503 | ) | Derivative assets/(liabilities) held for trading | | | 29,437,102 | | | | 326,772 | | | | (323,788 | ) | | | 32,624,342 | | | | 438,270 | | | | (438,623 | ) | | | | | | | | Total OTC derivatives held for trading | | | 11,690,262 | | | | 289,662 | | | | (285,618 | ) | | | 14,185,915 | | | | 388,879 | | | | (387,864 | ) | Total derivatives cleared by central counterparty held for trading | | | 11,694,310 | | | | 25,998 | | | | (26,578 | ) | | | 15,329,049 | | | | 34,865 | | | | (35,764 | ) | Total exchange traded derivatives held for trading | | | 6,052,530 | | | | 11,112 | | | | (11,592 | ) | | | 3,109,378 | | | | 14,526 | | | | (14,995 | ) | Derivative assets/(liabilities) held for trading | | | 29,437,102 | | | | 326,772 | | | | (323,788 | ) | | | 32,624,342 | | | | 438,270 | | | | (438,623 | ) |
| | | 232 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
15 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 | | | | | | | | | | | | | | | | | | | | | 2016 | | | | | | | | 2015 | | | | | | | | | | Notional | | | | Fair value | | | | Notional | | | | Fair value | | | | | | | 2015 | | | 2014 | | | | | | contract | | | | | | | | contract | | | | | | | | | |
| Notional
contract amount £m |
| | | Fair value | | |
| Notional
contract amount £m |
| | | Fair value | | | | | | amount | | | | Assets | | | | Liabilities | | | | amount | | | | Assets | | | | Liabilities | | | | | Assets £m | | | | Liabilities £m | | | | Assets £m | | | | Liabilities £m | | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | Derivatives designated as cash flow hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Currency swaps | | | | | 1,357 | | | | 133 | | | | – | | | | – | | | | – | | | | – | | | | | | 1,357 | | | | 453 | | | | – | | | | 1,357 | | | | 133 | | | | – | | Interest rate swaps | | | | | 14,198 | | | | 162 | | | | (115 | ) | | | 19,218 | | | | 223 | | | | (60 | ) | | | | | 5,965 | | | | 154 | | | | (6) | | | | 14,198 | | | | 162 | | | | (115) | | Forward foreign exchange | | | | | 759 | | | | 5 | | | | – | | | | 930 | | | | 17 | | | | – | | | | | | – | | | | – | | | | – | | | | 759 | | | | 5 | | | | – | | Interest rate derivatives cleared by central counterparty | | | | | 147,072 | | | | – | | | | – | | | | 82,550 | | | | – | | | | – | | | | | | 181,541 | | | | 62 | | | | (27) | | | | 147,072 | | | | – | | | | – | | Derivatives designated as cash flow hedges | | | | | 163,386 | | | | 300 | | | | (115 | ) | | | 102,698 | | | | 240 | | | | (60 | ) | | | | | 188,863 | | | | 669 | | | | (33) | | | | 163,386 | | | | 300 | | | | (115) | | Derivatives designated as fair value hedges | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate swaps | | | | | 13,798 | | | | 637 | | | | (264 | ) | | | 27,345 | | | | 1,379 | | | | (590 | ) | | | | | 10,733 | | | | 301 | | | | (744) | | | | 13,798 | | | | 637 | | | | (264) | | Forward foreign exchange | | | | | 2,527 | | | | – | | | | (32 | ) | | | – | | | | – | | | | – | | | | | | – | | | | – | | | | – | | | | 2,527 | | | | – | | | | (32) | | Interest rate derivatives cleared by central counterparty | | | | | 134,939 | | | | – | | | | – | | | | 135,553 | | | | – | | | | – | | | | | | 130,842 | | | | – | | | | – | | | | 134,939 | | | | – | | | | – | | Derivatives designated as fair value hedges | | | | | 151,264 | | | | 637 | | | | (296 | ) | | | 162,898 | | | | 1,379 | | | | (590 | ) | | | | | 141,575 | | | | 301 | | | | (744) | | | | 151,264 | | | | 637 | | | | (296) | | Derivatives designated as hedges of net investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Forward foreign exchange | | | | | 1,955 | | | | – | | | | (53 | ) | | | 2,852 | | | | 20 | | | | (47 | ) | | | | | 6,086 | | | | 32 | | | | (64) | | | | 1,955 | | | | – | | | | (53) | | Derivatives designated as hedges of net investments | | | | | 1,955 | | | | – | | | | (53 | ) | | | 2,852 | | | | 20 | | | | (47 | ) | | | | | 6,086 | | | | 32 | | | | (64) | | | | 1,955 | | | | – | | | | (53) | | Derivative assets/(liabilities) held for risk management | | | | | 316,605 | | | | 937 | | | | (464 | ) | | | 268,448 | | | | 1,639 | | | | (697 | ) | | | | | 336,524 | | | | 1,002 | | | | (841) | | | | 316,605 | | | | 937 | | | | (464) | | | Total OTC derivatives held for risk management | | | | | 34,594 | | | | 937 | | | | (464 | ) | | | 50,345 | | | | 1,639 | | | | (697 | ) | | | | | 24,141 | | | | 940 | | | | (814) | | | | 34,594 | | | | 937 | | | | (464) | | Total derivatives cleared by central counterparty held for risk management | | | | | 282,011 | | | | – | | | | – | | | | 218,103 | | | | – | | | | – | | | | | | 312,383 | | | | 62 | | | | (27) | | | | 282,011 | | | | – | | | | – | | Derivative assets/(liabilities) held for risk management | | | | | 316,605 | | | | 937 | | | | (464 | ) | | | 268,448 | | | | 1,639 | | | | (697 | ) | | | | | 336,524 | | | | 1,002 | | | | (841) | | | | 316,605 | | | | 937 | | | | (464) | | | 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: | 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: | | 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: | | | | | | | Up to | | | | One to | | | | Two to | | | | Three to | | | | Four to | | | | More than | | | | | | Up to | | | | One to | | | | Two to | | | | Three to | | | | Four to | | | | More than | | | | Total | | | one year | | | | two years | | | | three years | | | | four years | | | | five years | | | | five years | | | | Total | | | | one year | | | | two years | | | | three years | | | | four years | | | | five years | | | | five years | | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | 2016 | | | | | | | | | | | | | | | | Forecast receivable cash flows | | | | 2,616 | | | | 455 | | | | 531 | | | | 511 | | | | 411 | | | | 327 | | | | 381 | | Forecast payable cash flows | | | | 52 | | | | 15 | | | | 16 | | | | 7 | | | | 6 | | | | 5 | | | | 3 | | | | £m | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Forecast receivable cash flows | | 4,952 | | | 555 | | | | 816 | | | | 875 | | | | 813 | | | | 633 | | | | 1,260 | | | | 4,952 | | | | 555 | | | | 816 | | | | 875 | | | | 813 | | | | 633 | | | | 1,260 | | Forecast payable cash flows | | 872 | | | 769 | | | | 35 | | | | 31 | | | | 22 | | | | 11 | | | | 4 | | | | 872 | | | | 769 | | | | 35 | | | | 31 | | | | 22 | | | | 11 | | | | 4 | | | 2014 | | | | | | | | | | | | | | | | Forecast receivable cash flows | | 4,277 | | | 308 | | | | 491 | | | | 695 | | | | 729 | | | | 651 | | | | 1,403 | | | Forecast payable cash flows | | 972 | | | 178 | | | | 770 | | | | 10 | | | | 7 | | | | 4 | | | | 3 | | | | | | | | | | | | | | | | | | | 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 10 years (2015: 10 years). | | 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 10 years (2015: 10 years). | | Amounts recognised in net interest income | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| | | | | | | | | | | | | | 2015 | | | | 2014 | | | | | | | | | | | | | | | | £m | | | | £m | | | Gains/(losses) on the hedged items attributable to the hedged risk | | | | | | | | | | | 552 | | | | 2,610 | | | (Losses)/gains on the hedging instruments | | | | | | | | | | | | | (485 | ) | | | (2,797 | ) | | Gains on the hedged items attributable to the hedged risk | | Gains on the hedged items attributable to the hedged risk | | | | | | | | | | | | 1,787 | | | | 552 | | Losses on the hedging instruments | | | | | | | | | | | | | | (1,741) | | | | (485) | | Fair value ineffectiveness | | | | | | | | | | | | | 67 | | | | (187 | ) | | | | | | | | | | | | | 46 | | | | 67 | | Cash flow hedging ineffectiveness | | | | | | | | | | | | | 16 | | | | 41 | | | | | | | | | | | | | | 28 | | | | 16 | | Net investment hedging ineffectiveness | | | | | | | | | | | | | (2 | ) | | | – | | | | | | | | | | | | | | (3) | | | | (2) | |
Gains and losses transferred from the cash flow hedging reserve to the income statement included a £36m£17m gain (2014: £52m(2015: £36m gain) transferred to interest income; a £267m£491m gain (2014: £778m(2015: £267m gain) to interest expense; anil (2015: £4m loss (2014: £15m loss) to net trading income; a £17m gain (2014: nil)(2015: £17m gain) to administration and general expenses; and a £69m£75m loss (2014: £78m(2015: £69m loss) to taxation. | | | | | 244 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 233 | | |
Notes to the financial statements
Assets and liabilities held at fair value
16 Available for sale financial assetsFinancial investments | Accounting for available for sale financial assetsinvestments Available for sale financial assets are held at fair value with gains and losses being included in other comprehensive income. The Group uses this classification for assets that are not derivatives and are not held for trading purposes or otherwise designated at fair value through profit or loss, or at amortised cost. Dividends and interest (calculated using the effective interest method) are recognised in the income statement in Note 3 Netnet interest income (Note 3) or, Note 6 Netnet investment income.income (Note 6). On disposal, the cumulative gain or loss recognised in other comprehensive income is also included in net investment income. Held to maturity assets are held at amortised cost. The Group uses this classification when there is an intent and ability to hold the asset to maturity. Interest on the investments are recognised in the income statement within Net interest income (Note 3). |
| | | | | | | | | | | | 2015 | | | | 2014 | | | | | £m | | | | £m | | Debt securities and other eligible bills | | | 89,278 | | | | 85,539 | | Equity securities | | | 989 | | | | 527 | | Available for sale investments | | | 90,267 | | | | 86,066 | |
| | | | | | | | | | | | 2016 | | | | 2015 | | | | | £m | | | | £m | | Available for sale debt securities and other eligible bills | | | 57,703 | | | | 89,278 | | Available for sale equity securities | | | 438 | | | | 989 | | Held to maturity debt securities | | | 5,176 | | | | – | | Financial investments | | | 63,317 | | | | 90,267 | |
In June 2016 UK Gilts previously classified as available for sale investments, were reclassified to held to maturity in order to reflect the intention with these assets. Any previous fair value gain or loss on the asset that has been accumulated within the available for sale reserve (Note 32) is amortised to profit or loss over the remaining life of the financial asset using the effective interest method. 17 Financial liabilities designated at fair value | Accounting for liabilities designated at fair value through profit and loss In accordance with IAS 39, financial liabilities may be designated at fair value, with gains and losses taken to the income statement within Netnet trading income (Note 5) and Netnet investment income (Note 6). The Group has the ability to make the fair value designation when holding the instruments at fair value reduces an accounting mismatch (caused by an offsetting liability or asset being held at fair value), or is managed by the Group on the basis of its fair value, or includes terms that have substantive derivative characteristics (see Note(Note 15 Derivative financial instruments). The details on how the fair value amounts are arrivedderived for financial liabilities designated at fair value are described in Note 18 Fair value of assets and liabilities (Note 18).liabilities. |
| | | | 2015 | | | 2014 | | | | 2016 | | | | 2015 | | | | | | | Contractual | | | | | | Contractual | | | | | | Contractual | | | | | | Contractual | | | | | | | amount due | | | | | | amount due | | | | | | amount due | | | | | | amount due | | | | | Fair value | | | | on maturity | | | | Fair value | | | | on maturity | | | | Fair value | | | | on maturity | | | | Fair value | | | | on maturity | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | Debt securities | | | 33,177 | | | | 36,097 | | | | 42,395 | | | | 44,910 | | | | 34,985 | | | | 37,034 | | | | 33,177 | | | | 36,097 | | Deposits | | | 6,029 | | | | 6,324 | | | | 7,206 | | | | 7,301 | | | | 5,269 | | | | 5,303 | | | | 6,029 | | | | 6,324 | | Liabilities to customers under investment contracts | | | 1,633 | | | | – | | | | 1,823 | | | | – | | | | 37 | | | | – | | | | 1,633 | | | | – | | Repurchase agreementsa | | | 50,838 | | | | 50,873 | | | | 5,423 | | | | 5,433 | | | Repurchase agreements | | | | 55,710 | | | | 55,760 | | | | 50,838 | | | | 50,873 | | Other financial liabilities | | | 68 | | | | 68 | | | | 125 | | | | 125 | | | | 30 | | | | 30 | | | | 68 | | | | 68 | | Financial liabilities designated at fair value | | | 91,745 | | | | 93,362 | | | | 56,972 | | | | 57,769 | | | | 96,031 | | | | 98,127 | | | | 91,745 | | | | 93,362 | |
The cumulative own credit net loss recognised is £226m (2014: £716m)£239m (2015: £226m). Note
a | During 2015, new repurchase agreements and other similar secured borrowing in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
| | | 234 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 245 |
Notes to the financial statements Assets and liabilities held at fair value 18 Fair value of assets and liabilitiesfinancial instruments | | | Accounting for financial assets and liabilities – fair values The Group applies IAS 39. All financial instruments are initially recognised at fair value on the date of initial recognition and, depending on the classification of the asset or liability, may continue to be held at fair value either through profit or loss or other comprehensive income. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Wherever possible, fair value is determined by reference to a quoted market price for that instrument. For many of the Group’s financial assets and liabilities, especially derivatives, quoted prices are not available and valuation models are used to estimate fair value. The models 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 sourcedindependently-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 fromcalibrated to observable market data such as in primary issuance and redemption activity for structured notes. Own credit spreads onfor instruments issued out of Barclays Bank PLC were previously derived from Barclays Bank PLC issued bonds or credit default swaps (CDS). Most market parameters are either directly observable or are implied from instrument prices. The model may perform numerical proceduresvanilla debt in the pricing such as interpolation when input values do not directly correspondsecondary market but, due to extensive bondbuy-back programmes, observations of Barclays Bank PLC secondary market bond prices have significantly decreased and no longer provide a reliable estimation for the most actively traded market trade parameters.fair value measurement. On initial recognition, it is presumed that the transaction price is the fair value unless there is observable information available in an active market to the contrary. The best evidence of an instrument’s fair value on initial recognition is typically the transaction price. However, if fair value can be evidenced by comparison with other observable current market transactions in the same instrument, or is based on a valuation technique whose inputs include only data from observable markets, then the instrument should be recognised at the fair value derived from such observable market data. For valuations that have made use of unobservable inputs, the difference between the model valuation and the initial transaction price (‘Day One profit’) is recognised in profit or loss either: on a straight-line basis over the term of the transaction; or where appropriate over the period until all model inputs will become observable where appropriate; or released in full when previously unobservable inputs become observable. Various factors influence the availability of observable inputs and these may vary from product to product and change over time. Factors include 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, dependentdepending 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. The sensitivity of valuations used in the financial statements to possible changes in significant unobservable inputs is shown on page 244.256. Critical accounting estimates and judgements The valuation of financial instruments often involves a significant degree of judgement and complexity, in particular where valuation models make use of unobservable inputs (‘Level 3’ assets and liabilities). This note provides information on these instruments, including the related unrealised gains and losses recognised in the period, a description of significant valuation techniques and unobservable inputs, and a sensitivity analysis. | | |
Valuation IFRS 13Fair Value Measurement requires an entity to classify its assets and liabilities according to a hierarchy that reflects the observability of significant market inputs. The three levels of the fair value hierarchy are defined below. Quoted market prices – Level 1 Assets and liabilities are 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. An active market is one in which transactions occur with sufficient volume and frequency to provide pricing information on an ongoing basis. Valuation technique using observable inputs – Level 2 Assets and liabilities classified as Level 2 have been valued using models whose inputs are observable in an active market.either directly or indirectly. Valuations based on observable inputs include assets and liabilities 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 technique using significant unobservable inputs – Level 3 Assets and liabilities are classified as Level 3 if their valuation incorporates significant inputs that are not based on observable market data (unobservable inputs). A valuation input is considered observable if it can be directly observed from transactions in an active market, or if there is compelling external evidence demonstrating an executable exit price. Unobservable input levels are generally determined via reference to observable inputs, historical observations or using other analytical techniques. | | | 246 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
18 Fair value of financial instrumentscontinued The following table shows the Groups’ assets and liabilities that are held at fair value disaggregated by valuation technique (fair value hierarchy) and balance sheet classification: | | | | | | | | | | | | | | | | | Assets and liabilities held 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 31 December 2016 | | | | | | | | | | | | | | | | | Trading portfolio assets | | | 41,550 | | | | 36,625 | | | | 2,065 | | | | 80,240 | | Financial assets designated at fair value | | | 4,031 | | | | 64,630 | | | | 9,947 | | | | 78,608 | | Derivative financial assets | | | 5,261 | | | | 332,819 | | | | 8,546 | | | | 346,626 | | Available for sale investments | | | 21,218 | | | | 36,551 | | | | 372 | | | | 58,141 | | Investment property | | | – | | | | – | | | | 81 | | | | 81 | | Assets included in disposal groups classified as held for salea | | | 6,754 | | | | 8,511 | | | | 6,009 | | | | 21,274 | | Total assets | | | 78,814 | | | | 479,136 | | | | 27,020 | | | | 584,970 | | | | | | | Trading portfolio liabilities | | | (20,205 | ) | | | (14,475 | ) | | | (7 | ) | | | (34,687 | ) | Financial liabilities designated at fair value | | | (70 | ) | | | (95,121 | ) | | | (840 | ) | | | (96,031 | ) | Derivative financial liabilities | | | (5,051 | ) | | | (328,265 | ) | | | (7,171 | ) | | | (340,487 | ) | Liabilities included in disposal groups classified as held for salea | | | (397 | ) | | | (5,224 | ) | | | (6,201 | ) | | | (11,822 | ) | Total liabilities | | | (25,723 | ) | | | (443,085 | ) | | | (14,219 | ) | | | (483,027 | ) | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | Trading portfolio assets | | | 36,676 | | | | 35,725 | | | | 4,947 | | | | 77,348 | | Financial assets designated at fair value | | | 6,163 | | | | 52,909 | | | | 17,758 | | | | 76,830 | | Derivative financial assets | | | 6,342 | | | | 315,949 | | | | 5,418 | | | | 327,709 | | Available for sale investments | | | 42,552 | | | | 46,693 | | | | 1,022 | | | | 90,267 | | Investment property | | | – | | | | – | | | | 140 | | | | 140 | | Assets included in disposal groups classified as held for salea | | | 26 | | | | 8 | | | | 7,330 | | | | 7,364 | | Total assets | | | 91,759 | | | | 451,284 | | | | 36,615 | | | | 579,658 | | | | | | | Trading portfolio liabilities | | | (23,978 | ) | | | (9,989 | ) | | | – | | | | (33,967 | ) | Financial liabilities designated at fair value | | | (240 | ) | | | (90,203 | ) | | | (1,302 | ) | | | (91,745 | ) | Derivative financial liabilities | | | (5,450 | ) | | | (314,033 | ) | | | (4,769 | ) | | | (324,252 | ) | Liabilities included in disposal groups classified as held for salea | | | (1,024 | ) | | | (802 | ) | | | (4,171 | ) | | | (5,997 | ) | Total liabilities | | | (30,692 | ) | | | (415,027 | ) | | | (10,242 | ) | | | (455,961 | ) |
Note a | Disposal groups held for sale and measured at fair value less cost to sell are included in the fair value table. For disposal groups measured at carrying amount, the underlying financial assets and liabilities measured at fair value are included in the fair value disclosures on pages 247 to 260 and items measured at amortised cost are included on page 261.Non-financial assets (£6.6bn) and liabilities (£1.7bn) within disposal groups measured at carrying amount are excluded from these disclosures. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 235247 |
Notes to the financial statements Assets and liabilities held at fair value 18 Fair value of assets and liabilitiescontinued The following table shows the Group’s assets and liabilities that are held at fair value disaggregated by valuation technique (fair value hierarchy) and balance sheet classification:
| | | | | | | | | | | | | | | | | Assets and liabilities held 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 31 December 2015 | | | | | | | | | | | | | | | | | Trading portfolio assets | | | 36,676 | | | | 35,725 | | | | 4,947 | | | | 77,348 | | Financial assets designated at fair valuea | | | 6,163 | | | | 52,909 | | | | 17,758 | | | | 76,830 | | Derivative financial assets | | | 6,342 | | | | 315,949 | | | | 5,418 | | | | 327,709 | | Available for sale investments | | | 42,552 | | | | 46,693 | | | | 1,022 | | | | 90,267 | | Otherb | | | 26 | | | | 8 | | | | 7,470 | | | | 7,504 | | Total assets | | | 91,759 | | | | 451,284 | | | | 36,615 | | | | 579,658 | | | | | | | Trading portfolio liabilities | | | (23,978 | ) | | | (9,989 | ) | | | – | | | | (33,967 | ) | Financial liabilities designated at fair valuea | | | (240 | ) | | | (90,203 | ) | | | (1,302 | ) | | | (91,745 | ) | Derivative financial liabilities | | | (5,450 | ) | | | (314,033 | ) | | | (4,769 | ) | | | (324,252 | ) | Otherb | | | (1,024 | ) | | | (802 | ) | | | (4,171 | ) | | | (5,997 | ) | Total liabilities | | | (30,692 | ) | | | (415,027 | ) | | | (10,242 | ) | | | (455,961 | ) | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | Trading portfolio assets | | | 48,962 | | | | 59,428 | | | | 6,327 | | | | 114,717 | | Financial assets designated at fair value | | | 9,934 | | | | 8,461 | | | | 19,905 | | | | 38,300 | | Derivative financial assets | | | 9,863 | | | | 425,301 | | | | 4,745 | | | | 439,909 | | Available for sale investments | | | 44,234 | | | | 40,519 | | | | 1,313 | | | | 86,066 | | Otherb | | | 33 | | | | 198 | | | | 15,550 | | | | 15,781 | | Total assets | | | 113,026 | | | | 533,907 | | | | 47,840 | | | | 694,773 | | | | | | | Trading portfolio liabilities | | | (26,840 | ) | | | (17,935 | ) | | | (349 | ) | | | (45,124 | ) | Financial liabilities designated at fair value | | | (15 | ) | | | (55,141 | ) | | | (1,816 | ) | | | (56,972 | ) | Derivative financial liabilities | | | (10,313 | ) | | | (424,687 | ) | | | (4,320 | ) | | | (439,320 | ) | Otherb | | | – | | | | – | | | | (13,115 | ) | | | (13,115 | ) | Total liabilities | | | (37,168 | ) | | | (497,763 | ) | | | (19,600 | ) | | | (554,531 | ) |
Notes
a | During 2015, new reverse repurchase agreements and other similar secured lending and repurchase agreements and other similar secured borrowing in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
b | Other includes assets and liabilities held for sale of £7,364m (2014: £15,574m) and £5,997m (2014: £13,115m) respectively, which are measured at fair value on a non-recurring basis. Refer to Note 44 for more information on non-current assets and liabilities held for sale. Other also includes investment property of £140m (2014: £207m). |
| | | 236 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
18 Fair value of assets and liabilitiesfinancial instrumentscontinued
The following table shows the Group’s assets and liabilities that are held at fair value disaggregated by valuation technique (fair value hierarchy) and product type:type. | | | | | | | | | | | | | | | | | | | | | | | | | Assets and liabilities held at fair value by product type | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | Liabilities | | | | | | | | | Valuation technique using | | | | 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 |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate derivatives | | | – | | | | 228,751 | | | | 2,675 | | | | – | | | | (218,864 | ) | | | (2,247 | ) | Foreign exchange derivatives | | | 2 | | | | 54,839 | | | | 95 | | | | (4 | ) | | | (58,594 | ) | | | (196 | ) | Credit derivativesa | | | – | | | | 16,279 | | | | 1,902 | | | | – | | | | (16,405 | ) | | | (219 | ) | Equity derivatives | | | 3,830 | | | | 9,279 | | | | 690 | | | | (2,870 | ) | | | (14,037 | ) | | | (1,545 | ) | Commodity derivatives | | | 2,510 | | | | 6,801 | | | | 56 | | | | (2,576 | ) | | | (6,133 | ) | | | (562 | ) | Government and government sponsored debt | | | 55,150 | | | | 52,967 | | | | 419 | | | | (15,036 | ) | | | (5,474 | ) | | | (1 | ) | Corporate debt | | | 352 | | | | 11,598 | | | | 2,895 | | | | (234 | ) | | | (4,558 | ) | | | (15 | ) | Certificates of deposit, commercial paper and other money market instruments | | | 82 | | | | 503 | | | | – | | | | (5 | ) | | | (6,955 | ) | | | (382 | ) | Reverse repurchase and repurchase agreementsb | | | – | | | | 49,513 | | | | – | | | | – | | | | (50,838 | ) | | | – | | Non-asset backed loans | | | – | | | | 1,931 | | | | 16,828 | | | | – | | | | – | | | | – | | Asset backed securities | | | – | | | | 12,009 | | | | 770 | | | | – | | | | (384 | ) | | | (37 | ) | Commercial real estate loans | | | – | | | | – | | | | 551 | | | | – | | | | – | | | | – | | Issued debt | | | – | | | | – | | | | – | | | | – | | | | (29,695 | ) | | | (546 | ) | Equity cash products | | | 29,704 | | | | 4,038 | | | | 171 | | | | (8,943 | ) | | | (221 | ) | | | – | | Funds and fund linked products | | | – | | | | 1,649 | | | | 378 | | | | – | | | | (1,601 | ) | | | (148 | ) | Physical commodities | | | 87 | | | | 156 | | | | – | | | | – | | | | – | | | | – | | Otherc | | | 42 | | | | 971 | | | | 9,185 | | | | (1,024 | ) | | | (1,268 | ) | | | (4,344 | ) | Total | | | 91,759 | | | | 451,284 | | | | 36,615 | | | | (30,692 | ) | | | (415,027 | ) | | | (10,242 | ) | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate derivatives | | | – | | | | 308,706 | | | | 1,239 | | | | (5 | ) | | | (299,181 | ) | | | (1,344 | ) | Foreign exchange derivatives | | | 4 | | | | 74,358 | | | | 108 | | | | (3 | ) | | | (79,188 | ) | | | (138) | | Credit derivativesa | | | – | | | | 21,541 | | | | 1,966 | | | | – | | | | (21,958 | ) | | | (409 | ) | Equity derivatives | | | 3,847 | | | | 9,750 | | | | 1,247 | | | | (3,719 | ) | | | (13,780 | ) | | | (2,092 | ) | Commodity derivatives | | | 6,012 | | | | 10,946 | | | | 185 | | | | (6,586 | ) | | | (10,580 | ) | | | (337 | ) | Government and government sponsored debt | | | 62,577 | | | | 48,296 | | | | 1,014 | | | | (11,563 | ) | | | (14,002 | ) | | | (346 | ) | Corporate debt | | | 151 | | | | 22,036 | | | | 3,061 | | | | – | | | | (3,572 | ) | | | (13 | ) | Certificates of deposit, commercial paper and other money market instruments | | | 78 | | | | 921 | | | | – | | | | (4 | ) | | | (6,276 | ) | | | (665 | ) | Reverse repurchase and repurchase agreements | | | – | | | | 5,236 | | | | – | | | | – | | | | (5,423 | ) | | | – | | Non-asset backed loans | | | 1 | | | | 2,462 | | | | 17,744 | | | | – | | | | – | | | | – | | Asset backed securities | | | 30 | | | | 16,211 | | | | 1,631 | | | | – | | | | (67 | ) | | | – | | Commercial real estate loans | | | – | | | | – | | | | 1,180 | | | | – | | | | – | | | | – | | Issued debt | | | – | | | | – | | | | – | | | | (10 | ) | | | (40,592 | ) | | | (749 | ) | Equity cash products | | | 40,252 | | | | 7,823 | | | | 171 | | | | (15,276 | ) | | | (699 | ) | | | – | | Funds and fund linked products | | | – | | | | 2,644 | | | | 631 | | | | – | | | | (2,060 | ) | | | (210 | ) | Physical commodities | | | 4 | | | | 1,447 | | | | – | | | | – | | | | (363 | ) | | | – | | Otherc | | | 70 | | | | 1,530 | | | | 17,663 | | | | (2 | ) | | | (22 | ) | | | (13,297 | ) | Total | | | 113,026 | | | | 533,907 | | | | 47,840 | | | | (37,168 | ) | | | (497,763 | ) | | | (19,600 | ) |
Assets and liabilities reclassified between Level 1 and Level 2
There were transfers of £537m assets and £801m liabilities (2014: nil) of equity and foreign exchange derivatives from Level 1 to Level 2 to reflect the market observability of these product types.
| | | | | | | | | | | | | | | | | | | | | | | | | Assets and liabilities held at fair value by product type | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | Liabilities | | | | | | | | | Valuation technique using | | | | 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 |
| As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate derivatives | | | – | | | | 222,892 | | | | 5,759 | | | | – | | | | (215,213 | ) | | | (4,860 | ) | Foreign exchange derivatives | | | – | | | | 79,612 | | | | 132 | | | | – | | | | (78,263 | ) | | | (51 | ) | Credit derivatives | | | – | | | | 14,662 | | | | 1,611 | | | | – | | | | (14,844 | ) | | | (241 | ) | Equity derivatives | | | 4,210 | | | | 11,842 | | | | 1,037 | | | | (4,058 | ) | | | (15,808 | ) | | | (2,007 | ) | Commodity derivatives | | | 1,052 | | | | 3,809 | | | | 8 | | | | (991 | ) | | | (4,138 | ) | | | (13 | ) | Government and government sponsored debt | | | 31,203 | | | | 49,834 | | | | 3 | | | | (12,761 | ) | | | (11,454 | ) | | | – | | Corporate debt | | | 46 | | | | 11,921 | | | | 969 | | | | (27 | ) | | | (1,907 | ) | | | (5 | ) | Certificates of deposit, commercial paper and other money market instruments | | | – | | | | 994 | | | | – | | | | – | | | | (6,936 | ) | | | (319 | ) | Reverse repurchase and repurchase agreements | | | – | | | | 63,162 | | | | – | | | | – | | | | (55,710 | ) | | | – | | Non-asset backed loans | | | – | | | | 2,888 | | | | 8,767 | | | | – | | | | – | | | | – | | Asset backed securities | | | – | | | | 1,956 | | | | 515 | | | | – | | | | (256 | ) | | | – | | Commercial real estate loans | | | – | | | | – | | | | 442 | | | | – | | | | – | | | | – | | Issued debt | | | – | | | | – | | | | – | | | | – | | | | (31,973 | ) | | | (298 | ) | Equity cash products | | | 35,399 | | | | 6,478 | | | | 150 | | | | (7,416 | ) | | | (934 | ) | | | (2 | ) | Funds and fund linked products | | | 53 | | | | 137 | | | | 273 | | | | – | | | | (170 | ) | | | (37 | ) | Private equity investments | | | 23 | | | | 110 | | | | 856 | | | | – | | | | (18 | ) | | | (12 | ) | Assets and liabilities held for sale | | | 6,754 | | | | 8,511 | | | | 6,009 | | | | (397 | ) | | | (5,224 | ) | | | (6,201 | ) | Othera | | | 74 | | | | 328 | | | | 489 | | | | (73 | ) | | | (237 | ) | | | (173 | ) | Total | | | 78,814 | | | | 479,136 | | | | 27,020 | | | | (25,723 | ) | | | (443,085 | ) | | | (14,219 | ) | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate derivatives | | | – | | | | 228,751 | | | | 2,675 | | | | – | | | | (218,864 | ) | | | (2,247 | ) | Foreign exchange derivatives | | | 2 | | | | 54,839 | | | | 95 | | | | (4 | ) | | | (58,594 | ) | | | (196 | ) | Credit derivatives | | | – | | | | 16,279 | | | | 1,902 | | | | – | | | | (16,405 | ) | | | (219 | ) | Equity derivatives | | | 3,830 | | | | 9,279 | | | | 690 | | | | (2,870 | ) | | | (14,037 | ) | | | (1,545 | ) | Commodity derivatives | | | 2,510 | | | | 6,801 | | | | 56 | | | | (2,576 | ) | | | (6,133 | ) | | | (562 | ) | Government and government sponsored debt | | | 55,150 | | | | 52,967 | | | | 419 | | | | (15,036 | ) | | | (5,474 | ) | | | (1 | ) | Corporate debt | | | 352 | | | | 11,598 | | | | 2,895 | | | | (234 | ) | | | (4,558 | ) | | | (15 | ) | Certificates of deposit, commercial paper and other money market instruments | | | 82 | | | | 503 | | | | – | | | | (5 | ) | | | (6,955 | ) | | | (382 | ) | Reverse repurchase and repurchase agreements | | | – | | | | 49,513 | | | | – | | | | – | | | | (50,838 | ) | | | – | | Non-asset backed loans | | | – | | | | 1,931 | | | | 16,828 | | | | – | | | | – | | | | – | | Asset backed securities | | | – | | | | 12,009 | | | | 770 | | | | – | | | | (384 | ) | | | (37 | ) | Commercial real estate loans | | | – | | | | – | | | | 551 | | | | – | | | | – | | | | – | | Issued debt | | | – | | | | – | | | | – | | | | – | | | | (29,695 | ) | | | (546 | ) | Equity cash products | | | 29,704 | | | | 4,038 | | | | 171 | | | | (8,943 | ) | | | (221 | ) | | | – | | Funds and fund linked products | | | – | | | | 1,649 | | | | 378 | | | | – | | | | (1,601 | ) | | | (148 | ) | Private equity investments | | | 7 | | | | 283 | | | | 1,388 | | | | – | | | | – | | | | – | | Assets and liabilities held for sale | | | 26 | | | | 8 | | | | 7,330 | | | | (1,024 | ) | | | (802 | ) | | | (4,171 | ) | Othera | | | 96 | | | | 836 | | | | 467 | | | | – | | | | (466 | ) | | | (173 | ) | Total | | | 91,759 | | | | 451,284 | | | | 36,615 | | | | (30,692 | ) | | | (415,027 | ) | | | (10,242 | ) |
NotesNote
a | Credit derivatives includes derivative exposure to monoline insurers. |
b | During 2015, new reverse repurchase agreements and other similar lending and repurchase agreements and other similar secured borrowing in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
c | Other includes non-current assets and liabilities held for sale, private equity investments, asset backed loans, physical commodities and investment property. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 237 |
Notes to the financial statements
Assets and liabilities held at fair value
18 Fair value of assets and liabilitiescontinued
Level 3 movement analysis
The following table summarises the movements in the Level 3 balance during the year. The table shows gains and losses and includes amounts for all assets and liabilities transferred to and from Level 3 during the year. Transfers have been reflected as if they had taken place at the beginning of the year.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of movements in Level 3 assets and liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total gains and losses | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | in the period | | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | recognised in the | | | | gains | | | | | | | | | | | | | | | | | As at | | | | | | | | | | | | | | | | | | | | income statement | | | | or losses | | | | Transfers | | | | As at 31 | | | | | 1 January | | | | | | | | | | | | | | | | | | | | Trading | | | | Other | | | | recognised | | | | | | | | | | | | December | | | |
| 2015
£m |
| | | Purchases £m | | | | Sales £m | | | | Issues £m | | | | Settlements £m | | | | income £m | | | | income £m | | |
| in OCI
£m |
| | | In £m | | | | Out £m | | |
| 2015
£m |
| Government and government sponsored debt | | | 685 | | | | 27 | | | | (119 | ) | | | – | | | | (109 | ) | | | (6 | ) | | | – | | | | – | | | | 2 | | | | (160 | ) | | | 320 | | Corporate debt | | | 3,026 | | | | 62 | | | | (64 | ) | | | – | | | | (20 | ) | | | (47 | ) | | | – | | | | – | | | | 5 | | | | (80 | ) | | | 2,882 | | Asset backed securities | | | 1,610 | | | | 1,365 | | | | (1,565 | ) | | | – | | | | (711 | ) | | | 58 | | | | – | | | | – | | | | 5 | | | | (19 | ) | | | 743 | | Non-asset backed loans | | | 273 | | | | 520 | | | | (251 | ) | | | – | | | | (3 | ) | | | (42 | ) | | | – | | | | – | | | | 11 | | | | (1 | ) | | | 507 | | Funds and fund linked products | | | 589 | | | | – | | | | (174 | ) | | | – | | | | (56 | ) | | | (27 | ) | | | – | | | | – | | | | 12 | | | | (4 | ) | | | 340 | | Other | | | 144 | | | | 23 | | | | (19 | ) | | | – | | | | (9 | ) | | | (14 | ) | | | – | | | | – | | | | 53 | | | | (23 | ) | | | 155 | | Trading portfolio assets | | | 6,327 | | | | 1,997 | | | | (2,192 | ) | | | – | | | | (908 | ) | | | (78 | ) | | | – | | | | – | | | | 88 | | | | (287 | ) | | | 4,947 | | | | | | | | | | | | | | Commercial real estate loans | | | 1,179 | | | | 3,540 | | | | (3,878 | ) | | | – | | | | (342 | ) | | | 49 | | | | 1 | | | | – | | | | – | | | | – | | | | 549 | | Non-asset backed loansc | | | 17,471 | | | | 192 | | | | (114 | ) | | | – | | | | (756 | ) | | | (531 | ) | | | (6 | ) | | | – | | | | – | | | | – | | | | 16,256 | | Asset backed loans | | | 393 | | | | 1,098 | | | | (1,260 | ) | | | – | | | | 2 | | | | 8 | | | | – | | | | – | | | | 15 | | | | – | | | | 256 | | Private equity investments | | | 701 | | | | 94 | | | | (200 | ) | | | – | | | | (3 | ) | | | 8 | | | | 38 | | | | – | | | | 4 | | | | (132 | ) | | | 510 | | Other | | | 161 | | | | 66 | | | | (31 | ) | | | – | | | | (3 | ) | | | (11 | ) | | | 5 | | | | – | | | | 26 | | | | (26 | ) | | | 187 | | Financial assets designated at fair value | | | 19,905 | | | | 4,990 | | | | (5,483 | ) | | | – | | | | (1,102 | ) | | | (477 | ) | | | 38 | | | | – | | | | 45 | | | | (158 | ) | | | 17,758 | | | | | | | | | | | | | | Asset backed securities | | | 1 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | (1 | ) | | | – | | Government and government sponsored debt | | | 327 | | | | 14 | | | | (36 | ) | | | – | | | | – | | | | – | | | | – | | | | 1 | | | | – | | | | (212 | ) | | | 94 | | Other | | | 985 | | | | 65 | | | | (91 | ) | | | – | | | | (1,026 | ) | | | – | | | | 549 | | | | 419 | | | | 27 | | | | – | | | | 928 | | Available for sale investments | | | 1,313 | | | | 79 | | | | (127 | ) | | | – | | | | (1,026 | ) | | | – | | | | 549 | | | | 420 | | | | 27 | | | | (213 | ) | | | 1,022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Othera | | | 207 | | | | 27 | | | | (89 | ) | | | – | | | | – | | | | – | | | | (5 | ) | | | – | | | | – | | | | – | | | | 140 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading portfolio liabilities | | | (349 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 349 | | | | – | | | | | | | | | | | | | | Certificates of deposit, commercial paper and other money market instruments | | | (666 | ) | | | – | | | | – | | | | (216 | ) | | | 261 | | | | – | | | | 17 | | | | – | | | | – | | | | 221 | | | | (383 | ) | Issued debt | | | (748 | ) | | | – | | | | – | | | | (16 | ) | | | 245 | | | | (4 | ) | | | (8 | ) | | | – | | | | (38 | ) | | | 4 | | | | (565 | ) | Other | | | (402 | ) | | | – | | | | – | | | | – | | | | (19 | ) | | | (18 | ) | | | 75 | | | | – | | | | – | | | | 10 | | | | (354 | ) | Financial liabilities designated at fair value | | | (1,816 | ) | | | – | | | | – | | | | (232 | ) | | | 487 | | | | (22 | ) | | | 84 | | | | – | | | | (38 | ) | | | 235 | | | | (1,302 | ) | | | | | | | | | | | | | Interest rate derivatives | | | (105 | ) | | | 1 | | | | 218 | | | | – | | | | (247 | ) | | | 203 | | | | – | | | | – | | | | 243 | | | | 117 | | | | 430 | | Credit derivatives | | | 1,557 | | | | 273 | | | | (12 | ) | | | – | | | | (6 | ) | | | (123 | ) | | | – | | | | – | | | | (11 | ) | | | 7 | | | | 1,685 | | Equity derivatives | | | (845 | ) | | | 111 | | | | (2 | ) | | | (290 | ) | | | 103 | | | | 34 | | | | – | | | | – | | | | (21 | ) | | | 52 | | | | (858 | ) | Commodity derivatives | | | (152 | ) | | | – | | | | – | | | | – | | | | (66 | ) | | | (6 | ) | | | – | | | | – | | | | (388 | ) | | | 106 | | | | (506 | ) | Foreign exchange derivatives | | | (30 | ) | | | 14 | | | | (1 | ) | | | (7 | ) | | | 9 | | | | (14 | ) | | | – | | | | – | | | | (73 | ) | | | – | | | | (102 | ) | Net derivative financial instrumentsb | | | 425 | | | | 399 | | | | 203 | | | | (297 | ) | | | (207 | ) | | | 94 | | | | – | | | | – | | | | (250 | ) | | | 282 | | | | 649 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 26,012 | | | | 7,492 | | | | (7,688 | ) | | | (529 | ) | | | (2,756 | ) | | | (483 | ) | | | 666 | | | | 420 | | | | (128 | ) | | | 208 | | | | 23,214 | |
Notes
a | Other includes investment property of £140m (2014: £207m). Non-current assets held for sale of £7,330m (2014: £15,574m) and liabilities in a disposal group classified as held for sale of £4,171m (2014: £13,115m) are not included as these are measured at fair value on a non-recurring basis. |
b | The derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £5,418m (2014: £4,745m) and derivative financial liabilities are £4,769m (2014: £4,320m). |
c | A partially offsetting market gain of £172m (2014: £2,921m loss) has been recognised on the Level 2 derivative instruments that hedge the ESHLA loan portfolio interest rate risk. |
| | | 238248 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
18 Fair value of assets and liabilitiesfinancial instrumentscontinued | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of movements in Level 3 assets and liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Total gains and losses in | | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | the period recognised in | | | | gains | | | | | | | | | | | | | | | | | As at | | | | | | | | | | | | | | | | | | | | the income statement | | | | or losses | | | | Transfers | | | | As at 31 | | | | | 1 January | | | | | | | | | | | | | | | | | | | | Trading | | | | Other | | | | recognised | | | | | | | | | | | | December | | | |
| 2014
£m |
| | | Purchases £m | | | | Sales £m | | | | Issues £m | | | | Settlements £m | | | | income £m | | | | income £m | | |
| in OCI
£m |
| | | In £m | | | | Out £m | | |
| 2014
£m |
| Government and government sponsored debt | | | 161 | | | | 96 | | | | (198 | ) | | | – | | | | (46 | ) | | | 5 | | | | – | | | | – | | | | 676 | | | | (9 | ) | | | 685 | | Corporate debt | | | 3,039 | | | | 177 | | | | (332 | ) | | | – | | | | (370 | ) | | | 484 | | | | – | | | | – | | | | 39 | | | | (11 | ) | | | 3,026 | | Asset backed securities | | | 2,111 | | | | 1,037 | | | | (1,552 | ) | | | – | | | | (141 | ) | | | 178 | | | | – | | | | – | | | | 8 | | | | (31 | ) | | | 1,610 | | Non-asset backed loans | | | 176 | | | | 250 | | | | (30 | ) | | | – | | | | (49 | ) | | | 2 | | | | – | | | | – | | | | 13 | | | | (89 | ) | | | 273 | | Funds and fund linked products | | | 494 | | | | – | | | | (92 | ) | | | – | | | | – | | | | (17 | ) | | | – | | | | – | | | | 204 | | | | – | | | | 589 | | Other | | | 440 | | | | 8 | | | | (369 | ) | | | – | | | | 54 | | | | 22 | | | | – | | | | – | | | | – | | | | (11 | ) | | | 144 | | Trading portfolio assets | | | 6,421 | | | | 1,568 | | | | (2,573 | ) | | | – | | | | (552 | ) | | | 674 | | | | – | | | | – | | | | 940 | | | | (151 | ) | | | 6,327 | | | | | | | | | | | | | | Commercial real estate loans | | | 1,198 | | | | 2,919 | | | | (2,678 | ) | | | – | | | | (334 | ) | | | 76 | | | | (2 | ) | | | – | | | | – | | | | – | | | | 1,179 | | Non-asset backed loansc | | | 15,956 | | | | 2 | | | | (177 | ) | | | – | | | | (81 | ) | | | 1,830 | | | | 9 | | | | – | | | | – | | | | (68 | ) | | | 17,471 | | Asset backed loans | | | 375 | | | | 855 | | | | (777 | ) | | | – | | | | (4 | ) | | | 19 | | | | – | | | | – | | | | 1 | | | | (76 | ) | | | 393 | | Private equity investments | | | 1,168 | | | | 173 | | | | (500 | ) | | | – | | | | (11 | ) | | | 4 | | | | 82 | | | | – | | | | – | | | | (215 | ) | | | 701 | | Other | | | 73 | | | | 75 | | | | (1 | ) | | | – | | | | (35 | ) | | | 9 | | | | 32 | | | | – | | | | 2 | | | | 6 | | | | 161 | | Financial assets designated at fair value | | | 18,770 | | | | 4,024 | | | | (4,133 | ) | | | – | | | | (465 | ) | | | 1,938 | | | | 121 | | | | – | | | | 3 | | | | (353 | ) | | | 19,905 | | | | | | | | | | | | | | Asset backed securities | | | 1 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1 | | Government and government sponsored debt | | | 59 | | | | 281 | | | | (12 | ) | | | – | | | | (1 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | 327 | | Other | | | 2,085 | | | | 37 | | | | (78 | ) | | | – | | | | (1,694 | ) | | | 1 | | | | 586 | | | | 74 | | | | 4 | | | | (30 | ) | | | 985 | | Available for sale investments | | | 2,145 | | | | 318 | | | | (90 | ) | | | – | | | | (1,695 | ) | | | 1 | | | | 586 | | | | 74 | | | | 4 | | | | (30 | ) | | | 1,313 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Othera | | | 451 | | | | 47 | | | | (238 | ) | | | – | | | | – | | | | – | | | | 5 | | | | – | | | | – | | | | (58 | ) | | | 207 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading portfolio liabilities | | | – | | | | – | | | | – | | | | – | | | | – | | | | (3 | ) | | | – | | | | – | | | | (346 | ) | | | – | | | | (349 | ) | | | | | | | | | | | | | Certificates of deposit, commercial paper and other money market instruments | | | (409 | ) | | | – | | | | – | | | | (254 | ) | | | 12 | | | | 2 | | | | 88 | | | | – | | | | (108 | ) | | | 3 | | | | (666 | ) | Issued debt | | | (1,164 | ) | | | – | | | | – | | | | (16 | ) | | | 293 | | | | 88 | | | | – | | | | – | | | | (48 | ) | | | 99 | | | | (748 | ) | Other | | | (67 | ) | | | – | | | | – | | | | (341 | ) | | | 10 | | | | 6 | | | | 30 | | | | – | | | | (40 | ) | | | – | | | | (402 | ) | Financial liabilities designated at fair value | | | (1,640 | ) | | | – | | | | – | | | | (611 | ) | | | 315 | | | | 96 | | | | 118 | | | | – | | | | (196 | ) | | | 102 | | | | (1,816 | ) | | | | | | | | | | | | | Interest rate derivatives | | | (15 | ) | | | 5 | | | | 45 | | | | (5 | ) | | | 7 | | | | (358 | ) | | | – | | | | – | | | | 103 | | | | 113 | | | | (105 | ) | Credit derivatives | | | 1,420 | | | | 11 | | | | – | | | | – | | | | 42 | | | | 121 | | | | – | | | | – | | | | (81 | ) | | | 44 | | | | 1,557 | | Equity derivatives | | | (601 | ) | | | 86 | | | | (12 | ) | | | (305 | ) | | | 113 | | | | (278 | ) | | | – | | | | – | | | | (14 | ) | | | 166 | | | | (845 | ) | Commodity derivatives | | | (141 | ) | | | – | | | | – | | | | (3 | ) | | | (10 | ) | | | 4 | | | | – | | | | – | | | | (11 | ) | | | 9 | | | | (152 | ) | Foreign exchange derivatives | | | 31 | | | | – | | | | (12 | ) | | | (4 | ) | | | (71 | ) | | | (6 | ) | | | – | | | | – | | | | 29 | | | | 3 | | | | (30 | ) | Net derivative financial instrumentsb | | | 694 | | | | 102 | | | | 21 | | | | (317 | ) | | | 81 | | | | (517 | ) | | | – | | | | – | | | | 26 | | | | 335 | | | | 425 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 26,841 | | | | 6,059 | | | | (7,013 | ) | | | (928 | ) | | | (2,316 | ) | | | 2,189 | | | | 830 | | | | 74 | | | | 431 | | | | (155 | ) | | | 26,012 | |
Notes
a | Other includes investment property of £140m (2014: £207m). Non-current assets held for sale of £7,330m (2014: £15,574m) and liabilities in a disposal group classified as held for sale of £4,171m (2014: £13,115m) are not included as these are measured at fair value on a non-recurring basis. |
b | The derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £5,418m (2014: £4,745m) and derivative financial liabilities are £4,769m (2014: £4,320m). |
c | A partially offsetting market gain of £172m (2014: £2,921m loss) has been recognised on the Level 2 derivative instruments that hedge the ESHLA loan portfolio interest rate risk. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 239 |
Notes to the financial statements
Assets and liabilities held at fair value
18 Fair value of assets and liabilitiescontinued
Assets and liabilities move between Level 2 and Level 3 primarily due to i) an increase or decrease in observable market activity related to an input, or ii) a change in the significance of the unobservable input, with assets and liabilities classified as Level 3 if an unobservable input is deemed significant.
Unrealised gains and losses on Level 3 financial assets and liabilities
The following table discloses the unrealised gains and losses recognised in the year arising on Level 3 financial assets and liabilities held at year end.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrealised gains and losses recognised during the period on Level 3 assets and liabilities held at period end | | | | | 2015 | | | | 2014 | | | | | | | | | | | | | Other | | | | | | | | | | | | | | | | Other | | | | | | | | | Income statement | | | | compre- | | | | | | | | Income statement | | | | compre- | | | | | | | | | Trading | | | | Other | | | | hensive | | | | | | | | Trading | | | | Other | | | | hensive | | | | | | As at 31 December | | | income £m | | | | income £m | | | | income £m | | | | Total £m | | | | income £m | | | | income £m | | | | income £m | | | | Total £m | | Trading portfolio assets | | | (125 | ) | | | – | | | | – | | | | (125 | ) | | | 466 | | | | – | | | | – | | | | 466 | | Financial assets designated at fair value | | | (562 | ) | | | (17 | ) | | | – | | | | (579 | ) | | | 1,849 | | | | (9 | ) | | | – | | | | 1,840 | | Available for sale assets | | | – | | | | (20 | ) | | | 488 | | | | 468 | | | | – | | | | 572 | | | | 80 | | | | 652 | | Trading portfolio liabilities | | | (1 | ) | | | – | | | | – | | | | (1 | ) | | | (3 | ) | | | – | | | | – | | | | (3 | ) | Financial liabilities designated at fair value | | | (24 | ) | | | 76 | | | | – | | | | 52 | | | | 98 | | | | 118 | | | | – | | | | 216 | | Othera | | | – | | | | (22 | ) | | | – | | | | (22 | ) | | | – | | | | 5 | | | | – | | | | 5 | | Net derivative financial instruments | | | 123 | | | | – | | | | – | | | | 123 | | | | (238 | ) | | | – | | | | – | | | | (238 | ) | Total | | | (589 | ) | | | 17 | | | | 488 | | | | (84 | ) | | | 2,172 | | | | 686 | | | | 80 | | | | 2,938 | |
The trading losses of £562m (2014: trading gains of £1,849m) within Level 3 financial assets designated at fair value was primarily due to fair value losses on the ESHLA loan portfolio of £531m.
Valuation techniques and sensitivity analysis Sensitivity analysis is performed on products with significant unobservable inputs (Level 3) to generate a range of reasonably possible alternative valuations. The sensitivity methodologies applied take account of the nature of the valuation techniques used, as well as the availability and reliability of observable proxy and historical data and the impact of using alternative models. Sensitivities are dynamically calculated on a monthly basis. The calculation is based on range or spread data of a reliable reference source or a scenario based on relevant market analysis alongside the impact of using alternative models. Sensitivities are calculated without reflecting the impact of any diversification in the portfolio. The valuation techniques used for the material products within Levels 2 and 3, and observability and sensitivity analysis for products within Level 3, are described below. Interest rate derivatives Description: These are derivatives linked to interest rates or inflation indices. This category includes futures, interest rate and inflation swaps, swaptions, caps, floors, inflation options, balance guaranteed swaps and other exotic interest rate derivatives. Valuation:Interest rate derivative cash flows are valued using interest rate yield curves whereby observable market data is used to construct the term structure of forward rates. This is then used to project and discount future cash flows based on the parameters of the trade. Instruments with optionality are valued using volatilities implied from market observable inputs. Exotic interest rate derivatives are valued using industry standard and bespoke models based on observable and unobservable market parameter inputs. Input parameters include interest rates, volatilities, correlations and others as appropriate. Inflation forward curves and interest rate yield curves may be extrapolated beyond observable tenors. Balance guaranteed swaps are valued using 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. Observability: In general, input parameters are deemed observable up to liquid maturities which are determined separately for each parameter and underlying. Certain correlation, convexity, long dated forwards and volatility exposures are unobservable beyond liquid maturities. Unobservable market data and model inputs are set by referencing liquid market instruments and applying extrapolation techniques or inferred via another reasonable method. Level 3 sensitivity:Sensitivity relating to unobservable valuation inputs is based on the dispersion of consensus data services where available, otherwise stress scenarios or historic data are used. Notes
a | Other consists of investment properties. |
| | | 240 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
18 Fair value of assets and liabilitiescontinued
Foreign exchange derivatives Description:These are derivatives linked to the foreign exchange (FX) market. This category includes FX forward contracts, FX swaps and FX options. The vast majority are traded as OTCover the counter (OTC) derivatives. Valuation: Exotic andnon-exotic derivatives are valued using industry standard and bespoke models. Input parameters include FX rates, interest rates, FX volatilities, interest rate volatilities, FX interest rate correlations and others as appropriate. Unobservable model inputs are set by referencing liquid market instruments and applying extrapolation techniques to match the appropriate risk profile. Observability:Certain correlations, long dated forwards and volatilities are unobservable beyond liquid maturities. Level 3 sensitivity:Sensitivity relating to unobservable valuation inputs is primarily based on the dispersion of consensus data services. Credit derivatives Description: These are derivatives linked to the credit spread of a referenced entity, index or basket of referenced entities or a pool of referenced assets via securitisation. This category includes single name and index CDS,credit default swaps (CDS), asset backed CDS, synthetic CDOs andNth-to-default basket swaps. Valuation:CDS are valued using a market standard model that incorporates the credit curve as its principal input. Credit spreads are observed directly from broker data, third partythird-party vendors or priced to proxies. Where credit spreads are unobservable, they are determined with reference to recent transactions or proxied from bond spreads on observable trades of the same issuer or other similar entities. Synthetic CDOs are valued using a model that calculates fair value based on credit spreads, recovery rates, correlations and interest rates, and is calibrated to the index tranche market. Observability:CDS contracts referencing entities that are not actively traded are considered unobservable. The correlation input to synthetic CDO valuation is considered unobservable as it is proxied from the observable index tranche market. Where an asset backed credit derivative does not have an observable market price and the valuation is determined using a model, thean instrument is considered unobservable. Level 3 sensitivity: The sensitivity of valuations of the illiquid CDS portfolio is determined by applying a shift to each spread curve. The shift is based on the average range of pricing observed in the market for similar CDS. Synthetic CDO sensitivity is calculated using correlation levels derived from the range of contributors to a consensus bespoke service. Derivative exposure to monoline insurers
Description:These products are derivatives through which credit protection has been purchased on structured debt instruments (primarily CLOs) from monoline insurers.
Valuation:Given the bespoke nature of the CDS, the primary valuation input is the price of the cash instrument it protects.
Observability: While the market value of the cash instrument underlying the CDS contract may be observable, its use in the valuation of CDS is considered unobservable due to the bespoke nature of the monoline CDS contracts.
Level 3 sensitivity:Due to the high degree of uncertainty, the sensitivity reflects the impact of writing down the credit protection element of fair value to zero.
Equity derivatives Description:These are derivatives linked to equity indices and single names. This category includes exchange traded and OTC equity derivatives including vanilla and exotic options. Valuation: The valuations of OTC equity derivatives are determined using industry standard models. Input parameters include stock prices, dividends, volatilities, inte restinterest rates, equity repo curves and, for multi-asset products, correlations. Unobservable model inputs are determined by reference to liquid market instruments and applying extrapolation techniques to match the appropriate risk profile. Observability: In general, input parameters are deemed observable up to liquid maturities which are determined separately for each parameter and underlying. Level 3 sensitivity:Sensitivity is estimated based on the dispersion of consensus data services either directly or through proxies. Commodity derivatives Description:These products are exchange traded and OTC derivatives based on underlying commodities such as metals, crude oil and refined products, agricultural, power and natural gas. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 249 |
Notes to the financial statements Assets and liabilities held at fair value 18 Fair value of financial instrumentscontinued Valuation:The valuations of commodity swaps and options are determined using models incorporating discounting of cash flows and other industry standard modelling techniques. Valuation inputs include forward curves, volatilities implied from market observable inputs and correlations. Unobservable inputs are set with reference to similar observable products or by applying extrapolation techniques from the observable market. Observability: Certain correlations, forward curves and volatilities for longer dated exposures are unobservable. Level 3 sensitivity:Sensitivity is determined primarily by measuring historical variability over two years. Where historical data is unavailable or uncertainty is due to volumetric risk, sensitivity is measured by applying appropriate stress scenarios or using proxybid-offer spread levels. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 241 |
Notes to the financial statements
Assets and liabilities held at fair value
18 Fair value of assets and liabilitiescontinued
Complex derivative instruments Valuation estimates made by counterparties with respect to complex derivative instruments, for the purpose of determining the amount of collateral to be posted, often differ, sometimes significantly, from Barclays’ own estimates. In almost all cases, Barclays has been able to successfully resolve such differences or otherwise reach an accommodation with respect to collateral posting levels, including in certain cases by entering into compromise collateral arrangements. Due to the ongoing nature of collateral calls, Barclays will often be engaged in discussion with one or more counterparties in respect of such differences at any given time. Valuation estimates made by counterparties for collateral purposes are considered, like any other third partythird-party valuation, considered when determining Barclays’ fair value estimates. Government and government sponsored debt Description:These are government bonds, supra sovereign bonds and agency bonds. Valuation:Liquid government bonds actively traded through an exchange or clearing house are marked to the closing levels observed in these markets. Less liquid bonds are valued using observable market prices which are sourced from broker quotes, inter-dealer prices or other reliable pricing services. Where there are no observable market prices, fair value is determined by reference to either issuances or CDS spreads ofyields on other bonds from the same issuer as proxy inputs to obtain discounted cash flow amounts.issuer. Observability:Where an observable market price is not available the bond is considered Level 3. Level 3 sensitivity:Sensitivity is calculated by using the range of observable proxy prices. Corporate debt Description:This primarily contains corporate bonds. Valuation:Corporate bonds are valued using observable market prices which are sourced from broker quotes, inter-dealer prices or other reliable pricing services. Where there are no 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 flow amounts. In the absence of observable bond or CDS spreads for the respective issuer, similar reference assets or sector averages are applied as a proxy (the appropriateness of proxies being assessed based on issuer, coupon, maturity and industry). Observability:Where an observable market price is not available the security is considered Level 3. Level 3 sensitivity:The sensitivity forof the corporate bonds portfolio is determined by applying a shift to each underlying position driven by average ranges of external levels observed in the market for similar bonds. Certificates of Deposit, Commercial Paper and other money market instruments Description: These are certificates of deposit, commercial paper and other money market instruments. Valuation: Certificates of deposit and commercial paper are valued using observable market prices which are sourced from broker quotes inter-dealer prices or other reliable pricing services. Where there are no 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 flow amounts. In the absence of observable bond or CDS spreads for the respective issuer, similar reference assets or sector averages are applied as a proxy (the appropriateness of proxies being assessed based on issuer, coupon, maturity and industry). Observability: Where an observable market price is not available the instrument is considered Level 3. Level 3 sensitivity: Sensitivity is calculated by using the range of observable proxy prices. Reverse repurchase and repurchase agreements Description: These include securities purchased under resale agreements, securities sold under repurchase agreements, and other similar secured lending agreements. Valuation:Reverse repurchase and repurchase agreements are valued by discounting the expected future cash flows. The inputs to the valuation include interest rates and repo rates, which are determined based on the specific parameters of the transaction. Observability:In general, input parameters are deemed observable up to liquid maturities, as determined based on the specific parameters of the transaction. Unobservable market data and model inputs are set by referencing liquid market instruments and applying extrapolation techniques or inferred via another reasonable method. Level 3 sensitivity:Sensitivity relating to unobservable valuation inputs is based on the dispersion of consensus data services where available, otherwise stress scenarios or historic data are used. In general, the sensitivity of unobservable inputs is insignificant to the overall balance sheet valuation given the predominantly short termshort-term nature of the agreements. Non-asset backed loans Description:This category is largely made up of fixed rate loans, such asprimarily the ESHLA portfolio, which are valued using models that discount expected future cash flows. Valuation: Fixed rate loans are valued using models that calculate fair value based on observable interest rates and unobservable loan spreads. Unobservable loan spreads incorporate funding costs, the level of comparable assets such as gilts, issuer credit quality and other factors. Observability:Within this population, the unobservable input is the loan spread. Level 3 sensitivity:The sensitivity forof fixed rate loans is calculated by applying a shift to loan spreads. | | | 250 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
18 Fair value of financial instrumentscontinued Asset backed securities Description:These are securities that are linked to the cash flows of a pool of referenced assets via securitisation. This category includes residential mortgage backed securities, commercial mortgage backed securities, CDOs, CLOscollaterallised loan obligations (CLOs) and other asset backed securities. Valuation:Where available, valuations are based on observable market prices which are sourced from broker quotes and inter-dealer prices. Otherwise, valuations are determined using industry standard discounted cash flow analysis that calculates the fair value based on valuation inputs such as constant default rate, conditional prepayment rate, loss given default and yield. These inputs are determined by reference to a number of sources including proxying to observed transactions, market indices or market research, and by assessing underlying collateral performance. Proxying to observed transactions, indices or research requires an assessment and comparison of the relevant securities’ underlying attributes including collateral, tranche, vintage, underlying asset composition (historical losses, borrower characteristics and loan attributes such as loan to valueloan-to-value ratio and geographic concentration) and credit ratings (original and current). Observability: Where an asset backed product does not have an observable market price and the valuation is determined using a discounted cash flow analysis, anthe instrument is considered unobservable. Level 3 sensitivity: The sensitivity analysis for asset backed products is based on externally sourced pricing dispersion or by stressing the inputs of discounteddiscount cash flow analysis. | | | 242 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
18 Fair value of assets and liabilitiescontinued
Commercial real estate loans Description:This portfolio includes loans that are secured by a range of commercial property types including retail, hotel, office, multi-family and industrial properties. Valuation:Performing loans are valued using discounted cash flow analysis which considers the characteristics of the loan such as property type, geographic location, credit quality and property performance reviews in order to determine an appropriate credit spread. Where there is significant uncertainty regarding loan performance, valuation is based on independent third partythird-party appraisals or bids for the underlying properties. Independent third party appraisals are determined by discounted cash flow analysis, andanalysis. The key valuation inputs are yield and loss given default. Observability: Since each commercial real estate loan is unique in nature and the secondary loan market is relatively illiquid, valuation inputs are generally considered unobservable. Level 3 sensitivity: For performing loans, sensitivity is determined by stressing the credit spread for each loan. For loans which have significant uncertainty regarding loan performance, sensitivity is determined by either a range of bids or by stressing the inputs to independent third party appraisals. Issued debt Description:This category contains Barclays issued notes. Valuation:Fair valued Barclays issued notes are valued using discounted cash flow techniques and industry standard models incorporating various observable input parameters depending on the terms of theobserved for each parameter or instrument. Observability:Barclays issued notes are generally observable. Structured notes are debt instruments containing embedded derivatives. Where either an input to the embedded derivative or the debt instrument is deemed unobservable and significant to the overall valuation of the note, the structured note is classified as Level 3. Level 3 sensitivity: Sensitivity to the unobservable input in the embedded derivative is calculated in line with the method used for the type of derivative instrument concerned. Other
Description:Other includes non-current assets and liabilities held for sale and private equity investments. See below for more detail. Other also includes investment properties.
Non-current assets held for saleEquity cash products
Description: Non-current assets held for sale materially consists of the Portuguese Retail Banking, WealthThis category includes listed equities, Exchange Traded Funds (ETF) and Investment Management businesses and part of the Portuguese Corporate banking business, Barclays Vida y Pensiones (BVP), a company offering life insurance, pension products and services in Spain, Portugal and Italy, and the Italian Retail business. These sales are part of the divestment of the Barclays Non-Core segment of the Group.preference shares. Valuation:Non-current assets held for sale are valued at the lower Valuation of carrying value and fair value less cost to sell.equity cash products is primarily determined through market observable prices. Observability: The itemsPrices are generally observed in Level 2 and Level 3 include customer cash, nostro accounts with other banks and other time deposits.the market. Where a price for an equity security is not available, the instrument is considered unobservable. Level 3 sensitivity:The businesses held for sale Sensitivity is calculated based on a stressed valuation on the underlying asset. Funds and fund linked products Description: This category includes holdings in hedge funds and funds of funds. Valuation: In general, fund holdings are valued based on the latest available valuation received from the fund administrator. 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 adjusted relative to the performance of relevant index benchmarks. Observability: 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 from the fund administrators is older than the frequency dictated by the fund offering documents. Level 3 sensitivity: Sensitivity is calculated on an individual fund basis using a loss-based scenario approach which factors in the underlying assets of the specific fund and assumed recovery rates. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 251 |
Notes to the financial statements Assets and liabilities held at the agreed price less costs to sell and are not expected to display significant sensitivity.fair value 18 Fair value of financial instrumentscontinued Private equity investments Description:This category includes private equity investments. Valuation:Private equity investments are valued in accordance with the ‘International Private Equity and Venture Capital Valuation Guidelines’. This requiresThese require the use of a number of individual pricing benchmarks such as the prices of recent transactions in the same or similar entities, discounted cash flow analysis and comparison with the earnings multiples of listed comparative companies. Full valuations are generally performed at least biannually,bi-annually, with the positions reviewed periodically for material events that might impact upon fair value. 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. Private equity investments include Barclays’ equity interest in Visa Europe, an available for sale asset, which has been valued by reference to consideration, some of which is contingent upon future events, that will be receivable upon completion of the announced sale of Visa Europe to Visa Inc. The elements of consideration that are contingent on future events have been deemed unobservable and no value has been attributed to such elements in the year-end valuation. Observability:Unobservable inputs include earnings estimates, multiples of comparative companies, marketability discounts and discount rates. Level 3 sensitivity:The relevant valuation models are each sensitive to 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 on the resulting valuation. Assets and liabilities held for sale Description: Assets and liabilities held for sale materially consist of the intention to dispose of BAGL, France, Egypt, BVP and Zimbabwe. Valuation: Assets and liabilities held for sale are valued at the lower of carrying value and fair value less cost to sell. Level 3 sensitivity: The disposal groups that are measured at fair value less cost to sell are valued at the agreed price less costs to sell and are not expected to display significant sensitivity. The sensitivity of the assets and liabilities measured at carrying value is explained within the relevant product descriptions. Other Description: Other includes asset-backed loans, physical commodities and investment property. Assets and liabilities reclassified between Level 1 and Level 2 There were transfers of £2,340m of government bond assets during the period from Level 2 to Level 1 to reflect the market observability of these product types (2015: £537m assets and £801m liabilities of equity and foreign exchange derivatives transferred from Level 1 to Level 2). Level 3 movement analysis The following table summarises the movements in the Level 3 balances during the period. The table shows gains and losses and includes amounts for all financial assets and liabilities that are held at fair value transferred to, and from, Level 3 during the period. Transfers have been reflected as if they had taken place at the beginning of the year. Assets and liabilities included in disposal groups classified as held for sale and measured at fair value less cost to sell are not included as these are measured at fair value on anon-recurring basis. Asset and liability transfers between Level 2 and Level 3 are primarily due to i) an increase or decrease in observable market activity related to an input or ii) a change in the significance of the unobservable input, with assets and liabilities classified as Level 3 if an unobservable input is deemed significant. During the year: ☒ | £2.1bn corporate bonds were transferred from Level 3 to Level 2 to reflect the market observability of the products; |
☒ | £8.6bn ofnon-asset backed loans were derecognised due to a substantial modification of terms on the ESHLA loans. The new restructured loans are measured on an amortised cost basis; and |
☒ | Market moves in the interest rate and inflation markets have resulted in an increase in the value of the Level 3 assets being reported, the gains have largely been offset through Level 2 hedges. |
| | | 252 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
18 Fair value of financial instrumentscontinued | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Analysis of movements in Level 3 assets and liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total gains and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | losses in the period | | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | recognised in the | | | | gains or | | | | | | | | | | | | | | | | | As at | | | | | | | | | | | | | | | | | | | | income statement | | | | losses re- | | | | Transfers | | | | As at 31 | | | | | 1 January | | | | | | | | | | | | | | | | Settle- | | | | Trading | | | | Other | | | | cognised | | | | | | | | | | | | December | | | | | 2016a | | | | Purchases | | | | Sales | | | | Issues | | | | ments | | | | income | | | | income | | | | in OCI | | | | In | | | | Out | | | | 2016 | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | Government and government sponsored debt | | | 320 | | | | – | | | | (317 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 3 | | Corporate debt | | | 2,843 | | | | 38 | | | | (48 | ) | | | – | | | | (5 | ) | | | 206 | | | | – | | | | – | | | | 32 | | | | (2,097 | ) | | | 969 | | Non-asset backed loans | | | 507 | | | | 173 | | | | (498 | ) | | | – | | | | (4 | ) | | | (38 | ) | | | – | | | | – | | | | 18 | | | | (7 | ) | | | 151 | | Asset backed securities | | | 743 | | | | 129 | | | | (295 | ) | | | – | | | | (171 | ) | | | 111 | | | | – | | | | – | | | | 1 | | | | (3 | ) | | | 515 | | Funds and fund linked products | | | 340 | | | | – | | | | (77 | ) | | | – | | | | – | | | | 23 | | | | – | | | | – | | | | 1 | | | | (14 | ) | | | 273 | | Other | | | 155 | | | | 59 | | | | (16 | ) | | | – | | | | (1 | ) | | | (8 | ) | | | – | | | | – | | | | – | | | | (35 | ) | | | 154 | | Trading portfolio assets | | | 4,908 | | | | 399 | | | | (1,251 | ) | | | – | | | | (181 | ) | | | 294 | | | | – | | | | – | | | | 52 | | | | (2,156 | ) | | | 2,065 | | | | | | | | | | | | | | Non-asset backed loans | | | 15,963 | | | | – | | | | – | | | | – | | | | (8,602 | ) | | | 1,155 | | | | 100 | | | | – | | | | – | | | | – | | | | 8,616 | | Asset backed loans | | | 256 | | | | 48 | | | | (225 | ) | | | – | | | | (20 | ) | | | 30 | | | | – | | | | – | | | | 112 | | | | – | | | | 201 | | Commercial real estate loans | | | 543 | | | | 2,658 | | | | (2,755 | ) | | | – | | | | (12 | ) | | | 56 | | | | – | | | | – | | | | – | | | | (48 | ) | | | 442 | | Private equity investments | | | 457 | | | | 38 | | | | (51 | ) | | | – | | | | (3 | ) | | | 16 | | | | 120 | | | | – | | | | 6 | | | | (21 | ) | | | 562 | | Other | | | 78 | | | | – | | | | – | | | | – | | | | (21 | ) | | | (19 | ) | | | 85 | | | | – | | | | 41 | | | | (38 | ) | | | 126 | | Financial assets designated at fair value | | | 17,297 | | | | 2,744 | | | | (3,031 | ) | | | – | | | | (8,658 | ) | | | 1,238 | | | | 305 | | | | – | | | | 159 | | | | (107 | ) | | | 9,947 | | | | | | | | | | | | | | Private equity investments | | | 877 | | | | 15 | | | | (254 | ) | | | – | | | | (407 | ) | | | – | | | | – | | | | 63 | | | | – | | | | – | | | | 294 | | Other | | | 44 | | | | 53 | | | | (14 | ) | | | – | | | | (16 | ) | | | – | | | | 4 | | | | 7 | | | | 1 | | | | (1 | ) | | | 78 | | Available for sale investments | | | 921 | | | | 68 | | | | (268 | ) | | | – | | | | (423 | ) | | | – | | | | 4 | | | | 70 | | | | 1 | | | | (1 | ) | | | 372 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment property | | | 82 | | | | – | | | | (3 | ) | | | – | | | | – | | | | – | | | | 2 | | | | – | | | | – | | | | – | | | | 81 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading portfolio liabilities | | | – | | | | – | | | | (9 | ) | | | – | | | | – | | | | (1 | ) | | | – | | | | – | | | | – | | | | 3 | | | | (7 | ) | | | | | | | | | | | | | Certificates of deposit, commercial paper and other money market instruments | | | (272 | ) | | | – | | | | – | | | | (19 | ) | | | 48 | | | | 2 | | | | (7 | ) | | | – | | | | (301 | ) | | | 230 | | | | (319 | ) | Issued debt | | | (538 | ) | | | – | | | | – | | | | – | | | | 231 | | | | – | | | | 9 | | | | – | | | | – | | | | – | | | | (298 | ) | Other | | | (244 | ) | | | – | | | | – | | | | – | | | | 83 | | | | (48 | ) | | | (2 | ) | | | – | | | | (50 | ) | | | 38 | | | | (223 | ) | Financial liabilities designated at fair value | | | (1,054 | ) | | | – | | | | – | | | | (19 | ) | | | 362 | | | | (46 | ) | | | – | | | | – | | | | (351 | ) | | | 268 | | | | (840 | ) | | | | | | | | | | | | | Interest rate derivatives | | | 418 | | | | 45 | | | | 3 | | | | – | | | | (6 | ) | | | 228 | | | | – | | | | – | | | | 294 | | | | (83 | ) | | | 899 | | Foreign exchange derivatives | | | (104 | ) | | | – | | | | 30 | | | | 2 | | | | 40 | | | | 6 | | | | – | | | | – | | | | 55 | | | | 52 | | | | 81 | | Credit derivatives | | | 1,685 | | | | 2 | | | | (306 | ) | | | – | | | | (119 | ) | | | 111 | | | | – | | | | – | | | | 3 | | | | (6 | ) | | | 1,370 | | Equity derivatives | | | (857 | ) | | | 196 | | | | 7 | | | | (83 | ) | | | (34 | ) | | | (98 | ) | | | – | | | | – | | | | (15 | ) | | | (86 | ) | | | (970 | ) | Commodity derivatives | | | (506 | ) | | | – | | | | – | | | | – | | | | 91 | | | | (3 | ) | | | – | | | | – | | | | – | | | | 413 | | | | (5 | ) | Net derivative financial instrumentsb | | | 636 | | | | 243 | | | | (266 | ) | | | (81 | ) | | | (28 | ) | | | 244 | | | | – | | | | – | | | | 337 | | | | 290 | | | | 1,375 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Assets and liabilities held for sale | | | 424 | | | | 126 | | | | (166 | ) | | | (116 | ) | | | 85 | | | | – | | | | 172 | | | | – | | | | – | | | | 49 | | | | 574 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 23,214 | | | | 3,580 | | | | (4,994 | ) | | | (216 | ) | | | (8,843 | ) | | | 1,729 | | | | 483 | | | | 70 | | | | 198 | | | | (1,654 | ) | | | 13,567 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net liabilities held for sale measured at fair value onnon-recurring basis | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (766 | ) | Total | | | 23,214 | | | | 3,580 | | | | (4,994 | ) | | | (216 | ) | | | (8,843 | ) | | | 1,729 | | | | 483 | | | | 70 | | | | 198 | | | | (1,654 | ) | | | 12,801 | |
Notes a | The Level 3 opening balances have been amended to exclude the asset and liabilities held for sale. |
b | The derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £8,546m (2015: £5,418m) and derivative financial liabilities are £7,171m (2015: £4,769m). |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 243253 |
Notes to the financial statements Assets and liabilities held at fair value | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 18 Fair value of financial instrumentscontinued | | Analysis of movements in Level 3 assets and liabilities | | | | | | | | | | | | | | | | | | | | | | | | | Total gains and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | losses in the period | | | | Total | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | recognised in the | | | | gains or | | | | | | | | | | | | | | | | | As at | | | | | | | | | | | | | | | | | | | | income statement | | | | losses re- | | | | Transfers | | | | As at 31 | | | | | 1 January | | | | | | | | | | | | | | | | | | | | Trading | | | | Other | | | | cognised | | | | | | | | | | | | December | | | |
| 2015
£m |
| |
| Purchases £m | | |
| Sales
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| |
| Issues
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| |
| Settlements
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| |
| income
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| |
| income
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| |
| in OCI
£m |
| |
| In
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| Out
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| 2015
£m |
| Government and government sponsored debt | | | 685 | | | | 27 | | | | (119 | ) | | | – | | | | (109 | ) | | | (6 | ) | | | – | | | | – | | | | 2 | | | | (160 | ) | | | 320 | | Corporate debt | | | 3,026 | | | | 62 | | | | (64 | ) | | | – | | | | (20 | ) | | | (47 | ) | | | – | | | | – | | | | 5 | | | | (80 | ) | | | 2,882 | | Non-asset backed loans | | | 273 | | | | 520 | | | | (251 | ) | | | – | | | | (3 | ) | | | (42 | ) | | | – | | | | – | | | | 11 | | | | (1 | ) | | | 507 | | Asset backed securities | | | 1,610 | | | | 1,365 | | | | (1,565 | ) | | | – | | | | (711 | ) | | | 58 | | | | – | | | | – | | | | 5 | | | | (19 | ) | | | 743 | | Funds and fund linked products | | | 589 | | | | – | | | | (174 | ) | | | – | | | | (56 | ) | | | (27 | ) | | | – | | | | – | | | | 12 | | | | (4 | ) | | | 340 | | Other | | | 144 | | | | 23 | | | | (19 | ) | | | – | | | | (9 | ) | | | (14 | ) | | | – | | | | – | | | | 53 | | | | (23 | ) | | | 155 | | Trading portfolio assets | | | 6,327 | | | | 1,997 | | | | (2,192 | ) | | | – | | | | (908 | ) | | | (78 | ) | | | – | | | | – | | | | 88 | | | | (287 | ) | | | 4,947 | | | | | | | | | | | | | | Non-asset backed loans | | | 17,471 | | | | 192 | | | | (114 | ) | | | – | | | | (756 | ) | | | (531 | ) | | | (6 | ) | | | – | | | | – | | | | – | | | | 16,256 | | Asset backed loans | | | 393 | | | | 1,098 | | | | (1,260 | ) | | | – | | | | 2 | | | | 8 | | | | – | | | | – | | | | 15 | | | | – | | | | 256 | | Commercial real estate loans | | | 1,179 | | | | 3,540 | | | | (3,878 | ) | | | – | | | | (342 | ) | | | 49 | | | | 1 | | | | – | | | | – | | | | – | | | | 549 | | Private equity investments | | | 701 | | | | 94 | | | | (200 | ) | | | – | | | | (3 | ) | | | 8 | | | | 38 | | | | – | | | | 4 | | | | (132 | ) | | | 510 | | Other | | | 161 | | | | 66 | | | | (31 | ) | | | – | | | | (3 | ) | | | (11 | ) | | | 5 | | | | – | | | | 26 | | | | (26 | ) | | | 187 | | Financial assets designated at fair value | | | 19,905 | | | | 4,990 | | | | (5,483 | ) | | | – | | | | (1,102 | ) | | | (477 | ) | | | 38 | | | | – | | | | 45 | | | | (158 | ) | | | 17,758 | | | | | | | | | | | | | | Government and government sponsored debt | | | 327 | | | | 14 | | | | (36 | ) | | | – | | | | – | | | | – | | | | – | | | | 1 | | | | – | | | | (212 | ) | | | 94 | | Private equity investments | | | 425 | | | | 29 | | | | (89 | ) | | | – | | | | – | | | | – | | | | 471 | | | | 22 | | | | – | | | | 20 | | | | 878 | | Other | | | 561 | | | | 36 | | | | (2 | ) | | | – | | | | (1,026 | ) | | | – | | | | 78 | | | | 397 | | | | 27 | | | | (21 | ) | | | 50 | | Available for sale investments | | | 1,313 | | | | 79 | | | | (127 | ) | | | – | | | | (1,026 | ) | | | – | | | | 549 | | | | 420 | | | | 27 | | | | (213 | ) | | | 1,022 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Investment property | | | 207 | | | | 27 | | | | (89 | ) | | | – | | | | – | | | | – | | | | (5 | ) | | | – | | | | – | | | | – | | | | 140 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Trading portfolio liabilities | | | (349 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 349 | | | | – | | | | | | | | | | | | | | Certificates of deposit, commercial paper and other money market instruments | | | (666 | ) | | | – | | | | – | | | | (216 | ) | | | 261 | | | | – | | | | 17 | | | | – | | | | – | | | | 221 | | | | (383 | ) | Issued debt | | | (748 | ) | | | – | | | | – | | | | (16 | ) | | | 245 | | | | (4 | ) | | | (8 | ) | | | – | | | | (38 | ) | | | 4 | | | | (565 | ) | Other | | | (402 | ) | | | – | | | | – | | | | – | | | | (19 | ) | | | (18 | ) | | | 75 | | | | – | | | | – | | | | 10 | | | | (354 | ) | Financial liabilities designated at fair value | | | (1,816 | ) | | | – | | | | – | | | | (232 | ) | | | 487 | | | | (22 | ) | | | 84 | | | | – | | | | (38 | ) | | | 235 | | | | (1,302 | ) | | | | | | | | | | | | | Interest rate derivatives | | | (105 | ) | | | 1 | | | | 218 | | | | – | | | | (247 | ) | | | 203 | | | | – | | | | – | | | | 243 | | | | 117 | | | | 430 | | Foreign exchange derivatives | | | (30 | ) | | | 14 | | | | (1 | ) | | | (7 | ) | | | 9 | | | | (14 | ) | | | – | | | | – | | | | (73 | ) | | | – | | | | (102 | ) | Credit derivatives | | | 1,557 | | | | 273 | | | | (12 | ) | | | – | | | | (6 | ) | | | (123 | ) | | | – | | | | – | | | | (11 | ) | | | 7 | | | | 1,685 | | Equity derivatives | | | (845 | ) | | | 111 | | | | (2 | ) | | | (290 | ) | | | 103 | | | | 34 | | | | – | | | | – | | | | (21 | ) | | | 52 | | | | (858 | ) | Commodity derivatives | | | (152 | ) | | | – | | | | – | | | | – | | | | (66 | ) | | | (6 | ) | | | – | | | | – | | | | (388 | ) | | | 106 | | | | (506 | ) | Net derivative financial instrumentsa | | | 425 | | | | 399 | | | | 203 | | | | (297 | ) | | | (207 | ) | | | 94 | | | | – | | | | – | | | | (250 | ) | | | 282 | | | | 649 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 26,012 | | | | 7,492 | | | | (7,688 | ) | | | (529 | ) | | | (2,756 | ) | | | (483 | ) | | | 666 | | | | 420 | | | | (128 | ) | | | 208 | | | | 23,214 | | Net assets held for sale measured at fair value onnon-recurring basis | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 3,159 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 26,012 | | | | 7,492 | | | | (7,688 | ) | | | (529 | ) | | | (2,756 | ) | | | (483 | ) | | | 666 | | | | 420 | | | | (128 | ) | | | 208 | | | | 26,373 | |
Note a | The derivative financial instruments are represented on a net basis. On a gross basis, derivative financial assets are £8,546m (2015: £5,418m) and derivative financial liabilities are £7,171m (2015: £4,769m). |
| | | 254 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
18 Fair value of financial instrumentscontinued Unrealised gains and losses on Level 3 financial assets and liabilitiescontinued The following table discloses the unrealised gains and losses recognised in the year arising on Level 3 financial assets and liabilities held at year end. | | | | | | | | | | | | | | | | | | | | | | | | | Sensitivity analysis of valuations using unobservable inputs | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value | | | | Favourable changes | | | | Unfavourable changes | | | | | Total assets £m | | | | Total liabilities £m | | | | Income statement £m | | | | Equity £m | | | | Income statement £m | | | | Equity £m | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate derivatives | | | 2,675 | | | | (2,247 | ) | | | 93 | | | | – | | | | (103 | ) | | | – | | Foreign exchange derivatives | | | 95 | | | | (196 | ) | | | 17 | | | | – | | | | (17 | ) | | | – | | Credit derivativesa | | | 1,902 | | | | (219 | ) | | | 66 | | | | – | | | | (96 | ) | | | – | | Equity derivatives | | | 690 | | | | (1,545 | ) | | | 167 | | | | – | | | | (185 | ) | | | – | | Commodity derivatives | | | 56 | | | | (562 | ) | | | 13 | | | | – | | | | (13 | ) | | | – | | Government and government sponsored debt | | | 419 | | | | (1 | ) | | | 4 | | | | – | | | | (4 | ) | | | – | | Corporate debt | | | 2,895 | | | | (15 | ) | | | 10 | | | | 1 | | | | (5 | ) | | | (1 | ) | Certificates of deposit, commercial paper and other money market instruments | | | – | | | | (382 | ) | | | – | | | | – | | | | – | | | | – | | Non-asset backed loans | | | 16,828 | | | | – | | | | 1,581 | | | | – | | | | (1,564 | ) | | | – | | Asset backed securities | | | 770 | | | | (37 | ) | | | 1 | | | | – | | | | (1 | ) | | | – | | Commercial real estate loans | | | 551 | | | | – | | | | 24 | | | | – | | | | (1 | ) | | | – | | Issued debt | | | – | | | | (546 | ) | | | – | | | | – | | | | – | | | | – | | Equity cash products | | | 171 | | | | – | | | | – | | | | 17 | | | | – | | | | (17 | ) | Funds and fund linked products | | | 378 | | | | (148 | ) | | | 1 | | | | – | | | | (1 | ) | | | – | | Otherb | | | 9,185 | | | | (4,344 | ) | | | 154 | | | | 318 | | | | (172 | ) | | | (53 | ) | Total | | | 36,615 | | | | (10,242 | ) | | | 2,131 | | | | 336 | | | | (2,162 | ) | | | (71 | ) | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate derivatives | | | 1,239 | | | | (1,344 | ) | | | 70 | | | | – | | | | (71 | ) | | | – | | Foreign exchange derivatives | | | 108 | | | | (138 | ) | | | 36 | | | | – | | | | (36 | ) | | | – | | Credit derivativesa | | | 1,966 | | | | (409 | ) | | | 81 | | | | – | | | | (229 | ) | | | – | | Equity derivatives | | | 1,247 | | | | (2,092 | ) | | | 220 | | | | – | | | | (220 | ) | | | – | | Commodity derivatives | | | 185 | | | | (337 | ) | | | 46 | | | | – | | | | (46 | ) | | | – | | Government and government sponsored debt | | | 1,014 | | | | (346 | ) | | | – | | | | – | | | | (2 | ) | | | – | | Corporate debt | | | 3,061 | | | | (13 | ) | | | 26 | | | | (1 | ) | | | (9 | ) | | | (4 | ) | Certificates of deposit, commercial paper and other money market instruments | | | – | | | | (665 | ) | | | 3 | | | | – | | | | 3 | | | | – | | Non-asset backed loans | | | 17,744 | | | | – | | | | 1,164 | | | | – | | | | (820 | ) | | | – | | Asset backed securities | | | 1,631 | | | | – | | | | 46 | | | | 1 | | | | (72 | ) | | | (1 | ) | Commercial real estate loans | | | 1,180 | | | | – | | | | 20 | | | | – | | | | (19 | ) | | | – | | Issued debt | | | – | | | | (749 | ) | | | – | | | | – | | | | – | | | | – | | Equity cash products | | | 171 | | | | – | | | | – | | | | 11 | | | | – | | | | (11 | ) | Funds and fund linked products | | | 631 | | | | (210 | ) | | | 14 | | | | – | | | | (14 | ) | | | – | | Otherb | | | 17,663 | | | | (13,297 | ) | | | 180 | | | | 82 | | | | (156 | ) | | | (55 | ) | Total | | | 47,840 | | | | (19,600 | ) | | | 1,906 | | | | 93 | | | | (1,691 | ) | | | (71 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrealised gains and losses recognised during the period on Level 3 assets and liabilities held at period end | | | | | | | | | 2016 | | | | | | | | | | | | | | | | 2015 | | | | | | | | | | | | | Income statement | | | | Other | | | | | | | | Income statement | | | | Other | | | | | | | | | | | | | | | | | compre- | | | | | | | | | | | | | | | | compre- | | | | | | | | | Trading | | | | Other | | | | hensive | | | | | | | | Trading | | | | Other | | | | hensive | | | | | | | | | income | | | | income | | | | income | | | | Totala | | | | income | | | | income | | | | income | | | | Total | | As at 31 December | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | Trading portfolio assets | | | 243 | | | | – | | | | – | | | | 243 | | | | (125 | ) | | | – | | | | – | | | | (125 | ) | Financial assets designated at fair value | | | 227 | | | | 271 | | | | – | | | | 498 | | | | (562 | ) | | | (17 | ) | | | – | | | | (579 | ) | Available for sale investments | | | – | | | | 6 | | | | 70 | | | | 76 | | | | – | | | | (20 | ) | | | 488 | | | | 468 | | Investment property | | | – | | | | 2 | | | | – | | | | 2 | | | | – | | | | (22 | ) | | | – | | | | (22 | ) | Trading portfolio liabilities | | | (1 | ) | | | – | | | | – | | | | (1 | ) | | | (1 | ) | | | – | | | | – | | | | (1 | ) | Financial liabilities designated at fair value | | | 96 | | | | (6 | ) | | | – | | | | 90 | | | | (24 | ) | | | 76 | | | | – | | | | 52 | | Net derivative financial instruments | | | 175 | | | | – | | | | – | | | | 175 | | | | 123 | | | | – | | | | – | | | | 123 | | Assets and liabilities held for sale | | | – | | | | 128 | | | | – | | | | 128 | | | | – | | | | – | | | | – | | | | – | | Total | | | 740 | | | | 401 | | | | 70 | | | | 1,211 | | | | (589 | ) | | | 17 | | | | 488 | | | | (84 | ) |
Note a | The £1.2bn unrealised gain on Level 3 assets (2015: £84m loss) is largely offset by losses on related Level 2 and Level 1 portfolio hedges. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 255 |
Notes to the financial statements Assets and liabilities held at fair value | | | | | | | | | | | | | | | | | | | | | | | | | 18 Fair value of financial instrumentscontinued | | | | | | | | | | | | | | | | | | | | | | | | | Sensitivity analysis of valuations using unobservable inputs | | | | | | | | | | | | | | | | | | | | | | | | | | | | Fair value | | | | Favourable changes | | | | Unfavourable changes | | | | | Total | | | | Total | | | | Income | | | | | | | | Income | | | | | | | | | assets | | | | liabilities | | | | statement | | | | Equity | | | | statement | | | | Equity | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate derivatives | | | 5,759 | | | | (4,860 | ) | | | 209 | | | | – | | | | (249 | ) | | | – | | Foreign exchange derivatives | | | 132 | | | | (51 | ) | | | 15 | | | | – | | | | (15 | ) | | | – | | Credit derivatives | | | 1,611 | | | | (241 | ) | | | 127 | | | | – | | | | (133 | ) | | | – | | Equity derivatives | | | 1,037 | | | | (2,007 | ) | | | 163 | | | | – | | | | (164 | ) | | | – | | Commodity derivatives | | | 8 | | | | (13 | ) | | | 5 | | | | – | | | | (5 | ) | | | – | | Government and government sponsored debt | | | 3 | | | | – | | | | – | | | | – | | | | – | | | | – | | Corporate debt | | | 969 | | | | (5 | ) | | | 7 | | | | – | | | | (2 | ) | | | – | | Certificates of deposit, commercial paper and other money market instruments | | | – | | | | (319 | ) | | | – | | | | – | | | | (1 | ) | | | – | | Reverse repurchase and repurchase agreements | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Non asset backed loans | | | 8,767 | | | | – | | | | 462 | | | | – | | | | (597 | ) | | | – | | Asset backed securities | | | 515 | | | | – | | | | 1 | | | | – | | | | (1 | ) | | | – | | Commercial real estate loans | | | 442 | | | | – | | | | 2 | | | | – | | | | (2 | ) | | | – | | Issued debt | | | – | | | | (298 | ) | | | – | | | | – | | | | – | | | | – | | Equity cash products | | | 150 | | | | (2 | ) | | | 12 | | | | 26 | | | | (11 | ) | | | (26 | ) | Funds and fund linked products | | | 273 | | | | (37 | ) | | | 6 | | | | – | | | | (6 | ) | | | – | | Private equity investments | | | 856 | | | | (12 | ) | | | 104 | | | | 18 | | | | (104 | ) | | | (21 | ) | Assets and liabilities held for sale | | | 699 | | | | (125 | ) | | | 3 | | | | – | | | | (3 | ) | | | – | | Othera | | | 489 | | | | (173 | ) | | | 147 | | | | – | | | | (105 | ) | | | – | | Total | | | 21,710 | | | | (8,143 | ) | | | 1,263 | | | | 44 | | | | (1,398 | ) | | | (47 | ) | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate derivatives | | | 2,675 | | | | (2,247 | ) | | | 93 | | | | – | | | | (103 | ) | | | – | | Foreign exchange derivatives | | | 95 | | | | (196 | ) | | | 17 | | | | – | | | | (17 | ) | | | – | | Credit derivatives | | | 1,902 | | | | (219 | ) | | | 66 | | | | – | | | | (96 | ) | | | – | | Equity derivatives | | | 690 | | | | (1,545 | ) | | | 167 | | | | – | | | | (185 | ) | | | – | | Commodity derivatives | | | 56 | | | | (562 | ) | | | 13 | | | | – | | | | (13 | ) | | | – | | Government and government sponsored debt | | | 419 | | | | (1 | ) | | | 4 | | | | – | | | | (4 | ) | | | – | | Corporate debt | | | 2,895 | | | | (15 | ) | | | 10 | | | | 1 | | | | (5 | ) | | | (1 | ) | Certificates of deposit, commercial paper and other money market instruments | | | – | | | | (382 | ) | | | – | | | | – | | | | – | | | | – | | Reverse repurchase and repurchase agreements | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | Non asset backed loans | | | 16,828 | | | | – | | | | 1,581 | | | | – | | | | (1,564 | ) | | | – | | Asset backed securities | | | 770 | | | | (37 | ) | | | 1 | | | | – | | | | (1 | ) | | | – | | Commercial real estate loans | | | 551 | | | | – | | | | 24 | | | | – | | | | (1 | ) | | | – | | Issued debt | | | – | | | | (546 | ) | | | – | | | | – | | | | – | | | | – | | Equity cash products | | | 171 | | | | – | | | | – | | | | 17 | | | | – | | | | (17 | ) | Funds and fund linked products | | | 378 | | | | (148 | ) | | | 1 | | | | – | | | | (1 | ) | | | – | | Private equity investments | | | 1,388 | | | | – | | | | 149 | | | | 318 | | | | (149 | ) | | | (53 | ) | Othera | | | 467 | | | | (173 | ) | | | 5 | | | | – | | | | (23 | ) | | | – | | Total | | | 29,285 | | | | (6,071 | ) | | | 2,131 | | | | 336 | | | | (2,162 | ) | | | (71 | ) |
The effect of stressing unobservable inputs to a range of reasonably possible alternatives, alongside considering the impact of using alternative models, would be to increase fair values by up to £2.1bn (2014: £1.9bn)£1.3bn (2015: £2.1bn) or to decrease fair values by up to £2.2bn (2014: £1.7bn)£1.4bn (2015: £2.2bn) with substantially all the potential effect impacting profit and loss rather than reserves. NotesNote
a | Credit derivatives includes derivative exposure to monoline insurers. |
b | Other includes non-current assets and liabilities held for sale, which are measured at fair value on a non-recurring basis, investment property, private equity investments and asset backed loans.loans, physical commodities and investment property. |
| | | 244256 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
18 Fair value of assets and liabilitiesfinancial instrumentscontinued Significant unobservable inputs The following table discloses the valuation techniques and significant unobservable inputs for assets and liabilities recognised at fair value and classified as Level 3 along with the range of values used for those significant unobservable inputs: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets £m | | | | Total liabilities £m | | | Valuation technique(s) | | Significant unobservable inputs | | | |
| 2015
Range |
| |
| 2014
Range |
| | | Unitsa | | | | | | | | | | Min | | | | Max | | | | Min | | | | Max | | | Derivative financial instrumentsb | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate | | | 2,675 | | | | (2,247 | ) | | Discounted cash flows | | Inflation forwards | | | | | 0.3 | | | | 8 | | | | (0.5 | ) | | | 11 | | | | % | | derivatives | | | | | | | | | | Option model | | Inflation volatility | | | | | 36 | | | | 197 | | | | 40 | | | | 300 | | | | bp vol | | | | | | | | | | | | | | IR – IR correlation | | | | | (55 | ) | | | 100 | | | | (88 | ) | | | 100 | | | | % | | | | | | | | | | | | | | FX – IR correlation | | | | | (20 | ) | | | 30 | | | | 14 | | | | 90 | | | | % | | | | | | | | | | | | | | Interest rate volatility | | | | | 5 | | | | 249 | | | | 6 | | | | 437 | | | | bp vol | | Credit derivativesc | | | 1,902 | | | | (219 | ) | | Discounted cash flows | | Credit spread | | | | | 140 | | | | 413 | | | | 116 | | | | 240 | | | | bps | | | | | | | | | | | | Correlation model | | Credit correlation | | | | | 26 | | | | 41 | | | | 36 | | | | 90 | | | | % | | | | | | | | | | | | | | Credit spread | | | | | 10 | | | | 9,923 | | | | 6 | | | | 5,898 | | | | bps | | | | | | | | | | | | Comparable pricing | | Price | | | | | 80 | | | | 102 | | | | 64 | | | | 100 | | | | points | | Equity derivatives | | | 690 | | | | (1,545 | ) | | | | Equity volatility | | | | | – | | | | 318 | | | | 1 | | | | 97 | | | | % | | | | | | | | | | | | | | Equity – equity correlation | | | | | (54 | ) | | | 100 | | | | (55 | ) | | | 99 | | | | % | | | | | | | | | | | | | | Equity – FX correlation | | | | | (100 | ) | | | 40 | | | | (80 | ) | | | 55 | | | | % | | Non-derivative financial instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate debt | | | 2,895 | | | | (15 | ) | | Discounted cash flows | | Credit spread | | | | | 120 | | | | 529 | | | | 140 | | | | 900 | | | | bps | | | | | | | | | | | | Comparable pricing | | Price | | | | | 1 | | | | 114 | | | | – | | | | 104 | | | | points | | Asset backed | | | 770 | | | | (37 | ) | | Discounted cash flows | | Conditional prepayment rate | | | | | – | | | | 25 | | | | – | | | | 5 | | | | % | | securities | | | | | | | | | | | | Constant default rate | | | | | – | | | | 2 | | | | – | | | | 9 | | | | % | | | | | | | | | | | | | | Loss given default | | | | | 30 | | | | 100 | | | | 45 | | | | 100 | | | | % | | | | | | | | | | | | | | Yield | | | | | 5 | | | | 58 | | | | 3 | | | | 11 | | | | % | | | | | | | | | | | | | | Credit spread | | | | | 157 | | | | 1,416 | | | | 74 | | | | 2,688 | | | | bps | | | | | | | | | | | | Comparable pricing | | Price | | | | | 1 | | | | 114 | | | | – | | | | 100 | | | | points | | Commercial real | | | 551 | | | | – | | | Discounted cash flows | | Loss given default | | | | | 0 | | | | 100 | | | | – | | | | 100 | | | | % | | estate loans | | | | | | | | | | | | Yield | | | | | – | | | | – | | | | 4 | | | | 8 | | | | % | | | | | | | | | | | | | | Credit spread | | | | | 230 | | | | 801 | | | | 124 | | | | 675 | | | | bps | | Non-asset backed loans | | | 16,828 | | | | – | | | Discounted cash flows | | Loan spread | | | | | 3 | | | | 994 | | | | 39 | | | | 1,000 | | | | bps | | Otherd | | | 1,855 | | | | (173 | ) | | Discounted cash flows | | Loss given default | | | | | – | | | | 94 | | | | – | | | | – | | | | % | | | | | | | | | | | | | | Yield | | | | | 7 | | | | 12 | | | | 8 | | | | 9 | | | | % | | | | | | | | | | | | Comparable pricing | | Price | | | | | – | | | | 103 | | | | – | | | | 133 | | | | points | | | | | | | | | | | | Net asset valuee | | Net asset value | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Total assets
£m |
| |
| Total liabilities £m | | | Valuation technique(s) | | Significant unobservable inputs | | | |
| 2016
Range |
| |
| 2015
Range |
| | | Unitsa | | | | | | | | | | Min | | | | Max | | | | Min | | | | Max | | | Derivative financial instrumentsb | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest rate | | | 5,759 | | | | (4,860 | ) | | Discounted cash flows | | Inflation forwards | | | | | (1 | ) | | | 8 | | | | – | | | | 8 | | | | % | | derivatives | | | | | | | | | | | | Credit spread | | | | | 25 | | | | 1,669 | | | | 25 | | | | 1,563 | | | | bps | | | | | | | | | | | | Option model | | Inflation volatility | | | | | 35 | | | | 207 | | | | 36 | | | | 197 | | | | bp vol | | | | | | | | | | | | | | IR – IR correlation | | | | | (26 | ) | | | 98 | | | | (55 | ) | | | 100 | | | | % | | | | | | | | | | | | | | FX – IR correlation | | | | | (15 | ) | | | 81 | | | | (20 | ) | | | 30 | | | | % | | | | | | | | | | | | | | Interest rate volatility | | | | | 9 | | | | 295 | | | | 5 | | | | 249 | | | | bp vol | | Credit derivatives | | | 1,611 | | | | (241 | ) | | Discounted cash flows | | Credit spread | | | | | 133 | | | | 274 | | | | 140 | | | | 413 | | | | bps | | | | | | | | | | | | Correlation model | | Credit correlation | | | | | 25 | | | | 43 | | | | 26 | | | | 41 | | | | % | | | | | | | | | | | | | | Credit spread | | | | | 13 | | | | 2,317 | | | | 10 | | | | 9,923 | | | | bps | | | | | | | | | | | | Comparable pricing | | Price | | | | | 84 | | | | 100 | | | | 80 | | | | 102 | | | | points | | Equity derivatives | | | 1,037 | | | | (2,007 | ) | | Option model | | Equity volatility | | | | | 1 | | | | 150 | | | | – | | | | 318 | | | | % | | | | | | | | | | | | | | Equity – equity correlation | | | | | (90 | ) | | | 100 | | | | (54 | ) | | | 100 | | | | % | | | | | | | | | | | | | | Equity – FX correlation | | | | | (80 | ) | | | 25 | | | | (100 | ) | | | 40 | | | | % | | Non-derivative financial instruments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Corporate debt | | | 969 | | | | (5 | ) | | Discounted cash flows | | Credit spread | | | | | 145 | | | | 190 | | | | 120 | | | | 529 | | | | bps | | | | | | | | | | | | Comparable pricing | | Price | | | | | – | | | | 121 | | | | 1 | | | | 114 | | | | points | | Non-asset backed loans | | | 8,767 | | | | – | | | Discounted cash flows | | Loan spread | | | | | 30 | | | | 1,495 | | | | 3 | | | | 994 | | | | bps | | | | | | | | | | | | | | Price | | | | | – | | | | 99 | | | | – | | | | 100 | | | | points | | | | | | | | | | | | Comparable pricing | | Price | | | | | – | | | | 100 | | | | – | | | | 101 | | | | points | | | | | | | | | | | | | | Conditional | | | | | | | | | | | | | | | | | | | | | | | Asset backed securities | | | 515 | | | | – | | | Discounted cash flows | | prepayment rate | | | | | – | | | | – | | | | – | | | | 25 | | | | % | | | | | | | | | | | | | | Constant default rate | | | | | – | | | | – | | | | – | | | | 2 | | | | % | | | | | | | | | | | | | | Loss given default | | | | | – | | | | – | | | | 30 | | | | 100 | | | | % | | | | | | | | | | | | | | Yield | | | | | – | | | | – | | | | 5 | | | | 58 | | | | % | | | | | | | | | | | | | | Credit spread | | | | | 70 | | | | 150 | | | | 157 | | | | 1,416 | | | | bps | | Commercial real estate loans | | | 442 | | | | – | | | Discounted cash flows | | Loss given default | | | | | – | | | | 100 | | | | – | | | | 100 | | | | % | | | | | | | | | | | | | | Credit spread | | | | | 179 | | | | 408 | | | | 230 | | | | 801 | | | | bps | | Private equity investments | | | 856 | | | | (12 | ) | | Discounted cash flows | | Loss given default | | | | | – | | | | – | | | | – | | | | 94 | | | | % | | | | | | | | | | | | EBITDA multiple | | EBITDA multiple | | | | | 5 | | | | 17 | | | | – | | | | 12 | | | | multiple | | Otherc | | | 1,754 | | | | (1,018 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | 21,710 | | | | (8,143 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | |
Notes a | The units used to disclose ranges for significant unobservable inputs are percentages, points basis point volatility and basis points. Basis point volatility is a measure of implied volatility in terms of annual absolute basis point change in the underlying rate. Points are a percentage of par; for example, 100 points equals 100% of par. A basis point equals 1/100th of 1%; for example, 150 basis points equals 1.5%. |
b | Certain derivative instruments are classified as Level 3 due to a significant unobservable credit spread input into the calculation of the Credit Valuation Adjustment for the instruments. The range of significant unobservable credit spreads is between 69-1,175bps.65-874bps (2015:67-1,175bps). |
c | Credit derivatives includes derivative exposure to monoline insurers. |
d | Other includes private equity investments, asset backed loansthe remaining Level 3 assets and investment property.liabilities. |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 245257 |
Notes to the financial statements Assets and liabilities held at fair value 18 Fair value of assets and liabilitiesfinancial instrumentscontinued The following section describes the significant unobservable inputs identified in the table above, and the sensitivity of fair value measurement of the instruments categorised as Level 3 assets or liabilities to increases in significant unobservable inputs. Where sensitivities are described, the inverse relationship will also generally apply. Where reliable interrelationshipsinter-relationships can be identified between significant unobservable inputs used in fair value measurement, a description of those interrelationships inter-relationships is included below. Forwards A price or rate that is applicable to a financial transaction that will take place in the future. A forward is generally based on the spot price or rate, adjusted for the cost of carry, and defines the price or rate that will be used to deliver a currency, bond, commodity or some other underlying instrument at a point in the future. A forward may also refer to the rate fixed for a future financial obligation, such as the interest rate on a loan payment. In general, a significant increase in a forward in isolation will result in a movement in fair value that is favourable for the contracted receiver of the underlying (currency, bond, commodity, etc.), but the sensitivity is dependent on the specific terms of the instrument. Credit spread Credit spreads typically represent the difference in yield between an instrument and a benchmark security or reference rate. Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument and form part of the yield used in a discounted cash flow calculation. In general, a significant increase in credit spread in isolation will result in a movement in fair value that is unfavourable for the holder of a cash asset. For a derivative instrument, a significant increase in credit spread in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument. Volatility Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the variability or uncertainty in returns for a given derivative underlying. It represents an estimate of how much a particular underlying instrument, parameter or index will change in value over time. In general, volatilities will be implied from observed option prices. For unobservable options the implied volatility may reflect additional assumptions about the nature of the underlying risk, as well as reflecting the given strike/maturity profile of a specific option contract. In general a significant increase in volatility in isolation will result in a movement in fair value that is favourable for the holder of a simple option, but the sensitivity is dependent on the specific terms of the instrument. There may be inter-relationships between unobservable volatilities and other unobservable inputs that can be implied from observation, e.g. when equity prices fall, implied equity volatilities generally rise but these are specific to individual markets and may vary over time. Correlation Correlation is a measure of the relationship between the movements of two variables i.e. how the change in one variable influences a change in the other variable. Correlation is a key input into valuation of derivative contracts with more than one underlying instrument. For example, where an option contract is written on a basket of underlying names, the volatility of the basket, and hence the fair value of the option, will depend on the correlation between the basket’s components. Credit correlation generally refers to the correlation between default processes for the separate names that make up the reference pool of a collateralised debt obligation structure. A significant increase in correlation in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument. Comparable price Comparable instrument prices are used in valuation by calculating an implied yield (or spread over a liquid benchmark) from the price of a comparable observable bond, then adjusting that yield (or spread) to derive a value for the unobservable bond. The adjustment to yield (or spread) should account for relevant differences in the bonds such as maturity or credit quality. Alternatively, aprice-to-price basis can be assumed between the comparable instrument and bond being valued in order to establish the value of the bond. In general, a significant increase in comparable price in isolation will result in a movement in fair value that is favourable for the holder of a cash instrument. For a derivative instrument, a significant increase in an input derived from a comparable price in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument. Loan spread Loan spreads typically represent the difference in yield between an instrument and a benchmark security or reference rate. Loan spreads typically reflect funding costs, credit quality, the level of comparable assets such as gilts, and other factors, and form part of the yield used in a discounted cash flow calculation. The ESHLA portfolio primarily consists of long dated fixed rate loans extended to counterparties in the UK Education, Social Housing and Local Authority sectors. The loans are categorised as Level 3 in the fair value hierarchy due to their illiquid nature and the significance of unobservable loan spreads to the valuation. Valuation uncertainty arises from the long dated nature of the portfolio, the lack of a secondary market in the loans and the lack of observable loan spreads. The majority of ESHLA loans are to borrowers in heavily regulated sectors that are considered extremely low credit risk, and have a history of zero defaults since inception. While the overall loan spread range is from 30bps to 1,495bps (2015: 3bps to 994bps), the vast majority of spreads are concentrated towards the bottom end of this range, with 99% of the loan notional being valued with spreads less than 200bps consistently for both years. In general, a significant increase in loan spreads in isolation will result in a movement in fair value that is unfavourable for the holder of a loan. | | | 258 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
18 Fair value of financial instrumentscontinued Conditional prepayment rate Conditional prepayment rate is the proportion of voluntary, unscheduled repayments of loan principal by a borrower. Prepayment rates affect the weighted average life of securities by altering the timing of future projected cash flows. A significant increase in a conditional prepayment rate in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument. Conditional prepayment rates are typically inversely correlated to credit spread, i.e. securities with high borrower credit spread typically experience lower prepayment rates and also tend to experience higher default rates. Constant default rate The constant default rate represents an annualised rate of default of the loan principal by the borrower. A significant increase in a constant default rate in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument. Constant default rate and conditional prepayment rates are typically inversely correlated:correlated; fewer defaults on loans will typically will mean higher credit quality and therefore more prepayments. Correlation
Correlation is a measure of the relationship between the movements of two variables (i.e. how the change in one variable influences a change in the other variable). Correlation is a key input into valuation of derivative contracts with more than one underlying instrument. For example, where an option contract is written on a basket of underlying names, the volatility of the basket, and hence the fair value of the option, will depend on the correlation between the basket components. Credit correlation generally refers to the correlation between default processes for the separate names that make up the reference pool of a CDO structure.
A significant increase in correlation in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument.
Credit spread
Credit spreads typically represent the difference in yield between an instrument and a benchmark security or reference rate. Credit spreads reflect the additional yield that a market participant would demand for taking exposure to the credit risk of an instrument, and form part of the yield used in a discounted cash flow calculation.
In general, a significant increase in credit spread in isolation will result in a movement in fair value that is unfavourable for the holder of a cash asset.
For a derivative instrument, a significant increase in credit spread in isolation can result in a movement in fair value that is favourable or unfavourable depending on the specific terms of the instrument.
Loan spread
Loan spreads typically represent the difference in yield between an instrument and a benchmark security or reference rate. Loan spreads typically reflect funding costs, credit quality, the level of comparable assets such as gilts and other factors, and form part of the yield used in a discounted cash flow calculation.
The ESHLA portfolio primarily consists of long dated fixed rate loans extended to counterparties in the UK Education, Social Housing and Local Authority sectors. The loans are categorised as Level 3 in the fair value hierarchy due to their illiquid nature and the significance of unobservable loan spreads to the valuation. Valuation uncertainty arises from the long dated nature of the portfolio, the lack of secondary market in the loans and the lack of observable loan spreads. The majority of ESHLA loans are to borrowers in heavily regulated sectors that are considered extremely low credit risk, and have a history of zero defaults since inception. While the overall credit spread range is 991bps (2014: 961bps), the vast majority of spreads are concentrated towards the bottom end of this range, with 99% of the loan notional being valued with spreads less than 200bps, consistently for both years.
In general, a significant increase in loan spreads in isolation will result in a movement in fair value that is unfavourable for the holder of a loan.
Forwards
A price or rate that is applicable to a financial transaction that will take place in the future. A forward is generally based on the spot price or rate, adjusted for the cost of carry, and defines the price or rate that will be used to deliver a currency, bond, commodity or some other underlying instrument at a point in the future. A forward may also refer to the rate fixed for a future financial obligation, such as the interest rate on a loan payment. In general, a significant increase in a forward in isolation will result in a movement in fair value that is favourable for the contracted receiver of the underlying (currency, bond, commodity, etc), but the sensitivity is dependent on the specific terms of the instrument.
| | | 246 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
18 Fair value of assets and liabilitiescontinued
Loss given default (LGD) LGDLoss given default represents the expected loss upon liquidation of the collateral as a percentage of the balance outstanding.
In general, a significant increase in the LGD in isolation will translate to lower recovery and lower projected cash flows to pay to the securitisation, resulting in a movement in fair value that is unfavourable for the holder of the securitised product. Volatility
Volatility is a key input in the valuation of derivative products containing optionality. Volatility is a measure of the variability or uncertainty in returns for a given derivative underlying. It represents an estimate of how much a particular underlying instrument, parameter or index will change in value over time. In general, volatilities will be implied from observed option prices. For unobservable options the implied volatility may reflect additional assumptions about the nature of the underlying risk, as well as reflecting the given strike/maturity profile of a specific option contract.
In general a significant increase in volatility in isolation will result in a movement in fair value that is favourable for the holder of a simple option, but the sensitivity is dependent on the specific terms of the instrument.
There may be inter-relationships between unobservable volatilities and other unobservable inputs that can be implied from observation (e.g. when equity prices fall, implied equity volatilities generally rise) but these are specific to individual markets and may vary over time.
Yield The rate used to discount projected cash flows in a discounted future cash flow analysis. In general, a significant increase in yield in isolation will result in a movement in fair value that is unfavourable for the holder of a cash instrument. EBITDA Multiple EBITDA multiple is the ratio of the valuation of the investment to the earnings before interest, taxes, depreciation and amortisation. In general an increase in the multiple is favourable to the holder of the investment. Fair value adjustments Key balance sheet valuation adjustments are quantified below: | | | | 2015 £m | | | | 2014 £m | | |
| 2016 £m | | |
| 2015 £m | | Bid-offer valuation adjustments | | | (360 | ) | | | (396 | ) | | Other exit adjustments | | | (149 | ) | | | (169 | ) | | Exit price adjustments derived from marketbid-offer spreads | | | | (475 | ) | | | (509 | ) | Uncollateralised derivative funding | | | (72 | ) | | | (100 | ) | | | (82 | ) | | | (72 | ) | Derivative credit valuation adjustments: | | | | | | | | | – Monolines | | | (9 | ) | | | (24 | ) | | – Monolinesa | | | | – | | | | (9 | ) | – Other derivative credit valuation adjustments | | | (318 | ) | | | (394 | ) | | | (237 | ) | | | (318 | ) | Derivative debit valuation adjustments | | | 189 | | | | 177 | | | | 242 | | | | 189 | |
Bid-offer valuationExit price adjustments derived from marketbid-offer spreads
The Group uses mid marketmid-market pricing where it is a market maker and has the ability to transact at, or better than, mid price (which is the case for certain equity, bond and vanilla derivative markets). For other financial assets and liabilities,bid-offer adjustments are recorded to reflect the priceexit level for the expected close out strategy. The methodology for determining thebid-offer adjustment for a derivative portfolio involves calculating the net risk exposure by offsetting long and short positions by strike and term in accordance with the risk management and hedging strategy. Bid-offer levels are generally derived from market sources,quotes such as broker data. Other exit adjustments
Market data input for exotic derivatives Less liquid instruments may not have a directly observablebid-offer spread. level. In such instances, an exit adjustment is applied asmay be derived from an observablebid-offer level for a proxy for the bid-offer adjustment. An example of this is correlation risk where an adjustment is applied to reflect the possible range of values that market participants apply. The exit adjustment may becomparable liquid instrument, determined by calibrating to derivative prices, or by scenario analysis or historical analysis. Other exit
Exit price adjustments have reduced by £20m£34m to £149m respectively£475m as a result of movements in market bid-offer spreads.risk reduction and spread tightening. Note a | Derivative exposure to monoline insurers was exited in 2016. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 259 |
Notes to the financial statements Assets and liabilities held at fair value 18 Fair value of financial instruments continued Discounting approaches for derivative instruments Collateralised In line with market practice, the methodology for discounting collateralised derivatives takes into account the nature and currency of the collateral that can be posted within the relevant CSA.credit support annex (CSA). This CSA awareCSA-aware discounting approach recognises the ‘cheapest to deliver’ option that reflects the ability of the party posting collateral to change the currency of the collateral. For counterparties in dispute regarding the settlement of collateral interest, where the relevant rate is currently negative, an additional fair value adjustment of £24m is held to account for the potential impact of resolving the dispute. Uncollateralised A fair value adjustment of £72m£82m is applied to account for the impact of incorporating the cost of funding into the valuation of uncollateralised and partially collateralised derivative portfolios and collateralised derivatives where the terms of the agreement do not allow the rehypothecation of collateral received. This adjustment is referred to as the ‘FundingFunding Fair Value Adjustment’Adjustment (FFVA). FFVA has decreasedincreased by £28m£10m to £72m£82m mainly as a result of material trade unwinds and the reduction in the average maturity date of the portfolio as trades tend to maturity.unwinds. FFVA is determined by calculating the net expected exposure at a counterparty level and applying a funding rate to these exposures that reflects the market cost of funding. Barclays’ internal Treasury rates are used as an input to the calculation. The approach takes into account the probability of default of each counterparty, as well as any mandatory break clauses. FFVA incorporates a scaling factor which is an estimate of the extent to which the cost of funding is incorporated into observed traded levels. On calibrating the scaling factor, it is with the assumption that Credit Valuation Adjustments (CVA) and Debit Valuation Adjustments (DVA) are retained as valuation components incorporated into such levels. The effect of incorporating this scaling factor at 31 December 20152016 was to reduce FFVA by £216m (2014: £300m)£246m (2015: £216m). | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 247 |
Notes to the financial statements
Assets and liabilities held at fair value
18 Fair value of assets and liabilitiescontinued
Uncollateralised derivative trading activity is used to determine this scaling factor. The trading history analysed includes new trades, terminations, trade restructures and novations. The FFVA balance and movement is driven by the Barclays’ own cost of funding spread over LIBOR, counterparty default probabilities and recovery rates, as well as the market value of the underlying derivatives. Movements in the market value of the portfolio in scope for FFVA are mainly driven by interest rates, inflation rates and foreign exchange levels. Barclays continues to monitor market practices and activity to ensure the approach to uncollateralised derivative valuation remains appropriate. The above approach has been in use since 2012 with no significant changes. Derivative credit and debit valuation adjustments Credit valuation adjustments (CVA)CVAs and debit valuation adjustments (DVA)DVAs are incorporated into derivative valuations to reflect the impact on fair value of counterparty credit risk and Barclays’ own credit quality respectively. These adjustments are calculated for uncollateralised and partially collateralised derivatives across all asset classes. CVA and DVA are calculated using estimates of exposure at default, probability of default and recovery rates, at a counterparty level. Counterparties include but(but are not limited to,to) corporates, monolines, sovereigns and sovereign agencies, supranationals and special purpose vehicles.
Exposure at default is generally based on expected exposure, estimated through the simulation of underlying risk factors. For some complex products, where this approach is not feasible, simplifying assumptions are made, either through approximating with a more vanilla structure, or using current or scenario basedscenario-based mark to market as an estimate of future exposure. Where a strong CSA exists to mitigate counterparty credit risk, the exposure at default is set to zero. Probability of default and recovery rate information is generally sourced from the CDS markets. For counterparties where this information is not available, or considered unreliable due to the nature of the exposure, alternative approaches are taken based on mapping internal counterparty ratings onto historical or market basedmarket-based default and recovery information. In particular, this applies to sovereign relatedsovereign-related names where the effect of using the recovery assumptions implied in CDS levels would imply a £56m (2014: £120m)£95m (2015: £56m) increase in CVA. Correlation between counterparty credit and underlying derivative risk factors may lead to a systematic bias in the valuation of counterparty credit risk, termed ‘wrong way’‘wrong-way,’ or ‘right way’‘right-way’, risk. This is not systematically incorporated into the CVA calculation but risk of ‘wrong way’is adjusted where the underlying exposure is controlled atdirectly related to the trade origination stage.counterparty. CVA decreased by £91m£90m to £327m,£237m, primarily due to reductionreductions in the average maturity date of the portfolio as trades tend to maturity. In addition, there wasdriven by trade unwinds, including a reduction in monoline CVA of £15m due to trade unwinds.£9m. DVA increased by £12m£53m to £189m,£242m, primarily as a result of Barclays’ credit spreads deteriorating.widening. Portfolio exemptions The Group uses the portfolio exemption in IFRS 13Fair Value Measurement to measure the fair value of groups of financial assets and liabilities. Instruments are measured using the price that would be received to sell a net long position, i.e. an asset, for a particular risk exposure or to transfer a net short position, i.e. a liability, for a particular risk exposure in an orderly transaction between market participants at the balance sheet date under current market conditions. Accordingly, the Group measures the fair value of the group of financial assets and liabilities consistently with how market participants would price the net risk exposure at the measurement date. 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 i.e. the(the fair value at initial recognition,recognition) and the amount that would have arisen had valuation models using unobservable inputs been used on initial recognition, less amounts subsequently recognised, is £101m (2014: £96m)£179m (2015: £187m). There are additions of £35m (2014: nil)£29m (2015: £42m) and £31m (2014: £41m)£37m (2015: £51m) of amortisation and releases. The reserve held for unrecognised gains is predominantly related to derivative financial instruments.
Third party credit enhancements Structured and brokered certificates of deposit issued by Barclays Group are insured up to $250,000 per depositor by the Federal Deposit Insurance Corporation (FDIC) in the US. The FDIC is funded by premiums that Barclays and other banks pay for deposit insurance coverage. The carrying value of these issued certificates of deposit that are designated under the IAS 39 fair value option includes this third party credit enhancement. Theon-balance sheet value of these brokered certificates of deposit amounted to £3,729m (2014: £3,650m)£3,905m (2015: £3,729m). Valuation control framework
The valuation control framework covers fair value positions and is a key control in ensuring the material accuracy of valuations.
The valuation control function within Finance is responsible for independent price verification, oversight of prudent and fair value adjustments and escalation of valuation issues.
Governance over the valuation process is the responsibility of the Valuation Committee, and this is the governance forum to which valuation issues are escalated.
The Valuation Committee meets on a monthly basis and is responsible for overseeing valuation policy and practice within the Group. It provides reports to the Board Audit Committee, which examines the judgements taken on valuation and related disclosures.
Price verification uses independently sourced data that is deemed most representative of the market. The characteristics against which the data source is assessed are independence, reliability, consistency with other sources and evidence that the data represents an executable price. The most current data available at the balance sheet date is used. Where significant variances are noted in the independent price verification process, an adjustment is made to fair value. Additional fair value adjustments may be made to reflect such factors as bid-offer spreads, market data uncertainty, model limitations and counterparty risk. Further detail on these fair value adjustments is disclosed on page 247.
| | | 248260 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
18 Fair value of assets and liabilitiesfinancial instrumentscontinued Comparison of carrying amounts and fair values for assets and liabilities not held at fair value The following table summarises the fair value of financial assets and liabilities measured at amortised cost on the Group’s balance sheet: | As at 31 December 2015 | |
| Carrying amount
£m |
| |
| Fair
value £m |
| |
| Quoted market prices
(Level 1) £m |
| |
| Observable inputs
(Level 2) £m |
| |
| Significant unobservable inputs
(Level 3) £m |
| | As at 31 December 2016 | | |
| Carrying amount
£m |
| |
| Fair value
£m |
| |
| Quoted market
prices (Level 1) £m |
| |
| Observable inputs
(Level 2) £m |
| |
| Significant
unobservable inputs (Level 3) £m |
| Financial assets | | | | | | | | | | | | | | | | | | | | | Held to maturitya | | | | 5,176 | | | | 5,347 | | | | 5,347 | | | | – | | | | – | | Loans and advances to banks | | | 41,349 | | | | 41,301 | | | | 5,933 | | | | 34,125 | | | | 1,243 | | | | 43,251 | | | | 43,228 | | | | 7,256 | | | | 34,987 | | | | 985 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | – Home loans | | | 155,863 | | | | 151,431 | | | | – | | | | – | | | | 151,431 | | | | 144,765 | | | | 141,155 | | | | – | | | | – | | | | 141,155 | | – Credit cards, unsecured and other retail lending | | | 67,840 | | | | 67,805 | | | | 1,148 | | | | 284 | | | | 66,373 | | | | 57,808 | | | | 57,699 | | | | 737 | | | | 42 | | | | 56,920 | | – Finance lease receivables | | | 4,776 | | | | 4,730 | | | | | | | | | – Finance lease receivablesb | | | | 1,602 | | | | 1,598 | | | | | | | | – Corporate loans | | | 170,738 | | | | 169,697 | | | | 585 | | | | 129,847 | | | | 39,265 | | | | 188,609 | | | | 186,715 | | | | – | | | | 126,979 | | | | 59,736 | | Reverse repurchase agreements and other similar secured lendinga | | | 28,187 | | | | 28,187 | | | | – | | | | 28,187 | | | | – | | | Reverse repurchase agreements and other similar secured lending | | | | 13,454 | | | | 13,454 | | | | – | | | | 13,454 | | | | – | | Assets included in disposal groups classified as held for salec | | | | 43,593 | | | | 44,838 | | | | 1,070 | | | | 4,614 | | | | 39,154 | | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | (47,080 | ) | | | (47,080 | ) | | | (4,428 | ) | | | (42,652 | ) | | | – | | | | (48,214 | ) | | | (48,212 | ) | | | (5,256 | ) | | | (42,895 | ) | | | (61 | ) | Customer accounts: | | | | | | | | | | | | | | | | | | | | | – Current and demand accounts | | | (147,122 | ) | | | (147,121 | ) | | | (130,439 | ) | | | (16,537 | ) | | | (145 | ) | | | (138,204 | ) | | | (138,197 | ) | | | (127,258 | ) | | | (10,921 | ) | | | (18 | ) | – Savings accounts | | | (135,567 | ) | | | (135,600 | ) | | | (122,029 | ) | | | (13,537 | ) | | | (34 | ) | | | (133,344 | ) | | | (133,370 | ) | | | (120,471 | ) | | | (12,891 | ) | | | (8 | ) | – Other time deposits | | | (135,553 | ) | | | (135,796 | ) | | | (43,025 | ) | | | (84,868 | ) | | | (7,903 | ) | | | (151,630 | ) | | | (151,632 | ) | | | (48,853 | ) | | | (96,240 | ) | | | (6,539 | ) | Debt securities in issue | | | (69,150 | ) | | | (69,863 | ) | | | (190 | ) | | | (69,122 | ) | | | (551 | ) | | | (75,932 | ) | | | (76,971 | ) | | | (196 | ) | | | (74,712 | ) | | | (2,063 | ) | Repurchase agreements and other similar secured borrowinga | | | (25,035 | ) | | | (25,035 | ) | | | – | | | | (25,035 | ) | | | – | | | Repurchase agreements and other similar secured borrowing | | | | (19,760 | ) | | | (19,760 | ) | | | – | | | | (19,760 | ) | | | – | | Subordinated liabilities | | | (21,467 | ) | | | (22,907 | ) | | | – | | | | (22,907 | ) | | | – | | | | (23,383 | ) | | | (24,547 | ) | | | – | | | | (24,547 | ) | | | – | | Liabilities included in disposal groups classified as held for salec | | | | (51,775 | ) | | | (51,788 | ) | | | (22,264 | ) | | | (28,998 | ) | | | (526 | ) | | As at 31 December 2014 | | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | Financial assets | | | | | | | | | | | | | | | | | | | | | Loans and advances to banks | | | 42,111 | | | | 42,088 | | | | 2,693 | | | | 38,756 | | | | 639 | | | | 41,349 | | | | 41,301 | | | | 5,933 | | | | 34,125 | | | | 1,243 | | Loans and advances to customers: | | | | | | | | | | | | | | | | | | | | | – Home loans | | | 166,974 | | | | 159,602 | | | | – | | | | – | | | | 159,602 | | | | 155,863 | | | | 151,431 | | | | – | | | | – | | | | 151,431 | | – Credit cards, unsecured and other retail lending | | | 63,583 | | | | 63,759 | | | | 1,214 | | | | 488 | | | | 62,057 | | | | 67,840 | | | | 67,805 | | | | 1,148 | | | | 284 | | | | 66,373 | | – Finance lease receivables | | | 5,439 | | | | 5,340 | | | | | | | | | | – Finance lease receivablesb | | | | 4,776 | | | | 4,730 | | | | – | | | | – | | | | – | | – Corporate loans | | | 191,771 | | | | 188,805 | | | | 233 | | | | 143,231 | | | | 45,341 | | | | 170,738 | | | | 169,697 | | | | 585 | | | | 129,847 | | | | 39,265 | | Reverse repurchase agreements and other similar secured lending | | | 131,753 | | | | 131,753 | | | | 2 | | | | 131,751 | | | | – | | | | 28,187 | | | | 28,187 | | | | – | | | | 28,187 | | | | – | | | Financial liabilities | | | | | | | | | | | | | | | | | | | | | Deposits from banks | | | (58,390 | ) | | | (58,388 | ) | | | (4,257 | ) | | | (54,117 | ) | | | (14 | ) | | | (47,080 | ) | | | (47,080 | ) | | | (4,428 | ) | | | (42,652 | ) | | | – | | Customer accounts: | | | | | | | | | | | | | | | | | | | | | – Current and demand accounts | | | (143,057 | ) | | | (143,085 | ) | | | (126,732 | ) | | | (16,183 | ) | | | (170 | ) | | | (147,122 | ) | | | (147,121 | ) | | | (130,439 | ) | | | (16,537 | ) | | | (145 | ) | – Savings accounts | | | (131,163 | ) | | | (131,287 | ) | | | (116,172 | ) | | | (15,086 | ) | | | (29 | ) | | | (135,567 | ) | | | (135,600 | ) | | | (122,029 | ) | | | (13,537 | ) | | | (34 | ) | – Other time deposits | | | (153,484 | ) | | | (153,591 | ) | | | (43,654 | ) | | | (101,736 | ) | | | (8,201 | ) | | | (135,553 | ) | | | (135,796 | ) | | | (43,025 | ) | | | (84,868 | ) | | | (7,903 | ) | Debt securities in issue | | | (86,099 | ) | | | (87,522 | ) | | | (188 | ) | | | (87,334 | ) | | | – | | | | (69,150 | ) | | | (69,863 | ) | | | (190 | ) | | | (69,122 | ) | | | (551 | ) | Repurchase agreements and other similar secured borrowing | | | (124,479 | ) | | | (124,479 | ) | | | (423 | ) | | | (124,056 | ) | | | – | | | | (25,035 | ) | | | (25,035 | ) | | | – | | | | (25,035 | ) | | | – | | Subordinated liabilities | | | (21,153 | ) | | | (22,718 | ) | | | – | | | | (22,701 | ) | | | (17 | ) | | | (21,467 | ) | | | (22,907 | ) | | | – | | | | (22,907 | ) | | | – | |
Notes a | In June 2016 UK Gilts previously classified as available for sale were reclassified to held to maturity in order to reflect the intention with these assets. |
b | The fair value hierarchy for finance lease receivables is not required as part of the standard. |
c | Disposal groups held for sale and measured at fair value less cost to sell are in included in the fair value table. For disposal groups measured at carrying amount, the underlying financial assets and liabilities measured at fair value are included in the fair value disclosures on pages 247 to 260 and items measured at amortised cost are included on page 261. Non financial assets (£6.6bn) and liabilities (£1.7bn) within disposal groups measured at carrying amount are excluded from these disclosures. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 261 |
Notes to the financial statements Assets and liabilities held at fair value 18 Fair value of financial instrumentscontinued The fair value is an estimate of the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As a wide range of valuation techniques are often available, it may not be appropriate to directly compare this fair value information to independent market sources or other financial institutions. Different valuation methodologies and assumptions can have a significant impact on fair values which are based on unobservable inputs. Note
a | During 2015, new reverse repurchase agreements and other similar secured lending and repurchase agreements and other similar secured borrowing in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 249 |
Notes to the financial statements
Assets and liabilities held at fair value
18 Fair value of assets and liabilitiescontinued
Financial assets The carrying value of financial assets held at amortised cost (including loans and advances to banks and customers, and other lending such as reverse repurchase agreements and cash collateral on securities borrowed) is determined in accordance with the relevant accounting policy noted on pages 253 and 254.in Note 20. Loans and advances to banks The fair value of loans and advances, for the purpose of this disclosure, is derived from discounting expected cash flows in a way that reflects the current market price for lending to issuers of similar credit quality. Where market data or credit information on the underlying borrowers is unavailable, a number of proxy/extrapolation techniques are employed to determine the appropriate discount rates. There is minimal difference between the fair value and carrying amount due to the short termshort-term nature of the lending, (i.e.i.e. predominantly overnight deposits)deposits, and the high credit quality of counterparties. Loans and advances to customers The fair value of loans and advances to customers, for the purpose of this disclosure, is derived from discounting expected cash flows in a way that reflects the current market price for lending to issuers of similar credit quality. For retail lending, (i.e. homei.e. Home loans and credit cards)cards, tailored discounted cash flow models are used to estimate the fair value of different product types. For example, for home loans different models are used to estimate fair values of tracker, offset and fixed rate mortgage products. Key inputs to these models are the differentials between historic and current product margins and estimated prepayment rates. The discount of fair value to carrying amount for home loans has reduced to 2.5% (2015: 2.8% (2014: 4.4%) due to changes in product mix across the loan portfolio and movements in product margins. The fair value of corporate loans is calculated by the use of discounted cash flow techniques where the gross loan values are discounted at a rate of difference between contractual margins and hurdle rates or spreads where Barclays charges a margin over LIBOR depending on credit quality and loss given default and years to maturity. The discount between the carrying and fair value has decreasedincreased to 1.0% (2015: 0.6% (2014: 1.5%). Reverse repurchase agreements The fair value of reverse repurchase agreements approximates carrying amount as these balances are generally short dated and fully collateralised. Financial liabilities The carrying value of financial liabilities held at amortised cost (including customer accounts, other deposits, repurchase agreements and cash collateral on securities lent, debt securities in issue and subordinated liabilities) is determined in accordance with the accounting policy noted on pages 254 and 272.in Note 22. Deposits from banks and customer accounts In many cases, the fair value disclosed approximates 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 termshort-term debt securities. The fair value for deposits with longer termlonger-term maturities such as time deposits, are estimated using discounted cash flows applying either market rates or current rates for deposits of similar remaining maturities. Consequently the fair value discount is minimal. Debt securities in issue Fair values of other debt securities in issue are based on quoted prices where available, or where the instruments are short dated, carrying amount approximates fair value. The fair value difference has decreasedincreased to 1.4% (2015: 1.0% (2014: 1.7%). Repurchase agreements The fair value of repurchase agreements approximates carrying amounts as these balances are generally short dated. Subordinated liabilities Fair values for dated and undated convertible andnon-convertible loan capital are based on quoted market rates for the issueissuer concerned or issuesissuers with similar terms and conditions. | | | 250262 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
19 Offsetting financial assets and financial liabilities In accordance with IAS 32Financial Instruments:Instruments: Presentation,, the Group reports financial assets and financial liabilities on a net basis on the balance sheet only if there is a legally enforceable right to set offset-off the recognised amounts and there is intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. The following table shows the impact of netting arrangements on: §☒ | | all financial assets and liabilities that are reported net on the balance sheet |
§☒ | | all derivative financial instruments and reverse repurchase and repurchase agreements and other similar secured lending and borrowing agreements that are subject to enforceable master netting arrangements or similar agreements, but do not qualify for balance sheet netting. |
The table identifies the amounts that have been offset in the balance sheet and also those amounts that are covered by enforceable netting arrangements (offsetting arrangements and financial collateral) but do not qualify for netting under the requirements of IAS 32 described above. The ‘Net amounts’ presented below are not intended to represent the Group’s actual exposure to credit risk, as a variety of credit mitigation strategies are employed in addition to netting and collateral arrangements. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amounts subject to enforceable netting arrangements | | | | | | | | | | | | | Effects of offsetting on-balance sheet | | | | Related amounts not offseta | | | | Amounts not | | | | | | | | | Gross amounts £m | | |
| Amounts
offset £m |
b | |
| Net amounts reported on the balance sheet
£m |
| | | Financial instruments £m | | | | Financial collateral £m | | | | Net amount £m | | |
| subject to
enforceable netting arrangements £m |
c | |
| Balance sheet
total £m |
d | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative financial assetse | | | 328,692 | | | | (7,685 | ) | | | 321,007 | | | | (259,582 | ) | | | (42,402 | ) | | | 19,023 | | | | 6,702 | | | | 327,709 | | Reverse repurchase agreements and other similar secured lending | | | 33,805 | | | | (11,220 | ) | | | 22,585 | | | | – | | | | (22,299 | ) | | | 286 | | | | 5,602 | | | | 28,187 | | Reverse repurchase agreements designated at fair valuef | | | 135,792 | | | | (91,668 | ) | | | 44,124 | | | | – | | | | (44,101 | ) | | | 23 | | | | 5,389 | | | | 49,513 | | Total assets | | | 498,289 | | | | (110,573 | ) | | | 387,716 | | | | (259,582 | ) | | | (108,802 | ) | | | 19,332 | | | | 17,693 | | | | 405,409 | | Derivative financial liabilitiese | | | (325,984 | ) | | | 7,645 | | | | (318,339 | ) | | | 259,582 | | | | 40,124 | | | | (18,633 | ) | | | (5,913 | ) | | | (324,252 | ) | Repurchase agreements and other similar secured borrowing | | | (30,525 | ) | | | 10,687 | | | | (19,838 | ) | | | – | | | | 19,838 | | | | – | | | | (5,197 | ) | | | (25,035 | ) | Repurchase agreements designated at fair valuef | | | (141,126 | ) | | | 92,201 | | | | (48,925 | ) | | | – | | | | 48,364 | | | | (561 | ) | | | (1,913 | ) | | | (50,838 | ) | Total liabilities | | | (497,635 | ) | | | 110,533 | | | | (387,102 | ) | | | 259,582 | | | | 108,326 | | | | (19,194 | ) | | | (13,023 | ) | | | (400,125 | ) | | | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative financial assets | | | 617,981 | | | | (182,274 | ) | | | 435,707 | | | | (353,631 | ) | | | (52,278 | ) | | | 29,798 | | | | 4,202 | | | | 439,909 | | Reverse repurchase agreements and other similar secured lending | | | 204,895 | | | | (97,254 | ) | | | 107,641 | | | | – | | | | (106,436 | ) | | | 1,205 | | | | 24,112 | | | | 131,753 | | Reverse repurchase agreements designated at fair value | | | 4,119 | | | | – | | | | 4,119 | | | | – | | | | (3,918 | ) | | | 201 | | | | 1,117 | | | | 5,236 | | Total assets | | | 826,995 | | | | (279,528 | ) | | | 547,467 | | | | (353,631 | ) | | | (162,632 | ) | | | 31,204 | | | | 29,431 | | | | 576,898 | | Derivative financial liabilities | | | (617,161 | ) | | | 184,496 | | | | (432,665 | ) | | | 353,631 | | | | 54,311 | | | | (24,723 | ) | | | (6,655 | ) | | | (439,320 | ) | Repurchase agreements and other similar secured borrowing | | | (202,218 | ) | | | 97,254 | | | | (104,964 | ) | | | – | | | | 104,023 | | | | (941 | ) | | | (19,515 | ) | | | (124,479 | ) | Repurchase agreements designated at fair value | | | (4,256 | ) | | | – | | | | (4,256 | ) | | | – | | | | 3,942 | | | | (314 | ) | | | (1,167 | ) | | | (5,423 | ) | Total liabilities | | | (823,635 | ) | | | 281,750 | | | | (541,885 | ) | | | 353,631 | | | | 162,276 | | | | (25,978 | ) | | | (27,337 | ) | | | (569,222 | ) |
Notes
a | Financial collateral of £42,402m (2014: £52,278m) was received in respect of derivative assets, including £34,918m (2014: £44,047m) of cash collateral and £7,484m (2014: £8,231m) of non-cash collateral. Financial collateral of £40,124m (2014: £54,311m) was placed in respect of derivative liabilities, including £35,464m (2014: £43,768m) of cash collateral and £4,660m (2014: £10,543m) of non-cash collateral. The collateral amounts are limited to net balance sheet exposure so as to not include over-collateralisation. Of the £34,918m, (2014: £44,047m) cash collateral held, £27,732m, (2014: £33,769m) was included in deposits from banks and £7,186m (2014: £10,278m), was included in customer accounts. Of the £35,464m, (2014: £43,768m) cash collateral placed, £13,238m (2014: £16,815m) was included in loans and advances to banks and £22,226m (2014: £26,953m) was included in loans and advances to customers. |
b | Amounts offset for Derivative financial assets include cash collateral netted of £572m (2014: £1,052m). Amounts offset for Derivative liabilities include cash collateral netted of £532m (2014: £3,274m). Settlements assets and liabilities have been offset amounting to £8,886m (2014: £13,258m). No other significant recognised financial assets and liabilities were offset in the balance sheet. Therefore, the only balance sheet categories necessary for inclusion in the table are those shown above. |
c | This column includes contractual rights of set off that are subject to uncertainty under the laws of the relevant jurisdiction. |
d | The balance sheet total is the sum of ‘Net amounts reported on the balance sheet’ that are subject to enforceable netting arrangements and ‘Amounts not subject to enforceable netting arrangements’. |
e | The decrease in amounts offset is due to the conversion of Barclays daily collateralised interest rate swaps with LCH Clearnet Ltd, for which the collateral was offset against the derivative exposure, into daily settled interest rate swaps in December 2015. This led to a reduction in gross balances available to be offset. The derivative notional disclosure in Note 15 includes the notional of the daily settled interest rate swaps. |
f | During 2015, new reverse repurchase agreements and repurchase agreements, other similar secured lending and borrowing in certain businesses have been designated at fair value to better align to the way the business manages the portfolio’s risk and performance. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 251 |
Notes to the financial statements
Assets and liabilities held at fair value
19 Offsetting financial assets and financial liabilitiescontinued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Amounts subject to enforceable netting arrangements | | | | Amounts | | | | | | | | | Effects of offsettingon-balance sheet | | | | Related amounts not offseta | | | | not | | | | | | As at 31 December 2016 | |
| Gross amounts £m | | |
| Amounts offsetb
£m |
| |
| Net amounts reported on the balance sheet
£m |
| |
| Financial instruments £m | | |
| Financial collateral £m | | |
| Net
amount £m |
| |
| subject to
enforceable netting arrange- mentsc £m |
| |
| Balance
sheet totald £m |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative financial assets | | | 353,078 | | | | (11,934 | ) | | | 341,144 | | | | (273,602 | ) | | | (49,923 | ) | | | 17,619 | | | | 5,482 | | | | 346,626 | | Reverse repurchase agreements and other similar secured lendinge | | | 257,430 | | | | (187,262 | ) | | | 70,168 | | | | – | | | | (69,932 | ) | | | 236 | | | | 6,448 | | | | 76,616 | | Total assets | | | 610,508 | | | | (199,196 | ) | | | 411,312 | | | | (273,602 | ) | | | (119,855 | ) | | | 17,855 | | | | 11,930 | | | | 423,242 | | Derivative financial liabilities | | | (345,752 | ) | | | 10,962 | | | | (334,790 | ) | | | 273,602 | | | | 47,383 | | | | (13,805 | ) | | | (5,697 | ) | | | (340,487 | ) | Repurchase agreements and other similar secured borrowinge | | | (257,854 | ) | | | 187,262 | | | | (70,592 | ) | | | – | | | | 68,897 | | | | (1,695 | ) | | | (4,878 | ) | | | (75,470 | ) | Total liabilities | | | (603,606 | ) | | | 198,224 | | | | (405,382 | ) | | | 273,602 | | | | 116,280 | | | | (15,500 | ) | | | (10,575 | ) | | | (415,957 | ) | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Derivative financial assets | | | 328,692 | | | | (7,685 | ) | | | 321,007 | | | | (259,582 | ) | | | (42,402 | ) | | | 19,023 | | | | 6,702 | | | | 327,709 | | Reverse repurchase agreements and other similar secured lending | | | 169,597 | | | | (102,888 | ) | | | 66,709 | | | | – | | | | (66,400 | ) | | | 309 | | | | 10,991 | | | | 77,700 | | Total assets | | | 498,289 | | | | (110,573 | ) | | | 387,716 | | | | (259,582 | ) | | | (108,802 | ) | | | 19,332 | | | | 17,693 | | | | 405,409 | | Derivative financial liabilities | | | (325,984 | ) | | | 7,645 | | | | (318,339 | ) | | | 259,582 | | | | 40,124 | | | | (18,633 | ) | | | (5,913 | ) | | | (324,252 | ) | Repurchase agreements and other similar secured borrowing | | | (171,651 | ) | | | 102,888 | | | | (68,763 | ) | | | – | | | | 68,202 | | | | (561 | ) | | | (7,110 | ) | | | (75,873 | ) | Total liabilities | | | (497,635 | ) | | | 110,533 | | | | (387,102 | ) | | | 259,582 | | | | 108,326 | | | | (19,194 | ) | | | (13,023 | ) | | | (400,125 | ) |
Derivative assets and liabilities The ‘Financial instruments’ column identifies financial assets and liabilities that are subject to set offset-off under netting agreements, such as the ISDA Master Agreement or derivative exchange or clearing counterparty agreements, whereby all outstanding transactions with the same counterparty can be offset andclose-out netting applied across all outstanding transactiontransactions covered by the agreements if an event of default or other predetermined events occur. Financial collateral refers to cash andnon-cash collateral obtained, typically daily or weekly, to cover the net exposure between counterparties by enabling the collateral to be realised in an event of default or if other predetermined events occur. Repurchase and reverse repurchase agreements and other similar secured lending and borrowing The ‘Amounts offset’ column identifies financial assets and liabilities that are subject to set off under netting agreements, such as global master repurchase agreementsGlobal Master Repurchase Agreements and global master securities lending agreements,Global Master Securities Lending Agreements, whereby all outstanding transactions with the same counterparty can be offset andclose-out netting applied across all outstanding transactiontransactions covered by the agreements if an event of default or other predetermined events occur. Financial collateral typically comprises highly liquid securities which are legally transferred and can be liquidated in the event of counterparty default. These offsetting and collateral arrangements and other credit risk mitigation strategies used by the Group are further explained in the Credit risk mitigation section on page 100.102. Notes a | Financial collateral of £49,923m (2015: £42,402m) was received in respect of derivative assets, including £41,641m (2015: £34,918m) of cash collateral and £8,282m (2015: £7,484m) ofnon-cash collateral. Financial collateral of £47,383m (2015: £40,124m) was placed in respect of derivative liabilities, including £43,763m (2015: £35,464m) of cash collateral and £3,620m (2015: £4,660m) ofnon-cash collateral. The collateral amounts are limited to net balance sheet exposure so as to not include over-collateralisation. Of the £41,641m (2015: £34,918m) cash collateral held, £26,834m (2015: £27,732m) was included in deposits from banks and £14,807m (2015: £7,186m), was included in customer accounts. Of the £43,763m (2015: £35,464m) cash collateral placed, £17,587m (2015: £13,238m) was included in loans and advances to banks and £26,176m (2015: £22,226m) was included in loans and advances to customers. |
b | Amounts offset for Derivative financial assets include cash collateral netted of £972m (2015: £572m). Amounts offset for Derivative liabilities did not include any cash collateral netted for December 2016 (2015: £532m). Settlements assets and liabilities have been offset amounting to £10,486m (2015: £8,886m). No other significant recognised financial assets and liabilities were offset in the balance sheet. Therefore, the only balance sheet categories necessary for inclusion in the table are those shown above. |
c | This column includes contractual rights ofset-off that are subject to uncertainty under the laws of the relevant jurisdiction. |
d | The balance sheet total is the sum of ‘Net amounts reported on the balance sheet’ that are subject to enforceable netting arrangements and ‘Amounts not subject to enforceable netting arrangements’. |
e | Repurchase and Reverse Repurchase agreements include instruments at amortised cost and instruments designated at fair value through profit and loss. Reverse Repurchase agreements and other similar secured lending of £76,616m (December 2015: £77,700m) is split by fair value £63,162m (December 2015: £49,513m) and amortised cost £13,454m (December 2015: £28,187m). Repurchase agreements and other similar secured borrowing of £75,470m (December 2015: £75,873m) is split by fair value £55,710m (December 2015: £50,838m) and amortised cost £19,760m (December 2015: £25,035m). |
| | | 252 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 263 |
Notes to the financial statements Financial instruments held at amortised cost | The notes included in this section focus on assets that are held at amortised cost arising from the Group’s retail and wholesale lending including loans and advances, finance leases, repurchase and reverse repurchase agreements and similar secured lending. Detail regarding the Group’s capital and liquidity position can be found on pages 152 to 177. |
The notes included in this section focus on assets that are held at amortised cost arising from the Group’s retail and wholesale lending including loans and advances, finance leases, repurchase and reverse repurchase agreements and similar secured lending. Detail regarding the Group’s capital and liquidity position can be found on pages 154 to 171.
20 Loans and advances to banks and customers | Accounting for financial instruments held at amortised cost Loans and advances to customers and banks, customer accounts, debt securities and most financial liabilities, are held at amortised cost. That is, the initial fair value (which is normally the amount advanced or borrowed) is adjusted for repayments and the amortisation of coupon, fees and expenses to represent the effective interest rate of the asset or liability. In accordance with IAS 39, where the Group no longer intends to trade in financial assets it may transfer them out of the held for trading classification and measure them at amortised cost if they meet the definition of a loan. The initial value used for the purposes of establishing amortised cost is fair value on the date of the transfer. |
| As at 31 December | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| Gross loans and advances to banks | | | 41,349 | | | | 42,111 | | | | 43,251 | | | | 41,349 | | Less: allowance for impairment | | | – | | | | – | | | | – | | | | – | | Loans and advances to banks | | | 41,349 | | | | 42,111 | | | | 43,251 | | | | 41,349 | | | Gross loans and advances to customers | | | 404,138 | | | | 433,222 | | | | 397,404 | | | | 404,138 | | Less: allowance for impairment | | | (4,921 | ) | | | (5,455 | ) | | | (4,620 | ) | | | (4,921 | ) | Loans and advances to customers | | | 399,217 | | | | 427,767 | | | | 392,784 | | | | 399,217 | |
Further information onIncluded within the Group’scarrying value of gross loans and advances to banks and customers and impairment allowances is included on pages 117are effective interest rate adjustments of £1,028m (2015: £917m). Of the total balance deferred, £649m (2015: £424m) relate to 118.
Priorcosts, such asco-brand partner fees, incurred to 2010, the Group reclassified certain financial assets, originally classified as held for trading, that were deemed to be not held for trading purposes to loans and advances. The carrying value and fair value of securities reclassified into loans and advances is £975m (2014: £1,862m) and £958m (2014: £1,834m) respectively.
If the reclassifications had not been made, the Group’s income statement for 2015 would have included a net gain on the reclassified trading assets of £12m (2014: gain of £57m).originate credit card balances.
21 Finance leases | Accounting for finance leases The Group applies IAS 17Leases in accounting for finance leases, both where it is the lessor or the lessee. A finance lease is a lease which confers substantially all the risks and rewards of the leased assets on the lessee. Where the Group is the lessor, the leased asset is not held on the balance sheet; instead a finance lease receivable is recognised representing the minimum lease payments receivable under the terms of the lease, discounted at the rate of interest implicit in the lease. Where the Group is the lessee, the leased asset is recognised in property, plant and equipment and a finance lease liability is recognised, representing the minimum lease payments payable under the lease, discounted at the rate of interest implicit in the lease. Interest income or expense is recognised in interest receivable or payable, allocated to accounting periods to reflect a constant periodic rate of return. |
Finance lease receivables Finance lease receivables are included within loans and advances to customers. The Group engagesspecialises 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. | | | | 2015 | | | 2014 | | | | | | | | | | Present | | | | | | | | | | Present | | | | | | | | Gross | | | | | | value of | | | | | | Gross | | | | | | value of | | | | | | | | investment | | | | | | minimum | | | | Un- | | | | investment | | | | | | minimum | | | | Un- | | | | | | in finance | | | | Future | | | | lease | | | | guaranteed | | | | in finance | | | | Future | | | | lease | | | | guaranteed | | | | | | lease | | | | finance | | | | payments | | | | residual | | | | lease | | | | finance | | | | payments | | | | residual | | | | | | | | | | | | | | | | | | | | | | receivables | | | | income | | | | receivable | | | | values | | | | receivables | | | | income | | | | receivable | | | | values | | | | 2016 | | | | 2015 | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £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 | | | 1,826 | | | | (230 | ) | | | 1,596 | | | | 117 | | | | 2,139 | | | | (304 | ) | | | 1,835 | | | | 125 | | | | 646 | | | | (37 | ) | | | 609 | | | | 60 | | | | 1,826 | | | | (230 | ) | | | 1,596 | | | | 117 | | Over one year but not more than five years | | | 3,569 | | | | (555 | ) | | | 3,014 | | | | 275 | | | | 4,159 | | | | (682 | ) | | | 3,477 | | | | 293 | | | | 986 | | | | (57 | ) | | | 929 | | | | 132 | | | | 3,569 | | | | (555 | ) | | | 3,014 | | | | 275 | | Over five years | | | 224 | | | | (32 | ) | | | 192 | | | | 21 | | | | 213 | | | | (40 | ) | | | 173 | | | | 17 | | | | 73 | | | | (4 | ) | | | 69 | | | | 19 | | | | 224 | | | | (32 | ) | | | 192 | | | | 21 | | Total | | | 5,619 | | | | (817 | ) | | | 4,802 | | | | 413 | | | | 6,511 | | | | (1,026 | ) | | | 5,485 | | | | 435 | | | | 1,705 | | | | (98 | ) | | | 1,607 | | | | 211 | | | | 5,619 | | | | (817 | ) | | | 4,802 | | | | 413 | |
The decrease in finance lease receivables is primarily driven by BAGL balances now being classified as held for sale. The impairment allowance for uncollectable finance lease receivables is £56m (2014: £82m). | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 253 |
Notesamounted to the financial statements
Financial instruments held at amortised cost
21 Finance leasescontinued£6m (2015: £56m).
Finance lease liabilities The Group leases items of property, plant and equipment on terms that meet the definition of finance leases. Finance lease liabilities are included within Note 26 Accruals, deferred income and other liabilities. As at 31 December 2015,2016, the total future minimum payments under finance leases were nil (2014: £14m)£15m (2015: nil). The carrying amount of assets held under finance leases was nil (2014: £31m)£15m (2015: nil). | | | 264 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
22 Reverse repurchase and repurchase agreements including other similar lending and borrowing Reverse repurchase agreements (and stock borrowing or similar transaction)transactions) are a form of secured lending whereby the Group provides a loan or cash collateral in exchange for the transfer of collateral, generally in the form of marketable securities subject to an agreement to transfer the securities back at a fixed price in the future. Repurchase agreements are where the Group obtains such loans or cash collateral, in exchange for the transfer of collateral. | Accounting for reverse repurchase and repurchase agreements including other similar lending and borrowing The Group purchases (a reverse repurchase agreement) or borrows securities subject to a commitment to resell or return them. The securities are not included in the balance sheet as the Group does not acquire the risks and rewards of ownership. Consideration paid (or cash collateral provided) is accounted for as a loan asset at amortised cost, unless it is designated at fair value through profit and loss. The Group may also sell (a repurchase agreement) or lend securities subject to a commitment to repurchase or redeem them. The securities are retained on the balance sheet as the Group retains substantially all the risks and rewards of ownership. Consideration received (or cash collateral provided) is accounted for as a financial liability at amortised cost, unless it is designated at fair value through profit and loss. |
| | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2016 £m | | |
| 2015 £m | | Assets | | | | | | | | | Banks | | | 8,954 | | | | 39,528 | | | | 2,769 | | | | 8,954 | | Customers | | | 19,233 | | | | 92,225 | | | | 10,685 | | | | 19,233 | | Reverse repurchase agreements and other similar secured lendinga | | | 28,187 | | | | 131,753 | | | Reverse repurchase agreements and other similar secured lending at amortised costa | | | | 13,454 | | | | 28,187 | | | Liabilities | | | | | | | | | Banks | | | 13,951 | | | | 49,940 | | | | 12,820 | | | | 13,951 | | Customers | | | 11,084 | | | | 74,539 | | | | 6,940 | | | | 11,084 | | Repurchase agreements and other similar secured borrowinga | | | 25,035 | | | | 124,479 | | | Repurchase agreements and other similar secured borrowing at amortised costa | | | | 19,760 | | | | 25,035 | |
Note a | During 2015, newNew reverse repurchase and repurchase agreements including other similar secured lending and borrowing in certain businesses have been designated at fair value following a change in accounting treatment implemented in 2015 to better align to the way the business manages the portfolio’s risk and performance (see Notes 14 and 17 for further detail). |
| | | 254 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 265 |
Notes to the financial statements Non-current assets and other investments | The notes included in this section focus on the Group’snon-current tangible and intangible assets and property, plant and equipment, which provide long-term future economic benefits. |
The notes included in this section focus on the Group’s non-current tangible and intangible assets and property, plant and equipment, which provide long-term future economic benefits.
23 Property, plant and equipment | | | Accounting for property, plant and equipment | The Group applies IAS 16Property Plant and Equipmentand IAS 40Investment Properties.Properties. | | Property, plant and equipment is stated at cost, which includes direct and incremental acquisition costs less accumulated depreciation and provisions for impairment, if required. Subsequent costs are capitalised if these result in anthe enhancement to the asset. | | 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. 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. The Group uses the following annual rates in calculating depreciation: | Annual rates in calculating depreciation | | Depreciation rate | Freehold land | | Not depreciated | Freehold buildings and long-leasehold property (more than 50 years to run) | | 2-3.3% | 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 | | 6-10% | Equipment installed in freehold and leasehold property | | 6-10% | Computers and similar equipment | | 17-33% | Fixtures and fittings and other equipment | | 9-20% | | Where leasehold property has a remaining useful life of less than 17 years, costs of adaptation and installed equipment are depreciated over the remaining life of the lease. | | Investment property | The Group initially recognises investment property at cost, and subsequently at fair value at each balance sheet date, reflecting market conditions at the reporting date. Gains and losses on remeasurement are included in the income statement. |
| | |
| Investment property
£m |
| |
| Property
£m |
| |
| Equipment
£m |
| | | Leased assets £m | | |
| Total
£m |
| |
| Investment property £m | | |
| Property £m | | |
| Equipment £m | | |
| Leased assets £m | | |
| Total
£m |
| Cost | | | | | | | | | | | | | | | | | | | | | As at 1 January 2016 | | | | 140 | | | | 3,919 | | | | 4,259 | | | | 62 | | | | 8,380 | | Additions | | | | – | | | | 167 | | | | 370 | | | | – | | | | 537 | | Disposalsa | | | | (6 | ) | | | (761 | ) | | | (631 | ) | | | – | | | | (1,398 | ) | Change in fair value of investment properties | | | | – | | | | – | | | | – | | | | – | | | | – | | Exchange and other movementsb | | | | (53 | ) | | | 104 | | | | (158 | ) | | | (52 | ) | | | (159 | ) | As at 31 December 2016 | | | | 81 | | | | 3,429 | | | | 3,840 | | | | 10 | | | | 7,360 | | Accumulated depreciation and impairment | | | | | | | | | | | | As at 1 January 2016 | | | | – | | | | (1,697 | ) | | | (3,177 | ) | | | (38 | ) | | | (4,912 | ) | Depreciation charge | | | | – | | | | (185 | ) | | | (325 | ) | | | – | | | | (510 | ) | Disposalsa | | | | – | | | | 635 | | | | 405 | | | | – | | | | 1,040 | | Exchange and other movementsb | | | | – | | | | (236 | ) | | | 54 | | | | 29 | | | | (153 | ) | As at 31 December 2016 | | | | – | | | | (1,483 | ) | | | (3,043 | ) | | | (9 | ) | | | (4,535 | ) | Net book value | | | | 81 | | | | 1,946 | | | | 797 | | | | 1 | | | | 2,825 | | Cost | | | | | | | | | | | | As at 1 January 2015 | | | 207 | | | | 4,054 | | | | 4,350 | | | | 10 | | | | 8,621 | | | | 207 | | | | 4,054 | | | | 4,350 | | | | 10 | | | | 8,621 | | Additions and disposals | | | (71 | ) | | | 22 | | | | 173 | | | | 49 | | | | 173 | | | Additions | | | | 13 | | | | 385 | | | | 405 | | | | 49 | | | | 852 | | Disposals | | | | (84 | ) | | | (363 | ) | | | (232 | ) | | | – | | | | (679 | ) | Change in fair value of investment properties | | | 10 | | | | – | | | | – | | | | – | | | | 10 | | | | 10 | | | | – | | | | – | | | | – | | | | 10 | | Exchange and other movements | | | (6 | ) | | | (157 | ) | | | (264 | ) | | | 3 | | | | (424 | ) | | | (6 | ) | | | (157 | ) | | | (264 | ) | | | 3 | | | | (424 | ) | As at 31 December 2015 | | | 140 | | | | 3,919 | | | | 4,259 | | | | 62 | | | | 8,380 | | | | 140 | | | | 3,919 | | | | 4,259 | | | | 62 | | | | 8,380 | | Accumulated depreciation and impairment | | | | | | | | | | | | | | | | | | | | | As at 1 January 2015 | | | – | | | | (1,669 | ) | | | (3,157 | ) | | | (9 | ) | | | (4,835 | ) | | | – | | | | (1,669 | ) | | | (3,157 | ) | | | (9 | ) | | | (4,835 | ) | Depreciation charge | | | – | | | | (181 | ) | | | (373 | ) | | | – | | | | (554 | ) | | | – | | | | (181 | ) | | | (373 | ) | | | – | | | | (554 | ) | Disposals | | | – | | | | 144 | | | | 159 | | | | – | | | | 303 | | | | – | | | | 144 | | | | 159 | | | | – | | | | 303 | | Exchange and other movements | | | – | | | | 9 | | | | 194 | | | | (29 | ) | | | 174 | | | | – | | | | 9 | | | | 194 | | | | (29 | ) | | | 174 | | As at 31 December 2015 | | | – | | | | (1,697 | ) | | | (3,177 | ) | | | (38 | ) | | | (4,912 | ) | | | – | | | | (1,697 | ) | | | (3,177 | ) | | | (38 | ) | | | (4,912 | ) | Net book value | | | 140 | | | | 2,222 | | | | 1,082 | | | | 24 | | | | 3,468 | | | | 140 | | | | 2,222 | | | | 1,082 | | | | 24 | | | | 3,468 | | Cost | | | | | | | | | | | | As at 1 January 2014 | | | 451 | | | | 3,924 | | | | 4,552 | | | | 10 | | | | 8,937 | | | Additions and disposals | | | (160 | ) | | | 174 | | | | 7 | | | | – | | | | 21 | | | Change in fair value of investment properties | | | (1 | ) | | | – | | | | – | | | | – | | | | (1 | ) | | Exchange and other movements | | | (83 | ) | | | (44 | ) | | | (209 | ) | | | – | | | | (336 | ) | | As at 31 December 2014 | | | 207 | | | | 4,054 | | | | 4,350 | | | | 10 | | | | 8,621 | | | Accumulated depreciation and impairment | | | | | | | | | | | | As at 1 January 2014 | | | – | | | | (1,513 | ) | | | (3,201 | ) | | | (7 | ) | | | (4,721 | ) | | Depreciation charge | | | – | | | | (184 | ) | | | (399 | ) | | | (2 | ) | | | (585 | ) | | Disposals | | | – | | | | 34 | | | | 271 | | | | – | | | | 305 | | | Exchange and other movements | | | – | | | | (6 | ) | | | 172 | | | | – | | | | 166 | | | As at 31 December 2014 | | | – | | | | (1,669 | ) | | | (3,157 | ) | | | (9 | ) | | | (4,835 | ) | | Net book value | | | 207 | | | | 2,385 | | | | 1,193 | | | | 1 | | | | 3,786 | | |
Notes a | Cost and depreciation disposals include £0.9bn relating to fully depreciated assets that are no longer in use. There is no impact on the net book value. |
b | Includes property, plant and equipment relating to BAGL of £627m (cost of £1,066m less accumulated depreciation of £439m) which was reclassified to held for sale. |
| | | 266 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
23 Property, plant and equipmentcontinued Property rentals of £9m (2014: £5m)£7m (2015: £9m) and £9m (2014: £14m)£6m (2015: £9m) have been included in net investment income and other income respectively. Impairment of £38m (2014: £61m)£19m (2015: £38m) was charged in the period. 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. Refer to Note 18 Fair value of assets and liabilitiesfinancial instruments for further details. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 255 |
Notes to the financial statements
Non-current assets and other investments
24 Goodwill and intangible assets | | | Accounting for goodwill and other intangible assets Goodwill The carrying value of goodwill is determined in accordance with IFRS 3Business CombinationsandIAS 36Impairment of Assets.Assets. Goodwill arises on the acquisition of subsidiaries, associates and joint ventures, andventures. It represents the excess of the fair value of the purchase consideration 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. Goodwill is reviewed annually for impairment, or more frequently when there are indications that impairment may have occurred. The test involves comparing the carrying value of goodwill with the present value of thepre-tax cash flows, discounted at a rate of interest that reflects the inherent risks of the cash generating unit (CGU) to which the goodwill relates, or the CGU’s fair value if this is higher. Intangible assets Intangible assets other than goodwill are accounted for in accordance with IAS 38Intangible Assets and IAS 36Impairment of Assets.. Intangible assets include brands, customer lists, internally generated software, other software, licences and other contracts and core deposit intangibles. They 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. Intangible assets are stated at cost (which is, in the case of assets acquired in a business combination, the acquisition date fair value) less accumulated 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 using the amortisation periods set out below: | Annual rates in calculating amortisation | | Amortisation period | Goodwill | | Not amortised | Internally generated softwarea | | 12 months to 6 years | Other software | | 12 months to 6 years | Core deposits intangibles | | 12 months to 25 years | Brands | | 12 months to 25 years | Customer lists | | 12 months to 25 years | Licences and other | | 12 months to 25 years | | Intangible assets are reviewed for impairment when there are indications that impairment may have occurred. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Internally | | | | | | | | Core | | | | | | | | | | | | | | | | | | | | | | | | | generated | | | | Other | | | | deposit | | | | | | | | Customer | | | | Licences | | | | | | | | | Goodwill | | | | software | | | | software | | | | intangibles | | | | Brands | | | | lists | | | | and other | | | | Total | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 1 January 2015 | | | 6,329 | | | | 3,240 | | | | 482 | | | | 186 | | | | 112 | | | | 1,721 | | | | 447 | | | | 12,517 | | Additions and disposals | | | (515 | ) | | | 998 | | | | 75 | | | | – | | | | – | | | | – | | | | 18 | | | | 576 | | Exchange and other movements | | | (211 | ) | | | (126 | ) | | | (15 | ) | | | (40 | ) | | | (26 | ) | | | (56 | ) | | | 6 | | | | (468 | ) | As at 31 December 2015 | | | 5,603 | | | | 4,112 | | | | 542 | | | | 146 | | | | 86 | | | | 1,665 | | | | 471 | | | | 12,625 | | Accumulated amortisation and impairment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 1 January 2015 | | | (1,442 | ) | | | (1,257 | ) | | | (194 | ) | | | (88 | ) | | | (111 | ) | | | (962 | ) | | | (283 | ) | | | (4,337 | ) | Disposals | | | 518 | | | | 128 | | | | 2 | | | | – | | | | – | | | | – | | | | 3 | | | | 651 | | Amortisation charge | | | – | | | | (421 | ) | | | (17 | ) | | | (6 | ) | | | – | | | | (143 | ) | | | (30 | ) | | | (617 | ) | Impairment charge | | | (102 | ) | | | (101 | ) | | | (1 | ) | | | (1 | ) | | | – | | | | (12 | ) | | | – | | | | (217 | ) | Exchange and other movements | | | 28 | | | | 17 | | | | (2 | ) | | | 20 | | | | 25 | | | | 36 | | | | (7 | ) | | | 117 | | As at 31 December 2015 | | | (998 | ) | | | (1,634 | ) | | | (212 | ) | | | (75 | ) | | | (86 | ) | | | (1,081 | ) | | | (317 | ) | | | (4,403 | ) | Net book value | | | 4,605 | | | | 2,478 | | | | 330 | | | | 71 | | | | – | | | | 584 | | | | 154 | | | | 8,222 | | 2014 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 1 January 2014 | | | 6,346 | | | | 2,411 | | | | 556 | | | | 194 | | | | 116 | | | | 1,543 | | | | 437 | | | | 11,603 | | Additions and disposals | | | 36 | | | | 702 | | | | 176 | | | | – | | | | – | | | | 123 | | | | 7 | | | | 1,044 | | Exchange and other movements | | | (53 | ) | | | 127 | | | | (250 | ) | | | (8 | ) | | | (4 | ) | | | 55 | | | | 3 | | | | (130 | ) | As at 31 December 2014 | | | 6,329 | | | | 3,240 | | | | 482 | | | | 186 | | | | 112 | | | | 1,721 | | | | 447 | | | | 12,517 | | Accumulated amortisation and impairment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 1 January 2014 | | | (1,468 | ) | | | (999 | ) | | | (217 | ) | | | (85 | ) | | | (97 | ) | | | (799 | ) | | | (253 | ) | | | (3,918 | ) | Disposals | | | – | | | | 98 | | | | 21 | | | | – | | | | – | | | | 14 | | | | 2 | | | | 135 | | Amortisation charge | | | – | | | | (306 | ) | | | (19 | ) | | | (7 | ) | | | (18 | ) | | | (142 | ) | | | (30 | ) | | | (522 | ) | Impairment charge | | | – | | | | (74 | ) | | | (21 | ) | | | – | | | | – | | | | (5 | ) | | | – | | | | (100 | ) | Exchange and other movements | | | 26 | | | | 24 | | | | 42 | | | | 4 | | | | 4 | | | | (30 | ) | | | (2 | ) | | | 68 | | As at 31 December 2014 | | | (1,442 | ) | | | (1,257 | ) | | | (194 | ) | | | (88 | ) | | | (111 | ) | | | (962 | ) | | | (283 | ) | | | (4,337 | ) | Net book value | | | 4,887 | | | | 1,983 | | | | 288 | | | | 98 | | | | 1 | | | | 759 | | | | 164 | | | | 8,180 | |
Note a | Exceptions to the stated rate relate to useful lives of certain core banking platforms that are assessed individually and, if appropriate, amortised over longer periods ranging from 10 to 15 years. |
| | | 256 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 267 |
Notes to the financial statements Non-current assets and other investments 24 Goodwill and intangible assetscontinued
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 24 Goodwill and intangible assetscontinued | | | | | | | |
| Goodwill £m | | |
| Internally generated software £m | | |
| Other software £m | | |
| Core deposit intangibles £m | | |
| Brands £m | | |
| Customer lists
£m |
| |
| Licences and other
£m |
| |
| Total
£m |
| 2016 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 1 January 2016 | | | 5,603 | | | | 4,112 | | | | 542 | | | | 146 | | | | 86 | | | | 1,665 | | | | 471 | | | | 12,625 | | Additions and disposals | | | (77 | ) | | | 955 | | | | 2 | | | | – | | | | – | | | | 59 | | | | 78 | | | | 1,017 | | Exchange and other movementsa | | | (679 | ) | | | (140 | ) | | | (340 | ) | | | (140 | ) | | | (86 | ) | | | (16 | ) | | | (4 | ) | | | (1,405 | ) | As at 31 December 2016 | | | 4,847 | | | | 4,927 | | | | 204 | | | | 6 | | | | – | | | | 1,708 | | | | 545 | | | | 12,237 | | Accumulated amortisation and impairment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 1 January 2016 | | | (998 | ) | | | (1,634 | ) | | | (212 | ) | | | (75 | ) | | | (86 | ) | | | (1,081 | ) | | | (317 | ) | | | (4,403 | ) | Disposals | | | 77 | | | | 46 | | | | 1 | | | | – | | | | – | | | | 14 | | | | 12 | | | | 150 | | Amortisation charge | | | – | | | | (480 | ) | | | (36 | ) | | | – | | | | – | | | | (129 | ) | | | (29 | ) | | | (674 | ) | Impairment charge | | | – | | | | (73 | ) | | | (1 | ) | | | – | | | | – | | | | – | | | | (1 | ) | | | (75 | ) | Exchange and other movementsa | | | (9 | ) | | | 277 | | | | 105 | | | | 69 | | | | 86 | | | | (35 | ) | | | (2 | ) | | | 491 | | As at 31 December 2016 | | | (930 | ) | | | (1,864 | ) | | | (143 | ) | | | (6 | ) | | | – | | | | (1,231 | ) | | | (337 | ) | | | (4,511 | ) | Net book value | | | 3,917 | | | | 3,063 | | | | 61 | | | | – | | | | – | | | | 477 | | | | 208 | | | | 7,726 | | 2015 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cost | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 1 January 2015 | | | 6,329 | | | | 3,240 | | | | 482 | | | | 186 | | | | 112 | | | | 1,721 | | | | 447 | | | | 12,517 | | Additions and disposals | | | (515 | ) | | | 998 | | | | 75 | | | | – | | | | – | | | | – | | | | 18 | | | | 576 | | Exchange and other movements | | | (211 | ) | | | (126 | ) | | | (15 | ) | | | (40 | ) | | | (26 | ) | | | (56 | ) | | | 6 | | | | (468 | ) | As at 31 December 2015 | | | 5,603 | | | | 4,112 | | | | 542 | | | | 146 | | | | 86 | | | | 1,665 | | | | 471 | | | | 12,625 | | Accumulated amortisation and impairment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As at 1 January 2015 | | | (1,442 | ) | | | (1,257 | ) | | | (194 | ) | | | (88 | ) | | | (111 | ) | | | (962 | ) | | | (283 | ) | | | (4,337 | ) | Disposals | | | 518 | | | | 128 | | | | 2 | | | | – | | | | – | | | | – | | | | 3 | | | | 651 | | Amortisation charge | | | – | | | | (421 | ) | | | (17 | ) | | | (6 | ) | | | – | | | | (143 | ) | | | (30 | ) | | | (617 | ) | Impairment charge | | | (102 | ) | | | (101 | ) | | | (1 | ) | | | (1 | ) | | | – | | | | (12 | ) | | | – | | | | (217 | ) | Exchange and other movements | | | 28 | | | | 17 | | | | (2 | ) | | | 20 | | | | 25 | | | | 36 | | | | (7 | ) | | | 117 | | As at 31 December 2015 | | | (998 | ) | | | (1,634 | ) | | | (212 | ) | | | (75 | ) | | | (86 | ) | | | (1,081 | ) | | | (317 | ) | | | (4,403 | ) | Net book value | | | 4,605 | | | | 2,478 | | | | 330 | | | | 71 | | | | – | | | | 584 | | | | 154 | | | | 8,222 | |
Goodwill Goodwill is allocated to business operations according to business segments as follows: | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| Personal and Corporate Banking | | | 3,472 | | | | 3,471 | | Africa Banking | | | 725 | | | | 915 | | Barclaycard | | | 408 | | | | 427 | | Barclays Non-Core | | | – | | | | 74 | | Total net book value of goodwill | | | 4,605 | | | | 4,887 | |
| | | | | | | | | | |
| 2016 £m | | |
| 2015 £m | | Barclays UK | | | 3,556 | | | | 3,621 | | Barclays International | | | 361 | | | | 258 | | Africa Banking | | | – | | | | 703 | | BarclaysNon-Core | | | – | | | | 23 | | Total net book value of goodwill | | | 3,917 | | | | 4,605 | |
Critical accounting estimates and judgements Goodwill Testing goodwill for impairment involves a significant amount of judgement. This includes the identification of independent CGUs and the allocation of goodwill to these units based on which units are expected to benefit from the acquisition. The allocation is reviewed following business reorganisation.reorganisations. Cash flow projections necessarily take into account changes in the market in which a business operates including the level of growth, competitive activity, and the impacts of regulatory change. Determining both the expectedpre-tax cash flows and the risk adjustedrisk-adjusted interest rate appropriate to the operating unit requires the exercise of judgement. The estimation ofpre-tax cash flows is sensitive to the periods for which detailed forecasts are available and to assumptions regarding long-term sustainable cash flows. Other intangible assets Determining the estimated useful lives of intangible assets (such as those arising from contractual relationships) requires an analysis of circumstances. The assessment of whether an asset is exhibiting indicators of impairment as well as the calculation of impairment, which requires the estimationestimate of future cash flows and fair values less costs to sell, also requires the preparation of cash flow forecasts and fair values for assets that may not be regularly bought and sold. Note a | Includes goodwill and intangibles relating to BAGL of £1.1bn which was reclassified to held for sale. |
| | | 268 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
24 Goodwill and intangible assetscontinued Impairment testing of goodwill During 2015,2016, the Group recognised an impairment charge of nil (2015: £102m). The impairment charge of £102m (2014: nil) primarily attributablerecognised in 2015 related toNon-Core and the withdrawal of the Bespoke product in Barclaycard. This isBarclays International which was as a result of the carryingrecoverable amount of the goodwill relating to these businesses not being supported based on the value in use calculations. Key assumptions The key assumptions used for impairment testing are set out below for each significant goodwill balance. Other goodwill of £881m (2014: £1,031m)£787m (2015: £1,475m) was allocated to multiple CGUs which are not considered individually significant. Personal and Corporate Banking (PCB)Barclays UK
Goodwill relating to Woolwich in Personal Banking and Business Banking was £3,225m (2014: £3,225m)£3,130m (2015: £3,130m) of the total PCBBarclays UK balance. The carrying value of the CGU ishas been determined by using an allocation of total Group shareholder funds excluding goodwill based on the CGU’s share of risk weighted assets before goodwill balances are added back.net asset value. The recoverable amount of the CGU has been determined using cash flow predictions based on financial budgets approved by management and covering a three-yearfive-year period, with a terminal growth rate of 2.4% (2014:2.0% (2015: 2.4%) applied thereafter. The forecast cash flows have been discounted at apre-tax rate of 14.6% (2015: 11.4% (2014: 11.0%). Based on these assumptions, the recoverable amount exceeded the carrying amount including goodwill by £24,811m (2014: £17,260m)£4,130m (2015: £14,097m). A one percentage point change in the discount rate or terminal growth rate would increase or decrease the recoverable amount by £4,860m (2014: £2,888m)£988m (2015: £2,775m) and £3,422m (2014: £2,070m)£615m (2015: £2,109m) respectively. A reduction in the forecast cash flows of 10% per annum would reduce the recoverable amount by £4,835m (2014: £2,697m)£1,293m (2015: £2,789m). Africa
Goodwill relatingThe headroom reflects the changes made to the Absa Retail Bank CGU was £499m (2014: £631m)cash generating unit (CGU) in Barclays UK as part of the total Africa Banking balance.business reorganisation in 2016. The carrying value of the CGU has been determined by using net asset value. The recoverable amount of Absa Retail Bank has been determined usingreduction in headroom in 2016 reflects changes in discount rate and future cash flow predictions based on financial budgets approved by management and covering a three year period, with a terminal growth rate of 6% (2014: 6%) applied thereafter. The forecast cash flows have been discounted at a pre-tax rate of 18.5% (2014: 18.7%). The recoverable amount calculated based on value in use exceeded the carrying amount including goodwill by £2,946m (2014: £1,623m). A one percentage point change in the discount rate or the terminal growth rate would increase or decrease the recoverable amount by £349m (2014: £329m) and £221m (2014: £206m) respectively. A reduction in the forecast cash flows of 10% per annum would reduce the recoverable amount by £469m (2014: £440m).
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 257 |
Notes to the financial statements
Non-current assets and other investments
projections. 25 Operating leases | Accounting for operating leases The Group applies IAS 17Leases, for operating leases. An operating lease is a lease where substantially all of the risks and rewards of the leased assets remain with the lessor. Where the Group is the lessor, lease income is recognised on a straight-line basis over the period of the lease unless another systematic basis is more appropriate. The Group holds the leased assets on-balanceon balance sheet within property, plant and equipment. Where the Group is the lessee, 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. |
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 future minimum lease payments expected to be received undernon-cancellable operating leases was £1m (2014:nil (2015: £1m). Operating lease commitments The Group leases various offices, branches and other premises undernon-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. Operating lease rentals of £500m (2014: £594m)£560m (2015: £411m) have been included in administration and general expenses. The future minimum lease payments by the Group undernon-cancellable operating leases are as follows: | | | | 2015 | | | 2014 | | | | 2016 | | | | 2015 | | | | | Property £m | | | | Equipment £m | | | | Property £m | | | | Equipment £m | | |
| Property £m | | |
| Equipment £m | | |
| Property £m | | |
| Equipment £m | | Not more than one year | | | 376 | | | | 1 | | | | 403 | | | | 41 | | | | 364 | | | | – | | | | 376 | | | | 1 | | Over one year but not more than five years | | | 1,127 | | | | 11 | | | | 1,147 | | | | 106 | | | | 974 | | | 23 | | | | 1,127 | | | | 11 | | Over five years | | | 1,874 | | | | – | | | | 2,036 | | | | – | | | | 1,520 | | | | – | | | | 1,874 | | | | – | | Total | | | 3,377 | | | | 12 | | | | 3,586 | | | | 147 | | | | 2,858 | | | 23 | | | | 3,377 | | | | 12 | |
Total future minimum sublease payments to be received undernon-cancellable subleases were £1m (2014: £99m)was £2m (2015: £1m). | | | 258 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 269 |
Notes to the financial statements Accruals, provisions, contingent liabilities and legal proceedings | The notes included in this section focus on the Group’s accruals, provisions and contingent liabilities. Provisions are recognised for present obligations arising as consequences of past events where it is probable that a transfer of economic benefit will be necessary to settle the obligation, and it can be reliably estimated. Contingent liabilities reflect potential liabilities that are not recognised on the balance sheet. |
The notes included in this section focus on the Group’s accruals, provisions and contingent liabilities. Provisions are recognised for present obligations arising as consequences of past events where it is probable that a transfer of economic benefit will be necessary to settle the obligation, and it can be reliably estimated. Contingent liabilities reflect potential liabilities that are not recognised on the balance sheet.
26 Accruals, deferred income and other liabilities | Accounting for insurance contracts The Group applies IFRS 4Insurance Contractsto its insurance contracts. An insurance contract is a contract that compensates a third party against a loss fromnon-financial risk. Some wealth management and other products, such as life assurance contracts, combine investment and insurance features; these are treated as insurance contracts when they pay benefits that are at least 5% more than they would pay if the insured event does not occur. Insurance liabilities include current best estimates of future contractual cash flows, claims handling, and administration costs in respect of claims. Liability adequacy tests are performed at each balance sheet date to ensure the adequacy of contract liabilities. Where a deficiency is highlighted by the tests, insurance liabilities are increased with any deficiency being recognised in the income statement. Insurance premium revenue is recognised in the income statement in the period earned, net of reinsurance premiums payable, in net premiums from insurance contracts. Increases and decreases in insurance liabilities are recognised in the income statement in net claims and benefits on insurance contracts. |
| | |
| 2015
£m |
| | 2014 £m | |
| 2016
£m |
| |
| 2015
£m |
| Accruals and deferred income | | | 4,271 | | | 4,770 | | | 4,422 | | | | 4,271 | | Other creditors | | | 3,770 | | | 3,851 | | | 4,382 | | | | 3,770 | | Obligations under finance leases (see Note 21) | | | – | | | 36 | | | 15 | | | | – | | Insurance contract liabilities, including unit-linked liabilities | | | 2,569 | | | 2,766 | | | 52 | | | | 2,569 | | Accruals, deferred income and other liabilities | | | 10,610 | | | 11,423 | | | 8,871 | | | | 10,610 | |
Accruals and deferred income decreasedincreased by 10%4% to £4.3bn£4.4bn mainly driven by loweraccruals towards staff costs and administrative and general costs accrued as at 31 December 2015.2016. Insurance liabilities relate principallyLiabilities relating to the Group’s long-term business.business have decreased by £2.5bn primarily driven byNon-Core entities being classified as held for sale. Insurance contract liabilities associated with the Group’s short term non-lifeshort-term business are £115m (2014: £157m)£52m (2015: £115m). The maximum amounts payable under all of the Group’s insurance products, ignoring the probability of insured events occurring and the contribution from investments backing the insurance policies, were £65bn (2014: £82bn)£0.4bn (2015: £65bn) or £49bn (2014: £74bn)£0.2bn (2015: £49bn) after reinsurance. Of this insured risk, £55bn (2014: £69bn) or £43bn (2014: £66bn) after reinsurances was concentratedThe decrease in short-term insurance contractsthe maximum amounts payable is primarily due to BAGL which has been classified as held for sale in Africa.2016. The impact to the income statement and equity under a reasonably possible change in the assumptions used to calculate the insurance liabilities would be £5m (2014: £8m)£2m (2015: £1m). 27 Provisions | Accounting for provisions The Group applies IAS 37Provisions, Contingent Liabilities and Contingent Assetsin accounting fornon-financial liabilities. 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, which can be reliably estimated. Provision is made for the anticipated cost of restructuring, including redundancy costs when an obligation exists. This is the caseexists; for example, when the Group has a detailed formal plan for restructuring a business and has raised valid expectations in those affected by the restructuring by announcing its main features or starting to implement the plan. A provisionProvision is made for undrawn loan commitments if it is probable that the facility will be drawn and resultsresult in the recognition of an asset at an amount less than the amount advanced. |
| | | | | | | Undrawn | | | | | | | | Legal, | | | | | | | | | | | | | | Customer Redress | | | | | | | | | | | | | | contractually | | | | Customer redress | | | | competition | | | | | | |
| Onerous contracts £m | | |
| Redundancy and restructuring £m | | |
| Undrawn contractually committed facilities and guarantees £m | | |
| Payment Protection Insurance £m | | |
| Other customer redress £m | | |
| Legal, competition and regulatory matters
£m |
| |
| Sundry provisions £m | | |
| Total £m | | | |
| Onerous
contracts £m |
| |
| Redundancy
and restructuring £m |
| |
| committed
facilities and guarantees £m |
| | | Payment Protection Insurance £m | | | | Other customer redress £m | | |
| and
regulatory matters £m |
| |
| Sundry
provisions £m |
| |
| Total
£m |
| | As at 1 January 2015 | | | 205 | | | 291 | | | 94 | | | 1,059 | | | | 586 | | | | 1,690 | | | | 210 | | | | 4,135 | | | As at 1 January 2016 | | | | 141 | | | 186 | | | 60 | | | 2,106 | | | | 896 | | | | 489 | | | | 264 | | | | 4,142 | | Additions | | | 120 | | | 190 | | | 25 | | | 2,200 | | | | 821 | | | | 1,559 | | | | 177 | | | | 5,092 | | | | 328 | | | 336 | | | 52 | | | 1,000 | | | | 297 | | | | 212 | | | | 206 | | | | 2,431 | | Amounts utilised | | | (42 | ) | | (136 | ) | | (2 | ) | | (1,171 | ) | | | (440 | ) | | | (2,616 | ) | | | (49 | ) | | | (4,456 | ) | | | (39 | ) | | (274 | ) | | (1 | ) | | (1,127 | ) | | | (396 | ) | | | (254 | ) | | | (84 | ) | | | (2,175 | ) | Unused amounts reversed | | | (149 | ) | | (140 | ) | | (37 | ) | | | – | | | | (32 | ) | | | (136 | ) | | | (86 | ) | | | (580 | ) | | | (53 | ) | | (60 | ) | | (44 | ) | | | – | | | | (93 | ) | | | (27 | ) | | | (36 | ) | | | (313 | ) | Exchange and other movements | | | 7 | | | (19 | ) | | (20 | ) | | 18 | | | | (39 | ) | | | (8 | ) | | | 12 | | | | (49 | ) | | | 8 | | | 18 | | | | – | | | | – | | | | 8 | | | | 35 | | | | (20 | ) | | | 49 | | As at 31 December 2015 | | | 141 | | | 186 | | | 60 | | | 2,106 | | | | 896 | | | | 489 | | | | 264 | | | | 4,142 | | | As at 31 December 2016 | | | | 385 | | | 206 | | | 67 | | | 1,979 | | | | 712 | | | | 455 | | | | 330 | | | | 4,134 | |
Provisions expected to be recovered or settled within no more than 12 months after 31 December 20152016 were £2,113m (2014: £3,464m)£2,045m (2015: £2,113m). | | | 270 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
27 Provisionscontinued Onerous contracts Onerous contract provisions comprise an estimate of the costs involved with fulfilling the terms and conditions of contracts where the liability is higher than the amount of economic benefit to be received. Redundancy and restructuring These provisions comprise the estimated cost of restructuring, including redundancy costs where an obligation exists. Additions made during the year relate to formal restructuring plans and have either been utilised, or reversed, where total costs are now expected to be lower than the original provision amount. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 259 |
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
27 Provisionscontinued
Undrawn contractually committed facilities and guarantees Provisions are made if it is probable that a facility will be drawn and the resulting asset is expected to have a realisable value that is less than the amount advanced. Customer redress Customer redress provisions comprise the estimated cost of making redress payments to customers, clients and counterparties for losses or damages associated with inappropriate judgement in the execution of our business activities. Provisions for other customer redress include £282m (2014: nil) in respect of Packaged Bank Accounts and £290m (2014: nil)£264m (2015: £290m) in respect of historic pricing practices associated with certain Foreign Exchange transactions for certain customers between 2005 and 2012, and smaller provisions across the retail and corporate businesses which are likely to be utilised withinin the next 12 months. Sundry provisions This category includes provisions that do not fit into any of the other categories, such as fraud losses and dilapidation provisions. Legal, competition and regulatory matters The Group is engaged in various legal, proceedings, bothcompetition and regulatory matters in the UK and US and a number of other overseas jurisdictions, including the US.jurisdictions. For further information in relation to legal proceedings and discussion of the associated uncertainties, please see Note 29 Legal, competition and regulatory matters. Critical accounting estimates and judgements Payment Protection Insurance redressRedress As at 31 December 2015,2016, Barclays had recognised cumulative provisions totalling £7.4bn (2014: £5.2bn)£8.44bn (31 December 2015: £7.44bn) against the cost of Payment Protection Insurance (PPI) redress and associated processing costs with utilisation of £5.3bn (2014: £4.2bn)£6.46bn (31 December 2015: £5.33bn), leaving a residual provision of £2.1bn (2014: £1.1bn)£1.98bn (31 December 2015: £2.11bn). Through to 31 December 2015, 1.6m (2014: 1.3m)2016, 1.8m (31 December 2015: 1.6m) customer initiated claimsaclaimsa had been received and processed. The volume of claims received during 20152016 decreased 9%8%b from 2014.2015. This rate of decline however was slower than previously recorded but in line with expectations. The current provision reflects the estimated costs of PPI redress primarily relating to customer initiated complaints and ongoing remediation programmes. This also includes liabilities managed by third parties arising from portfolios previously sold where Barclays remains liable. As at 31 December 2016, the provision of £2.0bn represents Barclays’ best estimate of expected duePPI redress. However, it is possible the eventual outcome may differ from the current estimate. We will continue to steady levelsreview the adequacy of claims from Claims Management Companies (CMC)provision level in particular. During 2015 claims volumes continued to decline, but at a slower rate than had been projected at the startrespect of the year based on historic experience. As a result, management has revised upwards its estimateongoing level of future volumes and recognised additional provisions totalling £2.2bn during the year. The provision estimate reflects an assessment of the proposals contained in a consultation published by the FCA on 26 November 2015 which, if enacted, would impact on the timing and volume of future claims flow. This includes estimating the impact of a proposed 2018 complaint deadline and guidance on the impact of a 2014 UK Supreme Court judgment (Plevin vs Paragon Personal Finance Limited). The potential impact of these proposals is difficult to estimate and the outcome of the consultation is not yet known.complaints.
The PPI provision is calculated using a number of key assumptions which continue to involve significant management judgement and modelling: § | | customer initiated claim volumes – claims received but not yet processed plus an estimate of future claims initiated by customers where the volume is anticipated to decline over time |
§ | | proactive response rate – volume of claims in response to proactive mailing |
§ | | uphold rate – the percentage of claims that are upheld as being valid upon reviewcease after half year 2019 |
§ | | average claim redress – the expected average payment to customers for upheld claims based on the type and age of the policy/policies |
§ | | processing cost per claim – the cost to Barclays of assessing and processing each valid claim. |
These assumptions remain subjective, in particular due to the uncertainty associated with future claims levels, which include complaints driven by CMC activity. The current provision represents Barclays’ revised best estimate of all future expected costs of PPI redress, however, it is possible the eventual outcome may differ from the current estimate. If this were to be material, the provision will be increased or decreased accordingly.redress. The following table details by key assumption, actual data through to 31 December 2015,2016, key forecast assumptions used in the provision calculation and a sensitivity analysis illustrating the impact on the provision if the future expected assumptions prove too high or too low. | | | | | | | | | | | | | | | | | | | | Cumulative | | | | | | | | Sensitivity analysis | | | | Cumulative | | | | | actual to | | | | Future | | | | increase/decrease | | | | actual to | | Assumption | | | 31.12.15 | | | | expected | | | | in provision | | | | 31.12.14 | | Customer initiated claims received and processeda | | | 1,570k | | | | 730kc | | | | 50k = £103m | | | | 1,300k | | Proactive mailing | | | 680k | | | | 150k | | | | 50k = £16m | | | | 680k | | Response rate to proactive mailing | | | 28% | | | | 26% | | | | 1% = £2m | | | | 28% | | Average uphold rate per claimc | | | 86%d | | | | 88% | | | | 1% = £18m | | | | 79% | | Average redress per valid claime | | | £1,808 | | | | £1,810 | | | | £100 = £87m | | | | £1,740 | | Processing cost per claimf | | | £300 | | | | £295 | | | | 50k = £15m | | | | £294 | |
| | | | | | | | | | | | | | | | | Assumption | |
| Cumulative actual to 31.12.16 | | |
| Future expected | | |
| Sensitivity analysis increase/ decrease in provision | | |
| Cumulative actual to 31.12.15 | | Customer initiated claims received and processeda | | | 1,840k | | | | 650k | | | | 50k = £100m | | | | 1,570k | | Average uphold rate per claimc | | | 87% | | | | 83% | | | | 1% = £15m | | | | 86% | | Average redress per valid claimd | | | £2,137 | | | | £1,950 | | | | £100 = £74m | | | | £1,808 | | Processing cost per claime | | | £410 | | | | £350 | | | | 50k = £17m | | | | £300 | |
Notes a | Total claims received directly by Barclays to date, including those received via CMCs but excluding those for which no PPI policy exists and excluding responses to proactive mailing. |
b | Gross volumes received.received including no PPI. |
c | Average uphold rate per claim excludescustomer initiated claims received directly by Barclays and proactive mailings, excluding those for which no PPI policy exists. |
d | Average uphold rate adjusted to include full remediation.redress stated on a per policy basis for future customer initiated complaints received directly by Barclays and proactive mailings. |
e | Change in average uphold rate mainly due to increased remediation in 2015. |
f | Processing cost per claim on an upheld complaints basis, includes direct staff costs and associated overheads. |
| | | 260 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 271 |
Notes to the financial statements Accruals, provisions, contingent liabilities and legal proceedings 28 Contingent liabilities and commitments | Accounting for contingent liabilities | Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future events, and present obligations where the transfer of economic resources is uncertain or cannot be reliably measured. Contingent liabilities are not recognised on the balance sheet but are disclosed unless the outflow of economic resources is remote. |
|
The following table summarises the nominal principal amount of contingent liabilities and commitments which are not classified as on-balancerecorded on balance sheet: | | |
| 2015
£m |
| |
| 2014
£m |
| | | 2016 | | | | 2015 | | Contingent liabilities and commitments excluding BAGL | | | | £m | | | | £m | | Guarantees and letters of credit pledged as collateral security | | | 16,065 | | | | 14,547 | | | | 15,303 | | | | 16,065 | | Performance guarantees, acceptances and endorsements | | | 4,556 | | | | 6,777 | | | | 4,636 | | | | 4,556 | | Contingent liabilities | | | 20,621 | | | | 21,324 | | | | 19,939 | | | | 20,621 | | Documentary credits and other short-term trade related transactions | | | 845 | | | | 1,091 | | | | 1,005 | | | | 845 | | Forward starting reverse repurchase agreementsa | | | 93 | | | | 13,856 | | | Forward starting reverse repurchase agreements | | | | 24 | | | | 93 | | Standby facilities, credit lines and other commitments | | | 281,369 | | | | 276,315 | | | | 302,657 | | | | 281,369 | |
The Financial Services Compensation Scheme The Financial Services Compensation Scheme (the FSCS) is the UKUK’s government-backed compensation scheme for customers of authorised institutions that are unable to pay claims. It provides compensation to depositors in the event that UK licensed deposit-taking institutions are unable to meet their claims. The FSCS raises levies on UK licensed deposit-taking institutions to meet such claims based on their share of UK deposits on 31 December of the specified years preceding the scheme year (which runs from 1 April to 31 March). Compensation has previously been paid out by the FSCS, funded by loan facilities totalling approximately £18bn provided by HM Treasury to the FSCS in support of FSCS’s obligations to the depositors of banks declared in default. The interest rate chargeable on the loan and levied to the industry is subject to a floor equal to the higher of HM Treasury’s own cost of borrowing (typically 2024 UK Gilt yield), and GBP LIBOR with12-month maturity plus a spread.100 basis points. The FSCS recovered £1bn capital shortfall in respect of the legacy facility from industry in three instalments across 2013, 2014 and 2015. A separate shortfall in respect of Dunfermline Building Society was levied on the industry in both 2014, 2015 and 2015.fully recovered in 2016. The FSCS liability for the interest and capital levy for 2015-2016 was2016/17 has been recognised and paid in 2015.2016. Barclays has included an accrual of £56m£55m in other liabilities as at 31 December 2015 (2014: £88m)2016 (2015: £56m) in respect of the Barclays’Barclays portion of the Interest Levy. Capital Levies for 2015/16 were recognised in 2015 and settled in the same year. Further details on contingent liabilities relating to legal, and competition and regulatory matters can be found in Note 29. 29 Legal, competition and regulatory matters Barclays PLC, (BPLC), Barclays Bank PLC (BBPLC) and the Group face legal, competition and regulatory challenges, many of which are beyond our control. The extent of the impact on BPLC, BBPLCBarclays PLC, Barclays Bank PLC and the Group of these matters cannot always be predicted but may materially impact our operations, financial results, condition and prospects. Matters arising from a set of similar circumstances can give rise to either a contingent liability or a provision, or both, depending on the relevant facts and circumstances. The Group has not disclosed an estimate of the potential financial effect on the Group of contingent liabilities where it is not currently practicable to do so. Investigations into certain advisory services agreements and Civil Actioncivil action The United Kingdom (UK) Serious Fraud Office (SFO), the Financial Conduct Authority (FCA) has alleged that BPLC and BBPLC breached their disclosure obligations in connection with two advisory services agreements entered into by BBPLC. The FCA has imposed a £50m fine. BPLC and BBPLC are contesting the findings. The UK Serious Fraud Office (SFO), the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) are also investigating these agreements. Background Information
The FCA has investigatedhave been conducting investigations into certain agreements, including two advisory services agreements entered into by BBPLCBarclays Bank PLC.
Background Information Barclays Bank PLC entered into two advisory services agreements with Qatar Holding LLC (Qatar Holding) in June and October 2008 respectively, and2008. The FCA subsequently commenced an investigation into whether these agreements may have related to BPLC’sBarclays PLC’s capital raisings in June and November 2008. The FCA issued warning notices (Warning Notices) against BPLC and BBPLC in September 2013. 2008 (the Capital Raisings). The existence of the June 2008 advisory services agreement entered into in June 2008 was disclosed, but the entry into the advisory services agreement in October 2008 and the fees payable under both agreements, which amountamounted to a total of £322m payable over a period of five years, were not disclosed in the announcements or public documents relating to the capital raisings in JuneCapital Raisings. In September 2013, the FCA issued warning notices (the Notices) finding that while, Barclays PLC and November 2008. While the Warning Notices consider that BPLC and BBPLCBarclays Bank PLC believed at the time of the execution of the agreements that there should be at least some unspecified and undetermined value to be derived from the agreements, they state thatthem, the primary purpose of the agreements was not to obtain advisory services but to make additional payments, which would not be disclosed, for the Qatari participation in the capital raisings. Capital Raisings. The Warning Notices concludeconcluded that BPLCBarclays PLC and BBPLCBarclays Bank PLC were in breach of certain disclosure-related listing rules and BPLCBarclays PLC was also in breach of Listing Principle 3 (the requirement to act with integrity towards holders and potential holders of the Company’s shares). In this regard, the FCA considers that BPLCBarclays PLC and BBPLCBarclays Bank PLC acted recklessly. The financial penalty provided in the Warning Notices against the Group is £50m. BPLCBarclays PLC and BBPLCBarclays Bank PLC continue to contest the findings. Note
a | Forward starting reserve repurchase agreements were previously disclosed as loan commitments. Following the business designation of reverse repurchase and repurchase agreements at fair value through profit and loss new forward starting reverse repurchase agreements are within the scope of IAS 39 and are recognised as derivatives on the balance sheet. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 261 |
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
29 Legal, competition and regulatory matterscontinued
Recent Developments
The FCASFO has agreed that the FCA enforcement process be stayed pending progress in the SFO’salso been conducting an investigation into the agreements, referred to above, in respect of whichand the Group has received and has continuedcontinues to respond to requests for further information.information in that investigation, which is at an advanced stage. The FCA action has been stayed pending the resolution of the SFO investigation. In addition, the DOJ and the SEC have been conducting investigations relating to the agreements. In January 2016, PCP Capital Partners LLP and PCP International Finance Limited (PCP) served a claim on BBPLCBarclays Bank PLC seeking damages of £721.4m plus interest and costs for fraudulent misrepresentation and deceit, arising from alleged statements made by BBPLCBarclays Bank PLC to PCP in relation to the terms on which securities were to be issued to investors, including PCP, in the November 2008 capital raising. BBPLCBarclays Bank PLC is defending the claim. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period. PCP has made a claim against BBPLCBarclays Bank PLC totalling £721.4m plus interest and costs. This amount does not necessarily reflect BBPLC’sBarclays Bank PLC’s potential financial exposure if a ruling were to be made against it. | | | 272 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
29 Legal, competition and regulatory matterscontinued Investigations into certain business relationships The DOJ and SEC are undertaking an investigation into whether the Group’s relationships with third parties who assist BPLCBarclays PLC to win or retain business are compliant with the US Foreign Corrupt Practices Act. Certain regulators in other jurisdictions have also been briefed on the investigations. Separately, the Group is cooperating with the DOJ and SEC in relation to an investigation into certain of its hiring practices in Asia and elsewhere and is keeping certain regulators in other jurisdictions informed. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period. Alternative Trading Systems and High-Frequency Trading The SEC, the New York State Attorney General (NYAG), the FCA and regulators in certain other jurisdictions have been investigating a range of issues associated with alternative trading systems (ATSs), including dark pools, and the activities of high-frequency traders. Various parties, including the NYAG, have filed complaints against BPLC and Barclays Capital Inc. (BCI) and certain of the Group’s current and former officers in connection with ATS related activities. BPLC and BCI have settled with the NYAG and the SEC, and BCI continues to provide information to other relevant regulatory authorities in response to their enquiries. BPLC and BCI continue to defend against the class actions described below. Background Information Civil complaints have been filed in the New York Federal Court on behalf of a putative class of plaintiffs against BPLC and BCI and others generally alleging that the defendants violated the federal securities laws by participating in a scheme in which high-frequency trading firms were given informational and other advantages so that they could manipulate the US securities market to the plaintiffs’ detriment. These complaints were consolidated (Trader Class Action) and Barclays filed a motion to dismiss this action.
In June 2014, the NYAG filed a complaint (NYAG Complaint) against BPLCBarclays PLC and BCIBarclays Capital Inc. (BCI) in the Supreme Court of the State of New York (NY Supreme Court) alleging, amongst other things, that BPLCBarclays PLC and BCI engaged in fraud and deceptive practices in connection with LX, the Group’sSEC-registered ATS. In February 2016, Barclays reached separate settlement agreements with each of the SEC and the NYAG to resolve those agencies’ claims against Barclays PLC and BCI relating to the operation of LX for $35m each. BPLCBarclays PLC and BCI have also been named in a purported class action by an institutional investor client under California law based on allegations similar to those in the NYAG Complaint. ThisIn October 2016, the federal court in California class action has been consolidated withgranted the Trader Class Action.motion of Barclays PLC and BCI to dismiss the entire complaint and plaintiffs have appealed the court’s decision.
Also, followingFollowing the filing of the NYAG Complaint, BPLCBarclays PLC and BCI were also named in a shareholder securities class action along with certain of its former CEOs, and its current and a former CFO, andas well as an employee in Equities Electronic Trading on the basis(Shareholder Class Action). The plaintiffs claim that investors suffered damages when their investments in Barclays American Depository Receipts declined in value as a result of the allegations in the NYAG Complaint. BPLCBarclays PLC and BCI filed a motion to dismiss the complaint, which the court granted in part and denied in part. In February 2016, the court granted plaintiffs’ motion to conductcertified the litigationaction as a class action.
Recent Developments
In August 2015, the Court granted Barclays’ motion to dismiss the Trader Class Action, and the plaintiffs have chosen not to appeal. Also in August 2015, the Court granted Barclays’ motion to dismiss the California class action, and later transferred that action to the Central District of California. The California class action plaintiffs have filed an amended complaint, which Barclays has filed a motion to dismiss.
On 1 February 2016, Barclays reached separate settlement agreements with each of the SEC and the NYAG to resolve those agencies’ claims against BPLC and BCI relating to the operation of LX for $35m each.appealed that certification.
Claimed Amounts/Financial Impact The remaining complaintsclass actions seek unspecified monetary damages and injunctive relief. It is not currently practicable to provide an estimate of the financial impact of the matters in this sectionactions described on the Group or what effect that these mattersthey might have upon the Group’s operating results, cash flows or the Group’s financial position in any particular period. | | | 262 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
29 Legal, competition and regulatory matterscontinued
FERC The US Federal Energy Regulatory Commission (FERC) has filed a civil action against BBPLCBarclays Bank PLC and certain of its former traders in the US District Court in California seeking to collect on an order assessing a $435m civil penalty and the disgorgement of $34.9m of profits, plus interest, in connection with allegations that BBPLCBarclays Bank PLC manipulated the electricity markets in and around California. The US Attorney’s Office in the Southern District of New York (SDNY) has informed BBPLC that it is looking into the same conduct at issue in the FERC matter, and aA civil class action complaint was also filed in the US District Court for the SDNYSouthern District of New York (SDNY) against BBPLCBarclays Bank PLC asserting antitrust claims based on allegations that mirror those raised in the civil suit filed by FERC. Background Information In October 2012, FERC issued an Order to Show Cause and Notice of Proposed Penalties (Order and Notice) against BBPLCBarclays Bank PLC and four of its former traders in relation to their power trading in the western US. In the Order and Notice, FERC asserted that BBPLCBarclays Bank PLC and its former traders violated FERC’s Anti-Manipulation Rule by manipulating the electricity markets in and around California from November 2006 to December 2008, and proposed civil penalties and profit disgorgement to be paid by BBPLC.Barclays Bank PLC. In October 2013, FERC filed a civil action against BBPLCBarclays Bank PLC and its former traders in the US District Court in California seeking to collect the $435m civil penalty and disgorgement of $34.9m of profits, plus interest. In September 2013, the criminal division of the US Attorney’s Office in SDNY advised BBPLC that it is looking at the same conduct at issue in the FERC matter. In June 2015, a civil class action complaint was filed in the US District Court for the SDNY against BBPLCBarclays Bank PLC by Merced Irrigation District, a California utility company, asserting antitrust allegations in connection with BBPLC’sBarclays Bank PLC’s purported manipulation of the electricity markets in and around California. The factual allegations mirror those raised in the civil suitaction filed by FERC against BBPLCBarclays Bank PLC currently pending in the US District Court in California.
Recent Developments
In October 2015, the US District Court in California ordered that it would bifurcate its assessment of liabilities and penalties from its assessment of disgorgement. FERC has filed and BBPLCBarclays Bank PLC is opposing a brief seeking summary affirmance of the penalty assessment. The court has indicated that it will either affirm the penalty assessment or require further evidence to determine this issue. BBPLC has appealed Oral argument on the bifurcation ordermotion to affirm the US Court of Appeals for the Ninth Circuit and has also filed a motion with the US District Courtpenalty assessment occurred in California to stay the proceedings pending the outcome of the appeal.February 2017.
In December 2015, BBPLCBarclays Bank PLC filed a motion to dismiss the civil class action for failure to state a claim.claim, which the SDNY in February 2016 granted in part and denied in part. Claimed Amounts/Financial Impact FERC has made claims against BBPLC and certain of its former tradersBarclays Bank PLC totalling $469.9m, plus interest, for civil penalties and profit disgorgement. The civil class action complaint refers to damages of $139.3m. These amounts do not necessarily reflect BBPLC’sBarclays Bank PLC’s potential financial exposure if a ruling were to be made against it in either action. Investigations into LIBOR and other Benchmarks Regulators and law enforcement agencies, including certain competition authorities, from a number of governments have been conducting investigations relating to BBPLC’sBarclays Bank PLC’s involvement in manipulating certain financial benchmarks, such as LIBOR and EURIBOR. BBPLC, BPLCBarclays Bank PLC, Barclays PLC and BCI have reached settlements with the relevant law enforcement agency or regulator in certain of the investigations, but others, including the investigations by the US State Attorneys General, the SFO and the prosecutors’ office in Trani, Italy remain pending. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 273 |
Notes to the financial statements Accruals, provisions, contingent liabilities and legal proceedings 29 Legal, competition and regulatory matterscontinued Background Information In June 2012, BBPLCBarclays Bank PLC announced that it had reached settlements with the Financial Services Authority (FSA) (as predecessor to the FCA), the US Commodity Futures Trading Commission (CFTC) and the DOJ Fraud Section(DOJ-FS) in relation to their investigations concerning certain benchmark interest rate submissions, and BBPLCBarclays Bank PLC agreed to pay total penalties of £290m. The settlement with theDOJ-FS was made by entry into aNon-Prosecution Agreement (LIBOR NPA)(NPA) which has now expired. In addition, BBPLCBarclays Bank PLC was granted conditional leniency from the DOJ Antitrust Division(DOJ-AD) in connection with potential US antitrust law violations with respect to financial instruments that reference EURIBOR. The DOJ granted final leniency to Barclays Bank PLC in May 2016. Investigations bySettlements with the US State Attorneys General and the Swiss Competition Commission
Following the settlements announced in June 2012, a group of 31 US State Attorneys General (SAGs) commenced its own investigationinvestigations into LIBOR, EURIBOR and the Tokyo Interbank Offered Rate. The Group has cooperatedIn August 2016, Barclays Bank PLC, BCI and 44 SAGs entered into a settlement agreement resolving the claims of those SAGs (and those of any other SAG who joined the settlement within 60 days) with respect to the matters subject to the investigations. Barclays agreed among other things to make payments totalling $100m to the SAGs in connection with the investigation throughout and issettlement. In December 2016, a settlement in advanced discussionsthe sum of CHF29.8m was reached with the SAGs about potential resolution.Swiss Competition Commission relating to its investigation into EURIBOR-related conduct. Investigation by the SFO In July 2012, the SFO announced that it had decided to investigate the LIBOR matter, in respect of which BBPLCBarclays Bank PLC has received and continues to respond to requests for information. The SFO’s investigation, including in respect of Barclays Bank PLC, continues. For a discussion of civil litigation arising in connection with these investigations see ‘LIBOR and other Benchmarks Civil Actions’. Claimed Amounts/Financial Impact Aside from the settlements discussed above, it is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 263 |
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
29 Legal, competition and regulatory matterscontinued
LIBOR and other Benchmark Civil Actions Following the settlements of the investigations referred to above in ‘Investigations into LIBOR and other Benchmarks’, a number of individuals and corporates in a range of jurisdictions have threatened or brought civil actions against the Group in relation to LIBOR and/or other benchmarks. While several of such cases have been dismissed and certain have settled subject to approval from the court (and in the case of class actions, the right of class members toopt-out of the settlement and to seek to file their own claims), other actions remain pending and their ultimate impact is unclear. Background Information A number of individuals and corporates in a range of jurisdictions have threatened or brought civil actions against the Group and other banks in relation to manipulation of LIBOR and/or other benchmark rates. USD LIBOR Cases in MDL Court The majority of the USD LIBOR cases, which have been filed in various US jurisdictions, have been consolidated forpre-trial purposes before a single judge in the SDNY (MDL Court). The complaints are substantially similar and allege, amongst other things, that BBPLCBarclays Bank PLC and the other banks individually and collectively violated provisions of the US Sherman Antitrust Act (Antitrust Act), the Commodity Exchange Act (CEA), the US Racketeer Influenced and Corrupt Organizations Act (RICO) and various state laws by manipulating USD LIBOR rates. The lawsuits seek unspecified damages with the exception of five lawsuits, in which the plaintiffs are seeking a combined total in excess of $1.25bn in actual damages against all defendants, including BBPLC,Barclays Bank PLC, plus punitive damages. Some of the lawsuits also seek trebling of damages under the US Sherman Antitrust Act and RICO. The proposed class actions purportpurported to be brought on behalf of (amongst others) plaintiffs that (i) engaged in USD LIBOR-linkedover-the-counter transactions (OTC Class); (ii) purchased USD LIBOR-linked financial instruments on an exchange (Exchange-Based Class); (iii) purchased USD LIBOR-linked debt securities (Debt Securities Class); (iv) purchased adjustable rateadjustable-rate mortgages linked to USD LIBOR (Homeowner Class); or (v) issued loans linked to USD LIBOR (Lender Class). In August 2012 the MDL Court stayed all newly filed proposed class actions and individual actions (Stayed Actions), so that the MDL Court could address the motions pending in three lead proposed class actions (Lead Class Actions) and three lead individual actions (Lead Individual Actions). In March 2013, August 2013 and June 2014, the MDL Court issued a series of decisions effectively dismissing the majority of claims against BBPLCBarclays Bank PLC and other panel bank defendants in the Leadthree lead proposed class actions (Lead Class ActionsActions) and Leadthree lead individual actions (Lead Individual Actions.Actions). As a result, the:
§ | | Debt Securities Class was dismissed entirely |
§ | | claims of the Exchange-Based Class were limited to claims under the CEA |
§ | | claims of the OTC Class were limited to claims for unjust enrichment and breach of the implied covenant of good faith and fair dealing. |
The Debt Securities Class has appealed the dismissal of their action to the US Court of Appeals for the Second Circuit (Second Circuit). Multiple other plaintiffs in the litigation beforeIn July 2014, the MDL Court also joined the appeal, which has been briefed and argued. A decision is pending.
Additionally, the MDL Court has begun to address the claims inallowed the Stayed Actions manyto proceed and a number of which, including state law fraudplaintiffs filed amended complaints. The MDL Court subsequently dismissed a number of Lead Individual Action claims and tortious interference claims, were not assertedall Homeowner Class and Lender Class claims. In May 2016, the appeal court reversed the MDL Court’s holding that plaintiffs in the Lead Class Actions. As a result, in October 2014,Actions, including the direct action plaintiffs (those who have brought suits individually rather than as part of a class action) filed their amended complaintsDebt Securities Class, and in November 2014,Lead Individual Actions had not suffered an injury under the defendants filed their motions to dismiss. In August 2015,Antitrust Act, and remanded the antitrust claims for the MDL Court granted in partCourt’s further consideration of those claims and denied in part the motion to dismiss the direct action plaintiffs’ claims. Althoughrelated issues. Following further consideration, the MDL Court dismissed a numberthe majority of antitrust claims on various grounds, a numberagainst foreign defendants, including Barclays Bank PLC, for lack of state law claims will proceedpersonal jurisdiction. Certain plaintiffs have sought leave to discovery.
In November 2014, the plaintiffs in the Lender Class and Homeowner Class actions filed their amended complaints. In January 2015, the defendants filed their motions to dismiss. In November 2015,move the MDL Court granted in partto reconsider its decision, and denied in part the motionscertain defendants, including Barclays Bank PLC, have sought leave to move to dismiss these actions, dismissing all claims against BBPLC brought by the Homeowner Class and reserving judgment with respect to the claims asserted by the Lender Class. In December 2015, the MDL Court approved a schedule for litigation of class certification issues, with the associated discovery beginning in 2016 and extending through 2017.
Until there are further decisions, the ultimate impactcertain of the MDL Court’s decisions will be unclear, although it is possible that the decisions will be interpreted by the courts to affect other litigation, including the actions described further below, some of which concern different benchmark interest rates.remaining antitrust claims.
In December 2014, the MDL Court granted preliminary approval for the settlement of the remaining Exchange-Based Class claims for $20m. Final approval of the settlement is awaiting plaintiff’s submission of a plan for allocation of the settlement proceeds acceptable to the MDL Court.Court and will be subject to the right of class members toopt-out of the settlement and to seek to file their own claims. In November 2015, the outstanding OTC Class claims were settled for $120m. The settlement is subject to approvalwas preliminarily approved by the MDL Court.court in December 2016, but remains subject to final court approval and the right of class members toopt-out of the settlement and to seek to file their own claims. In November 2016, a settlement was agreed with respect to the Debt Securities Class claims. As the plaintiffs have not yet sought court approval of the settlement, the amount (which Barclays does not consider to be material to the Group) has not yet been publicly disclosed. | | | 264274 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
29 Legal, competition and regulatory matterscontinued EURIBOR CasesCase in the SDNY In February 2013, a EURIBOR-related class action was filed against BPLC, BBPLC,Barclays PLC, Barclays Bank PLC, BCI and other EURIBOR panel banks.banks in the SDNY. The plaintiffs assertasserted antitrust, CEA, RICO, and unjust enrichment claims. In particular, BBPLC is allegedclaims relating to have conspired with other EURIBOR panel banks to manipulate EURIBOR. The lawsuit is brought on behalf of purchasers and sellers of NYSE LIFFE EURIBOR futures contracts, purchasers of Euro currency-related futures contracts and purchasers of other derivative contracts (such as interest rate swaps and forward rate agreements that are linked to EURIBOR) during the period 1 June 2005 through 31 March 2011.manipulation. In October 2015, the class action was settled for $94m subject to court approval. The settlement has been preliminarily approved by the court but remains subject to final approval. Securities Fraud Case inapproval and the SDNYright of class members toopt-out
BPLC, BBPLC of the settlement and BCI were also named as defendants along with four former officers and directors of BBPLC in a securities class action in the SDNY in connection with BBPLC’s role as a contributor panel bank to LIBOR. The complaint principally alleged that BBPLC’s Annual Reports for the years 2006seek to 2011 contained misstatements and omissions and that BBPLC’s daily USD LIBOR submissions constituted false statements in violation of US securities law. In November 2015, the class action was settled for $14m. The settlement has been preliminarily approved by the court but remains subject to final approval.file their own claims.
Additional USD LIBOR Case in the SDNY An additional individual action was commenced in February 2013 in the SDNY against BBPLCBarclays Bank PLC and other panel bank defendants. The plaintiff alleged that the panel bank defendants conspired to increase USD LIBOR, which caused the value of bonds pledged as collateral for a loan to decrease, ultimately resulting in the sale of the bonds at a low point in the market. The panel bank defendants moved to dismiss the action, and the motion was granted inIn April 2015. In June 2015, the plaintiff sought leavecourt dismissed the action. The plaintiff’s motion to file a further amended complaint; that motioncomplaint is pending. Sterling LIBOR CasesCase in SDNY In May 2015, a putative class action was commenced in the SDNY against BBPLCBarclays Bank PLC and other Sterling LIBOR panel banks by a plaintiff involved in exchange-traded andover-the-counter derivatives that were linked to Sterling LIBOR. The complaint alleges, among other things, that BBPLCBarclays Bank PLC and other panel banks manipulated the Sterling LIBOR rate between 2005 and 2010 and, in so doing, committed CEA, antitrust,Antitrust Act, and RICO violations. Proceedings are ongoing. In Januaryearly 2016, this class action was consolidated with an additional putative class action concerning Sterling LIBOR was commenced in the SDNYmaking similar allegations against BBPLCBarclays Bank PLC and BCI as well asand other Sterling LIBOR panel banks. This additional class action similarly alleges manipulation of the Sterling LIBOR rate between 2005 and 2010, and asserts claims for violations of the CEA, antitrust, and RICO statutes, as well as common law violations. Proceedings are ongoing.Defendants have filed a motion to dismiss. Complaint in the US District Court for the Central District of California In July 2012, a purportedputative class action complaint in the US District Court for the Central District of California was amended to include allegations related to USD LIBOR and names BBPLCBarclays Bank PLC as a defendant. The amended complaint was filed on behalf of a purportedputative class that includes holders of adjustable rate mortgages linked to USD LIBOR. In January 2015, the court granted BBPLC’sBarclays Bank PLC’s motion for summary judgmentjudgement and dismissed all of the remaining claims against BBPLC.Barclays Bank PLC. The plaintiff has appealed the court’s decision to the US Court of Appeals for the Ninth Circuit.dismissal was affirmed on appeal in December 2016. Japanese Yen LIBOR CaseCases in SDNY A putative class action was commenced in April 2012 in the SDNY against BBPLCBarclays Bank PLC and other Japanese Yen LIBOR panel banks by a plaintiff involved in exchange-traded derivatives. The complaint also names members of the Japanese Bankers Association’s Euroyen Tokyo Interbank Offered Rate (Euroyen TIBOR) panel, of which BBPLCBarclays Bank PLC is not a member. The complaint alleges, amongst other things, manipulation of the Euroyen TIBOR and Yen LIBOR rates and breaches of the CEA and US Sherman Antitrust Act between 2006 and 2010. In March 2014, the court dismissed the plaintiff’s antitrust claims in full, but sustained the plaintiff’s CEA claims. The plaintiff moved for leave to file a third amended complaint adding additional claims, including a RICO claim, which was denied in March 2015. Theare pending. Plaintiff has sought an immediate appeal of that decision,amended the pleadings to extend the putative class period, and that request is pending. Discovery is continuing.defendants have filed a partial motion to dismiss claims arising during the extended period. In July 2015, a second putative class action concerning Yen LIBOR was filed in the SDNY against BPLC, BBPLCBarclays PLC, Barclays Bank PLC and BCI. The complaint names members of the Yen LIBOR panel, the Euroyen TIBOR panel, and certain of their affiliates and brokers. The complaint alleges breaches of the US Sherman Antitrust Act and RICO between 2006 and 2010 based on factual allegations that are substantially similar to those in the April 2012 class action. Defendants have filed a motion to dismiss. SIBOR/SOR Case in the SDNY A putative class action was commenced in July 2016 in the SDNY against Barclays PLC, Barclays Bank PLC, BCI, and other defendants, alleging manipulation of the Singapore Interbank Offered Rate (SIBOR) and Singapore Swap Offer Rate (SOR). The complaint alleges, amongst other things, manipulation of the SIBOR and SOR rates and breaches of the Antitrust Act and RICO between 2007 and 2011. Defendants filed motions to dismiss. Non-US Benchmarks Cases In addition to US actions, legal proceedings have been brought or threatened against the Group in connection with alleged manipulation of LIBOR and EURIBOR in a number of jurisdictions. The number of such proceedings innon-US jurisdictions, the benchmarks to which they relate, and the jurisdictions in which they may be brought have increased over time. Claimed Amounts/Financial Impact Aside from the settlements discussed above, it is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have onupon the Group’s operating results, cash flows or financial position in any particular period. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 265 |
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
29 Legal, competition and regulatory matterscontinued
Foreign Exchange Investigations Various regulatory and enforcement authorities have been investigating a range of issues associated with Foreign Exchange sales and trading, including electronic trading. Certain of these investigations involve multiple market participants in various countries. The Group has reached settlements with the CFTC, the DOJ, the New York State Department of Financial Services (NYDFS), the Board of Governors of the Federal Reserve System (Federal Reserve) and the FCA (together, the 2015 Resolving Authorities) and the Administrative Council for Economic Defence in Brazil with respect to certain of these investigations as further described below. The South African Competition Commission (SACC) has initiated proceedings before the South African Competition Tribunal (Tribunal). Investigations by the European Commission (Commission), the Administrative Council for Economic Defence in Brazil and the South African Competition Commission,DOJ, amongst others, remain pending. Background Information In May 2015, the Group announced that it had reached settlements with the 2015 Resolving Authorities in relation to investigations into certain sales and trading practices in the Foreign Exchange market, that it hadmarket. In connection with these settlements, the Group agreed to pay total penalties of approximately $2.38bn, including a $60m penalty imposed by the DOJ as a consequence ofand to undertake certain practices continuing after entry into the LIBOR NPA, and that BPLC had agreed to plead guilty to a violation of US anti-trust law.remedial actions. Under the plea agreement with the DOJ, BPLC agreedin addition to pay a criminal fine, of $650m andBarclays PLC agreed to a term of probation of three years from the date of the final judgment in respect of the plea agreement during which BPLCBarclays PLC must, amongst other things, (i) commit no crime whatsoever in violation of the federal laws of the United States,US, (ii) implement and continue to implement a compliance program designed to prevent and detect the conduct that gave rise to the plea agreement and (iii) strengthen its compliance and internal controls as required by relevant regulatory or enforcement agencies. In January 2017, the US District Court for the District of Connecticut accepted the plea agreement and in accordance with the agreement sentenced Barclays PLC to pay $650m as a fine and $60m for violating the NPA (which amounts are part of the $2.38bn referred to above) and to serve three years of probation from the date of the sentencing order. The Group also continues to provide relevant information to certain of the 2015 Resolving Authorities. Pursuant
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 275 |
Notes to the settlement with the CFTC, BBPLC consented to, among other things, pay a civil monetary penalty of $400m.financial statements Pursuant to its settlement with the Federal Reserve, BBPLCAccruals, provisions, contingent liabilities and BBPLC’s New York branch consented to an order imposing a civil monetary penalty of $342mlegal proceedings
29 Legal, competition and ordering BBPLC and BBPLC’s New York branch to submit in writing to the Federal Reserve Bank of New York for its approval certain programs to enhance internal controls and compliance. Under the Federal Reserve order, BBPLC and its institution-affiliated parties must not in the future directly or indirectly retain certain individuals who participated in the misconduct underlying the order. Pursuant to the settlement with the NYDFS, BBPLC and BBPLC’s New York branch consented to an order imposing a civil monetary penalty of $485m and requiring BBPLC and BBPLC’s New York branch to take all steps necessary to terminate four identified employees. BBPLC and BBPLC’s New York branch must also continue to engage the independent monitor previously selected by the NYDFS to conduct a comprehensive review of certain compliance programs, policies, and procedures.
The FCA issued a Final Notice and imposed a financial penalty of £284m on BBPLC.regulatory matterscontinued
The full text of the DOJ plea agreement, the orders of the CFTC, NYDFS and Federal Reserve, orders, and the FCA Final Notice issued by the FCA related to the settlements referred to above are publicly available on the 2015 Resolving Authorities’ respective websites. The settlementsIn December 2016 the Group reached a settlement with the Administrative Council for Economic Defence in May 2015 did not encompass ongoing investigations of electronic trading in theBrazil regarding its investigation into certain Foreign Exchange market.trading conduct. The Group is cooperating with certain authorities which continueagreed to investigate sales and trading practicesa penalty of various sales and trading personnel, including Foreign Exchange personnel, among multiple market participants, including BBPLC, in various countries.approximately £4.9m as part of the settlement agreement.
TheAn investigation by the FCA is also investigatinginto historic pricing practices by BBPLCBarclays Bank PLC associated with certain Foreign Exchange transactions forwas discontinued in December 2016. Barclays Bank PLC has initiated a customer remediation program and is keeping the FCA informed on its progress.
The DOJ is also conducting an investigation into conduct relating to certain customers between 2005trading activities in connection with certain transactions during 2011 and 2012. BBPLCBarclays is cooperatingproviding information to the DOJ and other relevant authorities reviewing this conduct. In February 2017 the SACC referred Barclays Bank PLC, BCI and Absa Bank Limited, a subsidiary of Barclays Africa Group Limited, among other banks, to the Tribunal to be prosecuted for breaches of South African antitrust law related to Foreign Exchange trading of South African Rand. The SACC found from its investigation that, from at least 2007, the banks had engaged in various forms of collusive behaviour. Barclays was the first to bring the conduct to the attention of the SACC under its leniency programme and has cooporated with, and will continue to cooperate with, the FCA regardingSACC in relation to this matter. The SACC is therefore not seeking an order from the proposed terms and timing for appropriate customer redress.Tribunal to impose any fine on Barclays Bank PLC, BCI or Absa Bank Limited. For a discussion of civil litigation arising in connection with these investigations see ‘Civil Actions in Respectrespect of Foreign Exchange Trading’Exchange’ below. Recent Developments
In November 2015, BBPLC announced that it had reached a settlement with the NYDFS in respect of its investigation into BBPLC and BBPLC’s New York branch electronic trading of Foreign Exchange and Foreign Exchange trading systems in the period between 2009 to 2014. Pursuant to the settlement the NYDFS imposed a civil monetary penalty of $150m, primarily for certain internal systems and controls failures. The Group continues to cooperate with other ongoing investigations.
Claimed Amounts/Financial Impact The fines in connection withprovision for the May 2015 settlements with the Resolving Authorities were covered by the Group’s provisions of £2.05bn. A provision of £290m in redress costs for certain customers was recognised in Q3 2015 in relationcustomer remediation program relating to the FCA investigation into historic pricing practices by BBPLCBarclays Bank PLC associated with certain Foreign Exchange transactions referred to above. Itabove was £264m as of 31 December 2016 (see Provisions Note 27). Aside from the settlements discussed above it is not currently practicable to provide an estimate of any further financial impact of the actions described on the Group or what effect they might have on the Group’s operating results, cash flows or financial position in any particular period.
| | | 266 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
29 Legal, competition and regulatory matterscontinued
Civil Actions in respect of Foreign Exchange SinceBackground Information
A number of individuals and corporates in a range of jurisdictions have threatened or brought civil actions against the Group and other banks in relation to Foreign Exchange or may do so in future. Certain of these cases have been dismissed or have been settled subject to approval from the relevant court (and in the case of class actions, the right of class members toopt-out of the settlement and to seek to file their own claims). Consolidated FX Action Beginning in November 2013, a number of civil actions have beenwere filed in the SDNY on behalf of proposed classes of plaintiffs alleging manipulation of Foreign Exchange markets under the US Sherman Antitrust Act and New York state law and naming several international banks as defendants, including BBPLC.Barclays Bank PLC. In February 2014, the SDNY combined all then-pending actions alleging a class of US persons in a single consolidated action. Settlements have been agreed with certain proposed classes of plaintiffs inaction (Consolidated FX Action). In September 2015, Barclays Bank PLC and BCI settled the consolidated class actionConsolidated FX Action for $384m. The settlement itself is subject to final court approval. The remaining proceedings are ongoing.approval and the right of class members toopt-out of the settlement and to seek to file their own claims. ERISA FX Action Since February 2015, several additionalother civil actions have been filed in the SDNY on behalf of proposed classes of plaintiffs alleging injuriespurporting to allege different legal theories of injury (other than those alleged in the Consolidated FX Action) related to Barclays’ alleged manipulation of Foreign Exchange rates and naming several international banks as defendants, including BPLC, BBPLCBarclays PLC, Barclays Bank PLC and BCI. One of the newly filed actionssuch consolidated action asserts claims under the US Employee Retirement Income Security Act (ERISA) statute (ERISA Claims) and includes allegations of conduct that are duplicative of allegations in the other cases, as well as additional allegations about Foreign Exchange sales practices and ERISA plans. The Court has ruled that the ERISA allegations concerning collusive manipulation of FX rates are covered by the settlement agreement in the Consolidated FX Action, but has not ruled on whether allegations characterised by the ERISA plaintiffs asnon-collusive manipulation of FX rates are likewise covered by the agreement. In September 2016, the Court dismissed all claims (based on both alleged collusive andnon-collusive conduct) in the ERISA Claims against Barclays and all other defendants as a matter of law. The ERISA plaintiffs have appealed this decision. Retail Basis Action Another action was filed in the Northern District of California (and subsequently transferred to the SDNY) against several international banks, including Barclays PLC and BCI, on behalf of a putative class of individuals that exchanged currencies on a retail basis at bank branches.branches (Retail Basis Claims). The Court has ruled that the Retail Basis Claims are not covered by the settlement agreement in the Consolidated FX Action. Barclays has moved to dismiss the Retail Basis Claims as a matter of law. Recent DevelopmentsLast Look Actions
In September 2015, BBPLC and BCI settled with certain proposed classes of plaintiffs in the consolidated action for $384m subject to court approval.
In addition, in November 2015 and December 2015, two additional civil actions were filed in the SDNY on behalf of proposed classes of plantiffsplaintiffs alleging injuries based on Barclays’ purported improper rejection of customer trades through Barclays’Barclays Last Look system. In February 2016, BBPLCBarclays Bank PLC and BCI agreed a settlement with plaintiffs insettled one of the actions for $50m on a class-wide basis subjectbasis. (The other action was voluntarily dismissed.) Class members have the right to court approval. The amountopt-out of the proposed settlement is $50m. and to seek to file their own claims. ETF FX Action In FebruarySeptember 2016, the plaintiffsanother action was filed in the secondSDNY under federal, New York and California law on behalf of proposed classes of stockholders of Exchange Traded Funds and others who supposedly were indirect investors in FX Instruments. Barclays will move to dismiss this action voluntarily dismissed their claims.as a matter of law or, alternatively, to enjoin the claims as covered by the settlement agreement in the Consolidated FX Action. Canadian FX Action Similar civil actions to the Consolidated FX Action have been filed in Canadian courts on behalf of proposed classes of plaintiffs containing similar factual allegations of manipulation of Foreign Exchange rates as in the US actions and of damages resulting from such manipulation in violation of Canadian law. Claimed Amounts/Financial Impact Aside from the settlements discussed above, the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period is currently uncertain. ISDAFIX Investigation
Regulators and law enforcement agencies, including the CFTC, have conducted separate investigations into historical practices with respect to ISDAFIX, amongst other benchmarks.
| | | 276 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
In May 2015, the CFTC entered into a settlement order with BPLC, BBPLC and BCI pursuant to which BPLC, BBPLC and BCI agreed to pay a civil monetary penalty of $115m in connection with the CFTC’s industry-wide investigation into the setting of the US Dollar ISDAFIX benchmark. In addition, the CFTC order requires BPLC, BBPLC and BCI to cease and desist from violating provisions of the CEA, fully cooperate with the CFTC in related investigations and litigation and undertake certain remediation efforts to the extent not already undertaken.
Investigations by other regulators and law enforcement agencies remain pending. For a discussion of civil litigation arising in connection with these investigations see ‘Civil Actions in Respect of ISDAFIX’ below.
Claimed Amounts/Financial Impact29 Legal, competition and regulatory matterscontinued
The fine in connection with the May 2015 settlement with the CFTC was covered by the Group’s provisions of £2.05bn.
It is not currently practicable to provide an estimate of any further financial impact of the actions described on the Group or what effect they might have on the Group’s operating results, cash flows or financial position in any particular period.
Civil Actions in respect of ISDAFIX SinceBeginning in September 2014, a number of ISDAFIX related civil actions have beenwere filed in the SDNY on behalf of a proposed class of plaintiffs, alleging that BBPLC,Barclays Bank PLC, a number of other banks and one broker, violated the US Sherman Antitrust Act and several state laws by engaging in a conspiracy to manipulate the USD ISDAFIX. AThose actions, which were consolidated amended complaint was filed in February 2015.2015, arose in connection with certain regulatory and law enforcement agencies’ investigations into historical practices with respect to ISDAFIX.
In April 2016, Barclays Bank PLC and BCI entered into a settlement agreement with plaintiffs to resolve the consolidated action for $30m, fully resolving all ISDAFIX-related claims that were or could have been brought by the class. In May 2016, the court preliminarily approved the settlement, which remains subject to final approval and to the right of class members toopt-out of the settlement and to seek to file their own claims. Claimed Amounts/Financial Impact ItAside from the settlements discussed above, it is not currently practicable to provide an estimate of theany further financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period.
Precious Metals Investigation BBPLCBarclays Bank PLC has been providing information to the DOJ, the CFTC and other authorities in connection with investigations into precious metals and precious metals-based financial instruments.
For a discussion of civil litigation arising in connection with these investigations see ‘Civil Actions in Respectrespect of the Gold Fix’ below. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period. Civil Actions in respect of the Gold Fix Since March 2014, a number of civil complaints have been filed in US Federal Courts, each on behalf of a proposed class of plaintiffs, alleging that BBPLCBarclays Bank PLC and other members of The London Gold Market Fixing Ltd. manipulated the prices of gold and gold derivative contracts in violation of the CEA, the US Sherman Antitrust Act, and state antitrust and consumer protection laws. All of the complaints have been transferred to the SDNY and consolidated for pre-trialpretrial purposes. In April 2015, defendants A similar civil action has been filed in Canadian courts on behalf of a motion to dismissproposed class of plaintiffs containing similar factual allegations of the claims. Proceedings are ongoing.manipulation of the prices of gold in violation of Canadian law. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 267 |
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
29 Legal, competition and regulatory matterscontinued
US Residential and Commercial Mortgage-related Activity and Litigation The Group’s activities within the US residential mortgage sector during the period from 2005 through 2008 included: § | | sponsoring and underwriting of approximately $39bn of private-label securitisationssecuritisations; |
§ | | economic underwriting exposure of approximately $34bn for other private-label securitisationssecuritisations; |
§ | | sales of approximately $0.2bn of loans to government sponsored enterprises (GSEs); |
§ | | sales of approximately $3bn of loans to othersothers; and |
§ | | sales of approximately $19.4bn of loans (net of approximately $500m of loans sold during this period and subsequently repurchased) that were originated and sold to third parties by mortgage originator affiliates of an entity that the Group acquired in 2007 (Acquired Subsidiary). |
Throughout this time period affiliates of the Group engaged in secondary market trading of US residential mortgaged-backed securities (RMBS) and US commercial mortgage-backed securities (CMBS), and such trading activity continues today. In connection with its loan sales and certain private-label securitisations, on 31 December 2015,2016, the Group had unresolved repurchase requests relating to loans with a principal balance of approximately $2.3bn$2.2bn at the time they were sold, and civil actions have been commenced by various parties alleging that the Group must repurchase a substantial number of such loans. In addition, the Group is party to a number of lawsuitslawsuit filed by purchasersa purchaser of RMBS asserting statutory and/or common law claims. The current outstanding face amount of RMBS related to these pending claims against the Group as of 31 December 20152016 was approximately $0.4bn.$0.1bn. Regulatory and governmental authorities, including amongst others, the DOJ, SEC, Special Inspector General for the US Troubled Asset Relief Program (SIGTARP), the US Attorney’s Office for the District of Connecticut and the US Attorney’s Office for the Eastern District of New York (EDNY) have initiatedbeen conducting wide-ranging investigations into market practices involving mortgage-backed securities, and the Group is cooperating with severalthose investigations. In December 2016, the DOJ filed a civil complaint against Barclays in the US District Court for the EDNY containing a number of those investigations.allegations, including mail and wire fraud, relating to mortgage-backed securities sold between 2005 and 2007. The complaint seeks, amongst other relief, unspecified monetary penalties. Barclays is defending the complaint. RMBS Repurchase Requests Background Information The Group was the sole provider of various loan-level representations and warranties (R&Ws) with respect to: § | | approximately $5bn of Group sponsored securitisationssecuritisations; |
§ | | approximately $0.2bn of sales of loans to GSEsGSEs; and |
§ | | approximately $3bn of loans sold to others. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 277 |
Notes to the financial statements Accruals, provisions, contingent liabilities and legal proceedings 29 Legal, competition and regulatory matterscontinued In addition, the Acquired Subsidiary provided R&Ws on all of the $19.4bn of loans it sold to third parties. R&Ws on the remaining Group sponsored securitisations were primarily provided by third-party originators directly to the securitisation trusts with a Group subsidiary, such as the depositor for the securitisation, providing more limited R&Ws. There are no stated expiration provisions applicable to most R&Ws made by the Group, the Acquired Subsidiary or these third parties. Under certain circumstances, the Group and/or the Acquired Subsidiary may be required to repurchase the related loans or make other payments related to such loans if the R&Ws are breached. The unresolved repurchase requests received on or before 31 December 20152016 associated with all R&Ws made by the Group or the Acquired Subsidiary on loans sold to GSEs and others and private-label activities had an original unpaid principal balance of approximately $2.3bn$2.2bn at the time of such sale. A substantial number (approximately $2.2bn) of theThe unresolved repurchase requests discussed above relate to civil actions that have been commenced by the trustees for certain RMBS securitisations in which the trustees allege that the Group and/or the Acquired Subsidiary must repurchase loans that violated the operative R&Ws. Such trustees and other parties making repurchase requests have also alleged that the operative R&Ws may have been violated with respect to a greater (but unspecified) amount of loans than the amount of loans previously stated in specific repurchase requests made by such trustees. Cumulative realised losses reported at 31 December 2016 on loans covered by R&Ws made by the Group or the Acquired Subsidiary are approximately $1.3bn. All of the litigation involving repurchase requests remain at early stages.
In addition, the Acquired Subsidiary is subject to a more advanced civil action seeking, among other things, indemnification for losses allegedly suffered by a loan purchaser as a result of alleged breaches of R&Ws provided by the Acquired Subsidiary in connection with loan sales to the purchaser during the period 1997 to 2007. This litigation is ongoing. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period. | | | 268 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
29 Legal, competition and regulatory matterscontinued
RMBS Securities Claims Background Information As a result of some of the RMBS activities described above, the Group ishas been party to a number of lawsuits filed by purchasers of RMBS sponsored and/or underwritten by the Group between 2005 and 2008. As a general matter, these lawsuits allege,alleged, among other things, that the RMBS offering materials allegedly relied on by such purchasers contained materially false and misleading statements and/or omissions and generally demanddemanded rescission and recovery of the consideration paid for the RMBS and recovery of monetary losses arising out of their ownership. Recent Developments
The Group has settledresolved a number of these claims, including in October 2015 a settlement with the National Credit Union Administration to resolve two outstanding civil lawsuits for $325m.and only one action currently remains pending. Claimed Amounts/Financial Impact If the Group were to lose the pending actions the Group believes it could incur a loss of up to the outstanding amountApproximately $0.1bn of the RMBS at the time of judgment, plus any cumulative losses on the RMBS at such time and any interest, fees and costs, less the market value of the RMBS at such time and less any provisions taken to date.
The original face amount of RMBS related to the remaining pending civil actions against the Group total approximately $1.3bn, of which approximately $0.4bnaction was outstanding as at 31 December 2015. Cumulative2016. There were virtually no cumulative realised losses reported on these RMBS as at 31 December 20152016. The Group does not expect that, if it were approximately $0.1bn.
Although the purchasers into lose the remaining securities actions have generally not identified a specific amount of alleged damages, the Group has estimated the total market value of these RMBS as at 31 December 2015pending action, any such loss to be approximately $0.3bn. The Group may be entitled to indemnification for a portion of such losses.material.
Mortgage-related Investigationsactions In addition to the RMBS Repurchase Requests and RMBS Securities Claims, numerous regulatory andNumerous governmental authorities amongst them the DOJ, SEC, Special Inspector General for the US Troubled Asset Relief Program, the US Attorney’s Office for the District of Connecticut and the US Attorney’s Office for the Eastern District of New York have been investigating various aspects of the mortgage-related business, including issuance and underwriting practices in primary offerings of RMBS and trading practices in the secondary market for both RMBS and CMBS.business. The Group continueshas responded to respond to requests from the DOJ relating to the RMBS Working Group of the Financial Fraud Enforcement Task Force (RMBS Working Group), which was formed to investigatepre-financial crisis mortgage-related misconduct. In connection with several of the investigations by members of the RMBS Working Group, a number of financial institutions have entered into settlements involving substantial monetary payments.payments resolving claims related to the underwriting, securitisation and sale of residential mortgage-backed securities. In December 2016, the DOJ filed a civil complaint against Barclays in the US District Court in the EDNY containing a number of allegations, including mail and wire fraud, relating to mortgage-backed securities sold between 2005 and 2007. The complaint seeks, amongst other relief, unspecified monetary penalties. Barclays is defending the complaint.
The Group has also received requests for information and subpoenas from the SEC, the US Attorney’s Office for the District of Connecticut and SIGTARP related to trading practices in the secondary market for both RMBS and CMBS. The investigation by the SEC is at an advanced stage. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period, but theperiod. The cost of resolving these investigationsactions could individually or in aggregate prove to be substantial. American Depositary Shares BPLC, BBPLCBarclays PLC, Barclays Bank PLC and various former members of BPLC’sBarclays PLC’s Board of Directors have been named as defendants in a securities class action consolidated in the SDNY alleging misstatements and omissions in offering documents for certain American Depositary Shares issued by BBPLCBarclays Bank PLC in April 2008 with an original face amount of approximately $2.5 billion (the April 2008 Offering).
Background Information The plaintiffs have asserted claims under the Securities Act of 1933, alleging that the offering documents for the April 2008 Offering contained misstatements and omissions concerning (amongst other things) BBPLC’sBarclays Bank PLC’s portfolio of mortgage-related (including US subprime-related) securities, BBPLC’sBarclays Bank PLC’s exposure to mortgage and credit market risk, and BBPLC’sBarclays Bank PLC’s financial condition. The plaintiffs have not specifically alleged the amount of their damages. In June 2014,2016, the SDNY deniedcertified the defendants’ motion to dismiss the claims. The case is in discovery.action as a class action. Barclays has moved for summary judgement. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the action described on the Group or what effect that it might have upon the Group’s operating results, cash flows or financial position in any particular period. | | | 278 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
29 Legal, competition and regulatory matterscontinued BDC Finance L.L.C. BDC Finance L.L.C. (BDC) filed a complaint against BBPLCBarclays Bank PLC in the NY Supreme Court alleging breach of contract in connection with a portfolio of total return swaps governed by an ISDA Master Agreement (collectively, the Agreement). Parties related to BDC have also sued BBPLCBarclays Bank PLC and BCI in Connecticut State Court in connection with BBPLC’sBarclays Bank PLC’s conduct relating to the Agreement. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 269 |
Notes to the financial statements
Accruals, provisions, contingent liabilities and legal proceedings
29 Legal, competition and regulatory matterscontinued
Background Information In October 2008, BDC filed a complaint in the NY Supreme Court alleging that BBPLCBarclays Bank PLC breached the Agreement when it failed to transfer approximately $40m of alleged excess collateral in response to BDC’s October 2008 demand (Demand). BDC asserts that under the Agreement BBPLCBarclays Bank PLC was not entitled to dispute the Demand before transferring the alleged excess collateral and that even if the Agreement entitled BBPLCBarclays Bank PLC to dispute the Demand before making the transfer, BBPLCBarclays Bank PLC failed to dispute the Demand. BDC demands damages totalling $298m plus attorneys’ fees, expenses, and prejudgementpre-judgement interest. Proceedings are currently pending before the NY Supreme Court.and a trial on liability issues is currently scheduled to occur in 2017. In September 2011, BDC’s investment advisor, BDCM Fund Adviser, L.L.C. and its parent company, Black Diamond Capital Holdings, L.L.C. also sued BBPLCBarclays Bank PLC and BCI in Connecticut State Court for unspecified damages allegedly resulting from BBPLC’sBarclays Bank PLC’s conduct relating to the Agreement, asserting claims for violation of the Connecticut Unfair Trade Practices Act and tortious interference with business and prospective business relations. The parties have agreed to a stay of thatthis case. Claimed Amounts/Financial Impact BDC has made claims against the Group totalling $298m plus attorneys’ fees, expenses, andpre-judgement interest. This amount does not necessarily reflect the Group’s potential financial exposure if a ruling were to be made against it. Civil Actions in respect of the US Anti-Terrorism Act In April 2015, an amended civil complaint was filed in the US Federal Court in the Eastern District of New YorkEDNY by a group of approximately 250 plaintiffs, alleging that BBPLCBarclays Bank PLC and a number of other banks engaged in a conspiracy and violated the US Anti-Terrorism Act (ATA) by facilitating US dollarDollar denominated transactions for the Government of Iran and various Iranian banks, which in turn funded Hezbollah and other attacks that injured or killed the plaintiffs’ family members. Plaintiffs seek to recover for pain, suffering and mental anguish pursuant to the provisions of the ATA, which allows for the tripling of any proven damages. BBPLC hasdamages and attorneys’ fees. Plaintiffs filed a second amended complaint in July 2016, which, among other things, added various plaintiffs, bringing the total number of plaintiffs to approximately 350. In November 2016, defendants’ filed a motion to dismissdismiss. In November 2016, a separate civil complaint was filed in the actionUS Federal Court in the Southern District of Illinois by a group of approximately 90 plaintiffs, alleging claims under the ATA against Barclays Bank PLC and a number of other banks. The allegations against Barclays Bank PLC are substantially similar to those in the second amended complaint in the US Federal Court in the EDNY action. Plaintiffs filed an amended complaint in January 2017, which, is fully briefed.among other things, added various plaintiffs, bringing the total number of plaintiffs to approximately 200. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the matters in this sectionactions described on the Group or what effect that these mattersthey might have upon the Group’s operating results, cash flows or the Group’s financial position in any particular period. Interest Rate Swap US Civil Action In November 2015, an antitrust class action was filed against BPLC, BBPLC,Barclays PLC, Barclays Bank PLC, and BCI, andtogether with other financial institutions in the SDNY by a US retirement and pension fund. The complaint alleges that the defendants that act as market makers for certain types of derivativesinterest rate swaps (IRS), Trade Web, and TradewebICAP, are named as defendants in several antitrust class actions consolidated in the SDNY. The complaints allege defendants conspired to prevent the development of exchanges for interest rate swaps (IRS)IRS and demandsdemand unspecified money damages, treble damages and legal fees. Plaintiffs include certain swap execution facilities, as well asbuy-side investors. The plaintiff claimsbuy-side investors claim to represent a class of buy-side investors that transacted infixed-for-floating IRS with defendants in the US from 1 January 2008 to the present, including, otherfor example, US retirement and pension funds, municipalities, university endowments, municipalities, corporations, insurance companies and insurance companies.investment funds. Defendants filed motion to dismiss.
Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the actionactions described on the Group or what effect it hashave upon the Group’s operating results, cash flows or financial position in any particular period. Treasury Auction Securities Civil Actions Numerous putative class action complaints have been filed in US Federal Courts against BCI and other financial institutions that have served as primary dealers in US Treasury securities. The complaints have been or areconsolidated in the process of being consolidated in theUS Federal Court in New York. The complaints generally allege that defendants conspired to manipulate the US Treasury securities market in violation of US federal antitrust laws, the CEA and state common law. Some complaints also allege that defendants engaged in illegal “spoofing” of the US Treasury market. The Group is considering Certain governmental authorities have been conducting investigations into activities relating to the allegationstrading of government securities in the complaintsvarious markets and is keeping all relevant agencies informed.Barclays has been providing information to various authorities on an ongoing basis. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period. Investigation into Americas Wealth & Investment Management Advisory Business The SEC is investigating the non-performance of certain due diligence on third-party managers by the Manager Research division ofpractices in Barclays’ former Wealth & Investment Management, Americas investment advisory business relating to certain due diligence failures, fee and billing practices and mutual fund fee waivers and related disclosures. Barclays has been cooperating with the Groupinvestigation, which is respondingat an advanced stage. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 279 |
Notes to requests for information.the financial statements Accruals, provisions, contingent liabilities and legal proceedings 29 Legal, competition and regulatory matterscontinued Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the investigationaction described on the Group or what effect that it might have upon the Group’s operating results, cash flows or financial position in any particular period. Retail Structured Products Investigation The Group is cooperating with an enforcement investigation commenced by the FCA in connection with structured deposit products provided to UK customers from June 2008November 2009 to the present. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of these mattersthe action described on the Group or what effect that they mayit might have upon the Group’s operating results, cash flows or the Group’s financial position in any particular period. | | | 270 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
29 Legal, competition and regulatory matterscontinued
Investigation into suspected money laundering related to foreign exchange transactions in South African operation Absa Bank Limited, a subsidiary of Barclays Africa Group Limited, has identified potentially fraudulent activity by certain of its customers using import advance payments for imports in 2014 and 2015 to effect foreign exchange transfers from South Africa to beneficiary accounts located in East Asia, UK, Europe and the US. As a result, the Group ishas been conducting a review of relevant activity, processes, systems and controls. The Group is keeping relevant agencies and regulatorsauthorities informed as to the ongoing status of this matter. Itmatter and is too earlyproviding information to assess reliably the outcome.these authorities as part of its ongoing cooperation.
Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period. Portuguese Competition Authority Investigation The Portuguese Competition Authority is investigating whether competition law was infringed by the exchange of information about retail credit products amongst 15 banks in Portugal, including the Group, over a period of 11 years with particular reference to mortgages, consumer lending and lending to small and medium enterprises. The Group is cooperating with the investigation. Claimed Amounts/Financial Impact It is not currently practicable to provide an estimate of the financial impact of these mattersthe action described or what effect that they mayit might have upon operating results, cash flows or the Group’s financial position in any particular period. Credit Default Swap (CDS) Antitrust Investigations and Civil Actions The Commission and theDOJ-AD commenced investigations into the CDS market in 2011 and 2009, respectively. In December 2015 the Commission announced its decision to close its investigations in respect of BBPLCBarclays Bank PLC and 12 other banks. TheIn July 2016 the Commission continuesannounced its decision to pursue its case in respectaccept legally binding commitments relating to licensing of inputs for CDS exchange trading from each of the remaining entities subject to the investigation, ISDA and Markit Ltd., and close its investigation. TheDOJ-AD has also closed its investigation. A related civil class action in the SDNY involving similar claims against Barclays Bank PLC, other financial institutions, Markit Ltd., and ISDA which could indirectly expose BBPLC to financial loss.was settled for a total of US$1.864bn (including a payment of US $170m from Barclays Bank PLC). The case relates to concerns about actions to delay and prevent the emergence of exchange traded credit derivative products. The DOJ-AD’s investigation is a civil investigation and relates to similar issues.
In September 2015, BBPLC settled a proposed, consolidated class action that had been filedsettlement received final approval in the US alleging similar issues for $178mApril 2016 subject to court approval.the right of class members toopt-out of the settlement and to seek to file their own claims.
Claimed Amounts/Financial Impact Aside from the settlement discussed above, it is not currently practicable to provide an estimate of the financial impact of the actions described on the Group or what effect that they might have upon the Group’s operating results, cash flows or financial position in any particular period. Lehman Brothers
Since September 2009, BCI and BBPLC have been engaged in litigation with various entities that have sought to challenge certain aspects of the transaction pursuant to which BCI, BBPLC and other companies in the Group acquired most of the assets of Lehman Brothers Inc. in September 2008, as well as the court order (Order) approving the sale (Sale). All of the claims challenging the Sale were ultimately resolved in favour of BCI. In May 2015, BCI and BBPLC reached a settlement with the SIPA Trustee for Lehman Brothers Inc. (Trustee) to resolve the remaining outstanding litigation between them relating to the Sale. Pursuant to the settlement, BBPLC has received all of the assets that BBPLC asserted it was entitled to receive with the exception of $80m of assets that the Trustee is entitled to retain and approximately $0.3bn of margin for exchange-traded derivatives still owed to BBPLC but expected to be received from third parties. The settlement was approved by the United States Bankruptcy Court for the SDNY on 29 June 2015, thereby bringing the litigation relating to the Sale to an end.
General The Group is engaged in various other legal, competition and regulatory matters both in the UK and US and a number of other overseas jurisdictions. It is subject to legal proceedings by and against the Group which arise in the ordinary course of business from time to time, including (but not limited to) disputes in relation to contracts, securities, debt collection, consumer credit, fraud, trusts, client assets, competition, data protection, money laundering, financial crime, employment, environmental and other statutory and common law issues. The Group is also subject to enquiries and examinations, requests for information, audits, investigations and legal and other proceedings by regulators, governmental and other public bodies in connection with (but not limited to) consumer protection measures, compliance with legislation and regulation, wholesale trading activity and other areas of banking and business activities in which the Group is or has been engaged. The Group is keeping all relevant agencies briefed as appropriate in relation to these matters and others described in this noteNote on an ongoing basis. At the present time, the Group does not expect the ultimate resolution of any of these other matters to have a material adverse effect on its financial position. However, in light of the uncertainties involved in such matters and the matters specifically described in this note, there can be no assurance that the outcome of a particular matter or matters will not be material to the Group’s operating results of operations or cash flowsflow for a particular period, depending on, amongamongst other things, the amount of the loss resulting from the matter(s) and the amount of income otherwise reported for the reporting period. | | | | | 280 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 271 | | |
Notes to the financial statements Capital instruments, equity and reserves | The notes included in this section focus on the Group’s loan capital and shareholders equity including issued share capital, retained earnings, other equity balances and interests of minority shareholders in our subsidiary entities(non-controlling interests). For more information on capital management and how the Group maintains sufficient capital to meet our regulatory requirements see pages 152 to 158. The notes included in this section focus on the Group’s loan capital and shareholders’ equity including issued share capital, retained earnings, other equity balances and interests of minority shareholders in our subsidiary entities (non-controlling interests). For more information on capital management and how the Group maintains sufficient capital to meet our regulatory requirements see pages 103 to 104.
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30 Subordinated liabilities | Accounting for subordinated debt
Subordinated debt is measured at amortised cost using the effective interest method under IAS 39.
|
Accounting for subordinated debt Subordinated debt is measured at amortised cost using the effective interest method under IAS 39. Subordinated liabilities include accrued interest and comprise undated and dated loan capital as follows: | | | | | | | | | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| Undated subordinated liabilities | | | | | | | 5,248 | | | | 5,640 | | Dated subordinated liabilities | | | | | | | 16,219 | | | | 15,513 | | Total subordinated liabilities | | | | | | | 21,467 | | | | 21,153 | | None of the Group’s loan capital is secured. | | | | | | | | | | | | | Undated subordinated liabilities | | | | | | | | | | | | | | | | | | Subordinated liabilities per balance sheet | | | | | Initial call date | | | | 2015 £m | | | | 2014 £m | | Barclays Bank PLC issued | | | | | | | | | | | | | Tier One Notes (TONs) | | | | | | | | | | | | | 6% Callable Perpetual Core Tier One Notes | | | 2032 | | | | 16 | | | | 16 | | 6.86% Callable Perpetual Core Tier One Notes (USD 569m) | | | 2032 | | | | 626 | | | | 604 | | Reserve Capital Instruments (RCIs) | | | | | | | | | | | | | 5.926% Step-up Callable Perpetual Reserve Capital Instruments (USD 159m) | | | 2016 | | | | 113 | | | | 112 | | 7.434% Step-up Callable Perpetual Reserve Capital Instruments (USD 117m) | | | 2017 | | | | 85 | | | | 85 | | 6.3688% Step-up Callable Perpetual Reserve Capital Instruments | | | 2019 | | | | 38 | | | | 39 | | 14% Step-up Callable Perpetual Reserve Capital Instruments | | | 2019 | | | | 3,062 | | | | 3,065 | | 5.3304% Step-up Callable Perpetual Reserve Capital Instruments | | | 2036 | | | | 51 | | | | 52 | | Undated Notes | | | | | | | | | | | | | 6.875% Undated Subordinated Notes | | | 2015 | | | | – | | | | 140 | | 6.375% Undated Subordinated Notes | | | 2017 | | | | 143 | | | | 146 | | 7.7% Undated Subordinated Notes (USD 99m) | | | 2018 | | | | 69 | | | | 69 | | 8.25% Undated Subordinated Notes | | | 2018 | | | | 149 | | | | 152 | | 7.125% Undated Subordinated Notes | | | 2020 | | | | 195 | | | | 202 | | 6.125% Undated Subordinated Notes | | | 2027 | | | | 245 | | | | 249 | | Junior Undated Floating Rate Notes (USD 109m) | | | Any interest payment date | | | | 74 | | | | 70 | | Undated Floating Rate Primary Capital Notes Series 3 | | | Any interest payment date | | | | 145 | | | | 145 | | Bonds | | | | | | | | | | | | | 9.25% Perpetual Subordinated Bonds (ex-Woolwich PLC) | | | 2021 | | | | 91 | | | | 94 | | 9% Permanent Interest Bearing Capital Bonds | | | At any time | | | | 45 | | | | 46 | | Loans | | | | | | | | | | | | | 5.03% Reverse Dual Currency Undated Subordinated Loan (JPY 8,000m) | | | 2028 | | | | 42 | | | | 39 | | 5% Reverse Dual Currency Undated Subordinated Loan (JPY 12,000m) | | | 2028 | | | | 59 | | | | 54 | | Barclays SLCSM Funding B.V. guaranteed by the Bank | | | | | | | | | | | | | 6.14% Fixed Rate Guaranteed Perpetual Subordinated Notes | | | 2015 | | | | – | | | | 261 | | Total undated subordinated liabilities | | | | | | | 5,248 | | | | 5,640 | |
| | | 272 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
30 Subordinated liabilitiescontinued
| | | | | | | | | | | | | | | | | | |
| 2016
£m |
| |
| 2015
£m |
| Undated subordinated liabilities | | | | | | | 4,495 | | | | 5,248 | | Dated subordinated liabilities | | | | | | | 18,888 | | | | 16,219 | | Total subordinated liabilities | | | | | | | 23,383 | | | | 21,467 | | None of the Group’s loan capital is secured. | | | | | | | | | | | | | Undated subordinated liabilities | | | | | | | | | | | | | | | | | | |
| Subordinated liabilities per balance sheet | | | | | Initial call date | | |
| 2016
£m |
| |
| 2015
£m |
| Barclays Bank PLC issued | | | | | | | | | | | | | Tier One Notes (TONs) | | | | | | | | | | | | | 6% Callable Perpetual Core Tier One Notes | | | 2032 | | | | 17 | | | | 16 | | 6.86% Callable Perpetual Core Tier One Notes (USD 179m) | | | 2032 | | | | 232 | | | | 626 | | Reserve Capital Instruments (RCIs) | | | | | | | | | | | | | 5.926%Step-up Callable Perpetual Reserve Capital Instruments | | | 2016 | | | | – | | | | 113 | | 7.434%Step-up Callable Perpetual Reserve Capital Instruments (USD 117m) | | | 2017 | | | | 100 | | | | 85 | | 6.3688%Step-up Callable Perpetual Reserve Capital Instruments | | | 2019 | | | | 37 | | | | 38 | | 14%Step-up Callable Perpetual Reserve Capital Instruments | | | 2019 | | | | 3,124 | | | | 3,062 | | 5.3304%Step-up Callable Perpetual Reserve Capital Instruments | | | 2036 | | | | 54 | | | | 51 | | Undated Notes | | | | | | | | | | | | | 6.375% Undated Subordinated Notes | | | 2017 | | | | 140 | | | | 143 | | 7.7% Undated Subordinated Notes (USD 99m) | | | 2018 | | | | 84 | | | | 69 | | 8.25% Undated Subordinated Notes | | | 2018 | | | | 148 | | | | 149 | | 7.125% Undated Subordinated Notes | | | 2020 | | | | 193 | | | | 195 | | 6.125% Undated Subordinated Notes | | | 2027 | | | | 45 | | | | 245 | | Junior Undated Floating Rate Notes (USD 38m) | | | Any interest payment date | | | | 31 | | | | 74 | | Undated Floating Rate Primary Capital Notes Series 3 | | | Any interest payment date | | | | 21 | | | | 145 | | Bonds | | | | | | | | | | | | | 9.25% Perpetual Subordinated Bonds(ex-Woolwich Plc) | | | 2021 | | | | 91 | | | | 91 | | 9% Permanent Interest Bearing Capital Bonds | | | At any time | | | | 47 | | | | 45 | | Loans | | | | | | | | | | | | | 5.03% Reverse Dual Currency Undated Subordinated Loan (JPY 8,000m) | | | 2028 | | | | 54 | | | | 42 | | 5% Reverse Dual Currency Undated Subordinated Loan (JPY 12,000m) | | | 2028 | | | | 77 | | | | 59 | | Total undated subordinated liabilities | | | | | | | 4,495 | | | | 5,248 | |
Undated loan capital Undated loan capital is issued by the Bank and its subsidiaries for the development and expansion of the business and to strengthen the capital bases. The principal terms of the undated loan capital are described below.below: Subordination All undated loan capital ranks behind the claims against the bank of depositors and other unsecured unsubordinated creditors and holders of dated loan capital in the following order: Junior Undated Floating Rate Notes; other issues of Undated Notes, Bonds and Loans ranking pari passu with each other; followed by TONs and RCIs ranking pari passu with each other. 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 6.375%, 7.125%, 6.125% Undated Notes and the 9.25% Bonds 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. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 281 |
Notes to the financial statements Capital instruments, equity and reserves 30 Subordinated liabilitiescontinued Payment of interest The Bank is not obliged to make a payment of interest on its Undated Notes, Bonds and Loans excluding the 7.7% Undated Notes, 8.25% Undated Notes and 9.25% Bonds 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 Notes and 8.25% Undated Notes. Until such time as any deferred interest has been paid in full, neither the Bank nor Barclays PLC may declare or pay a dividend, subject to certain exceptions, on any of its ordinary shares, preference shares, or other share capital or satisfy any payments of interest or coupons on certain other junior obligations. The Bank may elect to defer any payment of interest on the RCIs. Any such deferred payment of interest must be paid on the earlier of: (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 the 14% RCIs only, substitution. WhileWhilst 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, innon-compliance with capital adequacy requirements and policies of the PRA. 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 6.375%, 7.125%, 6.125% Undated Notes and the 9.25% Bonds 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 in the event of certain changes in the tax treatment of the notes, either at any time, or on an interest payment date. There are no events of default exceptnon-payment of principal or mandatory interest. Any repayments require the prior approval of the PRA. Other All issues of undated subordinated liabilities arenon-convertible. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 273 |
Notes to the financial statements
Capital instruments, equity and reserves
30 Subordinated liabilitiescontinued
| | | | | | | | | | | | | | | | | Dated subordinated liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | | | Subordinated liabilities | | | | | | | | | | | | | per balance sheet | | | | | Initial | | | | Maturity | | | | 2015 | | | | 2014 | | | | | call date | | | | date | | | | £m | | | | £m | | Barclays PLC issued | | | | | | | | | | | | | | | | | 2.625% Fixed Rate Subordinated Callable Notes (EUR 1,250m) | | | 2020 | | | | 2025 | | | | 918 | | | | – | | 4.375% Fixed Rate Subordinated Notes (USD 1,250m) | | | | | | | 2024 | | | | 883 | | | | 810 | | Barclays Bank PLC issued | | | | | | | | | | | | | | | | | 4.38% Fixed Rate Subordinated Notes (USD 75m) | | | | | | | 2015 | | | | – | | | | 49 | | 4.75% Fixed Rate Subordinated Notes (USD 150m) | | | | | | | 2015 | | | | – | | | | 98 | | 6.05% Fixed Rate Subordinated Notes (USD 1,556m) | | | | | | | 2017 | | | | 1,124 | | | | 1,102 | | Floating Rate Subordinated Notes (EUR 40m) | | | | | | | 2018 | | | | 29 | | | | 31 | | 6% Fixed Rate Subordinated Notes (EUR 1,750m) | | | | | | | 2018 | | | | 1,377 | | | | 1,462 | | CMS-Linked Subordinated Notes (EUR 100m) | | | | | | | 2018 | | | | 77 | | | | 82 | | CMS-Linked Subordinated Notes (EUR 135m) | | | | | | | 2018 | | | | 103 | | | | 109 | | Fixed/Floating Rate Subordinated Callable Notes | | | 2018 | | | | 2023 | | | | 555 | | | | 565 | | 7.75% Contingent Capital Notes (USD 1,000m) | | | 2018 | | | | 2023 | | | | 679 | | | | 640 | | Floating Rate Subordinated Notes (EUR 50m) | | | | | | | 2019 | | | | 36 | | | | 38 | | 5.14% Lower Tier 2 Notes (USD 1,094m) | | | | | | | 2020 | | | | 808 | | | | 767 | | 6% Fixed Rate Subordinated Notes (EUR 1,500m) | | | | | | | 2021 | | | | 1,252 | | | | 1,338 | | 9.5% Subordinated Bonds (ex-Woolwich PLC) | | | | | | | 2021 | | | | 293 | | | | 306 | | Subordinated Floating Rate Notes (EUR 100m) | | | | | | | 2021 | | | | 73 | | | | 77 | | 10% Fixed Rate Subordinated Notes | | | | | | | 2021 | | | | 2,317 | | | | 2,363 | | 10.179% Fixed Rate Subordinated Notes (USD 1,521m) | | | | | | | 2021 | | | | 1,083 | | | | 1,062 | | Subordinated Floating Rate Notes (EUR 50m) | | | | | | | 2022 | | | | 37 | | | | 39 | | 6.625% Fixed Rate Subordinated Notes (EUR 1,000m) | | | | | | | 2022 | | | | 891 | | | | 947 | | 7.625% Contingent Capital Notes (USD 3,000m) | | | | | | | 2022 | | | | 1,984 | | | | 1,856 | | Subordinated Floating Rate Notes (EUR 50m) | | | | | | | 2023 | | | | 37 | | | | 39 | | 5.75% Fixed Rate Subordinated Notes | | | | | | | 2026 | | | | 802 | | | | 828 | | 5.4% Reverse Dual Currency Subordinated Loan (JPY 15,000m) | | | | | | | 2027 | | | | 80 | | | | 74 | | 6.33% Subordinated Notes | | | | | | | 2032 | | | | 60 | | | | 62 | | Subordinated Floating Rate Notes (EUR 100m) | | | | | | | 2040 | | | | 74 | | | | 78 | | Absa Bank Limited issued | | | | | | | | | | | | | | | | | 8.1% Subordinated Callable Notes (ZAR 2,000m) | | | 2015 | | | | 2020 | | | | – | | | | 114 | | 10.28% Subordinated Callable Notes (ZAR 600m) | | | 2017 | | | | 2022 | | | | 26 | | | | 34 | | Subordinated Callable Notes (ZAR 400m) | | | 2017 | | | | 2022 | | | | 18 | | | | 22 | | Subordinated Callable Notes (ZAR 1,805m) | | | 2017 | | | | 2022 | | | | 79 | | | | 101 | | Subordinated Callable Notes (ZAR 2,007m) | | | 2018 | | | | 2023 | | | | 88 | | | | 112 | | 8.295% Subordinated Callable Notes (ZAR 1,188m) | | | 2018 | | | | 2023 | | | | 42 | | | | 64 | | 5.50% CPI-linked Subordinated Callable Notes (ZAR 1,500m) | | | 2023 | | | | 2028 | | | | 86 | | | | 109 | | Barclays Africa Group Limited Issued | | | | | | | | | | | | | | | | | Subordinated Callable Notes (ZAR 370m) | | | 2019 | | | | 2024 | | | | 16 | | | | 21 | | 10.835% Subordinated Callable Notes (ZAR 130m) | | | 2019 | | | | 2024 | | | | 6 | | | | 7 | | Subordinated Callable Notes (ZAR 1,693m) | | | 2020 | | | | 2025 | | | | 74 | | | | – | | 10.05% Subordinated Callable Notes (ZAR 807m) | | | 2020 | | | | 2025 | | | | 36 | | | | – | | 11.4% Subordinated Callable Notes (ZAR 288m) | | | 2020 | | | | 2025 | | | | 13 | | | | – | | 11.365% Subordinated Callable Notes (ZAR 508m) | | | 2020 | | | | 2025 | | | | 23 | | | | – | | Subordinated Callable Notes (ZAR 437m) | | | 2020 | | | | 2025 | | | | 19 | | | | – | | 11.81% Subordinated Callable Notes (ZAR 737m) | | | 2022 | | | | 2027 | | | | 33 | | | | – | | Subordinated Callable Notes (ZAR 30m) | | | 2022 | | | | 2027 | | | | 1 | | | | – | | Other capital issued by Barclays Africa and Japan | | | | | | | 2016–2019 | | | | 87 | | | | 107 | | Total dated subordinated liabilities | | | | | | | | | | | 16,219 | | | | 15,513 | |
| | | 274282 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
30 Subordinated liabilitiescontinued
| | | | | | | | | | | | | | | | | 30 Subordinated liabilitiescontinued | | | | | | | | | | | | | | | | | Dated subordinated liabilities | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Subordinated liabilities per
balance sheet |
| | |
| Initial call date | | |
| Maturity date | | |
| 2016
£m |
| |
| 2015
£m |
| Barclays PLC issued | | | | | | | | | | | | | | | | | 2.625% Fixed Rate Subordinated Callable Notes (EUR 1,250m) | | | 2020 | | | | 2025 | | | | 1,084 | | | | 918 | | 4.375% Fixed Rate Subordinated Notes (USD 1,250m) | | | | | | | 2024 | | | | 1,054 | | | | 883 | | 5.20% Fixed Rate Subordinated Notes (USD 2,050m) | | | | | | | 2026 | | | | 1,590 | | | | – | | Barclays Bank PLC issued | | | | | | | | | | | | | | | | | 6.05% Fixed Rate Subordinated Notes (USD 1,556m) | | | | | | | 2017 | | | | 1,316 | | | | 1,124 | | Floating Rate Subordinated Notes (EUR 40m) | | | | | | | 2018 | | | | 34 | | | | 29 | | 6% Fixed Rate Subordinated Notes (EUR 1,750m) | | | | | | | 2018 | | | | 1,590 | | | | 1,377 | | CMS-Linked Subordinated Notes (EUR 100m) | | | | | | | 2018 | | | | 90 | | | | 77 | | CMS-Linked Subordinated Notes (EUR 135m) | | | | | | | 2018 | | | | 120 | | | | 103 | | Fixed/Floating Rate Subordinated Callable Notes | | | 2018 | | | | 2023 | | | | 548 | | | | 555 | | 7.75% Contingent Capital Notes (USD 1,000m) | | | 2018 | | | | 2023 | | | | 822 | | | | 679 | | Floating Rate Subordinated Notes (EUR 50m) | | | | | | | 2019 | | | | 42 | | | | 36 | | 5.14% Lower Tier 2 Notes (USD 1,094m) | | | | | | | 2020 | | | | 956 | | | | 808 | | 6% Fixed Rate Subordinated Notes (EUR 1,500m) | | | | | | | 2021 | | | | 1,444 | | | | 1,252 | | 9.5% Subordinated Bonds(ex-Woolwich Plc) | | | | | | | 2021 | | | | 286 | | | | 293 | | Subordinated Floating Rate Notes (EUR 100m) | | | | | | | 2021 | | | | 85 | | | | 73 | | 10% Fixed Rate Subordinated Notes | | | | | | | 2021 | | | | 2,345 | | | | 2,317 | | 10.179% Fixed Rate Subordinated Notes (USD 1,521m) | | | | | | | 2021 | | | | 1,285 | | | | 1,083 | | Subordinated Floating Rate Notes (EUR 50m) | | | | | | | 2022 | | | | 43 | | | | 37 | | 6.625% Fixed Rate Subordinated Notes (EUR 1,000m) | | | | | | | 2022 | | | | 1,042 | | | | 891 | | 7.625% Contingent Capital Notes (USD 3,000m) | | | | | | | 2022 | | | | 2,390 | | | | 1,984 | | Subordinated Floating Rate Notes (EUR 50m) | | | | | | | 2023 | | | | 43 | | | | 37 | | 5.75% Fixed Rate Subordinated Notes | | | | | | | 2026 | | | | 384 | | | | 802 | | 5.4% Reverse Dual Currency Subordinated Loan (JPY 15,000m) | | | | | | | 2027 | | | | 103 | | | | 80 | | 6.33% Subordinated Notes | | | | | | | 2032 | | | | 64 | | | | 60 | | Subordinated Floating Rate Notes (EUR 68m) | | | | | | | 2040 | | | | 58 | | | | 74 | | Absa Bank Limited issueda | | | | | | | | | | | | | | | | | 10.28% Subordinated Callable Notes (ZAR 600m) | | | 2017 | | | | 2022 | | | | – | | | | 26 | | Subordinated Callable Notes (ZAR 400m) | | | 2017 | | | | 2022 | | | | – | | | | 18 | | Subordinated Callable Notes (ZAR 1,805m) | | | 2017 | | | | 2022 | | | | – | | | | 79 | | Subordinated Callable Notes (ZAR 2,007m) | | | 2018 | | | | 2023 | | | | – | | | | 88 | | 8.295% Subordinated Callable Notes (ZAR 1,188m) | | | 2018 | | | | 2023 | | | | – | | | | 42 | | 5.50%CPI-linked Subordinated Callable Notes (ZAR 1,500m) | | | 2023 | | | | 2028 | | | | – | | | | 86 | | Barclays Africa Group Limited Issueda | | | | | | | | | | | | | | | | | Subordinated Callable Notes (ZAR 370m) | | | 2019 | | | | 2024 | | | | – | | | | 16 | | 10.835% Subordinated Callable Notes (ZAR 130m) | | | 2019 | | | | 2024 | | | | – | | | | 6 | | Subordinated Callable Notes (ZAR 1,693m) | | | 2020 | | | | 2025 | | | | – | | | | 74 | | 10.05% Subordinated Callable Notes (ZAR 807m) | | | 2020 | | | | 2025 | | | | – | | | | 36 | | 11.4% Subordinated Callable Notes (ZAR 288m) | | | 2020 | | | | 2025 | | | | – | | | | 13 | | 11.365% Subordinated Callable Notes (ZAR 508m) | | | 2020 | | | | 2025 | | | | – | | | | 23 | | Subordinated Callable Notes (ZAR 437m) | | | 2020 | | | | 2025 | | | | – | | | | 19 | | 11.81% Subordinated Callable Notes (ZAR 737m) | | | 2022 | | | | 2027 | | | | – | | | | 33 | | Subordinated Callable Notes (ZAR 30m) | | | 2022 | | | | 2027 | | | | – | | | | 1 | | Other capital issued by Barclays Africaa | | | | | | | 2019 | | | | – | | | | 3 | | Capital issued by other subsidiaries | | | | | | | 2017-2019 | | | | 70 | | | | 84 | | Total dated subordinated liabilities | | | | | | | | | | | 18,888 | | | | 16,219 | |
Dated loan capital Dated loan capital is issued by the Company, the Bank and respective subsidiaries for the development and expansion of their business and to strengthen their respective capital bases. The principal terms of the dated loan capital are described below: Subordination Dated loan capital issued by the Company ranks behind the claims against the Company of unsecured unsubordinated creditors but before the claims of the holders of its equity. All dated loan capital issued by the Bank ranks behind the claims against the Bank of depositors and other unsecured unsubordinated creditors but before the claims of the undated loan capital and the holders of its equity. The dated loan capital issued by other subsidiaries is similarly subordinated. Notes a | Instruments forming part of the BAGL group have been reclassified to Liabilities included in disposal groups classified as held for sale. For more information refer to Note 44 on page 305. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 283 |
Notes to the financial statements Capital instruments, equity and reserves 30 Subordinated liabilitiescontinued Interest Interest on the Floating Rate Notes is fixed periodically in advance, based on the related interbank or local central bank rates. Interest on the 7.75% Contingent Capital Notes and the 2.625% Fixed Rate Subordinated Callable Notes are fixed until the call date. After the respective call dates, in the event that they are not redeemed, the interest rates will be resetre-set and fixed until maturity based on a market rate. Repayment Those Notes with a call date are repayable at the 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 31 December 20152016 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 to certain changes in legislation or regulations. Any repayments prior to maturity require, in the case of the Company and the Bank, the prior approval of the PRA, or in the case of the overseas issues, the approval of the local regulator for that jurisdiction and of the PRA in certain circumstances. There are no committed facilities in existence at the balance sheet date which permit the refinancing of debt beyond the date of maturity. Other The 7.625% Contingent Capital Notes will be automatically transferred from investors to Barclays PLC (or another entity within the Group) for nil consideration in the event the Barclays PLC consolidated CRD IV CET1Common Equity Tier 1 (CET1) ratio (FSA October 2012 transitional statement) falls below 7.0%. The 7.75% Contingent Capital Notes will be automatically written-down and investors will lose their entire investment in the notes in the event the Barclays PLC consolidated CRD IV CET1Common Equity Tier 1 (CET1) ratio (FSA October 2012 transitional statement) falls below 7.0%. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 275 |
Notes to the financial statements
Capital instruments, equity and reserves
31 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 share
capital and share premium £m |
| |
| Other
equity instruments £m |
| As at 1 January 2016 | | | | 16,805 | | | | 4,201 | | | | 17,385 | | | | 21,586 | | | | 5,305 | | Issued to staff under share incentive plans | | | | 116 | | | | 30 | | | | 158 | | | | 188 | | | | – | | Issuances relating to Scrip Dividend Programme | | | | 42 | | | | 10 | | | | 58 | | | | 68 | | | | – | | AT1 securities issuance | | | | – | | | | – | | | | – | | | | – | | | | 1,132 | | Other movements | | | | – | | | | – | | | | – | | | | – | | | | 12 | | As at 31 December 2016 | | | | 16,963 | | | | 4,241 | | | | 17,601 | | | | 21,842 | | | | 6,449 | | | |
| Number of
shares m |
| |
| Ordinary
shares £m |
| |
| Share
premium £m |
| |
| Total share
capital and share premium £m |
| |
| Other
equity instruments £m |
| | As at 1 January 2015 | | | 16,498 | | | | 4,125 | | | | 16,684 | | | | 20,809 | | | | 4,322 | | | | 16,498 | | | | 4,125 | | | | 16,684 | | | | 20,809 | | | | 4,322 | | Issued to staff under share incentive plans | | | 253 | | | | 63 | | | | 577 | | | | 640 | | | | – | | | | 253 | | | | 63 | | | | 577 | | | | 640 | | | | – | | Issuances relating to Scrip Dividend Programme | | | 54 | | | | 13 | | | | 124 | | | | 137 | | | | – | | | | 54 | | | | 13 | | | | 124 | | | | 137 | | | | – | | AT1 securities issuance | | | – | | | | – | | | | – | | | | – | | | | 995 | | | | – | | | | – | | | | – | | | | – | | | | 995 | | Other movements | | | – | | | | – | | | | – | | | | – | | | | (12 | ) | | | – | | | | – | | | | – | | | | – | | | | (12) | | As at 31 December 2015 | | | 16,805 | | | | 4,201 | | | | 17,385 | | | | 21,586 | | | | 5,305 | | | | 16,805 | | | | 4,201 | | | | 17,385 | | | | 21,586 | | | | 5,305 | | | As at 1 January 2014 | | | 16,113 | | | | 4,028 | | | | 15,859 | | | | 19,887 | | | | 2,063 | | | Issued to staff under share incentive plans | | | 320 | | | | 81 | | | | 691 | | | | 772 | | | | – | | | Issuances relating to Scrip Dividend Programme | | | 65 | | | | 16 | | | | 134 | | | | 150 | | | | – | | | AT1 securities issuance | | | – | | | | – | | | | – | | | | – | | | | 2,263 | | | Other movements | | | – | | | | – | | | | – | | | | – | | | | (4 | ) | | As at 31 December 2014 | | | 16,498 | | | | 4,125 | | | | 16,684 | | | | 20,809 | | | | 4,322 | | |
Called up share capital Called up share capital comprises 16,805m (2014: 16,498m)16,963m (2015: 16,805m) ordinary shares of 25p each. The increase was due to the issuance of 253m (2014:320m)116m (2015: 253m) shares under employee share schemes and a further 54m (2014: 65m)42m (2015: 54m) issued as part of the Barclays PLC Scrip Dividend Programme. Share repurchase At the 20152016 AGM on 2328 April 2015,2016, Barclays PLC was authorised to repurchase 1,650mpurchase up to an aggregate of 1,681m of its ordinary shares of 25p. The authorisation is effective until the AGM in 20162017 or the close of business on 30 June 2016,2017, whichever is the earlier. No share repurchases were made during either 20152016 or 2014.2015. Other equity instruments Other equity instruments of £5,305m (2014: £4,322m)£6,449m (2015: £5,305m) include AT1 securities issued by Barclays PLC. In 2016, there was one issuance of Fixed Rate Resetting Perpetual Subordinated Contingent Convertible Securities, with a principal amount of £1.1bn. In 2015, there was one issuance of Fixed Rate Resetting Perpetual Subordinated Contingent Convertible Securities, with a principal amount of £1.0bn. In 2014, there were three issuances of Fixed Rate Resetting Perpetual Subordinated Contingent Convertible Securities, with principal amounts of $1.2bn,€1.1bn and £0.7bn. The AT1 securities are perpetual securities with no fixed maturity and are structured to qualify as AT1 instruments under CRD IV. The principal terms of the AT1 securities are described below: § | | AT1 securities rank behind the claims against Barclays PLC of (i) unsubordinated creditors; (ii) claims which are expressed to be subordinated to the claims of unsubordinated creditors of Barclays PLC but not further or otherwise; or (iii) claims which are, or are expressed to be, junior to the claims of other creditors of Barclays PLC, whether subordinated or unsubordinated, other than claims which rank, or are expressed to rank, pari passu with, or junior to, the claims of holders of the AT1 securitiessecurities. |
§ | | AT1 securities bear a fixed rate of interest until the initial call date. After the initial call date, in the event that they are not redeemed, the AT1 securities will bear interest at rates fixed periodically in advance for five-year periods based on market ratesrates. |
§ | | interestInterest on the AT1 securities will be due and payable only at the sole discretion of Barclays PLC, and Barclays PLC has sole and absolute discretion at all times and for any reason to cancel (in whole or in part) any interest payment that would otherwise be payable on any interest payment datedate. |
| | | 284 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
31 Ordinary shares, share premium, and other equitycontinued § | | AT1 securities are undated and are repayable, at the option of Barclays PLC, in whole at the initial call date, or on any fifth anniversary after the initial call date. In addition, the AT1 securities are repayable, at the option of Barclays PLC, in whole in the event of certain changes in the tax or regulatory treatment of the securities. Any repayments require the prior consent of the PRA. |
All AT1 securities will be converted into ordinary shares of Barclays PLC, at a pre-determinedpre determined price, should the fully loaded CET1 ratio of the Barclays PLC Group fall below 7.0%. | | | 276 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
32 Reserves 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. As at 31 December 2015,2016, there was a debitcredit balance of £3,051m (2015: £623m (2014: £582m debit) in the currency translation reserve. The increase in the debitcredit balance of £3,674m (2015: £41m (2014: £560m decrease to a debit balance)debit) principally reflected the depreciationstrengthening of ZAR and EUR against GBP, offset by the appreciation of USDall major currencies against GBP. The currency translation reserve movement associated withnon-controlling interests was a £801m credit (2015: £435m debit (2014: £74m debit) reflecting the depreciationstrengthening of ZAR against GBP. During the year a £101m net gain (2015: £65m net loss (2014: £91m net gain)loss) from recycling of the currency translation reserve was recognised in the income statement. 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. As at 31 December 20152016 there was a creditdebit balance of £74m (2015: £317m (2014: £562m credit) in the available for sale reserve. The decrease of £391m (2015: £245m (2014: £414m increase) principally reflecteddecrease) was primarily due to a £350m loss£2,192m gain from changes in fair value on government bonds,Government Bonds, predominantly held in the liquidity pool £148mwhich was more than offset by £1,677m of losses from related hedging £378mand £912m of net gains transferred to the income statement, partially offset by a £396mnet profit, mainly due to £615m gain from changes in fair valueon disposal of equity investments inBarclays’ share of Visa Europe and an £86m change in insurance liabilities.Limited. A tax creditcharge of £132m£28m was recognised in the period relating to these items. The tax credit on AFS movements represented an effective rate of tax of 35.0% (2014: 19.9%). This is significantly higher than the UK corporation tax rate of 20.25% (2014: 21.5%) due to AFS movements including the Visa Europe gain that will be offset by existing UK capital losses for which a deferred tax asset has not been recognised. 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. As at 31 December 2015,2016, there was a credit balance of £2,105m (2015: £1,261m (2014: £1,817m credit) in the cash flow hedging reserve. The decreaseincrease of £844m (2015: £556m (2014: £1,544m increase)decrease) principally reflected a £378m decrease£1,595m increase in the fair value of interest rate swaps held for hedging purposes as interest rate forward curves increased and £247mdecreased, partially offset by £450m gains recycled to the income statement in line with when the hedged item affects profit or loss partially offset by aand tax creditcharge of £66m.£326m. The tax creditcharge on cash flow hedging reservehedge movements represented an effective rate of tax of 27.9% (2015: 10.6% (2014: 19.8%). This is significantly lower thantax charge reflects the introduction of the new surcharge of 8%, that applies to bank’s UK profits with effect from January 2016, in addition to the standard UK corporation tax rate of 20.25% (2014: 21.5%) due to the tax rate changes introduced by the UK Summer Budget increasing associated deferred tax liabilities.20%. Other reserves and treasury shares As at 31 December 2015,2016, there was a credit balance of £1,011m (2014: £1,011m£969m (2015: £943m credit) in other reserves relatingand treasury shares. A credit balance of £1,011m (2015: £1,011m credit ) related to the excess repurchase price paid over nominal of redeemed ordinary and preference shares issues by the Group. The treasury shares relate to Barclays PLC shares held in relation to the Group’s various share schemes. These schemes are described in Note 34 Share basedShare-based payments. Treasury shares are deducted from shareholders’ equity within other reserves. A transfer is made to retained earnings in line with the vesting of treasury shares held for the purposes of share basedshare-based payments. As at 31 December 2015,2016, there was a debit balance of £42m (2015: £68m (2014: £84m debit) in other reserves relating to treasury shares. The increasedecrease principally reflected £602m (2014: £909m)£166m (2015: £618m) transferred from treasury shares reflecting the vesting of deferred share-based payments, partially offset by £140m (2015: £602m) net purchases of treasury shares held for the purposes of employee share schemes, partially offset by £618m (2014: £866m) transferred to retained earnings reflecting the vesting of deferred share based payments.schemes. 33Non-controlling interests | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Profit attributable to non-controlling interest | | |
| Equity attributable to non-controlling interest | | |
| Dividends paid to non-controlling interest | | | |
| 2016 £m | | |
| 2015 £m | | |
| 2016 £m | | |
| 2015 £m | | |
| 2016 £m | | |
| 2015 £m | | Barclays Bank PLC issued: | | | | | | | | | | | | | | | | | | | | | | | | | – Preference shares | | | 340 | | | | 343 | | | | 2,698 | | | | 3,654 | | | | 340 | | | | 343 | | – Upper Tier 2 instruments | | | 3 | | | | 2 | | | | 272 | | | | 486 | | | | – | | | | – | | Barclays Africa Group Limited | | | 402 | | | | 324 | | | | 3,507 | | | | 1,902 | | | | 235 | | | | 209 | | Othernon-controlling interests | | | 3 | | | | 3 | | | | 15 | | | | 12 | | | | – | | | | – | | Total | | | 748 | | | | 672 | | | | 6,492 | | | | 6,054 | | | | 575 | | | | 552 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit attributable to non-controlling interest | | | | Equity attributable to non-controlling interest | | | | Dividends paid to non-controlling interest | | | | | 2015 £m | | | | 2014 £m | | | | 2015 £m | | | | 2014 £m | | | | 2015 £m | | | | 2014 £m | | Barclays Bank PLC issued: | | | | | | | | | | | | | | | | | | | | | | | | | – Preference shares | | | 343 | | | | 441 | | | | 3,654 | | | | 3,654 | | | | 343 | | | | 441 | | – Upper Tier 2 instruments | | | 2 | | | | 2 | | | | 486 | | | | 486 | | | | – | | | | – | | Barclays Africa Group Limited | | | 325 | | | | 320 | | | | 1,902 | | | | 2,247 | | | | 209 | | | | 189 | | Other non-controlling interests | | | 2 | | | | 6 | | | | 12 | | | | 4 | | | | – | | | | 1 | | Total | | | 672 | | | | 769 | | | | 6,054 | | | | 6,391 | | | | 552 | | | | 631 | |
Subsidiaries of the Group that give rise to significantnon-controlling interests are Barclays Bank PLC and Barclays Africa Group Limited. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 277 |
Notes to the financial statements
Capital instruments, equity and reserves
33 Non-controlling interestscontinued
Barclays Bank PLC Barclays PLC holds 100% of the voting rights of Barclays Bank PLC. As at 31 December 2015,2016, Barclays Bank PLC has in issue preference shares and Upper Tier 2 instruments, representing 11% (2014:(2015: 11%) of its equity. Preference share dividends and redemption are typically at the discretion of Barclays Bank PLC. The payment of Upper Tier 2 instrument coupons and principal are typically at the discretion of Barclays Bank PLC, except for coupon payments that become compulsory where Barclays PLC has declared or paid a dividend on ordinary shares in the preceding six monthsix-month period. Preference share and Upper Tier 2 instrument holders typically only have rights to redeem in the event of insolvency. | | | | | | | | | Instrument | | | | | | | | | | |
| 2015
£m |
| |
| 2014
£m |
| Preference Shares: | | | | | | | | | 6.00% non cumulative callable preference shares | | | 203 | | | | 203 | | 6.278% non cumulative callable preference shares | | | 318 | | | | 318 | | 4.75% non cumulative callable preference shares | | | 211 | | | | 211 | | 6.625% non cumulative callable preference shares | | | 406 | | | | 406 | | 7.1% non cumulative callable preference shares | | | 657 | | | | 657 | | 7.75% non cumulative callable preference shares | | | 550 | | | | 550 | | 8.125% non cumulative callable preference shares | | | 1,309 | | | | 1,309 | | Total Barclays Bank PLC Preference Shares | | | 3,654 | | | | 3,654 | | Barclays Africa Group Limited | | | 201 | | | | 258 | | Total | | | 3,855 | | | | 3,912 | | | | | Upper Tier 2 Instruments: | | | | | | | | | Undated Floating Rate Primary Capital Notes Series 1 | | | 222 | | | | 222 | | Undated Floating Rate Primary Capital Notes Series 2 | | | 264 | | | | 264 | | Total Upper Tier 2 Instruments | | | 486 | | | | 486 | | Summarised financial information for Barclays Africa Group Limited Summarised financial information for Barclays Africa Group Limited, before intercompany eliminations, is set out below: | | | | | | | | | | |
| Barclays Africa Group Limited
2015 £m |
| |
| Barclays Africa Group Limited
2014 £m |
| Income statement information | | | | | | | | | Total income net of insurance claims | | | 3,418 | | | | 3,530 | | Profit after tax | | | 781 | | | | 765 | | Total other comprehensive income for the year, after tax | | | 26 | | | | (7 | ) | Total comprehensive income for the year | | | 807 | | | | 758 | | | | | Statement of cash flows information | | | | | | | | | Net cash inflows | | | 923 | | | | 43 | | | | | Balance sheet information | | | | | | | | | Total assets | | | 49,471 | | | | 55,378 | | Total liabilities | | | 45,200 | | | | 50,150 | | Shareholder equity | | | 4,271 | | | | 5,228 | |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 285 |
Full
Notes to the financial statements for Barclays Africa Group Limited can be obtained at barclaysafrica.com/barclaysafrica/Investor-Relations. Capital instruments, equity and reserves 33Non-controlling interestscontinued | | | | | | | | | Instrument | |
| 2016
£m |
| |
| 2015
£m |
| Preference Shares: | | | | | | | | | 6.00% non cumulative callable preference shares | | | 203 | | | | 203 | | 6.278% non cumulative callable preference shares | | | 318 | | | | 318 | | 4.75% non cumulative callable preference shares | | | 211 | | | | 211 | | 6.625% non cumulative callable preference shares | | | – | | | | 406 | | 7.1% non cumulative callable preference shares | | | 657 | | | | 657 | | 7.75% non cumulative callable preference shares | | | – | | | | 550 | | 8.125% non cumulative callable preference shares | | | 1,309 | | | | 1,309 | | Total Barclays Bank PLC Preference Shares | | | 2,698 | | | | 3,654 | | Barclays Africa Group Limited | | | 277 | | | | 201 | | Total | | | 2,975 | | | | 3,855 | | | | | Upper Tier 2 Instruments: | | | | | | | | | Undated Floating Rate Primary Capital Notes Series 1 | | | 93 | | | | 222 | | Undated Floating Rate Primary Capital Notes Series 2 | | | 179 | | | | 264 | | Total Upper Tier 2 Instruments | | | 272 | | | | 486 | |
Protective rights ofnon-controlling interests Barclays Africa Group Limited Barclays owns 62.5% (62.3%50.2% (50.1% including treasury shares) of the share capital of Barclays Africa Group Limited. Barclays PLC’s rights to access the assets of Barclays Africa and its group companies are restricted by virtue of the South African Companies Act which requires 75% shareholder approval to dispose of all or the greater part of Barclays Africa Group Limited’s assets or to complete the voluntary winding up of the entity. Barclays Bank PLC Barclays Bank PLC also has in issue preference shares which arenon-controlling interests to the Group. Under the terms of these instruments, Barclays PLC may not pay dividends on ordinary shares until a dividend is next paid on these instruments or the instruments are redeemed or purchased by Barclays Bank PLC. There are no restrictions on Barclays Bank PLC’s ability to remit capital to the Parent as a result of these issued instruments. | | | 278286 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Notes to the financial statements Employee benefits | The notes included in this section focus on the costs and commitments associated with employing our staff. |
The notes included in this section focus on the costs and commitments associated with employing our staff.
34 Share basedShare-based payments | Accounting for share basedshare-based payments The Group applies IFRS 2Share Based Share-Based Payments in accounting for employee remuneration in the form of shares. Employee incentives include awards in the form of shares and share options, as well as offering employees the opportunity to purchase shares on favourable terms. 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 employees provide services, generally the period in which the award is granted or notified and the vesting date of the shares or options. The overall cost of the award is calculated using the number of shares and options expected to vest and the fair value of the shares or options at the date of grant. The number of shares and options expected to vest takes into account the likelihood that performance and service conditions included in the terms of the awards will be met. Failure to meet thenon-vesting condition is treated as a cancellation, resulting in an acceleration of recognition of the cost of the employee services. The fair value of shares is the market price ruling on the grant date, in some cases adjusted to reflect restrictions on transferability. The fair value of options granted is determined using option pricing models to estimate the numbers of shares likely to vest. These 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. Market conditions that must be met in order for the award to vest are also reflected in the fair value of the award, as are any othernon-vesting conditions – such as continuing to make payments into a share based savings scheme. |
The charge for the year arising from share basedshare-based payment schemes was as follows: | | | | Charge for the year | | | | Charge for the year | | | | | 2015 £m | | | | 2014 £m | | | | 2013 £m | | |
| 2016 £m | | |
| 2015 £m | | |
| 2014 £m | | Share Value Plan | | | 442 | | | | 575 | | | | 576 | | | | 473 | | | | 442 | | | | 575 | | Others | | | 100 | | | | 84 | | | | 126 | | | | 192 | | | | 86 | | | | 82 | | Total equity settled | | | 542 | | | | 659 | | | | 702 | | | | 665 | | | | 528 | | | | 657 | | Cash settled | | | 24 | | | | 43 | | | | 25 | | | | 1 | | | | 4 | | | | 5 | | Total share based payments | | | 566 | | | | 702 | | | | 727 | | | | 666 | | | | 532 | | | | 662 | |
The terms of the main current plans are as follows: Share Value Plan (SVP) The SVP was introduced in March 2010 and approved by shareholders (for Executive Director participation and use of new issue shares) at the AGM in April 2011. SVP awards are granted to participants in the form of a conditional right to receive Barclays PLC shares or provisional allocations of Barclays PLC shares which vest or are considered for release 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. The grantor may also make a dividend equivalent payment to participants on release of a SVP award. SVP awards are also made to eligible employees for recruitment purposes. All awards are subject to potential forfeiture in certain leaver scenarios. See also Note 8 for additional detail on share awards granted under SVP. Other schemes In addition to the SVP, the Group operates a number of other schemes including schemes operated by, and settled in, the shares of subsidiary undertakings, none of which areis individually or in aggregate material in relation to the charge for the year or the dilutive effect of outstanding share options. Included within other schemes are Sharesave (both UK and overseas), the Barclays’ Long Term Incentive Plan, the Share Incentive Award and the Executive Share Award Scheme. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 279 |
Notes to the financial statements
Employee benefits
34 Share based paymentscontinued
Share option and award plans The weighted average fair value per award granted and weighted average share price at the date of exercise/release of shares during the year was: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Weighted average fair value per award granted in year | | |
| Weighted average share
price at exercise/release during year |
| | | | | | | | | | |
| 2015
£ |
| |
| 2014
£ |
| |
| 2015
£ |
| |
| 2014
£ |
| SVPa | | | | | | | | | | | 2.54 | | | | 2.33 | | | | 2.53 | | | | 2.31 | | Othersa | | | | | | | | | | | 0.49-2.54 | | | | 0.52-2.39 | | | | 2.37-2.67 | | | | 2.23-2.56 | | SVP 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. Movements in options and awards The movement in the number of options and awards for the major schemes and the weighted average exercise price of options was: | | | | | SVPa,b | | | | Othersa,c | | | | | Number (000s) | | | | Number (000s) | | |
| Weighted average
ex. price (£) |
| | | | 2015 | | | | 2014 | | | | 2015 | | | | 2014 | | | | 2015 | | | | 2014 | | Outstanding at beginning of year/acquisition date | | | 480,042 | | | | 524,260 | | | | 185,599 | | | | 231,989 | | | | 1.61 | | | | 1.55 | | Granted in the year | | | 186,397 | | | | 275,152 | | | | 55,982 | | | | 64,326 | | | | 2.27 | | | | 1.78 | | Exercised/released in the year | | | (252,031 | ) | | | (287,319 | ) | | | (50,538 | ) | | | (71,594 | ) | | | 1.41 | | | | 1.44 | | Less: forfeited in the year | | | (27,938 | ) | | | (32,051 | ) | | | (20,811 | ) | | | (32,784 | ) | | | 1.76 | | | | 1.66 | | Less: expired in the year | | | – | | | | – | | | | (3,257 | ) | | | (6,338 | ) | | | 2.39 | | | | 2.24 | | Outstanding at end of year | | | 386,470 | | | | 480,042 | | | | 166,975 | | | | 185,599 | | | | 1.75 | | | | 1.61 | | Of which exercisable: | | | 30 | | | | 44 | | | | 26,058 | | | | 20,025 | | | | 1.48 | | | | 1.88 | | Certain of the Group’s share option plans enable certain Directors and employees to subscribe for new ordinary shares of Barclays PLC. For accounting for treasury shares see Note 32 Reserves. The weighted average contractual remaining life and number of options and awards outstanding (including those exercisable) at the balance sheet date are as follows: | | | | | | | | | | | | | 2015 | | | | 2014 | | | | | | | | | | | | | Weighted average remaining contractual life in years | | | | Number of options/ awards outstanding (000s) | | | | Weighted average remaining contractual life in years | | | | Number of options/ awards outstanding (000s) | | SVPa,b | | | | | | | | | | | 1 | | | | 386,470 | | | | 1 | | | | 480,042 | | Othersa | | | | | | | | | | | 0-2 | | | | 166,975 | | | | 0-3 | | | | 185,599 | |
| | | | | | | | | | | | | | | | | | |
| Weighted average
fair value per award granted in year |
| |
| Weighted average
share price at exercise/ release during year |
| | |
| 2016
£ |
| |
| 2015
£ |
| |
| 2016
£ |
| |
| 2015
£ |
| SVPa | | | 1.66 | | | | 2.54 | | | | 1.66 | | | | 2.53 | | Othersa | | | 0.61-1.67 | | | | 0.49-2.54 | | | | 1.65-1.88 | | | | 2.37-2.67 | |
SVP 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. Notes a | Options/award granted over Barclays PLC shares. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 287 |
Notes to the financial statements Employee benefits 34 Share based paymentscontinued Movements in options and awards The movement in the number of options and awards for the major schemes and the weighted average exercise price of options was: | | | | | | | | | | | | | | | | | | | | | | | | | | | | SVPa,b | | | | Othersa,c | | | | | Number (000s) | | | | Number (000s) | | |
| Weighted average
ex. price (£) |
| | | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | Outstanding at beginning of year/acquisition date | | | 386,470 | | | | 480,042 | | | | 166,975 | | | | 185,599 | | | | 1.75 | | | | 1.61 | | Granted in the year | | | 229,371 | | | | 186,397 | | | | 154,069 | | | | 55,982 | | | | 1.20 | | | | 2.27 | | Exercised/released in the year | | | (191,623 | ) | | | (252,031 | ) | | | (60,912 | ) | | | (50,538 | ) | | | 1.39 | | | | 1.41 | | Less: forfeited in the year | | | (18,202 | ) | | | (27,938 | ) | | | (47,342 | ) | | | (20,811 | ) | | | 1.95 | | | | 1.76 | | Less: expired in the year | | | – | | | | – | | | | (7,661 | ) | | | (3,257 | ) | | | 1.83 | | | | 2.39 | | Outstanding at end of year | | | 406,016 | | | | 386,470 | | | | 205,129 | | | | 166,975 | | | | 1.38 | | | | 1.75 | | Of which exercisable: | | | | | | | 30 | | | | 24,435 | | | | 26,058 | | | | 1.78 | | | | 1.48 | | Certain of the Group’s share option plans enable certain Directors and employees to subscribe for new ordinary shares of Barclays PLC. For accounting for treasury shares see Note 32 Reserves. The weighted average contractual remaining life and number of options and awards outstanding (including those exercisable) at the balance sheet date are as follows: | | | | | | | | | | | | | 2016 | | | | 2015 | | | | | | | | | | | |
| Weighted average remaining contractual life in years | | |
| Number of options/ awards outstanding (000s | ) | |
| Weighted average remaining contractual life in years | | |
| Number of options/ awards outstanding (000s | ) | SVPa,b | | | | | | | | | | | 1 | | | | 406,016 | | | | 1 | | | | 386,470 | | Othersa | | | | | | | | | | | 0-3 | | | | 205,129 | | | | 0-2 | | | | 166,975 | |
There were no significant modifications to the share based payments arrangements in 20152016 and 2014.2015. As at 31 December 2015,2016, the total liability arising from cash-settled share based payments transactions was £13m (2014: £45m)nil (2015: £13m). Holdings of Barclays PLC shares Various employee benefit trusts established by the Group hold shares in Barclays PLC to meet obligations under the Barclays share based payment schemes. The total number of Barclays shares held in these employee benefit trusts at 31 December 20152016 was 5.16.6 million (2014: 5.2(2015: 5.1 million). Dividend rights have been waived on all these shares. The total market value of the shares held in trust based on the year end share price of £2.19 (2014: £2.43)£2.23 (2015: £2.19) was £11.2m (2014: £12.6m)£14.7m (2015: £11.2m). 35 Pensions and post retirement benefits | Accounting for pensions and post retirement benefits The Group operates a number of pension schemes and post-employment benefit schemes. 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. Defined benefit schemes – the Group recognises its obligations to members of each scheme at the period end, less the fair value of the scheme assets after applying the asset ceiling test. The clarifications contained in the proposed amendments to IFRIC 14 as to when an entity has an unconditional right to benefit from a scheme surplus are not expected to have a material impact on the Group. The Trustee board do not have a substantive right to augment benefits in the UKRF, nor do they have the right to wind up the plan except in the dissolution of the Bank or termination of contributions by the Bank. Each scheme’s obligations are calculated using the projected unit credit method. Scheme assets are stated at fair value as at the period end. Changes in pension scheme liabilities or assets (remeasurements) that do not arise from regular pension cost, net interest on net defined benefit liabilities or assets, past service costs, settlements or contributions to the scheme, are recognised in other comprehensive income. Remeasurements comprise experience adjustments (differences between previous actuarial assumptions and what has actually occurred), the effects of changes in actuarial assumptions, return on scheme assets (excluding amounts included in the interest on the assets) and any changes in the effect of the asset ceiling restriction (excluding amounts included in the interest on the restriction). Post-employment benefit schemes – the cost of providing health care benefits to retired employees is accrued as a liability in the financial statements over the period that the employees provide services to the Group, using a methodology similar to that for defined benefit pension schemes. |
Notes a | Options/awardsaward granted over Barclays PLC shares. |
b | Nil cost award and therefore the weighted average exercise price was nil. |
c | The number of awards within Others at the end of the year principally relates to Sharesave (number of awards exercisable at end of year was 12,479,264)10,584,072). The weighted average exercise price relates to Sharesave. |
| | | 280288 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
35 Pensions and post retirement benefitscontinued Accounting for pensions and post retirement benefits
The Group operates a number of pension schemes (including defined contribution and defined benefit) and post-employment benefit schemes.
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.
Defined benefit schemes – the Group recognises its obligations to members of the scheme at the period end, less the fair value of the scheme assets after applying the asset ceiling test. The clarifications contained in the proposed amendments to IFRIC 14 as to when an entity has an unconditional right to benefit from a scheme surplus are not expected to have a material impact on the Group.
Each scheme’s obligations are calculated using the projected unit credit method on the assumptions set out in the note below. Scheme assets are stated at fair value as at the period end.
Changes in pension scheme liabilities or assets (remeasurements) that do not arise from regular pension cost, net interest on net defined benefit liabilities or assets, past service costs, settlements or contributions to the scheme, are recognised in other comprehensive income.
Remeasurements comprise experience adjustments (differences between previous actuarial assumptions and what has actually occurred), the effects of changes in actuarial assumptions, return on scheme assets (excluding amounts included in the interest on the assets) and any changes in the effect of the asset ceiling restriction (excluding amounts included in the interest on the restriction).
Post-employment benefits – the cost of providing health care benefits to retired employees is accrued as a liability in the financial statements over the period that the employees provide services to the Group, using a methodology similar to that for defined benefit pension schemes.
Pension schemes UK Retirement Fund (UKRF) The UKRF is the Group’s main scheme, representing 92%96% of the Group’s total retirement benefit obligations. The UKRF was closed to new entrants on 1 October 2012, and comprises 10 sections, the two most significant of which are: § | | Afterwork, which comprises a contributory cash balance defined benefit element, and a voluntary defined contribution element. The cash balance element is accrued each year and revalued until Normal Retirement Age in line with the increase in Retail Price Index (RPI) (up to a maximum of 5% p.a.). An investment related increase of up to 2% a year may also be added at Barclays’ discretion. Between 1 October 2003 and 1 October 2012 the majority of new employees outside of the Investment Bankinvestment banking business within Barclays International were eligible to join this section. The costs ofill-health retirements and death in service benefits for Afterwork members are borne by the UKRF. The main risks that Barclays runs in relation to Afterwork are limited to needing to makealthough additional contributions are required ifpre-retirement investment returns are not sufficient to provide for the benefits. |
§ | | theThe 1964 Pension Scheme. Most employees recruited before July 1997 built up benefits in thisnon-contributory defined benefit scheme in respect of service up to 31 March 2010. Pensions were calculated by reference to service and pensionable salary. From 1 April 2010, members became eligible to accrue future service benefits in either Afterwork or the Pension Investment Plan (PIP), a historic defined contribution section which is now closed to future contributions. The risks that Barclays runs in relation to the 1964 section are typical of final salary pension schemes, principally that investment returns fall short of expectations, that inflation exceeds expectations, and that retirees live longer than expected. |
Barclays Pension Savings Plan (BPSP) § | | From 1 October 2012, a new UK pension scheme, the BPSP, was established to satisfy Auto Enrolment legislation. The BPSP is a defined contribution scheme (Group Personal Pension) providing benefits for all new Barclays UK hires from 1 October 2012, Investment Bank UKinvestment banking business within Barclays International employees who were in PIP as at 1 October 2012, and also all UK employees who were not members of a pension scheme at that date. As a defined contribution scheme, BPSP is not subject to the same investment return, inflation or longevitylife expectancy risks for Barclays that defined benefit schemes are. Members’ benefits reflect contributions paid and the level of investment returns achieved. |
Apart from the UKRF and the BPSP, Barclays operates a number of smaller pension and long-term employee benefits and post-retirement health care plans globally, the largest of which are the US and South African defined benefit schemes. Many of the schemes are funded, with assets backing the obligations held in separate legal vehicles such as trusts. Others are operated on an unfunded basis. The benefits provided, the approach to funding, and the legal basis of the schemes, reflect their local environments. 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, a private limited company 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 selected from eligible active staff and pensioner members who apply for the role. The BPSP is a Group Personal Pension arrangement which operates as a collection of personal pension plans. Each personal pension plan is a direct contract between the employee and the BPSP provider (Legal & General Assurance Society Limited), and is regulated by the FCA. Similar principles of pension governance apply to the Group’s other pension schemes, although different legislation covers overseas schemes where, in most cases,depending on local legislation. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 289 |
Notes to the Group has the power to determine the funding rate.financial statements Employee benefits 35 Pensions and post retirement benefitscontinued Amounts recognised The following tables include amounts recognised in the income statement and an analysis of benefit obligations and scheme assets for all Group defined benefit schemes. The net position is reconciled to the assets and liabilities recognised on the balance sheet. The tables include funded and unfunded post-retirement benefits. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 281 |
Notes to the financial statements
Employee benefits
35 Pensions and post retirement benefitscontinued
| | | | | | | | | | | | | Income statement charge | | | | | | | | | | | | | | | | 2015 | | | | 2014 | | | | 2013 | | | | | £m | | | | £m | | | | £m | | Current service cost | | | 303 | | | | 324 | | | | 371 | | Net finance cost | | | 42 | | | | 78 | | | | 55 | | Past service cost | | | (434 | ) | | | (5 | ) | | | 4 | | Settlements | | | 1 | | | | (15 | ) | | | (3 | ) | Total | | | (88 | ) | | | 382 | | | | 427 | |
Past Service costs includes a £429m (2014: nil; 2013: nil) gain on valuation of a component of the defined retirement benefit liability.
| Balance sheet reconciliation | | | 2015 | | | 2014 | | | Income statement chargea | | | | | | | | | | | | | | | | 2016 | | | | 2015 | | | | 2014 | | | | | | | | £m | | | | £m | | | | £m | | Current service cost | | | | | | 243 | | | | 255 | | | | 279 | | Net finance cost | | | | | | (32 | ) | | | 41 | | | | 69 | | Past service cost | | | | | | – | | | | (432 | ) | | | (1 | ) | Other movements | | | | | | 2 | | | | 1 | | | | (15 | ) | Total | | | | | | 213 | | | | (135 | ) | | | 332 | | Past service costs includes a nil (2015: £429m; 2014: nil) gain on valuation of a component of the defined retirement benefit liability. | | Past service costs includes a nil (2015: £429m; 2014: nil) gain on valuation of a component of the defined retirement benefit liability. | | Balance sheet reconciliationa | | | | 2016 | | | | 2015 | | | | | | | Of which | | | | | | Of which | | | | | | Of which | | | | | | Of which | | | | | | | relates to | | | | | | relates to | | | | | | relates to | | | | | | relates to | | | | | Total | | | | UKRF | | | | Total | | | | UKRF | | | | Total | | | | UKRF | | | | Total | | | | UKRF | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | Benefit obligation at beginning of the year | | | (30,392 | ) | | | (27,931 | ) | | | (27,568 | ) | | | (25,093 | ) | | | (28,279 | ) | | | (26,027 | ) | | | (30,392 | ) | | | (27,931 | ) | Current service cost | | | (303 | ) | | | (234 | ) | | | (324 | ) | | | (258 | ) | | | (243 | ) | | | (220 | ) | | | (303 | ) | | | (234 | ) | Interest costs on scheme liabilities | | | (1,147 | ) | | | (1,010 | ) | | | (1,261 | ) | | | (1,101 | ) | | | (1,016 | ) | | | (980 | ) | | | (1,147 | ) | | | (1,010 | ) | Past service cost | | | 434 | | | | 429 | | | | 5 | | | | 2 | | | | – | | | | – | | | | 434 | | | | 429 | | Settlements | | | – | | | | – | | | | 83 | | | | – | | | Remeasurement gain/(loss) – financial | | | 1,161 | | | | 1,121 | | | | (2,493 | ) | | | (2,382 | ) | | Remeasurement loss – demographic | | | (159 | ) | | | (160 | ) | | | (370 | ) | | | (340 | ) | | Remeasurement (loss)/gain – financial | | | | (7,214 | ) | | | (7,170 | ) | | | 1,161 | | | | 1,121 | | Remeasurement gain/(loss) – demographic | | | | 413 | | | | 390 | | | | (159 | ) | | | (160 | ) | Remeasurement gain – experience | | | 609 | | | | 611 | | | | 407 | | | | 418 | | | | 525 | | | | 490 | | | | 609 | | | | 611 | | Employee contributions | | | (36 | ) | | | (2 | ) | | | (35 | ) | | | (2 | ) | | | (4 | ) | | | (1 | ) | | | (36 | ) | | | (2 | ) | Benefits paid | | | 1,172 | | | | 1,021 | | | | 999 | | | | 825 | | | | 1,852 | | | | 1,800 | | | | 1,172 | | | | 1,021 | | Exchange and other movements | | | 382 | | | | 128 | | | | 165 | | | | – | | | | 933 | | | | (129 | ) | | | 382 | | | | 128 | | Benefit obligation at end of the year | | | (28,279 | ) | | | (26,027 | ) | | | (30,392 | ) | | | (27,931 | ) | | | (33,033 | ) | | | (31,847 | ) | | | (28,279 | ) | | | (26,027 | ) | Fair value of scheme assets at beginning of the year | | | 28,874 | | | | 26,827 | | | | 25,743 | | | | 23,661 | | | | 28,752 | | | | 26,829 | | | | 28,874 | | | | 26,827 | | Interest income on scheme assets | | | 1,105 | | | | 979 | | | | 1,183 | | | | 1,042 | | | | 1,048 | | | | 1,023 | | | | 1,105 | | | | 979 | | Employer contribution | | | 689 | | | | 586 | | | | 347 | | | | 241 | | | | 720 | | | | 634 | | | | 689 | | | | 586 | | Settlements | | | – | | | | – | | | | (68 | ) | | | – | | | Remeasurement – return on scheme assets greater than discount rate | | | (476 | ) | | | (446 | ) | | | 2,736 | | | | 2,705 | | | Remeasurement – return on scheme assets greater/(less) than discount rate | | | | 5,009 | | | | 5,002 | | | | (476 | ) | | | (446 | ) | Employee contributions | | | 36 | | | | 2 | | | | 35 | | | | 2 | | | | 4 | | | | 1 | | | | 36 | | | | 2 | | Benefits paid | | | (1,172 | ) | | | (1,021 | ) | | | (999 | ) | | | (825 | ) | | | (1,852 | ) | | | (1,800 | ) | | | (1,172 | ) | | | (1,021 | ) | Exchange and other movements | | | (304 | ) | | | (98 | ) | | | (103 | ) | | | 1 | | | | (1,024 | ) | | | 131 | | | | (304 | ) | | | (98 | ) | Fair value of scheme assets at the end of the year | | | 28,752 | | | | 26,829 | | | | 28,874 | | | | 26,827 | | | | 32,657 | | | | 31,820 | | | | 28,752 | | | | 26,829 | | Net surplus/(deficit) | | | 473 | | | | 802 | | | | (1,518 | ) | | | (1,104 | ) | | Net (deficit)/surplus | | | | (376 | ) | | | (27 | ) | | | 473 | | | | 802 | | Irrecoverable surplus (effect of asset ceiling) | | | (60 | ) | | | – | | | | – | | | | – | | | | – | | | | – | | | | (60 | ) | | | – | | Net recognised assets/(liabilities) | | | 413 | | | | 802 | | | | (1,518 | ) | | | (1,104 | ) | | Net recognised (liabilities)/assets | | | | (376 | ) | | | (27 | ) | | | 413 | | | | 802 | | Retirement benefit assets | | | 836 | | | | 802 | | | | 56 | | | | – | | | | 14 | | | | – | | | | 836 | | | | 802 | | Retirement benefit liabilities | | | (423 | ) | | | – | | | | (1,574 | ) | | | (1,104 | ) | | | (390 | ) | | | (27 | ) | | | (423 | ) | | | – | | Net retirement benefit liabilities | | | 413 | | | | 802 | | | | (1,518 | ) | | | (1,104 | ) | | Net retirement benefit (liabilities)/assets | | | | (376 | ) | | | (27 | ) | | | 413 | | | | 802 | |
Included within the benefit obligation was £2,050m (2014: £2,272m)£979m (2015: £2,050m) relating to overseas pensions and £202m (2014: £189m)£207m (2015: £202m) relating to other post-employment benefits. Of the total benefit obligation of £28,279m (2014: £30,392m), £245m (2014: £286m) was wholly unfunded. As at 31 December 2015,2016, the UKRFUKRF’s scheme assets were in surplusdeficit versus IAS 19R19 obligations by £802m (2014: deficit£27m (2015: surplus of £1,104m)£802m). The movement for the UKRF is mainly due to a £1.9bn decrease in the defined benefit obligation. The decrease in defined benefit obligation can be linkeddiscount rate to 2.62% (2015: 3.82%), and an increase in discountinflation rate membershipto 3.35% (2015: 3.05%) partially offset by deficit contributions, updated mortality assumptions based on scheme experience, and higher than assumed returns on plan assets. The UKRF benefits paid of £1,800m (2015: £1,021m) included transfers out of the fund and contribution refunds of £1,029m (2015: £270m). Where a changescheme’s assets exceed its obligation, an asset is recognised to the calculationextent that it does not exceed the present value of statutory underpin forfuture contribution holidays or refunds of contributions (the “asset ceiling”). In the case of the UKRF the asset ceiling is not applied as, in certain benefits.specified circumstances such aswind-up, Barclays expects to be able to recover any surplus. The application of the asset ceiling to other plans is considered on an individual plan basis. Critical accounting estimates and judgements Actuarial valuation of the schemes’ obligation is dependent upon a series of assumptions, below is a summary of the main financial and demographic assumptions adopted for the UKRF. | | | | | | | | | UKRF financial assumptions | | | | | | | | | | | | 2015 | | | | 2014 | | | | | % p.a | | | | % p.a | | Discount rate | | | 3.82 | | | | 3.67 | | Inflation rate | | | 3.05 | | | | 3.05 | | Rate of increase in salaries | | | 2.55 | | | | 2.55 | | Rate of increase for pensions in payment | | | 2.87 | | | | 2.98 | | Rate of increase for pensions in deferment | | | 2.87 | | | | 2.98 | | Afterwork revaluation rate | | | 3.27 | | | | 3.35 | |
| | | | | | | | | Key UKRF financial assumptions | |
| 2016 % p.a. | | |
| 2015 % p.a. | | Discount rate | | | 2.62 | | | | 3.82 | | Inflation rate (RPI) | | | 3.35 | | | | 3.05 | |
Note a | Comparative information for the income statement charge has been restated to exclude discontinued operations, while balance sheet information has not been restated. Please see page 217 for more details. |
| | | 290 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
35 Pensions and post retirement benefitscontinued The UKRF discount rate assumption for 20152016 was based on a variant of the standard Willis Towers Watson RATE Link model. This variant includes all bonds rated AA by at least one of the four major ratings agencies, and assumes that yields after year 30 are flat. For 2014,The RPI inflation assumption for 2016 was set by reference to the Bank of England’s implied inflation spot curve, assuming the spot curve remains flat after the published 25 years. The inflation assumption incorporates a deduction of 20 basis points as an allowance for an inflation risk premium. The methodology used to derive the discount rate and price inflation assumption was based onis consistent with that used at the single equivalent discount rate implied by the standard Willis Towers Watson RATE Link model. | | | 282 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
35 Pensions and post retirement benefitscontinuedprior year end.
The UKRF’s post-retirement mortality assumptions are based on a best estimate assumption derived from an analysis in 20142016 of Barclays’Barclays own post-retirement mortality experience, and taking account of the recent evidence from published mortality surveys. An allowance has been made for future mortality improvements based on the 20132015 core projection model published by the Continuous Mortality Investigation Bureau subject to a long-term trend of 1.25% p.a.per annum in future improvements. The table below shows how the assumed life expectancy at 60, for members of the UKRF, has varied over the past three years: | Assumed life expectancy | | | | | | | | | 2016 | | | | 2015 | | | | 2014 | | | | | 2015 | | | | 2014 | | | | 2013 | | | | | | £m | | | | £m | | | | £m | | | Life expectancy at 60 for current pensioners (years) | | | | | | | | | | | | | – Males | | | 28.4 | | | | 28.3 | | | | 27.9 | | | | 27.9 | | | | 28.4 | | | | 28.3 | | – Females | | | 30.0 | | | | 29.9 | | | | 29.0 | | | | 29.7 | | | | 30.0 | | | | 29.9 | | Life expectancy at 60 for future pensioners currently aged 40 (years) | | | | | | | | | | | | | – Males | | | 30.2 | | | | 30.1 | | | | 29.3 | | | | 29.7 | | | | 30.2 | | | | 30.1 | | – Females | | | 32.0 | | | | 31.9 | | | | 30.6 | | | | 31.7 | | | | 32.0 | | | | 31.9 | |
Sensitivity analysis on actuarial assumptions The sensitivity analysis has been calculated by valuing the UKRF liabilities using the amended assumptions shown in the table below and keeping the remaining assumptions the same as disclosed in the table above the same, except in the case of the inflation sensitivity where other assumptions that depend on assumed inflation have also been amended correspondingly.amended. The difference between the recalculated liability figure and that stated in the balance sheet reconciliation table above is the figure shown. The selection of these movements to illustrate the sensitivity of the defined benefit obligation to key assumptions should not be interpreted as Barclays expressing any specific view of the probability of such movements happening. | | | | | | | | | | | | | | | | | Change in key assumptions | | | | | | | | | | | | 2015 | | | | 2014 | | | | | Impact on UKRF defined | | | | Impact on UKRF defined | | | | | benefit obligation | | | | benefit obligation | | | | | (Decrease)/ | | | | (Decrease)/ | | | | (Decrease)/ | | | | (Decrease)/ | | | | | Increase | | | | Increase | | | | Increase | | | | Increase | | | | | % | | | | £bn | | | | % | | | | £bn | | 0.5% increase in discount rate | | | (8.2 | ) | | | (2.1 | ) | | | (9.0 | ) | | | (2.5 | ) | 0.5% increase in assumed price inflation | | | 5.4 | | | | 1.4 | | | | 7.3 | | | | 2.0 | | One year increase to life expectancy at 60 | | | 3.5 | | | | 0.9 | | | | 3.5 | | | | 1.0 | |
| | | | | | | | | Change in key assumptions | | | | | | | | | | | | 2016 | | | | 2015 | | | |
| (Decrease)/
Increase in UKRF defined benefit obligation £bn |
| |
| (Decrease)/
Increase in UKRF defined benefit obligation £bn |
| Discount rate | | | | | | | | | 0.5% p.a. increase | | | (2.8 | ) | | | (2.1 | ) | 0.25% p.a. increase | | | (1.4 | ) | | | (1.1 | ) | 0.25% p.a. decrease | | | 1.5 | | | | 1.2 | | 0.5% p.a. decrease | | | 3.2 | | | | 2.4 | | Assumed RPI | | | | | | | | | 0.5% p.a. increase | | | 1.9 | | | | 1.4 | | 0.25% p.a. increase | | | 0.9 | | | | 0.7 | | 0.25% p.a. decrease | | | (0.9 | ) | | | (0.7 | ) | 0.5% p.a. decrease | | | (2.0 | ) | | | (1.3 | ) | Life expectancy at 60 | | | | | | | | | One year increase | | | 1.1 | | | | 0.9 | | One year decrease | | | (1.1 | ) | | | (0.9 | ) |
The weighted average duration of the benefit payments reflected in the defined benefit obligation for the UKRF is 1820 years. Assets A long termlong-term investment strategy has been set for the UKRF, with its asset allocation comprising a mixture of equities, bonds, property and other appropriate assets. This recognises that different asset classes are likely to produce different long termlong-term returns and some asset classes may be more volatile than others. The long termlong-term investment strategy ensures, among other aims, that investments are adequately diversified. Asset managers are permitted some flexibility to vary the asset allocation from the long termlong-term investment 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 assets held by the scheme, with any derivative holdings reflected on a fair value basis. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 291 |
Notes to the financial statements Employee benefits 35 Pensions and post retirement benefitscontinued The value of the assets of the schemes and their percentage in relation to total scheme assets were as follows: | | | | | | | | | | | | | | | | | Analysis of scheme assets | | | | | | | | | | | | | | | | | | | | Total | | | | Of which relates to UKRF | | | | | | | | | % of total | | | | | | | | % of total | | | | | | | | | fair value of | | | | | | | | fair value of | | | | | | | | | scheme | | | | | | | | scheme | | | | | Value | | | | assets | | | | Value | | | | assets | | | | | £m | | | | % | | | | £m | | | | % | | As at 31 December 2015 | | | | | | | | | | | | | | | | | Equities – quoted | | | 7,764 | | | | 27.0 | | | | 6,947 | | | | 25.9 | | Equities – non quoted | | | 1,757 | | | | 6.1 | | | | 1,750 | | | | 6.5 | | Bonds – fixed governmenta | | | 1,105 | | | | 3.8 | | | | 577 | | | | 2.2 | | Bonds – index-linked governmenta | | | 9,677 | | | | 33.7 | | | | 9,670 | | | | 36.0 | | Bonds – corporate and othera | | | 5,856 | | | | 20.4 | | | | 5,680 | | | | 21.2 | | Property – commercialb | | | 1,602 | | | | 5.6 | | | | 1,581 | | | | 5.9 | | Derivativesb | | | 183 | | | | 0.6 | | | | 183 | | | | 0.7 | | Cash | | | 67 | | | | 0.2 | | | | 47 | | | | 0.2 | | Otherb | | | 741 | | | | 2.6 | | | | 394 | | | | 1.4 | | Fair value of scheme assets | | | 28,752 | | | | 100.0 | | | | 26,829 | | | | 100.0 | |
Notes
a | Assets held are predominantly quoted. |
b | Assets held are predominantly non-quoted. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 283 |
Notes to the financial statements
Employee benefits
35 Pensions and post retirement benefitscontinued
| Analysis of scheme assets | | | | | | | | | | | | | | | | | | | | Total | | | | Of which relates to UKRF | | | | Total | | | | Of which relates to UKRF | | | | | | | % of total | | | | | | % of total | | | | Value | | |
| % of total fair value of scheme assets | | | | Value | | |
| % of total fair value of scheme assets | | | | | | | fair value of | | | | | | fair value of | | | | £m | | | | % | | | | £m | | | | % | | | | | | | scheme | | | | | | scheme | | | | | | Value | | | | assets | | | | Value | | | | assets | | | | | | £m | | | | % | | | | £m | | | | % | | | As at 31 December 2014 | | | | | | | | | | As at 31 December 2016 | | | | | | | | | | Equities – quoted | | | 6,813 | | | | 23.6 | | | | 5,808 | | | | 21.6 | | | | 8,123 | | | | 24.9 | | | | 7,840 | | | | 24.6 | | Equities – non-quoted | | | 1,549 | | | | 5.4 | | | | 1,537 | | | | 5.7 | | | | 2,043 | | | | 6.3 | | | | 2,042 | | | | 6.4 | | Bonds – fixed governmenta | | | 934 | | | | 3.2 | | | | 609 | | | | 2.3 | | | | 1,330 | | | | 4.1 | | | | 1,072 | | | | 3.4 | | Bonds – index-linked governmenta | | | 7,114 | | | | 24.6 | | | | 7,114 | | | | 26.5 | | | | 13,173 | | | | 40.3 | | | | 13,165 | | | | 41.4 | | Bonds – corporate and othera | | | 5,599 | | | | 19.4 | | | | 5,317 | | | | 19.8 | | | | 5,222 | | | | 16.0 | | | | 5,054 | | | | 15.9 | | Property – commercialb | | | 2,023 | | | | 7.0 | | | | 1,945 | | | | 7.3 | | | | 1,630 | | | | 5.0 | | | | 1,622 | | | | 5.1 | | Derivativesb | | | 1,472 | | | | 5.1 | | | | 1,472 | | | | 5.5 | | | | 870 | | | | 2.7 | | | | 870 | | | | 2.7 | | Cash | | | 2,897 | | | | 10.0 | | | | 2,644 | | | | 9.9 | | | Pooled fundsc | | | 284 | | | | 1.0 | | | | 284 | | | | 1.1 | | | Otherb | | | 189 | | | | 0.7 | | | | 97 | | | | 0.3 | | | | 266 | | | | 0.7 | | | | 155 | | | | 0.5 | | Fair value of scheme assets | | | 28,874 | | | | 100.0 | | | | 26,827 | | | | 100.0 | | | | 32,657 | | | | 100.0 | | | | 31,820 | | | | 100.0 | | | As at 31 December 2015 | | | | | | | | | | Equities – quoted | | | | 7,764 | | | | 27.0 | | | | 6,947 | | | | 25.9 | | Equities –non-quoted | | | | 1,757 | | | | 6.1 | | | | 1,750 | | | | 6.5 | | Bonds – fixed governmenta | | | | 1,105 | | | | 3.8 | | | | 577 | | | | 2.2 | | Bonds – index-linked governmenta | | | | 9,677 | | | | 33.7 | | | | 9,670 | | | | 36.0 | | Bonds – corporate and othera | | | | 5,856 | | | | 20.4 | | | | 5,680 | | | | 21.2 | | Property – commercialb | | | | 1,602 | | | | 5.6 | | | | 1,581 | | | | 5.9 | | Derivativesb | | | | 183 | | | | 0.6 | | | | 183 | | | | 0.7 | | Otherb | | | | 808 | | | | 2.8 | | | | 441 | | | | 1.6 | | Fair value of scheme assets | | | | 28,752 | | | | 100.0 | | | | 26,829 | | | | 100.0 | |
Included within the fair value of scheme assets were: £5m (2014: £3m)£0.2m (2015: £5m) relating to shares in Barclays PLC, £23m (2014: £39m)£0.1m (2015: £23m) relating to bonds issued by the Barclays Group, £6m (2014:PLC, nil (2015: £6m) relating to property occupied by Group companies, and £7m (2014: £14m)nil (2015: £7m) relating to other investments. The UKRF also invests in pooled investment vehicles which may hold shares or debt issued by the Barclays Group.PLC. The UKRF scheme assets also include £36m (2014:£32m (2015: £36m) relating to UK private equity investments and £1,714m (2014: £1,502m)£2,009m (2015: £1,714m) relating to overseas private equity investments. These are disclosed above within Equities –non-quoted. Approximately a third40% of the UKRF assets are invested in liability-driven investment strategies; primarily UK gilts as well as interest rate and inflation swaps. These are used to better match the assets to its liabilities. The swaps are used to reduce the scheme’s inflation and duration risks against its liabilities. Notes a | Assets held are predominately quoted. |
b | Assets held are predominantlynon-quoted. |
| | | 292 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
35 Pensions and post retirement benefitscontinued Funding The latest triennial funding valuation of the UKRF was carried outis currently underway with an effective date of 30 September 2013. This was completed2016. Contribution requirements, including any deficit recovery plans, must be agreed by 31 December 2017, and are expected to be agreed between the Bank and Trustee well in 2014advance of this statutory deadline. In these discussions, the Bank and the Trustee are taking into account the impact of the Structural Reform Programme. The previous triennial funding valuation at 30 September 2013 showed a deficit of £3.6bn and a funding level of 87.4%. The next funding valuation of the UKRF is due to be completed in 2017 with an effective date of 30 September 2016. In non-valuation years, the Scheme Actuary prepares an annual update of the funding position. The latest annual update was carried out as at 30 September 2015 and showed a deficit of £6.0bn and a funding level of 82.7%. The increase in funding deficit over the year to 30 September can be mainly attributed to the fall in real gilt yields over the year. The Bank and Trustee agreed a scheme specificscheme-specific funding target, statement of funding principles, a schedule of contributions and a recovery plan to eliminate the deficit inrelative to the Fund.funding target. The main differences between the funding and IAS 19 assumptions are a more prudent discount rate and longevity assumptionassumptions for funding and a different approach to setting the discount rate.funding.
The recovery plan to eliminateagreed as part of the deficit will result in2013 actuarial valuation provided for the Bank payingto pay deficit contributions to the FundUKRF until 2021. Deficit contributions of £300m were paid in 2015 and also are payable in 2016. FurtherUnder the existing recovery plan, further deficit contributions of £740m per annum are payable during 2017 to 2021. Up2021, and up to £500m of the 2021 deficit contribution is payable in 2017 depending on the deficit level at that time. These deficit contributions are in addition to the regular contributions to meet the Group’s share of the cost of benefits accruing over each year. Innon-valuation years, the Scheme Actuary prepares an annual update of the funding position. The latest annual update was carried out as at 30 September 2015 and showed a deficit of £6.0bn and a funding level of 82.7%. The increase in funding deficit over the year to 30 September 2015 can be mainly attributedcontributions paid to the fall in real gilt yields overUKRF are agreed between Barclays and the year.Trustee every three years. Defined benefit contributions paid with respect to the UKRF were as follows: | Contributions paid | | | | | | | | £m | | | | £m | | 2016 | | | | 634 | | 2015 | | | 586 | | | | 586 | | 2014 | | | 241 | | | | 241 | | 2013 | | | 238 | | |
Included within the Group’s contributions paid were £112m (2015: nil; 2014: nil) Section 75 contributions. The Group’s expected contribution to the UKRF in respect of defined benefits in 20162017 is £632m (2015: £586m).£1,585m (2016: £634m) including £167m Section 75 contributions. In addition, the expected contributions to UK defined contribution schemes in 20162017 is £49m (2015: £52m)£36m (2016: £49m) to the UKRF and £140m (2015:£124m (2016: £126m) to the BPSP. For the material non-UK defined benefit schemes, the expected contributions in 2016 are £78m (2015: £107m). Notes
a | Assets held are predominantly quoted. |
b | Assets held are predominantly non-quoted. |
c | Pooled funds relate to a variety of investments which are predominantly non-quoted. |
| | | 284 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 293 |
Notes to the financial statements Scope of consolidation ThisThe section presents information on the Group’s investments in subsidiaries, joint ventures and associates and its interests in structured entities. Detail is also given on securitisation transactions the Group has entered into and arrangements that are held off-balanceoff balance sheet.
36 Principal subsidiaries | Barclays applies IFRS 10Consolidated Financial Statements. The consolidated financial statements combine the financial statements of Barclays PLC and all its subsidiaries. Subsidiaries are entities over which the Group has control. Under IFRS 10, this is when the Group is exposed or has rights to variable returns from its involvement in the entity and has the ability to affect those returns through its power over the entity. The Group reassesses whether it controls an entity if facts and circumstances indicate that there have been changes to its power, its rights to variable returns or its ability to use its power to affect the amount of its returns. 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 been obtained and they do not result in loss of control. The significant judgements used in applying this policy are set out below. |
Accounting for investment in subsidiaries In the individual financial statements of Barclays PLC, investments in subsidiaries are stated at cost less impairment. |
Principal subsidiaries for the Group are set out below. This includes those subsidiaries that are most significant in the context of the Group’s business, results or financial position. | | | | | | | | | | Non- | | | | Non- | | | | | | | | | | | | controlling | | | | controlling | | | | | | | | | | | | interests – | | | | interests – | | | | | | | | | | Percentage | | | | proportion of | | | | proportion of | | | | | | | | | | of voting | | | | ownership | | | | voting | | | | | Principal place of business or | | | | | rights held | | | | interests | | | | interests | | | Company name | | incorporation | | Nature of business | | | % | | | | % | | | | % | | | Company Name | | | Principal place of business or incorporation | | Nature of business | |
| Percentage of voting rights held % | | |
| Non- controlling interests – proportion of ownership interests
% |
| |
| Non- controlling interests – proportion of voting interests
% |
| Barclays Bank PLC | | England | | Banking, holding company | | | 100 | | | | 11 | | | | – | | | England | | Banking, holding company | | | 100 | | | | 11 | | | | – | | Barclays Capital Securities Limited | | England | | Securities dealing | | | 100 | | | | – | | | | – | | | England | | Securities dealing | | | 100 | | | | – | | | | – | | Barclays Private Clients International Limited | | Isle of Man | | Banking | | | 100 | * | | | – | | | | – | | | Barclays Securities Japan Limited | | Japan | | Securities dealing | | | 100 | | | | – | | | | – | | | Japan | | Securities dealing | | | 100 | | | | – | | | | – | | Barclays Africa Group Limited | | South Africa | | Banking | | | 62 | | | | 38 | | | | 38 | | | South Africa | | Banking | | | 50.1 | | | | 49.9 | | | | 49.9 | | Barclays Capital Inc | | United States | | Securities dealing | | | 100 | | | | – | | | | – | | | US | | Securities dealing | | | 100 | | | | – | | | | – | | Barclays Bank Delaware | | United States | | Credit card issuer | | | 100 | | | | – | | | | – | | | US | | Credit card issuer | | | 100 | | | | – | | | | – | |
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 *. See Note 46 Related undertakings for further information on the Group’s undertakings. Ownership interests are in some cases different to voting interests due to the existence ofnon-voting equity interests, such as preference shares. See Note 33Non-controlling interests for more information. Barclays Bank SAUPrivate Clients International Limited was considered a principal subsidiary in 2014.2015. Barclays Bank SAU and its subsidiaries, comprisingPrivate Clients International Limited transferred all its associated assets and liabilities was sold to a third party, Caixabank, SA on 2 January 2015.Barclays Bank PLC in October 2016. Significant judgements and assumptions used to determine the scope of the consolidation Determining whether the Group has control of an entity is generally straightforward based on ownership of the majority of the voting capital. However, in certain instances, this determination will involve significant judgement, particularly in the case of structured entities where voting rights are often not the determining factor in decisions over the relevant activities. This judgement may involve assessing the purpose and design of the entity. It will also often be necessary to consider whether the Group, or another involved party with power over the relevant activities, is acting as a principal in its own right or as an agent on behalf of others. There is also often considerable judgement involved in the ongoing assessment of control over structured entities. In this regard, where market conditions have deteriorated such that the other investors’ exposures to the structure’s variable returns have been substantively eliminated, the Group may conclude that the managers of the structured entity are acting as its agent and therefore will consolidate the structured entity. An interest in equity voting rights exceeding 50% would typically indicate that the Group has control of an entity. However, certain entities, as set out below, are excluded from consolidation because the Group does not have exposure to their variable returns. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 285 |
Notes to the financial statements
Scope of consolidation
36 Principal subsidiariescontinued
| | | | | | | | | | | | | Percentage of voting | | Equity shareholder’s | | Retained profit for | Country of registration or incorporation | | Company name | | Percentage of voting rights held (%) | | Equity shareholder’s funds (£m) | | Retained profit for the year (£m) | | Company name | | rights held (%) | | funds (£m) | | the year (£m) | UK | | Fitzroy Finance Limited | | 100 | | – | | – | | Fitzroy Finance Limited | | 100 | | – | | – | Cayman Islands | | Palomino Limited | | 100 | | 2 | | – | | Palomino Limited | | 100 | | 2 | | 1 |
These entities are managed by external counterparties and consequently are not controlled by the Group. Where appropriate, interests relating to these entities are included in Note 37 Structured entities. Significant restrictions As is typical for a Group of its size and international scope, there are restrictions on the ability of Barclays PLC to obtain distributions of capital, access the assets or repay the liabilities of members of its Group due to the statutory, regulatory and contractual requirements of its subsidiaries and due to the protective rights ofnon-controlling interests. These are considered below.on the next page. | | | 294 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
36 Principal subsidiariescontinued Regulatory requirements Barclays’ principal subsidiary companies have assets and liabilities before intercompany eliminations of £1,468bn (2014: £1,757bn)£1,553bn (2015: £1,468bn) and £1,398bn (2014: £1,683bn)£1,480bn (2015: £1,398bn) respectively. The assets and liabilities are subject to prudential regulation and regulatory capital requirements in the countries in which they are regulated. These require entities to maintain minimum capital levels which cannot be returned to the parent company, Barclays PLC on a going concern basis. In order to meet capital requirements, subsidiaries may hold certain equity-accounted and debt-accounted issued financial instruments andnon-equity instruments such as Tier 1 and Tier 2 capital instruments and other forms of subordinated liabilities. See Note 33 Non-controlling interests28 Contingent liabilities and commitments, Note 30 Subordinated liabilities and Note 33Non-controlling interests for particulars of these instruments. These instruments may be subject to cancellation clauses or preference share restrictions that would limit the ability of the entity to repatriate the capital on a timely basis. Liquidity requirements Regulated subsidiaries of the Group are required to maintain liquidity pools to meet PRA and local regulatory requirements. The main subsidiaries affected are Barclays Bank PLC, Barclays Africa Group Limited and Barclays Capital Inc which must maintain daily compliance with the regulatory minimum. See page 105pages 159 to 177 for further details of liquidity requirements, including those of our significant subsidiaries. Statutory requirements The Group’s subsidiaries are subject to statutory requirements not to make distributions of capital and unrealised profits and generally to maintain solvency. These requirements restrict the ability of subsidiaries to make remittances of dividends to Barclays PLC, the ultimate parent, except in the event of a legal capital reduction or liquidation. In most cases, the regulatory restrictions referred to above exceed the statutory restrictions. Contractual requirements Asset encumbrance The Group uses its financial assets to raise finance in the form of securitisations and through the liquidity schemes of central banks. Once encumbered, the assets are not available for transfer around the Group. The assets typically affected are disclosed in Note 40 Assets pledged.Pledged. Assets held by consolidated structured entities £80m (2014: £379m)99m (2015: £80m) of assets included in the Group’s balance sheet relate to consolidated investment funds and are held to pay return and principal to the holders of units in the funds. The assets held in these funds cannot be transferred to other members of the Group. The decrease is materially driven by the sale of the Spanish business in January 2015, which included certain European wealth funds, and the disposal of a French wealth fund during the year. Other restrictions The Group is required to maintain balances with central banks and other regulatory authorities, and these amounted to £4,369m (2014: £4,448m)£4,254m (2015: £4,369m). Barclays Africa Group Limited assets are subject to exchange control regulation determined by the South African Reserve Bank (SARB). Special dividends and loans in lieu of dividends cannot be transferred without SARB approval. 37 Structured entities A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding control. Structured entities are generally created to achieve a narrow and well defined objective with restrictions around their ongoing activities. Depending on the Group’s power over the activities of the entity and its exposure to and ability to influence its own returns, it may consolidate the entity. In other cases, it may sponsor or have exposure to such an entity but not consolidate it. Consolidated structured entities The Group has contractual arrangements which may require it to provide financial support to the following types of consolidated structured entities: Securitisation vehicles The Group uses securitisation as a source of financing and a means of risk transfer. Refer to Note 39 Securitisations for further detail. The Group provides liquidity facilities to certain securitisation vehicles. At 31 December 2015,2016, there were outstanding loan commitments to these entities totalling £135m (2014: £201m)£152m (2015: £135m). | | | 286 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
37 Structured entitiescontinued
Commercial paper (CP) and medium-term note conduits The Group provided £8.5bn (2014: £9.1bn)£9bn (2015: £8.5bn) in undrawn contractual backstop liquidity facilities to CP conduits. Fund management entities Barclays has contractually guaranteed the performance of certain cash investments in a number of managed investment funds which have resulted in their consolidation. As at 31 December 2015,2016, the notional value of the guarantee was £257m (2014: £585m)£99m (2015: £257m). The decrease is primarily due to the closure of a number of European wealth funds during the year.year, as well as a reduction in fund assets. Employee benefit and other trusts The Group provides capital contributions to employee share trusts to enable them to meet their obligations to employees under share-based payment plans. During 2015,2016, the Group provided undrawn liquidity facilities of £784m (2014: £332m)£0.4bn (2015: £0.8bn) to certain trusts. Unconsolidated Structured Entities in which the Group has an interest An interest in a structured entity is any form of contractual ornon-contractual involvement which creates variability in returns arising from the performance of the entity for the Group. Such interests include holdings of debt or equity securities, derivatives that transfer financial risks from the entity to the Group, lending, loan commitments, financial guarantees and investment management agreements. Interest rate swaps, foreign exchange derivatives that are not complex and which expose the Group to insignificant credit risk by being senior in the payment waterfall of a securitisation and derivatives that are determined to introduce risk or variability to a structured entity are not considered to be an interest in an entity and have been excluded from the disclosures below. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 295 |
Notes to the financial statements Scope of consolidation 37 Structured entitiescontinued The nature and extent of the Group’s interests in structured entities is summarised below: | | | | | | | | | | | | | | | | | | | | | Summary of interests in unconsolidated structured entities | | | | | | | | | | | | | | | | | | | | | | |
| Secured
financing £m |
| |
| Short-term
traded interests £m |
| |
| Traded
derivatives £m |
| |
| Other
interests £m |
| |
| Total
£m |
| As at December 2015 | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | | | | | Trading portfolio assets | | | – | | | | 8,949 | | | | – | | | | 1,648 | | | | 10,597 | | Financial assets designated at fair value | | | 12,382 | | | | – | | | | – | | | | 353 | | | | 12,735 | | Derivative financial instruments | | | – | | | | – | | | | 4,427 | | | | 1,926 | | | | 6,353 | | Available for sale investments | | | – | | | | – | | | | – | | | | 1,060 | | | | 1,060 | | Loans and advances to banks | | | – | | | | – | | | | – | | | | 4,067 | | | | 4,067 | | Loans and advances to customers | | | – | | | | – | | | | – | | | | 27,700 | | | | 27,700 | | Reverse repurchase agreements and other similar secured lending | | | 7,117 | | | | – | | | | – | | | | – | | | | 7,117 | | Other assets | | | – | | | | – | | | | – | | | | 31 | | | | 31 | | Total assets | | | 19,499 | | | | 8,949 | | | | 4,427 | | | | 36,785 | | | | 69,660 | | Liabilities | | | | | | | | | | | | | | | | | | | | | Derivative financial instruments | | | – | | | | – | | | | 2,761 | | | | 1,926 | | | | 4,687 | | | | | | | | As at December 2014 | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | | | | | Trading portfolio assets | | | – | | | | 14,538 | | | | – | | | | 3,668 | | | | 18,206 | | Financial assets designated at fair value | | | – | | | | – | | | | – | | | | 963 | | | | 963 | | Derivative financial instruments | | | – | | | | – | | | | 5,207 | | | | 1,594 | | | | 6,801 | | Available for sale investments | | | – | | | | – | | | | – | | | | 1,216 | | | | 1,216 | | Loans and advances to banks | | | – | | | | – | | | | – | | | | 4,277 | | | | 4,277 | | Loans and advances to customers | | | – | | | | – | | | | – | | | | 30,067 | | | | 30,067 | | Reverse repurchase agreements and other similar secured lending | | | 37,139 | | | | – | | | | – | | | | – | | | | 37,139 | | Other assets | | | – | | | | – | | | | – | | | | 38 | | | | 38 | | Total assets | | | 37,139 | | | | 14,538 | | | | 5,207 | | | | 41,823 | | | | 98,707 | | Liabilities | | | | | | | | | | | | | | | | | | | | | Derivative financial instruments | | | – | | | | – | | | | 5,222 | | | | 1,514 | | | | 6,736 | |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 287 |
Notes to the financial statements
Scope of consolidation
| | | | | | | | | | | | | | | | | | | | | Summary of interests in unconsolidated structured entities | | | | | | | | | | | | | | | | | | | | | | |
| Secured financing £m | | |
| Short-term traded interests £m | | |
| Traded derivatives £m | | |
| Other interests £m | | |
| Total
£m |
| As at 31 December 2016 | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | | | | | Trading portfolio assets | | | – | | | | 8,436 | | | | – | | | | 516 | | | | 8,952 | | Financial assets designated at fair value | | | 22,706 | | | | – | | | | – | | | | 367 | | | | 23,073 | | Derivative financial instruments | | | – | | | | – | | | | 4,731 | | | | 2,130 | | | | 6,861 | | Available for sale investments | | | – | | | | – | | | | – | | | | 894 | | | | 894 | | Loans and advances to banks | | | – | | | | – | | | | – | | | | 4,915 | | | | 4,915 | | Loans and advances to customers | | | – | | | | – | | | | – | | | | 24,142 | | | | 24,142 | | Reverse repurchase agreements and other similar secured lending | | | 6,338 | | | | – | | | | – | | | | – | | | | 6,338 | | Other assets | | | – | | | | – | | | | – | | | | 25 | | | | 25 | | Total assets | | | 29,044 | | | | 8,436 | | | | 4,731 | | | | 32,989 | | | | 75,200 | | Liabilities | | | | | | | | | | | | | | | | | | | | | Derivative financial instruments | | | – | | | | – | | | | 3,567 | | | | 2,130 | | | | 5,697 | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | | | | | Trading portfolio assets | | | – | | | | 8,949 | | | | – | | | | 1,648 | | | | 10,597 | | Financial assets designated at fair value | | | 12,382 | | | | – | | | | – | | | | 353 | | | | 12,735 | | Derivative financial instruments | | | – | | | | – | | | | 4,427 | | | | 1,926 | | | | 6,353 | | Available for sale investments | | | – | | | | – | | | | – | | | | 1,060 | | | | 1,060 | | Loans and advances to banks | | | – | | | | ��� | | | | – | | | | 4,067 | | | | 4,067 | | Loans and advances to customers | | | – | | | | – | | | | – | | | | 27,700 | | | | 27,700 | | Reverse repurchase agreements and other similar secured lending | | | 7,117 | | | | – | | | | – | | | | – | | | | 7,117 | | Other assets | | | – | | | | – | | | | – | | | | 31 | | | | 31 | | Total assets | | | 19,499 | | | | 8,949 | | | | 4,427 | | | | 36,785 | | | | 69,660 | | Liabilities | | | | | | | | | | | | | | | | | | | | | Derivative financial instruments | | | – | | | | – | | | | 2,761 | | | | 1,926 | | | | 4,687 | |
37 Structured entitiescontinued
Secured financing arrangements, short term traded interests and traded derivatives are typically managed under market risk management policies described on pages 101 and 102page 143 which includes an indication of the change of risk measures compared to last year. For this reason, the total assets of these entities are not considered meaningful for the purposes of understanding the related risks and so have not been presented. Other interests include a portfolio held withinNon-Core portfolio which is being managed down, conduits and corporate lending where the interest is driven by normal customer demand. Secured financing The Group routinely enters into reverse repurchase contracts, stock borrowing and similar arrangements on normal commercial terms where the counterparty to the arrangement is a structured entity. Due to the nature of these arrangements, especially the transfer of collateral and ongoing margining, the Group has minimal exposure to the performance of the structured entity counterparty. A description of these transactions is included in Note 22 Reverse repurchase and repurchase agreements including other similar secured lending and borrowing. Short-term traded interests The Group buys and sells interests in structured entities as part of its trading activities, for example, retail mortgage backedmortgage-backed securities, CDOscollateralised debt obligations and similar interests. Such interests are typically held individually or as part of a larger portfolio for no more than 90 days. In such cases, the Group typically has no other involvement with the structured entity other than the securities it holds as part of trading activities and its maximum exposure to loss is restricted to the carrying value of the asset. As at 31 December 2015, £8,576m (2014: £12,058m)2016, £6,568m (2015: £7,443m) of the Group’s £8,949m (2014: £14,538m)£8,436m (2015: £8,949m) short-term traded interests were comprised of debt securities issued by asset securitisation vehicles. Traded derivatives The Group enters into a variety of derivative contracts with structured entities which reference market risk variables such as interest rates, foreign exchange rates and credit indices amongamongst other things. The main derivative types which are considered interests in structured entities include index basedindex-based and entity specific credit default swaps, balance guaranteed swaps, total return swaps, commodities swaps, and equity swaps. A description of the types of derivatives and the risk management practices are detailed in Note 15 Derivative financial instruments. The risk of loss may be mitigated through ongoing margining requirements as well as a right to cash flows from the structured entity which are senior in the payment waterfall. Such margining requirements are consistent with market practice for many derivative arrangements and in line with the Group’s normal credit policies. Derivative transactions require the counterparty to provide cash or other collateral under margining agreements to mitigate counterparty credit risk. Included in the traded derivatives total are £409m (2014: £445m) of derivative assets which are ‘cleared derivative’ type arrangements. These are transactions where the Group enters into a contract with an exchange on behalf of a structured entity client and holds an opposite position with it. The Group is exposed to settlement risk only on these derivatives which is mitigated through daily margining. Total notionals amounted to £117,642m (2014: £176,584m)£1,183,215m (2015: £1,117,642m). | | | 296 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
37 Structured entitiescontinued Except for CDScredit default swaps where the maximum exposure to loss is the swap notional amount, it is not possible to estimate the maximum exposure to loss in respect of derivative positions as the fair value of derivatives is subject to changes in market rates of interest, exchange rates and credit indices which by their nature are uncertain. In addition, the Group’s losses would be subject to mitigating action under its traded market risk and credit risk policies that require the counterparty to provide collateral in cash or other assets on a daily basis in most cases. Other interests in unconsolidated structured entities The Group’s interests in structured entities not held for the purposes of short-term trading activities are set out below, summarised by the purpose of the entities and limited to significant categories, based on maximum exposure to loss. | | | 288 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
37 Structured entitiescontinued
| Nature of interest | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Structured
credit portfolio £m |
| |
| Multi-seller
conduit programmes £m |
| |
| Lending
£m |
| |
| Mortgage- backed
securities £m |
| |
| Investment
funds and trusts £m |
| |
| Others
£m |
| |
| Total
£m |
| |
| Structured credit portfolio £m | | |
| Multi-seller conduit programmes £m | | |
| Lending
£m |
| |
| Mortgage- backed securities £m | | |
| Investment funds and trusts
£m |
| |
| Others £m | | |
| Total
£m |
| As at December 2015 | | | | | | | | | | | | | | | | As at 31 December 2016 | | | | | | | | | | | | | | | | Trading portfolio assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | – Debt securities | | | 1,545 | | | | – | | | | – | | | | – | | | | – | | | | 40 | | | | 1,585 | | | | 441 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 441 | | – Equity securities | | | – | | | | – | | | | – | | | | – | | | | – | | | | 63 | | | | 63 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 75 | | | | 75 | | Financial assets designated at fair value | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | – Loans and advances to customers | | | – | | | | – | | | | 247 | | | | – | | | | – | | | | 6 | | | | 253 | | | | – | | | | – | | | | 260 | | | | – | | | | – | | | | 4 | | | | 264 | | – Debt securities | | | – | | | | – | | | | 41 | | | | – | | | | – | | | | 57 | | | | 98 | | | | – | | | | – | | | | 50 | | | | – | | | | – | | | | 48 | | | | 98 | | – Equity securities | | | – | | | | – | | | | – | | | | – | | | | – | | | | 2 | | | | 2 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 5 | | | | 5 | | Derivative financial instruments | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,926 | | | | 1,926 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 2,130 | | | | 2,130 | | Available for sale investments | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | – | | | | | | | | | | | | | | | | – Debt securities | | | 537 | | | | – | | | | – | | | | 515 | | | | – | | | | 8 | | | | 1,060 | | | | 535 | | | | – | | | | – | | | | 357 | | | | – | | | | 2 | | | | 894 | | Loans and advances to banks | | | | – | | | | – | | | | 4,890 | | | | – | | | | – | | | | 25 | | | | 4,915 | | Loans and advances to customers | | | 1,599 | | | | 5,029 | | | | 20,571 | | | | – | | | | – | | | | 501 | | | | 27,700 | | | | 637 | | | | 6,016 | | | | 16,754 | | | | – | | | | – | | | | 735 | | | | 24,142 | | Loans and advances to banks | | | – | | | | – | | | | 4,051 | | | | – | | | | – | | | | 16 | | | | 4,067 | | | Other assets | | | – | | | | 4 | | | | 7 | | | | – | | | | 20 | | | | – | | | | 31 | | | | – | | | | 5 | | | | 7 | | | | – | | | | 13 | | | | – | | | | 25 | | Total on-balance sheet exposures | | | 3,681 | | | | 5,033 | | | | 24,917 | | | | 515 | | | | 20 | | | | 2,619 | | | | 36,785 | | | Total off-balance sheet notional amounts | | | 708 | | | | 3,042 | | | | 10,225 | | | | – | | | | – | | | | 1,409 | | | | 15,384 | | | Total on balance sheet exposures | | | | 1,613 | | | | 6,021 | | | | 21,961 | | | | 357 | | | | 13 | | | | 3,024 | | | | 32,989 | | Total off balance sheet notional amounts | | | | 681 | | | | 2,734 | | | | 9,873 | | | | – | | | | – | | | | 1,058 | | | | 14,346 | | Maximum exposure to loss | | | 4,389 | | | | 8,075 | | | | 35,142 | | | | 515 | | | | 20 | | | | 4,028 | | | | 52,169 | | | | 2,294 | | | | 8,755 | | | | 31,834 | | | | 357 | | | | 13 | | | | 4,082 | | | | 47,335 | | Total assets of the entity | | | 36,290 | | | | 81,355 | | | | 376,296 | | | | 115,351 | | | | 21,766 | | | | 5,084 | | | | 636,142 | | | | 22,508 | | | | 75,535 | | | | 492,950 | | | | 12,213 | | | | 18,550 | | | | 4,621 | | | | 626,377 | | | As at December 2014 | | | | | | | | | | | | | | | | As at 31 December 2015 | | | | | | | | | | | | | | | | Trading portfolio assets | | | | | | | | | | | | | | | | | | | | | | | | | | | | | – Debt securities | | | 3,590 | | | | – | | | | – | | | | – | | | | – | | | | 51 | | | | 3,641 | | | | 1,545 | | | | – | | | | – | | | | – | | | | – | | | | 40 | | | | 1,585 | | – Equity securities | | | – | | | | – | | | | – | | | | – | | | | – | | | | 27 | | | | 27 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 63 | | | | 63 | | Financial assets designated at fair value | | | | | | | | | | | | | | | | | | | | | | | | | | | | | – Loans and advances to customers | | | – | | | | – | | | | 881 | | | | – | | | | – | | | | 11 | | | | 892 | | | | – | | | | – | | | | 247 | | | | – | | | | – | | | | 6 | | | | 253 | | – Debt securities | | | – | | | | – | | | | – | | | | – | | | | – | | | | 35 | | | | 35 | | | | – | | | | – | | | | 41 | | | | – | | | | – | | | | 57 | | | | 98 | | – Equity securities | | | – | | | | – | | | | – | | | | – | | | | – | | | | 36 | | | | 36 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 2 | | | | 2 | | Derivative financial instruments | | | – | | | | – | | | | 80 | | | | – | | | | – | | | | 1,514 | | | | 1,594 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 1,926 | | | | 1,926 | | Available for sale investments | | | | | | | | | | | | | | | | | | | | | | | | | | | | | – Debt securities | | | 1 | | | | 575 | | | | – | | | | 626 | | | | – | | | | 14 | | | | 1,216 | | | | 537 | | | | – | | | | – | | | | 515 | | | | – | | | | 8 | | | | 1,060 | | Loans and advances to banks | | | | – | | | | – | | | | 4,051 | | | | – | | | | – | | | | 16 | | | | 4,067 | | Loans and advances to customers | | | 3,390 | | | | 8,236 | | | | 17,780 | | | | – | | | | – | | | | 661 | | | | 30,067 | | | | 1,599 | | | | 5,029 | | | | 20,571 | | | | – | | | | – | | | | 501 | | | | 27,700 | | Loans and advances to banks | | | – | | | | – | | | | 4,277 | | | | – | | | | – | | | | – | | | | 4,277 | | | Other assets | | | – | | | | 5 | | | | 9 | | | | – | | | | 21 | | | | 3 | | | | 38 | | | | – | | | | 4 | | | | 7 | | | | – | | | | 20 | | | | – | | | | 31 | | Total on-balance sheet exposures | | | 6,981 | | | | 8,816 | | | | 23,027 | | | | 626 | | | | 21 | | | | 2,352 | | | | 41,823 | | | Total off-balance sheet notional amounts | | | 1,078 | | | | 8,075 | | | | 6,359 | | | | – | | | | – | | | | 2,104 | | | | 17,616 | | | Total on balance sheet exposures | | | | 3,681 | | | | 5,033 | | | | 24,917 | | | | 515 | | | | 20 | | | | 2,619 | | | | 36,785 | | Total off balance sheet notional amounts | | | | 708 | | | | 3,042 | | | | 10,225 | | | | – | | | | – | | | | 1,409 | | | | 15,384 | | Maximum exposure to loss | | | 8,059 | | | | 16,891 | | | | 29,386 | | | | 626 | | | | 21 | | | | 4,456 | | | | 59,439 | | | | 4,389 | | | | 8,075 | | | | 35,142 | | | | 515 | | | | 20 | | | | 4,028 | | | | 52,169 | | Total assets of the entity | | | 50,279 | | | | 97,298 | | | | 390,522 | | | | 147,422 | | | | 25,556 | | | | 5,816 | | | | 716,893 | | | | 36,290 | | | | 81,355 | | | | 376,296 | | | | 115,351 | | | | 21,766 | | | | 5,084 | | | | 636,142 | |
Maximum exposure to loss Unless specified otherwise below, the Group’s maximum exposure to loss is the total of its on-balanceon balance sheet positions and its off-balanceoff balance sheet arrangements, being loan commitments and financial guarantees. Exposure to loss is mitigated through collateral, financial guarantees, the availability of netting and credit protection held. Structured Credit Portfolio This comprises interests in debt securities issued by securitisation vehicles, mainly CLOs, CDOs,Collateralised Loan Obligations (CLOs), Collateralised Debt Obligations (CDOs), Residential and Commercial Mortgage-Backed Securitisation structures (RMBSs and CMBSs), and drawn and undrawn loan facilities to these entities. In some cases, the securities are ‘wrapped’ with credit protection from a monoline insurer, which transfers the credit risk to the monoline. The entities are wholly debt financed through the issuance of tranches of debt securities or through direct funding, such as the loan facilities provided by the Group. As the underlying assets of the entities amortise and pay down, the debt securities issued by the entities are repaid in order of seniority. Where the entities experience significant credit deterioration, debt securities may be written off or cancelled in reverse order of seniority. As at 31 December 2016, the £1,613m (2015: £3,681m) Group’s funded exposures comprised of £441m (2015: £1,545m) debt securities at fair value and £637m (2015: £1,599m) amortised cost loans and advances. Of which £645m (2015: £2,783m) were within investment grade, and the remainder eithernon-investment grade or not rated. The Group also had £681m (2015: £708m) of unfunded exposures in the form of undrawn liquidity commitments. Of the £2,294m (2015: £4,389m) of funded and unfunded exposures, £2,294m (2015: £4,387m) is senior in the capital structure of the entity. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 289297 |
Notes to the financial statements Scope of consolidation 37 Structured entitiescontinued As at 31 December 2015 the Group’s funded exposures comprised £1,545m (2014: £3,591m) debt securities at fair value and £1,599m (2014: £3,390m) amortised cost loans and advances. Of the £3,681m (2014: £6,981m), £2,783m (2014: £4,822m) is investment grade, with the remainder either non-investment grade or not rated. The Group also had £708m (2014: £1,078m) of unfunded exposures in the form of undrawn liquidity commitments. Of the £4,389m (2014: £8,059m) of funded and unfunded exposures, £4,387m (2014: £7,897m) is senior in the capital structure of the entity.
Though the Group’s funded exposures are primarily investment grade and senior in the capital structure, there are cases where the interests that are subordinate to the Group’s senior and mezzanine interests have minimal or no value, due to decreases in the fair value of the underlying collateral held by the entity. The Group’s income from these entities comprises trading income (largely gains and losses on changes in the fair value and interest earned on bonds) on items classified as held for trading and interest income on interests classified as loans and receivables. During 2015,2016, the Group recorded a fair value lossgain of £78m (2015: £4m (2014: £91m loss) on debt securities. Impairmentsecurities, impairment losses recorded on loans and advances were immaterial in both the current and prior year. The fair value of the Group’s interests in certain CLOs and CDOs is influenced by the protection directly provided to the structured entities by monoline insurers in addition to the value of the collateral held by the entities. The protection provided to the entities by the monoline insurers is in the form of a CDS. However, the ability of the monolines to make payments is uncertain, which is reflected in the valuation of the Group’s interests in the monoline wrapped CLOs and CDOs.
Multi-seller conduit programmesprogramme The conduits engagemulti-seller conduit engages in providing financing to various clients and hold whole or partial interests in pools of receivables or similar obligations. These instruments are protected from loss through over-collateralisation, seller guarantees, or other credit enhancements provided to the conduits.conduit. The Group’s off balance sheet exposure included in the table above represents liquidity facilities that are provided to the conduitsconduit for the benefit of the holders of the commercial paper issued by the conduitsconduit and will only be drawn where the conduits areconduit is unable to access the commercial paper market. If these liquidity facilities are drawn, the Group is protected from loss through over-collateralisation, seller guarantees, or other credit enhancements provided to the conduits.conduit. The Group also has overlapping exposure to the conduit that arises from the letter of credit and the programme loan. The letter of credit is an unfunded commitment that is only funded to cover credit losses up to 10% of total commitments. The programme loan, which allows the conduit to comply with US risk retention rules, is a funded exposure that is positioned pari passu with the interests of commercial paper holders. The Group earns income from fees received on the liquidity facility and the letter of credit provided to the conduits.conduit, as well as from management fees. There were no impairment losses on this lending in either of the current year or the prior year. Lending The portfolio includes lending provided by the Group to unconsolidated structured entities in the normal course of its lending business to earn income in the form of interest and lending fees and includes loans to structured entities that are generally collateralised by property, equipment or other assets. All loans are subject to the Group’s credit sanctioning process. Collateral arrangements are specific to the circumstances of each loan with additional guarantees and collateral sought from the sponsor of the structured entity for certain arrangements. During the period the Group incurred an impairment of £35m (2014: £31m)£24m (2015: £35m) against such facilities. The main types of lending are £3bn (2014: £4bn)£2bn (2015: £3bn) of funding loans to bankruptcy remote structured entities to either invest or develop properties, £4bn (2014: £5bn)£3bn (2015: £4bn) of loans to structured entities which have been created by an individual to hold one or more assets, £2bn (2014:(2015: £2bn) to entities whose operations are limited to financing or funding the acquisition of specific assets such as schools, hospitals, roads and renewable energy projects under the Private Finance Initiative (PFI), and £1bn (2014:(2015: £1bn) of funding loans to bankruptcy remote structured entities to enable them to purchase capital equipment for parent companies and are supported by government export guarantees. Mortgage-backed securities This represents a portfolio of floating rate notes mainly mortgage-backed security positions, used as an accounting hedge of interest rate risk under the Group’s structural hedging programme. All notes are investment grade. The portfolio has decreased owing to a reduced requirement for hedge accounting capacity in sterling.Sterling. Investment funds and trusts In the course of its fund management activities, the Group establishes pooled investment funds that comprise investments of various kinds, tailored to meet certain investors’ requirements. The Group’s interest in funds is generally restricted to a fund management fee, the value of which is typically based on the performance of the fund. The Group acts as trustee to a number of trusts established by or on behalf of its clients. The purpose of the trusts, which meet the definition of structured entities, is to hold assets on behalf of beneficiaries. The Group’s interest in trusts is generally restricted to unpaid fees which, depending on the trust, may be fixed or based on the value of the trust assets. Barclays has no other risk exposure to the trusts. Other This includes £1,926m (2014: £1,514m)£2,130m (2015: £1,926m) of derivative transactions with structured entities where the market risk is materially hedged with corresponding derivative contracts. Assets transferred to sponsored unconsolidated structured entities Assets transferred to sponsored unconsolidated structured entities were immaterial. 38 Investments in associates and joint ventures Accounting for associates and joint ventures Barclays applies IAS 28 Investments in Associates and IFRS 11 Joint Arrangements. Associates are entities in which the Group has significant influence, but not control, over the operating and financial policies. Generally the Group holds more than 20%, but less than 50%, of their voting shares. Joint ventures are arrangements where the Group has joint control and rights to the net assets of the entity. The Group’s investments in associates and joint ventures are initially recorded at cost and increased (or decreased) each year by the Group’s share of the post acquisition profit/(loss). The Group ceases to recognise its share of the losses of equity accounted associates when its share of the net assets and amounts due from the entity have been written off in full, unless it has a contractual or constructive obligation to make good its share of the losses. In some cases, investments in these entities may be held at fair value through profit or loss, for example, those held by private equity businesses. | | | 290298 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
38 Investments in associates and joint venturescontinued | Accounting for associates and joint ventures
Barclays applies IAS 28Investments in Associates and IFRS 11Joint Arrangements. Associates are entities in which the Group has significant influence, but not control, over the operating and financial policies. Generally the Group holds more than 20%, but less than 50%, of their voting shares. Joint ventures are arrangements where the Group has joint control and rights to the net assets of the entity.
The Group’s investments in associates and joint ventures are initially recorded at cost and increased (or decreased) each year by the Group’s share of the post acquisition profit/(loss). The Group ceases to recognise its share of the losses of equity accounted associates when its share of the net assets and amounts due from the entity have been written off in full, unless it has a contractual or constructive obligation to make good its share of the losses. In some cases, investments in these entities may be held at fair value through profit or loss, for example, those held by private equity businesses.
|
There are no individually significant investments in joint ventures or associates held by Barclays. | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2015 | | | | 2014 | | | | | Associates | | | | Joint ventures | | | | Total | | | | Associates | | | | Joint ventures | | | | Total | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | Equity accounted | | | 217 | | | | 356 | | | | 573 | | | | 303 | | | | 408 | | | | 711 | | Held at fair value through profit or loss | | | 77 | | | | 475 | | | | 552 | | | | 307 | | | | 366 | | | | 673 | | Total | | | 294 | | | | 831 | | | | 1,125 | | | | 610 | | | | 774 | | | | 1,384 | | Summarised financial information for the Group’s equity accounted associates and joint ventures is set out below. The amounts shown are the net income of the investees, not just the Group’s share for the year ended 31 December 2015, with the exception of certain undertakings for which the amounts are based on accounts made up to dates not earlier than three months before the balance sheet date. | | | | | | | | | | | | | Associates | | | | Joint ventures | | | | | | | | | | | | | 2015 | | | | 2014 | | | | 2015 | | | | 2014 | | | | | | | | | | | | | £m | | | | £m | | | | £m | | | | £m | | Profit/(loss) from continuing operations | | | | | | | | | | | 6 | | | | (9 | ) | | | 86 | | | | 146 | | Other comprehensive income | | | | | | | | | | | – | | | | 13 | | | | (24 | ) | | | (5 | ) | Total comprehensive income | | | | | | | | | | | 6 | | | | 4 | | | | 62 | | | | 141 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2016 | | | | | | | | | | | | 2015 | | | | | | | | | Associates | | | | Joint ventures | | | | Total | | | | Associates | | | | Joint ventures | | | | Total | | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | | | £m | | Equity accounted | | | 321 | | | | 363 | | | | 684 | | | | 217 | | | | 356 | | | | 573 | | Held at fair value through profit or loss | | | – | | | | 484 | | | | 484 | | | | 77 | | | | 475 | | | | 552 | | Total | | | 321 | | | | 847 | | | | 1,168 | | | | 294 | | | | 831 | | | | 1,125 | | Summarised financial information for the Group’s equity accounted associates and joint ventures is set out below. The amounts shown are the net income of the investees, not just the Group’s share for the year ended 31 December 2016, with the exception of certain undertakings for which the amounts are based on accounts made up to dates not earlier than three months before the balance sheet date. | | | | | | | | | | | | | Associates | | | | Joint ventures | | | | | | | | | | | | | 2016 | | | | 2015 | | | | 2016 | | | | 2015 | | | | | | | | | | | | | £m | | | | £m | | | | £m | | | | £m | | Profit from continuing operations | | | | | | | | | | | 33 | | | | 5 | | | | 64 | | | | 73 | | Other comprehensive expense | | | | | | | | | | | – | | | | – | | | | 19 | | | | (24) | | Total comprehensive income from continuing operations | | | | | | | | | | | 33 | | | | 5 | | | | 83 | | | | 49 | |
Unrecognised shares of the losses of individually immaterial associates and joint ventures were nil (2014:(2015: nil). The Group’s associates and joint ventures are subject to statutory requirements such that they cannot make remittances of dividends or make loan repayments to Barclays PLC without agreement from the external parties. The Group’s share of commitments and contingencies of its associates and joint ventures comprised unutilised credit facilities provided to customers of £1,450m (2014: £1,566m)£1,755m (2015: £1,450m). In addition, the Group has made commitments to finance or otherwise provide resources to its joint ventures and associates of £177m (2014: £183m)£263m (2015: £177m). 39 Securitisations | Accounting for securitisations
The Group uses securitisations as a source of finance and a means of risk transfer. Such transactions generally result in the transfer of contractual cash flows from portfolios of financial assets to holders of issued debt securities.
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.
|
Accounting for securitisations The Group uses securitisations as a source of finance and a means of risk transfer. Such transactions generally result in the transfer of contractual cash flows from portfolios of financial assets to holders of issued debt securities. 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 result in full 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 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. In the course of its normal banking activities, the Group makes transfers of financial assets, either legally (where legal rights to the cash flows from the asset are passed to the counterparty) or beneficialbeneficially (where the Group retains the rights to the cash flows but assumes a responsibility to transfer them to the counterparty). Depending on the nature of the transaction, this may result in derecognition of the assets in their entirety, partial derecognition or no derecognition of the assets subject to 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 substantially all the risks and rewards of ownership, including credit risk, prepayment risk and interest rate risk. When an asset is transferred, in some circumstances, the Group may retain an interest in it (continuing involvement) requiring the Group to repurchase it in certain circumstances for other than its fair value on that date.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 291 |
Notes to the financial statements
Scope of consolidation
39 Securitisationscontinued
A summary of the main transactions, and the assets and liabilities and the financial risks arising from these transactions, is set out below: Transfers of financial assets that do not result in derecognition Securitisations The Group was party to securitisation transactions involving its residential mortgage loans, business loans and credit card balances. In these transactions, the assets, interests in the assets, or beneficial interests in the cash flows arising from the assets, are transferred to a special purpose entity, which then issues interest bearing 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. Partial continued recognition of the assets to the extent of the Group’s continuing involvement in those assets can also occur or derecognition of the assets and the separate recognition, as assets or liabilities, of any rights and obligations created or retained in the transfer. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 299 |
Notes to the financial statements Scope of consolidation 39 Securitisationscontinued The following table shows the carrying amount of securitised assets that have not resulted in full derecognition, together with the associated liabilities, for each category of asset on the balance sheet: | | | | 2015 | | | 2014 | | | | 2016 | | | | 2015 | | | | | Assets | | | Liabilities | | | Assets | | | | Liabilities | | | | Assets | | | | Liabilities | | | | Assets | | | | Liabilities | | | | | Carrying amount £m | | | | Fair value £m | | | | Carrying amount £m | | | | Fair value £m | | | | Carrying amount £m | | | | Fair value £m | | | | Carrying amount £m | | | | Fair value £m | | |
| Carrying
amount £m |
| |
| Fair Value
£m |
| |
| Carrying
amount £m |
| |
| Fair Value
£m |
| |
| Carrying
amount £m |
| |
| Fair Value
£m |
| |
| Carrying
amount £m |
| |
| Fair Value
£m |
| Loans and advances to customers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Residential mortgage loans | | | 376 | | | | 362 | | | | (168 | ) | | | (170 | ) | | | 2,830 | | | | 2,619 | | | | (2,352 | ) | | | (2,360 | ) | | | 125 | | | | 120 | | | | (107 | ) | | | (107 | ) | | | 376 | | | | 362 | | | | (168 | ) | | | (170 | ) | Credit cards, unsecured and other retail lending | | | 5,433 | | | | 5,472 | | | | (4,604 | ) | | | (4,606 | ) | | | 7,060 | | | | 7,162 | | | | (5,160 | ) | | | (5,178 | ) | | | 5,094 | | | | 5,084 | | | | (4,926 | ) | | | (4,931 | ) | | | 5,433 | | | | 5,472 | | | | (4,604 | ) | | | (4,606 | ) | Corporate loans | | | 8 | | | | 8 | | | | (8 | ) | | | (8 | ) | | | 157 | | | | 154 | | | | (135 | ) | | | (146 | ) | | Corporate loansa | | | | – | | | | – | | | | – | | | | – | | | | 8 | | | | 8 | | | | (8 | ) | | | (8 | ) | Total | | | 5,817 | | | | 5,842 | | | | (4,780 | ) | | | (4,784 | ) | | | 10,047 | | | | 9,935 | | | | (7,647 | ) | | | (7,684 | ) | | | 5,219 | | | | 5,204 | | | | (5,033 | ) | | | (5,038 | ) | | | 5,817 | | | | 5,842 | | | | (4,780 | ) | | | (4,784 | ) | Loans and advances to customers | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Retained interests in residential mortgage loans | | | – | | | | – | | | | – | | | | – | | | | 66 | | | | n/a | | | | – | | | | n/a | | | Retained interests in corporate loans | | | 42 | | | | 42 | | | | n/a | | | | n/a | | | | – | | | | – | | | | – | | | | – | | | Retained interests in corporate loansa | | | | – | | | | – | | | | – | | | | – | | | | 42 | | | | 42 | | | | n/a | | | | n/a | |
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 relationship between the transferred assets and the associated liabilities is that holders of notes may only look to cash flows from the securitised assets for payments of principal and interest due to them under the terms of their notes, although the contractual terms of their notes may be different to the maturity and interest of the transferred assets. Retained interests in transfers of financial assets that resulted in partial derecognition are securities which represent a continuing exposure to the prepayment and credit risk in the underlying securitised assets. TheFor the Group only, the carrying amount of the loans before transfer was £78m (2014: £120m)nil (2015: £78m). 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. For transfers of assets in relation to repurchase agreements, see Note 22 Reverse repurchase and repurchase agreements including other similar and secured lending and borrowing and Note 40 Assets pledged. Continuing involvement in financial assets that have been derecognised In some cases, the Group may have transferred a financial asset in its entirety but may have continuing involvement in it. This arises in asset securitisations where loans and asset backed securities were derecognised as a result of the Group’s continuing involvement, mainly withinNon-Core, with CLOs, CDOs, RMBS and CMBS. Continuing involvement largely arises from providing financing into these structures in the form of retained notes, which do not bear first losses. The table below shows the potential financial implications of such continuing involvement: | | |
| Continuing involvement as at
31 December 2015 |
| | | Gain/(loss) from continuing involvement | | |
| Continuing involvement as at
31 December 2016 |
| |
| Gain/(loss) from continuing
involvement |
| Type of transfer | | | Carrying amount £m | | | | Fair value £m | | | | Maximum exposure to loss £m | | |
| For the year ended 31 December 2015
£m |
| |
| Cumulative to 31 December 2015
£m |
| |
| Carrying
amount £m |
| |
| Fair value
£m |
| |
| Maximum
exposure to loss £m |
| |
| For the year
ended 31 December 2016 £m |
| |
| Cumulative
to 31 December 2016 £m |
| CLO and other assets | | | 686 | | | | 684 | | | | 686 | | | | 7 | | | | (36 | ) | | | 10 | | | | 10 | | | | 10 | | | | – | | | | (3 | ) | US sub-prime and Alt-A | | | 38 | | | | 37 | | | | 38 | | | | – | | | | (426 | ) | | | – | | | | – | | | | – | | | | – | | | | (95 | ) | Commercial mortgage backed securities | | | – | | | | – | | | | – | | | | – | | | | – | | | Total | | | 724 | | | | 721 | | | | 724 | | | | 7 | | | | (462 | ) | | | 10 | | | | 10 | | | | 10 | | | | – | | | | (98 | ) | | | | | | | | | | | | | | | |
| Continuing involvement as at
31 December 2015 |
| |
| Gain/(loss) from continuing involvement | | Type of transfer | | |
| Carrying
amount £m |
| |
| Fair value
£m |
| |
| Maximum
exposure to loss £m |
| |
| For the year
ended 31 December 2015 £m |
| |
| Cumulative
to 31 December 2015 £m |
| CLO and other assets | | | | 686 | | | | 684 | | | | 686 | | | | 7 | | | | (36 | ) | USsub-prime andAlt-A | | | | 38 | | | | 37 | | | | 38 | | | | – | | | | (426 | ) | Total | | | | 724 | | | | 721 | | | | 724 | | | | 7 | | | | (462 | ) |
Note a | Corporate loans and retained interest in corporate loans balances as at December 2015 were attributable to BAGL which is classified as held for sale in 2016. |
| | | 292300 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
+39 Securitisationscontinued
Assets which represent the Group’s continuing involvement in derecognised assets are recorded in the following line items: | | | | | | | | | | | | | | | | | | | | | | |
| Continuing involvement as at
31 December 2014 |
| | | Gain/(loss) from continuing involvement | | Type of transfer | | | Carrying amount £m | | | | Fair value £m | | |
| Maximum exposure to loss
£m |
| |
| For the year ended 31 December 2014
£m |
| |
| Cumulative to 31 December 2014
£m |
| CLO and other assets | | | 1,370 | | | | 1,354 | | | | 1,370 | | | | 14 | | | | (720 | ) | US sub-prime and Alt-A | | | 208 | | | | 195 | | | | 208 | | | | – | | | | (1,365 | ) | Commercial mortgage backed securities | | | 200 | | | | 200 | | | | 200 | | | | 15 | | | | (8 | ) | Total | | | 1,778 | | | | 1,749 | | | | 1,778 | | | | 29 | | | | (2,093 | ) | | Assets which represent the Group’s continuing involvement in derecognised assets are recorded in the following line items: | | Type of transfer | | | | | | | | | | | Loans and advances £m | | |
| Trading portfolio assets
£m |
| |
| Total
£m |
| As at 31 December 2015 | | | | | | | | | | | | | | | | | | | | | CLO and other assets | | | | | | | | | | | 327 | | | | 359 | | | | 686 | | US sub-prime and Alt-A | | | | | | | | | | | 38 | | | | – | | | | 38 | | Commercial mortgage backed securities | | | | | | | | | | | – | | | | – | | | | – | | Total | | | | | | | | | | | 365 | | | | 359 | | | | 724 | | | | | | | | As at 31 December 2014 | | | | | | | | | | | | | | | | | | | | | CLO and other assets | | | | | | | | | | | 829 | | | | 541 | | | | 1,370 | | US sub-prime and Alt-A | | | | | | | | | | | 200 | | | | 8 | | | | 208 | | Commercial mortgage backed securities | | | | | | | | | | | – | | | | 200 | | | | 200 | | Total | | | | | | | | | | | 1,029 | | | | 749 | | | | 1,778 | |
| | | | | | | | | | | | | Type of transfer | |
| Loans and
advances £m |
| |
| Trading
portfolio assets £m |
| |
| Total
£m |
| As at 31 December 2016 | | | | | | | | | | | | | CLO and other assets | | | – | | | | 10 | | | | 10 | | USsub-prime andAlt-A | | | – | | | | – | | | | – | | Total | | | – | | | | 10 | | | | 10 | | As at 31 December 2015 | | | | | | | | | | | | | CLO and other assets | | | 327 | | | | 359 | | | | 686 | | USsub-prime andAlt-A | | | 38 | | | | – | | | | 38 | | Total | | | 365 | | | | 359 | | | | 724 | |
40 Assets pledged Assets are pledged as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as collateral posted against derivative margin requirements.security deposits relating to derivatives. Assets pledged as collateral include all assets categorised as encumbered in the disclosure on pages 162 to 164,page 168, other than those held in commercial paper conduits. In these transactions, Barclays will be required to step in to provide financing itself under a liquidity facility if the vehicle cannot access the commercial paper market. The following table summarises the nature and carrying amount of the assets pledged as security against these liabilities: | | |
| 2015
£m |
| |
| 2014
£m | a
| |
| 2016
£m |
| |
| 2015
£m |
| Trading portfolio assets | | | 49,308 | | | | 50,782 | | | | 51,241 | | | | 49,308 | | Financial assets designated at fair value | | | 2,534 | | | | 2,324 | | | Financial assets at fair value | | | | 3,195 | | | | 2,534 | | Loans and advances to customers | | | 51,038 | | | | 62,459 | | | | 30,414 | | | | 51,038 | | Cash collateral | | | 62,599 | | | | 72,562 | | | | 68,797 | | | | 62,599 | | Available for sale financial investments | | | 11,666 | | | | 8,732 | | | Financial Investments | | | | 13,053 | | | | 11,666 | | Non current assets held for sale | | | 1,930 | | | | 4,693 | | | | 117 | | | | 1,930 | | Assets pledged | | | 179,075 | | | | 201,552 | | | | 166,817 | | | | 179,075 | |
Barclays has an additional £13bn (2014: £9bn)£14bn (2015: £13bn) of loans and advances within its asset backed funding programmes that can readily be used to raise additional secured funding and are available to support future issuance. Collateral held as security for assets Under certain transactions, including reverse repurchase agreements and stock borrowing transactions, the Group is allowed to resell orre-pledge the collateral held. The fair value at the balance sheet date of collateral accepted andre-pledged to others was as follows: | | |
| 2015
£m |
| |
| 2014
£m |
| |
| 2016
£m |
| |
| 2015
£m |
| Fair value of securities accepted as collateral | | | 308,162 | | | | 396,480 | | | | 466,975 | | | | 308,162 | | Of which fair value of securities re-pledged/transferred to others | | | 266,015 | | | | 313,354 | | | | 405,582 | | | | 266,015 | |
The full disclosure as per IFRS 7 has been included in collateral and other credit enhancements (seesee pages 113119 to 114). Note
a 2014 has been revised to align balance sheet categories to the asset encumbrance table on page 163.120.
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 293301 |
Notes to the financial statements Other disclosure matters The notes included in this section focusfocuses on related party transactions, auditors’Auditors’ remuneration and Directors’directors’ remuneration. Related parties include any subsidiaries, associates, joint ventures, entities under common directorships and Key Management Personnel. 41 Related party transactions and Directors’ remuneration 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 operational decisions, or one other party controls both. The definition includes subsidiaries, associates, joint ventures and the Group’s pension schemes. Subsidiaries Transactions between Barclays PLC and its 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 Barclays PLC’s balance sheet and income statement. A list of the Group’s principal subsidiaries is shown in Note 36. 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 andnon-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, which are not individually material. All of these transactions are conducted on the same terms as third partythird-party transactions. Summarised financial information for the Group’s investments in associates and joint ventures is set out in Note 38. Amounts included in the Group’s financial statements, in aggregate, by category of related party entity are as follows: | | | | | | | | | Pension | |
| Associates
£m |
| |
| Joint
ventures £m |
| | Pension funds, unit trusts and investment funds £m | | | | | | | | | Entities | | | funds, unit | | | | | | | | | | under | | | trusts and | | | | | | | Joint | | | common | | | investment | | | | Associates | | | ventures | | | directorships | | | funds | | | | | £m | | | | £m | | | | £m | | | £m | | For the year ended and as at 31 December 2016 | | | | | | | | Income | | | | (20 | ) | | | 7 | | | 4 | Impairment | | | | (13 | ) | | | – | | | – | Total assets | | | | 72 | | | | 2,244 | | | – | Total liabilities | | | | 94 | | | | 95 | | | 260 | For the year ended and as at 31 December 2015 | | | | | | | | | | | | | | | Income | | | (19) | | | | 40 | | | | (4) | | | 4 | | | (19 | ) | | | 40 | | | 4 | Impairment | | | (4) | | | | (2) | | | | – | | | – | | | (4 | ) | | | (2 | ) | | – | Total assets | | | 36 | | | | 1,578 | | | | 116 | | | – | | | 36 | | | | 1,578 | | | – | Total liabilities | | | 158 | | | | 133 | | | | 6 | | | 184 | | | 158 | | | | 133 | | | 184 | For the year ended and as at 31 December 2014 | | | | | | | | | | | | | | | Income | | | (5) | | | | 9 | | | | 51 | | | 4 | | | (5 | ) | | | 9 | | | 4 | Impairment | | | – | | | | (1) | | | | – | | | – | | | – | | | | (1 | ) | | – | Total assets | | | 130 | | | | 1,558 | | | | 219 | | | – | | | 130 | | | | 1,558 | | | – | Total liabilities | | | 264 | | | | 188 | | | | 36 | | | 149 | | | 264 | | | | 188 | | | 149 | For the year ended and as at 31 December 2013 | | | | | | | | | | Income | | | (10) | | | | 24 | | | | 1 | | | 3 | | Impairment | | | (3) | | | | (4) | | | | – | | | – | | Total assets | | | 116 | | | | 1,521 | | | | 33 | | | 5 | | Total liabilities | | | 278 | | | | 185 | | | | 73 | | | 207 | |
Guarantees, pledges or commitments given in respect of these transactions in the year were £881m (2014: £911m)£940m (2015: £881m) predominantly relating to joint ventures. No guarantees, pledges or commitments were received in the year. Derivatives transacted on behalf of the pensionpensions funds, unit trusts and investment funds were £13m (2014: £587m)£3m (2015: £13m). 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 and functions. 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. | | | 294302 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
41 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 were as follows: | | | | | | | Loans outstanding | | | | | | | | | | 2015 | | | 2014 | | | | £m | | | £m | As at 1 January | | | 11.4 | | | 13.4 | Loans issued during the year | | | 1.1 | | | 1.3 | Loan repayments during the year | | | (2.7) | | | (3.3) | As at 31 December | | | 9.8 | | | 11.4 |
No allowances for impairment were recognised in respect of loans to Directors or other members of Key Management Personnel (or any connected person).
| | | | | | | Deposits outstanding | | | | | | | | | | 2015 | | | 2014 | | | | £m | | | £m | As at 1 January | | | 103.0 | | | 100.2 | Deposits received during the year | | | 44.8 | | | 25.7 | Deposits repaid during the year | | | (31.3) | | | (22.9) | As at 31 December | | | 116.5 | | | 103.0 |
Total commitments outstanding
Total commitments outstanding refers to the total of any undrawn amounts on credit cards and/or overdraft facilities provided to Key Management Personnel. Total commitments outstanding as at 31 December 2015 were £0.5m (2014: £1.3m).
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.
| | | | | | | | | Loans outstanding | | | | | | | | | | | | 2016 | | | | 2015 | | | | | £m | | | | £m | | As at 1 January | | | 9.8 | | | | 11.4 | | Loans issued during the year | | | 0.6 | | | | 1.1 | | Loan repayments during the year/change of key management personnel | | | (1.2 | ) | | | (2.7 | ) | As at 31 December | | | 9.2 | | | | 9.8 | | | No allowances for impairment were recognised in respect of loans to Directors or other members of Key Management Personnel (or any connected person). | | | | | | | | | | | Deposits outstanding | | | | | | | | | | | | 2016 | | | | 2015 | | | | | £m | | | | £m | | As at 1 January | | | 116.5 | | | | 103.0 | | Deposits received during the year | | | 18.9 | | | | 44.8 | | Deposits repaid during the year/change of key management personnel | | | (128.1 | ) | | | (31.3 | ) | As at 31 December | | | 7.3 | | | | 116.5 | | Total commitments outstanding Total commitments outstanding refers to the total of any undrawn amounts on credit cards and/or overdraft facilities provided to Key Management Personnel. Total commitments outstanding as at 31 December 2016 were £0.2m (2015: £0.5m). 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. Remuneration of Directors and other Key Management Personnel Total remuneration awarded to Directors and other Key Management Personnel below represents the awards made to individuals that have been approved by the Board Remuneration Committee as part of the latest remuneration decisions, and is consistent with the approach adopted for disclosures set out on pages 5051 to 83.85. Costs recognised in the income statement reflect the accounting charge for the year and are 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. Figures are provided for the period that individuals met the definition of Directors and other Key Management Personnel. | | | | | | | | | | | 2015 | | | 2014 | | | | £m | | | £m | Salaries and other short-term benefits | | | 31.3 | | | 28.3 | Pension costs | | | 0.3 | | | 0.3 | Other long-term benefits | | | 4.7 | | | 8.1 | Share-based payments | | | 11.0 | | | 15.0 | Employer social security charges on emoluments | | | 5.2 | | | 5.8 | Costs recognised for accounting purposes | | | 52.5 | | | 57.5 | Employer social security charges on emoluments | | | (5.2) | | | (5.8) | Other long-term benefits – difference between awards granted and costs recognised | | | 2.5 | | | (4.3) | Share-based payments – difference between awards granted and costs recognised | | | (2.3) | | | (8.4) | Total remuneration awarded | | | 47.5 | | | 39.0 |
| | | | | | | | | | | | | 2016 | | | | 2015 | | | | | £m | | | | £m | | Salaries and other short-term benefits | | | 31.9 | | | | 31.3 | | Pension costs | | | 0.2 | | | | 0.3 | | Other long-term benefits | | | 11.0 | | | | 4.7 | | Share-based payments | | | 21.9 | | | | 11.0 | | Employer social security charges on emoluments | | | 6.2 | | | | 5.2 | | Costs recognised for accounting purposes | | | 71.2 | | | | 52.5 | | Employer social security charges on emoluments | | | (6.2 | ) | | | (5.2 | ) | Other long-term benefits – difference between awards granted and costs recognised | | | (2.5 | ) | | | 2.5 | | Share-based payments – difference between awards granted and costs recognised | | | (8.9 | ) | | | (2.3 | ) | Total remuneration awarded | | | 53.6 | | | | 47.5 | | Disclosure required by the Companies Act 2006 The following information regarding Directors is presented in accordance with the Companies Act 2006: | | | | | | | | | | | 2015 | | | 2014 | | | | £m | | | £m | Aggregate emolumentsa | | | 7.0 | | | 7.8 | Amounts paid under LTIPsb | | | 2.2 | | | – | | | | 9.2 | | | 7.8 |
There were no pension contributions paid to defined contribution schemes on behalf of Directors (2014: nil). There were no notional pension contributions to defined contribution schemes.
As at 31 December 2015, there were no Directors accruing benefits under a defined benefit scheme (2014: nil).
Notes
a | The aggregate emoluments include amounts paid for the 2015 year. In addition, deferred share awards for 2015 will be made to Antony Jenkins and Tushar Morzaria which will only vest subject to meeting certain conditions. The total of the deferred share awards is £0.7m (£1.2m for 2014). |
b | The figure shown for 2015 in ‘Amounts paid under long-term incentive schemes’ is the amount that was released in 2015 in respect of the 2012-2014 Barclays Long Term Incentive Plan (‘LTIP’) cycle. The LTIP amount in the single total figure table for executive Directors’ 2015 remuneration in the Directors’ Remuneration report relates to the award that is scheduled to be released in 2016 in respect of the 2013-2015 LTIP cycle. |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 295 |
Notes to the financial statements
Other disclosure matters
| | | | | | | | | | | | | 2016 | | | | 2015 | | | | | £m | | | | £m | | Aggregate emolumentsa | | | 8.1 | | | | 7.0 | | Amounts paid under LTIPsb | | | – | | | | 2.2 | | | | | 8.1 | | | | 9.2 | |
There were no pension contributions paid to defined contribution schemes on behalf of Directors (2015: £nil). There were no notional pension contributions to defined contribution schemes. As at 31 December 2016, there were no Directors accruing benefits under a defined benefit scheme (2015: nil). Notes a | The aggregate emoluments include amounts paid for the 2016 year. In addition, a deferred share award for 2016 will be made to James E Staley and Tushar Morzaria which will only vest subject to meeting certain conditions. The total of the deferred share awards is £1.4m for 2016 (£0.7m for 2015). |
b | The figure of nil is shown for 2016 in “Amounts paid under LTIPs” because neither executive Director held an LTIP award that was released in 2016. The LTIP amount in the single total figure table for executive Directors’ 2016 remuneration in the Directors’ Remuneration report relates to the award that is scheduled to be released in 2017 in respect of the 2014-2016 LTIP cycle. |
41 Related party transactions and Directors’ remunerationcontinued
Directors’ and Officers’ shareholdings and options
The beneficial ownership of ordinary share capital of
| | | | | Barclays PLC by all Directors and Officers of Barclays Bank PLC (involving 26 persons) at 31 December 2015 amounted to 10,586,812 (2014: 9,078,157) ordinary shares of 25p each (0.06%2016 Annual Report on Form 20-F | 303 |
Notes to the financial statements Other disclosure matters 41 Related party transactions and Directors’ remunerationcontinued Directors’ and Officers’ shareholdings and options The beneficial ownership of ordinary share capital of Barclays PLC by all Directors and Officers of Barclays PLC (involving 24 persons) at 31 December 2016 amounted to 11,464,580 (2015: 10,586,812) ordinary shares of 25p each (0.07% of the ordinary share capital outstanding). At 31 December 2016, executive Directors and officers of Barclays PLC (involving 13 persons) held options to purchase a total of 22,527 (2015: 17,206) Barclays PLC ordinary shares of 25p each at prices ranging from 120p to 178p under Sharesave. Advances and credit to Directors and guarantees on behalf of Directors In accordance with Section 413 of the Companies Act 2006, the total amount of advances and credits made available in 2016 to persons who served as Directors during the year was £0.2m (2015: £0.3m). The total value of guarantees entered into on behalf of Directors during 2016 was £nil (2015:£nil). 42 Auditors’ remuneration Auditors’ remuneration is included within consultancy, legal and professional fees in administration and general expenses and comprises: | | | | | | | | | | | | | | | | | | | | | | |
| Audit £m | | |
| Audit related £m | | |
| Taxation services £m | | |
| Other services £m | | |
| Total £m | | 2016 | | | | | | | | | | | | | | | | | | | | | Audit of the Group’s annual accounts | | | 14 | | | | – | | | | – | | | | – | | | | 14 | | Other services: | | | | | | | | | | | | | | | | | | | | | Fees payable for the Company’s associatesa | | | 27 | | | | – | | | | – | | | | – | | | | 27 | | Other services suppliedb | | | – | | | | 3 | | | | – | | | | – | | | | 3 | | Other services relating to taxation | | | | | | | | | | | | | | | | | | | | | – compliance services | | | – | | | | – | | | | – | | | | – | | | | – | | – advisory servicesc | | | – | | | | – | | | | – | | | | – | | | | – | | Other | | | – | | | | 1 | | | | – | | | | 4 | | | | 5 | | Total Auditors’ remuneration | | | 41 | | | | 4 | | | | – | | | | 4 | | | | 49 | | | | | | | | 2015 | | | | | | | | | | | | | | | | | | | | | Audit of the Group’s annual accounts | | | 13 | | | | – | | | | – | | | | – | | | | 13 | | Other services: | | | | | | | | | | | | | | | | | | | | | Fees payable for the Company’s associatesa | | | 21 | | | | – | | | | – | | | | – | | | | 21 | | Other services suppliedb | | | – | | | | 3 | | | | – | | | | – | | | | 3 | | Other services relating to taxation | | | | | | | | | | | | | | | | | | | | | – compliance services | | | – | | | | – | | | | 1 | | | | – | | | | 1 | | – advisory servicesc | | | – | | | | – | | | | – | | | | – | | | | – | | Other | | | – | | | | 4 | | | | – | | | | 1 | | | | 5 | | Total Auditors’ remuneration | | | 34 | | | | 7 | | | | 1 | | | | 1 | | | | 43 | | | | | | | | 2014 | | | | | | | | | | | | | | | | | | | | | Audit of the Group’s annual accounts | | | 11 | | | | – | | | | – | | | | – | | | | 11 | | Other services: | | | | | | | | | | | | | | | | | | | | | Fees payable for the Company’s associatesa | | | 24 | | | | – | | | | – | | | | – | | | | 24 | | Other services suppliedb | | | – | | | | 4 | | | | – | | | | – | | | | 4 | | Other services relating to taxation | | | | | | | | | | | | | | | | | | | | | – compliance services | | | – | | | | – | | | | 1 | | | | – | | | | 1 | | – advisory servicesc | | | – | | | | – | | | | – | | | | – | | | | – | | Other | | | – | | | | 3 | | | | – | | | | 1 | | | | 4 | | Total Auditors’ remuneration | | | 35 | | | | 7 | | | | 1 | | | | 1 | | | | 44 | |
The figures shown in the above table relate to fees paid to PricewaterhouseCoopers LLP and its associates, of which the fees paid in relation to discontinued operations were £12m (2015: £10m, 2014: £10m). At 31 December 2015, executive Directors and officers of Barclays PLC (involving 32 persons) held options to purchase a total of 17,206 (2014: 30,398) Barclays PLC ordinary shares of 25p each at prices ranging from 133.01p to 178p under Sharesave.
Advances and credit to Directors and guarantees on behalf of Directors
In accordance with Section 413 of the Companies Act 2006, the total amount of advances and credits made available in 2015 to persons who served as Directors during the year was £0.3m (2014: £0.4m). The total value of guarantees entered into on behalf of Directors during 2015 was nil (2014: nil).
42 Auditors’ remuneration
Auditors’ remuneration is included within consultancy, legal and professional fees in administration and general expenses and comprises:
| | | | | | | | | | | | | | | | | | | | | | | | | | Audit | | | | Taxation | | | | Other | | | | | | Audit | | | related | | | services | | | services | | | Total | | | | £m | | | | £m | | | | £m | | | | £m | | | £m | 2015 | | | | | | | | | | | | | | | | | | | Audit of the Group’s annual accounts | | | 13 | | | | – | | | | – | | | | – | | | 13 | Other services: | | | | | | | | | | | | | | | | | | | Fees payable for the Company’s associatesa | | | 21 | | | | – | | | | – | | | | – | | | 21 | Other services suppliedb | | | – | | | | 3 | | | | – | | | | – | | | 3 | Other services relating to taxation | | | | | | | | | | | | | | | | | | | – compliance services | | | – | | | | – | | | | 1 | | | | – | | | 1 | – advisory servicesc | | | – | | | | – | | | | – | | | | – | | | – | Other | | | – | | | | 4 | | | | – | | | | 1 | | | 5 | Total auditors’ remuneration | | | 34 | | | | 7 | | | | 1 | | | | 1 | | | 43 | | | | | | | 2014 | | | | | | | | | | | | | | | | | | | Audit of the Group’s annual accounts | | | 11 | | | | – | | | | – | | | | – | | | 11 | Other services: | | | | | | | | | | | | | | | | | | | Fees payable for the Company’s associatesa | | | 24 | | | | – | | | | – | | | | – | | | 24 | Other services suppliedb | | | – | | | | 4 | | | | – | | | | – | | | 4 | Other services relating to taxation | | | | | | | | | | | | | | | | | | | – compliance services | | | – | | | | – | | | | 1 | | | | – | | | 1 | – advisory servicesc | | | – | | | | – | | | | – | | | | – | | | – | Other | | | – | | | | 3 | | | | – | | | | 1 | | | 4 | Total auditors’ remuneration | | | 35 | | | | 7 | | | | 1 | | | | 1 | | | 44 | | | | | | | 2013 | | | | | | | | | | | | | | | | | | | Audit of the Group’s annual accounts | | | 10 | | | | – | | | | – | | | | – | | | 10 | Other services: | | | | | | | | | | | | | | | | | | | Fees payable for the Company’s associatesa | | | 25 | | | | – | | | | – | | | | – | | | 25 | Other services suppliedb | | | – | | | | 3 | | | | – | | | | – | | | 3 | Other services relating to taxation | | | | | | | | | | | | | | | | | | | – compliance services | | | – | | | | – | | | | 2 | | | | – | | | 2 | – advisory servicesc | | | – | | | | – | | | | – | | | | – | | | – | Other | | | – | | | | 3 | | | | – | | | | 2 | | | 5 | Total auditors’ remuneration | | | 35 | | | | 6 | | | | 2 | | | | 2 | | | 45 |
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 discontinued operations were £5m (2015: £4m, 2014: £4m).
43 Financial risks, liquidity and capital management To improve transparency and ease of reference, by concentrating related information in one place, and to reduce duplication, disclosures required under IFRS relating to financial risks and capital resources have been included within the Risk management and governance section as follows: § | | Credit risk, on pages 116 to 140; |
§ | | Market risk, on pages 141 to 151; |
§ | | Capital resources, on pages 152 to 158; and |
§ | | Liquidity risk, on pages 159 to 177. |
Notes a | Comprises the fees for the statutory audit of the subsidiaries both inside and outside UK and fees for the work performed by associates of PricewaterhouseCoopers LLP in respect of the auditconsolidated financial statements of the Company’s subsidiaries were £4m (2014: £4m, 2013: £5m).Notes
a | Comprises 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 associates of PricewaterhouseCoopers LLP in respect of the consolidated financial statements of the Company. Fees relating to the audit of the associated pension schemes were nil (2014: £0.2m).Company. |
b | Comprises 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. |
c | Includes consultation on tax matters, tax advice relating to transactions and other tax planning and advice. |
| b | Comprises 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. |
c | Includes consultation on tax matters, tax advice relating to transactions and other tax planning and advice. |
| | | 296 | Barclays PLC and Barclays Bank PLC 2015 | 304 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
44 Assets included in disposal groups classified as held for sale and associated liabilities | 43 Financial risks, liquidity and capital managementAccounting fornon-current
To improve transparency and ease of reference, by concentrating related information in one place, and to reduce duplication, disclosures required under IFRS relating to financial risks and capital resources have been included within the Risk management and governance section as follows:
§ | | Credit risk, on pages 111 to 137 |
§ | | Market risk, on pages 138 to 147 |
§ | | Capital risk, on pages 148 to 153 |
§ | | Liquidity risk, on pages 154 to 171. |
44 Non-current assets held for sale and associated liabilities
| Accounting for non-current assets held for sale and associated liabilitiesThe group applies IFRS 5Non-current Assets Held for Sale and Discontinued Operations. Non-current The Group applies IFRS 5Non-current Assets Held for Sale and Discontinued Operations.
Non-current assets (or disposal groups) are classified as held for sale when their carrying amount is to be recovered principally through a sale transaction rather than continuing use. In order to be classified as held for sale, the asset must be available for immediate sale in its present condition subject only to terms that are usual and customary and the sale must be highly probable. Non-current assets (or disposal groups) held for sale are measured at the lower of carrying amount and fair value less cost to sell.
|
| | | | | | | | | | | | | | | | | | | | | | | | | Assets classified as held for sale | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portugal 2015
£m |
| |
| BVP
2015 £m |
| |
| Italy
2015 £m |
| | | Other 2015 £m | | |
| Total 2015
£m |
| |
| Total
2014 £m |
| Available for sale financial investments | | | 7 | | | | 1,220 | | | | – | | | | 3 | | | | 1,230 | | | | 162 | | Loans and advances to customers | | | 3,407 | | | | – | | | | 2,091 | | | | 15 | | | | 5,513 | | | | 14,943 | | Property, plant and equipment | | | 42 | | | | – | | | | – | | | | 86 | | | | 128 | | | | 92 | | Deferred tax assets | | | – | | | | 22 | | | | – | | | | – | | | | 22 | | | | 291 | | Other assets | | | 28 | | | | 756 | | | | 27 | | | | 104 | | | | 915 | | | | 557 | | Total | | | 3,484 | | | | 1,998 | | | | 2,118 | | | | 208 | | | | 7,808 | | | | 16,045 | | Balance of impairment unallocated under IFRS 5 | | | (180 | ) | | | (22 | ) | | | (242 | ) | | | – | | | | (444 | ) | | | (471 | ) | Total agreed to consolidated balance sheet | | | 3,304 | | | | 1,976 | | | | 1,876 | | | | 208 | | | | 7,364 | | | | 15,574 | | | | | | | | | | | | | | | | | | | | | | | | | | | Liabilities classified as held for sale | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Portugal 2015
£m |
| |
| BVP
2015 £m |
| |
| Italy
2015 £m |
| | | Other 2015 £m | | |
| Total 2015
£m |
| |
| Total
2014 £m |
| Deposits from banks | | | – | | | | – | | | | – | | | | – | | | | – | | | | (4,313 | ) | Customer accounts | | | (1,826 | ) | | | – | | | | (2,174 | ) | | | – | | | | (4,000 | ) | | | (6,827 | ) | Repurchase agreements and other similar secured borrowing | | | – | | | | – | | | | – | | | | – | | | | – | | | | (77 | ) | Other liabilities | | | (37 | ) | | | (1,858 | ) | | | (66 | ) | | | (36 | ) | | | (1,997 | ) | | | (1,898 | ) | Total | | | (1,863 | ) | | | (1,858 | ) | | | (2,240 | ) | | | (36 | ) | | | (5,997 | ) | | | (13,115 | ) |
Sale of the Portuguese business
The disposal group includes all assets and liabilities of the Portuguese Retail Banking, Wealth and Investment Management businesses and part of the Portuguese Corporate banking business. This sale is part of the divestment of the Non-Core segment of the Group.
The Portuguese disposal was announced on 2 September 2015 and the sale is due to complete in Q116. A loss of £180m has been recognised in the income statement within (loss)/profit on disposal of subsidiaries, associates and joint ventures.
Sale of Barclays Vida Y Pensiones
The disposal group includes all assets and liabilities of Barclays Vida Y Pensiones (BVP), a company offering life insurance, pension products and services in Spain, Portugal and Italy. BVP was classified as held for sale in the first half of 2015 andwhen their carrying amount is expected to be soldrecovered principally through a sale transaction rather than continuing use. In order to be classified as held for sale, the asset must be available for immediate sale in the first half of 2016. A loss of £22m has been recognised in the income statement within (loss)/profit on disposal of subsidiaries, associatesits present condition subject only to terms that are usual and joint ventures.
Sale of the Italian business
The disposal group includes the assets and liabilities of the Italian Retail Banking business including mortgages. This sale is part of the divestment of the Non-Core segment of the Group.
The Italian disposal was announced on 3 December 2015customary and the sale is expected to complete in the first half of 2016. A loss of £258m has been recognised in the income statement within (loss)/profit onmust be highly probable.Non-current assets (or disposal of subsidiaries, associates and joint ventures.
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 297 |
Notes to the financial statements
Other disclosure matters
44 Non-current assetsgroups) held for sale are measured at the lower of carrying amount and associated liabilitiescontinuedfair value less cost to sell.
Other held for sale assets
Other assets
|
On 1 March 2016, Barclays announced its intention to reduce the Group’s 62.3% interest in BAGL. This reduction is intended to be to a level which will permit deconsolidation from an accounting and regulatory perspective for which approval was granted by shareholders at the Group’s general meeting held on 28 April 2016. On 5 May 2016 Barclays sold 12.2% of the Group’s interest in BAGL resulting in a transfer tonon-controlling interests of £601m. Following this sale, Barclays’ interest represents 50.1% of BAGL’s share capital. The BAGL disposal group includes all assets and liabilities of BAGL and its subsidiaries as well as Group balances associated with BAGL and expected contributions that will form part of the sale. No impairment for BAGL has been recognised under IFRS 5 as at 31 December 2016. Impairment under IFRS 5 is calculated as the difference between fair value less disposal costs and the carrying value of the disposal group. The fair value is determined by reference to the quoted market price for BAGL and the foreign exchange rate for ZAR/GBP as at 31 December 2016, less the expected contributions. The fair value less disposal costs and the expected contribution exceeds the Barclays Risk Analysis Index Solutions business. A pre-tax gain of approximately £480m is expected to be recognised on completion during 2016. During the year, a number of held for sale assets have been disposed of. The sale of the Spanish business (Barclays Bank SAU) took place in January 2015. Losses of £446m in 2014 and £117m in 2015 have been recognised in the income statement within (loss)/profit on disposal of subsidiaries, associates and joint ventures. Of the 2015 loss, £97m relates to recycling of the related currency translation reserve with the remainder due to revision of the estimated closing net asset value as at 31 December 2016.
Barclays continues to explore a sale through the disposal of its shares in BAGL during the course of 2017. | | | | | | | | | | | | | | | | | Assets included in disposal groups classified as held for sale | | | | | | | | | | | | | | | | | | |
| BAGL 2016
£m |
| |
| Other 2016 £m | | |
| Total 2016
£m |
| |
| Total 2015 £m | | Cash and balances at central banks | | | 2,689 | | | | 241 | | | | 2,930 | | | | 21 | | Items in the course of collection from other banks | | | 549 | | | | 21 | | | | 570 | | | | 24 | | Trading portfolio assets | | | 3,044 | | | | 40 | | | | 3,084 | | | | – | | Financial assets designated at fair value | | | 5,546 | | | | 1,438 | | | | 6,984 | | | | 696 | | Derivative financial instruments | | | 1,992 | | | | – | | | | 1,992 | | | | – | | Financial investments | | | 4,995 | | | | 2,742 | | | | 7,737 | | | | 1,230 | | Loans and advances to banks | | | 1,184 | | | | 482 | | | | 1,666 | | | | 74 | | Loans and advances to customers | | | 41,793 | | | | 1,711 | | | | 43,504 | | | | 5,513 | | Prepayments, accrued income and other assets | | | 637 | | | | 59 | | | | 696 | | | | 47 | | Investments in associates and joint ventures | | | 63 | | | | 24 | | | | 87 | | | | 10 | | Property, plant and equipment | | | 902 | | | | 52 | | | | 954 | | | | 128 | | Goodwill | | | 965 | | | | 32 | | | | 997 | | | | – | | Intangible assets | | | 554 | | | | 16 | | | | 570 | | | | 43 | | Current and deferred tax assets | | | 124 | | | | 25 | | | | 149 | | | | 22 | | Retirement benefit assets | | | 33 | | | | – | | | | 33 | | | | – | | Total | | | 65,070 | | | | 6,883 | | | | 71,953 | | | | 7,808 | | Balance of impairment unallocated under IFRS 5 | | | | | | | (499 | ) | | | (499 | ) | | | (444 | ) | Total assets classified as held for sale | | | 65,070 | | | | 6,384 | | | | 71,454 | | | | 7,364 | | | | | | | | | | | | | | | | | | | Liabilities included in disposal groups classified as held for sale | | | | | | | | | | | | | | | | | | |
| BAGL 2016
£m |
| |
| Other 2016
£m |
| |
| Total 2016
£m |
| |
| Total 2015
£m |
| Deposits from banks | | | 2,113 | | | | 36 | | | | 2,149 | | | | – | | Items in the course of collection due to banks | | | 350 | | | | 23 | | | | 373 | | | | 74 | | Customer accounts | | | 39,331 | | | | 3,100 | | | | 42,431 | | | | 4,000 | | Repurchase agreements and other similar secured borrowing | | | 597 | | | | – | | | | 597 | | | | – | | Trading portfolio liabilities | | | 388 | | | | – | | | | 388 | | | | – | | Financial liabilities designated at fair value | | | 3,748 | | | | 3,577 | | | | 7,325 | | | | 346 | | Derivative financial instruments | | | 1,610 | | | | 1 | | | | 1,611 | | | | 3 | | Debt securities in issue | | | 7,997 | | | | – | | | | 7,997 | | | | 1,474 | | Subordinated liabilities | | | 934 | | | | – | | | | 934 | | | | – | | Accruals, deferred income and other liabilities | | | 1,061 | | | | 119 | | | | 1,180 | | | | 39 | | Provisions | | | 52 | | | | 51 | | | | 103 | | | | 34 | | Current and deferred tax liabilities | | | 154 | | | | 8 | | | | 162 | | | | (6 | ) | Retirement benefit liabilities | | | 26 | | | | 16 | | | | 42 | | | | 33 | | Total liabilities classified as held for sale | | | 58,361 | | | | 6,931 | | | | 65,292 | | | | 5,997 | | | | | | | | | | | | | | | | | | | Net assets/(liabilities) classified as held for salea | | | 6,709 | | | | (547 | ) | | | 6,162 | | | | 1,367 | | Expected BAGL separation payments and costsb,c | | | 866 | | | | – | | | | 866 | | | | – | | Disposal group post contribution | | | 7,575 | | | | (547 | ) | | | 7,028 | | | | 1,367 | |
Notes a | The carrying value of the disposal group on completion.is stated after the elimination of internal balances between Barclays and BAGL of £595m. Internal balances have been considered in determining the carrying value of BAGL (of £7.3bn before the planned contributions in respect of BAGL) for the purposes of measuring the disposal group at the lower of carrying amount and fair value less costs to sell. |
b | In December 2016, Barclays finalised proposals regarding planned contributions to the BAGL group relating to the reimbursement of certain expenses as well as contributions for investment to support separation activities. The salecash and cash equivalents to make these planned contributions is included within the perimeter of the Pakistan business took placedisposal group, also for the purposes of measuring the disposal group at the lower of carrying amount and fair value less costs to sell. The planned contributions are reported within Cash and balances at central banks in June 2015,the Group’s consolidated balance sheet. |
c | In December 2016, Barclays reimbursed BAGL for expenses incurred for an amount of £28m. This amount is excluded from the proposed overall potential reimbursement and UKSL in September 2015 with gainscontribution figure of £14m and £7m respectively recognised in other income.£866m. |
45 | | | | | Barclays PLC (the Parent Company)Other income/(expense)
Other income of £227m (2014: £275m) includes £345m (2014: £250m) of income received from gross coupon payments onand Barclays Bank PLC issued AT1 securities partially offset by a £114m fair value loss (2014: £27m gain)2016 Annual Report on derivative financial instruments.Form 20-F | 305
|
Notes to the financial statements Other disclosure matters 44 Assets included in disposal groups classified as held for sale and associated liabilitiescontinued The BAGL disposal group meets the requirements for presentation as a discontinued operation. As such, the results, which have been presented as the profit after tax andnon-controlling interest in respect of the discontinued operation on the face of the Group income statement, are analysed in the income statement below. | | | | | | | | | BAGL group income statement | | | | | | | | | For the year ended 31 December | |
| 2016
£m |
| |
| 2015
£m |
| Net interest income | | | 2,169 | | | | 1,950 | | Net fee and commission income | | | 1,072 | | | | 1,033 | | Net trading income | | | 281 | | | | 197 | | Net investment income | | | 45 | | | | 41 | | Other income | | | 179 | | | | 193 | | Total income | | | 3,746 | | | | 3,414 | | Credit impairment charges and other provisions | | | (445 | ) | | | (353 | ) | Net operating income | | | 3,301 | | | | 3,061 | | Staff costs | | | (1,186 | ) | | | (1,107 | ) | Administration and general expenses | | | (653 | ) | | | (545 | ) | Depreciation of property, plant and equipment | | | (513 | ) | | | (442 | ) | Amortisation of intangible assets | | | (58 | ) | | | (47 | ) | Operating expenses | | | (2,410 | ) | | | (2,141 | ) | Share ofpost-tax results of associates and joint ventures | | | 6 | | | | 7 | | Profit before tax | | | 897 | | | | 927 | | Taxation | | | (306 | ) | | | (301 | ) | Profit after tax | | | 591 | | | | 626 | | | | | Attributable to: | | | | | | | | | Equity holders of the parent | | | 189 | | | | 302 | | Non-controlling interests | | | 402 | | | | 324 | | Profit after tax | | | 591 | | | | 626 | | | Other comprehensive income relating to discontinued operations is as follows: | | For the year ended 31 December | |
| 2016 £m | | |
| 2015 £m | | Available for sale assets | | | (9 | ) | | | (22 | ) | Currency translation reserves | | | 1,451 | | | | (1,223 | ) | Cash flow hedge reserves | | | 89 | | | | (101 | ) | Other comprehensive income, net of tax from discontinued operations | | | 1,531 | | | | (1,346 | ) | | | | The cash flows attributed to the discontinued operations are as follows: | | | | | | | | | For the year ended 31 December | |
| 2016 £m | | |
| 2015 £m | | Net cash flows from operating activities | | | 1,164 | | | | 794 | | Net cash flows from investing activities | | | (691 | ) | | | (1,883 | ) | Net cash flows from financing activities | | | (105 | ) | | | 133 | | Effect of exchange rates on cash and cash equivalents | | | 37 | | | | (865 | ) | Net increase/(decrease) in cash and cash equivalents | | | 405 | | | | (1,821 | ) |
Non-current assets | | | 306 | Barclays PLC and liabilitiesInvestment in subsidiary
The investment in subsidiary of £35,303m (2014: £33,743m) represents investments made into Barclays Bank PLC including £5,350m (2014: £4,350m) of AT1 securities. The increase of £1,560m during the year was due to a £1,000m increased holding2016 Annual Report on Form 20-F
| | |
44 Assets included in disposal groups classified as held for sale and associated liabilitiescontinued Other held for sale assets Sale of the French retail business The disposal group includes the total assets and liabilities in the French retail business with assets of £4bn. An impairment of £456m has been recognised in expectation of the loss on sale, with the sale expected to be completed in 2017. Sale of the Egypt banking business The disposal group includes the total assets and liabilities in Barclays Bank Egypt, with assets of £1bn. Subject to regulatory approvals, the sale is expected to be completed in Q1 2017. Sale of Barclays Vida Y Pensiones The majority of the disposal group have been sold during 2016. The sale of the remaining Spanish Life Insurance business, with assets of £657m, is expected to complete in 2017. Sale of the Zimbabwe business The disposal group includes the total assets and liabilities in the Zimbabwe business, with assets of £362m. The sale is expected to be completed in Q4 2017. Sale of other businesses Other disposals include £379m of assets, mainly comprised of the Italian business, with assets of £258m. The sale is expected to be completed in 2017. The remaining businesses mainly comprise of the Irish Insurance business, UK Trust and Vocalink, all of which are expected to be completed in 2017. During the year, a number of disposal groups of held for sale assets have been disposed of. The sale of the Asia Wealth business took place in November 2016. A gain on sale of £164m has been recognised in the income statement within (loss)/profit on disposal of subsidiaries, associates and joint ventures. The sales of Barclays Risk Analytics and Index Solutions Ltd in August 2016, the Spanish and Portuguese credit card businesses in November 2016, Italian insurance business in June 2016, Italian retail banking in August 2016, Portuguese retail and insurance businesses in April 2016, the Offshore Trust business in January 2016, the sale of the designated Market Maker business in April 2016 and part of the Spanish Insurance business in November 2016 also took place this year. 45 Barclays PLC (the Parent Company) Other income Other income of £334m (2015: £227m) includes £457m (2015: £345m) of income received from gross coupon payments on Barclays Bank PLC issued AT1 securities. Non-Current Assets and Liabilities Investment in subsidiaries The investment in subsidiary of £36,553m (2015: £35,303m) represents investments made in Barclays Bank PLC, including £6,486m (2015: £5,350m) of AT1 securities. The increase of £1,250m during the year was mainly driven by a $1.5bn AT1 issuance during the third quarter. Loans and advances to subsidiaries, subordinated liabilities and debt securities in issue During the period, Barclays PLC issued $2.1bn of Fixed Rate Subordinated Notes included within the subordinated liabilities balance of £3,789m (2015: £1,766m), $6.7bn of Fixed Rate Senior Notes, Yen 20bn of Fixed Rate Senior Notes,€ 2.7bn Fixed and Floating Rate Senior Notes, £1.3bn of Fixed Rate Senior Notes and AUD 0.2bn of Fixed Rate Senior Notes included within the debt securities in issue balance of £16,893m (2015: £6,224m). The proceeds raised through these transactions were used to invest in subsidiaries of Barclays Bank PLC accounted for as loans and advances to subsidiaries of £19,421m (2015: £7,990m). Barclays PLC retains the discretion to manage the nature of its internal investments in subsidiaries according to their regulatory and business needs. As we implement our structural reform programme, Barclays PLC will invest capital and funding to Barclays Bank PLC and other group subsidiaries such as the Group Service Company, the US IHC and the UK ring-fenced bank. Financial investments The financial investment assets relate to loans made to subsidiaries of the Group. These instruments include a feature that allows for the loan to be written down in whole or in part by the borrower only in the event that the liabilities of the subsidiary would otherwise exceed its assets. Derivative financial instrument The derivative financial instrument of £268m (2015: £210m) held by the Parent Company represents Barclays PLC’s right to receive a Capital Note for no additional consideration, in the event the Barclays PLC consolidated CRD IV Common Equity Tier 1 (CET1) ratio (FSA October 2012 transitional statement) falls below 7% at which point the notes are automatically assigned by the holders to Barclays PLC. Total equity Called up share capital and share premium of Barclays PLC was £21,842m (2015: £21,586m). Other equity instruments of £6,453m (2015: £5,321m) comprises of AT1 securities. For further details please refer to Note 31 Ordinary share, share premium and other equity.
| | | | | Barclays PLC and Barclays Bank PLC issued securities and a further cash contribution of £560m.Loans and advances to subsidiary, subordinated liabilities and debt securities in issue
During the period, Barclays PLC issued€1.25bn equivalent of Fixed Rate Subordinated Notes included within the subordinated liabilities balance of £1,766m (2014: £810m), $5.5bn of Fixed Rate Senior Notes, Yen 60bn of Fixed and Floating Rate Notes and€100m of private MTN included within the debt securities in issue balance of £6,224m (2014: £2,056m). The proceeds raised through these transactions were used to invest in Barclays Bank PLC Notes in each case with a ranking corresponding to the notes issued by Barclays PLC and included within the loans and advances to subsidiary balance of £7,990m (2014: £2,866m).
Derivative financial instrument
The derivative financial instrument of £210m (2014: £313m) held by the Parent Company represents Barclays PLC’s right to receive a Capital Note with a face value of $3bn for no additional consideration, in the event the Barclays PLC consolidated CRD IV CET1 ratio (FSA October 2012 transitional statement) falls below 7% at which point the notes are automatically assigned by the holders to Barclays PLC.
Shareholders’ equity
Called up share capital and share premium of Barclays PLC was £21,586m (2014: £20,809m). Other equity instruments of £5,321m (2014: £4,326m) comprises of AT1 securities. For further details please refer to Note 31.
| | | 298 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 307 |
Notes to the financial statements 46 Related undertakings The Group’s corporate structure consists of a number of related undertakings, comprising subsidiaries, joint ventures, associates and significant other interests. A full list of these undertakings, the country of incorporation and the ownership of each share class is set out below. The information is provided as at 31 December 2016. The entities are grouped by the countries in which they are incorporated. The profits earned by the activities of these entities are in some cases taxed in countries other than the country of incorporation. Barclays’ 2016 Country Snapshot provides details of where the Group carries on its business, where its profits are subject to tax and the taxes it pays in each country it operates in. Wholly owned subsidiaries Unless otherwise stated the undertakings below are wholly owned and consolidated by Barclays and the share capital disclosed comprises ordinary or common shares which are held by Group subsidiaries. | | | Wholly owned subsidiaries | | Note | United Kingdom | | | – 1 Churchill Place, London, E14 5HP | | |
Notes to the financial statements
46 Related undertakings
The Group’s corporate structure consists of a number of related undertakings, comprising subsidiaries, joint ventures, associates and significant other interests. A full list of these undertakings, the country of incorporation and the ownership of each share class is set out below. The information is provided as at 31 December 2015.
The entities are grouped by the countries in which they are incorporated. The profits earned by the activities of these entities are in some cases taxed in countries other than the country of incorporation. Barclays’ 2015 Country Snapshot provides details of where the Group carries on its business, where its profits are subject to tax and the taxes it pays in each country it operates in.
Wholly owned subsidiaries
Unless otherwise stated the undertakings below are wholly owned and consolidated by
Aequor Investments Limited | | | Ardencroft Investments Limited | | | B D & B Investments Limited | | | B.P.B. (Holdings) Limited | | | Barafor Limited | | | Barclay Leasing Limited | | | Barclays and the share capital disclosed comprises ordinary or common shares which are held by Group subsidiaries. Where multiple share classes are held the proportion of the nominal value of each class of shares held is 100% unless otherwise stated. | | | Wholly owned subsidiaries | | Note | United Kingdom
| | | 54 Lombard Street Investments | | F, I | Aequor Investments Limited | | | Alynore Investments Limited Partnership | | B | Ardencroft Investments Limited | | F, I | Astraea Investment Funds | | J, K | Axis Partners | | B | B D & B Investments Limited | | | B.P.B. (Holdings) Limited | | | Barafor Limited | | | Barclay Leasing Limited | | | Barclaycard Funding PLC | | | Barclays (Security Realisation) Limited | | | Barclays Africa Group Holdings Limited | | J, K | Barclays Aldersgate Investments Limited | | | Barclays Asset Management Limited | | | Barclays Bank PLC | | A, F, I | Barclays Bank Trust Company Limited | | I, P | Barclays Bayard Investments Trust | | D | Barclays BCL FI Trust | | D | Barclays Bedivere Trust | | D | Barclays BR Holdings Trust | | D | Barclays BR Investments Trust | | D | Barclays Cantal Investments Trust | | D | Barclays Capital Asia Holdings Limited | | | Barclays Capital Finance Limited | | | Barclays Capital Japan Securities Holdings Limited | | | Barclays Capital Luxembourg S.à r.l. Trust | | D | Barclays Capital Margin Financing Limited | | | Barclays Capital Nominees (No.2) Limited | | | Barclays Capital Nominees (No.3) Limited | | | Barclays Capital Nominees Limited | | | Barclays Capital Principal Investments Limited | | | Barclays Capital Securities Client Nominee Limited | | | Barclays Capital Securities Limited | | F, I | Barclays Capital Services Limited | | | Barclays Capital Strategic Advisers Limited | | | Barclays Capital Trading Luxembourg(Security Realisation) Limited | | | Barclays Aegis Trust | | D | Barclays Africa Group Holdings Limited | | J, K | Barclays Aldersgate Investments Limited | | | Barclays Asset Management Limited | | | Barclays Bank PLC | | A, F, I | Barclays BCL FI Trust | | D | Barclays Bedivere Trust | | D | Barclays BR Investments Trust | | D | Barclays Cantal Investments Trust | | D | Barclays Capital Asia Holdings Limited | | | Barclays Capital Finance Limited | | | Barclays Capital Japan Securities Holdings Limited | | | Barclays Capital Luxembourg S.à.r.l. Trust | | D | Barclays Capital Margin Financing Limited | | | Barclays Capital Nominees (No.2) Limited | | | Barclays Capital Nominees (No.3) Limited | | | Barclays Capital Nominees Limited | | | Barclays Capital Principal Investments Limited | | | Barclays Capital Securities Client Nominee Limited | | | Barclays Capital Securities Limited | | F, I | Barclays Capital Services Limited | | A | Barclays CCP Funding LLP | | B | Barclays Claudas Investments Partnership | | B | Barclays Converted Investments (No.2) Limited | | | Barclays Converted Investments Limited | | | Barclays Darnay Euro Investments Limited (In Liquidation) | | | Barclays Direct Investing Nominees Limited | | | Barclays Directors Limited | | | Barclays Equity Index Investments Bare Trust | | D | Barclays Executive Schemes Trustees Limited | | | Barclays Export and Finance Company Limited (In Liquidation) | | | Barclays Fiduciary Services (UK) Limited | | | Barclays Financial Planning | | | Barclays Financial Planning Nominee Company Limited | | | Barclays Funds Investments Limited | | | Barclays Global Investors Finance Limited (In Liquidation) | | | Barclays Global Investors UK Holdings Limited (in Liquidation) | | J, K | Barclays Global Shareplans Nominee Limited | | | Barclays Group Holdings Limited | | | Barclays Group Operations Limited | | | Barclays Industrial Development Limited | | | Barclays Industrial Investments Limited | | | Barclays Insurance Services Company Limited | | |
| | | Wholly owned subsidiaries | | Note | Barclays Investment Management Limited | | | Barclays Lamorak Trust | | D | Barclays Leasing (No.9) Limited | | | Barclays Long Island Limited | | | Barclays Luxembourg EUR Holdings Trust | | D | Barclays Luxembourg Finance Index Trust | | D | Barclays Luxembourg GBP Holdings Trust | | D | Barclays Luxembourg USD Holdings Trust | | D | Barclays Marlist Limited | | | Barclays Mercantile Business Finance Limited | | | Barclays Mercantile Highland Finance Limited (In Liquidation) | | | Barclays Mercantile Limited | | | Barclays Metals Limited | | | Barclays Nominees (Branches) Limited | | | Barclays Nominees (George Yard) Limited | | | Barclays Nominees (K.W.S.) Limited | | | Barclays Nominees (Monument) Limited | | | Barclays Nominees (Provincial) Limited | | | Barclays Nominees (United Nations For UNJSPF) Limited | | | Barclays Operational Services Limited | | | Barclays Pelleas Investments Limited Partnership | | B | Barclays Pelleas Trust | | D | Barclays Pension Funds Trustees Limited | | | Barclays Physical Trading Limited |
| | | Wholly owned subsidiaries | | Note | Barclays Private Bank | | | Barclays Private Banking Services Limited | | | Barclays Private Trust | | | Barclays Risk Analytics and Index Solutions Limited | | | Barclays SAMS Limited | | | Barclays Services (Japan) Limited | | | Barclays Sharedealing | | | Barclays Shea Limited | | | Barclays Singapore Global Shareplans Nominee Limited | | | Barclays SLCSM (No.1) Limited | | | Barclays Stockbrokers (Holdings) Limited | | | Barclays Stockbrokers Limited | | | Barclays Trust Company Limited | | I, P | Barclays UK and Europe PLC | | | Barclays Unquoted Investments Limited | | | Barclays Unquoted Property Investments Limited | | | Barclays USD Funding LLP | | B | Barclays Wealth Nominees Limited | | | Barclayshare Nominees Limited | | | Barcosec Limited | | | Barley Investments Limited | | I, J, K | Barometers Limited | | | Barsec Nominees Limited | | | BB Client Nominees Limited | | | BBUK Private Credit Partners Limited (In Liquidation) | | | BCLI GP Trust | | D | Blossom Finance General Partnership | | B | BMBF (Bluewater Investments) Limited | | | BMBF (No.12) Limited | | | BMBF (No.18) Limited (Dissolved 20/01/2016) | | | BMBF (No.21) Limited | | | BMBF (No.24) Limited | | | BMBF (No.3) Limited | | | BMBF (No.6) Limited | | | BMBF (No.9) Limited | | | BMBF USD NO 1 Limited | | | BMI (No.6) Limited (Dissolved 16/01/2016) | | |
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 299 |
Notes to the financial statements
46 Related undertakingscontinued
| | | Wholly owned subsidiaries | | Note | BMI (No.9) Limited | | | BNRI ENG 2013 Limited Partnership | | B | BNRI ENG 2014 Limited Partnership | | B | BNRI ENG GP LLP | | B | BNRI England 2010 Limited Partnership | | B | BNRI England 2011 Limited Partnership | | B | BNRI England 2012 Limited Partnership | | B | BNRI PIA Scot GP Limited | | | BNRI Scots GP, LLP | | B | Boudeuse Limited | | | Capel Cure Sharp Limited | | | Carnegie Holdings Limited | | I, J, K | Chapelcrest Investments Limited | | | Clearlybusiness.com Limited (In Liquidation) | | | Clydesdale Financial Services Limited | | | Cobalt Investments Limited | | | Condor No.1 Limited Partnership | | B | Condor No.2 Limited Partnership | | B | CP Flower Guaranteeco (UK) Limited | | E | CP Propco 1 Limited | | | CP Propco 2 Limited | | | CP Topco Limited | | J, K | CPIA England 2008 Limited Partnership | | B | CPIA England 2009 Limited Partnership | | B | CPIA England No.2 Limited Partnership | | B | Denham Investments Limited | | | DMW Realty Limited | | | Durlacher Nominees Limited | | | Eagle Financial and Leasing Services (UK) Limited | | | Ebbgate Investments Limited (In Liquidation) | | | Eldfell Investments Limited (In Liquidation) | | | EM Investments No.1 Limited (In Liquidation) | | | Equity Value Investments Limited Liability Partnership | | B | Equity Value Investments No.1 Limited | | | Equity Value Investments No.2 Limited | | F, I | Exshelfco (DZBC) | | | Fair and Square Limited (In Liquidation) | | | Finpart Nominees Limited | | |
| | | 308 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
46 Related undertakingscontinued | | | Wholly owned subsidiaries | | Note | – 1 Churchill Place, London, E14 5HP (continued) | | | FIRSTPLUS Financial Group PLC | | | Fitzroy Finance Limited | | Z | Foltus Investments Limited | | | Gerrard (OMH) Limited | | | Gerrard Financial Planning Limited | | | Gerrard Investment Management Limited | | | Gerrard Management Services Limited | | | Gerrard Nominees Limited | | | Global Dynasty Natural Resource Private Equity | | | Fitzroy Finance Limited | | Z | Foltus Investments Limited | | | Gerrard (OMH) Limited | | | Gerrard Financial Planning Limited | | | Gerrard Investment Management Limited | | | Gerrard Management Services Limited | | | Gerrard Nominees Limited | | | Global Dynasty Natural Resource Private Equity Limited Partnership | | B | Globe Nominees Limited | | | GM Computers Limited | | | Greig Middleton Holdings Limited | | | Greig Middleton Nominees Limited | | | Hawkins Funding Limited | | | Heraldglen Limited | | G, H, I | Hoardburst Limited (In Liquidation) | | | Investors In Infrastructure Limited | | | J.V. Estates Limited | | | Keepier Investments | | | Kirsche Investments Limited | | | Laser Investment Company 1 Limited (In Liquidation) | | | Laser Investment Company 2 Limited (In Liquidation) | | | Leonis Investments LLP | | B | Lindley Developments Limited | | U | Lombard Street Nominees Limited | | | Long Island Assets Limited | | | Luscinia Investments Funds | | | Maloney Investments Limited | | | MCC Leasing (No. 6) Limited (In Liquidation) | | | MCC Leasing (No.24) Limited (Dissolved 04/02/2016) | | | Menlo Investments Limited | | | Mercantile Credit Company Limited | | | Mercantile Industrial Leasing Limited (In Liquidation) | | | Mercantile Leasing Company (No.132) Limited | | | Mercers Debt Collections Limited | | | MK Opportunities LP | | B |
| | | Wholly owned subsidiaries | | Note | Muleta | Murray House Investment Management Limited | | | Naxos Investments Limited | | | North Colonnade Investments Limited | | | Northwharf Investments Limited | | I, X | Northwharf Nominees Limited | | | PIA England No.2 Limited Partnership | | B | Real Estate Participation Management Limited | | | Real Estate Participation Services Limited | | | Relative Value Investments UK Limited Liability Partnership | | B | Relative Value Trading Limited | | | Roder Investments No. 1 Limited | | I, Y | Roder Investments No. 2 Limited | | I, Y | Ruthenium Investments Limited | | | RVT CLO Investments LLP | | B | Scotlife Home Loans (No.3) Limited | | | Sharelink Nominees Limited | | | Solution Personal Finance Limited | | | Surety Trust Limited | | | Swan Lane Investments Limited | | F, I | US Real Estate Holdings No.1 Limited | | | US Real Estate Holdings No. 2 Limited | | | US Real Estate Holdings No.3 Limited | | | W.D. Pension Fund Limited | | | Wedd Jefferson (Nominees) Limited | | | Westferry Investments Limited | | | Woolwich Assured Homes Limited | | | Woolwich Homes (1987) Limited | | E | Woolwich Homes Limited | | | Woolwich Limited | | | Woolwich Plan Managers Limited | | | Woolwich Qualifying Employee Share Ownership Trustee Limited | | | Woolwich Surveying Services Limited | | | Zeban Nominees Limited | | | Barclays Financial Planning (Entered Liquidation 26 January 2017) | | | – Hill House, 1 Little New Street, London, EC4A 3TR | | | 54 Lombard Street Investments (In Liquidation) | | | Barclays Global Investors Finance Limited (in Liquidation) | | | Barclays Global Investors UK Holdings Limited (in Liquidation) | | J, K | Barclays Mercantile Highland Finance Limited (in Liquidation) | | | Barclays Physical Trading Limited (In Liquidation) | | | Eldfell Investments Limited (in Liquidation) | | | Fair and Square Limited (in Liquidation) | | | Mercers Debt Collections Limited (In Liquidation) | | | Pendle Shipping Limited (In Liquidation) | | | Murray House Investment Management Limited | | | Naxos Investments Limited | | | North Colonnade Investments Limited | | | Northwharf Investments Limited | | I, X | Northwharf Nominees Limited | | | Odysseus (Martins) Investments Limited (In Liquidation) | | | Pecan Aggregator LP | | B | Pendle Shipping Limited | | | PIA England No.2 Limited Partnership |
| | | Wholly owned subsidiaries | | Note | Reflex Nominees Limited (In Liquidation) | | | – 5 The North Colonnade, Canary Wharf, London, E14 4BB | | | Barclays Bayard Investments Trust | | D | BBR Holdings Trust | | D | Barclays Capital Trading Luxembourg Trust | | D | Barclays Luxembourg EUR Holdings Trust | | D | Barclays Luxembourg Finance Index Trust | | D | CPIA Canada Holdings | | B | Leonis Investments LLP | | B | Preferred Liquidity Limited Partnership | | B | R.C. Greig Nominees Limited | | | Real Estate Participation Management Limited | | | Real Estate Participation Services Limited | | | Reflex Nominees Limited | | | Relative Value Investments UK Limited Liability Partnership | | B | Relative Value Trading Limited | | | Roder Investments No. 1 Limited | | I, Y | Roder Investments No. 2 Limited | | I, Y | Ruthenium Investments Limited | | | RVT CLO Investments LLP | | B | Scotlife Home Loans (No.3) Limited | | | Sharelink Nominees Limited | | | Solution Personal Finance Limited | | J, K, L | Stellans Investments Limited (In Liquidation) | | | Surety Trust Limited | | | Swan Lane Investments Limited | | F, I | The Logic Group Enterprises Limited | | | The Logic Group Holdings Limited | | J | US Real Estate Holdings No.3 Limited | | | W.D. Pension Fund Limited | | | Wedd Jefferson (Nominees) Limited | | | Westferry Investments Limited | | | Woolwich Assured Homes Limited | | | Woolwich Homes (1987) Limited | | E | Woolwich Homes Limited | | | Woolwich Limited | | | Woolwich Plan Managers Limited | | | Woolwich Qualifying Employee Share Ownership Trustee Limited | | | Woolwich Surveying Services Limited | | | Wysteria Euro Investments Limited (In Liquidation) | | | Zeban Nominees Limited | | | Argentina
| | | Compañia regional del Sur S.A. | | | Compañía Sudamerica S.A. | | | Belgium
| | | Belgian Turbine Lease Corporation NV | | | Brazil
| | | Banco Barclays S.A. | | | Barclays Corretora de Titulos e Valores Mobiliarios S.A. | | | Canada
| | | Barclays Canadian Commodities Limited | | | Barclays Capital Canada Inc | | | Barclays Corporation Limited | | | CPIA Canada Holdings | | B | – Aurora Building, 120 Bothwell Street, Glasgow, G2 7JS | | | Barclays SLCSM (No.1) Limited (In Liquidation) | | | R.C. Grieg Nominees Limited | | | – 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ | | | BNRI PIA Scot GP Limited | | | BNRI Scots GP, LLP | | B | Pecan Aggregator LP | | B | – Logic House, Waterfront Business Park, Fleet Road, GU1 3SB | | | The Logic Group Holdings Limited | | J | The Logic Group Enterprises Limited | | | | | Argentina | | | – 855 Leandro N.Alem Avenue, 8th Floor, Buenos Aires | | | Compañía Sudamerica S.A. | | | – Marval, O’Farrell & Mairal, Av. Leandro N. Alem 882, Buenos Aires, C1001AAQ | | | Compañia Regional del Sur S.A. | | | | | Brazil | | | – Av. Brigadeiro Faria Lima, No. 4.440, 12th Floor, Bairro Itaim Bibi, Sao Paulo, CEP,04538-132 | | | Banco Barclays S.A. | | | | | Canada | | | – 333 Bay Street, Suite 4910, Toronto ON M5H 2R2 | | | Barclays Capital Canada Inc | | | – Stikeman Elliott LLP, 199 Bay Street, 5300 Commerce Court West, Toronto ON M5L 1B9 | | | Barclays Corporation Limited | | | | | Cayman Islands | | | – Maples Corporate Services Limited, PO Box 309GT, Ugland House, South Church Street, Grand Cayman,KY1-1104 | | | Alymere Investments Limited | | G, H, I | Alymere Investments Two Limited (In Liquidation) | | | Analytical Trade UK Limited | | | Aquitaine Investments Limited (In Liquidation) | | | Aubisque UK Investments Limited (In Liquidation) | | | Barclays Capital (Cayman) Limited | | | Barclays Trust Company (Cayman) Limited (Sold 14/01/2016) | | | Barclays Wealth Corporate Nominees Limited (Sold 14/01/2016) | | | Beille Investments Limited (In Liquidation) | | | Bigorre UK Investments Limited (In Liquidation) | | | Blaytell Limited | | | Braven Investments No.1 Limited | | | Brule 1 Investments Limited (In Liquidation) | | | Calthorpe Investments Limited | | | Capton Investments Limited | | | Claudas Investments Limited | | G, H, I | Claudas Investments Two Limited | | | Colombiere UK Investments Limited (In Liquidation) | | |
| | | 300 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | Barclays Capital (Cayman) Limited | | |
46 Related undertakingscontinued
| | | Wholly owned subsidiaries | | Note | Coskwo | Braven Investments No.1 Limited | | | Capton Investments Limited | | | Claudas Investments Limited | | G, H, I | Claudas Investments Two Limited | | | CPIA Investments No.1 Limited | | V | CPIA Investments No.2 Limited | | F, I | Cureton Investments No. 1 Limited (In Liquidation) | | | Cuth Investments Limited | | F, I, T | Eagle Holdings Ltd (Sold 14/01/2016) | | | Eagle Management Services Limited (Sold 14/01/2016) | | | Feste Investments Limited (In Liquidation) | | | Furbridge Investments Limited | | | Gallen Investments Limited | | H, I | Gironde Investments Limited (In Liquidation) | | | Godler Limited | | | Golden Eagle Holdings Ltd (Sold 14/01/2016) | | | Hamar Investments Limited | | | Hurley Investments No.1 Limited | | | Iris Investments 1 Limited | | G, H, I | Mintaka Investments No. 4 Limited | | | OGP Leasing Limited | | | Pelleas Investments Limited | | | Pelleas Investments Two Limited | | | Pippin Island Investments Limited | | | Razzoli Investments Limited | | F, I | RVH Limited | | F, I | Zanonne Investments Limited (In Liquidation) | | | Zumboorok Investments Limited | | | – PO Box 1093, Queensgate House, Grand Cayman,KY1-1102 | | | Blaytell Limited | | | Coskwo Limited | | | Godler Limited | | | Harflane Limited | | |
| | | Hauteville UK Investments Limited (In Liquidation) | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 309 |
Notes to the financial statements 46 Related undertakingscontinued | | | Wholly owned subsidiaries | | Note | – PO Box 1093, Queensgate House, Grand Cayman,KY1-1102continued | | | Hentock Limited | | | Hollygrice Limited | | | Pilkbull Limited | | | Strickyard Limited | | | Winhall Limited | | | – 190 Elgin Avenue, George Town, Grand Cayman,KY1-9005 | | | Calthorpe Investments Limited | | | Gallen Investments Limited | | | JV Assets Limited | | L | Palomino Limited | | Z | Raglan Investments Limited | | | Wessex Investments Limited | | | – Walkers Corporate Limited, Cayman Corporate Centre, | | | 27 Hospital Road, George Town, KY1 – 9008 | | | Long Island Holding B Limited | | | | | Hollygrice Limited | | | Hurley Investments No.1 Limited | | I, W | Hurley Investments No.2 Limited (In Liquidation) | | | HYMF (Cayman) Limited | | | Iris Investments 1 Limited | | G, H, I | JV Assets Limited | | | Mintaka Investments No. 4 Limited | | | Moselle No 3 UK Investments Limited (In Liquidation) | | | OGP Leasing Limited | | | Palomino Limited | | Z | Pelleas Investments Limited | | | Pelleas Investments Two Limited | | | Pilkbull Limited | | | Pippin Island Investments Limited | | | Raglan Investments Limited | | | Razzoli Investments Limited | | F, I | RVH Limited | | F, I | Spargi Investments Limited (In Liquidation) | | | Spatial Investments Limited (In Liquidation) | | | Spoonhill Investments Limited (In Liquidation) | | | Strickyard Limited | | | Tourmalet UK Investments Limited (In Liquidation) | | | Ventotene Investments Limited (In Liquidation) | | | Wessex Investments Limited | | | Winhall Limited | | | Zane Investments Limited | | | Zanonne Investments Limited (In Liquidation) | | | Zinc Holdings Limited (In Liquidation) | | | Zumboorok Investments Limited | | F, I, T | China | | | – Room 213, Building 1, No. 1000 Chenhui Road, | | | ZhangjiangHi-Tech Park, Shanghai | | | Barclays Technology Centre (Shanghai) Company Limited | | | | | Egypt | | | – Star Capital AI Tower, City Stars Project, 2 Ali Rashed Street, | | | Nasr City, Cairo | | | Barclays Bank Egypt SAE | | | | | France | | | – 183 avenue Daumesnil, Paris, 75012 | | | Barclays Courtage SAS | | | Barclays Diversification | | | Barclays Patrimoine S.C.S. | | | Barclays Vie SA | | | BBAIL SAS | | | – 32 avenue George V, Paris, 75008 | | | Barclays France SA | | | Barclays Wealth Managers France SA | | | | | Germany | | | – Bockenheimer Landstrasse38-40,D-60323 Frankfurt Am Main | | | Barclays Capital Effekten GmbH | | | Sulm Investments GmbH (In Liquidation) | | | – c/o SFM Deutschland GmbH, Gruneburgweg58-62, 60322, | | | Frankfurt am Main | | | Baubecon Holding 1 GmbH (In Liquidation) | | | Opal 110. GmbH (In Liquidation) | | | – Gasstrasse 4c, 22761, Hamburg, Germany | | | Baban Mantel AG (In Liquidation) | | | | | Gibraltar | | | – Suite 1, Burns House, 19 Town Range | | | Frankland Properties Limited | | | Norfolk LP | | B | Ringmer Properties Limited | | | Saveway Properties Limited | | | Stowmarket Investments Limited | | | Townmead Properties Limited | | | Trefield Holdings Limited | | | | | Guernsey | | | – P.O. Box 33, Maison Trinity, Trinity Square, St. Peter Port, GY1 4AT | | | Barclays Insurance Guernsey PCC Limited | | Q | – PO BOX 41, Floor 2, Le Marchant House, Le Truchot, St Peter Port, | | | GY1 3BE | | | Barclays Nominees (Guernsey) Limited | | | | | Hong Kong | | | – 42nd floor Citibank Tower, Citibank Plaza, 3 Garden Road | | | Barclays Bank (Hong Kong Nominees) Limited (In Liquidation) | | | Barclays Capital Asia Nominees Limited (In Liquidation) | | | – Level 41, Cheung Kong Center, 2 Queen’s Road Central | | | Barclays Asia Limited | | | Barclays Capital Asia Limited | | | Egypt
| | | Barclays Bank Egypt SAE | | | France
| | | Barclays Courtage SAS | | | Barclays Diversification | | | Barclays France SA | | | Barclays Patrimoine S.C.S. | | | Barclays Vie SA | | | Barclays Wealth Managers France SA | | | BBAIL SAS | | | Germany
| | | Barclaycard Bank AG | | | Barclays Capital Effekten GmbH | | | Baubecon Holding 1 GmbH (In Liquidation) | | | Opal 110. GmbH (In Liquidation) | | | Sulm Investments GmbH | | | Gibraltar
| | | Barclays Gibraltar Nominees Company Limited | | | Frankland Properties Limited | | | Norfolk LP | | B | Ringmer Properties Limited | | | Saveway Properties Limited | | | Stowmarket Investments Limited | | | Townmead Properties Limited | | | Trefield Holdings |
| | | Wholly owned subsidiaries | | Note | India | | | – 208 Ceejay House, Shivsagar Estate, Dr A Beasant Road, Worli, | | | Mumbai, 400 018 | | | Barclays Securities (India) Private Limited | | |
| | | Wholly owned subsidiaries | | Note | GuernseyBarclays Wealth Trustees (India) Private Limited | | | – 67, Maker Tower ‘F’ 6th Floor, Cuffe Parade, Mumbai, 400 005 | | | Barclays Insurance Guernsey PCC Limited | | Q | Barclays Nominees (Guernsey) Limited | | | Barclays Wealth Advisory Holdings (Guernsey) Limited (Sold 14/01/2016) | | | Barclays Wealth Corporate Officers (Guernsey) Limited (Sold 14/01/2016) | | | Barclays Wealth Corporate Services (Guernsey) Limited (Sold 14/01/2016) | | | Barclays Wealth Directors (Guernsey) Limited (Sold 14/01/2016) | | | Barclays Wealth Fund Managers (Guernsey) Limited (Sold 14/01/2016) | | | Barclays Wealth Nominees (Guernsey) Limited (Sold 14/01/2016) | | | Barclays Wealth Trustees (Guernsey) Limited (Sold 14/01/2016) | | | Bormio Limited (Sold 14/01/2016) | | | Lindmar Trust Company Limited (Sold 14/01/2016) | | | Regency Secretaries Limited (Sold 14/01/2016) | | | Hong Kong
| | | Barclays Asia Limited | | | Barclays Bank (Hong Kong Nominees) Limited (In Liquidation) | | | Barclays Capital Asia Limited | | | Barclays Capital Asia Nominees Limited (In Liquidation) | | | Barclays Wealth Nominees (Hong Kong) Limited (Sold 14/01/2016) | | | India
| | | Barclays Holdings India Private Limited (In Liquidation) | | | Barclays Investments & Loans (India) Limited | | F, I | Barclays Securities (India) Private Limited | | | Barclays Shared Services Private Limited | | | Barclays Technology Centre India Private Limited | | | Barclays Wealth Trustees (India) Private Limited | | | Indonesia
| | | PT Bank Barclays Indonesia (In Liquidation) | | | PT Bhadra Buana Persada (In Liquidation) | | | Ireland | | | Barclaycard International Payments Limited | | | Barclays Assurance (Dublin) Limited | | | Barclays Bank Ireland Public Limited Company | | | Barclays Equities Trading (Ireland) Limited (In Liquidation) | | | Barclays Insurance (Dublin) Limited | | | Barclays Ireland Nominees Limited | | | Isle of Man
| | | Barclays Holdings (Isle of Man) Limited | | | Barclays Nominees (Manx) Limited | | | Barclays Portfolio (IoM GP) No.2 Limited | | | Barclays Private Clients International Limited | | J, K | Barclays Trust Company (Isle of Man) Limited (Sold 14/01/2016) | | | Barclays Wealth Corporate Officers (Isle of Man) Limited (Sold 14/01/2016) | | | Barclays Wealth Corporate Services (IOM) Limited (Sold 14/01/2016) | | | Barclays Wealth Directors (Isle of Man) Limited (Sold 14/01/2016) | | | Barclays Wealth Nominees (IOM) Limited (Sold 14/01/2016) | | | Barclays Wealth Trustees (Isle of Man) Limited (Sold 14/01/2016) | | | Barclaytrust (Nominees) Isle of Man Limited (Sold 14/01/2016) | | | Barclaytrust International Nominees (Isle of Man) Limited (Sold 14/01/2016) | | | Island Nominees Limited (Sold 14/01/2016) | | | Stowell Limited (Sold 14/01/2016) | | | Walbrook (IOM) 2006 Nominees (No. 1) Limited (Sold 14/01/2016) | | | Walbrook (IOM) Nominees (No. 23) Limited (Sold 14/01/2016) | | | Walbrook (IOM) Nominees (No. 3) Limited (Sold 14/01/2016) | | | Walbrook (IOM) Nominees (No. 4) Limited (Sold 14/01/2016) | | | Walbrook (IOM) Nominees (No. 5) Limited (Sold 14/01/2016) | | | Walbrook (IOM) Nominees (No. 6) Limited (Sold 14/01/2016) | | | Italy
| | | Barclays Private Equity S.p.A. (In Liquidation) | | | Barclays Services Italia S.p.A. (In Liquidation) | | | Japan
| | | Barclays Funds and Advisory Japan Limited | | | Barclays Securities Japan Limited | | | Barclays Wealth Services Limited | | | Jersey
| | | Barbridge Limited | | | Barclays Nominees (Jersey) Limited | | | Barclays Services Jersey Limited | | | Barclays Trust Company (Jersey) Limited (Sold 14/01/2016) | | | Barclays Wealth Corporate Officers (Jersey) Limited (Sold 14/01/2016) | | | Barclays Wealth Directors (Jersey) Limited (Sold 14/01/2016) | | | Barclays Wealth Fund Managers (Jersey) Limited (Sold 14/01/2016) | | | Barclays Wealth Management Jersey Limited | | | Barclays Wealth Signatories Limited (Sold 14/01/2016) | | |
|
| Barclays Holdings India Private Limited (In Liquidation) | | | – DLF IT Park 8th Floor, Building 9A and B, 1/124 Shivaji Gardens, | | | Mount Poonamallee Road, Manapakkam, Chennai, 600089 | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 301 |
Notes
| Barclays Shared Services Private Limited | | | – Ground to the financial statementsFourth Floor, Wing 3 – Cluster A, Eon Free Zone, MIDC | | | Knowledge Park, Pune, 411014 | | | Barclays Technology Centre India Private Limited | | | – Level 10, Block B6, Nirlon Knowledge Park, Off Western Express | | | Highway, Goregaon (East), Mumbai, 40063 | | | Barclays Investments & Loans (India) Limited | | F, I | | | Indonesia | | | – Barclays House, 12th Floor, Jl. Jend Sudirman Kav.22-23, Jakarta, | | | 12920 46 Related undertakingscontinued
| | | Wholly owned subsidiaries | | Note | Barclays Wealth Trustees (Jersey) Limited (Sold 14/01/2016) | | | Barclaytrust Channel Islands Limited | | | Barclaytrust International (Jersey) Limited (Sold 14/01/2016) | | | Barclaytrust Jersey Limited (Sold 14/01/2016) | | | BIFML PTC Limited | | | CP Newco 1 Limited | | | CP Newco2 Limited | | J, K | CP Newco3 Limited | | | Karami Holdings Limited (Sold 14/01/2016) | | | MK Opportunities GP Ltd | | | Sandringham Nominees Limited (Sold 14/01/2016) | | | Tiara Trustees (Jersey) Limited (Sold 14/01/2016) | | | Walbrook Executors Limited (Sold 14/01/2016) | | | Walbrook Properties Limited (Sold 14/01/2016) | | | PT Bank Barclays Indonesia (In Liquidation) | | | – Plaza Lippo, 10th Floor, Jalan Jend, Sudirman Kav 25, Jakarta, 12920 | | | PT Bhadra Buana Persada (In Liquidation) | | | | | Ireland | | | – Two Park Place, Hatch Street, Dublin 2 | | | Barclaycard International Payments Limited | | | Barclays Assurance (Dublin) Designated Activity Company | | | Barclays Bank Ireland Public Limited Company | | | Barclays Insurance (Dublin) Designated Activity Company | | | Barclays Ireland Nominees Limited (In Liquidation) | | | | | Isle of Man | | | – Barclays House, Victoria Street, Douglas, IM1 2LE | | | Barclays Nominees (Manx) Limited | | | Barclays Portfolio (IoM GP) No.2 Limited | | | Barclays Private Clients International Limited | | J, K | – 2nd Floor, St Georges Court, Upper Church Street, Douglas, IM1 1EE | | | Barclays Holdings (Isle of Man) Limited | | | | | Italy | | | – Milano, Via della Moscova 18 | | | Barclays Private Equity S.p.A. (In Liquidation) | | | | | Japan | | | –10-1, Roppongi6-chome,Minato-ku, Tokyo | | | Barclays Funds and Advisory Japan Limited | | | Barclays Securities Japan Limited | | | Barclays Wealth Services Limited | | | | | Jersey | | | – Third Floor, 37 Esplanade, St. Helier, JE2 3QA | | | CP Newco 1 Limited | | | CP Newco2 Limited | | J, K | CP Newco3 Limited | | | – La Motte Chambers, St Helier, JE1 1BJ | | | Barclays Services Jersey Limited | | | –39-41 Broad Street, St Helier, JE2 3RR | | | Barclays Wealth Management Jersey Limited | | | BIFML PTC Limited | | | – 13 Castle Street, St. Helier, JE4 5UT | | | Barclays Index Finance Trust | | S | – Lime Grove House, Green Street, St Helier, JE1 2ST | | | Barbridge Limited | | | – 13 Library Place, St Helier, JE4 8NE | | | Barclays Nominees (Jersey) Limited | | | Barclaytrust Channel Islands Limited | | | – Appleby Trust (Jersey) Limited, PO Box 207,13-14 | | | Esplanade, St Helier, JE1 1BD | | | MK Opportunities GP Ltd | | | | | Korea, Republic of | | | –A-1705 Yeouido Park Centre,28-3 Yeouido-dong, | | | Yeongdeungpo-gu, Seoul | | | Barclays Korea GP Limited | | | Luxembourg
|
| | | 310 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | | Adler Toy Holding Sarl |
46 Related undertakingscontinued | | | Wholly owned subsidiaries | | Note | Luxembourg | | | – 9, allée Scheffer,L-2520 | | | Barclays Aegis Investments S.à r.l. | | | Barclays Alzin Investments S.à r.l. | | | Barclays Bayard Investments S.à r.l. | | J, K | Barclays BCL Fixed Income S.à r.l. | | | Barclays BCLI no.1 S.à r.l. | | | Barclays BCLI no.2 S.à r.l. | | | Barclays Bedivere Investments S.à r.l. | | | Barclays Bordang Investments S.à r.l. | | | Barclays BR Holdings S.à r.l. | | | Barclays BR Investments S.à r.l. | | | Barclays Cantal Investments S.à r.l. | | | Barclays Capital Luxembourg S.à r.l. | | I, N | Barclays Capital Trading Luxembourg S.à r.l. | | | Barclays Equity Index Investments S.à r.l. | | | Barclays Lamorak Investments S.à r.l. | | | Barclays Leto Investments S.à r.l. | | | Barclays Luxembourg EUR Holdings S.à r.l | | | Barclays Luxembourg Finance S.à r.l. | | I, K | Barclays Luxembourg GBP Holdings S.à r.l. | | | Barclays Luxembourg Holdings S.à r.l. | | | Barclays Luxembourg Holdings SSC | | B | Barclays Luxembourg USD Holdings S.à r.l. | | | Barclays Pelleas Investments S.à r.l. | | G, I | Barclays US Investments S.à r.l. | | J, K | Barclays BCL Fixed Income S.à.r.l. | | | – 9, allée Scheffer,L-2520 (continued) | | | Barclays BCLI no.1 S.à r.l | | | Barclays BCLI no.2 S.à r.l. | | | Barclays Bedivere Investments S.à r.l. | | | Barclays Bordang Investments S.à r.l. | | | Barclays BR Holdings S.à r.l. | | | Barclays BR Investments S.à r.l. | | | Barclays Cantal Investments S.�� r.l. | | J | Barclays Capital Luxembourg S.à r.l. | | | Barclays Capital Trading Luxembourg S.à r.l. | | J, K | Barclays Claudas Investments Partnership | | B | Barclays Equity Index Investments S.à r.l. | | | Barclays Lamorak Investments S.à r.l. | | | Barclays Leto Investments S.à r.l. | | | Barclays Luxembourg EUR Holdings S.à r.l | | | Barclays Luxembourg Finance S.à r.l. | | | Barclays Luxembourg GBP Holdings S.à r.l. | | | Barclays Luxembourg Holdings S.à r.l. | | I, AA | Barclays Luxembourg Holdings SSC | | B | Barclays Luxembourg USD Holdings S.à r.l. | | J, K | Barclays Pelleas Investments Partnership | | B | Barclays Pelleas Investments S.à r.l. | | G, I | Barclays US Investments S.à r.l. | | J, K | Blossom Finance General Partnership | | B | –68-70 Boulevard de la Petrusse,L-2320 | | | Adler Toy Holding Sarl | | | | | Malaysia | | | – Unit30-01, Level 30, Tower A, Vertical Business Suite, Avenue 3, Bangsar South, No.8, Jalan Kerinchi, Kuala Lumpur, 59200 | | | Barclays Capital Markets Malaysia Sdn Bhd. (In Liquidation) | | F, I | | | Mauritius | | | – C/O Rogers Capital Corporate Services, St. Louis Business Centre, | | | Cnr Desroches & St. Louis Streets, Port Louis | | | Barclays Capital Markets Malaysia Sdn Bhd. | | F, I | Mauritius
| | | Barclays (H&B) Mauritius Limited | | | Barclays Capital Mauritius Limited | | | Barclays Capital Securities Mauritius Limited | | | – Fifth Floor, Ebene Esplanade, 24 Cybercity, Ebene | | | Barclays (H&B) Mauritius Limited | | | Barclays Mauritius Overseas Holdings Limited | | | | | Mexico | | | – Paseo de la Reforma 505, 41 Floor, Torre Mayor, Col. Cuauhtemoc, CP 06500 | | | Barclays Bank Mexico, S.A. | | K, M | Barclays Capital Casa de Bolsa, S.A. de C.V. | | K, M | Grupo Financiero Barclays Mexico, S.A. de C.V. | | K, M | Servicios Barclays, S.A. de C.V. | | | | | Monaco | | | – 31 Avenue de la Costa, BP 339 | | | Barclays Wealth Asset Management (Monaco) S.A.M | | | | | Netherlands | | | – Strawinskylaan 3105, 1077 ZX, Amsterdam | | | Barclays SLCSM Funding B.V. | | | – De Boelelaan 7, 1083 Hj Amsterdam | | | Chewdef BidCo BV. (In Liquidation) | | | | | Nigeria | | | – Southgate House, Udi Street, Osborne Estate, Ikoyi, Lagos | | | Barclays Group Representative Office (NIG) Limited | | | | | Philippines | | | – 21/F, Philamlife Tower, 8767 Paseo de Roxas, Makati City, 1226 | | | Meridian(SPV-AMC) Corporation | | | Mexico
|
| | | Wholly owned subsidiaries | | Note | Russian Federation | | | – Four Winds Plaza, 1st Tverskaya-Yamskaya Str , Moscow 21, 125047 | | | Barclays Bank Mexico, S.A. | | K, M | Barclays Capital Casa de Bolsa, S.A. de C.V. | | K, M | Grupo Financiero Barclays Mexico, S.A. de C.V. | | K, M | Servicios Barclays, S.A. de C.V. | | | Monaco
| | | Barclays Wealth Asset Management (Monaco) S.A.M. | | | Netherlands
| | | Barclays SLCSM Funding B.V. | | | Chewdef BidCo BV. (In Liquidation) | | | Nigeria
| | | Barclays Group Representative Office (NIG) Limited | | | Philippines
| | | Meridian (SPV-AMC) Corporation | | | Portugal
| | | Barclays Wealth Managers Portugal – SGFIM, S.A. | | | Russian Federation
| | | Limited Liability Company Barclays Capital | | | Saudi Arabia
| | | Barclays Saudi Arabia (In Liquidation) | | | Singapore
| | | Barclays Bank (Singapore Nominees) Pte Ltd. | | | Barclays Bank (South East Asia) Nominees Private Limited Liability Company Barclays Capital (In Liquidation) | | | | | Saudi Arabia | | | – 18th Floor Al Faisaliah Tower , Riyadh, 11311 | | | Barclays Saudi Arabia (In Liquidation) | | | | | | | | | | | Singapore | | | – 10 Marina Boulevard,#24-01 Marina Bay Financial Centre, Tower 2, | | | 018983 | | | Barclays Bank (Singapore Nominees) Pte Ltd | | | Barclays Bank (South East Asia) Nominees Pte Ltd | | | Barclays Capital Futures (Singapore) Private Limited | | |
Barclays Capital Holdings (Singapore) Private Limited | | | Barclays Merchant Bank (Singapore) Ltd. | | | | | Wholly owned subsidiaries | | Note | Barclays Capital Holdings (Singapore) Private Limited | | | Barclays Merchant Bank (Singapore) Ltd. | | | Barclays Wealth Trustees (Singapore) Limited (Sold 14/01/2016) | | | Spain | | | – Plaza De Colon 1, 28046, Madrid | | | Barclays Tenedora De Immuebles SL. | | | Barclays Vida Y Pensiones, Compania De Seguros, S.A | | Z | The Logic Group Enterprises S.L | | | | | Switzerland | | | – Chemin de Grange Canal18-20, PO Box 3941, 1211, Geneva | | | Barclays Bank (Suisse) S.A. | | | BPB Holdings SA | | | | | Taiwan | | | – 11/F, 106Xin-Yi Road, Sec. 5, Taipei 110 | | | Barclays Mediador, Operador de Banca Seguros Vinculado, S.A. | | | Barclays Tenedora De Immuebles SL. | | | Barclays Vida Y Pensiones, Compañía De Seguros, S.A. | | | Iberalbion A.I.E. | | | The Logic Group Enterprises S.L | | | Switzerland
| | | Barclays Bank (Suisse) S.A. | | | Barclaytrust (Suisse) SA (Sold 14/01/2016) | | | BPB Holdings SA | | | Taiwan
| | | Barclays Capital Securities Taiwan Limited | | | Thailand
| | | Barclays Capital Securities (Thailand) Ltd. | | | Uganda
| | | Barclays Bank of Uganda Limited | | | Ukraine
| | | Barclays Capital Services (Ukraine) LLC (In Liquidation) | | C | United States
| | | 475 Fifth 09 LLC | | C | Analog Analytics Inc | | | Analytical FX Trading Strategy Cell I | | F, I | Analytical FX Trading Strategy Cell II | | | Analytical FX Trading Strategy Series LLC | | C | Analytical Trade Holdings LLC | | | Analytical Trade Investments LLC | | H | Archstone Equity Holdings Inc | | | Barclays Bank Delaware | | F, I | Barclays BWA, Inc. | | | Barclays Capital Commodities Corporation | | | Barclays Capital Derivatives Funding LLC | | C | Barclays Capital Energy Inc. | | | Barclays Capital Equities Trading GP | | B | Barclays Capital Securities Taiwan Limited (In Liquidation) | | | | | Thailand | | | – 87, M Thai Tower All Seasons Place, 23rd Floor, Wireless Road, | | | Lumpini, Phatumwan, Bangkok, 10330 | | | Barclays Capital (Thailand) Ltd. (In Liquidation) | | | | | United States | | | – Corporation Trust Company, Corporation Trust Center, | | | 1209 Orange Street, Wilmington DE 19801 | | | Archstone Equity Holdings Inc | | | Barclays BWA, Inc. | | | Barclays Capital Commodities Corporation | | | Barclays Capital Derivatives Funding LLC | | C | Barclays Capital Energy Inc. | | | Barclays Capital Real Estate Finance Inc. | | | Barclays Capital Real Estate Holdings Inc. | | | Barclays Capital Real Estate Inc. | | | Barclays Commercial Mortgage Securities LLC | | C | Barclays Delaware Holdings LLC | | F, I | Barclays Electronic Commerce Holdings Inc. | | | Barclays Financial LLC | | C | Barclays Group US Inc. | | | Barclays Investment Holdings LLC | | | Barclays Oversight Management Inc. | | | Barclays Receivables LLC | | C | Barclays Services Corporation | | | Barclays US CCP Funding LLC | | C | Barclays US Funding LLC | | C | Barclays US LLC | | G, I | Barclays Capital Inc. | | | Barclays Capital Real Estate Finance Inc. | | | Barclays Capital Real Estate Holdings Inc. | | | Barclays Capital Real Estate Inc. | | | Barclays Capital Services Inc. | | | Barclays Commercial Mortgage Securities LLC | | C | Barclays Delaware Holdings LLC | | F, I | Barclays Dryrock Funding LLC | | C | Barclays Electronic Commerce Holdings Inc. | | | Barclays Financial LLC | | C | Barclays Group US Inc. | | | Barclays Insurance U.S. Inc. | | | Barclays Investment Holdings Inc. | | | Barclays Oversight Management Inc. | | | Barclays Receivables LLC | | C | Barclays Services Corporation | | | Barclays Services LLC | | C | Barclays US CCP Funding LLC | | C | Barclays US Funding LLC | | C | Barclays US GPF Inc. | | | Barclays US LP | | B | Barclays US Management, LLC | | C | BCAP LLC | | C | BNRI Acquisition No.4 LLC | | C | BNRI Acquisition No.5, LP | | B | BTXS Inc. | | | Centergate at Gratigny LLC | | C | CPIA Acquisition No.1 LLC | | C | CPIA Acquisition No.2 LLC | | C | CPIA Acquisition No.3 LLC | | C | CPIA Equity No. 1 Inc. | | | CPIA Finance No.1, LLC | | C | CPIA FX Investments Inc. | | | CPIA Holdings No.1, LLC | | C | Crescent Real Estate Member LLC | | C | Curve Investments GP | | B |
| | | 302 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
46 Related undertakingscontinued
| | | Wholly owned subsidiaries | | Note | Equifirst Corporation (In Liquidation) | | | Gracechurch Services Corporation | | | HYMF, Inc. | | | La Torretta Beverages LLC | | C | La Torretta Hospitality LLC | | C | La Torretta Operations LLC | | C | Lagalla Investments LLC | | C | Long Island Holding A LLC | | C | Long Island Holding B LLC | | C | LTDL Holdings LLC | | C | Marbury Holdings LLC | | | Persica Holdings LLC | | C | Persica Lease LLC | | C | Persica LL LLC | | C | Persica Property LLC | | C |
| | | Preferred Liquidity, LLC | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 311 | Procella Investments LLC | | C | Procella Investments No.1 LLC | | C | Procella Investments No.2 LLC | | C | Procella Investments No.3 LLC | | C | Procella Swaps LLC | | C | Protium Finance I LLC | | C | Protium Master Grantor Trust | | D | Protium Master Mortgage LP | | B | Protium REO I LP | | B | RB Special Assets, L.L.C. | | C | Relative Value Holdings, LLC | | | Rhode Investments LLC | | C | Securitized Asset Backed Receivables LLC | | C | Sutton Funding LLC | | C | TPLL LLC | | C | TPProperty LLC | | C | TPWorks LLC | | C | US Secured Investments LLC | | C | Vail 09 LLC | | C | Vail Development 09 LLC | | C | Vail Hotel 09 LLC | | C | Vail Hotel A LLC | | C | Vail Hotel B LLC | | C | Vail Residential 09 LLC | | C | Vail SC LLC | | C | Vanoise Inc | | H, I | Verain Investments LLC | | I, J, K | Wilmington Riverfront Receivables LLC | | J, K | Zambia
|
Notes to the financial statements 46 Related undertakingscontinued | | | Barclays Bank Zambia Plc | | | Kafue House Limited | | | Wholly owned subsidiaries | | Note | – Corporation Trust Company, Corporation Trust Center, | | | 1209 Orange Street, Wilmington DE 19801 (continued) | | | | | Protium Finance I LLC | | C | Protium Master Mortgage LP | | B | Protium REO I LP | | B | RB Special Assets, L.L.C. | | C | Securitized Asset Backed Receivables LLC | | C | Sutton Funding LLC | | C | TPLL LLC | | C | TPProperty LLC | | C | TPWorks LLC | | C | US Secured Investments LLC | | C | Vail 09 LLC | | C | Vail Residential 09 LLC | | C | Vail SC LLC | | C | – 1201 North Market Street, P.O. Box 1347 Wilmington, DE19801 | | | Barclays Bank Delaware | | F, I | Procella Investments LLC | | C | Procella Investments No.1 LLC | | C | Procella Investments No.2 LLC | | C | Procella Investments No.3 LLC | | C | Procella Swaps LLC | | C | Verain Investments LLC | | | – 2711 Centerville Road, Suite 400, Wilmington DE 19808 | | | Analog Analytics Inc | | | Barclays Capital Equities Trading GP | | B | Barclays Capital Holdings Inc. | | G, I | Lagalla Investments LLC | | | Protium Master Grantor Trust | | D | Relative Value Holdings, LLC | | | – 745 Seventh Avenue, New York NY 10019 | | | Alynore Investments Limited Partnership | | B | Curve Investments GP | | B | Preferred Liquidity, LLC | | J | – CT Corporation System, One Corporate Center, Floor 11, Hartford CT | | | 06103-3220 | | | Barclays Capital Inc. | | | – c/o RL&F Service Corp, One Rodney Square, 10th Floor, Tenth and | | | King Streets, Wilmington DE 19801 | | | Analytical Trade Holdings LLC | | | Analytical Trade Investments LLC | | BB | – 100 South West Street, Wilmington DE 19801 | | | Barclays Dryrock Funding LLC | | C | Wilmington Riverfront Receivables LLC | | J, K | – 100 South Wacker Drive, Suite 2000, Chicago IL 60606 | | | BTXS Inc. | | | – 15 East North Street, Dover DE DE 19801 | | | Barclays Services LLC | | C | – 200 Park Avenue, New York, New York, 10166 | | | HYMF, Inc. | | | – CT Corporation System, 225 Hillsborough Street, Raleigh, NC 27603 | | | Barclays US GPF Inc. | | | – CT Corporation System, 350 North St. Paul Street, Dallas TX 75201 | | | La Torretta Beverages LLC | | C | La Torretta Hospitality LLC | | C | La Torretta Operations LLC | | C | – Aon Insurance Managers (USA) Inc., 199 Water Street, New York | | | NY 10038 | | | Barclays Insurance U.S. Inc. | | | – Suite 1100, 50 W. Liberty St., Reno, Nev 89501 | | | CPIA FX Investments Inc. | | | – 500 Forest Point Circle, Charlotte, North Carolina 28273 | | | Equifirst Corporation (In Liquidation) | | | | | Zimbabwe | | | – 2 Premium Close, Mount Pleasant Business Park, | | | Mount Pleasant, Harare | | | Afcarme Zimbabwe Holdings (Pvt) Limited | | | Branchcall Computers (Pvt) Limited | | |
| – 2nd Floor, Barclays House, Corner Jason Moyo | | | Avenue/First Street, Harare | | | Afcarme Zimbabwe Holdings (Pvt) Limited | | | |
Other Related Undertakings Unless otherwise stated, the undertakings below are consolidated and the share capital disclosed comprises ordinary or common shares which are held by subsidiaries of the Group. The Group’s overall ownership percentage is provided for each undertaking. | | | | | Other related undertakings | | Percentage | | Note | United Kingdom | | | | | Unless otherwise stated, the undertakings below are consolidated and the share capital disclosed comprises ordinary or common shares which are held by subsidiaries of the Group. The ownership percentage is provided for each undertaking. Where multiple share classes are held the proportion of the nominal value of each class of shares held is the same as the ownership unless otherwise stated.– 1 Churchill Place, London, E14 5HP
| | | | | Other related undertakings | | Percentage | | Note | United Kingdom
| | | | | Barclays Africa Limited | | 62.32% | | | Barclays Alma Mater Management Limited | | | | | Partnership | | 30.00% | | B, Z | Barclays Covered Bond Funding LLP | | 50.00% | | B | Barclays Infrastructure Investors Management LP | | 38.00% | | B, Z | BEIF Management Limited Partnership | | 30.00% | | B, Z | BMC (UK) Limited | | 40.13% | | Z | Business Growth Fund PLC | | 23.96% | | Z | Camperdown UK Limited | | 50.00% | | | | | Barclays Africa Limited | | 50.10% | | | Barclaycard Funding PLC | | 75.00% | | J Z | Claas Finance Limited | | 51.00% | | K | PSA Credit Company Limited (in liquidation) | | 50.00% | | J, L | Barclays Covered Bond Funding LLP | | 50.00% | | B | – 1 Angel Lane, London, EC4R 3AB | | | | | Vocalink Holdings Limited | | 15.18% | | Z | – 1 Poultry, London, England, EC2R 8EJ | | | | | Igloo Regeneration (General Partner) Limited | | 25.00% | | L, Z | – 1 Robeson Way, Sharston Green Business Park, | | | | | Manchester, M22 4SW | | | | | KDC Holdings Limited | | 37.41% | | EE, Z | –3-5 London Road, Rainham, Kent, ME8 7RG | | | | | Trade Ideas Limited | | 20.00% | | Z | – Derby Training Centre, Ascot Drive, Derby, DE24 8GW | | | | | Develop Training Group Limited | | 70.01% | | CC, Z | – 50 Lothian Road, Festival Square, Edinburgh, EH3 9BY | | | | | Equistone Founder Partner II L.P. | | 20.00% | | B, Z | Equistone Founder Partner III L.P. | | 35.00% | | B, Z |
– Building 6 Chiswick Park, 566 Chiswick High Road, | | | | | London W4 5HR | | | | | Intelligent Processing Solutions Limited | | 19.50% | | Z | – 13 Frensham Road, Sweet Briar Industrial Estate, | | | | | Norwich, NR3 2BT | | | | | Warehouse Express Group Limited | | 62.88% | | DD, Z | – Oak House, Ellesmere Port, Cheshire, CH65 9HQ | | | | | Elan Homes Holdings Limited | | 59.94% | | J, L, Z | – 16 Palace Street, London, SW1E 5JD | | | | | Barclays Alma Mater Management Limited Partnership | | 30.00% | | B, Z | –20-22 Bedford Row, London, WC1R 4JS | | | | | Cyber Defence Alliance Limited | | 25.00% | | E, Z | – 30 Gresham Street, London, EC2V 7PG | | | | | Gresham Leasing March (3) Limited | | 30.00% | | Z | – 80 New Bond Street, London, W1S 1SB | | | | | | Other related undertakings | | Percentage | | Note | Equity Estates Basingstoke Limited | | 31.16% | | J, Z | GN Tower Limited | | 50.00% | | Z | GW City Ventures Limited | | 50.00% | | K, Z | – Basepoint Business Centre,70-72 The Havens Ransomes | | | | | Europ, IP3 9SJ, Ipswich | | | | | Equity Estates Basingstoke Limited | | 25.05% | | J, Z | – 5th Floor, 70 Gracechurch Street, London, EC3V 0XL | | | | | Camperdown UK Limited | | 50.00% | | J, Z | – 5 North Colonnade, Canary Wharf, London, E14 4BB | | | | | BEIF Management Limited Partnership | | 30.00% | | B, Z | Imalivest LP | | 66.71% | | J, K, Z | – Blake House, Schooner Court, Crossways Business Park, | | | | | Dartford, DA2 6QQ | | | | | Lakeview Computers Group Limited | | 57.83% | | J, Z | – Queens House, 8 Queen Street, London EC4N 1SP | | | | | BIE Topco Limited | | 44.80% | | J, Z | – No.1 Dorset Street, Southampton, Hampshire, SO15 2DP | | | | | MCC (15) GH Limited | | 72.25% | | J, Z | – 2nd Floor, 110 Cannon Street, London, EC4N 6EU | | | | | Vectorcommand Limited (in Liquidation) | | 30.39% | | J, K, Z | – 55 Baker Street, London, W1U 7EU | | | | | Formerly H Limited (In Liquidation) | | 70.32% | | J, Z | – Countryside House, The Warley Hill Business Park, | | | | | The Drive, Brentwood, Essex, CM13 3AT | | | | | Woolwich Countryside Limited | | 50.00% | | O, Z | – Haberfield Old Moor Road, Wennington, Lancaster, | | | | | LA2 8PD | | | | | Full House Holdings Limited | | 67.43% | | J, Z | – 6th Floor 60 Gracechurch Street, London, EC3V 0HR | | | | | BMC (UK) Limited | | 40.57% | | F, J, Z | – Central House, 124 High Street, Hampton Hill, Middlesex | | | | | TW12 1NS | | | | | Rio Laranja Holdings Limited | | 45.00% | | J, Z | –13-15 York Buildings, London, WC2N 6JU | | | | | Business Growth Fund PLC | | 24.18% | | Z | Gresham Leasing March (3) Limited | | 30.00% | | Z | GW City Ventures Limited | | 50.00% | | K, Z | Igloo Regeneration (General Partner) Limited | | 25.00% | | L, Z | Imalivest LP | | 66.28% | | B, Z | Intelligent Processing Solutions Limited | | 19.50% | | Z | PetroGranada Limited | | 65.25% | | Z | PSA Credit Company Limited (in liquidation) | | 50.00% | | J, L | Vocalink Holdings Limited | | 15.00% | | Z | Woolwich Countryside Limited | | 50.00% | | O, Z | Australia
|
| | | | 312 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | | Hydra Energy Holdings Pty Ltd | | 59.26% | | Z |
46 Related undertakingscontinued | | | | | Other related undertakings | | Percentage | | Note | Botswana | | | | | – 5th Floor, Prime Plaza, Plot 74358, Central Business | | | | | District, Gabarone | | | | | Barclays Bank of Botswana Limited | | 33.98% | | | – Deloitte & Touche House, Lot 50664 , Gaborone | | | | | Barclays Insurance Services (Pty) Limited | | 33.98% | | | – Khama Crescent, Plot 17938, Government Enclave | | | | | Barclays Life Botswana Proprietary Limited | | 50.10% | | | | | | Canada | | | | | – 15th Floor, Bankers Court, 850 – 2nd Street, Calgary AB | | | | | T2P 0R8 | | | | | Clearbrook Resources Inc | | 21.62% | | Z | | | | Cayman Islands | | | | | – Maples Corporate Services Limited, PO Box 309GT, | | | | | Ugland House, South Church Street, Grand Cayman, | | | | | KY1-1104 | | | | | Chrysaor Holdings Limited | | 39.60% | | F, J, Z | Cupric Canyon Capital LP | | 40.03% | | FF, Z | Southern Peaks Mining LP | | 56.17% | | FF, Z | Third Energy Holdings Limited | | 77.82% | | F, J, K, Z | | | | Germany | | | | | – SchopenhauerstraBe 10,D-90409, Nurnberg | | | | | Eschenbach Holding GmbH | | 21.70% | | Z | | | | Ghana | | | | | – Barclays House, High Street, Accra | | | | | Barclays Bank of Ghana Limited | | 50.10% | | | | | | Hong Kong | | | | | – 6/F, Kiu Fu Commercial Building,300-306 Lockhart Road | | | | | CR SpaClub at Sea (HK) Limited | | 53.86% | | Z | | | | Indonesia | | | | | – Wisma GKBI 39th Floor, Suite 3906, Jl. Jend. Sudirman | | | | | No.28, Jakarta, 10210 | | | | | PT Barclays Capital Securities Indonesia (In Liquidation) | | 99.00% | | | | | | Isle of Man | | | | | – 3rd Floor, St George’s Court, Upper Church Street, | | | | | Douglas, IM1 1EE | | | | | Absa Manx Holdings Limited | | 50.10% | | | Absa Manx Insurance Company Limited | | 50.10% | | | | | | Kenya | | | | | – 5th Floor, IKM Place, 5th Ngong Avenue, Nairobi | | | | | Barclays Life Assurance Kenya Limited | | 31.99% | | | – The West End Building, Waiyaki Way, Nairobi | | | | | Barclays (Kenya) Nominees Limited | | 34.32% | | | Barclays Bank Insurance Agency Limited | | 34.32% | | | Barclays Bank of Kenya Limited | | 34.32% | | | Barclays Deposit-Taking Microfinance Limited | | 34.32% | | | Barclays Financial Services Limited | | 34.32% | | | Barclays Pension Services Limited | | 31.20% | | Z | – 9th Floor, Williamson House, 4th Ngong Avenue, Nairobi | | | | | First Assurance Company Limited | | 31.99% | | | First Assurance Holdings Limited | | 50.10% | | | | | | Korea, Republic of | | | | | – 18th Floor, Daishin Finance Centre, 343, Samil-daero, | | | | | Jung-go, Seoul | | | | | Woori BC Pegasus Securitization Specialty Co., Limited | | 70.00% | | W | | | | Luxembourg | | | | | – 9, allée Scheffer,L-2520 | | | | | BNRI Limehouse No.1 Sarl | | 96.30% | | R | Partnership Investments S.à r.l. | | 33.40% | | | Preferred Funding S.à r.l. | | 33.33% | | H | Preferred Investments S.à r.l. | | 33.33% | | H, I | | | | Barclays Bank of Botswana Limited | | 42.27% | | | Barclays Insurance Services (Pty) Limited | | 42.27% | | | Barclays Life Botswana Proprietary Limited | | 62.32% | | | Canada
| | | | | Clearbrook Resources Inc | | 20.71% | | Z | Cayman Islands
| | | | | Chrysaor Holdings Limited | | 37.98% | | Z | Cupric Canyon Capital GP Limited | | 49.90% | | Z | Cupric Canyon Capital LP | | 38.10% | | B, Z | Southern Peaks Mining LP | | 54.67% | | B, Z | SPM GP Limited | | 49.61% | | Z | Third Energy Holdings Limited | | 74.76% | | Z | France
| | | | | Financière DSBG SAS | | 31.51% | | Z | Sogetrel | | 27.31% | | Z | Germany
| | | | | Eschenbach Holding GmbH | | 23.25% | | Z | Ghana
| | | | | Barclays Bank of Ghana Limited | | 62.32% | | | Hong Kong
| | | | | CR SpaClub at Sea (HK) Limited | | 53.86% | | Z | Indonesia
| | | | | PT Barclays Capital Securities Indonesia | | 99.00% | | | Isle of Man
| | | | | Absa Manx Holdings Limited | | 62.32% | | | Absa Manx Insurance Company Limited | | 62.32% | | | Italy
| | | | | Eudea SpA | | 22.03% | | Z | Jersey
| | | | | Barclays Index Finance Trust | | 32.69% | | S | Kenya
| | | | | Barclays (Kenya) Nominees Limited | | 42.69% | | | Barclays Bank Insurance Agency Limited | | 42.69% | | | Barclays Bank of Kenya Limited | | 42.69% | | | Barclays Deposit-Taking Microfinance Limited | | 42.69% | | | Barclays Financial Services Limited | | 42.69% | | | Barclays Life Assurance Kenya Limited | | 39.45% | | | Barclays Pension Services Limited | | 38.81% | | | First Assurance Company Limited | | 39.45% | | | First Assurance Holdings Limited | | 62.31% | | | Korea, Republic of
| | | | | Woori BC Pegasus Securitization Specialty Co., Limited | | 70.00% | | | Luxembourg
| | | | | BNRI Limehouse No.1 Sarl | | 96.30% | | R | Partnership Investments S.à r.l. | | 33.40% | | | Preferred Funding S.à r.l. | | 33.33% | | H | Preferred Investments S.à r.l. | | 33.33% | | H, I | Malta | | | | | – RS2 Buildings, Fort Road, Mosta MST 1859 | | | | | RS2 Software PLC | | 18.25% | | Z |
| | | | | Other related undertakings | | Percentage | | Note | Mauritius | | | | | – Barclays House, 68 Cyber City, Ebène | | | | | Barclays Bank Mauritius Limited | | 50.10% | | G, H, J, K | | | | Monaco | | | | | – 31 Avenue de la Costa, Monte Carlo | | | | | Societe Civile Immobiliere 31 Avenue de la Costa | | 75.00% | | | | | | Mozambique | | | | | – Avenida 25 de Setembro, No 1184, 15 Andar, Maputo | | | | | Barclays Bank Mocambique SA | | 49.50% | | | – Rua da Imprensa, 183 – R/C, Maputo | | | | | Global Alliance Seguros, S.A. | | 50.10% | | | | | | Namibia | | | | | – Bougain Villas, 78 Sam Nujoma Drive, Windhoek | | | | | EFS Namibia Proprietary Limited | | 50.10% | | | – Unit 6, Ausspann Plaza, Dr Agostinho Nero Road, | | | | | Ausspannplatz, Windhoek | | | | | Absa Namibia Proprietary Limited | | 50.10% | | | | | | Netherlands | | | | | – Alexanderstraat 18, 2514 JM, The Hague | | | | | Tulip Oil Holding BV | | 30.45% | | J, L,Z | | | | Nigeria | | | | | – Plot 6, Block XII, Osborne Estate, Ikoyi, Lagos | | | | | Absa Capital Representative Office Nigeria Limited | | 50.10% | | | | | | Norway | | | | | – Postbox 6783, ST Olavs plass, 0130 Oslo | | | | | EnterCard Norge AS | | 40.00% | | Z | – Skansegata 2, Stavanger, 4006, Rogland | | | | | Origo Exploration Holding AS | | 28.32% | | F, I, Z | | | | Seychelles | | | | | – Capital City, Room1-01, 1st Floor, Independence | | | | | Avenue, Victoria, Mahe | | | | | Barclays Bank (Seychelles) Limited | | 49.98% | | | | | | South Africa | | | | | – Barclays Towers West, 15 Troye Street, | | | | | Johannesburg, 2001 | | | | | 1900 Summerstrand Share Block Limited | | 50.10% | | | Absa Alternative Asset Management Proprietary Limited | | 50.10% | | | Absa Asset Management Proprietary Limited | | 50.05% | | | Absa Bank Limited | | 50.10% | | I, J | Absa Capital Securities Proprietary Limited | | 50.10% | | | Absa Consultants and Actuaries Proprietary Limited | | 50.10% | | | Absa Development Company Holdings Proprietary Limited | | 50.10% | | F, I | Absa Estate Agency Proprietary Limited | | 50.10% | | | Absa Financial Services Africa Holdings Proprietary Limited | | 50.10% | | | Absa Financial Services Limited | | 50.10% | | | Absa Fleet Services Proprietary Limited | | 50.10% | | | Absa Fund Managers Limited | | 50.10% | | | Absa idirect Limited | | 50.10% | | | Absa Insurance and Financial Advisers Proprietary Limited | | 50.10% | | | Absa Insurance Company Limited | | 50.10% | | | Absa Insurance Risk Management Services Limited | | 50.10% | | | Absa Investment Management Services Proprietary Limited | | 50.10% | | | Absa Life Limited | | 50.10% | | F, I | Absa Mortgage Fund Managers Proprietary Limited | | 50.10% | | | Absa Nominees Proprietary Limited | | 50.10% | | | Absa Ontwikkelingsmaatskappy Eiendoms Beperk | | 50.10% | | | Absa Outsource Competency Centre Proprietary Limited | | 50.10% | | | Absa Portfolio Managers Proprietary Limited | | 50.10% | | | Absa Property Development Proprietary Limited | | 50.10% | | | Absa Secretarial Services Proprietary Limited | | 50.10% | | | Absa Stockbrokers and Portfolio Management | | | | | Proprietary Limited | | 50.10% | | | Absa Technology Finance Solutions Proprietary Limited | | 50.10% | | | Absa Trading and Investment Solutions Holdings | | | | | Proprietary Limited | | 50.10% | | | Absa Trading and Investment Solutions Proprietary Limited | | 50.10% | | | Absa Trust (Natal) Limited | | 50.10% | | | Barclays Bank Mauritius Limited | | 62.32% | | G, H, J, K |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 313 | Monaco
|
Notes to the financial statements 46 Related undertakingscontinued | | | | | Other related undertakings | | Percentage | | Note | – Barclays Towers West, 15 Troye Street, Johannesburg, 2001 (continued) | | | | | Société Civile Immobilière 31 Avenue de la Costa | | 75.00% | | | Mozambique
| | | | | Barclays Bank Moçambique SA | | 61.58% | | | Global Alliance Seguros, S.A. | | 62.32% | | | Namibia
| | | | | Absa Namibia Proprietary Limited | | 62.32% | | | EFS Namibia Proprietary Limited | | 62.32% | | |
Absa Trust Limited | | 50.10% | | I, J | Absa Vehicle Management Proprietary Limited | | 50.10% | | | Absa Vehicle Management Solutions Proprietary Limited | | 50.10% | | | ABSAN Proprietary Limited | | 50.10% | | | ACS Nominees Proprietary Limited | | 50.10% | | | AIMS Nominees (RF) Proprietary Limited | | 50.10% | | | Alberton Industrial Properties Proprietary Limited | | 50.10% | | | Allied Development Company Proprietary Limited | | 50.10% | | | Allied Grinaker Properties Proprietary Limited (In Liquidation) | | 25.55% | | | Allpay Consolidated Investment Holdings Proprietary Limited | | 50.10% | | | Allpay Eastern Cape Proprietary Limited (In Liquidation) | | 33.07% | | | Allpay Free State Proprietary Limited (In Liquidation) | | 30.06% | | | Allpay Gauteng Proprietary Limited (In Liquidation) | | 30.06% | | | Allpay Mpumalanga Proprietary Limited | | 50.10% | | | Allpay Western Cape Proprietary Limited (In Liquidation) | | 33.07% | | | Bankorptrust Limited | | 50.10% | | | Barclays Africa Group Limited | | 50.10% | | | Barclays Africa Regional Office Proprietary Limited | | 50.10% | | | Cedar Lakes Country Estates Proprietary Limited | | | | | (Liquidated on 19 January 2017) | | 50.10% | | | Combined Mortgage Nominees Proprietary Limited | | 50.10% | | | Compro Holdings Proprietary Limited | | 50.10% | | | Draaikloof Properties Proprietary Limited (In Liquidation) | | 40.08% | | | FFS Finance South Africa (RF) Proprietary Limited | | 25.05% | | | Fradey Nominees (RF) Proprietary Limited | | 50.10% | | | Goldreef Village Share Block Limited | | 50.10% | | | Instant Life Proprietary Limited | | 37.57% | | | iSentials Proprietary Limited | | 25.05% | | | MAN Financial Services (SA) (RF) Proprietary Limited | | 25.05% | | | Marmanet Retirement Village Proprietary Limited | | 50.10% | | | Kempwest Proprietary Limited | | 25.05% | | | Lekkerleef Eiendoms Beperk | | 50.10% | | | MB Acquired Operations Limited (In Liquidation) | | 50.10% | | | Meeg Asset Finance Proprietary Limited (In Liquidation) | | 50.10% | | | Merfin Proprietary Limited | | 50.10% | | | Nation-Wide Recovery Services Proprietary Limited | | 25.05% | | | NewFunds (RF) Proprietary Limited | | 50.10% | | | Newgold Issuer (RF) Limited | | 50.10% | | Z | Newgold Managers Proprietary Limited | | 24.55% | | | Olieven Properties Proprietary Limited | | | | | (Liquidated on 19 January 2017) | | 50.10% | | | Ottawa Development Trust Proprietary Limited | | 50.10% | | | Palmietfontein Investments Proprietary Limited | | | | | (Liquidated on 19 January 2017) | | 50.10% | | | Roodekop Townships Proprietary Limited | | 50.10% | | | UBS Trust Limited | | 50.10% | | | United Development Corporation Proprietary Limited | | 50.10% | | | United Towers Proprietary Limited | | 50.10% | | | Volkskas Eiendomsdienste Eiendoms Beperk | | 50.10% | | I, J | Volkskastrust Beperk | | 50.10% | | I, J | Woodbook Finance Proprietary Limited | | 50.10% | | | Woolworths Financial Services Proprietary Limited | | 25.05% | | | – Absa Capital, 15 Alice Lane, Sandton, Gauteng | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 303 |
Notes to the financial statements
46 Related undertakingscontinued
| | | | | Other related undertakings | | Percentage | | Note | Netherlands
| | | | | Tulip Oil Holding BV | | 30.43% | | Z | Nigeria
| | | | | Absa Capital Representative Office Nigeria Limited | | 62.32% | | | Norway
| | | | | EnterCard Norge AS | | 40.00% | | Z | Origo Exploration Holding AS | | 23.08% | | Z | Seychelles
| | | | | Barclays Bank (Seychelles) Limited | | 62.18% | | | South Africa
| | | | | 1900 Summerstrand Share Block Limited | | 62.32% | | | Absa Alternative Asset Management Proprietary Limited | | 62.32% | | | Absa Asset Management Proprietary Limited | | 62.26% | | | Absa Bank Limited | | 62.32% | | I, J | Absa Capital Securities Proprietary Limited | | 62.32% | | F, I | Absa Consultants and Actuaries Proprietary Limited | | 62.32% | | | Absa Development Company Holdings Proprietary Limited | | 62.32% | | F, I | Absa Estate Agency Proprietary Limited | | 62.32% | | | Absa Financial Services Africa Holdings Proprietary Limited | | 62.32% | | | Absa Financial Services Limited | | 62.32% | | | Absa Fleet Services Proprietary Limited | | 62.32% | | | Absa Fund Managers Limited | | 62.32% | | | Absa idirect Limited | | 62.32% | | | Absa Insurance and Financial Advisers Proprietary Limited | | 62.32% | | | Absa Insurance Company Limited | | 62.32% | | | Absa Insurance Risk Management Services Limited | | 62.32% | | | Absa Investment Management Services Proprietary Limited | | 62.32% | | | Absa Life Limited | | 62.32% | | F, I | Absa Mortgage Fund Managers Proprietary Limited | | 62.32% | | | Absa Nominees Proprietary Limited | | 62.32% | | | Absa Ontwikkelingsmaatskappy Eiendoms Beperk | | 62.32% | | | Absa Outsource Competency Centre Proprietary Limited | | 62.32% | | | Absa Portfolio Managers Proprietary Limited | | 62.32% | | | Absa Property Development Proprietary Limited | | 62.32% | | | Absa Secretarial Services Proprietary Limited | | 62.32% | | | Absa Stockbrokers Proprietary Limited | | 62.32% | | | Absa Technology Finance Solutions Proprietary Limited | | 62.32% | | | Absa Trading and Investment Solutions Holdings | | 62.32% | | | Proprietary Limited | | | | | Absa Trading and Investment Solutions Proprietary Limited | | 62.32% | | | Absa Trust (Natal) Limited | | 62.32% | | | Absa Trust Limited | | 62.32% | | I, J | Absa Vehicle Management Proprietary Limited | | 62.32% | | | Absa Vehicle Management Solutions Proprietary Limited | | 62.32% | | | ABSAN Proprietary Limited | | 62.32% | | | Account on Us Proprietary Limited | | 31.16% | | | ACMB Specialised Finance Nominees Proprietary Limited | | 62.32% | | | (In Liquidation) | | | | | ACS Nominees Proprietary Limited | | 62.32% | | | African Spirit Trading 309 Proprietary Limited | | 31.16% | | Z | AIMS Nominees (RF) Proprietary Limited | | 62.32% | | | Alberton Industrial Properties Proprietary Limited | | 62.32% | | | Allied Development Company Proprietary Limited | | 62.32% | | | Allied Grinaker Properties Proprietary Limited | | 31.78% | | | Allpay Consolidated Investment Holdings Proprietary Limited | | 62.32% | | | Allpay Eastern Cape Proprietary Limited – (In Liquidation) | | 41.13% | | | Allpay Free State Proprietary Limited (In Liquidation) | | 37.39% | | | Allpay Gauteng Proprietary Limited (In Liquidation) | | 37.39% | | | Allpay Limpopo Proprietary Limited (In Liquidation) | | 62.32% | | | Allpay Mpumalanga Proprietary Limited | | 62.32% | | | Allpay Northern Cape Proprietary Limited (In Liquidation) | | 62.32% | | | Allpay Northwest Proprietary Limited (In Liquidation) | | 62.32% | | | Allpay Payment Solutions Proprietary Limited (In Liquidation) | | 62.32% | | | Allpay Western Cape Proprietary Limited (In Liquidation) | | 41.13% | | | Bankorptrust Limited | | 62.32% | | | Barclays Africa Group Limited | | 62.32% | | | Barclays Africa Regional Office Proprietary Limited | | 62.32% | | | Barrie Island Property Investments Proprietary Limited | | 62.32% | | | Blue Age Properties 60 Proprietary Limited | | 62.32% | | | Campus on Rigel Proprietary Limited | | 20.77% | | Z | Cedar Lakes Country Estates Proprietary Limited | | 62.32% | | | Combined Mortgage Nominees Proprietary Limited | | 62.32% | | | Compro Holdings Proprietary Limited | | 62.32% | | | Culemborg Investment Properties Proprietary Limited | | 35.67% | Barrie Island Property Investments Proprietary Limited | | 50.10% | | | Blue Age Properties 60 Proprietary Limited | | 50.10% | | | Culemborg Investment Properties Proprietary Limited | | 28.69% | | J, K |
| | | | | Other related undertakings | | Percentage | | Note | Diluculo Investments Proprietary Limited | | 62.32% | | | Diluculo Properties Proprietary Limited | | 62.32% | | | Diluculo Property Trading Proprietary Limited | | 62.32% | | | Draaikloof Properties Proprietary Limited | | 49.86% | | | FFS Finance South Africa (RF) Proprietary Limited | | 31.16% | | | Fradey Nominees (RF) Proprietary Limited | | 62.32% | | | Goldreef Village Share Block Limited | | 61.88% | | | Guaret Investments No 1 Proprietary Limited | | 62.32% | | H, I | Integrated Processing Solutions Proprietary Limited | | 31.16% | | | iSentials Proprietary Limited | | 31.16% | | | Kangrove Proprietary Limited (In Liquidation) | | 62.32% | | | Kempwest Proprietary Limited | | 31.16% | | | Lekkerleef Eiendoms Beperk | | 62.32% | | | Lodel Proprietary Limited (In Liquidation) | | 62.32% | | | MAN Financial Services (SA) (RF) Proprietary Limited | | 31.16% | | | Marmanet Retirement Village Proprietary Limited | | 62.32% | | | MB Acquired Operations Limited (In Liquidation) | | 62.32% | | | Meeg Asset Finance Proprietary Limited (In Liquidation) | | 62.32% | | | Merfin Proprietary Limited | | 62.32% | | | Nation-Wide Recovery Services Proprietary Limited | | 31.16% | | | NewFunds (RF) Proprietary Limited | | 62.32% | | | Newgold Issuer (RF) Limited | | 62.32% | | | Newgold Managers Proprietary Limited | | 30.54% | | | Ngwenya River Estate Proprietary Limited | | 62.32% | | | Nkwe Rosslyn Properties Proprietary Limited | | 62.32% | | | Northern Lights Trading 197 Proprietary Limited | | 31.16% | Diluculo Investments Proprietary Limited | | 50.10% | | | Diluculo Properties Proprietary Limited | | 50.10% | | | Diluculo Property Trading Proprietary Limited | | 50.10% | | | Ngwenya River Estate Proprietary Limited | | 50.10% | | | Nkwe Rosslyn Properties Proprietary Limited | | 50.10% | | | Pienaarsrivier Properties Proprietary Limited | | 50.10% | | | – 18 Bompas Road, Dunkeld West | | | | | African Spirit Trading 309 Proprietary Limited | | 25.05% | | Z | – 52 Grosvenor Road, Bryanston, 2021 | | | | | Campus on Rigel Proprietary Limited (In Liquidation) | | 16.70% | | Z | – 9th Floor, Standard Bank Centre, 5 Simmonds Street, | | | | | Johannesburg | | | | | Integrated Processing Solutions Proprietary Limited | | 25.05% | | | – Abcon House, Fairway Office Park, Bryanston | | | | | Somerset West Autopark Proprietary Limited | | 16.70% | | Z | – Corner Ian Halle, P O Box 44845, Claremont, 7735 | | | | | Northern Lights Trading 197 Proprietary Limited | | 25.05% | | Z | Pacific Heights Investments 196 Proprietary Limited | | 25.05% | | Z | Olieven Properties Proprietary Limited | | 62.32% |
| | | | | Other related undertakings | | Percentage | | Note | Ottawa Development Trust Proprietary Limited | | 62.32% | | | Pacific Heights Investments 196 Proprietary Limited | | 31.16% | | Z | Palmietfontein Investments Proprietary Limited | | 62.32% | | | Pienaarsrivier Properties Proprietary Limited | | 62.32% | | | RainFin (RF) Proprietary Limited | | 30.54% | | Z | Roodekop Townships Proprietary Limited | | 62.32% | | | Somerset West Autopark Proprietary Limited | | 20.77% | | Z | T E AND M J Proprietary Limited (In Liquidation) | | 62.32% | | | Tembisa Mall Proprietary Limited | | 31.16% | | Z | The Ballito Junction Development Proprietary Limited | | 62.32% | | F, I | (in Liquidation) | | | | | Thebes Landgoed Eiendoms Beperk | | 62.32% | | | UBS Trust Limited | | 62.32% | | | United Development Corporation Proprietary Limited | | 62.32% | | | United Towers Proprietary Limited | | 62.32% | | | Up-Front Investments 132 Proprietary Limited | | 31.16% | | | Volkskas Eiendomsdienste Eiendoms Beperk | | 62.32% | | I, J | Volkskastrust Beperk | | 62.32% | | I, J | Woodbook Finance Proprietary Limited | | 62.32% | | | Woolworths Financial Services Proprietary Limited
| | 31.16% | | | Sweden | | | | | – c/o ForeningsSparbanken AB, 105 34 Stockholm | | | | | EnterCard Holding AB | | 40.00% | | K, Z | EnterCard Sverige AB | | 40.00% | | Z | | | | Tanzania, United Republic of | | | | | – Azali Certified Public Secretaries, Hillside Apartments, | | | | | First Floor, Suite #04, Ragati Road Upperhill, Nairobi | | | | | First Assurance Company Limited (Tanzania) | | 16.79% | | | – Barclays House, P O Box 5137, Ohio Street, | | | | | Dar es Salaam | | | | | Barclays Bank Tanzania Limited | | 50.10% | | G, I | – Mezzanine Floor, NBC House, Sokoine Drive, | | | | | Dar Es Salaam | | | | | National Bank of Commerce Limited | | 27.55% | | | | | | Turkey | | | | | – Bahcelievier Mah., Kaldirim Cad. No. 34/1, | | | | | Cengelkoy-Uskudar, Istanbul | | | | | CRKK RESORT OTEL ISLETMECILGI LIMITED SIRKETI | | 54.40% | | Z | | | | Uganda | | | | | – 16 Kampala Road, Kampala | | | | | Barclays Bank of Uganda Limited | | 50.10% | | | | | | United States | | | | | – 777 Main Street, Fort Worth TX 76102 | | | | | CR Lenox Residences, LLC | | 54.40% | | C, Z | CR Management, LLC | | 54.40% | | C, Z | CRE Diversified Holdings LLC | | 80.00% | | C, Z | Crescent Crown Greenway Plaza SPV LLC | | 80.00% | | C, Z | Crescent Crown Land Holding SPV LLC | | 80.00% | | C, Z | Crescent Plaza Hotel Owner GP, LLC | | 80.00% | | C, Z | Crescent Plaza Hotel Owner, L.P. | | 80.00% | | B, Z | Crescent Plaza Residential LP, LLC | | 80.00% | | C, Z | Crescent Plaza Residential, L.P. | | 80.00% | | B, Z | Crescent Plaza Residential, LLC | | 80.00% | | C, Z | Crescent Plaza Restaurant GP, LLC | | 80.00% | | C, Z | Crescent Property Services LLC | | 80.00% | | C, Z | Crescent Real Estate Equities Limited Partnership | | 80.00% | | B, Z | Crescent Real Estate Equities, LLC | | 80.00% | | C, Z | Crescent Real Estate Holdings LLC | | 80.00% | | C, Z | Crescent Resort Development LLC | | 80.00% | | C, Z | Crescent Tower Residences GP, LLC | | 80.00% | | C, Z | Crescent Tower Residences, L.P. | | 80.00% | | B, Z | Crescent TRS Holdings LLC | | 80.00% | | C, Z | Crescent-Fearing, L.P. | | 40.00% | | B, Z | CREW Tahoe Holdings LLC | | 80.00% | | C, Z | DBL Texas Holdings LLC | | 80.00% | | C, Z | Desert Mountain Development LLC | | 80.00% | | C, Z | Desert Mountain Properties Limited Partnership | | 74.40% | | B, Z | East West Resort Development VII LLC | | 80.00% | | C, Z | Mira Vista Development LLC | | 78.40% | | C, Z | Moon Acquisition Holdings LLC | | 80.00% | | C, Z | Moon Acquisition LLC | | 80.00% | | C, Z | Mountainside Partners LLC | | 80.00% | | C, Z | Sonoma Golf Club, LLC | | 64.00% | | C, Z | Sonoma Golf, LLC | | 64.00% | | C, Z | Sonoma National, LLC | | 80.00% | | C, Z | – 8600 E. Rockcliff Road, Tuscon AZ 85750 | | | | | EnterCard Holding AB | | 40.00% | | K, Z | EnterCard Sverige AB | | 40.00% | | Z | Tanzania, United Republic of
| | | | | Barclays Bank Tanzania Limited | | 62.32% | | | First Assurance Company Limited (Tanzania) | | 34.43% | | | National Bank of Commerce Limited | | 41.06% | | | Turkey
| | | | | CRKK RESORT OTEL ISLETMECILGI LIMITED SIRKETI | | 54.40% | | Z | United States
| | | | | Blue River Land Company, LLC | | 39.55% | | C, Z | Canyon Ranch Enterprises, LLC | | 54.40% | | C, Z | Central Platte Valley Management, LLC | | 51.78% | | C, Z | Continental Intermodal Group GP LLC | | 50.00% | | C, Z | Continental Intermodal Group LP | | 37.29% | | B, Z | CR Bodrum Management, LLC | | 54.40% | | C, Z | CR Employment, Inc. | | 54.40% | | Z | CR Las Vegas, LLC | | 54.40% | | C, Z | CR Lenox Residences, LLC | | 54.40% | | C, Z | CR License, LLC | | 54.40% | | C, Z | CR Management, LLC | | 54.40% | | C, Z | CR Miami Employment, LLC | | 54.40% | | C, Z | CR Miami, LLC | | 54.40% | | C, Z | CR Operating, LLC | | 54.40% | | C, Z | CR Orlando, LLC | | 54.40% | | C, Z | CR Products, LLC | | 54.40% | | C, Z | CR Resorts, LLC | | 54.40% | | C, Z |
| | | 304 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
46 Related undertakingscontinued
| | | | | Other related undertakings | | Percentage | | Note | CR SpaClub at Sea, LLC | | 54.40% | | C, Z | Spa Project Advisors, LLC | | 54.40% | | C, Z | Tucson/Lenox Special Manager, Inc. | | 54.40% | | Z | Tucson/Lenox, LLC | | 54.40% | | C, Z | CR SPE1, LLC | | 54.40% | | C, Z | CRE Diversified Holdings LLC | | 80.00% | | C, Z | Crescent CR Holdings LLC | | 80.00% | | C, Z | Crescent Crown Greenway Plaza SPV LLC | | 80.00% | | C, Z | Crescent Crown Land Holding SPV LLC | | 80.00% | | C, Z | Crescent Fresh Series B Hold Co. | | 80.00% | | Z | Crescent McKinney Olive Holdings GP LLC | | 80.00% | | C, Z | Crescent Plaza Hotel Owner GP, LLC | | 80.00% | | C, Z | Crescent Plaza Hotel Owner, L.P. | | 80.00% | | B, Z | Crescent Plaza Residential LP, LLC | | 80.00% | | C, Z | Crescent Plaza Residential, L.P. | | 80.00% | | B, Z | Crescent Plaza Residential, LLC | | 80.00% | | C, Z | Crescent Plaza Restaurant GP, LLC | | 80.00% | | C, Z | Crescent Property Services LLC | | 80.00% | | C, Z | Crescent Real Estate Equities Limited Partnership | | 80.00% | | B, Z | Crescent Real Estate Equities, LLC | | 80.00% | | C, Z | Crescent Real Estate Holdings LLC | | 80.00% | | C, Z | Crescent Resort Development LLC | | 80.00% | | C, Z | Crescent Tower Residences GP, LLC | | 80.00% | | C, Z | Crescent Tower Residences, L.P. | | 80.00% | | B, Z | Crescent TRS Holdings LLC | | 80.00% | | C, Z | Crescent-Fearing, L.P. | | 40.00% | | B, Z | CREW Tahoe Holdings LLC | | 80.00% | | C, Z | CREW Tahoe LLC | | 60.80% | | C, Z | Cupric Canyon Capital LLC | | 26.04% | | C, Z | DBL Texas Holdings LLC | | 80.00% | | C, Z | Desert Mountain Development LLC | | 80.00% | | C, Z | Desert Mountain Properties Limited Partnership | | 74.40% | | B, Z | DG Solar Lessee II, LLC | | 50.00% | | C, Z | DG Solar Lessee, LLC | | 50.00% | | C, Z | East West Resort Development IV, L.P., L.L.L.P. | | 71.11% | | B, Z | East West Resort Development V, L.P., L.L.L.P. | | 74.75% | | B, Z | East West Resort Development VI, L.P., L.L.L.P. | | 35.86% | | B, Z | East West Resort Development VII LLC | | 80.00% | | C, Z | East West Resort Development VIII, L.P., L.L.L.P. | | 71.11% | | B, Z | East West Resort Development XIV, L.P., L.L.L.P. | | 33.52% | | B, Z | EW Deer Valley, LLC | | 29.28% | | C, Z | EWRD Perry Holding, L.P., L.L.L.P. | | 67.61% | | B, Z | EWRD Perry-Riverbend, LLC | | 54.31% | | C, Z | EWRD Summit Holding, L.P., L.L.L.P. | | 79.57% | | B, Z | EWRD Summit, LLC | | 79.10% | | C, Z | Gray’s Station, LLC | | 56.96% | | C, Z | Home Run Tahoe, LLC | | 60.82% | | C, Z | Mira Vista Development LLC | | 78.40% | | C, Z | Mira Vista Golf Club, L.C. | | 76.83% | | Z | Moon Acquisition Holdings LLC | | 80.00% | | C, Z | Moon Acquisition LLC | | 80.00% | | C, Z | Mountainside Partners LLC | | 80.00% | | C, Z | MV Penthouses, LLC | | 51.20% | | C, Z | MVWP Development LLC | | 30.40% | | C, Z | MVWP Investors LLC | | 60.80% | | C, Z | Northstar Mountain Properties, LLC | | 60.82% | | C, Z | Northstar Trailside Townhomes, LLC | | 60.82% | | C, Z | Northstar Village Townhomes, LLC | | 56.93% | | C, Z | Old Greenwood Realty, Inc. | | 60.80% | | Z | Old Greenwood, LLC | | 60.80% | | C, Z | Overlook at Sugarloaf Inc | | 62.32% |
| | | 314 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | | Parkside Townhomes, LLC | | 47.63% | | C, Z | Sonoma Golf Club, LLC | | 64.00% | | C, Z | Sonoma Golf, LLC | | 64.00% | | C, Z | Sonoma National, LLC | | 80.00% | | C, Z | Spa Project Advisors, LLC | | 54.40% | | C, Z | St. Charles Place, LLC | | 47.63% | | C, Z | Stellar Residences, LLC | | 60.82% | | C, Z | Stellar Townhomes, LLC | | 60.82% | | C, Z | Tahoe Club Company, LLC | | 60.80% | | C, Z | Tahoe Club Employee Company | | 60.80% | | Z | Tahoe Mountain Resorts, LLC | | 60.82% | | C, Z | The Glades Tahoe, LLC | | 60.82% | | C, Z | The Park at One Riverfront, LLC | | 47.63% | | C, Z | Truckee Land, LLC | | 74.75% | | C, Z | Tucson/Lenox Special Manager, Inc. | | 54.40% | | Z | Tucson/Lenox, |
46 Related undertakingscontinued | | | | | Other related undertakings | | Percentage | | Note | – 126 Riverfront Lane , 5th Floor, Drawer 2770, | | | | | Avon CO 81620 | | | | | Blue River Land Company, LLC | | 39.55% | | C, Z | East West Resort Development IV, L.P., L.L.L.P. | | 71.11% | | B, Z | East West Resort Development VI, L.P., L.L.L.P. | | 35.86% | | B, Z | East West Resort Development VIII, L.P., L.L.L.P. | | 71.11% | | B, Z | East West Resort Development XIV, L.P., L.L.L.P. | | 33.52% | | B, Z | EW Deer Valley, LLC | | 29.28% | | C, Z | EWRD Perry Holding, L.P., L.L.L.P. | | 67.61% | | B, Z | EWRD Perry-Riverbend, LLC | | 54.31% | | C, Z | EWRD Summit Holding, L.P., L.L.L.P. | | 79.57% | | B, Z | EWRD Summit, LLC | | 79.10% | | C, Z | MV Penthouses, LLC | | 51.20% | | C, Z | Water House on Main Street LLC | | 35.26% | | C, Z | – 3001 Northstar Drive, C200, Truckee CA 96161 | | | | | CREW Tahoe LLC | | 60.80% | | C, Z | East West Resort Development V, L.P., L.L.L.P. | | 74.75% | | B, Z | Gray’s Station, LLC | | 56.96% | | C, Z | Home Run Tahoe, LLC | | 60.82% | | C, Z | Northstar Mountain Properties, LLC | | 60.82% | | C, Z | Northstar Trailside Townhomes, LLC | | 60.82% | | C, Z | Northstar Village Townhomes, LLC | | 56.93% | | C, Z | Old Greenwood Realty, Inc. | | 60.80% | | Z | Old Greenwood, LLC | | 60.80% | | C, Z | Tahoe Club Company, LLC | | 60.80% | | C, Z | Tahoe Mountain Resorts, LLC | | 60.82% | | C, Z | The Glades Tahoe, LLC | | 60.82% | | C, Z | – Corporation Service Company, 2711 Centreville Road, | | | | | Suite 400, Wilmington DE 19808 | | | | | CR SPE1, LLC | | 54.40% | | C, Z |
Crescent CR Holdings LLC | | 80.00% | | C, Z | Crescent Fresh Series B Hold Co. | | 80.00% | | Z | Crescent McKinney Olive Holdings GP LLC | | 80.00% | | C, Z | MVWP Development LLC | | 30.40% | | C, Z | MVWP Investors LLC | | 60.80% | | C, Z | Stellar Residences, LLC | | 60.82% | | C, Z | Stellar Townhomes, LLC | | 60.82% | | C, Z | – 1701 Wynkoop Street, Suite 140, Box 47, Denver | | | | | CO 80202 | | | | | Other related undertakings | | Percentage | | Note | Union Center LLC | | 51.78% | | C, Z | Vendue/Prioleau Associates LLC | | 49.60% | | C, Z | Village Walk, LLC | | 46.08% | | C, Z | VS BC Solar Lessee I LLC | | 50.00% | | C, Z | Water House on Main Street LLC | | 35.26% | | C, Z | Zambia
| | | | | Barclays Life Zambia Limited | | 62.32% | | | | | Parkside Townhomes, LLC | | 47.63% | | C, Z | St. Charles Place, LLC | | 47.63% | | C, Z | The Park at One Riverfront, LLC | | 47.63% | | C, Z | Central Platte Valley Management, LLC | | 51.78% | | C, Z | Union Center LLC | | 51.78% | | C, Z | – Corporation Trust Company, Corporation Trust Center, | | | | | 1209 Orange Street, Wilmington DE 19801 | | | | | DG Solar Lessee II, LLC | | 50.00% | | C, Z | DG Solar Lessee, LLC | | 50.00% | | C, Z | Cupric Canyon Capital LLC | | 40.03% | | FF, Z | VS BC Solar Lessee I LLC | | 50.00% | | C, Z | – East West Partners, Inc., 126 Riverfront Lane, 5th Floor, | | | | | Avon CO 81620 | | | | | Tahoe Club Employee Company | | 60.80% | | Z | – 200 Renaissance Parkway Suite 20, Atlanta, | | | | | Georgia 30308 | | | | | Overlook at Sugarloaf Inc | | 50.10% | | | – C/O Capitol Services Inc., Suite B, 1675 South State | | | | | Street, Dover DE 19901-5140 | | | | | Continental Intermodal Group LP | | 37.58% | | FF, Z | – C/O W.J. Harrison & Associates, P.C., 3561 East Sunrise | | | | | Dr., Ste. 201, Tucson AZ 85718 | | | | | CR Bodrum Management, LLC | | 54.40% | | C, Z | – 6600 Mira Vista Blvd., Fort Worth TX 76132 | | | | | Mira Vista Golf Club, L.C. | | 76.83% | | Z | – c/o National Corporate Research Ltd. 615 DuPont | | | | | Highway, Dover, Kent County, DE 19901 | | | | | Surrey Funding Corporation | | 99.45% | | | Sussex Purchasing Corporation | | 99.45% | | |
| | | | | Other related undertakings | | Percentage | | Note | Zambia | | | | | – 3rd Floor, Mpile Park, 74 Independence Avenue, Lusaka | | | | | Barclays Life Zambia Limited | | 50.10% | | | – Stand No. 4643 and 4644, Elunda Office Park, | | | | | Addis Ababa Roundabout, Lusaka | | | | | Barclays Bank Zambia PLC | | 50.10% | | | – Kafue House, Cairo Road, Lusaka, 10101 | | | | | Kafue House Limited | | 50.10% | | | | | | Zimbabwe | | | | | – 2nd Floor, Barclay House, Corner First Street, Jason | | | | | Moyo Avenue, PO Box 1279, Harare | | | | | Barclays Bank of Zimbabwe Limited | | 67.68% | | | Barclays Merchant Bank of Zimbabwe Limited (In Liquidation) | | 67.68% | | | Barclays Zimbabwe Nominees (Pvt) Limited | | 67.68% | | | BRAINS Computer Processing (Pvt) Limited (In Liquidation) | | 67.68% | | F, I | Fincor Finance Corporation Limited | | 67.68% | | | – 2 Premium Close, Mount Pleasant Business Park, | | | | | Mount Pleasant , Harare | | | | | BRAINS Computer Processing (Pvt) Limited (In Liquidation) | | 78.45% | | F, I |
Subsidiaries by virtue of control The related undertakings below are subsidiaries in accordance with s.1162 Companies Act 2006 as Barclays can exercise dominant influence or control over them. The entities are owned by The Barclays Bank UK Retirement Fund. | | | | | Subsidiaries by virtue of control The related undertakings below are subsidiaries in accordance with s.1162 Companies Act 2006 as Barclays can exercise dominant influence or control over them. The entities are all owned by the Barclays Bank UK Retirement Fund.
| | | | | Subsidiaries by virtue of control | | Percentage | | Note | United Kingdom | | | | | – 1 Churchill Place, London, E14 5HP | | | | | Oak Pension Asset Management Limited | | 0.00% | | Z | Water Street Investments Limited | | 0.00% | | Z | | | | Cayman Islands | | | | | – PO Box 309GT, Ugland House, South Church Street, | | | | | Grand Cayman,KY1-1104 | | | | | Hornbeam Limited | | 0.00% | | Z | Water Street Investments Limited | | 0.00% | | Z | Cayman Islands
|
Joint Ventures The related undertakings below are Joint Ventures in accordance with s. 18, Schedule 4, The Large andMedium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and are proportionally consolidated. | | | | | Hornbeam Limited | | 0.00% | | Z |
Joint Ventures
The related undertakings below are Joint Ventures in accordance with s. 18, Schedule 4, The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 and are proportionally consolidated.
| | | | | Joint Ventures | | Percentage | | Joint management factors | United Kingdom | | | | | – 21 Garlick Hill, London, EC4V 2AU Vaultex UK Limited | | 50.00% | | The Joint Venture Board comprises two Barclays representative directors, two JV partner directors and threenon-JV partner directors. The Board is responsible for setting the company strategy and budgets. |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 315 |
Notes to the financial statements 46 Related undertakingscontinued | | | | Notes | A | | Directly held by Barclays PLC | | | Vaultex UK Limited
21 Garlick Hill, London EC4V 2AU
| | 50.00% | | The Joint Venture Board comprises two Barclays representative directors, two JV partner directors and three non-JV partner directors. The Board are responsible for setting the company strategy and budgets. |
Notes
A | Directly held by Barclays PLC |
| | I | | Ordinary/Common Shares in addition to other shares |
| | P | | Redeemable Ordinary Shares |
| | Q | | Core Shares and Insurance (Classified) Shares |
| | R | | B, C, D, E (94.36%), F (94.36%), G (94.36%), H (94.36%), I (94.36%), J (95.23%) and K Class Shares |
| | T | | Class A Residual Shares, Class B Residual Shares |
U | A Voting Shares and B Non-Voting Shares |
U | | A Voting Shares and BNon-Voting Shares | | | V | | Class A Ordinary Shares, Class A Preference Shares (48.50%), Class B Ordinary Shares, Class C Ordinary Shares, Class C Preference Shares (92.53%), Class D Ordinary Shares, Class D Preference Shares, Class E Ordinary Shares, Class E Preference Shares, Class F Ordinary Shares, Class F Preference Shares, Class H 2012 Ordinary Shares, Class H 2012 Preference Shares, Class H Ordinary Shares, Class H Preference Shares (79.84%), Class I Preference Shares (50.00%), Class J Ordinary Shares, Class J Preference Shares |
W | Class A1, A2, A3, A4, A6, A8, A9, A10, A11, A12, A13, A14, A15, A16 and Class B |
W | | First Class Common Shares, Second Class Common Shares | | | X | | PEF Carry Shares |
| | Y | | EUR Tracker Shares, GBP Tracker Shares and USD Tracker Shares |
Z | Not Consolidated (see Note 37 for scope of consolidation) | | | Z | | Not Consolidated (see Note 37 Structured entities) | | | AA | | USD Linked Ordinary Shares | | | BB | | Redeemable Class B Shares | | | CC | | A Ordinary, Y Ordinary, Z Ordinary | | | DD | | A Ordinary, B Ordinary, ZA Ordinary, ZB Ordinary, D Ordinary | | | EE | | A Ordinary, ZI Ordinary | | | FF | | Class A Units / Interests |
| | | 316 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 305 |
Notes to the financial statements
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Additional shareholder information Shareholder information Additional shareholder information Articles of Association Barclays PLC (the “Company”) is a public limited company registered in England and Wales under company number 48839. Barclays, originally named Barclay & Company Limited, was incorporated in England and Wales on 20 July 1896 under the Companies Acts 1862 to 1890 as a company limited by shares. The company name was changed to Barclays Bank Limited on 17 February 1917 and it was registered on 15 February 1982 as a public limited company under the Companies Acts 1948 to 1980. On 1 January 1985, the company changed its name to Barclays PLC. Under the Companies Act 2006 a company’s Memorandum of Association now need only contain the names of the subscribers and the number of shares each subscriber has agreed to take. For companies in existence as of 1 October 2009, all other provisions which were contained in the company’s Memorandum of Association, including the company’s objects, are now deemed to be contained in the company’s articles. The Companies Act 2006 also states that a company’s objects are unrestricted unless the company’s articles provide otherwise. The Articles of Association were adopted at the Company’s Annual General Meeting (“AGM”) on 30 April 2010 and amended at the AGM of the Company on 25 April 2013. The following is a summary and explanation of the current Articles of Association, which are available for inspection. 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 £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 reasonable 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 under the Articles of Association to retire from office by rotation and may offer themselves forre-election. The Directors so retiring are first, those who wish to retire and not offer themselves forre-election, and, second 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. It is Barclays’ practice that all Directors offer themselves forre-election annually in accordance with the UK Corporate Governance Code. (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 reappointment. 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) The Company may by ordinary resolution remove a Director before the expiry of his/her period of office (without prejudice to a claim for damages for breach of contract or otherwise) and may by ordinary resolution appoint another person who is willing to act to be a Director in his/her place. (viii) 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). (ix) 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. (x) A Director may hold positions with or be interested in other companies and, subject to legislation applicable to the Company and the FCA’s requirements, may contract with the Company or any other company in which the Company is interested. A Director may not vote or count towards the quorum on any resolution concerning any proposal in which he/she (or any person connected with him/her) has a material interest (other than by virtue of his/her interest in securities of the Company) or if he/she has a duty which conflicts or may conflict with the interests of the Company, unless the resolution relates to any proposal: (a) to indemnify a Director or provide him/her with a guarantee or security in respect of money lent by him/her to, or any obligation incurred by him/her or any other person for the benefit of (or at the request of), the Company (or any other member of the Group); (b) to indemnify or give security or a guarantee to a third party in respect of a debt or obligation of the Company (or any other member of the Group) for which the Director has personally assumed responsibility; (c) to obtain insurance for the benefit of Directors; (d) involving the acquisition by a Director of any securities of the Company (or any other member of the Group) 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 other member of the Group); | | | 306 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Additional shareholder information
Shareholder information
Additional shareholder information
Articles of Association
| | Barclays PLC (the “Company”) is a public limited company registered in England and Wales under company number 48839. The Company, originally named Barclay & Company Limited, was incorporated in England and Wales on 20 July 1896 under the Companies Acts 1862 to 1890 as a company limited by shares. The company name was changed to Barclays Bank LimitedPLC 2016 Annual Report on 17 February 1917 and it was registered on 15 February 1982 as a public limited company under the Companies Acts 1948 to 1980. On 1 January 1985, the Company changed its name to Barclays PLC.Form 20-F | 317 | |
Additional shareholder information Under the Companies Act 2006 a company’s Memorandum of Association now need only contain the names of the subscribers and the number of shares each subscriber has agreed to take. For companies in existence as of 1 October 2009, all other provisions which were contained in the company’s Memorandum of Association, including the company’s objects, are now deemed to be contained in the company’s articles. The Companies Act 2006 also states that a company’s objects are unrestricted unless the company’s articles provide otherwise.
The Articles of Association were adopted at the Company’s Annual General Meeting (“AGM”) on 30 April 2010 and amended at the AGM by special resolution of the Company on 25 April 2013.
The following is a summary and explanation of the current Articles of Association, which are available for inspection.
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 £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
reasonable 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 under the Articles of Association to retire from office by rotation and may offer themselves for re-election. The Directors so retiring are first, those who wish to retire and not offer themselves for re-election, and, second 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. It is Barclays’ practice that all Directors offer themselves for re-election annually in accordance with the UK Corporate Governance Code.
(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 reappointment. 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) The Company may by ordinary resolution remove a Director before the expiry of his/her period of office (without prejudice to a claim for damages for breach of contract or otherwise) and may by ordinary resolution appoint another person who is willing to act to be a Director in his/her place.
(viii) 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).
| | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 307 |
Additional shareholder information
(ix) 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.
(x) A Director may hold positions with or be interested in other companies and, subject to legislation applicable to the Company and the FCA’s requirements, may contract with the Company or any other company in which the Company is interested. A Director may not vote or count towards the quorum on any resolution concerning any proposal in which he/she (or any person connected with him/her) has a material interest (other than by virtue of his/her interest in securities of the Company) or if he/she has a duty which conflicts or may conflict with the interests of the Company, unless the resolution relates to any proposal:
(a) to indemnify a Director or provide him/her with a guarantee or security in respect of money lent by him/her to, or any obligation incurred by him/her or any other person for the benefit of (or at the request of), the Company (or any other member of the Group);
(b) to indemnify or give security or a guarantee to a third party in respect of a debt or obligation of the Company (or any other member of the Group) for which the Director has personally assumed responsibility;
(c) to obtain insurance for the benefit of Directors;
(d) involving the acquisition by a Director of any securities of the Company (or any other member of the Group) 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 other member of the Group);
(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.
(xi) 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.
(xii) Subject to applicable legislation, the provisions described 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. (xi) 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. (xii) Subject to applicable legislation, the provisions described insub-paragraphs (x) and (xi) may be relaxed or suspended by an ordinary resolution of the members of the Company or any applicable governmental or other regulatory body. (xiii) 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. (xiv) 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 Shares The Company only has Ordinary Shares in issue. The Articles of Association also provide for pound sterling preference shares of £100 each, US dollar preference shares of US$100 each, US 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”). In accordance with the | | | 308 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Additional shareholder information
authority granted at the AGM on 25 April 2013, 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. No Preference Shares have been issued to date. 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 any 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 preferential dividend (“Preference Dividend”) payable in such currency at such rates (whether fixed or calculated by reference to or in accordance with a specified procedure or mechanism), on such dates and on such other terms as may be determined by the Board prior to allotment thereof. The Preference Shares rank in regard to payment of dividends 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 a pro rata basis. 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 suchnon-payment. 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, 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. The Company currently provides a scrip dividend programme pursuant to an authority granted at the AGM held on 25 April 2013. 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 of Association. | | | | | 318 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 309 | | |
Additional shareholder information 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). 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. 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 thenon-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 satellite meeting 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 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. 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, in accordance with the provisions set out in the Companies Act 2006. 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 in hard copy form, or an address to which notices, documents or information may be sent or supplied by electronic means, is not entitled to have documents or information sent to him/her. In addition, the Company may cease to send notices to any member who has been sent documents on two consecutive occasions over a period of at least 12 months and when each of those documents is returned undelivered or notification is received that they have not been delivered. 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 | | | 310 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Additional shareholder information
available for distribution should be applied only in paying up unissued shares 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, or any criminal or regulatory fine.fine | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 319 |
Additional shareholder information | | | | | Officers of the Group | | Date of appointmentAppointment as Officer | | | | Lawrence Dickinson
| | Company Secretary
| | 2002
| Robert Le Blanc
| | Chief Risk Officer
| | 2004
| Maria Ramos
| | Chief Executive, Barclays Africa Group
| | 2009
| Ashok Vaswani | | Chief Executive Personal and Corporate BankingOfficer, Barclays UK | | 2012 | Bob Hoyt | | Group General Counsel | | 2013
| Thomas King
| | Chief Executive, Investment Bank
| | 2013 | Tushar Morzaria | | Group Finance Director | | 2013 | Michael Roemer | | Group Head of Compliance | | 2014 | Michael Harte
| | Chief Operations and Technology Officer
| | 2014
| Jonathan Moulds
| | Group Chief Operating Officer
| | 2015
| James E Staley | | Group Chief Executive Officer | | 2015 | Tristram Roberts | | Group Human Resources Director | | 2015 | Amer Sajed | | Interim Chief Executive,CEO, Barclaycard International
| | 2015 | Paul Compton | | Group Chief Operating Officer | | 2016 | CS Venkatakrishnan | | Chief Risk Officer | | 2016 | Claire Davies | | Company Secretary | | 2016 | Tim Throsby | | President, Barclays International Chief Executive Officer, Corporate and Investment Bank | | 2017 |
| | | | | 320 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 311 | | |
Additional shareholder information Dividends on the ordinary shares of Barclays PLC On 1 March 2016, Barclays PLC has paidannounced that it would pay semi-annual dividends on its ordinary shares every year since its incorporation in 1896. Since December 2009 Barclays has declared and paid dividends on a quarterly basis. A final dividend for the full year ended 31 December 2014 of 3.5p was paid in April 2015 and there were three equal payments in June, September and December 2015 of 1p per ordinary share.going forward. A final dividend for the full year ended 31 December 2015 of 3.5p will bewas paid on 5 April 2016. In respect of the year ended 31 December 2016, one interim dividend of 1p was paid on 19 September 2016 and a final dividend of 2.0p was announced on 1 March 201623 February 2017 for payment on 5 April 2016.2017.
The dividends declared for each of the last five years were: | Pence per 25p ordinary share | Pence per 25p ordinary share | | Pence per 25p ordinary share | | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | | | 2011 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | | Interim | | | 3.00 | | | | 3.00 | | | | 3.00 | | | | 3.00 | | | | 3.00 | | | | 1.00 | | | | 3.00 | | | | 3.00 | | | | 3.00 | | | | 3.00 | | | Final | | | 3.50 | | | | 3.50 | | | | 3.50 | | | | 3.50 | | | | 3.00 | | | | 2.00 | | | | 3.50 | | | | 3.50 | | | | 3.50 | | | | 3.50 | | Total | |
| 6.50
|
| | | 6.50 | | | | 6.50 | | | | 6.50 | | | | 6.00 | | | | 3.00 | | | | 6.50 | | | | 6.50 | | | | 6.50 | | | | 6.50 | | | | | | | | | | | | | | | | | | | | | | | | | US Dollars per 25p ordinary share | US Dollars per 25p ordinary share | | US Dollars per 25p ordinary share | | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | | | 2011 | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | Interim | | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.01 | | | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.05 | | Final | |
| 0.05
|
| | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.02 | | | | 0.05 | | | | 0.05 | | | | 0.05 | | | | 0.05 | | Total | | | 0.10 | | | | 0.10 | | | | 0.10 | | | | 0.10 | | | | 0.10 | | | | 0.03 | | | | 0.10 | | | | 0.10 | | | | 0.10 | | | | 0.10 | | 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 | | | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | | | 2011 | | | Interim | | | 0.18 | | | | 0.18 | | | | 0.18 | | | | 0.19 | | | | 0.19 | | | Final | | | 0.20 | | | | 0.22 | | | | 0.23 | | | | 0.22 | | | | 0.19 | | | Total | | | 0.38 | | | | 0.40 | | | | 0.41 | | | | 0.41 | | | | 0.38 | | |
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 | | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | Interim | | | 0.05 | | | | 0.18 | | | | 0.18 | | | | 0.18 | | | | 0.19 | | Final | | | 0.10 | | | | 0.20 | | | | 0.22 | | | | 0.23 | | | | 0.22 | | Total | | | 0.15 | | | | 0.38 | | | | 0.40 | | | | 0.41 | | | | 0.41 | |
The final dividends shown above are 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 the latest practicable date for inclusion in this report. No representation is made that have been, or could have been, or could be, converted into Dollars at these rates. Trading market for ordinary shares of Barclays PLC The principal trading market for Barclays PLC ordinary shares is the London Stock Exchange. At the close of business on 31 December 2015, 16,804,603,9492016, 16,963,242,876 ordinary shares were in issue. Ordinary share listings were also obtained on the New York Stock Exchange (NYSE) with effect from 9 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 PJP Morgan Chase Bank, N.A. Details of trading activity are published in the stock tables of leading daily newspapers in the US. There were 523517 ADR holders and 1,6751,673 recorded holders of ordinary shares with US addresses at 31 December 2015,2016, whose shareholdings represented approximately 0.02%4.68% of total outstanding ordinary shares on that date. Since a certain number 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. The following table shows the high and low sales price for the ordinary shares during the periods indicated, based onmid-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 | | | | | p | | | | p | | | | US$ | | | | US$ | | 2016 | | | | | | | | | | | | | | | | | By month: | | | | | | | | | | | | | | | | | February | | | 182.8 | | | | 147.9 | | | | 10.66 | | | | 8.63 | | January | | | 218.9 | | | | 178.4 | | | | 12.96 | | | | 10.37 | |
| | | | | | | | | | | | | | | | | Sale prices for ordinary shares | | | | | 25p ordinary shares | | | | American Depositary Shares | | | | | High | | | | Low | | | | High | | | | Low | | | | | p | | | | p | | | | US$ | | | | US$ | | 2017 | | | | | | | | | | | | | | | | | By month: | | | | | | | | | | | | | | | | | February1 | | | 239.25 | | | | 221.35 | | | | 11.89 | | | | 11.12 | | January | | | 236.25 | | | | 219.45 | | | | 11.71 | | | | 11.07 | | 1 as at 22 February 2017 | | | | | | | | | | 2016 | | | | | | | | | | | | | | | | | By month: | | | | | | | | | | | | | | | | | August | | | 172.25 | | | | 146.00 | | | | 9.11 | | | | 7.84 | | September | | | 174.75 | | | | 164.70 | | | | 9.31 | | | | 8.39 | | October | | | 191.30 | | | | 166.50 | | | | 9.27 | | | | 8.16 | | November | | | 215.95 | | | | 181.35 | | | | 10.75 | | | | 8.91 | | December | | | 239.00 | | | | 212.95 | | | | 11.99 | | | | 10.70 | | | | | | | By Quarter: | | | | | | | | | | | | | | | | | First quarter | | | 215.25 | | | | 147.85 | | | | 12.85 | | | | 8.62 | | Second quarter | | | 186.95 | | | | 127.20 | | | | 11.18 | | | | 7.03 | | Third quarter | | | 174.75 | | | | 131.65 | | | | 9.31 | | | | 7.06 | | Fourth quarter | | | 239.00 | | | | 166.50 | | | | 11.99 | | | | 8.16 | | | | | | | 2015 | | | | | | | | | | | | | | | | | First quarter | | | 266.00 | | | | 223.55 | | | | 16.31 | | | | 13.63 | | Second quarter | | | 274.45 | | | | 248.90 | | | | 17.15 | | | | 14.94 | | Third quarter | | | 288.95 | | | | 239.00 | | | | 17.98 | | | | 14.58 | | Fourth quarter | | | 257.00 | | | | 209.10 | | | | 15.81 | | | | 12.80 | | | | | | | 2014 | | | 296.50 | | | | 207.90 | | | | 19.58 | | | | 13.50 | | 2013 | | | 308.39 | | | | 242.39 | | | | 18.93 | | | | 15.69 | | 2012 | | | 288.00 | | | | 148.20 | | | | 17.47 | | | | 9.31 | | 2011 | | | 333.55 | | | | 138.85 | | | | 21.64 | | | | 8.55 | | 2010 | | | 383.20 | | | | 255.40 | | | | 24.10 | | | | 15.40 | | 2009 | | | 383.60 | | | | 51.20 | | | | 25.40 | | | | 3.10 | |
| | | 312 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 321 |
Additional shareholder information | | | | | | | | | | | | | | | | | 2015 | | | | | | | | | | | | | | | | | By month: | | | | | | | | | | | | | | | | | August | | | 288.95 | | | | 244.7 | | | | 17.98 | | | | 15.29 | | September | | | 262.5 | | | | 239 | | | | 16.28 | | | | 14.58 | | October | | | 257 | | | | 232 | | | | 15.81 | | | | 14.23 | | November | | | 236.05 | | | | 220.05 | | | | 14.61 | | | | 13.27 | | December | | | 234.75 | | | | 209.1 | | | | 14.09 | | | | 12.8 | | | | | | | By Quarter: | | | | | | | | | | | | | | | | | First quarter | | | 266 | | | | 223.55 | | | | 16.31 | | | | 13.63 | | Second quarter | | | 274.45 | | | | 248.9 | | | | 17.15 | | | | 14.94 | | Third quarter | | | 288.95 | | | | 239 | | | | 17.98 | | | | 14.58 | | Fourth quarter | | | 257 | | | | 209.1 | | | | 15.81 | | | | 12.8 | | | | | | | 2014 | | | | | | | | | | | | | | | | | First quarter | | | 296.5 | | | | 230.95 | | | | 19.58 | | | | 15.41 | | Second quarter | | | 262.45 | | | | 212.8 | | | | 17.73 | | | | 14.55 | | Third quarter | | | 234.55 | | | | 207.9 | | | | 15.53 | | | | 14.26 | | Fourth quarter | | | 249.45 | | | | 207.9 | | | | 15.54 | | | | 13.50 | | | | | | | 2013 | | | 308.39 | | | | 242.39 | | | | 18.93 | | | | 15.69 | | 2012 | | | 288.00 | | | | 148.20 | | | | 17.47 | | | | 9.31 | | 2011 | | | 333.55 | | | | 138.85 | | | | 21.64 | | | | 8.55 | | 2010 | | | 383.20 | | | | 255.40 | | | | 24.10 | | | | 15.40 | | 2009 | | | 383.60 | | | | 51.20 | | | | 25.40 | | | | 3.10 | | 2008 | | | 506.40 | | | | 127.70 | | | | 41.40 | | | | 7.40 | |
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 31 December 2015a | | Number of shareholders | | Percentage of holders | | Shares held | | Percentage ofcapital | | Shareholdings at 31 December 2016a | | | Number of shareholders | | Percentage ofholders | | Shares held | | Percentage ofcapital | Classification of shareholders | | | | | | | | | Classification of shareholders | Personal Holders | | 279,092 | | 95.97% | | 470,007,048 | | 2.80% | | 266,012 | | 97.24% | | 456,102,830 | | 2.69% | Banks and Nominees | | 3,129 | | 1.08% | | 14,859,691,756 | | 88.43% | | 2,764 | | 1.01% | | 14,785,945,892 | | 87.16% | Other Companies | | 8,578 | | 2.95% | | 1,474,893,844 | | 8.78% | | 4,787 | | 1.75% | | 1,721,183,651 | | 10.15% | Insurance Companies | | 2 | | 0.00% | | 523 | | 0.00% | | 2 | | 0.00% | | 523 | | 0.00% | Pension Funds | | 8 | | 0.00% | | 10,778 | | 0.00% | | 7 | | 0.00% | | 9,980 | | 0.00% | Total | | 290,809 | | 100.00% | | 16,804,603,949 | | 100.00% | | 273,572 | | 100.00% | | 16,963,242,876 | | 100.00% | Shareholding range | 1 - 100 | | 19,421 | | 6.68% | | 711,520 | | 0.00% | | 18,163 | | 6.64% | | 678,463 | | 0.00% | 101 - 250 | | 59,269 | | 20.38% | | 12,073,995 | | 0.07% | | 55,920 | | 20.44% | | 11,370,607 | | 0.07% | 251 - 500 | | 79,537 | | 27.35% | | 27,783,774 | | 0.17% | | 75,447 | | 27.58% | | 26,331,004 | | 0.16% | 501 - 1,000 | | 46,810 | | 16.10% | | 33,197,807 | | 0.20% | | 44,334 | | 16.21% | | 31,375,347 | | 0.18% | 1,001 - 5,000 | | 61,333 | | 21.09% | | 135,514,901 | | 0.81% | | 56,942 | | 20.81% | | 125,625,032 | | 0.74% | 5,001 - 10,000 | | 12,899 | | 4.44% | | 90,575,688 | | 0.54% | | 12,094 | | 4.42% | | 84,906,729 | | 0.50% | 10,001 - 25,000 | | 7,758 | | 2.67% | | 117,540,890 | | 0.70% | | 7,190 | | 2.63% | | 108,767,678 | | 0.64% | 25,001 - 50,000 | | 1,799 | | 0.62% | | 61,645,616 | | 0.37% | | 1,668 | | 0.61% | | 56,858,249 | | 0.34% | 50,001 and over | | 1,983 | | 0.68% | | 16,325,559,758 | | 97.15% | | 1,184 | | 0.66% | | 16,517,329,767 | | 97.37% | Totals | | 290,809 | | 100.00% | | 16,804,603,949 | | 100.00% | | 273,572 | | 100.00% | | 16,963,242,876 | | 100.00% | United States Holdings | | 1,675 | | 0.58% | | 4,150,392 | | 0.02% | | 1,673 | | 0.61% | | 4,200,586 | | 0.02% |
Note aa. | These figures do not include Barclays Sharestore members. |
Currency of presentation In this report, unless otherwise specified, all amounts are expressed in Pound Sterling. For the months of September 20132016 through to February 2014,2017, the highest and lowest closing spot rates as determined by Bloomberg at 5:00 p.m (New York time) (the ‘Closing Spot Rate’), expressed in USD per GBP were: | | | | | | (US Dollars per Pound Sterling) | | | | | February | | January | | December | | November | | October | | September | | (US Dollars per Pound Sterling) | | (US Dollars per Pound Sterling) | | | | | | | February | | | | January | | | | December | | | | November | | | | October | | | | September | | | | 2016 | | 2015 | | | 2017 | | | | 2016 | | High | | 1.46 | | 1.47 | | 1.52 | | 1.54 | | 1.55 | | 1.56 | | | 1.27 | | | | 1.26 | | | | 1.27 | | | | 1.26 | | | | 1.28 | | | | 1.34 | | | Low | | 1.39 | | 1.42 | | 1.47 | | 1.50 | | 1.51 | | 1.51 | | | 1.24 | | | | 1.20 | | | | 1.22 | | | | 1.22 | | | | 1.21 | | | | 1.30 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | (US Dollars per Pound Sterling) | | | | | | | | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | | | 2011 | | | | | | | | Average | | | 1.53 | | | | 1.65 | | | | 1.56 | | | | 1.59 | | | | 1.61 | |
| | | | | | | | | | | | | | | | | | | | | (US Dollars per Pound Sterling) | | | | | 2016 | | | | 2015 | | | | 2014 | | | | 2013 | | | | 2012 | | Average | | | 1.56 | | | | 1.53 | | | | 1.65 | | | | 1.56 | | | | 1.59 | |
On 2922 February 2016,2017, the Closing Spot Rate in Pound Sterling was $1.39.$1.25. No representation is made that Pounds Sterling amounts have been, or could have been, or could be, converted into USD 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. | | | | | 322 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 313 | | |
Additional shareholder information Taxation of UK holders The following is a summary of certain UK tax issues which are likely to be material to the holding and disposal of Ordinary Shares of Barclays PLC, Preference Shares of Barclays Bank PLC (the ‘Bank’), 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, save where expressly stated to the contrary, this summary deals with shareholders who are resident and, in the case of individuals, domiciled in (and only in) the UK for UK tax purposes, who hold their Shares as investments (other than under an individual savings account) and who are the absolute beneficial owners of their Shares and any dividends paid on them. The statements are not addressed to: (i) shareholders who own (or are deemed to own) 10 per cent. or more of the voting power of Barclays PLC or the Bank; (ii) shareholders who hold Shares as part of hedging transactions; (iii) investors who have (or are deemed to have) acquired their Shares by virtue of an office or employment; and (iv) shareholders who hold Shares in connection with a trade, profession or vocation carried on in the UK (whether through a branch or agency or, in the case of a corporate shareholder, through a permanent establishment, or otherwise). It does not discuss the tax treatment of 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 KingdomUK 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 the 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. Under currentDividends paid on or after 6 April 2016
For dividends paid on or after 6 April 2016, dividends paid to a UK law (butresident individual shareholder in a tax year (the ‘Total Dividend Income’) will generally form part of that shareholder’s total income for UK income tax purposes. The Total Dividend Income will be regarded as the top slice of the shareholder’s total income, and will be subject to UK income tax at the proposed changesrates discussed below. The rate of UK income tax applicable to the Total Dividend Income will depend on the amount of the Total Dividend Income and the UK income tax band(s) that the Total Dividend Income falls within when included as part of the shareholder’s total income for UK income tax purposes. A nil rate of UK income tax applies to the first £5,000 of Total Dividend Income received by an individual shareholder in law discussed below)a tax year (the ‘Nil Rate Amount’) Where the Total Dividend Income received by an individual shareholder in a tax year exceeds the Nil Rate Amount, the excess amount (the ‘Remaining Dividend Income’) will be subject to UK income tax at the following rates: (a) at the rate of 7.5% on any portion of the Remaining Dividend Income that falls within the basic tax band; (b) at the rate of 32.5% on any portion of the Remaining Dividend Income that falls within the higher tax band; and (c) at the rate of 38.1% on any portion of the Remaining Dividend Income that falls within the additional tax band. In determining the tax band the Remaining Dividend Income falls within, the individual shareholder’s Dividend Income (along with any other dividends received that are included in the shareholder’s total income for UK income tax purposes) for the tax year in question (including the portion comprising the Nil Rate Amount) will be treated as the top slice of the shareholder’s total income for UK tax purposes. 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. Dividends paid between 6 April 2015 and 5 April 2016 (inclusive) In respect of dividends paid between 6 April 2015 and 5 April 2016 (inclusive) (the ‘2015-2016 tax year’), a UK resident individual shareholder will be subject to tax under a different UK regime for the taxation of dividends. UK resident individuals receiving a dividend during the 2015-2016 tax year will generally be entitled to a tax credit in respect of such dividend which may be 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 toone-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. Itpurposes for the 2015-2016 tax year. The gross dividend will be regarded as the top slice of the shareholder’s income, and will be subject to UK income tax at a special rate (discussed below).the rates discussed below. If the shareholder is a UK resident individual liable to UK income tax solely at the basic rate for the 2015-2016 tax year, then that shareholder 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. A UK resident individual shareholder that is a higher or additional rate taxpayer for the 2015-2016 tax year will be liable to UK income tax on the gross dividend at special marginal rates (currently 32.5%(32.5% or 37.5% respectively) against which the tax credit may be set. In that case, there will be a further liability to UK income tax for the shareholder as the tax credit will not fully match the tax liability. On 9 December 2015 the UK Government published draft legislation which proposes to amend the taxation of dividends paid on or after 6 April 2016 to UK resident individuals. If enacted, that legislation will replace the tax credit described above with an annual tax-free dividend allowance of £5,000. It will also amend the rates of UK tax on dividends to 7.5 per cent. for a UK resident individual liable to UK income tax solely at the basic rate, 32.5 per cent. for a UK resident individual liable to UK income tax at the higher rate and 38.1 per cent for a UK resident individual liable to UK income tax at the additional rate.
| | | 314 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Additional shareholder information
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 unlessin the dividend falls within an exempt class and certain conditions are met.2015-2016 tax year in the same way as dividends paid on or
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 323 |
Additional shareholder information after 6 April 2016 (see the section “–(i) Taxation of Dividends-Dividends paid on or after 6 April 2016” above). UK resident shareholders are not entitled to any repayment of the tax credits attaching to the dividends paid on the Shares.Shares in the 2015-2016 tax year. Anon-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.Shares in the 2015-2016 tax year. Somenon-UK resident shareholders may be able to recover some of the tax credit in respect of a UK dividend paid on the Shares in the 2015-2016 tax year 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 as part of the Dividend Reinvestment Plan, such shareholders will generally be liable for UK income tax or corporation tax (as the case may be) 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 tax return in the normal way. (iii) Taxation of capital gains The disposal of Shares may, depending on the shareholder’s circumstances, give rise to a liability to tax on chargeable capital gains. Where Shares are sold, a liability to tax may result if the proceeds from that sale exceed the sum of the base cost of the Shares sold and any other allowable deductions such as share dealing costs and, in certain circumstances, indexation relief. 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, 1988 and 2013 must be added to the cost of all such shares held. For this purpose, current legislation permits the market valuation at 31 March 1982 to be substituted for the original cost of shares purchased before that date. Shareholders other than those within the charge to UK 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. Chargeable 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. The calculations required to compute chargeable capital gains may be complex. Shareholders are advised to consult their personal financial adviser if further information regarding a possible tax liability in respect of their holdings of shares is required. (iv) Stamp duty and stamp duty reserve tax Dealings in Shares will generally be subject to UK stamp duty or stamp duty reserve tax (although see the comments below as regards ADSs in the section ‘Taxation of US holders – StampUK 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 to stamp duty reserve tax 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 duly 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 so liable, inheritance tax may be charged on the amount by which the value of his or her estate | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 315 |
Additional shareholder information
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 federal income tax consequences and certain UK tax consequences for US holders (as defined below) of Ordinary Shares of Barclays PLC, Preference Shares of Barclays Bank PLC (the ‘Bank’), or ADSs representing such Ordinary Shares or Preference Shares, who own the shares or ADSs as capital assets for tax purposes. It is not, however, a comprehensive analysis of all the potential US or UK tax consequences for such holders and it does not discuss the tax consequences of members of special classes of holders subject to special rules, including (i) dealers in securities, (ii) traders in securities that elect to use amark-to-market method of accounting for securities holdings,(iii) tax-exempt organizations, (iv) life insurance companies, (v) holders liable for alternative minimum tax, (vi) holders that actually or constructively own 10 per cent or more of the voting stock of Barclays PLC or the Bank, (vii) holders that hold shares or ADSs as part of a straddle or a hedging or conversion transaction, (viii) holders that purchase or sell shares or ADSs as part of a wash sale, (ix) holders whose functional currency is not the US dollar, or (x) holders who are resident, or (in the case of individuals) ordinarily resident, or who are carrying on a trade, in the UK. The summary also does not address any aspect of US federal taxation other than US federal income taxation (such as the estate and gift tax or the Medicare tax on net investment income). 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. This section is also based on the Internal Revenue Code of 1986, as amended (the ‘Code’), 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’), and, in respect of UK tax, the Estate and Gift Tax Convention between the UK and the US as entered into force on 11 November 1979 (the ‘Estate and Gift Tax Convention’), the current UK tax law and the practice of HMRC, all of which are subject to change, possibly on a retroactive basis. This | | | 324 | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | | |
Additional shareholder information 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. A US holder“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 US 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 US federal income tax treatment of an investment in the shares or ADSs. For the purposes of the Treaty, the Estate and Gift Tax Convention, between the UK and the US, 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. (i) Taxation of dividends Subject to the PFIC rules discussed below, a US holder is subject to US federal income taxation on the gross amount of any dividend paid by Barclays PLC or the Bank, as applicable, out of its current or accumulated earnings and profits (as determined for US federal income tax purposes). Dividends paid by Barclays PLC or the Bank, as applicable, with respect to the Ordinary Shares, Preference Shares or ADSs will generally be qualified dividend income. Dividends paid to a noncorporate US holder that constitute qualified dividend income will be taxable to the holder at preferential rates, provided that the holder has a holding period of the shares or ADSs of more than 60 days during the121-day period beginning 60 days before theex-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 the181-day period beginning 90 days before theex-dividend date) and meets certain other holding period requirements. A US holder will not be subject to UK withholding tax. Dividends must be included in income when the US holder, in the case of shares, or the Depositary, in the | | | 316 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Additional shareholder information
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 US and will, depending on a US holder’s circumstances, be either ‘passive’ or ‘general’ income for purposes of computing the foreign tax credit allowable to a US holder. The amount of the dividend distribution includable in income will be the US Dollar value of the Pound Sterling payments made, determined at the spot Pound Sterling/US Dollar rate on the date the dividend distribution is includable in income, regardless of whether the payment is in fact converted into US Dollars. Generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is includable in income to the date the payment is converted into US Dollars will be treated as ordinary income or loss and, for foreign tax credit limitation purposes, from sources within the US, and will not be eligible for the special tax rates 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. Because Barclays PLC and the Bank do not currently maintain calculations of earnings and profits for US federal income tax purposes, it is expected that distributions with respect to the shares and ADSs will generally be reported to US holders as dividends. (ii) Taxation of capital gains Subject to the 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 US 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 is generally taxed at 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 US 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 the Bank or on a purchase of Ordinary Shares by Barclays PLC. For US tax purposes, redemption premium generally will be treated as an additional amount realised in the calculation of a US holder’s gain or loss. (iv) Taxation of passive foreign investment companies (PFICs) Barclays PLC and the Bank believe that their respective shares and ADSs should not be treated as stock of a PFIC for US federal income tax purposes, but this conclusion is a factual determination that is made annually and thus may be subject to change. If Barclays PLC or the Bank were to be treated as a PFIC, then the gain realised on the sale or other disposition of the shares or ADSs would in general not be treated as a capital gain. Instead, unless a US holder elects to be taxed annually on amark-to-market basis with respect to its shares or ADSs, such gain and certain ‘excess distributions’ would be treated as having been realised ratably over a US holder’s holding period for the shares or ADSs and generally would be taxed at the highest tax rate in effect for each such year to which the gain was allocated, together with an interest charge in respect of the tax attributable to each such year. With certain exceptions, a US holder’s shares or ADSs will be treated as stock in a PFIC if Barclays PLC or the Bank, as applicable, was a PFIC at any time during such holder’s holding period in its 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 the Bank is 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. | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 325 |
Additional shareholder information (v) Certain Reporting Requirements US holders should consult their tax advisers regarding any tax reporting or filing requirements that may apply to receiving payments on or with respect to, acquiring, owning, or disposing of the shares or ADSs. Failure to comply with certain reporting obligations could result in the imposition of substantial penalties. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 317 |
Additional shareholder information
(vi) StampUK stamp duty and stamp duty reserve tax No obligation to pay UK stamp duty will arise on the transfer on sale of an ADS, provided that any instrument of transfer is not executed in, and remains at all times outside, the UK. No UK stamp duty reserve tax is payable in respect of an agreement to transfer an ADS. For the UK stamp duty and stamp duty reserve tax implications of dealings in shares, see the section “Taxation of UK holders – (iv) Stamp duty and stamp duty reserve tax” above. (vii) EstateUK estate and gift tax Under the Estate and Gift Tax Convention, between the UK and the US, a US holder generally is not subject to UK inheritance tax. FATCA Risk Factor In certain circumstances, shares or ADSs may be subject to US “passthru” withholding tax starting in 2019. The US has enacted rules, commonly referred to as ‘FATCA’, that generally impose a new reporting and withholding regime with respect to certain US source payments (including dividends and interest), gross proceeds from the disposition of property that can produce US source interest and dividends, and certain payments made by, and financial accounts held with, entities that are classified as financial institutions under FATCA. The US has entered into an intergovernmental agreement regarding the implementation of FATCA with the UK (the “UK IGA”). Under the UK IGA, as currently drafted, it is not expected that either Barclays PLC or the Bank will be required to withhold tax under FATCA on payments made with respect to the shares or ADSs. However, significant aspects of when and how FATCA will apply remain unclear, and no assurance can be given that withholding under FATCA will not become relevant with respect to payments made on or with respect to the shares or ADS in the future. Investors should consult their own tax advisers regarding the potential impact of FATCA. The Barclays Group has registered with the Internal Revenue Service (‘IRS’) for FATCA. The Global Intermediary Identification Number (GIIN) for the Bank in the United Kingdom is E1QAZN.00001.ME.826 and it is a Reporting Model 1 FFI. The GIINs for other parts of the Barclays Group or Barclays branches outside of the UK may be obtained from your usual Barclays contact on request. The IRS list of registered Foreign Financial Institutions is publicly available at https://apps.irs.gov/app/fatcaFfilist/flu.jsf. 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 tonon-residents of the UK, and which limit the right of suchnon-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 at1-800-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 at www.sec.gov. | | | 318326 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Additional shareholder information 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 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: | | $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 | | $0.04 or less per ADS* | 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) | General depositary services, particularly those charged on an annual basis | | Other services performed by the ADR depositary in administering the ADS program | | No fee currently payable | Expenses of the ADR depositary | | Expenses incurred on behalf of Holders in connection with: - Expenses of the ADR depositary in connection with the conversion of foreign currency into US dollars (which are paid out of such foreign currency) | | 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 | | | - Expenses of the ADR depositary in connection with the conversion of foreign currency into US dollars (which are paid out of such foreign currency)
| | | | – 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 | | | | | – Any other charge payable by ADR depositary or its agents | | | |
* The fee in relation to the distribution of cash dividends was $0.0064 per ADS in respect of dividends paid in the year ended 31 December 2016. *The fee in relation to the distribution of cash dividends was $0.01 per ADS in respect of dividends paid in the year ended 31 December 2015.
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| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 319327 |
Additional shareholder information Fees and Payments made by the ADR depositary to Barclays The ADR depositary has agreed to provide Barclays with an amount based on the cash dividend fee charged on each ADS during each contract yeartwelve-month period running from August 11 of the relevant year to August 10 of the following year (a ‘Contract Year’) for expenses incurred by Barclays in connection with the ADS program (such amount being the ‘Contribution’ for the relevant Contract Year). The Contributions are paid to Barclays in two instalments each Contract Year.Year, both of which are scheduled to be paid in the Barclays’ fiscal year in which the relevant Contract Year ends. The table below sets out the Contribution for the 2014/20152015/2016 Contract Year and thus the total amount received in the year ended 31 December 2015: 2016: | | | | | Cash Dividend Fee Amount Collected during 2014/20152015/2016 Contract Year | | | | Amount provided in Contributions from the ADR depositary for the year ended 31 December 20152016 | | | | | | | | | US$0.010.0084 per ADSADS** | | | | $1,500,000 | | | | | | Total | | | | $1,500,000 |
** On 1 March 2016, Barclays announced its decision to pay dividends on a bi-annual rather than quarterly basis. As a result, the fees in relation to the 2015/16 Contract Year covering the September and December 2015 and April 2016 dividends amounted to $0.0084 per ADS. Under certain circumstances, includingnon-routine corporate actions, removal of the ADR depositary or termination of the ADS program by Barclays, Barclays may be charged by the ADR depositary certain fees (including in connection with depositary services, certain expenses paid on behalf of Barclays, an administrative fee, fees fornon-routine services and corporate actions and any other reasonable fees/expenses incurred by the ADR depositary). The ADR depositary has agreed to waive certain of its fees chargeable to Barclays with respect to standard costs associated with the administration of the ADS program. | | | 320328 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Additional informationInformation External auditor objectivity andindependence: Non-Audit Services Our policy on the provision of services by the Group’s statutory Auditor (the ‘Policy’) sets out the circumstances in which the auditor may be permitted to undertakenon-audit work for the Group. The Board Audit Committee oversees compliance with the Policy and considers and, if appropriate, approves requests to use the Auditor fornon-audit work. Allowable services arepre-approved up to but not including £100,000 or £25,000 in the case of certain taxation services. The Group Finance Director and the Company Secretary and their teams deal with day to day administration of the Policy, facilitating requests for approval. Details of the services that are prohibited and allowed under the Policy are set out below: Services that are prohibited include: | – | design and implementation of financial information systems; |
| – | design or implementation of internal controls or risk management services related to financial information |
| – | *appraisal or valuation services; |
| – | fairness opinions orcontribution-in-kind reports; |
| – | internal audit outsourcing;audit; |
| – | management and Human Resources functions; |
| – | broker or dealer, investment advisor or investment banking services; and |
| – | legal, expert and taxcertain *tax services involving advocacy or personal services to persons in a financial reporting role.role; and |
| – | transaction-related and restructuring services. |
*these may be permissible subject to compliance with certain requirements Allowable services that the Board Audit Committee considers for approval include: | – | statutory audit and regulatory audit related services and regulatorynon-audit services; |
| – | other attest and assurance services; |
| – | accountancy advicetraining, surveys and training;software; |
| – | risk management and controls advice; |
| – | business support and recoveries; and |
| | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 321329 |
Additional information NYSE Corporate Governance NYSE Corporate Governance Statement As our main listing is on the London Stock Exchange, we follow the UK Corporate Governance Code. However, as Barclays also has American Depositary Receipts listed on the New York Stock Exchange (NYSE), we are also subject to the NYSE’s Corporate Governance Rules (NYSE Rules). We are exempt from most of the NYSE Rules, which US domestic companies must follow, because we are anon-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 here: 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 as well as developing best practices among other UK public companies. The independence of ournon-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 37. Board Committees We have a Board Nominations Committee and a Board Remuneration 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 Nominations Committee. Except for this appointment, both Committees are composed solely ofnon-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 independentnon-executive Directors. However, we follow the Code recommendations, rather than the NYSE Rules, regarding the responsibilities of the Board Audit Committee (except for applicable mandatory responsibilities under the Sarbanes-Oxley Act), although both are broadly comparable. Although the NYSE Rules state that the Board Audit Committee is to take responsibility for risk oversight, Barclays has additional Board Committees which address different areas of risk management. To enhance Board governance of risk, Barclays has two risk committees; the Board Risk Committee and the Board Reputation Committee. A full description of each Board Committee can be found on page 96.in the governance section. 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 Nominations Committee has developed corporate governance guidelines, ‘Corporate Governance in Barclays’, which have been approved and adopted by the Board. Code of Ethics The NYSE Rules require that domestic US companies adopt and disclose a code of business conduct and ethics for Directors, officers and employees.The Barclays Way was introduced in 2013,2013; this is a Code of Conduct which outlines the Values and Behaviours which govern our way of working across our business globally.The Barclays Way has been adopted on a Group wide basis by all Directors, Officers and employees.The Barclays Way is available to view on the Barclays website at home.barclays/about-barclays/barclays-values. 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’. | | | 322330 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Additional information Share Capital
Substantial shareholders As at 20 February 2017 the Company had been notified under Rule 5 of the Disclosure and Transparency Rules of the UKLA of the following holdings of voting rights in its shares: | | | | | | | | | | | | | | | | | 2016 | | | | | | | | | | | | | | | | | Holder | |
| Number of Barclays Shares | | |
| % of total voting rights attached to issued share capitala | | |
| Number of warrants | | |
| % of total voting rights attached to issued share capitala | | | | | | | The Capital Group Companies Incb | | | 1,172,090,125 | | | | 6.98 | | | | - | | | | - | | | | | | | Qatar Holding LLCc | | | 1,017,455,690 | | | | 5.99 | | | | - | | | | - | | | | | | | BlackRock, Incd | | | 922,509,972 | | | | 5.45 | | | | - | | | | - | |
a The percentage of voting rights detailed above were as calculated at the time of the relevant disclosures made in accordance with Rule 5 of the DTR. b. The Capital Group Companies Inc (CG) holds its shares via CG Management companies and funds. Part of the CG holding is held as American Depositary Receipts. c. Qatar Holding LLC is wholly-owned by Qatar Investment Authority. d Total shown includes 3,860,531 contracts for difference to which voting rights are attached. Part of the holding is held as American Depositary receipts. On 19 January 2017, BlackRock, Inc. disclosed by way of a Schedule 13G filed with the SEC, beneficial ownership of 1,054,988,420 ordinary shares of the Company as of 31 December 2016, representing 6.2% of that class of shares. On 23 January 2017 the Company was notified that Norges Bank now holds 508,175,594 Barclays shares, representing 2.996% of the total voting rights attached to the issued share capital. The relevant threshold for UK disclosure is 3%, so Norges Bank will make no further notifications to the Company unless they again exceed 3% of the total voting rights attached to the issued share capital. As at 29 February 2016 the Company had been notified under Rule 5 of the Disclosure and Transparency Rules of the UKLA of the following holdings of voting rights in its shares: | 2015 | | | | | | | | | | | | | | | | | Holder | | | Number of Barclays Shares | | | | % of total voting rights attached to issued share capitala | | | | Number of warrants | | | | % of total voting rights attached to issued share capitala | | |
| Number of Barclays Shares | | |
| % of total voting rights attached to issued share capitala | | |
| Number of warrants | | |
| % of total voting rights attached to issued share capitala | | | Qatar Holding LLCb | | | 813,964,552 | | | | 6.65 | | | | - | | | | - | | | | 813,964,552 | | | | 6.65 | | | | - | | | | - | | | BlackRock, Incc | | | 822,938,075 | | | | 5.02 | | | | - | | | | - | | | | 822,938,075 | | | | 5.02 | | | | - | | | | - | | | The Capital Group Companies Incd | | | 1,172,090,125 | | | | 6.98 | | | | - | | | | - | | | | 1,172,090,125 | | | | 6.98 | | | | - | | | | - | | | Norges Bank | | | 506,870,056 | | | | 3.02 | | | | - | | | | - | | | | 506,870,056 | | | | 3.02 | | | | - | | | | - | | a The percentage of voting rights detailed above were as calculated at the time of the relevant disclosures made in accordance with Rule 5 of the DTR. b Qatar Holding LLC is wholly-owned by Qatar Investment Authority. c Total shown includes 1,408,618 contracts for difference to which voting rights are attached. On 25 January 2016, BlackRock, Inc. disclosed, by way of a Schedule 13G filed with the SEC, beneficial ownership of 1,109,026,156 ordinary shares of Barclays PLC as of 31 December 2015, representing 6.6% of that class of shares. d The Capital Group Companies Inc (CG) holds its shares via CG Management companies and funds. Part of the CG holding is held as American Depositary Receipts (ADRs) with a ratio of 1 share to every 4 ADRs. As at 27 February 2015 the Company had been notified under Rule 5 of the Disclosure and Transparency Rules of the UKLA of the following holdings of voting rights in its shares: | | | 2014 | | | | | | | | | | Holder | | | Number of Barclays Shares | | | | % of total voting rights attached to issued share capitala | | | | Number of warrants | | | | % of total voting rights attached to issued share capitala | | | | Qatar Holding LLCb | | | 813,964,552 | | | | 6.65 | | | | - | | | | - | | | | BlackRock, Incc | | | 822,938,075 | | | | 5.02 | | | | - | | | | - | | | | The Capital Group Companies Incd | | | 861,142,569 | | | | 5.22 | | | | - | | | | - | | | a The percentage of voting rights detailed above were as calculated at the time of the relevant disclosures made in accordance with Rule 5 of the DTR. b Qatar Holding LLC is wholly-owned by Qatar Investment Authority. c Total shown includes 1,408,618 contracts for difference to which voting rights are attached. On 12 January 2015 BlackRock, Inc disclosed, by way of a Schedule 13G filed with the SEC, beneficial ownership of 1,032,843,875 ordinary shares of Barclays PLC as of 31 December 2014, representing 6.3% of that class of shares. d The Capital Group Companies Inc (CG) holds its shares via CG Management companies and funds. Part of the CG holding is held as American Depositary Receipts (ADRs) with a ratio of 1 share to every 4 ADRs. As at 4 March 2014, the Company had been notified under Rule 5 of the Disclosure and Transparency Rules of the UKLA of the following holdings of voting rights in its shares: | | | 2013 | | | | | | | | | | Holder | | | Number of Barclays Shares | | | | % of total voting rights attached to issued share capitala | | | | Number of warrants | | | | % of total voting rights attached to issued share capitala | | | | Qatar Holding LLCb | | | 813,964,552 | | | | 6.65 | | | | - | | | | - | | | | BlackRock, Incc | | | 805,969,166 | | | | 7.06 | | | | - | | | | - | | | | The Capital Group Companies Incd | | | 809,174,196 | | | | 5.03 | | | | - | | | | - | | |
a The percentage of voting rights detailed above were as calculated at the time of the relevant disclosures made in accordance with Rule 5 of the DTR. b Qatar Holding LLC is wholly-owned by Qatar Investment Authority. c Total shown includes 1,408,618 contracts for difference to which voting rights are attached. On 13 February 2014 Qatar Holding LLC25 January 2016, BlackRock, Inc. disclosed, by way of a Schedule 13G filed with the SEC, beneficial ownership of 1,017,455,6901,109,026,156 ordinary shares of Barclays PLC as of 31 December 2013,2015, representing 6.31% of that class of shares. c Total shown includes 8,003,236 contracts for difference to which voting rights are attached. On 17 January 2014 BlackRock, Inc disclosed, by way of a Schedule 13G filed with the SEC, beneficial ownership of 1,040,177,738 ordinary shares of Barclays PLC as of 31 December 2014, representing 6.5%6.6% of that class of shares.
d The Capital Group Companies Inc (CG) holds its shares via CG Management companies and funds. Part of the CG holding is held as American Depositary Receipts (ADRs) with a ratio of 1 share to every 4 ADRs. | | | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 323331 |
Additional information As at 27 February 2015 the Company had been notified under Rule 5 of the Disclosure and Transparency Rules of the UKLA of the following holdings of voting rights in its shares: | | | | | | | | | | | | | | | | | 2014 | | | | | | | | | | | | | | | | | Holder | |
| Number of Barclays Shares | | |
| % of total voting rights attached to issued share capitala | | |
| Number of warrants | | |
| % of total voting rights attached to issued share capital | | | | | | | Qatar Holding LLCb | | | 813,964,552 | | | | 6.65 | | | | - | | | | - | | | | | | | BlackRock, Incc | | | 822,938,075 | | | | 5.02 | | | | - | | | | - | | | | | | | The Capital Group Companies Incd | | | 861,142,569 | | | | 5.22 | | | | - | | | | - | |
a The percentage of voting rights detailed above were as calculated at the time of the relevant disclosures made in accordance with Rule 5 of the DTR. b Qatar Holding LLC is wholly-owned by Qatar Investment Authority. c Total shown includes 1,408,618 contracts for difference to which voting rights are attached. On 12 January 2015 BlackRock, Inc disclosed, by way of a Schedule 13G filed with the SEC, beneficial ownership of 1,032,843,875 ordinary shares of Barclays PLC as of 31 December 2014, representing 6.3% of that class of shares. d The Capital Group Companies Inc (CG) holds its shares via CG Management companies and funds. Part of the CG holding is held as American Depositary Receipts (ADRs) with a ratio of 1 share to every 4 ADRs. Disclosure controls and procedures The Chief Executive, JesJames E Staley, and the Group Finance Director, Tushar Morzaria, conducted with Group Management an evaluation of the effectiveness of the design and operation of the Group’s disclosure controls and procedures of each of Barclays PLC and Barclays Bank PLC as at 31 December 2015,2016, 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. Change in Registrant’s Certifying Accountant
In 2015, in order to conform with the auditor rotation requirements of the final statutory audit services order published in October 2014 by the UK’s Competition and Markets Authority, which took effect in January 2015, the Board Audit Committee (through the Audit Tender Oversight Sub-Committee) conducted an external audit tender. Barclays did not request PwC to submit a tender proposal and PwC declined to stand for re-election as the Group’s auditor. Barclays identified KPMG as the preferred candidate for appointment as the new auditor and made a recommendation to the Board. The Board announced on 3 July 2015 that it had appointed KPMG as Auditor following the completion of the audit of the Barclay PLC and Barclays Bank PLC financial statements for the year ended 31 December 2016 and the audit of the effectiveness of internal control over financial reporting as of 31 December 2016. Accordingly, the engagement of PricewaterhouseCoopers LLP, Barclays’ current auditor, will not be renewed for 2017. The appointment of KPMG is subject to the approval of Barclays’ shareholders at the 2017 Annual General Meeting.
During the two years prior to 31 December 2015, (1) PwC has not issued any reports on the financial statements of Barclays PLC or Barclays Bank PLC or on the effectiveness of internal control over financial reporting that contained an adverse opinion or a disclaimer of opinion, nor were the auditors’ reports of PwC qualified or modified as to uncertainty, audit scope, or accounting principles, and (2) there has not been any disagreement over any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreement if not resolved to PwC’s satisfaction would have caused it to make reference to the subject matter of the disagreement in connection with its auditors’ reports, or any “reportable event” as described in Item 16F(a)(1)(v) of Form 20-F.
Barclays has provided PwC with a copy of the foregoing disclosure and has requested that PwC furnish Barclays with a letter addressed to the SEC stating whether it agrees with such disclosure. A copy of the letter, dated 1 March 2015, is filed herewith as Exhibit 15.2.
Board of Directors John McFarlane, Chairman John McFarlane is a senior figure in global banking and financial services circles and is in his 42nd year in the sector (including 22 years as a main-board director, 10 years as CEO and six years as chairman). John is Chairman of Barclays. John joined the Board as a non-executive Director in January 2015Barclays PLC and became Chairman at the conclusion of the AGM in April 2015.Barclays Bank PLC. He is also anon-executive director of Westfield Corporation and Old Oak Holdings.Holdings Limited. He is chairman of TheCityUK and a member of the Financial Services Trade and Investment Board and the European Financial Roundtable. John was formerly chairman of Aviva plc, where he oversaw a transformation of the company the board and management, making Aviva one of the UK’s best-performing financial institutions. Forfor a brief period he was also chairman of FirstGroup plc. John hasHe was also a strong track record as a CEOnon-executive director of the Royal Bank of Scotland plc, joining at the time of the UK government rescue. Prior to that, for 10 years he was Chief Executive officer of Australia and subsequently as a chairmanNew Zealand Banking Group Ltd, Group Executive Director of Standard Chartered plc and brings to Barclays extensive experiencehead of investment, corporate and retail banking, as well as insurance, strategy, risk and cultural change. John is a senior figure in global banking and financial services circles and is in his 40th yearCitibank in the sector including 20 years as a board director, 10 years as CEO and more recently as chairman.UK. Jes Staley, Chief Executive, Executive Director Jes Staley joined Barclays as Group Chief Executive on 1 December 2015. Jes has nearly four decades of extensive experience in banking and financial services. He worked for more than 30 years at JP Morgan, initially training as a commercial banker, and later advancing to the leadership of major businesses involving equities, private banking and asset management, and ultimately heading the company’s Global Investment Bank. Most recently, Jes served as Managing Partner at BlueMountain Capital. Sir Gerry Grimstone, Deputy Chairman and Senior Independent Director, Non-executive Director Sir Gerry Grimstone is Deputy Chairman and Senior Independent Director of Barclays and chairs the Board Reputation Committee. He is also chairman of Standard Life plc, one of the UK’s largest savings and investments businesses. He is an independentnon-executive board member of Deloitte LLP where he represents the public interest. Within the UK public sector, he is the leadnon-executive on the board of the Ministry of Defence and is a member of HM Treasury’s Financial Services Trade and Investment Board. From 2012-2015, Gerry served as the chairman of TheCityUK, the representative body for the financial and professional services industry in the UK. Gerry has held a number of board appointments in the public and private sectors and has served as one of the UK’s Business Ambassadors. He was previously a senior investment banker at Schroders and ran businesses in London, New York and Asia Pacific. He specialised in mergers and acquisitions and capital-raising for major companies worldwide. Prior to that, he was an official in HM Treasury where he was responsible for privatisation and policy towards state-owned enterprises. Sir Gerry’s other current principal external appointments are the Financial Services Trade and Investment Board and The Shareholder Executive. Mike Ashley,Non-executive Director Mike joined the Board as anon-executive Director in September 2013. He was formerly head of quality and risk management for KPMG Europe LLP (ELLP), which forms part of the KPMG global network, where his responsibilities included the management of professional risks and quality control. | | | 324332 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | |
Additional information and quality control. He was a member of the ELLP Board and was also KPMG UK’s designated Ethics Partner. Mike has over 20 years’ experience as an audit partner, during which he was the lead audit partner for several large financial services groups, most recently HSBC Holdings PLC and Standard Chartered PLC, and also for the Bank of England. Mike has an in depth understanding of auditing and the associated regulatory issues, with specific experience of large, global banks. Mike’s other current principal external appointments are Institute of Chartered Accountants in England and Wales’ Ethics Standards Committee (member), European Financial Reporting Advisory Group’s Technical Expert Group (vice chair), Charity Commission (board member), Government Internal Audit Agency (chairman) and International Ethics Standards Board for Accountants.Accountants (member).
Tim Breedon,Non-executive Director Tim was appointed to the Board as anon-executive Director in November 2012. Tim held a number of roles at Legal & General Group plc (L&G) before joining its board as group directorGroup Director (Investments) and becoming group chief executive. He was later an adviserGroup Chief Executive, a position he held from January 2006 to L&G, primarily with responsibilities in connection with Solvency II.June 2012. Tim was a director of the Association of British Insurers (ABI), and also served as its chairman. He was also chairman of the UK Government’snon-bank lending taskforce, anindustry-led taskforce that looked at the structural and behavioural barriers to the development of alternative debt markets in the UK. Tim was a director of the Financial Reporting Council and was on the board of the Investment Management Association. Tim has over 25 years of experience in financial services and has extensive knowledge and experience of regulatory and government relationships. He brings to the Board the experience and knowledge of leading a financial services company, combined with an understanding of the UK and EU regulatory environment and risk management. His customer focus and understanding of investor issues, gained both at L&G and the ABI, is of particular relevance to Barclays. Tim’sBarclays.Tim’s other current principal external appointments are as chairman of Apax Global Alpha Limited (chairman) and Marie Curie Cancer Care (trustee).chairman of The Northview Group. Mary Francis, CBE,Non-executive Director Mary Francis CBE was appointed to the Board as anon-executive Director in October 2016. Mary has extensive board-level experience across a range of industries and is currently serving on the boards of Swiss Re Group and Ensco plc. She has previously served as Senior Independent Director on the board of Centrica and as anon-executive director of Aviva, Cable & Wireless Communications, the Bank of England and Alliance & Leicester. In her executive career, Mary was a senior civil servant in HM Treasury for twelve years, before serving as Private Secretary to the Prime Minister, Deputy Private Secretary to the Queen and as Director General of the Association of British Insurers. Crawford Gillies,Non-executive Director Crawford joined the Board as anon-executive Director in May 2014. Crawford has over three decades of business and management experience, initially with Bain & Company, a firm of international management consultants, where he was managing director Europe from 2001 to 2005. While at Bain he worked with major companies in the UK, Continental Europe and North America across multiple sectors. Since 2007 he has beenFrom 2007-2016 Crawford was on the board of Standard Life plc, where he has chaired the remuneration committee. He was chairman of the law firm Hammonds, now Squire Sanders (2006 - 2009), has chaired Control Risks Group Holdings LtdInternational since 2007 and chaired Touch Bionics (2006 - 2011), an innovative medical device company. He joinedCrawford was also on the board of MITIE Group PLC in 2012.from 2012 to July 2015. He has also held public sector posts in England and Scotland. He was an independent member of the Department of Trade and Industry (2002(2002 - 2007) and chaired its Audit and Risk Committee (2003 - 2007). He is former Chairmanchairman of Scottish Enterprise and of the Confederation of British Industry in London. Crawford’s other current principal external appointments are as Non-executive Directoranon-executive director of SSE plc and Standard Life plc. Crawford intends to retire from his position at Standard Life plc in 2016.The Edrington Group Limited. Reuben Jeffery III,Non-executive Director Reuben joined the Board in July 2009 as anon-executive Director. He is currently CEO, president and a director of Rockefeller & Co Inc. and Rockefeller Financial Services Inc. Reuben served in the US government as under secretary of State for Economic, Energy and Agricultural Affairs, as chairman of the Commodity Futures Trading Commission and as a special assistant to the President on the staff of the National Security Council. Before his government service, Reuben spent 18 years at Goldman, Sachs & Co where he was managing partner of Goldman Sachs in Paris and led the firm’s europeanEuropean financial institutions group in London. Prior to joining Goldman Sachs, Reuben was a corporate attorney with Davis Polk & Wardwell. Reuben has a broad range of financial services experience, particularly investment banking, and in addition brings extensive insight into the US political and regulatory environment. Reuben’s other current principal external appointments are International Advisory Council of the China Securities Regulatory Commission (member), Advisory Board of Towerbrook Capital Partners LP (member), Financial Services Volunteer Corps (Director) and the(director), Advisory Board of J. Rothschild Capital Management Limited (member). | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 325 |
Additional information
Wendy Lucas-Bull, Non-executive Director
Wendy was appointed to the Board as a non-executive Director in September 2013. She is currently chairman of Barclays Africa Group Limited (formerly Absa Group Limited), one of the largest financial services groups in Africa and majority owned by Barclays. She previously served as an executive director of Rand Merchant Bank and became chief executive of FirstRand Ltd’s retail businesses following the merger of Rand Merchant Bank and First National Bank. She has held senior board positions at the Development Bank of Southern Africa, the South African Financial Markets Advisory Board, Eskom, Aveng Ltd and Nedbank Group Limited. Wendy has also held positions on the boards of Telkom SA, Alexander Forbes Ltd, Dimension Data PLC and Anglo American Platinum Ltd. Wendy’s extensive experience provides the Board with valuable retail, commercial, asset management and investment banking expertise. Her widespread experience stems for board level positions in South African banks, having led some of South Africa’s blue chip companies, most notably as CEO of one of the largest retail banks in South Africa, serving as a senior executive of one of the major investment banks in South Africa, as well as providing consultancy services to the largest banks, financial exchanges and insurers in South Africa and internationally. As a CEO Wendy has a track record of successful financial turnaround and cultural transformation of a major South African bank. Her in-depth knowledge of banking in Africa also provides invaluable insight into banking in the region. Wendy has led or participated in a number of conduct related consultations throughout her career, and such knowledge and experience contribute greatly towards the discussion of culture at Barclays.The Asia Foundation (trustee).
Tushar Morzaria, Group Finance Director, Executive Director Tushar joined the Board and Group Executive Committee of Barclays in October 2013 as Group Finance Director. Prior to this, he was CFO, corporate and investment bank at JP Morgan, a role he held on the merger of the investment bank and the wholesale treasury/security services business at JP Morgan. Prior to the merger, he was CFO of the investment bank and held other various roles during his career at JP Morgan. Tushar qualified as an accountant at Coopers &and Lybrand Deloitte and for most of his career he has worked in investment banking, having held various roles at SG Warburg, JP Morgan and Credit Suisse. Tushar has over 20 years of strategic financial management experience, which prove invaluable in his role as Group Finance Director. Dambisa Moyo,Non-executive Director Dambisa joined the Board in May 2010 as anon-executive Director. She is an international economist and commentator on the global economy, with a background in financial services. After completing a PhD in Economics, she worked for Goldman Sachs in the debt capital markets, hedge funds coverage and global macroeconomics teams. Dambisa has also worked for the World Bank and formerly served as anon-executive director of Lundin Petroleum AB (publ). and SABMiller PLC. Dambisa’s background as an economist, in particular her knowledge and understanding of global macroeconomic issues and African economic, political and social issues, provides an important contribution to the Board’s discussion of Barclays’ business and citizenship strategy. Dambisa’s other current principal external appointments are asnon-executive director of SABMiller plc, Barrick Gold Corporation and Seagate Technology plc. Frits van Paasschen, Non-executive Director
Frits was appointed to the Board as a non-executive Director in August 2013. Frits is an experienced directorplc and CEO. He is the former CEO and president of Starwood Hotels and Resorts Worldwide Inc, one of the world’s largest hotel companies. He served as a non-executive director for two NYSE-listed companies, Jones Apparel Group and Oakley. He previously served as the CEO and President of Coors Brewing Company and has held various senior management positions with Nike, Inc. and Disney Consumer Products.
Frits’ extensive global and commercial experience and role as a CEO of an international business provides valuable strategic insight. In particular, his experience in developing and marketing brands, and a broad knowledge of enhancing business performance and the customer experience in a retail environment, is highly beneficial to many aspects of Barclays’ business.Chevron Corporation.
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Additional information Diane de Saint Victor,Non-executive Director Diane was appointed to the Board as anon-executive Director in June 2015.March 2013. She is currently executive director, general counsel and company secretary and a member of the group executive committee of ABB Limited, the publicly listed internationala pioneering technology leader in electrification products, robotics and motion, industrial automation and power and automation technologiesgrids. The company basedis headquartered in Switzerland. Her She is a member of the board of directors of the American Chamber of Commerce in France. At ABB her responsibilities include Head of Legal and Integrity Group. She was formerly senior vice president and general counsel of The Airbus Group, formerly EADS Group, the European aerospace and defence company. Diane’s legal experience and her knowledge of regulatory and compliance matters allows her to provide a unique perspective to the Board and its Committees.
Diane Schueneman,Non-executive Director Diane was appointed to the Board as anon-executive Director in June 2015. Diane has extensive experience in managing global, cross-discipline business operations, client services and technology in the financial services industry. She spent 37 years with Merrill Lynch and held senior roles with responsibility for banking, brokerage services and technology provided to the company’s retail and middle market clients, and latterly for IT, operations and client services worldwide as senior vice president and& head of global infrastructure solutions. As a consultant at McKinsey & Company she advised the IRS Commissioner in the US and has held a number ofnon-executive directorships. Steve Thieke,Non-executive Director Steve was appointed to the Board as anon-executive Director in January 2014. He has four decades of experience in financial services, both in regulation and investment banking. Steve worked for the Federal Reserve Bank of New York for 20 years, where he held several senior positions in credit and capital market operations and banking supervision and later he became anon-executive director at the FSA. He has also held senior roles in investment banking and risk management with JP Morgan, where he spent ten years. He was head of the fixed income division,co-head of global markets, president and chairman of JP Morgan Securities, Inc. and head of the corporate risk management group, retiring from JP Morgan in 1999. He has significant board level experience, both in executive andnon-executive roles, including spending seven years as a director of Risk Metrics Group, where latterly he served as chairman of the board, and nine years on the board of PNC Financial Services Group, Inc.Corp. Group Executive Committee Jes Staley, Group Chief Executive, Executive Director See above for full biography. Tushar Morzaria, Group Finance Director, Executive Director See above for full biography. Robert Le Blanc,Paul Compton, Group Chief RiskOperating Officer
RobertPaul joined Barclays as Group Chief Operating Officer in 2002 as HeadMay 2016. In this role, Paul is responsible for leading the global Operations & Technology functions, driving the implementation of Risk Managementthe structural reform and cost transformation programmes, and for the Investment Bank, and has been the Chief Risk Officer for the Group since 2004.delivery of other major bank-wide projects. Prior to joining Barclays, Robert spent mostPaul was the Chief Administrative Officer of JPMorgan Chase, and was accountable for overseeing global technology, operations, real estate and general services. Before being appointed in this role in 2013, Paul served asCo-Chief Administrative Officer for the Corporate & Investment Bank, Deputy Head of Operations for JPMorgan Chase, and head of the JPMorgan Chase Global Service Centre in India. Paul started his career at JPMorgan in 1997, and first led the overhaul of the wholesale bank’s credit risk infrastructure, before taking on the role as Chief Financial Officer for the Investment Bank. Previous to JP Morgan, Paul spent 10 years as Principal at Ernst & Young in the capital markets, fixed income, emerging marketBrisbane and credit and risk management areas in New York and London. Robertoffices. He has previously been a member of the Group Executive Committee since November 2009. From May 2016, Robert will become Vice Chair of Risk and Strategy.
Michael Harte, Chief Operations and Technology Officer
Michael joined Barclays in July 2014, becoming a member of the Group Executive Committee. Before joining Barclays, Michael was group executive of enterprise services and chief information officer at the Commonwealth Bank of Australia Group (CBA), where he was responsible for group-wide retail and institutional banking systems and operations, brokerage, wealth and asset management systems. Together with his team, Michael transformed CBA into one of the most respected, customer focused and technology leading banks in the world: one of only 8 AA rated banks and top ten by market capitalisation. In his earlier career, Michael held the posts of executive vice president, chief information officer, IT and operations and technology posts at PNC Financial Services Group, Inc (2001-2006, New York) and at Citigroup (1996-2001, London and New York).
| | | | | 334 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 327 | | |
Additional information member of the Board of Directors of the Depository Trust and Clearing Corporation (DTCC) American Australian Association and the American Red Cross of Greater New York. Bob Hoyt, Group General Counsel Bob joined Barclays as Group General Counsel designate in October 2013 and became Group General Counsel in November 2013,is responsible for all legal issuesand regulatory matters across Barclays.Barclays as Group General Counsel. Previously, Bob is also a member of the Group Executive Committee. Bob joined Barclays fromwas at PNC Financial Services Group, where he was general counselGeneral Counsel and chief regulatory affairs officer,Chief Regulatory Affairs Officer, having previously served as deputy general counselDeputy General Counsel since 2009. Prior to then he held roles in public serviceBetween 2006 and 2009, Bob served as general counsel atGeneral Counsel of the US Department of the Treasury, 2006-2009,where he was the Chief Legal Officer of the department and as special assistant and associate counsela senior policy advisor to Secretary Henry M. Paulson, Jr. Prior to that Bob served at the White House. Bob spent much of the early part of his career in private practice, specialising in securities, litigation and corporate. Tom King, Chief Executive, Investment Bank
Tom is Chief Executive of the Investment Bank. He is also a member of the Group Executive Committee. Tom joined Barclays in December 2009 as Head of Investment Banking Division (IBD), EMEA, and Co-Head of Global Corporate Finance. In April 2012, he assumed additional responsibility for jointly overseeing the newly combined Corporate Finance/M&A team. He was appointed Deputy Head of IBD in October 2012, and became Head of IBD in March 2013. Tom was appointed Co-Chief Executive of Corporate and Investment Banking on 1 May 2013 and joined the Group Executive Committee, in addition to his Investment Banking responsibilities. Previously, Tom was at CitigroupHouse where he was most recently head of banking for EMEA. Tom joined Salomon BrothersSpecial Assistant and Associate Counsel to President George W. Bush. Earlier in 1989his career, Bob was a partner in the Securities, Litigation and moved to London in 1999 when he was appointed global head of mergers and acquisitions. He was named head of EMEA Investment Banking in 2005, and headCorporate departments of the combined Corporatelaw firm of Wilmer Cutler Pickering Hale and Investment Bank in 2008.
Jonathan Moulds, Group Chief Operating Officer
Jonathan joined Barclays in February 2015 as Group Chief Operating Officer. He also is a member of the Group Executive Committee. Jonathan began his career in finance with Chicago Research and Trading, which was acquired by Bank of America. Jonathan remained at Bank of America Merrill Lynch for over 15 years until 2012 holding a number of positions including head of Latin America, Canada and Europe, head of risk for global markets and head of international global markets. Latterly, Jonathan was Head of Bank of America Merrill Lynch Europe and CEO of Merrill Lynch International. More broadly, Jonathan has been a board member for bodies such as the Association of Financial Markets, Europe and the Global Markets Association. Jonathan is a renowned patron of the arts and was appointed CBE in the 2015 New Year Honours list for his services to philanthropy.
Maria Ramos, Chief Executive, Absa Group and Barclays Africa
Maria is the Chief Executive Officer of Barclays Africa Group Limited (formerly Absa), which is majority owned by Barclays. Prior to joining Absa on 1 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 term as director-general of the National Treasury of South Africa (formerly the Department of Finance)Dorr (WilmerHale). She currently serves on the executive committees of the World Economic Forum’s International Business Council and Business Leadership South Africa. Maria joined the Group Executive Committee in November 2009.
Tristram Roberts, Group Human Resources Director Tristram is the Group Human Resources Director. Tristram joined Barclays in July 2013 as HR Director for the Investment Bank. HeHis remit was expanded his remit in May 2014 to include HR responsibilities for BarclaysNon-Core, and became the Group HR Director in December 2015. Prior to Barclays, Tristram was headHead of human resourcesHuman Resources for global functionsGlobal Functions and operationsOperations & technologyTechnology at HSBC Holdings PLC, as well as group head of performance and reward. Previously, he was group reward and policy director for Vodafone Group plc.Plc. Tristram began his career in consulting. He became a partner with Arthur Andersen in 2001 and was subsequently a partner with both Deloitte and KPMG. | | | 328 | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | | |
Additional information
Michael Roemer, Group Head of Compliance Mike joined Barclays in January 2011 as the Head of Internal Audit, before becoming Group Head of Compliance in January 2014 and joining the Group Executive Committee.Audit. Mike joined Barclays from CIT Group where he was the chief auditor, reporting directly to the board audit committee and having global responsibility for CIT Group’s internal audit function. Mikefunction.Mike has 27 years’ experience in internal audit, with 23 years of that time spent at JP Morgan. Mike currently serves on the advisory board of theMake-A-Wish Foundation of Metro New York where he is audit committee chair. He also serves on the board of Ronald McDonald House of New York, Inc. where he is also audit committee chair. In 2016, the LGBT Agenda (Lesbian, Gay, Bisexual and Transgender) announced Mike’s appointment as the new ExCo sponsor. Amer Sajed, Interim CEO, Barclaycard International Amer isSajed was appointed Chief Executive Officer for Barclaycard, the Interim CEO of Barclaycard. He is also a memberglobal consumer payments business of the Barclays Banking Group, Executive Committee.in May 2015. Barclaycard is a leading payments company with more than 15,000 employees, £40bn in net loans and advances and 28m customers and clients. In 2015, Barclaycard enabled payments globally with a value of more than £293bn and contributed 30% of Barclays’ PBT. Prior to his appointment as interim CEO for Barclaycard Amer served as CEOChief Executive Officer for Barclaycard US.US, the payments arm of Barclays in the United States. During his five years leading the US business it doubled in size to rank as one of the top ten credit card companies locally. Amer joined Barclaycard in August of 2006. Before assuming the US post, he was Chief Executive Officer for UK Cards. From 2010 to 2012, Amer also oversaw theBarclays’ South African Cards Issuingcards issuing and Acquiringacquiring businesses. Before coming to Barclays,Barclaycard, Amer worked at Citigroup for 20 years in various roles – most recently overseeing the travel and affluent segment. Previously, he served in senior finance roles. Amer served on the Board of Visa Europe from July 2015 to June 2016. Tim Throsby, President, Barclays International and Chief Executive Officer, Corporate and Investment Bank Tim Throsby is President of Barclays International and Chief Executive Officer of the Corporate and Investment Bank at Barclays. Based in London, he is a member of the Group Executive Committee. Prior to joining Barclays in January 2017, Tim worked for JP Morgan where he held a variety of senior management roles, most recently serving as Global Head of Equities. Tim has had an extensive career in banking and asset management, working initially for Credit Suisse and Macquarie, before joining Goldman Sachs in 1995 as a Managing Director andCo-Head of Equity Derivatives for Asia. In 2002, he joined Lehman Brothers to lead the Asia Equities Division, before relocating to New York in 2004 to run the global Equity Derivatives business as well as risk arbitrage. In | | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 335 |
Additional information 2005, he became President of Citadel Asia where he oversaw the investment firm’s Asia business. He serves on the board of Human Dignity Trust, and is a school governor at the Ark Oval Primary Academy. CS Venkatakrishnan, Chief Risk Officer Venkat joined as Chief Risk Officer in March 2016. Venkat is responsible for helping to define, set and manage the risk profile of Barclays. He has over 20 years of financial market and risk management expertise. Venkat worked at JP Morganfrom 1994, most recently as Head of Model Risk and Development and Operational Risk. Prior to this, he worked in fixed income structuring at the JP Morgan Investment Bank. This followed upon 14 years in JP Morgan Asset Management where he held senior positions in the Global Fixed Income business. Ashok Vaswani, CEO, Personal and Corporate BankingBarclays UK Ashok is responsible for the Personal and Corporate Bank. Ashok joined Barclays in 2010, managing the credit card business across the UK, Europe and the Nordics, joining the boardbecoming chairman of Entercard Holdings AB.Entercard. He went on to manage Barclays in Africa, Barclays Retail Business Bank globally and then became CEO for RetailBarclays Personal and Business Banking, covering Europe,Corporate Banking. Ashok represents Barclays as aNon-Executive director on the Board of Barclays Africa Group Limited and is a member of the UK.Board of Directors of Telenor ASA and a member of the Trustee Board at Citizens Advice. He also sits on the advisory boards of a number of institutions such as Rutberg & Co and is Founder Director ofLend-a-Hand, anon-profit organisation focused on rural education in India. Ashok has previously served on the advisory boards of SP Jain Institute of Management, Insead Singapore and Visa Asia Pacific. Prior to Barclays, Ashok was a partner atwith a J P Morgan Chase funded private equity firm - Brysam Global Partners, a New York City based private equity firmwhich focused on building retail financial service businesses in emerging markets. Ashok also spent 20 years with Citigroup working in Asia, Middle East, Central Asia, Europe and North America,where his last position beingwas as CEO, of the global consumer bank in Asia Pacific. Ashok is on the advisory board of S. P. Jain Institute of Management and has served on the advisory board of Insead Singapore and Visa Asia Pacific. He is founder director of Lend-a-Hand, a non-profit organisation focused on economic development in India. Ashok represents Barclays as a non-executive director on the board of Barclays Africa Group Limited (formerly Absa Group Limited), having been appointed in February 2013. Ashok has beenwas also a member of the Group ExecutiveCitigroup Operating Committee, since October 2012.the Citigroup Management Committee and the Global Consumer Planning Group.
| | | | | 336 | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | 329 | | |
Additional information Section 13(r) to the US Securities Exchange Act of 1934 (Iran sanctions and related disclosure) Section 13(r) of the US Securities Exchange Act of 1934, as amended (the ‘Exchange Act’) requires each SEC reporting issuer to disclose in its annual and, if applicable, quarterly reports whether it or any of its affiliates have knowingly engaged in certain activities, transactions or dealings relating to Iran or with the Government of Iran or certain designated natural persons or entities involved in terrorism or the proliferation of weapons of mass destruction during the period covered by the report. The required disclosurerequirement includes disclosure of activities not prohibited by US or other law even if conducted outside the US bynon-US companies or affiliates in compliance with local law. Pursuant to Section 13(r) of the Exchange Act we note the following in relation to activity occurring in 2015,2016, the period covered by this annual report, or in relation to activity we became aware of in 20152016 relating to disclosable activity prior to the reporting period. Barclays earned total revenue of less than £28,000£30,000 in 2016 from the activities disclosed below. Legacy guarantees Barclays entered into several guarantees for the benefit of Iranian banks between 1993 and 2006 in connection with the supply of goods and services by Barclays’ customers to Iranian buyers. These were counter guarantees issued to the Iranian banks to support guarantees issued by these banks to the Iranian buyers. The Iranian banks and a number of the Iranian buyers were then designated as Specially Designated Nationals (“SDNs”) by the U.S. Treasury Department’s Office of Foreign Assets Control (“OFAC”). In addition, Barclays entered into similar guarantees between 1993 and 2005 for the benefit of a Syrian bank that is now an OFAC SDN. Some of the underlying buyers related to the Syrian guarantees have also been designated as OFAC SDNs. The guarantees have been issued with the following conditions:either on: | (i) | On an “extend or pay” basis, wherewhich means that, although the guarantee is of limited duration on its face, until there is full performance under the contract to provide goods and/orand services, the terms of the guarantee require Barclays to either maintain the guarantee or pay the beneficiary bank the full amount of the guarantee;guarantee, or |
(ii) | Wherethe basis that Barclays obligations can only be discharged with the consent of the beneficiary or counterparty.counter party. |
Barclays is not able to exit its obligations under the guarantees unilaterally, and thus maintains a limited legacy portfolio of these guarantees. The guarantees were in compliance with applicable laws and regulations at the time at which they were entered into. Revenue in the amount of less than £15,000£11,000 was received in the year ended 31 December 2015. Any2016. Since the implementation of the Joint Comprehensive Plan of Action (“JCPOA”) on 16 January 2016, Barclays has terminated a number of these Iran-related legacy guarantees and intends to terminate the remainder where agreement can be reached with the counterparty, in accordance with applicable law. All payments made underin connection with termination of the guarantees arehave been made in compliance with applicable laws and regulations. Barclays intends to terminate each of these legacy guarantees if the applicable law changes so as to allow it. Lease payments Barclays is party to a long-term lease, entered into in 1979, with the National Iranian Oil Company (“NIOC”), pursuant to which Barclays rents part of NIOC House in London to house a Barclays bank branch. NIOC is the custodian trustee for the NIOC Pension Fund. The lease is for 60-years,60 years, contains no early termination clause and has 2423 years remaining. Barclays makes quarterly lease payments to Naft Trading and Technology Ltd, a wholly-owned subsidiary of the NIOC Pension Fund in respect of this lease. NIOC is wholly owned by the Iranian Government and iswas an SDN.SDN until it was delisted by OFAC and EU in January 2016 following implementation of sanctions relief under the Joint Comprehensive Plan of Action (JCPOA) with Iran. In December 2012, NIOC Pension Fund was sanctioned in the UK, by HM Treasury. From this pointAs a result of the listing, lease payments were made to a frozen account at Turkiye Is Bankasi in line with UK regulations. However, in 2014, Turkiye Is Bankasi refused to accept any further payments into the frozen account. Since then, noaccount, preventing Barclays from making further lease payments have been made andpayments. Barclays continues to accrueaccrued the ongoing rental payments on its books. In 2015 an additional payment of under £6,000 was made directly to a UK supplier by Barclays in respect ofbooks until November 2016, when Turkiye Is Bankasi confirmed they would accept payments again into the upkeep of the branch.frozen | | | 330 | | | Barclays PLC and Barclays Bank PLC 20152016 Annual Report on Form 20-F | | | 337 |
Additional information account. At this time the accrued lease payments were made and quarterly lease payments have restarted. Sanctions on NIOC Pension Fund were lifted on 18 January 2017. Barclays attributed no revenue in 2016 in relation to this activity. Local Clearing SystemsSystem Banks in the United Arab Emirates (“UAE”), including certain of the Iranian banks that are or were OFAC SDNs, participate in the various banking payment and settlement systems used in the UAE (the “UAE Clearing Systems”). Barclays, by virtue of its banking activities in the UAE, participates in the UAE Clearing Systems, and its participation in the UAE Clearing Systems is in compliance with applicable lawlaws and regulations. However, in order to help mitigate the risk of participating in transactions in which participant Iranian OFAC SDN banks may be involved, Barclays has implemented restrictions relating to its participation in the UAE Image Cheque Clearance System (ICCS), the UAE Funds Transfer System (FTS), the Direct Debit System (DDS) Automated Teller Machine (ATM) / Cheque Deposit Machine (CDM) activity as well as restricting activity via the Wages Protection Scheme (WPS). Barclays attributed no revenue in 20152016 from the OFAC SDN banks in relation to its participation in the UAE Clearing Systems. Commercial mortgageMortgage On 24 May 2013, a Barclays customer and its director were designated by OFAC under theNon-Proliferation and of Weapons of Mass Destruction (“NPWMD”) regime. Both the customer and the director werede-listed inmid-January 2016 as a result of the implementation of the JCPOA. The customer continues to hold a commercial mortgage with Barclays. The terms and conditions of the commercial mortgage do not allow for an early exit and Barclays is legally required to maintain the loan until the maturity date or until the customer defaults on payments. Repayments of the mortgage by the customer are being made in accordance with applicable laws and regulations. Revenues earned by Barclays in 2015throughout 2016 were less than £19,000.£18,000. New OFAC notificationDesignees On 6 September 2012 “Organization for Peace and Development Pakistan” opened an account in Pakistani Rupees with31 March 2016, a Barclays Pakistan. On 7 April 2015 OFAC issued a notification advising that the “Organization for Peace and Development Pakistan”retail customer was a new alias for an already sanctioned entity, Revival of Islamic Heritage Society, which has been designated under the OFAC SpecificallySpecially Designated Global Terrorist (“SDGT”) regime. It has also been listedregime by the European Union (“EU”) and in the UK by HM Treasury (“HMT”) under the Al Qaida Terrorism and Terrorism Financing regime since January 2002. At the time theOFAC. The customer’s GBP account was opened in 2000, subsequently became dormant, and was closed in July 2003. Upon designation, the account balance was moved to an internal dormant account preventing funds from being paid outside of Barclays. No revenue was earned from the relationship in 2016.
In March 2016, a company which was a Barclays Pakistanretail customer was not awaredesignated under the Specially Designated Global Terrorist (“SDGT”) regime by OFAC, in addition to the company director and one of the linkscompany officials who also had accounts with Barclays. The accounts were closed wherever possible with the remaining balances being moved to a sundry account in accordance with applicable laws. One GBP credit card remains open but blocked to prevent spending. Repayments by the designated entity.customer are being made in accordance with applicable laws and regulations. Barclays earned less than £850 in revenue from the three relationships in 2016. Payments notified Barclays Zimbabwe held an account for a relief, rescue, and medical aid organisation owned and controlled from within Iran and funded by the Government of Iran. The account was identified on 7 April 2015, followingopened for the OFAC notification and was frozen by Barclays on 9 April 2015. The account was closed on 12 May 2015purpose of providingfree-of-charge medical services via a voluntary medical centre established through a memorandum of understanding (MOU) between the Government of Zimbabwe and the funds were held in an account in Barclays Bank Pakistan, pendingorganisation. Neither the sale of Barclays Bank Pakistan to Habib Bank Ltd on 15 June 2015. A licence was granted by HMT to transfer the account to Habib Bank Ltd on 26 June 2015 (AFU/2015/015). The Barclays Bank PLC account holding the frozen funds was transferred to Habib Bank Ltd on 28 August 2015 in accordance with the licence. Barclays derived no revenue in relation to this account.
Review of designation
Mohammad Moinie, an existing customer, wasorganisation nor its officials are designated by OFAC as a Special Designated National (SDN) on 6 September 2013, under EO 13599. In April 2015 Barclaycard identified the customer as the SDN designated by OFAC.
A review of the customer’s account established the account was held in GBP. No US nexus was identified in relation to any transactions undertaken on the account. The relationship was exited at the customer’s request on 130 June 2015.2016. Barclays derived noearned less than £150 in revenue throughout its relationship with the customer.
IdentificationBarclays UK holds an account for aUK-based humanitarian organisation, which opened its office in Democratic People’s Republic of payments involving OFAC designated entity
In 2015,Korea in 2003 and implemented a small project. Barclays identified thathas processednon-USD payments to its customer,fund the office in North Korea and the projects that are run out of the office, which work to improve the lives of children in North Korea. The beneficiary bank is listed under the NPWMD regime. Barclays earned £70 in revenue from the activity.
Barclays holds a media company, had potentially beenrelationship with HMRC, a government agency which received indirectlyfunds from Press TV via a third partyan OFAC SDN on the SDGT list in relation to a weekly news show on Press TV. Press TV is designatedthe settlement of tax liabilities with the UK Government. The payment was received by Barclays and credited to the HMRC account. The payment activity was covered by licenses issued by OFAC dueand HM Treasury. Barclays earned £40 in revenue from the activity. Barclays processed a payment of £106.13 from a UK resident customer, which was ultimately remitted to itsthe Iranian government ownership. Payments totalling GBP 138,040.00 have been receivedEmbassy in Russia. The funds relating to the original transaction were settled by anon-Barclays related merchant acquirer, which was subsequently reimbursed by Barclays. No direct monies were paid to the customer from that third party since April 2013. The accounts of the customer and associated personsIranian Government by Barclays. Revenues earned by Barclays in 2016 were closed in February 2016. Revenue derived in 2015 from all account activity was less than £250.negligible. | | | | | Barclays PLC and Barclays Bank PLC 2015 Annual Report on Form 20-F | 331 |
Additional information
Payment relating to exports to Iran
In April 2015 Barclays established that it had processed an inbound US dollar payment on 27 October 2014, for which the ultimate remitter was located in Iran. The transaction related to the export of video surveillance products from the UK to Iran, for use on commercial aircraft belonging to state owned entity, ATA Airlines, located in Iran.
A voluntary disclosure of the possible violation of the Iranian Transactions Sanctions Regulations (31 CFR Part 560) under the Economic Sanctions Enforcement Procedures of OFAC, 31 CFR Part 501, Appendix A was made to OFAC on 22 October 2015. There were no US origin goods involved. Furthermore, there was no breach of UK/EU regulations as the payment was below reporting threshold and a UK licence was held for the export of the goods involved. Revenues earned by Barclays were less than GBP 10.00 in 2014, but the case was not identified for disclosure in the 20F filed in March 2015. No revenue was derived in 2015.
The customer’s transactional accounts are to be exited.
Ministry of Industry, Mine and Trade
During 2015, a payment from 2014 was identified as disclosable. The payment was from a London-based Barclays customer made a payment in favour of an entity in Kazakhstan called Joint Stock Company KTZ Express. The payment was stopped in sanctions screening due to a system match unrelated to Iran. However, it was subsequently released based on information provided by the customer that the final destination of the goods was Istanbul and that there was no direct or indirect involvement of any sanctioned countries.
A return of the funds was received in April 2014 from KTZ Express in favour of the Barclays customer and contained the reference “Prepayment return due to unperformed services”. The customer advised Barclays that the seller of the wheat was unable to supply the wheat and that the order was never fulfilled. In response to a Barclays request, the US correspondent bank supplied a copy of the invoice which showed the Government of Iran (the Ministry of Industry, Mine and Trade) as the intended recipient of the wheat and appears to show the customer was acting on behalf of the Government of Iran.
Less than GBP 10.00 of revenue was derived by Barclays in 2014. No revenue was derived in 2015.
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Additional information Summary of Certain Share and Cash Plans and Long-Term Incentive PlansInformation
Summary of Barclays Group share and cash plans and long-term incentive plans Barclays operates a number of share, and cash plans and long-term incentive plans. The principal plans used for awards made in or, in respect of, the 20152016 performance year are shown in the table below. Awards are granted either by the plan trustee or by the Board Remuneration Committee, and are subject to the applicable plan rules. Barclays has a number of employee benefit trusts which operate with these plans. In some cases the trustee purchases shares in the market to satisfy awards; in others, new issue or treasury shares may be used to satisfy awards where the appropriate shareholder approval has been obtained. Maria Ramos, a member of the Executive Committee and Chief Executive of Barclays Africa Group Limited, also participates in share and cash plans and long-term incentive plans of Barclays Africa Group Limited. | | | | | | | | | Summary of principal share and cash plans and long-term incentive plans | Name of plan | | Eligible employees | | Executive Directors eligible | | Delivery | | Design details | Deferred Share Value Plan (SVP)(DSVP) | | All employees (including executive(excluding Directors) | | YesNo
| | Deferred share bonus typically released in annual instalments over a three, five or seven year period, dependent on future service and subject to malus provisions | | – Plan typically used for mandatory deferral of a proportion of bonus into Barclays shares where bonus is above a threshold (set annually by the Committee) – This plan typically works in tandem with the CVP – Deferred share bonus vests over three, five or seven years in equal annual instalments dependent on future service – Vesting is subject to malus, and suspension provisions and the other provisions of the rules of the plan – Dividend equivalents may be released based on the number of shares under award that are released – On cessation of employment, eligible leavers normally remain eligible for release (on the scheduled release dates) subject to the Committee and/or trustee discretion. For other leavers, awards will normally lapse – On change of control, awards may vest at the Committee’s and/or trustee’s discretion – For SVP awards made in 2015respect of 2016 to materialMaterial Risk Takers (“MRTs”), a holding period of 6 months will apply to shares (after tax) on release |
| | | | | Barclays PLC and Barclays Bank PLC 2016 Annual Report on Form 20-F | 339 |
Additional information | | | | | | | | | Share Value Plan (SVP) | | All employees (including executive Directors) | | Yes | | Deferred share bonus typically released in annual instalments over a three, five or seven year period, dependent on future service and subject to malus provisions | | – The SVP is in all material respects the same as the DSVP described above. The principle differences are that executive Directors may only participate in the SVP and under the DSVP, if a MRT whose award is deferred over five or seven years resigns after the third anniversary of grant, they will be treated as an eligible leaver in respect of any unvested tranches of that award. | Cash Value Plan (CVP) | | All employees (excluding executive Directors)(excludingDirectors) | | No | | Deferred cash bonus paid in annual instalments over a three, five or seven year period, dependent on future service and subject to malus provisions | | – Plan typically used for mandatory deferral of a proportion of bonus where bonus is above a threshold (set annually by the Committee) – This plan typically works in tandem with the SVPDSVP – Deferred cash bonus vests over three years in equal annual instalments dependent on future service – Vesting is subject to malus, suspension provisions and the other provisions of the rules of the plan – Participants may be awarded a service credit of 10% of the initial value of the award aton the same time as the final instalment is paid (provided they are in active employment)third anniversary of a grant – Change of control and leaver provisions are as for SVP |
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Additional information
Summary of Certain Share and Cash Plans and Long-Term Incentive Plans
| | | | | | | | | Barclays LTIP | | Selected employees (including executive Directors) | | Yes | | Awards over Barclays shares or over other capital instruments, subject to risk-adjusted performance conditions and malus provisions | | – Awarded on a discretionary basis with participation reviewed by the Committee – Awards only vest if the risk-adjusted performance conditions are satisfied over a three year period – Vesting is subject to malus, suspension provisions and the other provisions of the rules of the plan – For awards made for the 2013-2015 performance period, 50% of anyAny Barclays shares released under the Barclays LTIP award (after payment of tax) will be subject to an additional two year holdingholder period of no less than the minimum regulatory requirements (currently 6 months). | | | | | | | | | – For awards made for the 2014-2016 performance period, any Barclays shares released (after payment of tax) will be subject to an additional two year holding period
– For the awards made for 2015-2017, any Barclays shares released (after payment of tax) will be subject to an additional two year holder period.
– On cessation of employment, eligible leavers normally remain eligible for release (on the scheduled release dates)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 | |
Business Unit Long-Term Incentive Plans
| | Selected senior
employees
(excluding
executive Directors)
within each
business unit
| | No
| | Design varies by business unit. Awards made after at least three years, with additional deferral
after this period. Awards typically made 50% in cash and 50% in Barclays share awards
| | – Participation on a discretionary basis
– Risk-adjusted performance conditions vary by business unit to reflect applicable business strategy
– Minimum plan duration is between three and five years (depending on plan)
– Award is subject to malus provisions and provisions of the plan rules
– Participation may cease if the participant leaves Barclays other than for eligible leaver reasons
– No new awards under business unit long-term incentive plans are expected to be made in 2016
|